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Minutes for
To:
Members of the Board
Prclm:
Office of the Secretary
September 21, 1966
Attached is a copy of the minutes of the Board of Governors
0f the Federal Reserve System on the above date.
It is proposed to place in the record of policy actions
required to be kept under the provisions of section 10 of the
Federal Reserve Act an entry covering the item in this set of
minutes commencing on the page and dealing with the subject
r
eferred to below:
Page 10
Amendments to Supplement to Regulation Q,
Payment of Interest on Deposits, relating
to maximum rate on time deposits under
$100,000 and compounding of interest.
Should you have any question with regard to the minutes,
will be appreciated if you will advise the Secretary's Office.
Ot
herwise, please initial below to
dte approval of the minutes.
it
Chairman Martin
Governor Robertson
Governor Shepardson
Governor Mitchell
Governor Daane
Governor Maisel
Governor Brimmer
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Federal Reserve Bank of St. Louis
35tiS
Minutes of the Board of Governors of the Federal Reserve
System on Wednesday, September 21, 1966.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Robertson, Vice Chairman
Shepardson
Mitchell
Daane
Maisel
Brimmer
Sherman, Secretary
Kenyon, Assistant Secretary
Bakke, Assistant Secretary
Young, Senior Adviser to the Board and
Director, Division of International Finance
Mr. Holland, Adviser to the Board
Mr. Fauver, Assistant to the Board
Mr. Brill, Director, Division of Research and
Statistics
Mr. Solomon, Director, Division of Examinations
Mr. Johnson, Director, Division of Personnel
Administration
Mr. Hexter, Associate General Counsel
Messrs. O'Connell and Shay, Assistant General
Counsel
Mr. Smith, Associate Adviser, Division of
Research and Statistics
Mr. Sammons, Associate Director, Division of
International Finance
Messrs. Daniels and Kiley, Assistant Directors,
Division of Bank Operations
Messrs. Goodman, Leavitt, and Thompson, Assistant
Directors, Division of Examinations
Mrs. Semia, Technical Assistant, Office of the
Secretary
Mr. Morgan, Staff Assistant, Board Members'
Offices
Messrs. Sanders and Via, Senior Attorneys, and
Smith and Cloth, Attorneys, Legal Division
Mr. Golden, Senior Economist, Division of Research
and Statistics
Messrs. Egertson, Maguire, and McClintock,
Supervisory Review Examiners, Division of
Examinations
Messrs. Donovan, Lyon, Poundstone, Rumbarger, and
Sanford, Review Examiners, Division of
Examinations
Miss Greene and Mr. Kline, Assistant Review Examiners
Division of Examinations
Mr.
Mr.
Mr.
Mr.
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Federal Reserve Bank of St. Louis
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-2Approved items.
The following items were approved unanimously
after consideration of background information that had been made available to the Board.
Copies are attached under the respective numbers
indicated.
Item No.
Letter to Washington Trust Bank, Spokane,
Washington, approving the establishment of a
branch in Opportunity, Spokane County.
1
Letter to Chase International Investment
Cor poration, New York, New York, granting
Permission to purchase shares of Liga
Financiera, S. A., Madrid, Spain.
2
Letter to the Federal Reserve Bank of St.
Louis waiving the assessment of a penalty
incurred
by First National Bank, Cape
1.rardeau, Missouri, because of a deficiency
in its required reserves.
3
Letter to the Federal Reserve Bank of
Philadelphia regarding a study made by the
Bank
of its building operating costs.
4
Letter to the Federal Reserve Bank of Boston
gPproving an adjustment of the employee salary
st
ructure.
5
Letter to the Federal Reserve Bank of Kansas
sl Y approving adjustment of the employee
0:larY structures applicable to the head
'
n c'lce and branches and a special maximum
$21,500 for Grade 16 at the head office.
.1,:etter to the Presidents of all Federal
"serve Banks requesting comments on a prorevision of the form of registration
htagtoirent (P.R. Y-5) to be used by bank
-ng companies; notice of proposed rule
r:'lng, for publication in the Federal Register,
'garding the revised statement.
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Federal Reserve Bank of St. Louis
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7-8
35
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-3Messrs. Sammons, Goodman, and Poundstone then withdrew from the
meeting.
Reports on competitive factors.
A report to the Federal Deposit
Insurance Corporation on the competitive factors involved in the proposed
merger of Kings County Lafayette Trust Company and Lafayette Safe Deposit
Company, both of Brooklyn, New York, was approved unanimously for transmittal to the Corporation.
The conclusion of the report stated that the
Proposed merger would have no effect on competition.
A report to the Comptroller of the Currency on the competitive
factors involved in the proposed consolidation of American Bank and Trust
Company, Suffolk, Virginia, and American National Bank of Portsmouth,
Por tsmouth, Virginia, was approved unanimously for transmittal to the
Comptroller.
The conclusion of the report stated that the proposed
e°nsolidation would not have adverse competitive effects.
Application of Ohio Citizens Trust Company.
dis
There had been
tributed a memorandum dated September 8, 1966, from the Division of
Examinations and other papers relating to the application of The Ohio
Citizens Trust Company, Toledo, Ohio, to merge with The Whitehouse State
Sallinga Bank, Whitehouse, Ohio.
Among other things, the memorandum
bt°ught out that in March 1966 the Whitehouse bank had notified three
Toledo banks and a bank in Sylvania, Ohio (The Sylvania Savings Bank
e°111PenY), of its interest in receiving offers for a merger.
The two
14rgest banks in Toledo declined to make an offer and the offer of Ohio
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Citizens Trust was accepted.
The Sylvania bank's offer was $1 per share
less than the offer of Ohio Citizens Trust.
The Division recommended approval, stating that the conversion
of Whitehouse State Savings Bank's two offices into branches of Ohio
Citizens Trust Company would provide the Whitehouse and Holland communities with additional services and broader credit accommodations without
significant adverse competitive effects.
The Whitehouse-Holland area
had good potential for growth as it was the most readily available area
for residential development in the Toledo metropolitan area.
Whitehouse
State Savings did not have the financial resources to serve the potential
credit needs of this area.
Approximately 62 per cent of Whitehouse State
savings Bank's deposits were in time and savings accounts.
It currently
Paid 3 per cent on savings accounts, and if it were forced to increase
his rate to remain competitive in the area, its earnings prospects might
be unfavorable.
If the merger were approved, the Whitehouse bank's current
customers would receive the more attractive rates currently offered by
C)hio Citizens Trust on time and savings accounts.
The Banking Markets Section of the Division of Research and
Sta tistics and the Legal Division recommended that the application be
denied.
stated
ba,o_
In support of its recommendation the Banking Markets Section
that the proposed merger would eliminate a viable independent
that was an effective competitor and whose policies seemed closely
attuned to the convenience and needs of the Whitehouse-Holland area,
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which was considered the relevant market.
The applicant and the two
Other large Toledo banks were now serving the Whitehouse-Holland area
generally; therefore, the merging of Whitehouse State Savings Bank into
°hi° Citizens Trust did not promise any improvement in convenience and
needs.
Moreover, the merger, by eliminating one of two non-Toledo
headquartered independent banks in the county, might also affect adversely
the
prospects of the other independent bank.
There existed a preferable
alternative to the Whitehouse bank (merger with Sylvania Savings) should
compelling reasons arise for merging.
The Legal Division's reasons for recommending denial were not
ma terially different from those of the Banking Markets Section, but the
/3ivision stressed what it considered the importance of the competitive
as pects of the proposal.
Ohio Citizens Trust was presently the third
largest commercial bank in Lucas County in terms of total deposits and,
Ilith the acquisition of the Whitehouse bank, would advance in rank from
third to
second in terms of total loans.
Ohio Citizens Trust and the
47° largest banks together accounted for over 80 per cent of the total
de
Pc
'site and more than 75 per cent of the total loans held by the 59
banking offices of the 11 banks that operated in the Toledo metropolitan
area.
It was true that the proposed acquisition would not increase the
ec3neentration of banking resources by a great amount, but it was equally
true
Leg
that the degree of concentration was already considerable.
al
The
•
Division cited the opinion of the Supreme Court in the Philadelphia
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National Bank case (1963) that "if concentration is already great, the
importance of preventing even slight increases in concentration and so
Preserving the possibility of eventual deconcentration is correspondingly
great."
The Court had also cautioned that it was not to be inferred
that a merger that involved a less substantial increase in concentration
than the Philadelphia case was not violative of section 7 of the Clayton
Act.
Regardless of whether the Court would deem the proposed merger of
the Whitehouse bank as anticompetitive within the meaning of section 7,
the Legal Division was of the view that the adverse competitive considerations outweighed the evidence that could be marshalled to show a
Probable benefit under the banking factors or the convenience and needs
factor.
The Legal Division found no basis for concluding that the existing
banking needs of the area served by the Whitehouse bank were not being
'net satisfactorily and without undue inconvenience, or that the area's
future banking needs would not be adequately served.
A contrary conclu-
sic)
n was compelled by the proximity to the area of offices of Ohio Citizens
'41-ist and of other large banks, by the employment and commuting patterns,
and by the fact that Ohio Citizens Trust and other large banks could
est
ablish de novo branches in the area.
that
The Division was not persuaded
the earnings prospects of the Whitehouse bank might be poor if a
de —
,lovo branch were established nearer to its immediate vicinity by one
°f the larger
banks; the Whitehouse bank was already competing successfully
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with the offices of larger banks.
If it should face financial difficulty
in the future, it seemed likely that feasible alternatives would exist
that were preferable to merger with applicant.
After summary comments by Mr. Egertson, the staff responded to
a number of inquiries by members of the Board centering around the questions whether merger of the Whitehouse bank with Sylvania Savings would
be preferable
to the present proposal, and what might be the competitive
affect on banks in the Whitehouse-Holland area if one of the large Toledo
banks established a de novo branch in the immediate area.
As to the
latter point, one consideration was whether the Whitehouse bank would be
able, without ill effect, to match the higher rates on time and savings
deposits that presumably would be paid by a branch of a large Toledo
bank.
It was also noted that the owners of the Whitehouse bank apparently
wanted to get out of the banking business.
Mr. Via referred to the competitive factor report of the Department
f Justice, which had expressed the view that although approval of the
merger would result in the disappearance of an established independent
bank and would contribute somewhat toward concentration in commercial
banking in the greater Toledo area, it would not materially affect the
StrUCtUre of commercial banking in either of the two service areas.
It
seemed strange to Mr. Via that the Department had not used more pointedly
adve
rQe terms, considering the principle expressed by the Supreme Court
the Philadelphia National decision.
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Federal Reserve Bank of St. Louis
Mr. Solomon, however, remarked
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that the present case did not involve magnitudes comparable to those in
the Philadelphia National case; and the increase in concentration that
would result from the presently proposed merger was minimal.
The members of the Board then stated their positions, beginning
with Governor Shepardson, who said that although conceivably it might
have been preferable if the Whitehouse bank had chosen the merger offer
of Sylvania Savings, such a merger proposal was not before the Board.
It appeared to him that the rapidly growing Whitehouse-Holland area
needed a more active, larger bank.
He did not find a sufficient diminu-
t1°4 of competition or other disadvantages to warrant overriding the
favorable recommendation of the Division of Examinations.
Therefore he
7°41d approve.
Governor Mitchell stated that it seemed clear that the Whitehouse
bank was seeking to end its independent existence, and the question
ePPeered to be whether through merger with Ohio Citizens or with Sylvania
Sayings.
He believed that the analysis of service areas left something
to be
desired, and that the Reserve Bank's investigation had not been
as thorough
as it might have been.
As a general statement, he did not
believe the best job was being done in regard to determination of service
ateas.
It seemed to him that the real competition in the present situa-
14as between the Whitehouse bank and Sylvania Savings; if the Whitehouse bank were eliminated, the competitive impact could be more signifiesht than
the entry of a Toledo bank with a de novo branch.
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Federal Reserve Bank of St. Louis
He was not
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concerned about whether Sylvania Savings could hold its own in competition
with a larger institution, in view of the quality of its management and
the likely extent of preference of local people for a local institution.
He did not regard the discussion of the degree of concentration of deposits
in the greater Toledo area as helpful, because the Whitehouse area had
little relationship to the concentration of deposits in greater Toledo.
In summary, he thought the best way out of an unhappy situation probably
was to approve the proposed merger on the grounds the Division of Examinations had cited.
Governor Daane remarked that he felt much the same as Governor
Mitchell.
While he was not sure whether or not more merit might have
been found in a Sylvania Savings merger proposal, he believed the facts
Presented demonstrated that consummation of the proposal before the Board
would not
have an adverse effect on competition in the community, and as
long as the Whitehouse bank's owners wanted to relinquish their interest
he would approve on the basis of the reasoning of the Division of Examinations.
Governors Maisel and Brimmer and Chairman Martin also indicated
that they would approve for the reasons set forth by the Division of
Examinations.
Governor Robertson stated that he would disapprove.
He saw no
Pcsitive grounds for approval; in his view, nothing in the record indicated that the convenience and needs of the community would be better
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served, and he agreed with the Legal Division and the Banking Markets
Section in regard to the competitive aspects.
The application was thereupon approved, Governor Robertson
dissenting.
It was understood that an order and statement reflecting
this decision would be prepared for the Board's consideration, and that
a statement regarding Governor Robertson's dissent also would be prepared.
Amendments to Supplement to Regulation Q (Items 9 and 10).
On
September 19, 1966, the Board had tentatively decided to amend the
Supplement to Regulation Q, Payment of Interest on Deposits, to reduce
fr°m 5-1/2 per cent to 5 per cent the maximum rate that might be paid
by member banks on time deposits of less than $100,000.
The Supplement
47131.11d also be amended to provide that the effects of compounding might be
disregarded for purposes of determining the allowable rate of interest
utlder the Regulation, but that an explicit statement of the basis of
"n1Pounding must be contained in every advertisement, etc., relating to
the rate offered on a time or savings deposit.
Such action was contin-
ent upon approval of H.R. 14026, which at that time had been passed by
both
houses of Congress and was awaiting the President's signature.
The
bill provided, for the Federal Reserve, expanded authorities for a term
of
0"e Year in regard to maximum rates of interest on time and savings
depos
its, reserve requirements, and open market operations in Federal
agencY obligations.
The provisions of the bill gave to the Federal Home
Loan Bank Board, for the first time, authority to prescribe maximum rates
°n di
vidends of insured savings and loan associations.
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Federal Reserve Bank of St. Louis
35i5
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-11It was now noted that the President had signed the bill this
morning prior to the convening of this meeting of the Board, and the
members of the Board were furnished copies of a draft press release that
would announce the Board's action.
(It was understood that the Federal
Deposit Insurance Corporation and the Federal Home Loan Bank Board also
would make announcements later this morning.)
Question was raised about a sentence in the draft press release
stating that "The action will also help to keep the growth of commercial
bank credit to a moderate pace."
While several possible substitutions
were offered for the word "keep," the consensus was that the word might
be about as acceptable as the others mentioned, and no change was made
in the sentence.
Comments made by members of the Board during the dis-
cussion were to the effect that it was to be hoped that the current action
wc3nld not be interpreted, by reason of the Board's statement, as either a
tightening or an easing credit policy move; that the results were quite
uncertain and predictions should be avoided.
In further discussion Governor Mitchell observed that he would
have
Preferred, for reasons expressed at a previous Board meeting, that
the Board provide a grandfather clause, so as to leave the banks in a
be _
tter Position
to defend existing deposits. Governor Maisel noted that
that
would have been his preference also, particularly since he understood
that the savings and loan associations were to be given the benefit
Of
a
grandfather clause.
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Federal Reserve Bank of St. Louis
He inquired whether the discussion at the meeting
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of the Board with the Federal Advisory Council yesterday might have
influenced other Board members in that direction.
Chairman Martin commented that it seemed clear that there were
going to be some difficulties.
The question was one of the degree.
He
doubted personally whether the inclusion of a grandfather clause would
make LOO much difference, and in any event it would be difficult for the
Board to try to reconsider its action at this juncture.
Governor Daane expressed agreement with the Chairman's concluding comment.
However, he anticipated that as a result of the action
banks might be led to disgorge some part of their remaining security
holdings, with resultant effects on the financial markets.
He was not
Sure to what extent the banks would come to the discount window as an
adjustment alternative, even though the Federal Reserve was receptive.
There followed comments on the estimated number of banks that
might be rather severely affected, and Governor Robertson noted that
he possible inclusion of a grandfather clause had been among the items
discussed in the interagency consultations.
There ensued comments by
several of
the Board members reflecting agreement with the Chairman that,
°tiler considerations aside, a move to include a grandfather clause for
the banks would not be practical at this late hour.
Accordingly, amendment of the Supplement to Regulation Q in the
manner
that had been contemplated was approved unanimously, effective
Se
Ptember 26, 1966, with the understanding that the press release on the
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act0 would be issued at 11:00 a.m., the release to be in the form of
the draft reviewed by the Board
at this meeting.
A copy of the amended Supplement to Regulation Q, as transmitted
to the Federal Register for publication, is attached as Item No. 9.
A
"PY of the press statement, as issued, is attached as Item No. 10.
Messrs. Young, Holland, Fauver, Morgan, and Sanders then withdrew
from the meeting.
Application of First at Orlando Corporation.
There had been
dis tributed a memorandum dated September 13, 1966, from the Division of
4eminations and other pertinent papers regarding the application of
First at Orlando Corporation, Orlando, Florida, to become a bank holding
ens1PanY through acquisition of 80 per cent or more of the voting shares
of The First
National Bank at Orlando, College Park National Bank at
Orlando, South Orlando National Bank, First National Bank at Pine Hills
(Post office Orlando), and The Plaza National Bank at Orlando.
The
13iv1sion recommended approval, as had the Federal Reserve Bank of Atlanta,
but
the Banking Markets Section of the Division of Research recommended
denial.
The Legal Division believed a decision either to approve or deny
the ePPlication would be supportable.
The Division of Examinations' memorandum pointed out that First
Natio
-nal Bank at Orlando was affiliated with each of the four smaller
bank
s through common majority shareholders.
This group of banks held
45
Percent of the total deposits in the primary service area.
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Federal Reserve Bank of St. Louis
As a
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reason in support of the request to become a bank holding company, the
a pplicant contended that although there was affiliation through coLimon
majority ownership of each of the four smaller banks and First National
at Orlando at present, there was not ownership of large blocks of stock
in any of the banks by a few large shareholders, and the ownership relationship could easily change if a number of individual stockholders were
to sel,
their shares.
In explanation of its favorable recommendation the Division
stated that when considering the existing affiliations, it found that
the
proposed acquisitions would have no significant effect on present
c°mPetition or concentration.
Although opinions might differ, the Divi-
si
"found no reasonable likelihood of the banks in the group becoming
So
completely disaffiliated as to place them in competition with each
Other in the future.
On the contrary, there was no indication that the
affiliations by means of common majority shareholders could be expected
to terminate.
Even without common majority shareholders, it was reason-
able to expect that the smaller banks would continue, in effect, as
satellites of First National Bank at Orlando.
Based upon these consid-
erations, it did not appear that the possibilities of lessening of
°Acentration or increase of competition were strong enough to justify
It was felt that the proposal would merely serve to solidify,
ill holding company form, the affiliate relationships that presently
eisted.
The Division found further that the proposed acquisitions
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would have no significant effect on the financial and managerial
resources and prospects of the banks or on the convenience and needs
of the communities served.
The Banking Markets Section cited as the basis for its adverse
recommendation the view that denial would prevent the existing affiliations from becoming permanently solidified.
Approval of the formation
°I a holding company would foreclose the possibility of control over one
°r more of the four affiliated banks being dissipated over time, and thus
would preclude the development of any degree of competition among them.
The creation of an additional holding company in the Orlando market would
4nt only solidify the present high degree of concentration but could well
encourage an increase in concentration in the future.
No apparent short-
run benefits to the public in terms of convenience and needs would result.
In the long run, however, convenience and needs might be impaired to the
extent that the further development of active competition was hindered.
Mr. Lyon summarized the salient facts pertinent to the applicati°n, after which members of the Board raised a number of questions
fc'eusing Principally on the import of the existing affiliation among the
banks
involved in the application and on the question whether or not there
was a likelihood that, if the banks were not tied together more securely
thrclugh a holding company organization, the existing affiliation would be
diabanded.
Mr. O'Connell indicated that the Legal Division was inclined to
clj
sbelieve that the present affiliation of the banks was likely to abate,
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with a resulting increase in competition.
He thought the Board could
reasonably conclude that the potential for competition among them was
minimal.
Governor Maisel asked what the effect would be on the legal
supportability of a decision to approve if the banks were not affiliated.
Re pointed
out that one of the reasons cited by the applicant to justify
the formation of a bank holding company was the need to cement a relationship that otherwise might be eroded by shifts of stock ownership.
Mr. O'Connell expressed the view that in the absence of the
Present affiliation approval of the application would be more difficult
to justify.
As for the apprehension of the applicant that the present
ties among the banks might weaken, he believed that the larger context
Of the application gave some reason to doubt that there was any real
likelihood of such a development.
Mr. Solomon observed that while the degree of control exercised
by
the principal bank in the group might diminish, that would not neces-
sati-lY mean that there would be actual rivalry for business among the
banks.
Governor Maisel then inquired to what extent previous decisions
by
the Board had been based on the existence of a chain banking situation,
nd Mr - O'Connell cited cases in which the Board had in effect taken the
POsition that a particular proposal was tantamount to a reorganization
C°
rporate form of a pre-existing affiliation and thus per se would
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not result in elimination of competition.
However, he did not recall
that the Board had specifically held that the existence of chain banking
warranted approval of a bank holding company application.
Governor Mitchell asked if the Board had a responsibility, when
confronted by a pre-existing situation that had characteristics of monop°1Y, to do what it could to prevent a furtherance of that trend, and Mr.
(P Connell responded that he believed the Board did have such a responsibility.
Governor Mitchell then remarked that while he found the documentaof the point inadequate, it seemed to him that the only sound basis
f°r denial would be a finding that the situation already existing in the
°rlando area was one of undue banking concentration.
If so, it would
aPPear that the proper course should be to attack the status quo rather
than to consent to a change in form through which concentration would
bec°me further entrenched.
Mr. O'Connell replied that in his judgment the Board could, if
it ao
desired, deny the application on a finding that acquisition of the
sh
ares of the banks would formalize an undue concentration that present
data .
indicated to exist.
Governor Robertson inquired whether, if a 45 per cent control
Of
A„
-'110sits now existed in a bank holding company organization, the Board
`4°111d h
ha
ave power under present statutes to require the divestment of a
L 0
r banks to lessen that percentage.
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Federal Reserve Bank of St. Louis
In reply Mr. O'Connell expressed
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the view that the Board would not have such power, although the Department of Justice could proceed under the Clayton Act.
However, if the
Board found undue concentration to exist in a given situation, it would
be improper for the Board to take action that would further the degree
of concentration.
Governor Daane remarked that if there was in fact a possibility
that the affiliations now existing among the banks would weaken, that
14(3u1d appear to be a plus from the standpoint of minimizing banking
concentration and would therefore point toward denial of the application.
Rexter added that it might be said, along the same lines, that if
the application were approved, the present affiliations would be frozen
and the possibility of future competition would be terminated.
Governor Maisel inquired about the relevance of the question of
the
degree to which banking in an area was dominated by holding companies.
There was
already one bank holding company with subsidiaries in the
Orlando area, and as he understood it the addition of the one now seeking
f°rImation would place about 70 per cent of the market in holding company
bank
had
Mr. O'Connell replied that in two previous cases appellate courts
held that it was proper for the Board to take into account the aggre-
gate of banks affiliated with all bank holding companies operating in an
•
Governor Mitchell reiterated the view that there was not sufficient information at hand in regard to the question of the degree of
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concentration in the pertinent market, yet he did not believe it was
lair to deny the application on other grounds if the degree of concentration was the primary negative consideration.
If the degree of
concentration was pivotal to the Board's decision, he believed it important to be very sure of the ground, and therefore further studies should
be made.
He suggested that the Banking Markets Section work with the
bivision of Examinations and the Atlanta Reserve Bank to obtain additional
information on this point, and that in the meantime the case be deferred.
At the request of other members of the Board, Governor Mitchell
mentioned specific types of information he believed should be developed.
Coyernor
Brimmer suggested that the inquiry be broadened to try to
determine whether there was any reasonable possibility that the banks
in the group might become disaffiliated.
Governor Maisel commented that
sli°ther critical point was what the Board's attitude should be if it
determined that banking concentration in the area was already excessive.
At the conclusion of the discussion it was agreed that further
studies along the lines suggested by Governor Mitchell should be made,
aud action on the application was deferred pending those studies.
Messrs. Smith (Research), Thompson, Via, Cloth, Smith (Legal),
C°1den, Egertson, Maguire, McClintock, Donovan, Kline, Lyon, Rumbarger,
a" Sanford, and Miss Greene then withdrew from the meeting.
tealphis Branch building site (Item No. 11).
There had been
4culated a memorandum dated September 13, 1966, from the Division of
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Bank Operations regarding a request from the Federal Reserve Bank of
St. Louis for authority to negotiate for the purchase of a new building
site for the Memphis Branch at a cost of about $530,000.
The memorandum
described the site proposed to be purchased (a full city block bounded
by Exchange, Second, Poplar, and Main Streets containing about 81,300
8qUare feet) and noted that in 1965 the then President of the St. Louis
Reserve Bank had discussed the need for additional space for the Memphis
Tirane_u
with the Board's Committee on Organization, Compensation, and
Building Plans, and subsequently had reported to the Reserve Bank's
di
rectors that the Committee had expressed no objection to the investigation of available sites for a new building.
Attached to the memorandum
xgas a
draft of letter that would state that the Board would interpose no
objection to negotiation by the Bank for acquisition of the proposed
building site.
It was brought out in discussion that there was no doubt as to
the
need of the Memphis Branch for additional space; that the price for
which the proposed site apparently could be purchased was favorable; and
that the location of the site in an area being developed as an urban
l'enewal project seemed to assure that the value of the property was not
likelY to diminish.
At the conclusion of the discussion the letter was approved
Ilnimously.
A copy is attached as Item No. 11.
Messrs. Daniels and Kiley then withdrew from the meeting.
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Federal Reserve Bank of St. Louis
9/21/66
-21Officer salary structure at New York (Item No. 12).
There had
been distributed a memorandum dated September 16, 1966, from the Board's
Committee on Organization, Compensation, and Building Plans regarding a
Proposed revision of the officer salary structure at the Federal Reserve
Bank of New York.
It seemed to the Committee that the extent of the
revisions proposed by the New York Reserve Bank presented a considerable
Problem when compared to salaries at other Federal Reserve Banks.
To
illustrate this point the memorandum cited various interbank relationShips; other comparisons were shown on charts attached to the memorandum.
It was recognized that officer salary ranges at the New York Bank, on
the basis of nonofficial structure surveys, would be higher than at other
Reserve Banks, but the extent of the difference that would be justifiable
Igss a matter of judgment.
There appeared to be adequate headroom in all
Of the officer groups at New York, especially in light of the fact that
most officers who were in the upper quarter of each group had received
substantial salary increases at the beginning of this year and probably
14°Iild not be considered for a salary adjustment effective January 1, 1967.
411°ther problem was that the proposed increase of the minimums of salary
c)uPs D and E would make it possible for the Bank to give a large number
Of salary adjustments in excess of the maximum of 40 per cent.
the
(Under
"40 per cent rule" a Reserve Bank was permitted to give salary
iticreases to no more than 40 per cent of its officers in any one year,
with
certain exceptions.) The Committee recommended for officer groups
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Federal Reserve Bank of St. Louis
9/21/66
-22-
A, B, and C upward revisions, as set out in the memorandum, that were
less extensive than those proposed by the Federal Reserve Bank of New
No revisions were recommended for groups D and E.
York.
Governor Mitchell commented on the Committee's recommendations,
with special emphasis on the degree of disparity between the officer
salary ranges that had been proposed by the New York Bank and those in
effect at the other Reserve Banks.
The revisions recommended by the
C°mmittee were in the nature of a holding operation that would take care
of the Bank's needs for the coming year.
As an aid to judgment regarding
1°Ilger-term problems, he suggested a full-scale review of the officer
"Lary ranges at all Reserve Banks.
He envisaged the study as beginning
with Comparisons of each Reserve Bank's officer salary ranges with the
salaries paid by financial institutions in its community as a basis for
formulating some kind of pattern that would be relatively consistent
thro
ughout the System.
Governor Brimmer expressed the view, with respect to the suggested
study,
that the focus on salary relationships among the Reserve Banks,
slthough a
good idea, might produce misleading conclusions.
Shire
Bank
He was not
that the relationship of officer salaries at the Federal Reserve
of New York to salaries paid by financial institutions in New York
need be the same as the relationship between Reserve Bank salaries and
"unercial bank salaries in other cities. In general, however, in order
to
mLcract and hold capable officers the Reserve Banks must be able to
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Federal Reserve Bank of St. Louis
9/21/66
-23-
offer salaries having a reasonable relationship to salaries paid in
their local communities, and it seemed well to get on with the study.
Governor Daane said that it seemed to him the Board might give
consideration to approving the revisions proposed by the New York Reserve
Bank rather than merely a holding operation.
had
The Reserve Bank's directors
given careful consideration to the relationship of the Bank's officer
salaries
to the salaries paid by commercial banks in their community, and
had concluded that the Reserve Bank was falling far behind competitively.
Re had in mind principally officers in group A, who were in positions of
heavy responsibility and who could easily command higher salaries elsewhere.
He felt that it might be preferable to accept the evaluation of
the New
York Reserve Bank's directors and then proceed with the survey
Of of
salaries over the entire System.
It was highly important to
keep top talent, especially in the areas most vitally related to primary
System responsibilities.
Governor Mitchell observed that the compromise revisions recomended would permit all officer salary adjustments that were anticipated
the near future.
Governor Maisel also concluded that the revisions
°mmended by the Committee would create no undue pressure at this time,
ad
Governor Brimmer agreed that the recommendations of the Committee
14°111d meet the short-run problem.
Governor Daane then said that while he would accept, as of now,
the
action recommended by the Committee, he hoped that the proposed
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Federal Reserve Bank of St. Louis
9/21/66
-24-
survey would be pressed forward as rapidly as possible, because he
thought the System was vulnerable in terms of losing its best people.
In further discussion it was suggested that the proposed survey
include reexamination of the impact of the "40 per cent rule."
Governor Shepardson expressed the view that pressing salary
comparability problems probably related only to a limited number of
o
fficers.
Many salaries were fully competitive, yet when a range was
raised all salaries within it were affected.
It should be remembered
that for many officer positions there were not the same kind of pressures,
such as pressure to produce income, that existed in profit-making institutions.
Governor Brimmer commented that the proposed survey would be a
sizable undertaking and suggested that it might be well to consider
hether specialists outside the System should be engaged for the purpose.
At the conclusion of the discussion the recommendation of the
Committee was approved unanimously.
A copy of the letter in which the
l'ederal Reserve Bank of New York was informed of this action is attached
a8
Item No. 12.
It was understood that the Committee would formulate
Plans for the survey of officer salary structures at the Reserve Banks.
Reports on meetings.
Mr. Brill reported summarily on a meeting
°f the
House Ways and Means Committee, which he had attended at Chairman
Ilartin t S
request, pursuant to a request of the latter by Chairman Mills,
re
-gard'
lng Proposed legislation to implement the fiscal policy measures
reco
mmended by the President in his recent message to the Congress.
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Federal Reserve Bank of St. Louis
9/21/66
-25Governors Daane and Mitchell then commented on the recent
Ineating, which they had attended, of the academic consultants to the
Treasury Department.
The meeting then adjourned.
Secretary's Notes: Letters were sent today to
First National City Bank, New York, New York,
acknowledging receipt of notice of its intent
to establish the following branches: (1) an
additional branch in Panama, to be located in
David; and (2) an additional branch in Kingston,
Jamaica. The letters noted that the expenditures required to establish the branches would
be provided from available local funds.
Pursuant to the procedure approved by the Board
on October 12, 1960, relating to examinations
of Edge and agreement corporations by examiners
for the Federal Reserve Banks of New York and
Philadelphia acting as examiners for the Board
of Governors, a letter was sent today to the
Federal Reserve Bank of Richmond authorizing a
similar arrangement in that District for examinations of Wachovia International Investment
Corporation, Winston-Salem, North Carolina.
A letter was also sent today to the Federal
Reserve Bank of Atlanta authorizing a similar
arrangement in that District for examinations
of Citizens and Southern International Corporation, Atlanta, Georgia.
On September 20, 1966, Governor Shepardson
approved on behalf of the Board memoranda
recommending the following actions relating
to the Board's staff:
t4trarice salary adjustment
Jared J. Enzler, Economist, Division of Research and Statistics,
at th
e rate of $11,111 per annum, effective September 19, 1966 (date
of
b, trance upon duty), rather than at the rate previously approved
J the
Board.
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Federal Reserve Bank of St. Louis
:SSW
9/21/66
-26-
T.E.2211LIE1
Susan K. Huffman, from the position of Stenographer in the Division
°f Personnel Administration to the position of Stenographer in the Division of International Finance, with no change in basic annual salary at
the rate of $4,936, effective September 26, 1966.
D. . Napoleon H. Marrow, Jr., from the position of Messenger in the
sion of Administrative Services to the position of Messenger in the
ooard Members' Offices, with an increase in basic annual salary from
$3,731 to $4,058, effective September 25, 1966.
Governor Shepardson today approved on
behalf of the Board memoranda recommending the following actions relating
to the Board's staff:
Sal-areffective September 25
Name and title
1966
Division
Basic annual salary
To
From
Office of the Secretary
Clor.
pr
'
la
J. Ogden, Secretary
--sncee R. Williams, Senior Records Clerk
$ 5,867
5,859
$ 6,065
6,035
7,253
7,451
5,331
8,218
5,507
8,479
16,675
17,198
16,675
17,198
Legal
Verna P. Ryon, Secretary
Research and Statistics
RUth p
m
Foster, Statistical Assistant
"arley H• McCaslin, Technical Editor
Bank Operations
alPh Massey, Assistant to the Director
Examinations
Jack m
Egertson, Supervisory Review Examiner
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Federal Reserve Bank of St. Louis
), •
9/21/66
-27-
increases, effective September 25
Name and title
1966 (continued)
Division
Basic annual salary
From
To
Administrative Services
Lois A.
Chandler, Utility Clerk
Johnnie D. Jones, Jr., Laborer
Abraham Rose, Operator (Mimeograph)
George William Smith, Laborer
$ 5,507
3,609
4,950
3,609
$ 5,683
3,731
5,200
3,731
16,675
5,331
17,198
6,451
Data Processing
betty
J. Collier, Assistant to the Director
Lee Smithson, Programmer
("Trainee" deleted from title)
Governor Shepardson today noted on behalf
of the Board a memorandum advising that
Winnie L. Tull, Supervisor, Cafeteria,
Division of Administrative Services, had
filed application for retirement for medical reasons, effective October 1, 1966.
Secretary
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No. 1
9/21/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL. CONAC•PONOCNCC
TO TUC MOAN°
September 21, 1966
Board of Directors,
Washington Trust Bank,
Spokane, Washington.
Gentlemen:
The Board of Governors of the Federal System
approves the establishment by Washington Trust Bank,
Spokane, Washington, of a branch on Pines Road between
Riverside and Hain Avenues in Opportunity, an uncorporated town, Spokane County, Washington, provided the
branch is established with one year from the date of
this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
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Federal Reserve Bank of St. Louis
3533
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 2
9/21/66
WASHINGTON, D. C. 20551
ADDRESS
orriciAL
CORRESPONDENCE
TO THE BOARD
September 21, 1966.
Chase Inter
national Investment Corporation,
One Chase Manhattan Plaza
,
New York, New York. 10005
Gentlemen
:
In accordance with the request contained in your letter
°f August
22, 1966, the Board of Governors grants consent for your
..'orporation ("CII
C") to purchase and hold additional shares of Liga
.li
nanciera, S.A. ("LIGA"), Madrid, Spain, at a cost
of approximately
..S$750,000, provi
ded such shares are acquired within one year from
le date of
this letter. In this connection, the Board also approves
th
Purchase and holding of such shares in exces
s of 10 per cent of
IIC's capital and surpl
us.
i
The Board's consent to the proposed additional purchase
and holding
of shares of LIGA by CIIC is granted subject to the
same
conditions as set forth in its letter of March 30, 1965, as
14°dified in
its letter of August 3, 1966.
The foregoing consent is given with the understanding
that
the
now being approved, combined with other foreign
loa,
n
(N - and investments of your Corporatio
n, The Chase Manhattan Bank
tiati"al Association), and Chase Manhattan Overs
eas Banking Corporace
:
n will not cause the
total of such loans and investments to exre d the
guidelines established under the voluntary foreign credit
,traint effort now
in effect and that due consideration is being
ae
tn to the
priorities contained therein. The Board considers
re
compliance with the priorities expre
ssed in Guideline 4 would
colTre that total nonex
port credits to developed countries in •
itiveinental Western Europe not exceed the amount of such loans and
inhiltrilents as of the end of 1965,
unless this can be done without
prio lting the bank's ability to meet all reaso
nable requests for
ritY credits within the over-all
target.
W
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No. 3
9/21/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 21, 1966
Mr. Joseph
C. Wotawa,
Vice President,
Federal Reserve Bank of St. Louis,
P. 0. Box
442,
St. Louis,
Missouri. 63166
Dear Mr. Wotawa:
This refers to your letter of August 30, 1966, regarding
deficiency of $175,105.05 in the reserves of the First National
Bank, Cape
Girardeau, Missouri, for the reserve computation period
ended November 24, 1965.
4
It is noted that (1) the deficiency occurred nine months
ago and
that your Bank inadvertently failed to assess a penalty at
the time.
(2) the omission was only recently brought to light
(J'Ilg an examination of your Bank by the Board's examiners;
after deduction of the excess reserves in the succeeding
r serve period, the remaining deficiency of $165,227.68 would
luire a penalty of $27.16; and (4) your Bank does not feel the
!
Penalty Should be charged after nine months because of the error
n its part.
In the circumstances, the Board authorizes your Bank to
assessment of the penalty of $27.16 for the reserve
`imputation period ended November 24, 1965.
waive
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
3
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 4
9/21/66
WASHINGTON, D. C. 20551
ADOREBB OFFICIAL CORRE
SPONDENCE
TO THE BOARD
September 21, 1966.
Mr. Karl R.
Bopp, President,
Federal Reserve Bank of Philadel
phia,
Philadelphia, Pennsylv
ania. 19101.
Dear Mr.
Bopp:
The study of Provision of Space costs at the Philadel
phia
Reserve Bank,
which was forwarded with your letter of August 16, 1966
has
b
,
an
een reviewed by the Boar
d, which was impressed with the scope
dep th
of the study made by the Special Committee. The Boar
d was
cula
rly
appreciative of the approach taken by your Bank in sett
rtiUp
ing
a special group of offi
cers to make the study, and it asked that
these
views be transmitted to you.
Sincerely yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
1
0,041
BOARD OF GOVERNORS
Item No. 5
9/21/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADORESS OFFICIAL CORRESPONDENCE
TO THE SOARO
September 21, 1966
.2911
tggagaLial
Mr. George
H. Ellis, President,
Federal Reserve Bank of Boston,
Boston, Massachusetts. .02106
Dear Mr,
Ellis:
As requested in your letter of September 1, 1966, the Board of
Gove
rnors approves the following minimum and maximum salaries for the re;:ective
grades of the employees' salary structure at the Federal Reserve
Ilk of Boston, effective September 15:
Grade
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Minimum Salary
Maximum Salary
$ 2,630
2,880
3,160
3,470
3,830
4,240
4,700
5,210
5,790
6,440
7,180
8,020
8,950
10,030
11,230
12,590
$ 3,550
3,890
4,270
4,680
5,170
5,720
6,350
7,030
7,820
8,700
9,690
10,830
12,080
13,540
15,160
17,000
Salaries should be paid to employees within the limits specified
for
tiotea"e grades in which their respective positions are classified. It is
tunis'i from your letter that all employees whose salaries are below the mini"their grades as a result of the structure increase will be brought
to app
atr„ raPriate ranges within 90 days after the effective date of the new
--cture.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 6
9/21/66
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 21, 1966
CONFIDENTIAL
FR
tir. George H.
Clay, President,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri. 64106
'kat' Mr.
Clay:
As requested in your letter of August 12, the Board of Governors
aPProv
es the following minimum and maximum salaries for the respective
me8 of the employees' salary structures at the Federal Reserve Bank of
6811 City and branches, effective September 1, 1966.
'
t
Minimum
1
2
3
4
5
6
7
a
9
10
11
12
13
14
15
16
City
Maximum
Denver
Minimum Maximum
Oklahoma City
Minimum Maximum
Omaha
Minimum Maximum
$ 2,912 $ 3,120 $ 2,912 $ 3,484 $ 2,912 $ 3,211 $ 2,912 $ 3,133
3,536
2,912
3,614
2,912
3,874
2,912
2,912
3,536
4,004
2,964
4,030
2,990
4,277
3,172
2,964
4,004
4,446
3,289
4,485
3,328
4,745
3,510
3,341
4,524
4,979
3,692
5,018
3,718
5,265
3,900
3,770
5,096
5,564
4,121
5,590
4,147
5,824
4,316
4,238
5,720
6,201
4,602
6,227
4,615
6,474
4,797
4,745
6,409
6,942
5,148
6,955
5,148
7,163
5,304
5,317
7,176
7,748
5,746
7,748
5,746
7,943
5,889
5,967
8,060
8,632
6,396
8,619
6,383
8,801
6,656
6,513
8,996
9,620
7,124
9,581
7,098
9,750
7,215
7,436
10,036
10,712
7,930
10,647
7,891
10,803
8,008
8,307
11,206
11,908
8,814
11,830
8,762
11,973
9,269
8,866
12,506
13,260
9,815
13,143
9,737
13,273
10,322
9,828
13,949
14,768
10,933
11,414
14,625
10,829
14,729
10,907
15,405
16,458
12,181
12,636
16,289
12,064
16,354
12,116
17,069
of $21
The Board also approved your request for a Grade 16 special maximum
of tile3500 at the Head Office, to assist in recruiting and retaining employees
desired quality in professional level positions.
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Federal Reserve Bank of St. Louis
,rr
Mr. George H. Clay
-2-
specified
Salaries should be paid to employees within the limits
for the
All
classified.
are
positions
respective
grades in which their
result
a
as
grades
their
of
minimums
the
!TPloyees whose salaries are below
by
ranges
appropriate
within
brought
be
these structure increases should
uecember 1, 1966.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
af
•
BOARD OF GOVERNORS
Item No. 7
9/21/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 28, 1966.
1)ear sir.
of, a
There are enclosed a memorandum relating to, and a draft
Y-5)
Prc/P°8ed
F.R.
(Form
t)
to.
revision of the form of registration statement
5(a)
section
to
pursuant
used
of
by bank holding companies in registering
the
be
will
Bank
Holding Company Act of 1956, as amended. It
and comments as your
roiated if you will submit such suggestions
aY
have regarding the proposed revision as soon as practicable,
ut
later than October 31, 1966.
The Board is submitting to the Federal Register a notice
,,regardi
for comf48 the Proposed revision which contains an invitation
uctobp-tft interested persons, also to be submitted not later than
Peder-ri 31 and the usual suggestion that such comments be sent to the
'Reserve Banks. The notice, which is expected to appear in the
Pecitra
:
1 Register within the next few days, states that copies of the
Prop0
i'ed revised form are available upon request to the Board or to
44t etderal Reserve Bank. A supply of 20 copies of the draft is being
You under separate cover.
is suggested that your Bank furnish a copy of the proion to any known bank holding company that became a bank
as a result of amendments to the Act and any company
14tilk
ip
:
eah:
ri
:
In
bP
ea
en
nYgranted approval by the Board to become a bank holding
4ddittY, but which has not yet filed a registration statement. In
c)n to requesting its comments and suggestions, this procedure
4i11 /It,
E-Ptiae any such company as to the probable requirements for filing.
Ned
jit
Should the Board approve the formation of any new bank holding
-vEt4Y b
t°Pies
efore the revised form is finally adoptedand available for use,
°f the draft revision should be forwarded to any such company.
Very truly yours,
toclo
8Ures
C
Merritt herma
VAASecretary.
,tlit
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PRESIDENTS OF
Federal Reserve Bank of St. Louis
ALL FEDERAL RESERVE BANKS
FEDERAL RESERVE SYSTEM
Item No. 8
9/21/66
[12 CFR Part 2221
[Reg. Y]
BANK HOLDING COMPANIES
Notice of Proposed Rule Making
The Board of Governors is considering the adoption of
1/
a revision of Form F.R.Y-5 for use by a bank holding company in
registering with the Board pursuant to the Bank Holding Company
Act of 1956 (12 U.S.C. 1841ff).
The proposed revised form, like its predecessor, is
designed to assure that a bank holding company furnish in its
registration statement the information required by section 5(a) of
the Act (12 U.S.C. 1844).
This notice is published pursuant to section 553(b) of
title 5, United States Code, and section 1(b) of the Rules of Procedure
of the Board of Governors of the Federal Reserve System (12 CFR 262.1(b)).
To aid in the consideration of this matter by the Board,
interested persons are invited to submit relevant data, views, or
arguments.
Any such material should be submitted in writing to the
Secretary, Board of Governors of the Federal Reserve System, Washington,
1).
C* 2
20551,
to be received not later than October 31, 1966.
-
in
Filed.
as part of the original document. Copies are available on
-equest to the Board of Governors of the Federal Reserve System or to
'
any Federal Reserve Bank.
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Federal Reserve Bank of St. Louis
35,31
-2of September, 1966.
Dated at Washington, D. C., this 28th day
By order of the Board of Governors.
_A-A"
Secretary.
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Federal Reserve Bank of St. Louis
k
of
t,
...
(11- Ogle
TITLE 12 - BANKS AND BANKING
Item No. 9
9/21/66
CHAPTER II - FEDERAL RESERVE SYSTEM
SUBCHAPTER A - BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
(Reg. Q]
PART 217 - PAYMENT OF INTEREST ON DEPOSITS
Maximum Rates of Interest
1.
Effective September 26, 1966, § 217.6 (Supplement to
Re
gulation Q) is amended to read as follows:
§ 217.6
deposits
Naximum rates of interest payable on time and savings
by member banks.
Reserve
Pursuant to the provisions of section 19 of the Federal
Act
and § 217.3, the Board of Governors of the Federal Reserve System
1/
of interest payable by
herebY prescribes the following maximum rates
Inember banks of the Federal Reserve System on time and savings deposits:
(a) Maximum rate of 5-1/2 per cent.--No member bank shall pay
interest at a rate in excess of 5-1/2 per cent per annum on any
time deposit of $100,000 or more, subject, however, to the prov
isions of (b)(ii) and (c)(i), below.
(b) Maximum rate of 5 per cent.--No member bank shall pay
interest
at a rate in excess of 5 per cent per annum (i) on any
time deposit of less than $100,000, subject, however, to the
Provisions of (c)(i), below, or (ii) on any multiple maturity
Res 'e maximum rates of interest payable by member banks of the Federal
are not
1
System on time and savings deposits as prescribed herein
ar„?tve
member
a
of
office
an
at
icable to any deposit which is payable only
District
the
and
States
. outside of the States of the United
I IZZd
Of L
bz
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Federal Reserve Bank of St. Louis
-2time deposit that is payable only 90 days or more after the
date of deposit or 90 days or
more after the last preceding
date on which it might have
been paid.
(c) Maximum rate of 4Ter cent.--No member bank shall pay
interest
at a rate in excess of 4 per cent per annum (i) on any
multiple
maturity time deposit that is payable less than 90 days
after the date of deposit or less
than 90 days after the last
Preceding date on
which it might have been paid, or (ii) on
41°Y savings
deposit.
eQl
culating the rate of interest paid, the effects of compounding
Of i
-4terest may be disregarded.
A member bank that elects to compound
i4terest - either
at the maximum permissible rate or at a lower rate 84411 state the basis of compounding
(such as semiannually, quarterly,
14°4%, weekly,
daily, or continuously) in every advertisement, announce44t)
8°11-citation, and agreement relating to the rate of interest paid
4 deposit.
2a.
lAtereet..rate
The purpose of these amendments is to implement the
legislation signed by the President on September 21, 1966
(4.4.
tQ
14026).
They reduce from 5-1/2 per cent to 5 per cent the maximum
°f interest that
may be paid on time deposits of less than $100,000
that 4re
received on or after September 26, 1966. ("Time deposit" does
4t
include any deposit that is payable in less than 30 days (§ 217.0.)
Ihe Illendmenta
also permit member banks slightly greater flexibility
14 the
terms of their deposit contracts and in their operations by
4411°rizing the compounding of interest at the applicable maximum per14144ibie rate on any basis
that the member bank may desire to adopt.
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Federal Reserve Bank of St. Louis
.3-
United
b. The requirements of section 553(b), title 5,
States Code, with respect to notice, public participation, and deferred
flEective date were not followed in connection with these amendments
•
been
48e the Board found that the general credit situation and the public
'
illtetest compelled it to make the action effective no later than the
A
data atlo
pted•
(12 U.S.C. 248(i), 371b, and 461.)
Dated at Washington, D. C., this 21st day of September, 1966.
By order of the Board of Governors.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
*-1
4 I;
Item No. 10
9/21/66
September 21, 1966
For immediate release
The Board of Governors of the Federal Reserve System
reduced to 5 per cent from 5-1/2 per cent the maximum rate of
interest that the System's member banks may pay on any time
deP°sit under $100,000.
The Board's action, to become effective
September 26, 1966, was taken under the new authority granted in
the law signed by the President today, providing increased
flexibility for establishing ceiling rates on time deposits and
lievings accounts at commercial banks and other depository
ins
titutions.
The purpose of the Board's action is to limit further
escalation of interest rates paid in competition for consumer
savings.
The action will also help to keep the growth of com-
rastoial bank credit to a moderate pace.
The reduction in maximum rates on time deposits of less
than 4100,000 does not, by itself, require any change in interest
Paid on certificates of deposit and other time deposits outStanding on the effective date.
Pay
If a member bank has agreed to
4 specified rate of interest on such a deposit, without any
tight to modify its obligation, it may continue to pay the contract
"te
to maturity.
If the deposit is then renewed, the rate of
interest may not exceed the new ceiling.
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Federal Reserve Bank of St. Louis
The Board's action does not change the maximum rate
Payable by member banks on savings accounts, which remains at
4 per
cent.
The maximum rates payable on multiple-maturity
time deposits, which are 4 per cent or 5 per cent depending on
ma turity,
are also unchanged.
The ceiling rate on single-
maturity time deposits of over $100,000 remains at the present
level of 5-1/2 per cent.
Today's action is one of a series of measures taken by
the Federal Reserve System in recent months to temper the
4188tesalve competition for funds among commercial banks and
"her financial institutions, and at the same time to assure
an orderly
and moderate rate of growth in bank credit in order
to restrain
inflationary pressures.
Earlier actions included a
le'wering of interest rate ceilings on time deposits with multiple
mat
urities, two increases in the reserves that member banks must
taj
a
against some of their time deposits and, more recently,
statement to member banks concerning the need to adopt lending
Pc'lleies that will result in slowing the growth of business loans.
Attached is the text of the amended Supplement to
Re
gulation Q, "Payment of Interest on Deposits," implementing
the 8
oard's action.
-0-
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Federal Reserve Bank of St. Louis
'354
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 11
9/21/66
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 21, 1966
Mr. Darryl R. Francis, President,
Federal Reserve Bank of St. Louis,
St. Louis, Missouri.
63166
Dear Mr. Francis:
er 9, 1966,
This refers to your letter of Septemb
the construction
for
site
d
concerning the purchase of a propose
Branch.
of a new building for the Memphis
on to your Bank's
The Board will interpose no objecti
d new building
propose
ne gotiating for the acquisition of the
approximately
of
price
site and authorizes its purchase at a
$530,000.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
54
BOARD OF GOVERNORS
Item No. 12
9/21/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 26, 1966
Mr. Alfred Hayes, President,
Federal Reserve Bank of New York,
New York, New York. 10045
Dear Mr. Hayes:
Your letter of July 29, 1966, addressed to Governor
Mitchell, proposing revised salary ranges for the salaries of
officers other than President and First Vice President of your
Bank, was presented by him to the Board of Governors who approved
the following revisions in your official salary structure:
Salary Grade
Present
Recommended
A
$26,000-$37,500
$22,500-$32,000
$19,000-$28,500
$26,000-00,000
$22,500-$34,000
$20,000-$30,000
There were no revisions approved for salary ranges in Grades D
and E.
This approval would, of course,be subject to review and
aPProval of the board of directors of your Bank.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
@FedFRASER