609

Minutes for

To: Members of the Board

From: Office of the Secretary

June 13, 1966

Attached is a copy of the minutes of the

Board of Governors of the Federal Reserve System onthe 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 tobe 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. IfYou were not present, your initials will indicate

only that you have seen the minutes.

Chm. Martin

Gov. Robertson

Gov. Shepardson

Gov. Mitchell

Gov. Daane

Gov. Maisel

Gov. Brimmer

204 S

Minutes of the Board of Governors of the Federal Reserve

System on Monday, June 13, 1966. The Board met in the Board Room

at 10:00 a.m.

PRESENT: Mr. Robertson, Vice Chairman

Mr. Daane

Mr. Maisel

Mr. Brimmer

Mr. Sherman, Secretary

Mr. Kenyon, Assistant Secretary

Mr. Young, Senior Adviser to the Board and

Director, Division of International Finance

Mr. Molony, Assistant to the Board

Mr. Cardon, Legislative Counsel

Mr. Solomon, Director, Division of Examinations

Mr. Hexter, Associate General Counsel

Mr. Shay, Assistant General Counsel

Mr. Koch, Deputy Director, Division of Research

and Statistics

Mr. Partee, Associate Director, Division of

Research and Statistics

Mr. Leavitt, Assistant Director, Division of

Examinations

Mr. Spencer, Staff Assistant, Office of the

Secretary

Miss Wolcott, Technical Assistant, Office of

the Secretary

Messrs. Egertson and Maguire, Supervisory

Review Examiners, Division of Examinations

Approved letters. The following letters were approved unani-

111°usly after consideration of background information that had been

made available to the Board. Copies are attached under the respective

item numbers indicated.

lietter to Rhode Island Hospital Trust Company,t'ovidence, Rhode Island, approving the estab-Ilshment of a branch in Pawtucket and commenting°n the bank's capital structure.

Item No.

1

6/13/66 -2-

204 9

Item No.

Letter to First Trust Company of Albany, Albany, 2

New York, approving the establishment of a

branch in Bethlehem.

Letter to Bank of Commerce & Trust Company, 3

Lexington, Kentucky, approving (1) the estab-lishment of an in-town branch coincident withrelocation of the bank's main office and (2)an investment in bank premises, and commentingon the bank's capital structure.

Report on competitive factors. A report to the Federal Deposit

Insurance Corporation on the competitive factors involved in the pro-

Posed merger of The National Bank of Rosslyn, Rosslyn, Virginia, with

The Bank of Prince William, Woodbridge, Virginia, was approved unani-

'hlOusly for transmittal to the Corporation. The conclusion stated was

that the proposed merger would not have adverse effects on competition.

In connection with the foregoing item there was a brief dis-

cussion, at the instance of Governor Brimmer, of exchange of information

between the Federal Reserve Banks and the Regional Comptrollers of the

Currency during which Vice Chairman Robertson reported on the status of

efforts being undertaken through a subcommittee of the Coordinating

C'mmittee on Bank Regulation to facilitate interagency flows of infor-

mati°n. The Vice Chairman indicated that he intended to follow up on

the matter through the Committee mechanism.

Letter to Congressman Talcott (Item No. ). Under date of

dun.. -13, 1966, Congressman Talcott of the House Banking and Currency

2050

6/13/66 -3-

Committee wrote a letter to each member of the Board posing questions

regarding interest rates on time and savings deposits. At the meeting

on Friday a draft of Board reply was distributed.

Vice Chairman Robertson reported that Chairman Martin had

suggested that such letter as might be agreed upon at today's meeting

be sent to Congressman Talcott over the signature of the Vice Chairman.

There followed a discussion of the draft reply and a number of sugges-

tions were offered, after which unanimous approval was given to the

transmittal of a letter in the form attached as Item No. 4.

Governor Maisel then referred to a June 10, 1966, memorandum

to Chairman Martin from Messrs. Brill and Holland discussing certain

Governmental actions that might be taken in light of the liquidity

squeeze being felt by savings and loan associations. Copies of the

Illemorandum had been furnished to all members of the Board.

Governor Maisel reported that savings and loan and mortgage

market problems had been considered at an interagency meeting on

june 10 called by the Council of Economic Advisers. While, as he

noted) the Brill-Holland memorandum had suggested among other things that

Public statements by responsible officials might tend to calm any undue

feats about savings and loan liquidity, when the question was discussed

at theinteragency meeting conflicting views were expressed as to

whether the impact on public confidence would be positive or negative.

Re doubted whether such steps would be taken.

1)0 r0 11,

6/13/66 -4-

Governor Maisel also reported that in a conversation with

Chairman Horne of the Federal Home Loan Bank Board he had referred to

the possibility of Federal Reserve assistance to mutual savings banks

should they experience a liquidity squeeze around the first of July.

Chairman Horne was receptive to this idea and recommended that any

such plan be extended to include lending to savings and loan associa-

tion-against Government securities in their portfolios.

Messrs. Egertson and Maguire withdrew from the meeting at

this Point.

Report on mission to Vietnam. Mr. Young reported for the

information of the Board on the mission to Vietnam in which he had

recently been engaged.

The meeting then adjourned.

Secretary's Note: Acting in the absence

of Governor Shepardson, Governor Robertson

today approved on behalf of the Board memo-

randa recommending the following actions

relating to the Board's staff:

AEpt.alatItat.!

Billy Donald Bradford as Summer Assistant, Division of Researchand Statistics, with basic annual salary at the rate of $4,641, effec-

tive the date of entrance upon duty.

Harvey Galper as Economist, Division of Research and Statistics,

nth basic annual salary at the rate of $11,723, effective the date-4, entrance upon duty.

Pro Louis Charles Baldanza as Summer Assistan , Division of Data

cessing, with basic annual salary at the rate of $4,641, effec-'I've the date of entrance upon duty.

4)

6/13/66 -5-

APtaaizlimILI (continued)

Christine V. Sebastian as Draftsman (Trainee), Division of DataProcessing, with basic annual salary at the rate of $4,149, effectivethe date of entrance upon duty.

Evelyn M. Swanner as Draftsman (Trainee), Division of Data Process-ing, with basic annual salary at the rate of $4,149, effective the dateof entrance upon duty.

Transfers

Phyllis A. Carson, from the position of Secretary in the BankingSection of the Division of Research and Statistics to the position ofSecretary to an officer of that Division, with an increase in basicnnual salary from $5,181 to $5,702, effective upon assuming her newduties.

Jo Ann Corrado, from the position of Secretary in the Divisionuolt_ Research and Statistics to the position of Secretary in the DivisionAt International Finance, with an increase in basic annual salary from5,352 to $5,702, effective upon assuming her new duties.

(7100044,_g "eaSecretary

"4"

BOARD OF GOVERNORSOF THE

FEDERAL RESERVE SYSTEMWASHINGTON, D. C. 20551

Board of Directors,Rhode Island Hospital Trust Company,

Providence, Rhode Island.

Gentlemen:

t'us oy,4..,7 Pt it

Item No. 16/13/66

ADDRESS OFFICIAL CORRESPONDENCE

TO THE OCIARD

June 13, 1966

The Board of Governors of the Federal Reserve

System approves the establishment by Rhode Island

Hospital Trust Company, Providence, Rhode Island, of a

branch at the intersection of Mineral Spring and

Smithfield Avenues, Pawtucket, Rhode Island, provided

the branch is established within one year from the date

Of this letter.

The last report of examination indicated your

bank's capital position to be somewhat less than satis-

factory. The Board understands that the directors are

considering means of strengthening the bank's capital

structure.

Very truly yours,

(Signed) Karl E. Bakke

Karl E. Bakke,

Assistant Secretary.

(The letter to the Reserve Bank stated that theBoard also had approved a six-month extensionof the period allowed to establish the branch;and that if an extension should be requested,the procedure prescribed in the Board's letterof November 9, 1962 (S-1846), should be followed.)

BOARD OF GOVERNORSOF THE

FEDERAL RESERVE SYSTEMWASHINGTON, D. C. 20551

Board of Directors,First Trust Company of Albany,

Albany, New York.

Gentlemen:

`A=i)Ott 7

Item No. 26/13/66

A00000S arnatm. comaseponciatiaaTO THE 1110AOD

June 13, 1966

The Board of Governors of the Federal Reperve

System approves the establishment by First Trust Company

of Albany, Albany, New York, of a branch on the south-

west corner of the intersection of Delaware and Elsmere

Avenues, Elsmere (unincorporated area), Town of Bethlehem,

Albany County, New York, provided the branch is established

Within one year from the date of this letter.

Very truly yours,

(Signed) Karl E. Bakke

Karl E. Bakke,

Assistant Secretary.

(The letter to the Reserve Bank stated that theBoard also had approved a six-month extensionof the period allowed to establish the branch;and that if an extension should be requested,the procedure prescribed in the Board's letterof November 9, 1962 (S-1846), should be followed.)

.r4

BOARD OF GOVERNORSOF THE

FEDERAL RESERVE SYSTEMWASHINGTON, D. C. 20551

Board of Directors,Bank of Commerce & Trust Company,Lexington, Kentucky.

Gentlemen:

Item No. 36/13/66

ADDRESS OFFICIAL CORRESPONDENCE

TO THE BOARD

June 13, 1966

the . The Board of Governors of the Federal Reserve System approves

acablishment of a branch by Bank of Commerce & Trust Company,_=4ington, Kentucky, at 269 West Main Street, Lexington, Kentucky,

cident with the relocation of Bank of Commerce & Trust Company'sxein office from that location to 318 East Main Street, Lexington,

d ntuckY, provided the branch is established within six months fromate of this letter.

The Board also approves, pursuant to the provisions ofSection 24A of the Federal Reserve Act, an investment in bank premises

not to exceed $200,000 by Bank of Commerce & Trust Company,teexington, Kentucky, for the purchase of property at 254-258, 260-268

at Main Street, Lexington, to be used as a customer parking lot.

The Board understands that a recently completed examinationour bank indicates the capital position to be somewhat less than

me'lefactory. The directors are urged to give consideration to all

O ne of strengthening the bank's capital structure in order that growth'.. Your bank will be on a sound basis.

Very truly yours,

(Signed) Karl E. Bakke

Karl E. Bakke,Assistant Secretary.

The letter to the Reserve Bank stated that theorrd also had approved a six-month extensionand the Period allowed to establish the branch;the til9 t if an extension should be requested,01 Procedure prescribed in the Board's letter

N°vember 9, 1962 (S-1846), should be followed.)

201--it;BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEMWASHINGTON

The Honorable Burt L. Talcott,House of Representatives,Washington, D. C. 20515

Dear Mr. Talcott:

Item No. 46/13/66

OFFICE OF THE VICE CHAIRMAN

June 13, 1966

This is in reply to your letter of June 3, 1966, to each Board

member in which you asked three questions regarding interest rates and

thrift institutions. I am replying on behalf of all Board members.

Question 1. Has the pursuit of anti-inflationary mon-

etary policy been hampered by fear of the effects of rising

short-term interest rates on savings and loan associations

and mutual savings banks?

Answer. The short answer is "No." In formulating monetary

Policy we try to take into account the expected impact of variousalternatives on all segments of the economy. We have during the current

Period of monetary constraint followed with special care the impact of

monetary policy on the flow of funds to selected parts and institutions

ln the economy. Our continued examination of the various developing

relationships has not, however, deterred the System from moving toward

a more restrictive monetary policy in order to combat inflationarydangers.

Question 2. Do you, as a Member of the Board of

Governors, favor legislation at this time to extend the

Fed's powers to limit interest paid by commercial banks

on time and savings deposits?

Answer. The Board believes that discretionary authority to

"distinguish temporarily between these two markets (the large negotiable

CT) market and that for smaller time deposits) in setting ceiling rates

might in some situations facilitate actions to smooth the transitory

adjustment problems of competition for savings funds in smaller amounts

without disrupting flows of funds in the money and capital markets."

The Honorable Burt L. Talcott -2-2057

Question 3. Do you, as a Member of the Board of

Governors, believe that a difference of one-half of onePer cent between the maximum rate paid on time deposits

under $10,000 and the maximum rate on larger depositsis justifiable because of deposit insurance coverage of

amounts up to $10,000?

Answer. Insurance coverage is obviously valuable to thesmaller depositor in that it eliminates risk to him. The precise value2f insurance coverage, however, cannot be determined with exactitude.!nrthermore, it seems clear that the value of insurance would be greater!c) depositors in some banks than in others, reflecting differences ineXPosure to potential loss.

Sincerely yours,

(Signed) J. L. Robertson

J. L. Robertson.