The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for
To:
September 27, 1960
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. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
31;2f
Minutes of the Board of Governors of the Federal Reserve System on
IDuesday, September 27, 1960.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman 1/
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
King 2/
Mr. Sherman, Secretary
Miss Carmichael, Assistant Secretary
Mr. Hackley, General Counsel
Mr. Solomon, Director, Division of Examinations
Mr. Sammons, Associate Adviser, Division of
International Finance
mr. Nelson, Assistant Director, Division of
Examinations
Mr. Rudy, Special Assistant, Legal Division
Discount rates.
The establishment without change by the Federal
Re8erVe Bank of Atlanta on September 26, 1960, of the rates on discounts
alld advances in its existing schedule was approved unanimously, with the
1114arstanding that appropriate advice would be sent to that Bank.
Items circulated to the Board.
The following items, which had been
cil'culated to the Board and copies of which are attached to these minutes
11"er the respective item numbers indicated, were approved unanimously:
Item No.
Lett
n -er to Hempstead Bank, Hempstead, New York,
?Pl'oving the establishment of a branch at 267
eenwich Street, Incorporated Village of
ernPstead.
1
'etter to
Manufacturers Trust Company, New York
°It
a tY) approving an extension of time to establish
°ranch at 159-29 Jamaica Avenue, Jamaica.
2
j
1
ttended morning session only.
Attended afternoon session only.
Ifs
9/27/60
-2Item No.
Letter to The First Pennsylvania Banking and Trust
a°mPany, Philadelphia, Pennsylvania, approving the
establishment of a branch at 202 West Ridge Pike,
PlYmouth Township.
3
Letter to the Federal Deposit Insurance Corporation
indicating that no exception had been taken to the
,
11°ting trust agreement in force at The Home Bank,
orapton, California.
4
Application to organize a national bank in Stinnett Texas (Item No.
There had been distributed a mamorandum from the Division of Examinations
dated September 20, 1960, regarding an application to organize a national bank
in Stinnett, Texas.
Both the Federal Reserve Bank of Dallas and the Division
Examinations had suggested an unfavorable recommendation to the Comptroller
c't
the Currency on the application.
/?as at
A letter that would reflect this view
to the memorandum.
As pointed out in the memorandum, Stinnett, Texas, with a population
°I' 2/697 was the county seat of Hutchinson County and was situated 12 miles
directly north of Borger.
There was little in the way of industry and
co4unerce in Stinnett, and most of the local citizens were employed in Borger
1141
Phillips.
The nearest banking facilities were located in Borger where
44t National Bank and Panhandle State Bank competed on an active basis.
0th
er banks were located from 31 to 38 miles from Stinnett.
Since December 1958, a group of local citizens had been seeking to
e8t"lish a State-chartered bank in Stinnett.
Their application was not filed
44til July 29, 1960, about four days subsequent to the filing of the application
9/27/60
-3-
to charter the national bank.
A formal protest had been filed by the group
sPonsoring the State bank, charging that the national charter application
14a8 filed in order to halt plans of the local group to establish a bank.
Governor Mills indicated that he would vote to recommend unfavora% to the Comptroller of the Currency on the application but he had some
q4estion about the proposed letter.
It did not emphasize the fact that there
71813 another pending application involving a request to establish a State bank
having wide community support and it did not indicate that the proposal to
establish a national bank was opposed in the community.
Also, the letter
clid not reflect that the national bank application originated almost exclUsively from individuals not living in the community.
After Mr. Nelson had read the portion of the memorandum relating to
the application to establish a State-chartered bank, Governor Mills questioned
144ether it was appropriate to state in the letter to the C)mptroller of the
C41r1ency that the prospects for successful operation of the proposed national
bahak were not favorable but to imply that there might be reasons for establisha State bank.
Mr. Nelson commented that there appeared to be hardly enough business
ill the community for either a national or a State bank, but it was the opinion
or
the Division of Examinations that the State bank would have a more
Batisfactory backing.
He added that the Office of the Comptroller of the
C4lrrency wished to act on the instant application before a scheduled hearing
°11 the State bank application
WBB
held.
9/27/60
Governor Robertson, who said that his views were in agreement
'with those expressed by Governor Mills, suggested a possible rewording
Of the letter to the Comptroller of the Currency.
After a brief discussion, unanimous approval was given a letter
to the Comptroller of the Currency recommending unfavorably on the application.
A copy is attached as Item No.
5.
Applications by Brenton Companies (Items
6 and 7). Pursuant to
1)°ard action on August 30, 1960, there was published in the Federal Register
°n September
7, 1960, a Notice of Tentative Decision approving applications
c'n behalf of Brenton Companies, Inc., Des Moines, Iowa, for the acquisition
'
11 25 per cent of the outstanding voting shares of the following four banks:
13renton State Bank, Dallas Center, Iowa; Jefferson State Bank, Jefferson,
icnra; The First National Bank of Perry, Perry, Iowa; and Poweshiek County
National Bank of Grinnell, Grinnell, Iowa.
A memorandum from the Legal Division dated September 23, 1960,
indicating that the 15-day period provided in the Notice for the filing of
Q°Inments on or objections to the proposed action expired at the close of
business on September 22, 1960, had been distributed.
No comments or
°I)Jections were received during that period.
Attached to the memorandum were drafts of an Order approving the
%Ilications under the Bank Holding Company Act, a Statement, and a press
l'elsas
for the Board's consideration.
9/27/60
Unanimous approval was given to the Order and Statement, copies of
vhich are attached as Items 6 and 7.
Mr. Rudy then withdrew from the meeting.
Account for the Banque drEmission du Rwanda et du Burundi (Item No. 8).
A memorandum from Mr. Marget dated September 23, 1960, recommending that the
Board approve a telegram authorizing the Federal Reserve Bank of New York to
°Pen and maintain an account in the name of the Banque d'Emission du Rwanda
et du Burundi had been distributed.
As indicated in the memorandum, the Federal Reserve Bank of New York
had been requested to close the sub-account of the Banque Centrale du Congo
Beige et du Ruanda-Urundi and to open an account in the name of the Banque
dttmission du Rwanda et du Burundi.
The latter bank was created by royal
decree of the King of Belgium to take over in the territory of Ruanda-Urundi
(a. Belgian United Nations trusteeship) the central banking functions formerly
eltercised in the area by Banque Centrale du Congo Beige et du Ruanda-Urundi.
After noting that the opening of the account had been approved by
the directors of the Federal Reserve Bank of New York on September 22, 1960,
alld that the Department of State interposed no objection to opening such an
"count, the telegram to the Federal Reserve Bank of New York authorizing
the Opening of the account was approved unanimously.
A copy is attached as
Messrs. Sammons and Nelson withdrew from the meeting at this point.
Attendance of Reserve Bank personnel at Classified Relocation Site
(Ite
There had been circulated a memorandum from Mr. Harris dated
9/27/60
-6-
September 16, 1960, regarding participation by representatives of Federal
Reserve Banks at the Classified Relocation Site of the Office of Civil
and Defense Mobilization.
During the past two years the Reserve Banks
had assigned representatives to the Site for two two-week periods each
Year.
It was noted in the memorandum that the arrangement had been
satisfactory, not only from the standpoint of providing full-time coverage
at the Site but also in affording an opportunity for the orientation of
Bank personnel and in having their participation in the development of
emergency plans.
It was felt by the Conference of Presidents* Committee on Emergency
°Perations that the program should be modified in order to reduce the time
high staff personnel familiar with monetary policy were away from their
regular duties.
Accordingly, the Conference suggested that the tours of
duty at the Site be reduced from two weeks to one week, with the underthat they might be extended to two weeks if the international
Bituation required it.
Also, it was suggested that the Reserve Bank
rePresentatives not be limited to official or high staff personnel familiar
with monetary policy but include operational personnel as well.
The memorandum contained a recommendation that the Board approve
the modification of the program along the lines suggested.
A draft letter
reflecting such modification was attached.
Governor Robertson commented that this was not a controversial matter,
11111 in accordance with the wishes of the Reserve Bank Presidents, and would
9/27/60
have the effect of bringing operational personnel at the Reserve Banks
into the program.
The Board then approved the letter to the Presidents of all
Federal Reserve Banks of which a copy is attached as Item No. 9.
Reply to Commission on Money and Credit.
There had been distributed
/rith a memorandum dated September 22, 1960, from Mr. Young, a draft reply
to the following question submitted on January 12, 1960, by the Commission
on Money and Credit:
Question XXV--What are the pros and cons of having the administrative responsibilities for bank examination and supervision
remain, as at present, divided among a number of different
authorities?
The proposed reply commented on (a) the types, numbers, and deposits
• commercial banks in the United States, (b) the agencies now concerned
ith the examination and supervision of commercial banks, and (c) the areas
°I*
cooperation between such agencies.
'
c t having
It then reviewed the pros and cons
administrative responsibilities for bank examination and bank
811Pervision remain, as at present, divided among a number of different
allthorities.
During a discussion of the draft, Governor Mills commented that his
✓
A d4._
- &fig of the proposed reply would leave no doubt in his mind that the
?ederal Reserve
11{ettcY.
was
in favor of a centralized Federal bank supervisory
For many reasons he thought it would be impolitic to take such a
11°Bition and
beyond that, it would be inadvisable.
He referred to the
f
9/27/60
f3,‘141;
-8-
portion of the reply that stated that a centralized Federal supervisory
agency would destroy "checks and balances" and benefits derived from the
coMpetitive interplay inherent in the present dual banking structure.
He felt the whole answer to the question should be aimed at that element.
It should be along the line that, while there were reasons for a centralized
sYstem, on balance the present system had the advantage of diversification
and of producing multiple decisions.
It would appear that in the long run
S. s
atisfactory scheme for Federal supervision of banking had been developed.
Ala°, the answer could be read as an invitation to centralize Federal bank
supervision in the Federal Reserve System.
Governor Robertson said that his impression of the proposed answer
%las somewhat different. He did not feel that it implied that the Board
/las strongly in favor of a centralized Federal supervisory system.
However,
he suggested the possibility of changing a portion of the reply to indicate
that a partial centralization of the administrative responsibilities for
baak examination and supervision could be accomplished through unification
or all present Federal examination and supervisory functions in a facttitlding agency, with another agency having responsibility for policy
f°1"mulation.
Governor Szymczak expressed the opinion that the proposed reply
sU
itsble.
was
However, if the Board's reply were to suggest a change in the
131"asent supervisory arrangements, he would favor proposing that such
teaPonsibility be placed in some agency other than the Board.
9/27/6o
-9After Chairman Martin noted that the question as submitted by the
Commission on Money and Credit did not ask the Board to take a position,
Governor Robertson referred to a suggestion that he had made that the reply
be changed to indicate that a partial unification of bank examination and
Supervision might be accomplished through placing all present Federal
examination and supervisory functions in one agency with another agency
having responsibility for policy formulation.
Governor Mills expressed the view that such a proposal would introaUce a complete reorientation of bank supervision and would require more
44Y.
"
He still felt that the proposed reply, as it now stood, seemed to
take the position that the Board favored a centralized Federal bank super1141°17 agency and, accordingly, he would like to be recorded as being adverse
to
The Board then approved the proposed reply, with Governor Mills
atesenting for the reason given.
During the above discussion Mr. Hackley withdrew, and Messrs. Noyes,
krector, Division of Research and Statistics, and Hexter, Assistant General
Counsel, entered the room.
All members of the staff then withdrew and the Board vent into
e)(eoutive session.
Service of Mr. Young on advisory committee.
Following the executive
a 0^.
'
- 10/1, Governor Shepardson informed the Secretary that the Board had
Pr ved a request for Mr. Ralph A. Young, Adviser to the Board, to serve on
9/27/60
-10-
an Advisory Committee of the National Bureau of Economic Research in
connection with a study of interest rates. Mr. Young's services had
been requested in a letter from the National Bureau dated September 20,
1960.
The meeting then recessed and reconvened in the Board Room at
4:00
p.m. with Governors Balderston, Szymczak, Mills, Robertson,
Shepardson, and King, and Messrs. Sherman and Solomon present.
Mr. G. Edward Cooper, Chairman of the Bank Management CornSion of the American Bankers Association, and Mr. Melvin C.
Miller, Deputy Manager, American Bankers Association, and Secretary,
Bank Management Commission, also were present for the purpose of
Presenting certain views with respect to the Board's ruling of
August
4, 1960,
regarding the absorption of exchange charges, which
l uling had been the subject of a letter from Mr. Cooper dated
'
September 1, 1960.
Mr. Cooper stated that considerable interest had been shown in
the Board's August
4 ruling
during the recent convention of the American
Bankers Association held in New York City, and that a number of
illqUiries had been raised during a meeting of the Bank Management
C°Mmission.
There also had been discussion of various phases of the
8°4rd's ruling by members of the Association of Reserve City Bankers.
irliat Part of the Board's August
L. ruling
relating to compensating
1144T-toes had received a most favorable reaction and was believed to
have taken care of a problem that had confronted some of the banks.
:16.1 3
9/27/60
-11With respect to that part of the ruling which prohibited the
direct absorption of any exchange charges, Mr. Cooper said that the
Problem of expense that would be caused by charging back trivial
amounts of exchange received a great deal of attention. Mr. Cooper
reviewed the steps taken by the Bank Management Commission before
its letter of September 1, 1960, was sent to the Board, stating that
the Commission made a countrywide analysis in which it tried to take
account of the problem that would be created by the Board's ruling in
local areas. The suggestions contained in the September 1 letter were
Presented on the basis of that analysis and to date the Bank ManageMent Commission had not been able to find a more acceptable
alternative from the standpoint of the banks.
The Commission there-
fore recommended strongly a modification of the Board's August
4
ruling to permit (1) member banks to absorb exchange charges of less
than five cents on any one nonpar item, and (2) resumption of the
Previous ruling made by the Board in 1945 that a member bank may absorb
exchange charges up to $2 per month for any one account.
Mr. Cooper went on to say that operating records of commercial
banks would be even more facilitated if the banks were permitted to
absorb exchange incurred in the collection of nonpar items in amounts
Of less than $50 (an alternative to the Commission's recommendation
t° Permit absorption of exchange charges of less than five cents on
411:Y one nonpar item), but that such a ruling would expose some banks,
:310
9/27/60
-12-
Particularly those in the Seventh and Ninth Federal Reserve Districts,
to increased competition for absorption of exchange charges that they
have heretofore been recovering. This was the reason why the
Commission presented as its first recommendation that member banks be
permitted to absorb exchange of less than five cents on any one nonpar
item, although in the case of banks in some cities, Philadelphia, for
example, the alternative recommendation that would permit exchange
absorption on any items of $50 or less would be preferable.
Mr. Cooper concluded his opening statement with the comment
that the Commission believed that in the best interest of the banking
sYstem a modification of the Board's August L. interpretation along the
lines of the Commission's letter of September I should be adopted, and
that it was hoped the Board would see its way clear to modifying its
ruling along these lines. In the meantime, there was a tendency among
banks to take no action toward changing their practices until some
indication had been received from the Board as to its reactions to the
Problems referred to in the Commission's letter.
In response to a question from Governor Mills, Mr. Cooper stated
that the Bank Management Commission had not gone through the National
arid State Bank Divisions of the American Bankers Association in making
its survey prior to sending its letter of September 1. This was
because the Commission operated across those lines and felt that it was
representing the membership of the American Bankers Association
9/27/60
-13-
generally. Mr. Cooper further stated, in response to a question from
Governor Mills as to the problem of getting acceptance of the proposal,
that he believed there would be no problem in getting acceptance by
banks generally of that portion of the Board's ruling relating to
compensating balances whereas banks almost unanimously were seeking
relief from the expense that would be caused by application of that
Portion of the ruling requiring recovery of exchange regardless of
amount.
Although the Bank Management Commission's survey of banks had
been somewhat weighted by larger institutions, he believed that the
views expressed were representative of banks generally.
Governor Balderston inquired whether the Bank Management
Commission was now seeking a meeting with the Board or whether such a
Meeting would be considered superfluous in view of the letter of
September 1, to which Mr. Cooper responded that the Commission had
asked him as Chairman to discuss with the Board its letter of September 1„
hoPing that the Board could give some indication as to whether there was
a possibility of a change in the August 4 ruling. In addition, the
Commission had requested that he and Mr. Miller discuss informally with
the Federal Deposit Insurance Corporation the question as to whether
there was any way in which the approach of the Corporation to absorption
Of
exchange charges could be modified to accord more nearly with that
taken by the Federal Reserve. The Commission had asked that, whenever
4
decision was reached by the Board on its letter of September 1, that
9/27/60
decision be conveyed to the Commission, at which time the American
Bankers Association -would study further the question of trying to get
the Federal Deposit Insurance Corporation to adopt a position that would
be uniform with whatever position might be arrived at by the Board.
Governor Robertson inquired as to the contemplated timing of
such conversations, to which Mr. Cooper responded that he could not
suggest when further conversations might take place with the Federal
Deposit Insurance Corporation but that as soon as members of the staff
c4 American Bankers Association had studied the matter and had some
Proposals that might be of interest to the Corporation they would be
submitted to officials of the latter. There was some concern, he said,
that if legislation were required, considerable time would be taken to
bring about a change.
Governor Mills inquired as to the applicability of the alternatiIre proposals contained in the Commission's letter of September 1.
'
lirlder one alternative, absorption of exchange of less than five cents
"any one item would be permitted, whereas under the other alternative,
absorption of exchange on any checks in amounts of less than 350 would
be Permitted. He suggested that the accumulation of exchange on a large
411mber of checks of less than J.50„ or some other amount that might be
agreed upon, could in the aggregate become more than a trivial amount
any one account.
9/27/60
Mr. Cooper and Mr. Miller responded that this was recognized
and commented in some further detail to the effect that the problem
from the standpoint of a commercial bank was that of maintaining
records. For example, many items had exchange charges of one or two
cents and the cost of maintaining records and charging back such
amounts would exceed the actual exchange charges. Permission for banks
to disregard exchange charges of less than five cents or, in the
alternative, exchange charges on checks of less than $50 or some
other
figure was the only practical solution to the expense problem that the
Commission had been able to come up with.
Mr. Cooper then stated that the letter that he had sent to the
Board under date of September I had been approved by each member of the
13ank Management Commission and that it also had been cleared by the
executive officers of the American Bankers Association.
Neither the
0°1/1mi5sion nor the Association had anything else to present to the
Board at this time. However, he wished to emphasize that the members
of the Commission hoped the Board understood that they did not believe
that a satisfactory solution to the problem of record keeping would be
presented if the Board simply restored the
the August
4, 1960,
1945
ruling (superseded by
ruling) so as to permit the absorption of as much
$2 a month in exchange charges for any one account.
This sort of
11ling would not meet the needs of the banking community for relief
fl
'
1071 keeping of costly and burdensome records.
3f41
9/27/60
-16Mr. Cooper added, in response to a question from Governor
Robertson, that he had received copies of letters written to the Board
by a number of individual banks and clearing house associations and
that he believed the views expressed in the September 1 letter would
be supported by all of the banks that had studied the matter.
Governor Robertson inquired whether Mr. Cooper believed that
the banks of the country would get behind a suggestion such as the
sank Management Commission had made to the extent that they would go
out and urge its acceptance by all other banks, so as to solve the
Probl m that had been presented in the past by absorption of exchange
and variations in practices in different parts of the country.
To this Mr. Cooper responded that he knew of no way of givino:
stloh assurance except to have some group such as the Federal Reserve
Banks make a field check and report back the results of the findings.
Mr. Miller added that the Bank Management Commission was
generally selected to represent banks nationwide even though, as had
been indicated earlier, it was somewhat weighted with representatives
°f larger institutions.
Governor Robertson next inquired what would be the probable
eaCtion of banks if the Board were to reverse completely the position
it had originally taken with respect to the absorption of exchange
Ilarges as an indirect payment of interest, thus opening the door for
anY bank to absorb in unlimited amounts.
9/27/60
-17Mr. Cooper responded emphatically that the banks of the
country would not like such a position, that generally they hook the
same position that the Federal Reserve had taken over the years, that
they were well satisfied with that part of the Board's recent ruling
relating to compensating balances, and that a shift of the sort
Governor Robertson mentioned would be a backward step for the banking
sYstem as a whole.
Governor Balderston stated that he was not entirely clear as
tO the procedure that should be followed, which in his view was the
main theme of today's meeting. 'While the Board, as such, had not
discussed the Bank Management Commission's letter of September 1,
each member of the Board had read the letter. There had been a sugt. 7esti0n that a meeting might be arranged to which the directors of
the Federal Deposit Insurance Corporation and the Comptroller of the
Currency would be invited, and at which representatives of the Bank
Management Commission might also be present, for a general discussion
°f the basic problems involved in absorption of exchange.
He inquired
°f Mr. Cooper whether the exploratory discussion now taking place
between the American Bankers Association and Federal Deposit Insurance
brporation might make such a meeting inappropriate at this particular
Mr. Cooper's response was that a meeting such as referred to
bY Governor Balderston might not be desirable at once, but that in the
9/27/60
-18-
meantime it would be helpful if the Board could arrive at some
Position with respect to whether its August 4 ruling would be modified. Following that, it would seem desirable to bring representatives
of the Federal Deposit Insurance Corporation into a discussion of the
matter.
In response to a question from Governor Shepardson as to whether
a change to a ruling that would apply to all insured banks might not be
a solution to the problem that had resulted from differences in the
rulings of the Board and the Corporation, Mr. Cooper said that if a
Iln-form approach could be taken by the Board and the Corporation, there
would be the obvious advantage of placing all member and nonmember
insured banks under the same ruling.
There would, however, still be the
question of exchange charges that are made by nonpar banks and the
Problem of whether par banks receiving checks on which exchange had been
charged would find it necessary to maintain records that would enable
them to recover such exchange. Thus, as long as nonpar items existed to
any degree, the cost problem would be present for banks in greater or
lesser degree. To get rid of the problem would call for getting rid of
licnPar clearance; that would be the only way to eliminate the problem
c°MPletely. The next best thing would be to get uniformity in rulings
'
cr the Board and the Federal Deposit Insurance Corporation. The third
beet thing, in his opinion, would be to permit banks to absorb trivial
4111°11nts of exchange in line with the recommendation contained in the
s---or•
9/27/60
-19-
Bank Management Commission's letter of September 1. To get rid of
nonpar clearance would require legislation in many States. Even
though Federal legislation were enacted to prohibit nonpar clearance
by any insured bank, the problem would not be eliminated from the
standpoint of the banks receiving nonpar checks in their clearances
sO long as even a small number of nonpar banks existed, although it
would, of course, be reduced.
Mr. Miller added the comment that, as he saw the picture, at
this stage Federal legislation would only be a matter of giving to the
Federal Deposit Insurance Corporation authority to determine whether
absorption of exchange charges constituted payment of interest on
dePosits by an insured bank. He did not think the American Bankers
Association could sponsor legislation of this sort, nor did he think the
Association could sponsor legislation in individual States that would
quire banks to remit at par. The Association's membership, he noted,
includes par and nonpar banks, member and nonmember banks, insured and
11°Ilinsu1Ied banks, and national and State banks. The Association could
hot discriminate
against any one of these groups.
Governor Robertson responded that such a move might be impolitic
the American Bankers Association, but that support by the Association
c)f any move to solve the problem under discussion was one of the
qUestions involved.
9/27/60
-20Mr. Cooper expressed the view that it would be desirable if
the Federal Deposit Insurance Act were amended to provide that in
order to qualify for insurance any bank must remit at Dar for checks
drawn on it. Such a provision would parallel that now applicable to
members of the Federal Reserve System.
Mr. Cooper then went on to say that the door had now been opened
for the Bank Management Commission to do something looking toward modification of the position that had been taken for many years by the
Federal Deposit Insurance Corporation. He hoped that there would be
some coordination of the Corporation's position with that of the Board
as the discussions moved along. In the meantime, banks of the country
Iliehed to know what the Board is going to do about the August 4 ruling
alld the proposals made in the Bank Management Commission's letter of
SePtember 1, The Commission had heard nothing in response to its
request and, although the Board's ruling of August 4 was effective
iMmediately, hanks did not wish to change their procedures until they
had heard officially from the Board of Governors regarding its position
on the formal request presented in the September I letter. Until the
Board was in a position to tell the Bank Management Commission that its
quest had been turned down or accepted, or that other modifications of
the August 4 ruling had been made, it would be preferable not to indicate
t° banks what steps they should take with respect to the August 4 ruling.
141% Cooper wondered whether the Board might wish to suggest a period of
9/27/60
time that it would require for consideration of the proposals in the
September I letter.
The Commission had attempted to keep its proposals
on a friendly and informal basis, and it had no desire to get the
subject into the press.
Governor Balderston stated that the Board would consider the
September 1 letter from the Commission in the near future.
Governor Robertson inquired again as to whether any further information should be expected from the American Bankers Association and
Whether the Bank Management Commission might wish to come to Washington
for the purpose of a meeting with the Board at which the Comptroller of
the Currency and members of the Board of Directors of the Federal
Deposit Insurance Corporation would also be invited to be present.
Mr. Cooper replied that the September 1 letter of the Bank
Management Commission was read and approved by the members of the
EXecutive Committee of the American Bankers Association.
The Bank
Management Commission had been given authority to speak for the American
Bankers Association, and there was nothing further to be presented at
this stage. Mr. Cooper said that he hoped that the Board would receive
shortly from the Association of Reserve City Bankers a communication
giving its view with respect to the Board's August 4 ruling. It was
his understanding that the letter would present essentially the same
ProPosal as that contained in the Commission's letter of September 1.
9/27/60
The meeting conclnded with a statement that the Board would
consider such letter as might be received from the Association of
Reserve City Bankers along with the Commission's letter of September 1
and that it would communicate with the latter at a subsequent date.
The meeting then adjourned.
Secretary's Notes: Pursuant to the action of
the Board on July 28, 1960, a letter was sent
today over the signature of the Secretary to
the Presidents of all Federal Reserve Banks
transmitting revised pages of the report of
examination of State member banks, Form FR 410.
Governor Shepardson approved on behalf of the
Board on September 26, 1960, a letter to the
Federal Reserve Bank of San Francisco (attached
Item No. 10) approving the appointment of
Chester Marion Rochowicz as assistant examiner.
Pursuant to recommendations contained in memoranda
from appropriate individuals concerned, Governor
Shepardson today aproved on behalf of the Board
the following items relating to the Board's staff:
A
. Kenneth Edwin Keen, Jr., as Supply Clerk in the Division of
Services, with basic annual salary at the rate of $305000
effective the date of entrance upon duty.
EER
,.
Nancy E. Harcourt, from the position of Clerk-Stenographer in the
vision of Administrative Services to that of Secretary in the Division
°
f1* Research and Statistics, with an increase in her basic annual salary
'
am $4,355 to Jj,Sl0, effective October 2, 1960.
34;r:
9/27/60
-23-
SPlly J. Hart, from the position of Clerk-Stenographer in the
Dtvisicn of Personnel Administration to that of Clerk-Stenographer in
the Division of Administrative Services, with no change in her basic
annual salary at the rate of '14,1115, effective October 2, 1960.
Governor Shepardson also approved today on behalf
of the Board a letter to Banco de Guatemala (attached
Item No. 11) with regard to the extension of the
services of Ralph E. Holben and reimbursement for
Mr. Holbents services.
Secreta
BOARD OF GOVERNORS
OF THE
Item No. 1
9/27/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CDRREPONOENCE
TO THE BOARD
September 27 1960
Board of Directors,
Hempstead Bank,
Hempstead, New York.
Gentlemen:
Pursuant to your request submitted through
the Federal Reserve Bank of New York, the Board of
Governors of the Federal Reserve System approves the
establishment of a branch at 267 Greenwich Street,
Incorporated Village of Hempstead, Nassau County, New
York, by Hempstead Bank, provided the branch is established within one year from the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 2
9/27/60
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 27, 1960
Board of Directors,
Manufacturers Trust Company,
New York, New York.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of New York, the Board of Governors
extends to March 17, 1961, the time within which Manufacturers
Trust Company may establish a branch at 159-29 Jamaica Avenue,
Jamaica, Queens County, New York, under the authorization
contained in the Board's letter of March 18, 1960.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
e
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
WASHINGTON 25. D. C.
ADDRESS
taFriciAL
CORRESPONDENCE
TO THE BOARD
September 27, 1960
Board of Directors,
The First Pennsylvania Banking and Trust Company,
Philadelphia, Pennsylvania.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Philadelphia, the Board of Governors
of the Federal Reserve System approves the establishment of
a branch at 202 "West Ridge Pike, Plymouth Township, Montgomery
County, Pennsylvania, by The First Pennsylvania Banking and
Trust Company provided the branch is established within one
Year from the date of this letter.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
'4
3
9/27/60
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
L.
9/27/60
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 271 1960
The Honorable Jesse P. Wolcott, Chairman,
Federal Deposit Insurance Corporation,
Washington 25, D. C.
Dear Mr. Wolcott:
Reference is made to your letter of September 15,
1960, regarding The Home Bank, Compton, California, and the
existing voting trust agreement which now controls 8,410 of the
8,520 of the outstanding shares of common stock of the bank.
The Home Bank was admitted to membership in the Federal Reserve
System on February 6, 1953, under the title of Compton Commercial
and Savings Bank. At that time, 2,430 of the outstanding 2,500
shares of capital stock of the bank were trusteed under a voting
trust agreement which was executed on July 310 1950, and terminates on July 31, 1971. There were eight trustees named in the
agreement, four of whom were directors of the bank. At the time
of examination on March 4,1959, the Board's information indicated
that a total of 146 shareholders participated in the trust which
held 8,410 of 8,520 shares outstanding. During the time this
bank has been a memb4 Of the Federal Reserve System, it has not
bkelen found necessary t take any exception to the voting trust
agreement in force.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
36,
BOARD OF GOVERNORS
OF THE
Item No. 5
FEDERAL RESERVE SYSTEM
9/27/60
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 27, 1960
2
°mPtro11er of the Currency,
,.1.,reasury Department,
"ashington 25, D. Co
Attention Mr. G. W. Garwood,
Deputy Comptroller of the Currency.
near Mr. Comptroller:
Reference is made to a letter from your office dated July 28,
1960)
enclosing copies of an application to organize a national bank at
Stinn
ett, Texas, and requesting a recommendation as to whether or not the
PPlication should be approved.
A report of investigation of the application made by an examiner
the Federal Reserve Bank of Dallas indicates that the proposed capital
s ructure of the bank would be adequate in view of the projected volume and
bei 'acter of business, and that the proposed management of the bank might
v reasonably acceptable. According to available information, only a modest
oottl'me of business could be anticipated and the prospects for earnings are
very favorable. This appears to be a borderline case and the successful
'"eration of the proposed institution is very questionable.
t()
As you know, there is a competing application pending for the
rnization of a State bank in Stinnett which has the support of local
izens. The two applications were filed about the same time. Since the
,
pl
11cipal supporters of the application for the national charter are not
},:*.'m the Stinnett community, it would appear that the local group should
entitled to preference.
Z
In view of all the circumstances, the Board of Governors does not
Justified in recommending favorable consideration of the application
°reanize a national bank at Stinnett.
ree,
4sp
The Boardls Division of Examinations will be glad to discuss any
ects of this case with representatives of your office if you so desire()
Very truly yours,
(Zer:
,
re 4r t Ire
Elizabeth L. Carmichael,
Assistant Secretary.
z
-r
Item No. 6
9/27/60
UNITED STATES OF AIERICA
BEFORE THE BOARD OF GOVERNORS OF ThE FEDERAL RESERVE SYSTEM
WASHINGTCN I D. C.
•
In the Matter of the Applications of
BRENTCN COMPANIES, INC.
for prior approval of acquisition of
voting shares of Brenton State Bank,
Dallas Center, Iowa; Jefferson State Bank,
Jefferson, Iowa; The First National Bank of
Perry, Perry, Iowa; Poweshiek County National
Bank of Grinnell, Grinnell, Iowa
•••
ORDER APPROVING APPLICATIONS UNDER
BANK HOLDING COMPANY ACT
There having come before the Board of Governors pursuant
to section 3(a)(2) of the Bank Holding Company Act of 1956
(12 USC 1843) and section 4(a)(2) of the Board's Regulation Y
(12 CFR 222.4(a)(2)), applications on behalf of Brenton Companies,
Inc., Des Moines, Iowa, for the Board's prior approval of the
acquisition of 25 per cent of the outstanding voting shares of
the following four banks:
Brenton State Bank, Dallas Center, Iowa
Jefferson State Bank, Jefferson, Iowa
The First National Bank of Perry, Perry, Iowa
Poweshiek County National Bank of Grinnell,
Grinnell, Iowa;
3158
-2a Notice of Tentative Decision referring to a Tentative Statement
on said applications having been published in the Federal Register
On September 7, 1960 (25 Federal Register 8626); the said Notice
having provided interested persons an opportunity, before issuance
of the Board's final order, to file objections or comments upon
the facts stated and the reasons indicated in the Tentative
Statement; and the time for filing such objections and comments
having expired and no such objections or comments having been
filed;
IT IS IEREBY ORDERED, for the reasons set forth in the
Board's Statement of this date, that the said applications be and
hereby are granted, and the acquisition by Brenton Companies, Inc.
Of 25 per cent of tne outstanding voting shares of the following
four banks
Brenton State Bank, Dallas Center, Iowa
Jefferson State Bank, Jefferson, Iowa
The First National Bank of Perry, Perry, Iowa
Poweshiek County National Bank of Grinnell,
Grinnell, Iowa
36,
-3is hereby approved, provided that such acquisition is completed
Within three months from the date hereof.
Dated at Washington, D. C., this 27th day of September 1960.
By order of the Board of Governors.
Voting for this action: Chairman Martin and Governors
Balderston, Szymczak, Mills, Robertson, and Shepardson
Absent and not voting: Governor King
(Signed) Merritt Sherman
Merritt Sherman;
Secretary.
EAL)
Item No. 7
9/27/60
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATIONS BY BRENTON COMPANIES, INC.,
FOR PRIOR APPROVAL OF ACQUISITION OF VOTING SHARES OF FOUR BANKS
STATEMENT
Brenton Companies, Inc., Des Moines, Iowa ("Applicant"),
a bank holding company, has applied, pursuant to section 3(a)(2) of
the Bank Holding Company Act of 1956 ("the Act"), for the Board's
Prior approval of the acquisition of 25 per cent of the outstanding
voting shares of the following four banks:
Brenton State Bank, Dallas Center, Iowa
Jefferson State Bank, Jefferson, Iowa
The First National Bank of Perry, Perry, Iowa
Poweshiek County National Bank of Grinnell,
Grinnell, Iowa
Views and recommendations of the Comptroller of the Currency
allE1 Superintendent of Banking. -
As required by section 3(b) of the
Act, the Board forwarded notice of the applications concerning the two
tational banks to the Comptroller of the Currency and notice of the
applications concerning the two State banks to the Superintendent of
Banking for the State of Iowa.
The Comptroller responded by recom-
Illending approval of each of the national bank applications.
The
-2-
Superintendent of Banking responded by recommending favorable action
concerning each of the State bank applications.
Statutory factors. -
Section 3(c) of the Act requires
the Board in each instance to take into consideration the following
five factors: (1) the financial history and condition of the holding company and bank concerned; (2) their prospects; (3) the
Character of their management; (4) the convenience, needs, and
welfare of the communities and area concerned; and (5) whether or
not the effect of the acquisition would be to expand the size or
e::tent of the bank holding company system involved beyond limits
consistent with adequate and sound banking, the public interest, and
the preservation of competition in the field of banking.
Discussicn. -
The proposal to acquire the voting control
Of 25 per cent of the voting shares of each of the four banks here
involved was prompted by an interpretation of the Board in December
3.959 (Federal Reserve Bulletin, December
1959, p. 1475) to the
effect that Brenton Companies was in violation of section 4(a)(2)
of the Act in that it was "furnishing services to or performing
services for" the four banks named, such activity not being perMissible since the holding company owned or controlled less than
25 Per cent of the voting shares of each bank receiving the services.
It appears that, while the Applicant itself now owns or
eontrols less than 25 per cent of the stock of each of the four banks,
a tajority of the stock of each of the banks has been owned since
3662
-3before the passage of the Bank Holding Company Act by the Applicant
and individual stockholders who are members of the Brenton family
and who also own a majority of the stock of the Applicant. It is
contemplated that the proposed acquisition by Applicant of additional
stock of the banks will be accomplished by means of a voting trust
agreement to be executed by the Applicant and one of the major individual stockholders.
A memorandum of Agreement as to each of the
banks provides that the Applicant shall continue to provide management services in the same manner and upon the same terms as heretofore.
The financial history and condition, prospects, and
management of both Applicant and each of the four banks are
satisfactory.
Each of the four banks is located in a small farming
community with the business of the bank originating in the rural
area of the town of its domicile and the surrounding agricultural
area within a radius varying from
5 to 20 miles. There is a non-
subsidiary bank in the primary service area of each of the four banks,
except that of the Brenton State Bank, Dallas Center, Iowa.
In
addition, the primary service area of each of the four banks is
surrounded by a number of banks which, while not having offices in
that area, and presently not serving the area to any material
extent, are, however, so located geographically that they are
Potential competitors.
Since the proposed acquisition
would not seem to result
in any substantial change in the operation of the banks involved
it does not appear that the proposed acquisition
would have any
material effect on the convenience, needs, and welfare of the communities and areas concerned.
Similarly, it does not appear that the acquisition
proposed
Would have any significant effect upon banking competition or that
they would expand the size or extant of banking resources under
APPlicant's control beyond limits consistent with adequate and sound
banking, the public interest, and the preservation of competition
in the field of banking.
Conclusion. - The above views were incorporated in the
Tentative Statement issued in connection with the Notice of Tentative
necision published in the Federal Register on September 7, 1960 (25
Pederal Register 8626), affording interested persons an opportunity
to submit comments on, or objections to, the Boardls proposed action.
No
comments or objections were received.
Viewing the relevant facts in the light of the general
Purposes of the Act and the factors enumerated in section 3(c),
it is the judgment of the Board that the proposed acquisition
140111d be consistent with the statutory objectives and the public
illterest and that the applications should be approved.
September 27, 1960
TELEGRAM
Item No.
9/27/60
LEASED WIRE SERVICE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
September 27, 1960
SANFORD - NEW YORK
Your wire September 22. Board approves the opening and maint"lance
of an account on your books in the name of Banque di Emission du
Rwanda et du Burundi subject to the uscrAl terms and conditions upon
Which your Bank maintains accounts for foreign central banks tit-4.
governments*
It is understood that you will in due course offer participation
in this account to the other Federal Reserve Banks*
.a.B.4pd) Merritt Sherman
HERKAN
BOARD OF GOVERNORS
00'4**,1,
OUtok.f'is,;(
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No.
9
9/27/60
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
tt,41.1.
September 27, 1960.
PC)NFIDENTIAL_CF111
Dear Sir2
During the past two years, the Federal Reserve Banks have assigned
elpresentatives to the Classified Relocation Site of the Office of Civil and
;efense Mobilization for two two-week periods each year. The time has come
schsduling assignments for the next twelve months beginning December 2,
4'960, The Board has reviewed the program in the light of its original purPoses, subsequent developments, and the mutual benefits received from the
Ptarticipation of the Banks in the program. The Board is of the opinion that
he program should be modified as follows
First, the tour of duty of Bank representatives should
be reduced to two one-week periods, provided that the tour of
duty may be extended to a two-weeks' period in the event that
the international situation should become sufficiently grave
as to require the augmentation of Government staffs at the Site.
Second, Bank representatives need not be limited to official
or high staff personnel familiar with monetary policy but might
Include operational personnel.
In accordance with the above modifications, a proposed schedule of
"e-week assignments beginning December 2, 1960, is enclosed. It is rested that the names of your representatives for the dates indicated in the
thhedule be forwarded to Innis D. Harris, Coordinator of Defense Planning, so
t,at the list may be submitted to the Office of Civil and Defense Mobiliza,
°4 bY October 17, 1960. In the event that unforeseen circumstances should
p.
a named representative from attending in accordance with the schedu
45
'etitution3 may be made as in the past.
,
tire
PRESIDENTS
Merritt
Secre
OF ALL FEDERAL RESERVE BANKS
CONFIDENTIAL (F.R.)
ADDITIONAL LIAISON REPRESENTATION
1960
1961
Dec. 2 - 9
New York
Dec. 16 - 30
Board
Jan. 3 - 10
Cleveland
Jan. 13 - 20
Richmond
Jan. 27 - Feb. 3
Boston
Feb. 10 - 17
Philadelphia
Feb. 24 - Mar. 3
Atlanta
Mar. 10 - 17
Chicago
Mar. 24 - 31
St. Louis
Apr. 7 - 14
Minneapolis
Apr. 21 - 28
Kansas City
May 5 - 12
Dallas
May 19 - 26
San Francisco
June 2 - 9
Boston
June 16 - 23
New York
June 30 - July 7
Philadelphia
July 14 - 21
Cleveland
July 28 - Aug. 4
Richmond
Aug. 11 - 18
Atlanta
Aug. 25 - Sept. 1
Chicago
Sept. 8 - 15
St. Louis
Sept. 22 - 29
Minneapolis
Oct. 6 - 13
Kansas City
Oct. 20 - 27
Dallas
Nov. 3 - 10
San Francisco
Nov. 17 - Dec. 1
Board
3 64-,
BOARD OF GOVERNORS
44it***31.0.
OF THE
e,OCOGOI.Z0
FEDERAL RESERVE SYSTEM
ts.
WASHINGTON 25, D. C.
Item No. 10
9/27/60
ADDRESS OFFICIAL COFIREOPONDENCE
TO THE BOARD
44.fras%
44044
,
September 27, 1960
Ni'. Eliot J. Swan,
First Vice President,
Federal Reserve Bank of San Francisco,
San Francisco 20, California.
Dear Er. Swan:
In accordance with the request contained
in your letter of September 16, 1960, the Board
approves the appointment of Chester liarion
Rochowicz as an assistant examiner for the Federal
Reserve Bank of San Francisco. Please advise
as to the effective date of the appointment.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
1-•
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 11
9/27/60
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 27, 1960
AD_MAIL
Mr. Arturo Arez Galliano„
Vicepresidente,
Banco de Guatemala,
Guatemala City, Guatemala.
Dear Mr. Arez Galliano:
In response to your letter of Augubt 17, 1960, and to
President Miron's letter of June 25, 1960, the Board of Governors
Of the Federal Reserve System has secured approval of a two-month
extension of Dr. Ralph E. Holben's detail from his Government agency
in Washington, and is prepared to extend the contract for his services
vIth the Banco de Guatemala for the period requested, namely, from
October 16, 1960 through December 14, 1960.
The terms of the existing agreement would be continued
except that an adjustment of the charges that the Bank of Guatemala
'fculd reimburse to the Board of Governors would be necessary to
cover an increase in the amount the Board would be billed by the
Government agency on whose payroll Dr. Holben is carried. This increase in the charges of approximately 7 per cent is the result of
the enactment by the Congress of the United States of (a) a general
increase in pay scales for United States Civil Service employees
effective July 10, 1960, and (b) a health benefit program also
effective (hay 10, 1960, for which the employing agency makes a
contribution on Dr. Holben's behalf. The details of the charges for
the period from October 16 through December 10, 1960, are set forth
,,x1 the attached schedule, and a pro rata charge for the period from
December 11 through December 14 would also be made, assuming that the
detail would end at that time.
In connection with the extension of Dr. Holben's detail, it
'
1 8 also necessary to call your attention to the fact that, as a
l'esult of the enactment of the general pay increase and health program
!'eferred to above, the amount being billed to the Board of Governors
°Y the Government agency on whose payroll Dr. Holben is carried has
"en increased for the period since July 10, 1960. The details of
Ire'(
Mr. Arturo Perez Galliano
-2-
the charges actually being billed to the Board of Governors for the
Period from July 10 through October 1.51 1960, are set forth in the
attached schedule, and are there compared with the amounts that
would have been billed at the rates applicable before July 10, as
set forth in the Board's letter of September 10, 1959. Since the
Board is being billed at the increased rate, it will be appreciated
if your Bank will reimburse the Board at that rate. This would be
in accordance with the principle on which our arrangements have been
based, namely, recovery by the Board of the actual costs incurred in
securing Dr. Holben's services.
If the above arrangement for extension of Dr. Holben's
and
for an adjustment of the reimbursable charges for the
services
Period July 10 - October l51 1960, meets with your approval, it will
be appreciated if you will so advise the Board by executing the
attached copy of this letter and appended schedule on behalf of the
Banco de Guatemala and returning the executed copy to the Board.
The Board is pleased to know that your Bank has found the
arrangement with Dr. Holben useful and that it has been possible to
arrange for an extension of the arrangement for the additional period
requested.
Sincerely yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Attachments
Schedule of Charges for the Services of
Dr. Ralph E. Holben
At new rates, effective
July 10, 1960
Oct. 16, 1960
through
Dec. 10. 1960
(8 weeks)
tt
tY
4-:
4-ement contributions
ll) insurance contributions
eic leave (1/2 day per 2-week
Deriods at $52.00 per day
at the
new rate or $48.32
tl/erda,y at the former rate,
167:88 that may be used during
lit"riod of detail)
leh benefit contributions
11..ram.ce of $7 per diem in
4.e14 of expenses
e
htq
At former
rates specified in Board's
letter of
Sept. 10, 1959
July 10 - Oct. 15, 1960
(14 weeks)
$2,080.00
135.20
7.00
$3,640.00
236.60
12.25
$3,382.40
219.97
11.38
104.00
12.48
182.00
21.84
169.12
392.00
686.00
686.00
$2,730.68
$4,778.69
$4,468.77
ANON
In addition, Dr. Holben accrues annual leave at the rate of
26 days per year (1 day per two-week period), and an additional
Charge will be made at the new rate of $52.00 per day (formerly
$48.32 per day) for any annual leave accrued beginning July 10, 1960,
and unused during the period of the detail.
@FedFRASER