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Minutes for September 16, 1963
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.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
316
Minutes of the Board of Governors of the Federal Reserve
System on Monday, September 16, 1963.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Robertson
Mitchell
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Miss Carmichael, Assistant Secretary
Mr. Young, Adviser to the Board and Director,
Division of International Finance
Mr. Cardon, Legislative Counsel
Mr. Fauver, Assistant to the Board
Mr. Hackley, General Counsel
Mr. Solomon, Director, Division of
Examinations
Mr. Connell, Controller
Mr. Shay, Assistant General Counsel
Mr. Furth, Adviser, Division of
International Finance
Mr. Kiley, Assistant Director, Division
of Bank Operations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mr. Thompson, Assistant Director, Division
of Examinations
Mr. Sprecher, Assistant Director, Division
of Personnel Administration
Mr. Bass, Assistant Controller
Mr. Spencer, General Assistant, Office of
the Secretary
Mr. Bakke, Senior Attorney, Legal Division
Mr. Young, Senior Attorney, Legal Division
Mr. Doyle, Attorney, Legal Division
Mr. McClelland, Assistant to the Director,
Division of Examinations
Mr. Rumbarger, Review Examiner, Division of
Examinations
Discount rates.
The establishment without change by the
Federal Reserve Banks of Cleveland, Richmond, Atlanta, Chicago,
3161
9/16/63
-2-
St. Louis, Kansas City, Minneapolis, and Dallas on September 12, 1963,
of the rates on discounts and advances in their existing schedules
was approved unanimously, with the understanding that appropriate
advice would be sent to those Banks.
Distributed items.
The following items, copies of which are
attached to these minutes under the respective item numbers indicated,
were approved unanimously:
Item No.
Telegram to the Federal Reserve Agent at Richmond
authorizing the issuance to The First Virginia
Corporation, Arlington, Virginia, of a general
voting permit covering its stock in Peoples' Bank,
Mount Jackson, Virginia; Shenandoah County Bank
and Trust Company, Woodstock, Virginia; and Richmond National Bank and Trust Company, Richmond,
Virginia.
1
Letter to the Federal Reserve Bank of New York
removing the caveat appended to the Board's 1954
ruling on the inapplicability of the prohibition
in section 32 of the Banking Act of 1933 to certain
directors of Investors Management Company, Inc.,
Elizabeth, New Jersey.
2
Memorandum dated September 13, 1963, from Mr. Young,
Adviser to the Board and Director, Division of International Finance, recommending that the Bureau of
the Budget be advised by telephone that the Board
would have no objection to a Treasury draft bill to
amend the International Development Association Act
to authorize the United States to participate in an
increase in the resources of the International
Development Association.
3
3162
_3_
9/16/63
Item No.
Telegram to the Presidents of all Federal Reserve Banks
concurring in the actions of the Conference of Presidents
on September 9, 1963, approving (1) payment of transportation costs on coin shipments to the Reserve Banks from
nonmember banks located outside Federal Reserve Bank and
Branch cities for the month of October 1963, and (2) acceptance of deposits of wrapped coin from member banks
located outside such cities for the period October 1 to
December 31, 1963. 1/
Report on competitive factors (Twin Falls-Hazelton, Idaho).
There had been distributed a draft of report to the Comptroller of the
Currency on the competitive factors involved in the proposal of Fidelity
National Bank of Twin Falls, Twin Falls, Idaho, to acquire the assets
and assume liability to pay deposits made in Hazelton State Bank, Hazelton, Idaho.
The conclusion in the report read as follows:
It does not appear that a significant amount of
competition exists between Fidelity National Bank of
Twin Falls and Hazelton State Bank. The proposed
acquisition would not have adverse competitive effects
on other banks operating in the service area of the
resulting institution.
The report was approved unanimously for transmittal to
the Comptroller.
.17-7fa-TeTnis of the telegram, as attached, were modified by action of
the available members of the Board during the afternoon of September 20,
1963. According to the modification, deposits of wrapped coin would
be accepted by the Reserve Banks from October 1 to December 31, 1963,
from all member banks rather than only from member banks located outside Federal Reserve Bank and Branch cities.
3163
9/16/63
Report to House Subcommittee on Legal and Monetary Affairs
(Item No. 5).
There had been distributed under date of September
9,
1963, a draft of letter to Chairman Dante B. Fascell of the Legal and
Monetary Affairs Subcommittee of the House Committee on Government
Operations enclosing a paper prepared by the Board's staff on bank
supervision and examination in relation to the prevention, detection,
and prosecution of crimes against State member banks.
This paper had
been prepared in response to Chairman Fascell's letter of July 12, 1963,
raising various questions with regard to measures taken by the Federal
supervisory agencies to cope with the problem of crimes against banks
and savings and loan institutions under their respective jurisdictions.
In discussion, Governor Robertson noted that it was anticipated
that the Subcommittee would hold hearings.
In this connection, he felt
that guidance should be given on a question that might arise as to
Whether the Board would favor legislation giving Federal supervisory
agencies authority to require independent audits at their discretion.
In his opinion, the Board should take a position in favor of such
legislation, which would have the effect of encouraging the development
Of adequate
internal audit systems.
Following Governor Robertson's remarks, it was indicated that
a view
favorable to such legislation should be expressed on behalf of
the Board if the
question should be raised at the hearings.
3164
9/16/63
-5At the conclusion of further discussion, it was understood that
Governor Robertson would represent the Board at the hearings if it
developed that an appearance by a member of the Board was desired, and
that otherwise Mr. Solomon, Director, Division of Examinations, would
represent the Board, with the understanding that he could arrange for
such additional Federal Reserve staff representation as seemed appropriate.
The paper prepared for the House Subcommittee on Legal and
Monetary Affairs was then approved unanimously for transmittal to
Chairman Fascell; a copy has been placed in the Board's files.
Secretary's Note: On the basis of advice
received subsequently from the Subcommittee,
it appeared that the Board should be represented by a Board member, along with appropriate staff, at the forthcoming hearings.
A copy of the letter sent to Chairman Fascell
in the light of that advice is attached as
Item No. 5.
Mr. Molony, Assistant to the Board, entered the room at this
Point.
Report to House Subcommittee on Foreign Operations and Government Information (Item No.
6). There had been distributed under date
of September 11, 1963, a draft of reply to a questionnaire from Chairman
John E. Moss of the Foreign Operations and Government Information
Subcommittee of the House Committee on Government Operations regarding
a study being
made by the Subcommittee with respect to the policies
and practices of Federal agencies in gathering and disseminating information to the public and the Congress.
3165
9/16/63
-6Discussion of the draft of reply related principally to the
request for an estimate of total man-hours spent and expenses incurred
in replying to inquiries from the Congress, the press, and the public.
It was recognized that such estimates as might be given would necessarily
have to be rough.
However, it was understood that the staff would prepare,
as accurately as possible, estimates such as the Subcommittee had requested
for inclusion in the reply to Chairman Moss.
Discussion then turned to a question by the Subcommittee regarding the terms used to designate information not available to the public.
It was brought out in the reply that, in addition to "Confidential F. R.",
terms such as "for internal use only" and "not for publication" sometimes
were used to indicate that a document was not intended for distribution
to the public.
Mr. Sherman explained that, as indicated in the reply and an
attachment, the term "Confidential F. R." had originated in
1953, since
the Federal Reserve was no longer authorized to classify security material,
for use on various material and documents to distinguish them from classified information and to identify them as Federal Reserve information.
This
term was used on many documents having confidential aspects and not intended
to be released publicly.
In addition, as the reply to Chairman Moss in-
dicated, certain other terms such as "not for publication" and "for internal
use only" were used occasionally.
These terms were used to designate
material that was not edited with a view to publication but as to which
3-1,66
9/16/63
-7-
there would be no particular objection to its public use.
Reference
to this fact had been included in the reply to give the Subcommittee
an appropriate explanation if some documents were found that were
labeled as "not for publication."
Mr. Sherman expressed the view that
the use of such terms, in appropriate circumstances, was reasonable and
justified.
Mr. Sprecher concurred generally in Mr. Sherman's comments,
although he indicated that there was some feeling on the part of members
of the Board's staff having responsibilities in connection with the handling of security information that use of the term "Confidential F. R. "
was preferable to the use of other terms.
Members of the Board expressed
the view tnai, it would be desirable for the reply to Chairman Moss to be
amPlified along the lines of the explanation Mr. Sherman had given, and
it was understood that this would be done.
At the conclusion of the discussion, the reply to the questionnaire
from the House Subcommittee on Foreign Operations and Government Information
was approved unanimously for transmittal to Chairman Moss subject to changes
In certain respects in light of the suggestions agreed upon at this meeting.
A copy of the letter transmitting the reply to Chairman Moss is
attached as Item No. 6; a copy of the reply to the questionnaire, as transmitted with the letter, has been placed in the Board's files.
Amendment to fiscal agency agreement (Item No. 7).
The action
Of the available members of the Board on September 13, 1963, in
authorizing the sending to the Federal Reserve Bank of New York of a
-8-
9/16/63
letter approving a proposed amendment to the fiscal agency agreement
between the Bank and the International Bank for Reconstruction and
Development to cover a proposed issue of the latter's two-year bonds
of 1963 was ratified by unanimous vote.
A copy of the letter is
attached as Item No. 7.
The meeting then adjourned.
Secretary's Notes: Pursuant to recommendations contained in memoranda from appropriate
individuals concerned, Governor Robertson,
acting in the absence of Governor Shepardson,
approved on behalf of the Board on September 13,
1963, the following actions relating to the
Board's staff:
Salary increases, effective September 15, 1963
Susan R. Clark, Statistical Clerk, Division of Bank Operations,
from $4,390 to $4,530 per annum.
Paul L. Tedrow, Operating Engineer, Division of Administrative
Services, from $5,429 to $5,699 per annum.
Reemployment following maternity leave
Jo Ann Cannada as Clerk-Stenographer, Division of Administrative
Services, with basic annual salary at the rate of $4,110, effective
September 16, 1963.
Acting in the absence of Governor Shepardson,
Governor Robertson today approved on behalf
of the Board the following items:
Letter to the Federal Reserve Bank of Dallas (attached Item No. 8)
aPProving the designation of Darrell W. Marker and Carroll D. Blake
as special assistant examiners.
Memoranda from appropriate individuals concerned recommending the
following actions relating to the Board's staff:
3168
9/16/63
-9-
Transfer
Rosemary V.
Division of Bank
Reserve Examiner
annual salary at
new duties.
Jordan, from the position of Clerk-Stenographer in the
Operations to the position of Special Assistant Federal
in the Division of Examinations, with no change in basic
the rate of $4,3901 effective the date she assumes her
Acceptance of resignations
Judith A. Ziobro, Statistical Assistant, Division of Research and
Statistics, effective at the close of business September 20, 1963.
Barbara Lou Jones, Special Assistant Federal Reserve Examiner,
Division of Examinations, effective at the close of business September 20,
1963.
.'1. 1
Secretar
1C-t
ItemN-431.41;!-'
9/16/63
AM
TELEGR
SERVICE
LEASED WIRE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
September 16, 1963
HYDE -- RICHMOND
KEBJE
A. The First Virginia Corporation, Arlington, Virginia.
B. Shenandoah County Bank and Trust Company, Woodstock, Virginia.
Richmond, Virginia.
Richmond National Bank and Trust Company,
Peoples' Bank, Mount Jackson, Virginia.
C. Prior to issuance of permit authorized herein, Applicant shall
agreement in form
execute and deliver to you, in duplicate, an
#7190).
accompanying Board's letter S-964 (F.R.L.S.
(Signed) Elizabeth L. Curmichael
CARMICHAEL
Definition of KEBJE
The Board authorizes the issuance of a general voting permit, under
the provisions of section 5144 of the Revised Statutes of the
United States, to the holding company affiliate named below
after the letter "A°, entitling such organization to vote the
stock which it owns or controls of the bank(s) named below
after the letter "8° at all meetings of shareholders of such
bank(s), subject to the condition(s) stated below after the
letter "C". The period within which a permit may be issued
pursuant to this authorization is limited to thirty days from
the date of this telegram unless an extension of time is granted
by the Board. Please proceed in accordance with the instructions contained in the Board's letter of March 10, 1947, (S-964).
317()
BOARD OF GOVERNORS
Item No. 2
9/16/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
w•
(-)
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
*
•'.41-REst.*:••
September 16, 1963.
Mr. Howard D. Crosse, Vice President,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mx. Crosse:
On August 28, 1963, you wrote to the Board transmitting
correspondence from counsel for Investors Management Company, Inc.
("Investors"), Elizabeth, New Jersey, proposing termination of the
caveat appended to the Board's 1954 ruling on the inapplicability
of the prohibition in section 32 of the Banking Act of 1933 to
certain of Investors' directors; namely, the requirement that your
Bank keep the factual situation of the relationship between Investors
and its parent company under review and report changes to the Board.
This proposal is occasioned by a recent corporate
reorganization which removed the underwriting function from the
ambit of Investors' parent company's operations and placed it in
another wholly-owned subsidiary of the parent company. In addition,
lt is reported that the long-term commitment by shareholders of
Investors parent regarding election of the one remaining director
who was the subject of the Board's 1954 ruling has been renewed.
You state that you concur in the proposal in question, but before
so advising Investors, the views of the Board are desired.
The Board has carefully considered this matter, including
the rationale underlying its 1954 decision. While of the opinion
that the surveillance provided for in connection with that decision
Was necessary and proper under the facts of the case as they existed
at the time, the Board is further of the opinion that the circumstances
are now such that these precautions are no longer necessary.
Accordingly, the Board concurs that Investors' proposal to
dispense with the periodic reviews heretofore conducted is reasonable
under the circumstances.
In communicating this to Investors, however, the Board
requests that your Bank emphasize that the Board's action is based
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. Howard D. Crosse
-2-
on its consideration of the facts of the corporate relationship
between Investors and Anchor Company and Hugh W. Long and
Company, Inc. as they exist at this time, and that by removing
the caveat from the previous determination the Board does not
intend to suggest that facts might not develop in the future
Which would warrant re-examination of the matter and lead the
Board to the conclusion that section 32 had become applicable
to one or more of Investors' directors.
Very truly yours,
(signed) Merritt Sherman
Merritt Sherman,
Secretary.
31.71
Item No. 3
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
9/16/63
September 13, 1963.
TO:
Board of Governors
FROM:
Ralph A. Young
SUBJECT:
Draft bill to increase the resources of the International Development Association
The Bureau of the Budget has requested the views of the Board of
9overnors on. a Treasury draft bill "To amend the International Development
Association Act to authorize the U. S. to participate in an increase in the
r esources
of the IDA."
This bill would authorize the U. S. Governor of the IDA to vote
for a $750 million increase
in the Association's resources and would authorthe appropriation of $312 million to pay the U. S. share of this increasec
Lhe funds
would be paid to the IDA in three equal annual instalments, begini-ng in fiscal year 1966. The U. S. share of the new subscriptions would be
71.6 per cent of the total, a slight decrease from the 43 per cent share of
the
subscriptions. The National Advisory Council has recommended
a PProval of both the increases in the capital of the IDA and
in the U. S.
sub
scription.
The IDA operates as the "soft loan window" of the International
Bank for
Reconstruction and Development. It normally makes loans repayable
50 years, including a 10 year grace period, which bear interest at the
of 3/4 of 1 per cent per annum; these terms are justified on the ground
that
manY of the less developed countries have incurred such heavy debt ser_ice burdens
that they cannot afford to contract new foreign debt on conve
b ntional terms. The initial hard currency subscriptions of IDA will soon
e fully committed; to date, about two-thirds of its total loan commitments
have been
made to India and Pakistan. A replenishment of its loanable
"Inds is needed if it is to continue operations.
The U. S. Government has taken the lead in pressing for the increase
in
60 the resources of the IDA. Since other countries would be putting up nearly
Per cent of the new subscription, the burdens that IDA assistance would
av bt on the U. S. budget and payments balance would be smaller than in the
senoe of this plan for mobilizing aid contributions from other countries.
The Bureau of the Budget has asked for comments by telephone. I
ree—
hasummend, therefore, that the Bureau be informed by telephone that the Board
no objections to the proposed bill.
9/16/63
TELEGRAM
LEASED WIRE SERVICE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
September 16, 1963.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANES
The Board concurs in actions of Conference of Presidents
On
September 9, 1963 approving (1) payment of transportation costs
on coin
shipments to the Reserve Banks from nonmember banks located
outside Federal Reserve
Bank and Branch cities for the month of
October 1963, and (2) acceptance of deposits of wrapped coin from
member banks located outside such cities for the period October 1
to December 31, 1963.
Board understands that these steps are
exPerimental and temporary in nature, but it agrees that the System
should take any reasonable action that might cause excess supplies
of coin
to be returned to the Reserve Banks for further circulation.
It also understands that the intent of the Conference was for each
Reserve Bank to circularize the banks in its district before
October 1, 1963, as to these actions.
(Signed) Merritt Sherman
Sherman
Note: The terms of this telegram were modified by action
°T the available members of the Board during the afternoon
September 20, 1963. According to the modification,
.;ePosits of wrapped coin would be accepted by the Reserve
hariks from October 1 to December 31, 1963, from all member
,anks rather than only from member banks located outside
rederal Reserve Bank and Branch cities.
I'
4 41
;
Item No.
5
9/16/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
September 17, 1963
Honorable Dante B. Fascell, Chairman,
Legal and Monetary Affairs Subcommittee
of the Committee on Government Operations,
House of Representatives,
Washington, D. C. 20515
Dear Mr. Chairman:
In response to your letter of July 12, 1963, there is
enclosed a paper which we have entitled "Bank Supervision and
Examination in Relation to the Prevention, Detection, and Prosecution of Crimes Against State Member Banks". In this paper the
bank supervisory and examination function as it relates to bank
Physical facilities, personnel, precautionary measures, security
devices, and the apprehension and conviction of criminals is
discussed, and the Board's views and suggestions with respect to
the major areas of inquiry are given. Portions of the Board's
letter of May 3, 1963, have been incorporated in the paper in
order to provide a unified presentation of the subject matter.
Governor J. L. Robertson and Mr. Frederic Solomon,
Director, Division of Examinations, will represent the Board at
any hearings you may hold. They will be glad to participate in
discussion of the various questions included in the attachment to
Your letter.
As requested in your letter, there is also enclosed a
Summary of Bank Shortages in State Member Banks reported to the
United States Attorney during the first six months of 1963. It
has been marked "Schedule E" for attachment to the lettered
schedules previously furnished your Subcommittee.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm, McC. Martin, Jr.
Enclosures
31.75
.....
90fG0v4..
/
;
BOARD OF GOVERNORS
Item No.
9/16/63
OF THE
•0
• 11
FEDERAL RESERVE SYSTEM
WA SHIN GTO N
OFFICE OF THE CHAIRMAN
September 17, 1963.
The Honorable John E. Moss,
Chairman,
Foreign Operations and Government
Information Subcommittee,
Committee on Government Operations,
House of Representatives,
Washington 25, D. C.
Dear Mr. Chairman:
This is in response to your letter of August 8, 1963,
regarding the study being made by the Foreign Operations and
Government Information Subcommittee of the House Committee on
Government Operations with respect to the policies and practices
used by Federal agencies in gathering and disseminating information to the public and the Congress.
The Board's replies to the four parts of the questionnaire furnished with your letter are enclosed.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
Enclosures
6
3117
Item No. 7
BOARD OF GOVERNORS
9/16/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE HOARD
September 13, 1963.
Mr. F. T. Davis,
Assistant Vice President,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mr. Davis:
This refers to your letter of September 11, 1963, and
enclosures, concerning the proposed issue by the International
Bank for Reconstruction and Development of $100 million aggregate principal amount of its Two Year Bonds of 1963, due
September 15, 1965. In that letter you state that it is proposed to amend Schedule A of the Fiscal Agency Agreement, dated
as of February 6,1950, between the International Bank and your
Bank to include the bonds in question.
The Board of Governors approves of your Bank acting
as Fiscal Agent in respect of the proposed issue by the International Bank of its Two Year Bonds of 1963, due September 15,
1965, and approves the execution and delivery by your Bank of
an Agreement with the International Bank in the form or substantially in the form of the draft of Supplement No. 23 to
the Fiscal Agency Agreement, dated as of February 6, 1950,
between your Bank and the International Bank, enclosed with
your letter.
Very truly yours,
(Signed)
Merritt Sherman
Merritt Sherman,
Secretary.
31_77
Item No.
BOARD OF GOVERNORS
8
9/16/63
OF THE
FEDERAL RESERVE SYSTEM
rk44100
+,
04,Vittr
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 16, 1963
Mr. Thomas R. Sullivan, Vice President,
Federal Reserve Bank of Dallas,
Dallas, Texas.
Dear Mr. Sullivan:
In accordance with the request contained in your
letter of September 9, 1963, the Board approves the designation
of Darrell W. Marker and Carroll D. Blake as special assistant
examiners for the Federal Reserve Bank of Dallas for the purpose
of participating in examinations of State member banks.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER