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Minutes for
To:
Members of the Board
From:
Office of the Secretary
September 30, 1966
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 miauteq.
Chm. Martin
Gov. Robertson
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Gov. Brimmer
t.)
$
Minutes of the Board of Governors of the Federal Reserve
System on Friday, September 30, 1966.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Robertson, Vice Chairman
Shepardson
Mitchell
Daane
Brimmer
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Sherman, Secretary
Kenyon, Assistant Secretary
Bakke, Assistant Secretary
Young, Senior Adviser to the Board and
Director, Division of International Finance
Holland, Adviser to the Board
Solomon, Adviser to the Board
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Furth, Consultant
Messrs. Brill, Koch, Partee, Axilrod, Bernard,
Eckert, Ettin, Fry, Keir, Kelty, and
Rosenblatt, and Mrs. Peskin of the Division
of Research and Statistics
Messrs. Sammons, Hersey, Katz, Baker, Gemmill,
and Ruckdeschel of the Division of International
Finance
Money market review.
Mr. Bernard commented on developments in
the Government securities market, Mr. Ettin discussed bank credit data,
Mr. Keir reviewed the capital markets, and Mr. Baker reviewed developments
in foreign exchange markets.
Copies of the several tables and charts
that were distributed have been placed in the Board's files, along with
coPies of the staff presentations.
All staff members except Messrs. Sherman, Kenyon, Bakke, Holland,
Cardon, Fauver, and Brill then withdrew from the meeting and the following
entered the room:
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9/30/66
Mr. Hexter, Associate General Counsel, Messrs. O'Connell,
Shay, and Hooff, Assistant General Counsel, and Mr.
Via, Senior Attorney, Legal Division
Mr. Leavitt, Assistant Director, and Messrs. Egertson
and McClintock, Supervisory Review Examiners, Division
of Examinations
Mr. Daniels, Assistant Director, and Mr. Ring, Technical
Assistant, Division of Bank Operations
Discount rates.
The establishment without change by the Federal
Reserve Bank of Boston on September 26, and by the Federal Reserve Banks
of New York and San Francisco on September 29, 1966, of the rates on
discounts and advances in their existing schedules was approved unanimously, with the understanding that appropriate advice would be sent to
those Banks.
Report on competitive factors.
There had been distributed a
draft of report to the Comptroller of the Currency on the competitive
factors involved in the proposed merger of The Central National Bank of
Mount Union, Mount Union, Pennsylvania, with the First-Grange National
Bank of Huntingdon, Huntingdon, Pennsylvania, under the charter of the
latter and with the new name of Penn Central National Bank.
Following adoption of a suggested change in emphasis of the
c°nclusion, the report was approved unanimously for transmittal to the
Comptroller in a form in which the conclusion read as follows:
Consummation of the merger of First-Grange National
Bank of Huntingdon and The Central National Bank of Mount
Union would eliminate some existing and potential competition between them and significantly enhance the position
of the now largest bank in the area. The overall effect
of the proposed merger is adverse.
9/30/66
-3Application of Ohio Citizens Trust Company (Items 1-3).
There
had been distributed a memorandum from the Legal Division dated
September 29, 1966, submitting drafts of an order and statement reflecting the Board's action on September 21, 1966, approving an application
by The Ohio Citizens Trust Company, Toledo, Ohio, for permission to merge
With The Whitehouse State Savings Bank, Whitehouse, Ohio.
A dissenting
statement by Governor Robertson also was submitted.
Following adoption of certain changes in the majority statement
suggested by Governor Mitchell, issuance of the order and statement was
authorized in the form attached to these minutes as Items 1 and 2, respectively.
The dissenting statement of Governor Robertson is attached as
Item No. 3.
Messrs. Shay, Via, and Egertson then withdrew from the meeting.
Interpretation of Regulation Q (Item No. 4).
There had been
distributed a memorandum from the Legal Division dated September 29, 1966,
to which was attached a draft of letter suitable for transmittal to all
Federal Reserve Banks answering two questions that had been raised concerning the Board's September 21 action amending the Supplement to
Regulation Q (Payment of Interest on Deposits) to establish a maximum
Permissible interest rate of 5 per cent on time deposits of member banks
under $100,000:
time
(1) notwithstanding that a customer may have aggregate
deposits with a member bank in excess of $100,000 on September 26
(the effective date of the amendment), the bank may not pay in excess
9/30/66
-4-
of 5 per cent on a certificate of deposit of less than $100,000 issued
to that customer on or after September 26; however, (2) if time deposits
of a customer aggregate $100,000 or more a member bank may issue a new
certificate of deposit combining such deposits and paying interest up
to 5-1/2 per cent, provided the maturity of the new contract equals or
exceeds the most distant maturity of any one of the existing contracts.
The proposed interpretations were approved unanimously.
A copy
of the letter of advice to the Reserve Banks is attached as Item No. 4.
Emergency storage of Federal Reserve notes (Items 5 and 6).
In
a report dated May 28, 1965, the Presidents' Conference Subcommittee on
Emergency Operations recommended that there be stored at the Chicago
Reserve Bank currency for emergency needs in the areas served by the
Buffalo, Cleveland, Cincinnati, New Orleans, Little Rock, Memphis, and
Minneapolis offices, in addition to a supply to be held by Chicago for
emergency needs in its own District.
Approximately 62,000 packages of
notes with a value of $1.4 billion would be involved.
The proposed emergency currency stockpile at Chicago was part
of a broad plan developed by the Subcommittee, under which one-half of
the currency supply goals of Federal Reserve offices most vulnerable to
destruction in case of enemy attack and one-fourth of the goals of offices
moderately vulnerable to destruction would be stored elsewhere than on
their own premises--either at cash agent banks or in one of three special
vaults proposed to be constructed at the Chicago Reserve Bank, at a proPosed new Denver Branch building, and at Culpeper, Virginia.
TY.
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9/30/66
On June 14, 1965, the Presidents' Conference approved the Subcommittee's recommendation, and on July 26, 1965, the Board authorized
the Chicago Reserve Bank to proceed with plans for completion of an
unfinished vault in the third basement level of its building for this
Purpose.
There had now been distributed a memorandum dated September 27,
1966, from the Division of Bank Operations advising that construction
of the Chicago vault facilities had been completed, and recommending
that the Board:
(1)
Approve the storage in the Chicago vault of
notes of the New York, Cleveland, Atlanta,
St. Louis, and Minneapolis Reserve Banks, as
proposed by the Subcommittee on Emergency
Operations
(2)
Authorize the Federal Reserve Banks of New York,
Cleveland, Atlanta, St. Louis, and Minneapolis,
and the Federal Reserve Agent at each of these
Banks, to appoint, respectively, the Chicago
Reserve Bank and the Federal Reserve Agent at
Chicago to hold the notes of the five Banks in
joint custody.
Sharing
(3) Approve, under provisions of the Loss
Agreement between the Reserve Banks, shipments
of Federal Reserve notes in amounts up to $50
million each, to the extent that such shipments
are needed to permit an orderly buildup in the
emergency currency stockpile at Chicago.
(4)
Authorize obtaining an amendment to the contract with Brink's, Incorporated, to cover
such special transfers of currency in amounts
over $15 million, the present contractual limit
per shipment.
,*3
-6-
9/30/66
Attached to the memorandum was a draft of letter to be sent to
the President and to the Federal Reserve Agent of each Reserve Bank
regarding the foregoing proposed actions, to which would be attached
appropriate forms of powers of attorney to accomplish the joint custody
arrangement recommended.
The recommendations of the Division were approved unanimously;
a copy of the letter sent to the Reserve Banks and Federal Reserve
Agents pursuant to this action is attached as Item No. 5, and a copy
of the letter sent to Brink's is attached as Item No. 6.
Messrs. Daniels and Ring then withdrew from the meeting.
Action to implement Public Law 88-593.
Under date of August 23,
1966, Chairman Patman of the House Banking and Currency Committee had
written to the Board requesting a copy of each report that had been
received pursuant to Public Law 88-593, which requires notification to
the appropriate Federal banking agency upon change in control of an
insured bank or where an insured bank makes a loan secured by 25 per
Cent or more of the outstanding voting stock of an insured bank.
At the meeting on September 29, 1966, there had been discussion
Of a draft of reply prepared by Mr. Cardon, and a decision thereon had
been
deferred pending an opportunity for members of the Board to review
the type of information contained in the reports filed under Public
Law 88-593.
There had now been distributed a memorandum from the Division
Of Examinations dated September 29 summarizing the requirements of the
9/30/66
-7-
statute and the administrative procedures established thereunder.
Attached to the memorandum were samples of reports submitted and also
of supplementary memoranda of comment received from Reserve Banks.
The memorandum concluded with the Division's recommendation that the
requested reports not be furnished.
Governor Robertson commented that he did not see how, as a
Practical matter, the request could be refused.
One possibility, he
noted, would be to transmit the reports with a request that they be
kept confidential because the public interest would not appear to be
served by their publication.
Governor Mitchell inquired whether a conclusion might be reached
that the type of information contained in the reports fell within one
of the exclusionary provisions of the "Freedom of Information Act."
In the course of discussion concerning this possible approach,
Mr. O'Connell suggested that it would appear prudent to refrain, pending further careful study, from taking a position on types of information that might or might not be excluded from disclosure under that Act.
Governor Shepardson stated his belief that the public interest
would not be served by publication of the reports, following which a
suggestion was made that Chairman Patman might be advised that while
the Board had no objection to furnishing the information to his Committee, it was felt to be contrary to the public interest for the reports
in
kluestion to be made public and assurance that they would not be
1 1
‘)0(7)0
-8-
9/30/66
published was desired.
However, reservations were expressed about the
Practicability of such a course of action; for one thing it seemed
unrealistic to expect the Committee to accept the information on such
a basis.
Governor Robertson then commented that in view of the fact that
the Comptroller of the Currency and the Federal Deposit Insurance Corporation had received similar requests from Chairman Patman, it would
seem desirable for the Board to defer responding until the position of
the other agencies could be ascertained.
In the interim the staff could
(1) investigate the matter further in light of the provisions of the
Freedom of Information Act, and (2) develop alternative drafts of
response to Chairman Patman's letter for the Board's consideration.
There being general agreement with Governor Robertson's suggestion, the decision on the reply to be made to Chairman Patman's request
was deferred.
The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
the following items:
Letter to the Federal Reserve Bank of Chicago (copy attached as
Item No. 7) approving the appointment of John A. Shinn as Alternate
sistant Federal Reserve Agent for use only in case of emergencies,
lth the understanding that he would not examine cash agent banks.
Letter to President Francis, Chairman of the Presidents' Conference
C°mmittee on Sundry Operations, advising that the Board had designated
1?hn R. Farrell to serve as associate of the Ad Hoc Subcommittee estab;
:0-shed to study the appropriate posture of the Federal Reserve Banks
re garding regional development.
36o4
9/30/66
-9-
Memorandum from the Division of Research and Statistics dated
September 28, 1966, requesting that the Board authorize the following
Special arrangements with regard to Ann P. Ulrey, Economist in the
Capital Markets Section: an additional leave of absence without pay
for a period of seven months beginning October 3, 1966; authorization
to requisition Mrs. Ulrey's services on current analyses in Washington,
as needed; and continued work by Mrs. Ulrey on a part-time basis away
from the Board's offices on a monograph on the U.S. capital markets
for a period of up to the full-time equivalent of 13 weeks (less four
weeks already worked).
Memoranda recommending the following actions relating to the Board's
staff:
AUTIAILEall
.
Marie Mackey as Statistical Clerk, Division of Research and Statistics, with basic annual salary at the rate of $4,776, effective the date
of entrance upon duty.
Charles P. Brown, Multilith Operator, Division of Administrative
Services, from $5,491 to $5,782 per annum, effective October 9, 1966.
3685
UNITED STATES OF AMERICA
Item No. 1
9/30/66
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
'Ti the ilatter of the Application of
THE OHIO CITIZENS TRUST COMPANY
for approval of merger with
The Whitehouse State Savings Bank
ORDER APPROVING APPLICATION FOR
MERGER OF BANKS
There has come before the Board of Governors, pursuant to the
sank Merger Act, as amended (12 U.S.C. 1828(c), Public Law 89-356), an
aPPlication by The Ohio Citizens Trust Company, Toledo, Ohio, a State
rliernber bank of the Federal Reserve System, for the Board's prior approval
Of the merger of that bank and The Whitehouse State Savings Bank,
Whitehouse, Ohio, under the charter and title of The Ohio Citizens
Trust
the main office and
Company, As an incident to the merger,
branch of The Whitehouse State Savings Bank would become
the resulting bank.
branches of
Notice of the proposed merger, in form approved
by the Board, has been published pursuant to said Act.
Upon consideration of all relevant material in the light of
the factors set forth in said Act, including reports furnished by the
Co—
Itroller of the Currency, the Federal Deposit Insurance Corporation,
3686
an
the Attorney General on the competitive factors involved in the
Proposed merger,
IT IS HEREBY ORDERED, for the reasons set forth in the
4
U4
ardis Statement of
this
date, that said application be and hereby
is
approved, provided that said merger shall not be consummated
(a) before the thirtieth calendar day following the date of this
0 der, or (b) later than three months after said date.
Dated at Washington, D. C., this 4th day of October, 1966.
By order of the Board of Governors.
Voting for this action: Chairman Martin and
Governors Shepardson, Mitchell, Daane, Maisel,
and Brimmer.
Voting against this action:
Governor Robertson.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
e'pric...)f460
t_)0(73(
Item No. 2
9/30/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Y
APPLICATION BY THE OHIO CITIZENS TRUST COMPAN
WITH
MERGER
OF
AL
FOR APPROV
THE WHITEHOUSE STATE SAVINGS BANK
STATEMENT
, Ohio ("Ohio Citizens"),
The Ohio Citizens Trust Company, Toledo
Ilith total deposits of about $141 million, has applied, pursuant to the
Bank Merger Act, as amended (12 U.S.C. 1828(c), Public Law 89-356), for
bank with The Whitehouse
the Board's prior approval of the merger of that
Bank"), which has total
State Savings Bank, Whitehouse, Ohio ("Whitehouse
de
The banks would merge under the charter
n
posits of about $5 millio'
and name of Ohio Citizens, which is a member bank of the Federal Reserve
System.
two offices of Whitehouse Bank
As an incident to the merger the
would become branches of Ohio Citizens, increasing the number of its
offices to 12.
Ohio Citizens is in Toledo,
Competition. - The head office of
318 thousand.
a citY with a 1960 population of
The bank operates six
and Oregon, an
branches in Toledo and one branch each in Maumee
ized.
additional Toledo branch has been author
The head office of
southwest of downtown Toledo in
Whitehouse Bank is about 18 miles
Whit
ity with an estimated population
ehouse, a residential and farm commun
branch in Holland, about 12 miles
°f 13300. The bank operates one
"rtheast of Whitehouse.
57-1T.g7"----lr"ETr-77s7;"
All offices of the two banks are in Lucas
April 1, 1966.
-2—
County.
fyi,cz,,L2
00C)C.73
Under Ohio law a bank may establish and operate branches only
in the county in which its head office is located.
There is some competition between Ohio Citizens and Whitehouse
Bank, mainly because most of the employable residents of Whitehouse
commute to work in Toledo.
The nearest offices of the two banks, the
Rolland branch of Whitehouse Bank and the Dorr-Secor branch of Ohio
Citizens in Toledo, are approximately six miles apart, and there are
three other banking offices situated directly between these branches.
The nearest branch of Ohio Citizens to the head office of Whitehouse
Bank is in Aaumee, approximately 10 miles to the northeast; there are
470 other banking offices in the intervening area.
The principal competition for Whitehouse Bank is now supplied
by two offices each of the First National Bank of Toledo and Sylvania
Savings Bank, the second and fifth largest banks, respectively, in Lucas
County.
The merger would replace a poor competitor in the Whitehouse-
Rolland area with a stronger, more resourceful one, and its effect
outside the Whitehouse-Holland area would be minuscule.
It does not appear that any banking offices would be adversely
affected by the merger.
The effect of the merger on competition would not be significantly adverse.
Financial and managerial resources and future prospects. lhe banking factors, as they relate to Ohio Citizens, are satisfactory
would not be adversely affected by the acquisition of Whitehouse Bank.
-.3..
The net operating earnings of Whitehouse Bank have been below
average and if it attempted to pay the prevailing area rate on savings
accounts, its prospects might be less than satisfactory.
Convenience and needs of the communities. - The principal
effect of the merger on banking needs and convenience would be in the
Whitehouse-Holland area, a growing suburb of Toledo, which has an
increasing demand for mortgage loans, and also potential for industrial
development. Whitehouse Bank operates under a restrictive policy with
respect to mortgage loans, does not aggressively pursue instalment loan
business and, due to its small size, is unable to meet the credit needs
of several businesses in its area.
The conversion of the two offices
of Whitehouse Bank into branches of Ohio Citizens would provide for the
Whitehouse and Holland communities more convenient access to broader
credit accommodations and to a generally wider range of banking services.
Summary and conclusion. - In the judgment of the Board, the
Proposed merger would benefit the banking convenience and needs of the
W hitehouse and Holland communities, and would not result in any significantly adverse consequences for banking competition.
Accordingly, the Board concludes that the application should
be approved.
October 4, 1966.
3(;90
Item No.3
9/30/66
DISSENTING STATEEENT OF GOVERNOR ROBERTSON
In my judgment, the record in this case leads inescapably
to the conclusion that the merger of Ohio Citizens and Whitehouse
Bank will have adverse consequences for banking competition. As the
majority acknowledges, all offices of the two baAs involved in this
merger are in Lucas Couaty and, under Ohio law, a bank may establish
and operate branches only in the county where its head office is
located.
In addition to Lucas County, the Toledo Standard Metropolitan
Statistical Area includes Monroe County, Michigan, to the north, and
tlood County, Ohio, to the south.
The locations of the offices of Ohio
Citizens and Whitehouse Bank, the sources of the bulk of their business,
and the branching possibilities, lead me to conclude that Lucas County
constitutes a meaningful market area; but since Whitehouse Bank competes
t° some extent with four banking offices located in northern Wood County,
think it proper and fair to include that region in the definition of
the relevant geographical market.
11 banks.
This area includes the offices of
My definition of the relevant market does not differ
taterially from the definitions employed in two of the
three reports
°n competitive factors submitted by other Government agencies in this
ease (each of the two used 12 banks in its analysis; the third report
used 16 banks).
Moreover, the majority offers not a single reason why
mY de
termination of the relevant market is not sound.
Ohio Citizens, with about 19 per cent of the deposits and
b
23 per cent of the loans, is the third largest bank in the area
-2-
which I believe reason requires us to treat as the relevant market;
With the acquisition of Uhitehouse Bank, Ohio Citizens will advance in
rank to second in terms of total area loans.
Ohio Citizens and the two
largest banks together account for over 80 per cent of the total deposits,
and for more than 75 per cent of the total loans, held by the 59 banking
Offices of the 11 banks that operate in the relevant area.
Ohio Citizens
alone holds more than three times the deposits and loans held by the
fourth ranking bank. After the merger is consummated, Ohio Citizens
alone will hold more loans than the combined offices of the seven banks
ranking fourth through tenth in terms of deposits and loans; further,
Ohio Citizens alone will hold very nearly as much in total deposits as
the offices of those seven banks.
It is true that the merger will not increase the concentration
of banking resources by a great amount, but it is equally true that the
degree of concentration is already considerable.
The Supreme Court has
Observed that "if concentration is already great, the importance of
Preventing even slight increases in concentration and so preserving the
Pc)ssibility of eventual deconcentration is correspondingly great."
United States v. Philadelphia Nat'l Bank, 373 U.S. 321, 365 n. 42.
Further, "the fact that a merger results in a less-than-307 market
share [in the acquiring firm], or in a less substantial increase in
concentration than in the .
. [Philadelphia] case [the merger would
have increased the market share of the two largest banks from 44% to
5974, does not raise an inference that the merger is not violative
of 5 7 [of the Clayton Act]." Id. at 364-65 & n. 41.
In addition, I do not think the existing and potential
competition between Ohio Citizens and Whitehouse Bank can be lightly
regarded. Whitehouse Bank obtains about 3 per cent of its deposits and
more than 7 per cent of its loans from the service area of Ohio Citizens.
The deposits and loans derived by Ohio Citizens from the service area
of Whitehouse Bank equal approximately 9 per cent and 25 per cent,
respectively, of the latter's deposits and loans. Competition between
these banks is facilitated by the fact that about 90 per cent of the
employable residents of Whitehouse commute to work in Toledo.
The
location of Whitehouse Bank in the most suitable section in the Toledo
area for the development of housing would facilitate the development of
further competition, as would the fact that either bank could extend
further into the market of the other through de novo branching.
The
majority ignores these considerations and offers no reasons why
Whitehouse Bank is not capable of significant growth.
In this con-
nection, I must point out that the record is bare of facts which would
justify the majority's characterization of this bank as a "poor
competitor".
The record shows, in fact, that from the end of 1956 to
the end of 1965, the deposits and loans of Whitehouse Bank increased by
145 per cent and 155 per cent, respectively, while the average increase
for all 11 banks in the relevant area was 35 per cent and 127 per cent,
tospectively.
Further, the record shows that the net operating income
of Whitehouse Bank grew in the 1958-1965 period at virtually the same
rate as that of Ohio Citizens.
The real and final impediment to the
-4-
3693
development of further competition between Ohio Citizens and Whitehouse
Bank is, of course, the decision of the majority in this case.
Regardless of whether a court would deem the merger as anticompetitive within the meaning of section 7 of the Clayton Act, I am
of the view that the adverse competitive considerations outweigh the
evidence that can be marshaled to show a probable benefit to the public
under the convenience and needs factor.
The finding of the majority is
that the merger would provide for the Whitehouse and Holland communities
more convenient access to broader credit accommodations and to a generally
wider range of banking services.
The majority makes no mention of the
fact that the merger will eliminate from the Whitehouse and Holland
communities an alternative source of banking services, a source that
many residents of those communities clearly prefer. Furthermore,
there is no demonstrable basis for the majority's assumption that the
two offices of Ohio Citizens resulting from the merger will be more
responsive to the needs of, and better able to serve, the people who
live in the Whitehouse-Holland area. The exact opposite may be the
case. For example, Whitehouse Bank maintains longer banking hours than
any Other bank
in Lucas County, and especially tailors its loans to
farmers to mature at the time they market their crops and livestock.
I find no basis for concluding that the existing banking
needs of the area served by Whitehouse Bank are not being met satis- and without
factorily
undue inconvenience, or that the area's future
banking
needs will not be adequately served.
A contrary conclusion
-.5-
3694.
is compelled by the proximity to the area of offices of Ohio Citizens
and of other large banks, by the employment and commuting patterns, and
by the fact that Ohio Citizens and other large banks can establish
de novo branches in the area.
Unlike the majority, I am not persuaded
that the prospects for Whitehouse Bank mi2ht be less than satisfactory
if it attempted to pay the prevailing area rate on savings accounts.
Even if substantially more than conjecture formed the basis for so
characterizing the future of Whitehouse Bank, there are two reasons
1411Y it should be accorded no weight. First, Whitehouse Bank is competing
successfully with the offices of much larger banks, and it is doing so
in the face of ample opportunity for its customers to place their
savings with financial institutions that pay higher rates. Second, if
Whitehouse Bank should, for any reason, sometime actually be faced with
adverse prospects, there is every indication that feasible alternatives
exist that are preferable, under the policy of the law we are
charged to administer, to merger with its third largest competitor.
I would deny the application.
October 4, 1966.
Item No. 4
9/30/66
BOARD OF GOVERNORS
OF THE
S-2004
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 30, 1966.
Dear Sir:
Quoted below is the substance of a Board letter of this date
replying to questions as to the maximum interest that may be paid on
deposits aggregating $100,000:
"A member bank may not pay interest in excess of 5 per
cent on any certificate of deposit of less than $100,000
issued after September 26th (except in automatic renewal of
certificate issued prior to July 20th), regardless of the
fact that the depositor may hold time deposits of the bank
aggregating more than $100,000. It was concluded that this
is necessary for administrative control purposes. For example,
if fragmentation of the deposit were permitted, such individual
certificates might pass into other hands and result in acquisition by third parties of certificates of less than $100,000
issued after September 26th paying interest in excess of that
permitted by regulation.
However, if outstanding deposits of one party equal in
the aggregate $100,000 or more, a member bank may issue a
new contract combining such deposits and paying interest up
to 5-1/2 per cent provided the single maturity of new contract
equals or exceeds the most distant maturity of any one of the
existing contracts. This is in accordance with the principal
stated in the Board's 1951 interpretation (FRLS #6330.5; 1951
Bulletin)."
Very truly ypurs,
I )
1-A4—/IL&/v/N
Merritt S erman,
Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
C/14/4
';69(;
t.
BOARD OF GOVERNORS
_
Item No. 5
9/30/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFVICIAL CORRESPONDENCE
TO THE BOARD
September 30, 1966.
Dear Sir:
The Subcommittee on Emergency Operations recommended in its
report of May 28, 1965, which the Conference of Presidents approved on
June 14, 1965, that Federal Reserve notes of the New York, Cleveland,
Atlanta, Chicago, St. Louis, and Minneapolis Reserve Banks be stored
in a separate vault (midwestern facility) at the Federal Reserve Bank
of Chicago for emergency use.
The special vault in the Chicago Reserve Bank has been
completed, and the Board would like to achieve the storage of this
emergency supply of currency substantially as recommended in Appendix VII
of the Subcommittee's report. A table showing the proposed storage is
attached.
For the purpose of the program, the Board authorizes the
Federal Reserve Banks of New York, Cleveland, Atlanta, St. Louis,
and Minneapolis, and the Federal Reserve Agent at each of these Banks,
to appoint, respectivel
y, the Chicago Reserve Bank and the Federal
Reserve Agent at that Bank
to hold the notes of the five Banks in joint
custody.
To facilitate establishment of such agency relationships,
there are attached suggested forms of powers of attorney. The
originals of the powers of attorney should be mailed to the Chicago
Reserve Bank and to the Federal Reserve Agent at the Bank as appropriate.
It would be helpful if a copy of each is also forwarded to the
Board.
The Board has approved shipments of the currency to the
Chicago Reserve Bank under Section 7 of the Loss Sharing Agreement in
-2the
amounts up to $50 million each and has authorized an amendment to
.
shipments
contract with Brink's, Incorporated, to cover such special
te
The Board's Division of Bank Operations will communica
ons
requisiti
with the Assistant Federal Reserve Agents about submitting
for the shipment of the notes.
Very truly yours,
Merritt Sherm
Secretary.
Enclosures
(THIS LETTER ADDRESSED TO THE FEDERAL RESERVE AGENTS
AND THE PRESIDENT OF EACH FEDERAL RESERVE BANK)
Facility (Chicago)
Proposed Storage of Federal Reserve Notes at Midwestern
$1's
/LI
$10's
$50's.
$20's
(number of packages)
Storage for offices as
shown in Appendix VII
of report of Subcommittee on Emergency
Operations, 5-28-65:
Buffalo
1/
Cleveland .Cincinnati 1./
New Orleans
Little Rock
Memphis
Minneapolis
Chicago
Detroit
1,029
2,559
1,292
2,896
966
2,166
1,302
15,000
3,080
539
1,501
764
1,219
370
1,224
666
7,000
1,470
455
1,726
679
1,188
169
797
243
6,000
1,150
365
1,308
175
480
189
511
214
Total by district adjusted
to even multiples of 8
packages for shipping purposes:
New York
Cleveland
Atlanta
St. Louis
Minneapolis
Chicago
1,032
3,856
2,896
3,136
1,304
18,080
544
2,272
1,224
1,600
672
8,472
456
2,408
1,192
968
248
7,152
30,304
$121,216
14,784
$295,680
12,424
$496,960
Total packages
Total value (in thousands)
1/
$100's
Total
10
16
16
56
26
28
13
26
22
2,431
7,244
2,970
5,815
1,707
4,734
2,463
28,000
7,000
368
1,488
480
704
216
1,304
32
128
8
16
16
16
88
32
40
24
2,448
10,240
5,832
6,464
2,480
35,008
4,560
$364,800
200
$40,000
200
$80,000
62,472
$1,398,656
27
94
34
4
1,300
NO .1
Excludes amounts stored at cash agent banks.
AVA.
POWER OF ATTORNEY
(II
The Federal Reserve Bank of
Bank")
hereby appoints and constitutes the Federal Reserve Bank of Chicago
Bank,
("Chicago Bank") the agent and attorney for the
Bank in joint
to hold Federal Reserve notes of the
custody with the Federal Reserve Agent accredited to the Federal Reserve
Bank of Chicago ("Chicago Agent") acting under power of attorney issued
to him by the Federal Reserve Agent accredited to the Federal Reserve
(II
Bank of
Agent").
Said joint custody shall
be in accordance with section 16 of the Federal Reserve Act (12 U.S.C.
417) and rules and regulations prescribed by the Board of Governors
of the Federal Reserve System and shall apply to all Federal Reserve
notes in the custody of the Chicago Agent as agent for the
Agent.
The Chicago Bank shall surrender, deliver, or take other
action with respect to, its joint custody of such notes as the
Bank from time to time shall direct.
This power of attorney is subject to revocation in writing
at any time, without prior notice.
FEDERAL RESERVE BANK OF
by
(Date)
(Title)
3700
POWER OF ATTORNEY
I, the undersigned, as Federal Reserve Agent accredited to
(II
the Federal Reserve Bank of
Agent"), hereby
appoint and constitute the person serving from time to time as
Federal Reserve Agent accredited to the Federal Reserve Bank of
Chicago ("Chicago Agent") my agent and attorney, to receive and to
hold in his custody, for me and on my behalf, Federal Reserve notes
in such numbers,
of the Federal Reserve Bank of
denominations, and aggregate amounts as I may from time to time direct.
In accordance with section 16 of the Federal Reserve Act (12 U.S.C.
417), such notes shall be held for me, under rules and regulations
Prescribed by the Board of Governors of the Federal Reserve System, in
the joint custody of the Chicago Agent and the Federal Reserve Bank of
Chicago, acting as agent for the Federal Reserve Bank of
under power of attorney issued to it by the Federal Reserve Bank of
.
The Chicago Agent is authorized and directed to
deposit and hold joint custody of such notes in the vaults of the
Federal Reserve Bank of Chicago.
The Chicago Agent shall surrender,
deliver or take other action with respect to his joint custody of such
notes, as I may from time to time direct.
This power of attorney is subject to revocation in writing
at any time, without prior notice.
IN WITNESS WHEREOF, I hereby set my hand to this instrument,
this
day of
, 1966.
Federal Reserve Agent at
BOARD OF GOVERNORS
Item No. 6
9/30/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 30, 1966.
Mr. J. R. Leidgen, Vice President,
Brink's, Incorporated,
234 East 24th Street,
Chicago, Illinois. 60616
Dear Mr. Leidgen:
This refers to the contract of November 2, 1964, between
Brink's, Incorporated, and the Board of Governors of the Federal
Reserve System for the transportation of new Federal Reserve notes.
The Board would like to amend paragraphs 6 and 7 of the
contract to provide for occasional special shipments in amounts up to
$50 million each. Such shipments would be made to the extent
necessary to permit an orderly buildup in supplies of currency stored
for use in a national emergency at designated Federal Resqrve Bank
offices.
The need for the proposed amendments at this time relates
to a plan to ship currency to the Federal Reserve Bank of Chicago to
be stored for emergency use rather than for current use. While
various denominations of notes will be shipped, it is expected that
only the $1, $5, and some $10 denomination notes will be transported
in large-load shipments exceeding $15 million in value. The higher
denominations will be sent in shipments not exceeding $15 million
following the established procedures. Not all of the currency is
available for shipping at this time and some may not be available for
at least several months.
It is understood that the timing of the special shipments
and the desired minimum load weight will be matters that will be
determined by Brink's, Incorporated.
Very truly yours,
Merritt She
Secretar
BOARD OF GOVERNORS
Item No. 7
9/30/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 30, 1966
Mr. Franklin J. Lunding,
Chairman of the Board
and Federal Reserve Agent,
Federal Reserve Bank of Chicago,
Chicago, Illinois. 60690
Dear Mr. Lunding:
As requested in your letter of September 22, 1966, the Board
of Governors approves the appointment of Mr. John A,Shinn as an Alternate Assistant Federal Reserve Agent for use only in case of emergencies
and with the understanding that he will not examine banks which are
designated cash agent banks under the Wartime Emergency Operations Procedure. This approval is given with the understanding that Mr. Shinn
will be solely responsible to the Federal Reserve Agent and the Board
of Governors for the proper performance of his duties, except that,
during the absence or disability of the Federal Reserve Agent or a
vacancy in that office, his responsibility will be to the Assistant
Federal Reserve Agent and the Board of Governors.
When not engaged in the performance of his duties as Alternate
Assistant Federal Reserve Agent, Mr. Shinn may, with the approval of
the Federal Reserve Agent and the President, perform such work for the
Bank as will not be inconsistent with his duties as Alternate Assistant,
Federal Reserve Agent.
It will be appreciated if Mr. Shinn is fully informed of the
importance of his responsibilities as a member of the staff of the
Federal Reserve Agent and the need for maintenance of independence from
the operations of the Bank in the discharge of these responsibilities.
Please have Mr. Shinn execute the usual Oath of Office which
Should be forwarded to the Board of Governors together with the advice
of the effective date of his appointment. It is understood that the
Proposed appointment of Hrs. Elisabeth B. Peterson as Alternate Assistant Federal Reserve Agent has been withdrawn.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
@FedFRASER