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9
Minutes for September 14, 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
'33"'11
Minutes of the Board of Governors of the Federal Reserve
System on Wednesday, September 14, 1966.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Robertson, Vice Chairman
Shepardson
Brimmer
Sherman, Secretary
Kenyon, Assistant Secretary
Bakke, Assistant Secretary
Young, Senior Adviser to the Board and
Director, Division of International Finance
Mr. Holland, Adviser to the Board
Mr. Solomon, Adviser to the Board
Mr. Molony, Assistant to the Board
Mr. Brill, Director, Division of Research and
Statistics
Mr. Solomon, Director, Division of Examinations
Mr. Harris, Coordinator of Defense Planning
Mr. Hexter, Associate General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Partee, Associate Director, Division of
Research and Statistics
Messrs. Daniels and Kiley, Assistant Directors,
Division of Bank Operations
Messrs. Goodman, Leavitt, and Smith, Assistant
Directors, Division of Examinations
Mrs. Semia, Technical Assistant, Office of the
Secretary
Messrs. Sanders, Senior Attorney, and Shuter,
Attorney, Legal Division
Messrs. Eckert, Chief, Banking Section, and Keir,
Chief, Capital Markets Section, Division of
Research and Statistics
Miss Ormsby, Economist, Division of Research and
Statistics
Messrs. Egertson and Maguire, Supervisory Review
Examiners, and Poundstone, Review Examiner,
Division of Examinations
Messrs. McIntosh and White, Technical Assistants,
Division of Bank Operations
Mr.
Mr.
Mr.
Mr.
Ott)
9/14/66
-2Approved letters.
The following letters were approved unanimously
after consideration of background information that had been made available to the Board.
Copies of the letters are attached under the respec-
tive item numbers indicated.
Item No.
Letter to The Merrill Trust Company, Bangor,
Maine, approving the establishment of a branch
rn Lincoln.
Letter to Security Trust Company of Rochester,
Rochester, New York, granting an extension of
time to establish a branch in Penfield and
commenting on the bank's capital position.
2
Letter to Bank of Keytesville, Keytesville,
Missouri, waiving the requirement of six
months' notice of withdrawal from membership
in the Federal Reserve System.
3
Letter to the Federal Deposit Insurance
Corporation regarding the application of
Bank of Keytesville, Keytesville, Missouri,
for continuation of deposit insurance after
w ithdrawal from membership in the Federal
Reserve System.
4
Reports on competitive factors.
A report to the Federal Deposit
Insurance Corporation on the competitive factors involved in the proposed
merger of American Bank and Trust Co. of Pa., Reading, Pennsylvania, and
Columbia Trust Company, Columbia, Pennsylvania, was approved unanimously
fc3r transmittal to the Corporation.
The conclusion read as follows:
There is little, if any, competition existing between
American Bank and Trust Co. of Pa., Reading, and Columbia
Trust Company. Until recently, Columbia was served by
three locally headquartered, comparatively small banks.
If this transaction and the proposal involving the remaining bank in Columbia are consummated, Columbia will be
served by branches of three large banks.
i
9/14/66
-3-
American Bank and Trust Co. of Pa. is presently by
far the largest bank operating in its service area, and
it would continue to be by far the largest institution
in the service area of the resulting bank. However,
since the proposal represents American Bank and Trust
Co.'s expansion into a new area, the overall competitive effects do not appear to be significantly adverse.
A report to the Comptroller of the Currency on the competitive
factors involved in the proposed merger of The First National Bank of
Boonville, Boonville, New York, into The Oneida National Bank and Trust
Company of Central New York, Utica, New York, was approved unanimously
for transmittal to the Comptroller.
The conclusion read as follows:
There appears to be little, if any, competition
existing between The First National Bank of Boonville
and The Oneida National Bank and Trust Company of
Central New York, Utica. While the proposed merger
would increase the concentration of banking resources
in the Oneida-Herkimer County area, the overall effect
on competition would not be significantly adverse.
Consummation of the proposed transaction would
represent a change in the nature of competition in
Boonville as the remaining locally-headquartered
bank would be in direct competition with a branch
of a substantially larger institution in place of
a bank of comparable size.
Requests by Internal Revenue Service (Items 5 and 6).
There
had been distributed a memorandum dated September 8, 1966, from the
Legal Division regarding a request by the Acting Commissioner of Interrtal
Revenue that his designee be permitted to examine certain parts of
411 examination report and other papers relating to the examination as
Of November 14, 1962, of Boston Overseas Financial Corporation, Boston,
9/14/66
-4-
Massachusetts, a wholly-owned subsidiary of First National Bank of
Boston.
The memorandum described the purpose for which the Internal
Revenue Service desired the information requested, commented on the
Board's practice in regard to supplying certain types of unpublished
information to other Government agencies, and concluded with the recommendation that the Board grant the requested permission.
A draft of
letter to the Acting Commissioner of Internal Revenue reflecting that
recommendation was attached.
After discussion the letter was approved unanimously.
A copy
is attached as Item No. 5.
Concurrently with consideration of the foregoing item, the Board
discussed the implications of a situation, reported by Mr. O'Connell, in
which the Internal Revenue Service had issued summonses to Valley Bank
°f Nevada, Reno, and Bank of Las Vegas, both in Nevada, calling for the
Production by each of the banks of four specified reports of examination,
47° of which were prepared by the State of Nevada and the other two by
the Federal Reserve Bank of San Francisco.
nically the property of the Board.
The latter reports were tech-
Internal Revenue Service had indicated
that the reports were needed for purposes of an investigation of the tax
returns of the two banks.
However, because of circumstances that Mr.
131Connell described, there seemed to be some reason to believe that the
in terest of Internal Revenue Service in the reports might be of a broader
nature -
The Federal Reserve Bank of San Francisco had expressed reserva-
ti"s whether the member banks should comply with the summonses in the
k)k)
9/14/66
-5-
absence of a court order, and the Division of Examinations also had misIt was understood that the Attorney General for the State of
gtvings.
Nevada had advised the banks not to produce the reports of examinations
Made by the State authorities, on the ground that the summonses should
have been directed to the State banking authorities rather than to the
hanks.
During discussion of various aspects of the problem there was
general agreement that, while the Board should be cooperative, within
reasonable limitations, with respect to requests by other Government
agencies, it would be preferable that Internal Revenue Service obtain
the information it needed through administrative arrangements in
Washington rather than through action in the field.
In the course of further discussion, it was agreed that the most
satisfactory approach to resolving the particular issue here involved
would be for Governor Robertson to contact the Couunissioner of Internal
Revenue, explain the problem, request that the summonses be withdrawn,
and assure him that the San Francisco Reserve Bank would cooperate in
making available pertinent information from the examination reports in
question.
Secretary's Note: Subsequent to a telephone
conversation with the Commissioner of Internal
Revenue, Governor Robertson addressed a letter
to President Swan of the Federal Reserve Bank
of San Francisco in the form attached as Item
No. 6.
9/14/66
-6Report on mobilization activities (Item No. 7).
There had been
distributed a memorandum dated September 7, 1966, from Mr. Harris attaching a draft of report on mobilization activities for the past year to
be sent in response to the usual request from the Joint Committee on
Defense Production.
The proposed report summarized preparedness pro-
grams relating to the Federal Reserve System and to commercial banking
institutions, and reported on the V-loan program (Government guaranteed
loans to finance defense production).
After summary comments by Mr. Harris, the report was approved
unanimously.
A copy of the transmittal letter to Committee Chairman
Robertson is attached as Item No. 7.
Messrs. Harris, O'Connell, Shuter, Egertson, Maguire, and
?oundstone then withdrew from the meeting.
New York building program (Item No. 8).
On June 24, 1966, the
E°ard granted the Federal Reserve Bank of New York an expansion of
authority to terminate certain leases on property acquired in 1964 as
a site for additional office space.
"4
However, the Board deferred action
request by the New York Bank for permission to engage an architect
to prepare preliminary plans and specifications for an annex building,
Principally because of uncertainties in then-available information bearing upon the impact of automation on the future size of the Bank's staff
and on its space needs.
The Board's staff was requested to prepare an
analYsis of those needs in the light of questions raised by members of
the Board.
-7-
9/14/66
There had now been distributed a memorandum dated August 29,
1966, from Mr. Kiley, attaching a draft of letter that would inform the
Federal Reserve Bank of New York of the Board's desire for further information before acting on the Bank's request for authority to have preliminary plans for a building prepared.
The letter would enclose a copy
of a study plan developed by the Division of Bank Operations pursuant
to the Board's June 24 request.
During discussion, there was agreement on several changes in the
draft letter.
In addition, Governor Brimmer recalled that at the meeting
On June 24 he had suggested the importance of taking into account environmental considerations.
He continued of the opinion that this was a
substantive facet of the study.
Other members of the Board agreed that
the matter of environment should be taken into account in the study, but
felt it would not be necessary to make explicit reference to that facet
of the matter at this time.
The letter was thereupon approved unanimously in the form attached
as Item No. 8.
Messrs. McIntosh and White then withdrew from the meeting.
Discount administration.
There had been distributed a memorandum
dated September 9, 1966, from Mr. Holland regarding measures taken to
imIPlement the discount administration program initiated by the Federal
Reserve early this month.
A telephone conference held with the discount
°fficers of the Federal Reserve Banks indicated two points in particular
concerning which the staff would like to know the Board's thinking.
9/14/66
-8The first question related to the desirability of coordinating
interpretations of the program by the Board or its staff and by the
Reserve Banks.
To this end, it was suggested that, if feasible, any
member bank officer who inquired of the Board or its staff regarding
the import of any aspect of the program be referred to the discount
Officer of his Reserve Bank.
If it was not feasible to refer the inquiry
in such manner, it was suggested that a memorandum of the substance of
the question and the reply given be sent to the appropriate discount
Officer.
The second question involved differences in the approach taken
by the
various Reserve Banks in implementing the announcement of the
Program; some had had meetings with member banks to discuss contemplated
Procedures, others had provided information only when member banks
requested clarification, and still others planned to elaborate on the
subject only when a member bank arrived at a borrowing position that
zight conflict with the principles of the program.
The question was to
What extent greater uniformity would be desirable, and through what means
it should be achieved.
At the Board's request, Mr. Holland commented in supplementation
of the distributed material, bringing out that the Board's views were
scqight especially as guidance for the staff in discussions at next week's
"
hference of the Federal Reserve discount officers in New York.
The ensuing discussion disclosed general agreement among the
Illembers of the Board, with respect to the first question raised in the
irieln°randum, that coordination in the manner suggested would be desirable.
P/
1
4
?
9/14/66
-9In regard to the different approaches used by the Reserve Banks
in implementing the program, Chairman Martin expressed the view that
while uniformity of policy was desirable, the Board should not go too
far in telling the individual Reserve Banks how to operate; it was to
be expected that there would be judgmental differences on administrative
Procedures.
Governor Robertson remarked that the question appeared to be
°ne of deciding the best lines of communication between the Reserve Bank
and the member banks of each District, and that the Reserve Banks should
be free to follow, after due consideration on their part, whatever course
aPPeared best in the light of their particular circumstances.
Governor Brimmer agreed that the Board should not attempt to
instruct the Reserve Bank Presidents or the discount officers in detail
how to
proceed.
However, his thought was that it would be well for each
Reserve Bank to have at least one meeting with officers of leading banks
for discussion of the program, as a follow-up to the letter that had been
sent by the Reserve Banks to all member banks.
Banks
He believed the Reserve
that were not planning to discuss the program until a member bank's
borrowing position needed special attention should be encouraged to take
Some action before that point was reached.
After further discussion Chairman Martin summarized the tenor
of the Board's views by saying that the staff could indicate at the
discount officers' conference the Board's interest in making the program
33„.i3
9/14/66
-10-
an effective one, and urge the individual Reserve Banks to take whatever
measures would produce that result.
If the discussions at the confer-
ence disclosed any significant operational problems, the staff should
report back to the Board.
H.R. 14026.
Governor Robertson requested exploratory discussion
of possible actions to be taken by the Board upon passage, which appeared
imminent, of H.R. 14026, which would provide flexible authority for Federal supervisory agencies to set maximum rates on deposit-type accounts,
expand the permissible range of reserve requirements on time deposits in
member banks, and authorize the System to buy and sell all Federal agency
°bligations.
(During Governor Robertson's opening remarks the members
of the Board were furnished copies of memoranda dated September 14 from
Mr. Eckert regarding the definition of consumer-type time deposits, from
Messrs.
Keir and King regarding the setting of rate spreads within stat-
utory rate
ceilings for different types of savings institutions, and from
Messrs. Brill and Partee discussing the merits of a freeze on time deposit
interest rates.
Also distributed were tables outlining alternative rate
ceiling plans, effective interest or dividend rates paid by depositarytYPe financial institutions, and member banks paying over 5 per cent on
anY consumer-type time deposit on May 11, 1966.)
Governor Robertson commented that three guidelines for administrative action were embodied in the legislation:
first, a "sense of
congress" statement that interest rates should be kept as low as possible
-11-
9/14/66
in the light of prevailing money market and general economic conditions;
second, an indication that it was incumbent upon the Federal authorities
to prevent further escalation of interest rates; and third, a provision
that the regulatory authority to implement these objectives was only
temporary, terminating automatically in one year.
He believed that the
Board should act fairly promptly after the new law was approved.
Governor Robertson then outlined possible actions that the Board
might take, emphasizing that he was trying to generate suggestions to
assist the Board in thinking through the problem and did not wish to
foreclose any approach.
He noted that the rate ceilings to be adopted
would have to be the subject of consultation with the Federal Deposit
Insurance Corporation and the Federal Home Loan Bank Board; the latter
would be setting dividend ceilings for the first time on savings and
loan share accounts
It probably would be difficult to obtain agreement
uPon the differential to be provided between rates payable by thrift
institutions and by member and insured nonmember commercial banks.
Over
the years it had been felt that a differential of 1/2 of 1 per cent favoring thrift accounts was justified as an offset to the advantage enjoyed
by commercial banks in attracting customers by virtue of the wider range
°f services that could be offered.
However, his view was that a differ-
ential of 1/4 of 1 per cent might be more realistic at the present time.
A related circumstance was a problem faced by the Federal Home
Loan Bank Board in regard to savings and loan associations in California,
9/14/66
-12-
Alaska, Nevada, and Hawaii, which had been offering higher rates than
institutions in other parts of the country to attract outside funds.
Governor Robertson said that while his preference would be to have
uniform rates throughout the country for institutions of the same types,
he recognized the fact that the foregoing circumstance might require
some compromise of that principle.
Governor Robertson then advanced, as a point of departure, two
Possible courses of action that the supervisory agencies might follow
upon enactment of the pending legislation to carry out the underlying
interest rate objective, both of which would focus on consumer-type
time deposits of under $100,000.
The first possibility would be to
establish a ceiling of 5 per cent for cominercial banks, with differential rates within that ceiling based on maturity, and a 5-1/4 per cent
maximum dividend rate for savings and loans and mutual savings banks.
In the alternative, a ceiling of 5 per cent for commercial banks, without regard to maturity, and 5-1/4 per cent for thrift institutions could
be established, accompanied by a requirement that rates presently below
these levels be maintained at the existing level on the theory that such
a s tructure already must reflect a viable competitive posture.
He rec-
cgnized, however, that to roll back rates for banks in areas where they
had been competing most aggressively with mutual thrift institutions
fOr funds, or to freeze rates where such competition had not been particularly strong but there was a possibility it might develop in intensity,
(It
03,3s
t
9/14/66
-13-
could be inequitable.
While data for the last six months indicated that
banks had shown a more satisfactory trend in attracting savings funds
than had the mutual thrift institutions, these data were aggregative and
therefore did not reflect variations due to geographical or other considerations.
Governor Robertson observed that, all things considered, it
would seem that the action to be taken should be one that would not occasion a severe impact on flows of savings funds, while conforming to the
underlying spirit and purpose of the legislation.
During the following discussion Chairman Martin expressed the
view that the Board should not take action hastily, and should think
through the problem carefully; he would rather be subject to some criticism for delay than to act precipitously.
Especially, he believed it
advisable to hear the views and proposals of the other agencies involved,
and then determine how the Board's action should be coordinated with them.
Governor Brimmer said he thought the question of timing was vital;
the October 1 interest or dividend date would be of special interest.
Governor Robertson expressed agreement, but added that one of
he Problems faced by the Federal Home Loan Bank Board was that a number
Of savings and loan associations were on a semiannual rather than quarter_
Y
dividend basis.
Governor Brimmer stated that it would be his preference to avoid
c0111Plexity and to take as simple an action as possible.
He would favor
9/14/66
-14-
steering clear of action involving maturities, and he believed imposing
a 5 per cent rate ceiling on time deposits under $100,000 would be
reasonable to separate consumer-type certificates from money-market
certificates.
Also, while he conceded the desirability of a differen-
tial for mutual thrift institutions, he thought that decision must be
left primarily to the agency concerned.
Governor Shepardson agreed that there was merit in the thought
of keeping the action simple and avoiding any more disruption than necOn the other hand, he could see more justification on economic
essary.
grounds for a differential in terms of maturity than on any other basis.
At the conclusion of the discussion it was understood that the
Staff would develop additional background analysis as a basis for further
co nsideration of the subject within the next few days, and that Governor
Robertson would represent the Board in interagency consultations on this
s
ubject.
The meeting then adjourned.
Secretary's Notes: Attached as Item
No. 9 is a copy of a letter that was
sent over the signature of Chairman
Martin to the Chairman of the House
Banking and Currency Committee on
September 13, 1966, regarding S. 1556,
a bill that would authorize the Board
of Governors of the Federal Reserve
System to delegate certain of its
functions.
On September 13, 1966, Governor
Shepardson approved on behalf of the
Board the following items:
OA;
-15-
9/14/66
Letter to the Federal Reserve Bank of Cleveland (copy attached
as Item No. 10) approving the appointment of Donald R. Barnard as
assistant examiner.
Telegram to the Federal Reserve Bank of Atlanta (copy attached
aS Item No. 11) approving the appointment of David L. Billingsley as
assistant examiner.
Memoranda recommending the following actions relating to the
Board's staff:
AzzaiaLaTIL
Charles W. Bennett as Analyst, Division of Bank Operations, with
basic annual salary at the rate of $6,877, effective the date of entrance
Upon duty.
Military leave
Reginald Haynes, Messenger, Division of Administrative Services,
for a period of approximately two years beginning the close of business
September 23, 1966, for a tour of duty in the Armed Forces of the United
States.
Acceptance of resignation
Pearle E. Randour, Statistical Supervisor, Division of Data
processing, effective the close of business September 23, 1966.
Governor Shepardson today approved
on behalf of the Board the following
items:
Letter to the Federal Reserve Bank of Philadelphia (copy attached
as Item No. 12) approving the appointment of Arthur L. Morath, Jr., as
assistant examiner.
Letter to the Federal Reserve Bank of Kansas City (copy attached
as Item No. 13) approving the designation of 51 employees as special
assistant examiners.
Letter to the Federal Reserve Bank of San Francisco (copy attached
as Item No. 14) approving the appointment of Ruel Baker, Jr., as assiscant examiner.
9/14/66
-16-
Memorandum from the Division of Personnel Administration dated
September 12, 1966, recommending approval of certain outside business
or teaching activities reported by members of the Board's staff and
not previously approved by the Board.
Memoranda recommending the following actions relating to the
Board's staff:
AaptalatImItl,
Carolyn L. Babin as Statistical Clerk, Division of Research and
S tatistics, with basic annual salary at the rate of $4,776, effective
the date of entrance upon duty.
Shirley L. B. Jackson as Chart Machine Operator, Division of
Data Processing, with basic annual salary at the rate of $7,055,
effective the date of entrance upon duty.
AS.S.tRtance
of resignation
Priscilla E. Wurtzel, Records Clerk, Office of the Secretary,
effective the close of business September 16, 1966.
BOARD OF GOVERNORS
Item No. 1
9/14/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
PONDENCE
ADDRESS OFFICIAL CORRES
TO THE BOARD
September 14, 1966
Board of Directors,
The Merrill Trust Company,
Bangor, Maine.
Gentlemen:
al
The Board of Governors of the Feder
by
lishment
Reserve System approves the estab
Maine, of a
r,
Bango
ny,
Compa
The Merrill Trust
Lincoln, Maine,
branch located at 81 Main Street,
within six
provided the branch is established
r.
lette
this
of
months from the date
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.)
BOARD OF GOVERNORS
Item No. 2
9/14/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
NDENCE
ADDRESS OFFICIAL CORRESPO
TO THE BOARD
September 14, 1966
Board of Directors,
Security Trust Company of Rochester,
Rochester, New York.
Gentlemen:
The Board of Governors of the Federal Reserve
which
System extends to October 6, 1967, the time within
York,
New
er,
Rochest
Security Trust Company of Rochester,
oft
Browncr
of
may establish a branch on the south side
BouleBoulevard, east of the intersection of Browncroft
d
Penfiel
vard, Blossom Road and Creek Street, Town of
(unincorporated area), Monroe County, New York.
The Board trusts that continuing attention
is being given to your bank's capital position.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 3
9/14/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 14, 1966
Board of Directors,
Bank of Keytesville,
Keytesville, Missouri.
Gentlemen:
The Federal Reserve Bank of St. Louis has forwarded to
the Board of Governors a letter dated August 24, 1966, signed by
resolution,
President Herman King, together with the accompanying
in the
membership
signifying your intention to withdraw from
months'
six
the
of
Federal Reserve System and requesting waiver
notice of such. withdrawal.
The Board of Governors waives the requirement of six
months' notice of withdrawal. Under the provisions of Section
208.10(c) of the Board's Regulation H, your institution may accommonths
Plish termination of its membership at any time within eight
membership
from the date that notice of intention to withdraw from
St. Louis
was given. Upon surrender to the Federal Reserve Bank of
stock
such
n,
of the Federal Reserve stock issued to your institutio
thereon.
Will be cancelled and appropriate refund will be made
be
It is requested.that the certificate of membership
returned to the Federal Reserve Bank of St. Louis.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 4
9/14/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS
orricsAL
CORRESPONOCNCE
TO THE BOARD
September 14, 1966
The
Honorable K. A. Randall, Chairman,
Federal Deposit Insurance Corporation,
Washington, D. C. 20429
Dear Mr. Randall:
September 6, 1966,
Reference is made to your letter of
Keytesville,
e"cerning the application of Bank of Keytesville,
Miss
after withdrawal
for continuance of deposit insurance
cniri)
fr°r11
membership in the Federal Reserve System.
ms urged upon the
There have been no corrective progra
banL,
consummated,
--) or agreed to by it, which have not been fully
be incora
:_ld
there are no programs that the Board would advise
Pt rated as conditions of admitting the bank to membership in
e System.
e Corporation as a nonmember of the Federal Reserv
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 5
9/14/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADORES/ orriciAL CORRESPONDENCE
TO THE BOARD
September 14, 1966
William H. Smith, Acting Commissioner,
Internal Revenue Service,
U. S. Treasury Department,
20224
Washington, D. C.
Re:
CP: AP: SS: MGH
Dear Mr. Smith:
Pursuant to your request of August 24, 1966, the Board
ks
of Governors will make available to Mr. Martin G. Hendric
of the
)
reports
related
(and
Portions of the Examination Report
r
transfe
the
ing
respect
tion
Boston Overseas Financial Corpora
Boston
de
era
Financi
cion
of the capital stock of the Corpora
s Financial
S.A.F.y C. from Massnat Corporation to Boston Oversea
arrange to
may
ks
Hendric
Corporation on November 28, 1961. Mr.
the Board's
at
him,
to
ent
inspect the reports, at a time conveni
may be
ments
arrange
The
of
during official business hours.
code
ent
governm
ning
telepho
by
made through Mr. Glenn M. Goodman
147 extension 612.
understanding
These reports are made available with the
strict
in
held
be
will
therein
that the information contained
gation.
investi
for
leads
ing
develop
confidence and used only for
the
use
to
made
be
will
effort
no
It is further understood that
further
without
ing,
proceed
similar
information in any court or
authorization from the Board.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
0M,f,r,0
t:``,4bitoly,*1
Item No. 6
9/14/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE
OF THE VICE CHAIRMAN
September 16, 1966
Mr, Eliot J. Swan, President,
Federal Reserve Bank of San Francisco,
San Francisco, California. 94120
Dear Mr, Swan:
This refers to the receipt by Valley Bank of Nevada, Reno,
and Bank of Las Vegas, Las Vegas, both of Nevada, of summonses from
the Internal Revenue Service ("IRS") calling for the production by
each of the banks of four specified reports of examination, two of
Which were prepared by the Federal Reserve Bank of San Francisco,
and two by the State of Nevada Banking Division. The summonses are
!tated to have been issued in connection with an investigation by
IRS of the tax returns of the two banks for the calendar years 1964
and
, 1965. With respect to the two reports in the possession of each
.1 that were prepared by your Bank's examiners, you have asked that
1111(
the Board respond to the banks' requests for instructions regarding
their response to the summonses.
The Board has been informed of the facts in this matter,
luding your staff's conversations with representatives of the IRS,
and of the position which the State of Nevada Superintendent of Banks
has taken
in directing the banks to decline to respond to the demand
or State reports of examination unless and until summonses are directed
to the
a
Superintendent of Banks. The Board also was informed of and
fully the reasons underlying your Bank's opposition to
authorizing the banks to comply with the demand for the Board's reports
:rhorizing
„ examination. At the same time, the Board expressed its concern over
1:".1"e likelihood that its refusal to authorize response to the summonses
Would result in IRS seeking Federal district court enforcement thereof.
er Board was strongly of the view that preferable to the prospective
Court
action would be an administrative resolution of the matter.
ine
With Board concurrence, I telephoned Commissioner of Internal
Rev.
-nue Cohen, advised him of the problem, expressed the Board's conthe potential for public litigation involving the Federal
moserve System, IRS. and member banks, and indicated that if the sumnsea were withdrawn tile Board would make available at your Bank your
Mr. Eliot J. Swan
-2-
coPies of the Federal Reserve reports of examination in question.
In making this suggestion, I expressed the Board's desire to cooperate
With IRS in its law enforcement efforts and expressed my belief that
the proposal would meet the investigative needs of IRS. The
Commissioner called me later in the day and assured me that the
summonses for the Board's copies of reports of examination of the two
banks would be withdrawn, and that his staff would be told that IRS
field representatives could contact you reipecting arrangements for
access to the reports of examination in question.
Accordingly, the Board authorizes you to make available to
representatives of the IRS, for study at your Bank under mutually
agreeable time and circumstances, reports of examination of June 9,
1964, and March 22, 1965, of Valley Bank of Nevada, and reports of
examination of October 26, 1964, and May 14, 1965, of Bank of Las Vegas.
This authorization contemplates IRS access only to the open section of
the four reports, with opportunity for notetaking or for copying of
such Portions of the several reports of examination as are shown to be
reasonably relevant to the investigation being made of the 1964 and
1965 tax returns of the two banks. Should a proposal for extracting or
:
°PYing a particular portion of a report raise a serious question either
i s to the relevancy of the data sought to the stated purpose of the IRS
nvestigation or as to a potential conflict with the public interest,
such question cannot be resolved by the discussants, the matter
Should be
forwarded to the Board for determination. Finally, the authorlzation herein given contemplates that any information obtained by IRS
r°111 its study of these reports of examination will be used solely for
cuve atigative purposes and that before any other use is made of any in:motion obtained from the reports of examination, particularly its
t, in a judicial proceeding of any nature, the Board's authorization
nerefor will be obtained.
I
Again, I wish to emphasize that the manner in which this
Problem has been resolved reflects the Board's desire to give the
full
est practicable weight to the considerations raised by you and
Your
associates in urging that the member banks not be authorized to
,T11PlY with the summonses issued by IRS, and at the same time to connue
i
in effect the pattern of cooperation between the Board and other
agencies in their law enforcement efforts. The arrangements
Zaeral
de
appear to avoid the most troublesome aspect with which we were
ay
fae", namely, a courtroom confrontation between the Board and IRS. The
idance of such confrontation in the manner proposed appears to be in
the
best interest of the parties involved, and of the public.
;:c
Your assistance along the lines indicated will be appreciated.
Sincerely,
(Signed) J. L. Robertson
J. L. Robertson.
BOARD OF GOVERNORS
Item No. 7
9/14/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
September 14, 1966
The Honorable A. Willis Robertson,
Chairman,
Joint Committee on Defense Production,
Congress of the United States,
Washington, D. C.
Dear Mr. Chairman:
In response to your letter of July 1, 1966, attached is
a summary of mobilization activities of the Board of Governors
for the year ending June 30, 1966.
The summary covers three major programs -- preparations
of the Board of Governors and Federal Reserve Banks for war emergencies, preparations of banking institutions for the continuity
Of operations in the event of an attack on the United States, and
activities related to the guaranteed defense production loan program.
Sincerely yours,
(Signed) Wm. HcC. Martin, Jr.
Wm. McC. Martin, Jr.
Attachment.
BOARD OF GOVERNORS
Item No. 8
9/14/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 15, 1966.
Mr. Alfred Hayes, President,
Federal Reserve Bank of New York,
New York, New York 10045.
Dear Mr. Hayes:
This refers to the request in your letter of April 19,
1966, for permission to engage an architect to prepare preliminary
Plans and specifications for the proposed additional banking quarters
for the head office.
During the Board's consideration of the differing views
expressed in your letter and in the report of the Diebold Group, Inc.,
which accompanied it, question was raised whether the building plans
should be deferred until the impact of automation on Reserve Bank
operations becomes more clear. The difficulties that have so far
been encountered in attempting to resolve this question would seem
to suggest a likelihood that there is not yet available enough
information to permit settled judgments in this regard.
During the discussions of your letter of April 19, 1966,
questions were also raised about the following matters and the Division of Bank Operations was asked to make a study and report on them:
(1)
Reliability of current staff levels as a basis for
estimating future space requirements.
(2)
Desirability of retaining the present main building,
from the point of view as to whether it would be
prudent to base building plans on long-term continued
use of a structure that is now over 40 years old.
Pursuant to this assignment the Division of Bank Operations
has developed a study plan which the Board has approved, and a copy
°f which is enclosed. The study plan calls for considerable additional
IP
fy
4 _Ait.
1.-1110...,..".43
information from your Bank, and your cooperation in this regard will
be appreciated. If your staff has any questions concerning the data
requested, it is suggested that they be addressed to Mr. John N. Kiley,
Assistant Director, Division of Bank Operations.
Very truly yours,
Merritt/gherma
Secrbtary:
Enclosure.
4.1,)(1
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 9
9/14/66
WASHINGTON, 0. C. 20551
OFFICE OF THE CHAIRMAN
September 13, 1966
The Honorable Wright Patman,
Chairman,
Committee on Banking and Currency,
House of Representatives,
Washington, D. C. 20515
Dear Mr. Chairman:
This is in response to your request for a report on S. 1556.
This bill would authorize the Board of Governors to delegate to its
members or employees or to the Federal Reserve Banks the performance
of functions of the Board other than its functions relating to the
issuance of regulations or pertaining principally to monetary and
credit policies. The Chairman of the Board would assign responsibility
for the performance of particular delegated functions. Effective
administrative means for review and control of actions at a delegated
level would be afforded by a provision of the bill that would enable
any member of the Board to require review of such action by the Board
itself.
In recent years, the responsibilities of the Board of
Governors have increased substantially, both in the field of monetary
and credit policy and in the field of bank supervision and regulation.
For example, the Bank Holding Company Act of 1956, the Bank Merger
Act of 1960, and the Securities Acts Amendments of 1964 have substarptially added to the regulatory duties of the Board.
The efficient and expeditious performance of the Board's
be facilitated by clear authority, such as that prowould
functions
vided by S. 1556, to delegate certain types of bank supervisory
functions that now must be performed in all cases by the Board itself.
For example, present law expressly requires Board approval
for an extension of time for filing of reports by affiliates of State
Member banks, for extensions of time for registration by a bank holding company, for extensions of time for registration of securities of
State member banks, for waiver of the six months' notice that a State
member bank must give before withdrawing from membership, for any
investment by a State member bank in bank premises in excess of its
capital stock, for the declaration of dividends by a State member
stocks
bank in certain circumstances, and for the purchase of certain
by foreign banking corporations.
The Honorable Wright Patman
-2-
of
The Board might not decide to delegate the performance
d.
enacte
were
all of the particular functions just mentioned if S. 1556
that
ons
functi
They are cited here merely to illustrate the kinds of
ence, the
could be delegated under the bill if, in the light of experi
le.
Board determined that their delegation would be desirab
zed by
Other Federal regulatory agencies have been authori
ed
unlimit
statute or Reorganization Plans to make more or less
sed, for
delegations of their functions. Such authority is posses
l Trade
example, by the Interstate Commerce Commission, the Federa
utics
Aerona
Commission, the Federal Home Loan Bank Board, the Civil
and
ies
Board, the Federal Maritime Commission, and the Securit
Exchange Commission.
is presently
The situation with which the Board of Governors
e any of its
delegat
faced because of its lack of specific authority to
a mesfrom
t
ng excerp
functions is perfectly described in the followi
sage sent to Congress by President Kennedy on April 13, 1961:
tory
"The reduction of existing delays in our regula
at
work
ss
needle
of
tion
elimina
the
agencies requires
estabwere
them
of
many
so
their top levels. Because
lished in a day of a less complex economy, many
be
matters that could and should in large measure
the
by
n
decisio
d
resolved at a lower level require
force
the
by
where,
agency members themselves. Even
now
of circumstances, many of these matters are
must
still
they
level
actually determined at a lower
Cons.
member
bear the imprimatur of the agency
occupy
sequently, unnecessary and unimportant details
s,
member
agency
of
energy
far too much of the time and
the
of
ration
conside
ious
and prevent full and expedit
most important issues."
approval
Accordingly, the Board strongly recommends prompt
ss.
of S. 1556 by your Committee and by the Congre
Sincerely yours,
(41t )111
,
el2(
Wm. McC. Martin, Jr.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 10
9/14/66
WASHINGTON, D. C. 20551
ADDRESS orriciAL CORRESPONDENCE
TO THE BOARD
September 14, 1966
Mr. Harry W. Huning, Vice President,
Federal Reserve Bank of Cleveland,
44101
Cleveland, Ohio.
Dear Mr. Huning:
In accordance with the request contained
in Mr. Pugh's letter of September 8, 1966, the
Board approves the appointment of Donald R.
Barnard as an assistant examiner for the Federal
Reserve Bank of Cleveland. Please advise the
effective date of the appointment.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
3403
Item No. 11
9/14/66
GRAM
TELE
D WIRE SERVICE
LEASE
RESERVE SYSTEM
BOARD OF GOVERNORS OF THE FEDERAL
WASHINGTON
September 13, 1966.
STEPHENSON - ATLANTA
appointment of
Reurlet September 9, 1966, Board approves
examiner Federal
David L. Billingsley as an assistant
Reserve Bank of Atlanta.
Please advise effective date
appointment.
(Signed) Carmichael
Carmichael
34(14
BOARD OF GOVERNORS
Item No. 12
9/14/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ENCE
ADDRESS OrrICIAL CORRESPOND
TO THE BOARD
September 14, 1966
dent,
Mr. Joseph R. Campbell, Vice Presi
ia,
delph
Phila
of
Bank
Federal Reserve
19101
ia.
ylvan
Philadelphia, Penns
Dear Mr. Campbell:
conIn accordance with the request
1966,
9,
mber
Septe
of
tained in your letter
of Arthur L.
the Board approves the appointment
for the
ner
exami
tant
Morath, Jr. as an assis
Please
ia.
delph
Phila
Federal Reserve Bank of
t.
ntmen
appoi
the
of
advise the effective date
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
105
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 13
9/14/66
WASHINGTON, D. C. 20551
DENCE
ADDRESS OFFICIAL CORRESPON
TO THE BOARD
September 14, 1966
141'. George D. Royer, Jr., Vice President,
Federal Reserve Bank of Kansas City,
64106
4n8as City, Missouri.
bear Mr. Royer:
your letter of
In accordance with the request contained in
the following
of
ion
designat
ePtember 8, 1966, the Board approves the
Bank of
Reserve
Federal
the
for
le,!Ployees as special assistant examiners
of
ion
examinat
1966
the
in
ating
:.‘,4nsas City for the purpose of particip
:
Missouri
411tmerce Trust Company, Kansas City,
'
Brown, Robert A.
Cable, Willard
Cahill, Robert
Carr, Gordon
Cockrell, Paul E.
Culbertson, W. E.
Czerwinski, H. R.
Dewey, Keith
Elliott, Jerry
Foley, Cecil
Fraser, Sidney K.
Gaston, Lee
Halley, M. Dee
Hughes, William M.
Hutton, Arthur H.
Kurek, Richard M.
LaRose, Sylvester
Lee, Larry R.
Miller, Larry
McCoy, Ronald
McKee, Hugh
Novak, Frank J.
Park, Dennis
Patterson, Charles
Peters, Kermit R.
Pope, Joseph M.
Rogers, Guy
Searle, Joseph
Shewmaker, Harold
Shreeves, Jerry
Shull, Keith
Slover, Don
Spurlock, John B.
Stanley, Billy R.
Swanson, Estus A.
Tindall, Keith
Trimble, Harry B.
Tuggle, Jess E.
Walker, Lawrence
Wangler, Arthur
Werner, Darrell
Wisniewski, Chester
Wray, Jack
Bramble, Gladys M.
Burns, Dorothy
Hirsch, Catherine
Johnson, Aileen
Lynn, Mary
Norris, Dorothy M.
Polfer, Edna
Smart, Dorothy J.
be terminated immediately
It is noted that these designations will
°II completion of the examination.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 14
9/14/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 14, 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 in
your letter of September 8, 1966, the Board approves the
appointment of Ruel Baker, Jr., as an assistant examiner
for the Federal Reserve Bank of San Francisco, effective
today.
It is noted that Mr. Baker owns six shares of
Bank of America, National Trust and Savings Association,
San Francisco, California. Accordingly, the Board's
approval of the appointment of Mr. Baker is given with
the understanding that he dispose of the stock no later
than 30 days from today's date.
Very truly yours,
(signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER