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PR 609 Rev. 10/59 Minutes for To: September 30, 1959. Members of the Board From: Office of the Secretary Attached is a copy of the minutes of the m on Board of Governors of the Federal Reserve Syste the above date. It is not proposed to include a statement of with respect to any of the entries in this set to red ns requi minutes in the record of policy actio al the Feder be maintained pursuant to section 10 of Reserve Act. Should you have any question with regard to will advise the minutes, it will be appreciated if you initial below. e pleas the Secretary's Office. Otherwise, als will initi your If you were present at the meeting, not present, were you If Indicate approval of the minutes. seen the have you that your initials will indicate only minutes. Chin. Martin Gov. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Minutes of the Board of Governors of the Federal Reserve System on Wednesday, September 30, 1959. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman 1/ Balderston, Vice Chairman Szymczak Mills Robertson Shepardson King Mr. Sherman, Secretary Mr. Thomas, Economic Adviser to the Board Mr. Young, Director, Division of Research and Statistics Mr. Marget, Director, Division of International Finance Mr. Hackley, General Counsel Mr. Solomon, Director, Division of Examinations Mr. Koch, Associate Adviser, Division of Research and Statistics Mr. Hexter, Assistant General Counsel Mr. Goodman, Assistant Director, Division of Examinations Mr. Landry, Assistant to the Secretary Mr. Thompson, Supervisory Review Examiner, Division of Examinations Mr. Knipe, Consultant to the Chairman Report by Mr. Marget. Mr. Marget reported on his recent partici- pation at the International Economic Association's "Round Table on Inflation" held at Elsinore, Denmark, September 2-10, 1959, as authorized by the Board on January 16, 1959. The consensus of the reports made at were being conthis meeting, he said, was that inflationary pressures tained in most of the western nations. 1/ In this connection, he noted Withdrew from meeting and re-entered at points indicated in minutes. -2- 9/30/59 by that there was generally favorable comment on the role played the the Federal Reserve in combatting inflationary pressures in United States at the present time. He observed, furthermore, that the Radcliffe Committee report received considerable attention at the meeting. Mr. Marget also commented on his attendance at the ments l September 14, 1959, meeting of the Bank for Internationa Settle ization held at Basle, Switzerland, in accordance with Board author to the central banks given him on March 26, 1959, and on his visits of Norway and Sweden. ant Director, Mr. Marget then withdrew and Mr. Benner, Assist ant General Counsel, Division of Examinations, Mr. O'Connell, Assist room. and Mr. Davis, Assistant Counsel, entered the the Joint Economic Report on conversations with Mr. Knowles of Committee staff. Mr. Young reported on conversations that he had with the Board meeting of Mr. Knowles pursuant to the understanding at providing statistics on September 25, 1959, regarding the problem of Government securities market trading volume and dealer positions in the for the period 1950 up to 1958. During the course of the ensuing dis- statistical information that cussion relating to the exact nature of the brought out that that the Joint Economic Committee desired, it was any Government security Committee had the power to subpoena records of desired by the Committee. dealer who did not voluntarily supply the data -3- 9/30/59 The Chairman made it clear that in his estimation the System may have been delinquent with respect to supplying data on the Government securities market, for which he felt the System probably had greater responsibility than the Treasury. He suggested that an arrange- ment for providing information to the Joint Economic Committee should be worked out in a way to avoid suspicion that the System was attempting to conceal anything about the Government securities market. In an effort to devise a means for assisting the Committee, it was agreed that Mr. Young might suggest to Mr. Knowles that Professor Smith of Harvard, whom the Committee had engaged to study the behavior of the Government securities market during the period 1950 through 1958, could submit a list of questions to the Trading Desk at the New York Federal Reserve Bank, and that he might explore other possible alternatives looking to development of better information in this field, keeping in mind a caution raised by Governor Mills that the confidentia ality of information supplied to the System should be protected as matter of principle. It was also suggested that the Chairman might undertake to discuss the situation with Mr. Lanston of the firm of Aubrey Lanston & Co., which thus far had declined to furnish certain historical data on the grounds that the cost to the firm would not be warranted. Chairman Martin and Messrs. Young and Koch withdrew from the meeting at this point. -4- 9/30/59 Applications for prior approval under the Bank Holding Company Act. Memoranda from the Division of Examinations dated September 14 and from the Legal Division dated September 281 19591 had been distributed to the Board concerning applications by the Atlantic National Bank and Atlantic Trust Company, both of Jacksonville, Florida, for prior approval pursuant to section 3(a)(2) of the Bank Holding Company Act of 1956 of the acquisition of up to 37,900 of the 40,000 outstanding shares (94.8 per cent) of a proposed new bank, the Southside Atlantic Bank, Jacksonville, Florida. After Mr. Thompson had commented briefly on the factnal background of the proposed acquisition of stock in the projected new bank by Atlantic National and Atlantic Trust, Mr. Hackley emphasized that the facts as discussed by Mr. Thompson could support either Board approval or Board denial of the application, but that it would be more difficult to support the latter than the former. At this point Mr. Masters entered the room. Mr. O'Connell added that the Board's action in the Southgate National Bank case of October 9, 19571 served as the basis for this opinion of the Legal Division. It was understood that the Legal Division would prepare for the Board's consideration drafts of a notice of tentative decision and tentative statement approving the applications of Atlantic National Bank and Atlantic Trust Company. -5- 9/30/59 withdrew, Messrs. O'Connell, Davis, Thompson, and Knipe then ion of Research and Mr. Brill, Chief, Capital Markets Section, Divis and Statistics, joined the meeting at this point. and, upon Chairman Martin re-entered the room at this point Atlantic case, being informed of the action taken with respect to the stated that he concurred. mending approval Letter to the Comptroller of the Currency recom in Washington, D. C. of an application to organize a national bank (Item No. 1). ng on Pursuant to the understanding at the Board meeti he had talked on the telephone September 29, 1959, Mr. Solomon said that ve Bank regarding this with Mr. Armistead of the Richmond Federal Reser application. e to appear He reported that the Richmond Bank had no desir the application should be before the Board to support its views that their conclusion had disapproved and that, in fact, it recognized due to a difference in differed from the Board's in this instance that the Mr. Armistead had indicated, Mr. Solomon said, approach. application were approved. Richmond Bank would not be unhappy if the to a letter in the form Thereupon, unanimous approval was given addressed to the Comptroller of attached to these minutes as Item No. I this application to organize a the Currency recommending approval of national bank in Washington, D. C. Counsel, Mr. Hexter then withdrew and Miss Hart, Assistant the room. and Mr. Farrell, Legal Assistant, entered -6- 9/30/59 New York Clearing House Association views on "carrying" under Regulation U. As requested by the Board, a memorandum dated September 18, 1959, from Miss Hart had been distributed commenting on the points raised by the representatives from the New York Clearing House Association in their meeting with the Board on September 11, 1959, concerning a proposed interpretation of "carrying" under section 221.3(b)(1) of Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying Registered Stocks. After noting that the New York Clearing House Association was preparing an additional memorandum on this question) Mr. Hackley stated that the Legal Division desired Board guidance on whether or not it should proceed with further interpretations of the nine proposed principles relating to "carrying." He indicated that the Reserve Banks were anxious to have such interpretations, two of which had already been prepared by the Division. He went on to say that further interpretations carried the danger of giving the public the unwarranted idea that the Board was uncertain about what it meant. On the other hand, should interpretations be promulgated which appeared to go beyond the language of the regulation, the possibility would be suggested that the June 15, 1959, interpretation of "carrying" should be amended. In his estimation the basic issue was how far the Board wished to go to catch substantial evasions of the regulation at the expense of the attendant difficulties of interpretation and administrative burdens imposed on bankers. If the Board were not so -7- 9/30/59 nt, concerned with preventing evasions, it would be easier, in his judgme either to interpret the present amendment or redraft it. Governor Mills pointed out that the Board was uninformed retly. garding the extent to which the regulation was being evaded curren York Clearing He suggested that it would be advisable to wait for the New further with House Association's additional memorandum before proceeding the question of revising the regulation. about Governor Shepardson stated that Mr. Hackley's suggestion ple it were possible redrafting the regulation was desirable if in princi to eliminate the question of interpretation. He said further that the June 15, 1959, "old" loans approach which made loans taken out before fol within the scope of section 221.3(b)(1) whenever changes in the for controlling the conditions of the loan occurred was a move taken amount of outstanding credit. He questioned whether this type of move ion. was appropriate to controlling further credit expans each item in Governor Robertson commented that not only should Association be thoroughly the presentation by the New York Clearing House d since it was so discussed, but that the regulation should be revise difficult for the people applying it to understand. had been At this point Mr. Hackley observed that a suggestion if the interpretations made in previous discussion of this question that -8- 9/30/59 of Regulation U were revised, the revisions should be published in the Federal Register for comment. In his opinion it seemed illogical to ask for comments on interpretations which reflected the Board's understanding of the regulation and, hence, were hardly proper cause for comment. After a question from Governor King as to whether the Legal Division had received the reply of the Federal Advisory Council to question number six under date of September 91 1959, had been answered ion affirmatively, it was agreed that the New York Clearing House Associat nt memorandum on "carrying" should be taken up item by item at a subseque meeting of the Board. The meeting then adjourned. k \ Seer? ,( :41,M.••=//, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item NO0 1 9/30/59 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD September 30, 19590 Comptroller of the Currency, Treasury Department, Washington 25, D. C. Attention Mr. W. M. Taylor, Deputy Comptroller of the Currency. Dear Mr. Comptroller: office dated Reference is made to a letter from your cation to organize a May 26, 1959, enclosing copies of an appli d by Mr. Eugene Young, national bank in Washington, D. C., signe mendation as to Jr., and associates, and requesting a recom ved. appro be d shoul whether or not the application tigation of Information contained in a report of inves Reserve Bank al Feder the for the application made by an examiner respect with ngs findi able of Richmond indicates generally favor ngs earni its bank, the to the proposed capital structure of as to ssed expre is doubt some prospects and management. While the that rs appea it area, the need for another bank in this ess to operate profitinstitution could develop sufficient busin cial institutions. finan ing exist ably without adversely affecting deration of the consi able favor Accordingly, the Board recommends application. be glad to The Board's Division of Examinations will of your tives senta repre discuss any aspects of this case with office if you so desire. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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