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American Bankers Association (2)
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Arthur F. Burns Papers
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The original documents are located in Box B1, folder "American Bankers Association (2)"
of the Arthur F. Burns Papers at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
THE AMERICAN BANKERS ASSOCIATION 815 CONNECTICUT AVENUE, N. W., WASHINGTON, D.C. 20006
WILLIS W. ALEXANDER
EXECUTIVE VICE PRESIDENT
May 1, 1970
The Honorable Arthur Burns
Chairman
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Dear Dr. Burns:
The 1970 A.B.A. Monetary Conference plans are in final form. We are
pleased that you will address the meeting at the Monday noon luncheon and hope
you will find it an interesting and provocative session.
One significant change has taken place in arrangements. Earlier, we
had indicated that only bus transportation was available from Washington at
1:00 p.m. on Sunday, May 17 to The Homestead and returning on Wednesday, May 20.
Because of numerous requests we have now augmented our transportation to include
charter flights for those who would so desire.
The aircraft to be used are Piedmont Airlines' two engine prop-jet
Martin 404s and each will accommodate 44 passengers. We will use as many planes
as are necessary to transport participants. For the air transportation, limou-
sines will depart from the Madison Hotel at 1:30 p.m. for Washington National
Airport and the one hour flight to Hot Springs. The flights will depart
National Airport at 2:00 p.m. with arrival at The Homestead to be shortly after
3:00 p.m. Returning on Wednesday following the Conference, limousines will de-
part The Homestead at 3:30 p.m., with arrival at Washington National scheduled
for 5:30 p.m.
We will be pleased to arrange your transportation from Washington to
Hot Springs if we can be of assistance. We realize your schedule is extremely
full, and while we would certainly like to have you with us for as long a time
as possible, we do understand that your plans are to return to Washington on
Monday. We have suggested the above transportation arrangements in the event
you may desire to go to Hot Springs on Sunday rather than Monday morning as
your secretary has indicated were your preliminary plans. We will look forward
to receiving your travel plans when they are formulated.
Enclosed is a preliminary copy of the Conference Program, along with
a list of the expected attendees.
FORD i LIBRARY GERALD
THE AMERICAN BANKERS ASSOCIATION
CONTINUING OUR LETTER OF May 1, 1970
SHEET No. 2
Again, we look forward to your participation in the Seventeenth
Monetary Conference. Please let us know if we may be of any further assistance
to you.
Sincerely,
Willi W. alexander
Encl.
FORD & LIBRARY 938670
QUESTIONNAIRE #2
To facilitate transportation planning by bus or charter aircraft to and from
The Homestead, please complete this questionnaire and return it as soon as
possible.
1.
My transportation is arranged and I do not desire to utilize
either the special charter aircraft or bus transportation.
2. From Washington to Hot Springs on May 17:
I would like to travel by the charter flight.
I would like to travel by bus.
3. From Hot Springs to Washington on May 20:
I would like to travel by the charter flight.
I would like to travel by bus.
4. This changes my requirements for a reservation at the Madison Hotel
before and/or after the Conference as follows:
(Name)
(Organization)
(Address)
Please return completed questionnaire to:
Mr. Roy W. Terwilliger
The American Bankers Association
815 Connecticut Avenue N.W.
Washington, D.C. 20006
(Please return one copy of this questionnaire and keep the duplicate for your file).
FORD & LIBRARY GERALD
QUESTIONNAIRE #2
To facilitate transportation planning by bus or charter aircraft to and from
The Homestead, please complete this questionnaire and return it as soon as
possible.
1.
My transportation is arranged and I do not desire to utilize
either the special charter aircraft or bus transportation.
2. From Washington to Hot Springs on May 17:
I would like to travel by the charter flight.
I would like to travel by bus.
3. From Hot Springs to Washington on May 20:
I would like to travel by the charter flight.
I would like to travel by bus.
4. This changes my requirements for a reservation at the Madison Hotel
before and/or after the Conference as follows:
(Name)
(Organization)
(Address)
Please return completed questionnaire to:
Mr. Roy W. Terwilliger
The American Bankers Association
815 Connecticut Avenue N.W.
Washington, D.C. 20006
(Please return one copy of this questionnaire and keep the duplicate for your file).
FORD & LIBRARY GERALD
CONFERENCE SCHEDULE
SUNDAY, MAY 17
12 Noon
Luncheon at the Madison Hotel, Washington
1:00 p.m.
Buses leave the Madison Hotel
1:30 p.m.
Limousines leave the Madison Hotel for
Washington National Airport
6:45 p.m.-
Chairman's reception
......
Crystal Room
7:45 p.m.
7:45 p.m.
Dinner
Empire Room
Business Session for International
Banking Conference
MONDAY, MAY 18
9:00 a.m.-
Session I
Commonwealth Room
12 Noon
Coffee break: 10:00 a.m.
12 Noon-
Social half hour
Crystal Room
12:30 p.m.
12:30 p.m.-
Luncheon
Empire Room
1:30 p.m.
2:30 p.m.-
Session II
Commonwealth Room
5:00 p.m.
Business Session for International
Banking Conference
6:00 p.m.-
Social hour
Crystal Room
7:00 p.m.
7:00 p.m.-
Dinner
Empire Room
8:00 p.m.
FORD i LIBRARY GERALD
CONFERENCE SCHEDULE
TUESDAY, MAY 19
9:00 a.m.-
Session III
Commonwealth Room
12 Noon
Coffee break: 10:00 a.m.
12 Noon-
Social half hour
Crystal Room
12:30 p.m.
12:30 p.m.-
Luncheon,
Empire Room
1:30 p.m.
2:00 p.m.-
Session IV.
Commonwealth Room
4:30 p.m.
Business Session for International
Banking Conference
6:00 p.m.-
Social hour
Crystal Room
7:00 p.m.
7:00 p.m.-
Dinner
Empire Room
8:00 p.m.
8:15 p.m.
Session V
Empire Room
WEDNESDAY, MAY 20
9:00 a.m.-
Session VI
Empire Room
12 Noon
Coffee break: 10:00 a.m.
12 Noon-
Social half hour
Crystal Room
12:30 p.m.
12:30 p.m.-
Luncheon
Commonwealth Room
1:30 p.m.
3:00 p.m.
Buses leave The Homestead
3:30 p.m.
Limousines leave The Homestead for the
airport
FORD & LIBRARY GERALD
CONFERENCE PROGRAM
Sunday
Welcoming Remarks and
May 17
Opening Comments
Nat S. Rogers, President, The American Bankers
Association, and President, First City
National Bank
William H. Moore, Chairman of the Monetary
Conference, and Chairman, Bankers Trust
Company
BUSINESS SESSION FOR INTERNATIONAL BANKING
CONFERENCE
SESSION I
THE BATTLE AGAINST INFLATION
Monday
CHAIRMAN:
May 18
Frederick G. Larkin, Jr., Chairman of the
9:00 a.m.
Board, Security Pacific National Bank
Commonwealth Room
SPEAKERS:
Paul W. McCracken, Chairman, Council of
Economic Advisers
Robert P. Mayo, Director, Bureau of the
Budget
Charls E. Walker, Under Secretary of the
Treasury
Andrew F. Brimmer, Member of the Board of
Governors of the Federal Reserve System
Walter Heller, Professor of Economics,
University of Minnesota
John Young, Chairman of the Prices and Incomes
Commission, Canada
FORD LIBRARY & GERALD
CONFERENCE PROGRAM
Luncheon
REMARKS:
Monday
Arthur F. Burns, Chairman, Board of Governors
May 18
of the Federal Reserve System
12:30 p.m.
Empire Room
SESSION II
THE INTERNATIONAL MONETARY
SITUATION
Monday
May 18
CHAIRMAN:
2:30 p.m.
Louis Camu, Chairman, Banque de Bruxelles
Commonwealth Room
SPEAKERS:
J. J. Polak, Economic Counselor, International
Monetary Fund
Peter B. Kenen, Provost, Columbia University
Louis Camu, Chairman, Banque de Bruxelles
(speaker to be announced)
Wolfgang Schmitz, President, Oesterreichische
Nationalbank
5:00 p.m.
BUSINESS SESSION FOR INTERNATIONAL BANKING CONFERENCE
FORD & LIBRARY GERALD
CONFERENCE PROGRAM
SESSION III
CAN BALANCE OF PAYMENT PROBLEMS
BE SOLVED?
Tuesday
May 19
CHAIRMAN:
9:00 a.m.
Emmett G. Solomon, Chairman of the Board,
Crocker-Citizens National Bank
Commonwealth Room
SPEAKERS:
Sir Douglas Allen, Permanent Secretary to the
Treasury
Guenther Schleiminger, German Executive Director,
International Monetary Fund
Andre de Lattre, Deputy Governor, Banque de France
Yusuke Kashiwagi, Vice Minister of Finance for
International Affairs, Ministry of Finance,
Japan
Paul A. Volcker, Under Secretary of the Treasury
for Monetary Affairs
INTERROGATORS:
Helmuth Cammann, General Manager, Bundesverband
deutscher Banken
C. F. Karsten, Managing Director, Amsterdam-
Rotterdam Bank, N.W.
Jean Richard, Directeur General Adjoint, Societe
General
Sir Eric Roll, K.C.M.G., C.B., Executive Director,
S. G. Warburg & Co. Ltd.
F. W. Schulthess, Chairman of the Board, Swiss
Credit Bank
Marc Wallenberg, Jr., President, Stockholms
Enskilda Bank
FORD & LIBRARY GERALD
CONFERENCE PROGRAM
SESSION IV
IMPACT OF CREDIT CONTROLS ON
COMMERCIAL BANKS
Tuesday
May 19
CHAIRMAN:
2:00 p.m.
Gaylord A. Freeman, Jr., Chairman of the Board
and Chief Executive Officer, First National
Commonwealth Room
Bank of Chicago
SPEAKERS:
Donald P. Jacobs, Professor of Finance, Graduate
School of Management, Northwestern University
Wesley Lindow, Executive Vice President and
Secretary, Irving Trust Company
K. A. Randall, Vice Chairman of the Board,
United Virginia Bankshares Inc.
Rex J. Morthland, President, The Peoples Bank
and Trust Company
Eric John Newnham Warburton, Vice Chairman,
Lloyds Bank Limited
4:30 p.m.
BUSINESS SESSION FOR INTERNATIONAL BANKING CONFERENCE
SESSION V
UNANSWERED QUESTIONS
(An open session for questions
Tuesday
and discussion)
May 19
8:15 p.m.
CHAIRMAN:
Roy L. Reierson, Senior Vice President and Chief
Empire Room
Economist, Bankers Trust Company
FORD & GERALD LIBRARY
CONFERENCE PROGRAM
SESSION VI
CHALLENGES FACING CENTRAL BANKERS
Wednesday
CHAIRMAN:
May 20
George W. Mitchell, Member, Board of
9:00 a.m.
Governors of the Federal Reserve System
Empire Room
SPEAKERS:
C. Jeremy Morse, Executive Director, Bank of
England
Andre de Lattre, Deputy Governor, Banque de France
Karl Klasen, President, Beutsche Bundesbank
Shiro Inoue, Executive Director, The Bank of Japan
L. Rasminsky, Governor, Bank of Canada
INTERROGATORS:
Geoffrey Bell, Assistant to the Chairman,
J. Henry Schroder Wagg, Ltd., New York
Robert Dhom, General Manager, Commerzbank AG
Gabriel Hauge, President, Manufactuers Hanover
Trust Company
Samuel Schweizer, Chairman of the Board,
Swiss Bank Corporation
Lars-Erik Thunholm, Chief Managing Director,
Skandinaviska Banken
FAREWELL
SPEAKER:
LUNCHEON
David M. Kennedy, Secretary of the Treasury
Wednesday
May 20
12:30 p.m.
Commonwealth Room
FORD & GERALD LIBRARY
PARTICIPANTS FOR THE 1970 MONETARY CONFERENCE
Willis W. Alexander
Executive Vice President, The American Bankers Association
Sir Douglas Allen KCB
Permanent Secretary, HM Treasury, London
C. B. Andersen
Chief General Manager, Kjøbenhavns Handelsbank, Copenhagen
Thomas R. Atkinson
Deputy Manager, The American Bankers Association
Geoffrey Bell
Assistant to the Chairman, J. Henry Schroder Wagg, Ltd., New York
T.H. Bevan
Vice Chairman, Barclays Bank Limited, London
H. Bizot
Chairman, Banque Nationale de Paris
Carlo Bombieri
Managing Director, Banca Commerciale Italiana, Milan
Andrew F. Brimmer
Member, Board of Governors of the Federal Reserve System
George Brosa
General Manager, Banco Espanol de Credito, Madrid
George H. Brown, Jr.
Chairman of the Board, Girard Trust Bank, Philadelphia
Arthur F. Burns
Chairman, Board of Governors of the Federal Reserve System
FORD & LIBRARY
- 2 -
Helmuth Cammann
General Manager, Bundesverband deutscher Banken
William B. Camp
Comptroller of the Currency
Louis Camu
Chairman, Banque de Bruxelles s.a., Brussels
Maxwell Carlson
President, National Bank of Commerce of Seattle
Edward L. Carpenter
Chairman and Chief Executive, Central National Bank of Cleveland
William A. Carpenter
President, Whitney National Bank of New Orleans
A. W. Clausen
President, Bank of America N.T. & S.A., San Francisco
Fernand J. Collin
Chairman of the Board, Kredietbank N.V., Brussels
Richard P. Cooley
President, Wells Fargo Bank, San Francisco
J. Dewey Daane
Member, Board of Governors of the Federal Reserve System
William L. Day
Chairman, First Pennsylvania Bank, Philadelphia
Charles de Bretteville
Chairman and Chief Executive Officer, The Bank of California, San Francisco
Robert Dhom
General Manager, Commerzbank AG., Frankfurt
FORD, & LIBRARY GERALD
- 3 -
A.F.J. Dijkgraaf
Member of the Presidium, Algemene Bank Nederland N.V., Amsterdam
G. Morris Dorrance, Jr.
President, The Philadelphia National Bank
George S. Eccles
President, First Security Bank of Utah N.A., Salt Lake City
Manuel R. Espirito Santo Silva
Chairman, Banco Espirito Santo e Comercial de Lisboa, Lisbon
Eric 0. Faulkner
Chairman, Lloyds Bank Limited, London
Alberto Ferrari
Managing Director, Banca Nazionale del Lavoro, Rome
John Fox
Chairman, Mercantile Trust Company, N.A., St. Louis
Gaylord A. Freeman, Jr.
Chairman of the Board, The First National Bank of Chicago
Douglas R. Fuller
President, The Northern Trust Company, Chicago
Merle E. Gilliand
President, Pittsburgh National Bank
Harold V. Gleason
President, Franklin National Bank, New York
Donald M. Graham
Chairman, Continental Illinois National Bank and Trust Company of Chicago
G. Arnold Hart
Chairman and Chief Executive Officer, Bank of Montreal
FORD is LIBRARY GERALD
- 4 -
Gabriel Hauge
President, Manufacturers Hanover Trust Company, New York
Alfred Hayes
President, Federal Reserve Bank of New York
Walter W. Heller
Regents' Professor of Economics, University of Minnesota, Minneapolis
James P. Hickok
Chairman, First National Bank of St. Louis
Richard D. Hill
President, The First National Bank of Boston
Walter E. Hoadley
Executive Vice President and Chief Economist, Bank of America N.T. & S.A.,
San Francisco
Shiro Inoue
Executive Director, The Bank of Japan, Tokyo
Donald P. Jacobs
Professor of Finance, Graduate School of Management, Northwestern University
William M. Jenkins
Chairman, Seattle-First National Bank
Lewellyn A. Jennings
Chairman of the Board and Chief Executive Officer, The Riggs National Bank of
Washington, D.C.
Edwin S. Jones
President, First National Bank in St. Louis
C. F. Karsten
Managing Director, Amsterdam-Rotterdam Bank N.V., Amsterdam
FORD i LIBRARY GERALD
- 5 -
Yusuke Kashiwagi
Vice Minister of Finance for International Affairs, Ministry of Finance, Japan
George J. Kelly
Deputy Manager, The American Bankers Association
Peter B. Kenen
Provost, Columbia University
David M. Kennedy
Secretary of the Treasury
Frederick H. Kingsbury, Jr.
Partner, Brown Brothers Harriman & Co., New York
Karl Klasen
President, Deutche Bundesbank, Frankfurt
Paul Krebs
Assistant General Manager, Deutsche Bank AG., Frankfurt
J. Howard Laeri
Vice Chairman, First National City Bank, New York
Allen T. Lambert
Chairman of the Board and President, The Toronto-Dominion Bank
Frederick G. Larkin, Jr.
Chairman of the Board, Security Pacific National Bank, Los Angeles
Andre de Lattre
Deputy Governor, Banque de France, Paris
Wesley Lindow
Executive Vice President and Secretary, Irving Trust Company, New York
Lawrence H. Martin
Chairman of the Board, The National Shawmut Bank, Boston
FORD & LIBRARY GERALD
- 6 -
Ichiro Matsudaira
Deputy President, The Bank of Tokyo, Ltd.
John A. Mayer
Chairman of the Board, Mellon National Bank and Trust Company, Pittsburgh
Robert P. Mayo
Director, Bureau of the Budget
Paul W. McCracken
Chairman, Council of Economic Advisers
W. Earle McLaughlin
Chairman and President, The Royal Bank of Canada, Montreal
Charles R. McNeill
Director of the Washington Office, The American Bankers Association
Jacques Merlin
'
Chairman, Credit Commercial de France, Paris
John M. Meyer, Jr.
Chairman of the Board, Morgan Guaranty Trust Company of New York
Derek Mitchell
Economic Minister, British Embassy, Washington
George W. Mitchell
Member, Board of Governors of the Federal Reserve System
William H. Moore
Chairman, Bankers Trust Company, New York
John A. Moorhead
Chairman of the Board, Northwestern National Bank of Minneapolis
C. Jeremy Morse
Executive Director, Bank of England, London
FORD & LIBRARY GERALD
- 7 -
Rex J. Morthland
President, The Peoples Bank and Trust Company, Selma, Alabama
Rokuro Mukasa
Managing Director, The Sumitomo Bank, Ltd., Osaka
William F. Murray
President, Harris Trust and Savings Bank, Chicago
Philip H. Nason
President, The First National Bank of Saint Paul
Mariano Navarro-Rubio
N
Governor, Banco de Espana, Madrid
Crocker Nevin
Chairman and President, Marine Midland Grace Trust Company of New York
F. William Nicks
Chairman of the Board and President, The Bank of Nova Scotia, Toronto
Herbert P. Patterson
President, The Chase Manhattan Bank, N.A., New York
Leslie C. Peacock
President, Crocker-Citizens National Bank, San Francisco
Raymond T. Perring
Chairman, Detroit Bank and Trust Company
Howard C. Petersen
Chairman, The Fidelity Bank, Philadelphia
William E. Petersen
President, Irving Trust Company, New York
J. G. Phillips
Governor, Reserve Bank of Australia, Sydney
FORD is LIBRARY GERALD
- 8 -
J.J. Polak
Economic Counsellor, International Monetary Fund
W. Dewey Presley
President, First National Bank in Dallas
Herbert V. Prochnow
Honorary Director and Former President, The First National Bank of Chicago
W. G. Pullen
Chairman, The Chartered Bank, London
K. A. Randall
Vice Chairman of the Board, United Virginia Bankshares, Inc., Richmond
L. Rasminsky
Governor, Bank of Canada, Ottawa
Addison H. Reese
Chairman of Board, North Carolina National Bank, Charlotte
Roy L. Reierson
Senior Vice President and Chief Economist, Bankers Trust Company, New York
Peter Reimpell
Deputy Managing Director, Vorstandsmitglied Der Bayerischen Vereinbank, Munich
William S. Renchard
Chairman, Chemical Bank, New York
Jean Richard
I
Directeur General Adjoint, Societe Generale, Paris
Dean E. Richardson
President, Manufacturers National Bank of Detroit
FORDO & LIBRARY GERALD
- 9 -
Nat S. Rogers
President, The American Bankers Association, and President, First City National
Bank, Houston
Sir Eric Roll, K.C.M.G., C.B.
Executive Director, S. G. Warburg & Co. Ltd., London
Guenther Schleiminger
German Executive Director, International Monetary Fund
Wolfgang Schmitz
Chairman and President, Oesterreichische Nationalbank, Vienna
F. W. Schulthess
Chairman of the Board, Swiss Credit Bank, Zurich
Samuel Schweizer
Chairman of the Board, Swiss Bank Corporation, Basle
Lyman E. Seely
Executive Vice President, First National Bank of Oregon, Portland
Edward D. Smith
Chairman and President, The First National Bank of Atlanta
Emmett G. Solomon
Chairman of the Board, Crocker-Citizens National Bank, San Francisco
Clifford C. Sommer
Vice President, The American Bankers Association, and President, Security Bank
and Trust Company, Owatonna, Minnesota
S. O. Sørensen
General Manager, Den Danske Landmansbank, Copenhagen
Beryl W. Sprinkel
Senior Vice President and Economist, Harris Trust and Savings Bank, Chicago
FORD is 108 RARV
- 10 -
LeRoy B. Staver
President, United States National Bank of Oregon, Portland
A. De V. Stewart-Richardson
Senior Deputy General Manager, Bank of New South Wales, Sydney
Howard J. Stoddard
Chairman, Michigan National Bank, Lansing
Clyde L. Stutts
Treasurer, The American Bankers Association, and President, Union Trust
Company, Shelby, North Carolina
Robert M. Surdam
President, National Bank of Detroit
Roy W. Terwilliger
Deputy Manager, The American Bankers Association
Lars-Erik Thunholm
Chief Managing Director, Skandinaviska Banken, Stockholm
Heinrich Treichl
Member of the Managing Board, Creditanstalt-Bankverein, Vienna
Matti Virkkunen
Chief General Manager, Kansallis-Osake-Pankki, Helsinki
Paul A. Volcker
Under Secretary of the Treasury for Monetary Affairs
Harry J. Volk
Chairman, Union Bank, Los Angeles
J. Page R. Wadsworth
Vice Chairman, Canadian Imperial Bank of Commerce, Montreal
FORD j LIBRARY 0ERALD
- 11 -
Charls E. Walker
Under Secretary of the Treasury
Marc Wallenberg, Jr.
President, Stockholms Enskilda Bank, Stockholm
Eric John Newnham Warburton
Vice Chairman, Lloyds Bank Limited, London
John F. Watlington, Jr.
President, Wachovia Bank and Trust Company N.A., Winston-Salem
Frank Wille
Chairman, Federal Deposit Insurance Corporation, Washington
John H. Wills
Senior Vice President and Chief Economist, The Northern Trust Company, Chicago
Samuel H. Woolley
Chairman, The Bank of New York
Paul I. Wren
Chairman of Board and Chief Executive Officer, Old Colony Trust Company, Boston
Walter B. Wriston
Chairman, First National City Bank, New York
Kenzo Yamamoto
Agent, Fuji Bank, New York Agency
John Young
Chairman, Prices and Incomes Commission of Canada, Ottawa
GERALD ini) R. FORD
BH-14
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 10016
NAT S. ROGERS
PRESIDENT
FIRST CITY NATIONAL BANK
HOUSTON, TEXAS 77001
May 27, 1970
The Honorable Arthur F. Burns
Chairman
Board of Governors
Federal Reserve System
Washington, D. C. 20551
Dear Mr. Chairman:
The American Bankers Association, through the activities of its
Agricultural and Rural Affairs Committee, has encouraged rural banks
to stay in the forefront as full financial service centers in their
communities. A considerable part of this effort has been directed
toward a better understanding of the various sources of funds available
to banks in rural areas where often seasonal or even longer-term short-
ages exist.
The tremendous changes that have been occurring in the capital
and credit requirements of agriculture have resulted in a widening of
the gap between the demand for farm credit and the supply of funds with
which the rural banks may meet it. The rate of increase in farm debt
during the 60's has been substantially greater than the rate of increase
in deposits in rural banks. The loan-to-deposit ratios of these banks
have risen steadily to a level where for many the future expansion of
loans is impossible if they maintain adequate liquidity positions.
Although banking has retained its number one position as a supplier of
farm credit, its share of the total outstanding debt has decreased from
28% in 1959 to 26% today.
I therefore applaud the Federal Reserve Board's decision to study
the 11
agricultural credit problems in capital deficient areas and
possibilities for their amelioration through improvements in the market-
ability of bank agricultural paper", as announced in the March issue of
the Federal Reserve Bulletin.
Continued.
GERALD FORD LIBRARY
THE AMERICAN BANKERS ASSOCIATION
CONTINUING OUR LETTER OF May 27, 1970
SHEET No. 2
In February the A.B.A.'s Agricultural and Rural Affairs Committee,
realizing the urgency of this problem, established a subcommittee to deal
with the question of sources of funds for rural banks. I feel strongly
that the entire banking industry needs to focus attention on this matter.
I wish therefore to encourage the Federal Reserve Board to give high
priority to its study. In addition I want to offer the A.B.A.'s assist-
ance, especially through its Agricultural and Rural Affairs Committee which
is chairmaned by Mr. Edward M. Norman, President of The First National Bank,
Clarksville, Tennessee. The Board's Study Committee should feel free to
call on Mr. Norman as well as the members of our special subcommittee which
includes: Thomas J. Prosser, President, The National Manufacturers Bank,
Neenah, Wisconsin, CHAIRMAN; Grant W. Perry, Senior Vice President, First
National Bank of Oregon, Portland, Oregon, and; George R. Reid, Senior
Vice President, The First National Bank and Trust Company, Stillwater,
Oklahoma.
An adequate supply of loanable funds will be one of the critical
problems that must be met if rural banks are to remain viable institutions
during the 70's. I sincerely believe that the Federal Reserve Board, by
initiating this study, has taken an important step to help banks to serve
the agricultural credit needs of the Nation.
nats Sincerely, Rogers
NSR:1cc
Nat S. Rogers
President
CC: Hugh Galusha, Jr.
Edward M. Norman
Thomas Prosser
E
FORD i LIBRARY GERALD
JUN 9 1970
Mr. Not S. Rogers, President,
The American Bankers Association,
90 Park Avenue,
New York, New York. 10016
Dear Nat:
Chairman Burns has asked BMB to let you know he appreciates
the sentiment conveyed in your letter of May 27 concerning the
Federal Reserve announced study of agricultural credit problems.
We are glad as well to have the offer of assistance from the ABA's
Agricultural and Rural Affairs Committee.
I am passing along your letter to Hugh Galusha, the
chairman of the recently established Federal Reserve System
committee to pursue the announced study. I have no doubt that
one of our consittee representatives will be in touch with
Mr. Norman in due course.
Yours sincerely,
(Signed) Robert C. Holland
Robert C. Holland,
Secretary of the Board.
ee: Mr. Galusha
be: Governor Mitchell
Mrs. Mallardi (2)
FORD & LIBRARY GERALD
BH-17
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N. Y. 10016
NAT S. ROGERS
PRESIDENT
FIRST CITY NATIONAL BANK
HOUSTON, TEXAS 77001
May 27, 1970
The Honorable Arthur F. Burns
Chairman
Board of Governors
Federal Reserve System
Washington, D. C. 20551
Dear Mr. Chairman:
The American Bankers Association, through the activities of its
Agricultural and Rural Affairs Committee, has encouraged rural banks
to stay in the forefront as full financial service centers in their
communities. A considerable part of this effort has been directed
toward a better understanding of the various sources of funds available
to banks in rural areas where often seasonal or even longer-term short-
ages exist.
The tremendous changes that have been occurring in the capital
and credit requirements of agriculture have resulted in a widening of
the gap between the demand for farm credit and the supply of funds with
which the rural banks may meet it. The rate of increase in farm debt
during the 60's has been substantially greater than the rate of increase
in deposits in rural banks. The loan-to-deposit ratios of these banks
have risen steadily to a level where for many the future expansion of
loans is impossible if they maintain adequate liquidity positions.
Although banking has retained its number one position as a supplier of
farm credit, its share of the total outstanding debt has decreased from
28% in 1959 to 26% today.
I therefore applaud the Federal Reserve Board's decision to study
the
=
agricultural credit problems in capital deficient areas and
possibilities for their amelioration through improvements in the market-
ability of bank agricultural paper", as announced in the March issue of
the Federal Reserve Bulletin.
FORD & LIBRARY GERALD
Continued
THE AMERICAN BANKERS ASSOCIATION
CONTINUING OUR LETTER OF May 27, 1970
SHEET No. 2
In February the A.B.A.'s Agricultural and Rural Affairs Committee,
realizing the urgency of this problem, established a subcommittee to deal
with the question of sources of funds for rural banks. I feel strongly
that the entire banking industry needs to focus attention on this matter.
I wish therefore to encourage the Federal Reserve Board to give high
priority to its study. In addition I want to offer the A.B.A.'s assist-
ance, especially through its Agricultural and Rural Affairs Committee which
is chairmaned by Mr. Edward M. Norman, President of The First National Bank,
Clarksville, Tennessee. The Board's Study Committee should feel free to
call on Mr. Norman as well as the members of our special subcommittee which
includes: Thomas J. Prosser, President, The National Manufacturers Bank,
Neenah, Wisconsin, CHAIRMAN; Grant W. Perry, Senior Vice President, First
National Bank of Oregon, Portland, Oregon, and; George R. Reid, Senior
Vice President, The First National Bank and Trust Company, Stillwater,
Oklahoma.
An adequate supply of loanable funds will be one of the critical
problems that must be met if rural banks are to remain viable institutions
during the 70's. I sincerely believe that the Federal Reserve Board, by
initiating this study, has taken an important step to help banks to serve
the agricultural credit needs of the Nation.
nats Sincerely, Rogers
NSR: 1cc
Nat S. Rogers
President
CC: Hugh Galusha, Jr.
Edward M. Norman
Thomas Prosser
GERALD FORD LIBRARY
Mrs. Mallara
June 10, 1970
Dear Willis:
I appreciate your invitation to attend the ABA convention
in October, but already my schedule for that period is
such that I will have to regretfully decline.
However, Bill Sherrill tells me that he and his wife are
planning to attend, and I know they will ably represent
the Federal Reserve at the meeting.
My best wishes for a successful convention,
Sincerely yours,
(Signed) Arthur F. Burns
Arthur F. Burns
Mr. Willis W. Alexander
Executive Vice President
The American Bankers Association
90 Park Avenue
New York, New York 10016
RCH:ck
FORD & LIBRARY GERALD
BH
DA
M 5
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 10016
WILLIS W.
EXECUTIVE VICE PRESIDENT
June 1, 1970
The Honorable Arthur F. Burns, Chairman
Board of Governors of the Federal Reserve System
Constitution Avenue
Washington, D. C. 20551
Dear Dr. Burns:
The 96th Annual Convention of The American Bankers Association
will be held in Miami Beach, Florida, on October 10-14, 1970.
On behalf of the officers of the Association, it is my pleasure
to extend you a cordial invitation to attend our convention.
An application for housing accommodations is enclosed for your
use. If you plan to be at our convention and need hotel accom-
modations, please fill out the form promptly and mail it to:
A.B.A. Convention Housing Bureau
Mrs. Edith J. Shapiro, Housing Supervisor
1700 Washington Avenue
Miami Beach, Florida 33139
Please also let me know if you plan to attend in order that later
we may arrange to send you a complimentary advance convention
registration.
Yours sincerely,
Willi W. Alexandr
Enclosures
LISRARY GERALD FORD ?)
FR 373
HJ6.1
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Date June 6, 1970.
To
Mr. Holland
From
Catherine Mallardi
Is it necessary for the Chairman
to attend this? He'd like to limit
his attendance as much as possible.
Attachment
to
for
[P.S I assume a reply should
be drafted. 1g]
FORD i LIBRARY GERALD
THE AMERICAN BANKERS ASSOCIATION
96th ANNUAL CONVENTION
MIAMI BEACH, FLORIDA
OCTOBER 10-14, 1970
APPLICATION FOR HOUSING ACCOMMODATIONS
The Honorable Arthur F. Burns, Chairman
THIS APPLICATION FORM IS FOR YOUR
Board of Governors of the Federal Reserve
OWN EXCLUSIVE USE.
System
Constitution Ave.
IF OTHERS FROM YOUR BANK OR
Washington, D. C. 20551
OFFICE DESIRE TO APPLY FOR HOTEL
ACCOMMODATIONS, THEY SHOULD USE
THE REGULAR APPLICATION FORM.
PLEASE FILL OUT THIS APPLICATION FORM COMPLETELY AND MAIL IT TO:
A.B.A. Convention Housing Bureau
Mrs. Edith J. Shapiro, Housing Supervisor
1700 Washington Avenue
Miami Beach, Florida 33139
HOTEL ACCOMMODATIONS DESIRED. (IT is NECESSARY THAT THREE CHOICES OF HOTELS BE LISTED BELOW.)
CHOICE
HOTEL
TYPE OF ROOM DESIRED (CHECK ONE)
1ST
ONE SINGLE BED
1 PERSON
2ND
ONE DOUBLE BED
2 PERSONS
3RD
TWIN BEDS
2 PERSONS
TWIN STUDIO
2 PERSONS
PARLOR & ONE BEDROOM 2 PERSONS
INDICATE APPROXIMATE RATE $
IF ACCOMMODATIONS ARE NOT AVAILABLE AT ANY OF THE ABOVE HOTELS, THE HOUSING BUREAU WILL ATTEMPT TO
MAKE YOUR RESERVATION AT ANOTHER SUITABLE PLACE.
THERE WILL BE AN INTERVAL OF SEVERAL WEEKS BEFORE YOU WILL RECEIVE A ROOM CONFIRMATION. ROOM NUMBERS
CANNOT BE ASSIGNED BY HOTELS UNTIL GUESTS REGISTER ON arrival.
CONVENTION ADVANCE REGISTRATION INFORMATION WILL BE SENT AUTOMATICALLY TO THOSE WHOSE HOUSING RESER-
VATIONS HAVE CLEARED THROUGH THE A.B.A. CONVENTION HOUSING BUREAU.
A.M.
ROOM WILL BE OCCUPIED BY
MYSELF ONLY
ARRIVING
HOUR
P.M.
(DATE)
MYSELF AND WIFE
LEAVING
(DATE)
FORD i LIBRARY GERALD
SIGNATURE
THE AMERICAN BANKERS ASSOCIATION
96TH ANNUAL CONVENTION
MIAMI BEACH, FLORIDA
OCTOBER 10-14, 1970
PLEASE ROUTE TO OFFICER RESPONSIBLE FOR APPLYING
FOR A.B.A. CONVENTION HOTEL ACCOMMODATIONS.
A.B.A. CONVENTION ANNOUNCEMENT
The 96th Annual Convention of The American Bankers Association will be held
in Miami Beach, Florida, October 10-14, 1970. This is your bank's official
1970 convention notification.
HOUSING ACCOMMODATIONS
Enclosed are: A list of convention hotels/motels, a map showing their
locations, a schedule of room rates, and an official Application for Housing
Accommodations form.
As in previous years, this letter was mailed on a staggered basis, based on
post office mail schedules, so that banks in all parts of the country should
have received their letters simultaneously. Rooms will be assigned on a
priority basis. The basis for this priority will be the date on the post
office cancellation stamp on the envelope used by the bank to mail the official
Application for Housing Accommodations form. Since the date of the mailing of
the application is the controlling factor, this plan gives everyone an "even
start.' The only exceptions to this priority rule will be in the assignment
of rooms to certain officers of the Association, speakers, government officials,
and the limitation which will be placed on the number of rooms any bank may have
in certain hotels as explained on page 2.
Because of the anticipated large attendance at the convention a "convention
headquarters hotel" is not designated.
HOUSING PROCEDURE
To facilitate the processing of your application, it is essential that you fill
the form out completely, giving five choices of hotels, rates, time of arrival
and departure, and the names of room occupants. Rooms will not be assigned
unless the names of the occupants are stated on the form.
FORD & LIBRARY GERALD
ROOM RATE SCHEDULE
We suggest you do not attempt to secure accommodations by asking Miami Beach
banks to obtain space for you. Such procedure will not improve your chances.
96th Annual Convention
In fact, it might operate in just the opposite manner because of the delay
The American Bankers Association
involved in getting the application to the Housing Bureau. The Bureau will
October 10-14, 1970, Miami Beach, Florida
honor only an official Application for Housing Accommodations form. Hence,
a Miami Beach bank acting as intermediary would only occasion delay. Other
banks would be getting priority on rooms requested directly from the Housing
BEDROOMS
PARLOR SUITES
Bureau during the period of your correspondence with the Miami Beach bank.
HOTEL/MOTEL
It is suggested, therefore, that you send your application directly to the
SINGLE
DOUBLE OR TWIN
1 Bedroom
2 Bedrooms
Housing Bureau rather than ask a local bank to try to get housing accommodations
Algiers
$16
$18
$40
$60
for you.
Americana
18-28
18-28
61--78
91-106
Regardless of any prior request you may have made for housing accommodations
to any hotel/motel, to the A.B.A. Convention Housing Bureau, or to The American
Balmoral
18-26
18-26
56--66
82--92
Bankers Association, assignments will be made only from the official Application
Barcelona
14
16 & 18
36
--
for Housing Accommodations forms which have been properly completed.
Beau Rivage
14-20
14--20
44--52
70
Please send the Application for Housing Accommodations to:
Cadillac
14
16
35
--
Carillon
16 & 18
20 & 22
45 & 50
65 & 75
A.B.A. Convention Housing Bureau
Mrs. Edith J. Shapiro, Housing Supervisor
Casablanca
15
18
--
--
1700 Washington Avenue
Crown
15
16--18
--
--
Miami Beach, Florida 33139
Deauville
16-22
16--22
38--56
66--84
Should you later find it necessary to cancel or make any change in your
Doral Beach
20-30
20-30
69--75
93-105
reservation, please notify Mrs. Shapiro immediately. Telephone: (312) 532-5215.
Eden Roc
16-26
16--26
35* & 70
94
Applications will be processed as rapidly as possible and every effort will be
Fontainebleau
16-30
16-30
50 & 75
85 & 125
made to assign applicants to the hotel/motel they prefer. However, several weeks
will elapse before assignments are made and confirmations mailed.
Harbour House S.
14 & 18
14 & 18
--
--
Holiday (22nd St.)
15
17
37
64
Holiday (87th St.)
18
18
--
--
HOUSING LIMITATIONS IN CERTAIN HOTELS
Ivanhoe
14
21 & 26
60
90
You will agree that our limited allotment of rooms in certain of the more popular
Kenilworth
15-21
15-21
60
--
hotels should be spread among as many of our members as possible. This we will
Lucerne
14 & 15
16-20
38
54
try to do. But it is necessary that even those banks which reply early be
restricted. Therefore, if sizable numbers of persons are to be registered at
Montmartre
16--22
16--22
44
66
the convention from one bank, these persons should not all request housing in
the same hotel. It is suggested that someone in the bank send a priority list
Plaza
20-30
20-30
65
100
to Mrs. Shapiro at the time the Application for Housing Accommodations is mailed.
Sans Souci
15
17
--
--
This will enable the Housing Bureau to process reservations more efficiently and
to assign individuals to various hotels more nearly in accordance with the desires
Saxony
15
16--18
--
--
of those individuals.
SeaView
18-28
18-28
63 & 68
--
Seville
16 & 18
17-21
45
--
For guidance, the restriction in the more popular hotels will be that any bank
(and obviously only as long as rooms are available) will be limited for sleep-
Twelve Caesars
12
12
28
42
ing accommodations to a total of five rooms (counting a parlor and bedroom as
two rooms). The five rooms might be in one or divided among several of the
*A few Jr. (studio) suites available at $35.
following hotels: Americana, Doral Beach, Eden Roc, Fontainebleau, and Plaza.
BAY HARBOR
Harbour House S.
HOTEL/MOTEL ADDRESSES
ADVANCE CONVENTION REGISTRATION
ISLANDS
Kenilworth
Ivanhoe
0.5 miles
BAL HARBOUR
Early in the summer those whose housing reservations have cleared through the
Broad Causeway
Beau Rivage
Sea View
Balmoral
ADDRESS ON
A.B.A. Convention Housing Bureau will automatically receive forms and
96th.
St.
Americana
HOTEL/MOTEL
COLLINS AVENUE
instructions for registering in advance for the convention. All advance
8614 ST
Twelve Caesars
2555
registrations must be received prior to September 18 in order for the names
Algiers
9701
to be printed in the registration list.
Americana
Balmoral
9801
INDIAN
Barcelona
4343
If it is not necessary for you to process your housing reservation through the
SURFSIDE
CREEK
Beau Rivage
9955
A.B.A. Convention Housing Bureau, as would be the case for representatives
VILLAGE
Cadillac
3925
from banks in the local area, and you desire to have your name appear in the
88th.
St.
Carillon
6801
printed registration list, it is suggested that you obtain an advance
Holiday (87th)
Casablanca
6345
registration form from:
Crown
4041
Collins Ave.
Deauville
6701
Advance Registration
Doral Beach
4833
The American Bankers Association
Eden Roc
4525
90 Park Avenue
Fontainebleau
4441
New York, N. Y. 10016
Harbour House S.
10275
Holiday (22nd St.)
2201
All persons (including wives) attending the convention must be registered.
71st St.
Holiday (87th St.)
8701
71st ST.
Ivanhoe
10175
CONVENTION MEETINGS AND ACTIVITIES
Kenilworth
10205
Carillon
5.2 miles
Lucerne
4101
Meetings will be held in a number of hotels. So that you may plan your arrival
Deauville
GERCE
Montmartre
4775
and departure time, as well as arrange for transportation accommodations, the
ISLAND
Plaza
5445
following schedule has been arranged:
63rd.
St.
Sans Souci
3101
Casablanca
Saxony
3201
Saturday
10 a.m.
Exhibits and Registration Area open.
Road
Drive
SeaView
9909
Oct. 10
Seville
2901
Twelve Caesars
9449
MIAMI
Sunday
Morning &
Committee Meetings.
Oct. 11
afternoon
BEACH
Pine Tree
Creek
Plaza
4:30-6 p.m.
Reception for convention registrants.
Alton
Monday
9:30 a.m.
Marketing/Savings Division--General Meeting.
Oct. 12
State Bank Division--General Meeting.
47th.
Ave,
Trust Division--General Meeting.
St.
unipul
Doral Beach
Montmartre
Collins
2 p.m.
National Bank Division--General Meeting.
Eden Roc
5:30 p.m.
Executive Council--business meeting for
Arthur
Godfrey Rd.
Fontainebleau
1969-70 Council members.
Barcelona
Lucerne
Crown
Tuesday
9:45 a.m.
First General Convention Session.
Cadillac
Oct. 13
2 p.m.
Workshops.
2.1 miles
8:30 p.m.
Entertainment for registrants.
Saxony
Sans Souci
Wednesday
9:45 a.m.
Second General Convention Session.
Seville
Oct. 14
Algiers
12:30 p.m.
(New) Executive Council--meeting and
Holiday (22nd)
luncheon for 1970-71 Council members.
CONVENTION HALL
Lincoln Rd.
TRANSPORTATION
The American Bankers Association does not arrange for special trains or planes
to and from the convention. This is sometimes done by certain state groups.
Therefore, any inquiry you have regarding special trains or planes from your
area should be made directly to the managing officer of your state bankers
association.
POST-CONVENTION TRIPS AND TOURS
You may receive material from travel agencies, airlines, steamship companies,
and others advertising "pre-convention" or "post-convention" trips or tours.
The American Bankers Association is not in any way endorsing or sponsoring
any convention trips or tours this year. The decision to take such a trip is
one for individual determination.
We hope you will attend the convention in Miami Beach in October, and we urge
you to request your housing and make your transportation reservations promptly.
Melmul Miller
Melvin
C.
Miller
Convention Director
2 June 1970
(202) 298-9090
WASHINGTON OFFICE
THE AMERICAN BANKERS ASSOCIATION 815 CONNECTICUT AVENUE, N. W., WASHINGTON, D. C. 20006
FEDERAL ADMINISTRATIVE ADVISER
July 15, 1970
WILLIAM T. HEFFELFINGER
Mrs. Catherine Mallardi
Secretary to Dr. Arthur J. Burns
Board of Governors of the
Federal Reserve System
Washington, D. C. 20250
Dear Mrs. Mallardi:
I am enclosing for the information of Chairman Burns
a list showing the members of the Government Borrowing Com-
mittee of the A.B.A. Most of these members will be present
for the July 28 meeting, although there will be a few absentees.
I am sure the Committee will appreciate the oppor-
tunity of discussing the Treasury's financing problems with
Chairman Burns as they did for so many years with Chairman
Martin. Previous practice has been for the Chairman or Vice
Chairman to come over to our offices, Room 1002, at 815
Connecticut Avenue, and meet with the Committee in our Board
Room.
Sincerely yours,
W. T. Heffelfinger
WTH: TB
Enclosure
FORD & LIBRARY GERALD
COMMITTEES OF THE A.B.A.
GOVERNMENT BORROWING COMMITTEE
FREDERICK G. LARKIN. JR.
GEORGE S. CRAFT
Chairman of board, Security
Chairman of board, Trust Com-
Pacific National Bank, P. O. Box
pany of Georgia, P.O. Box 4418,
2097, Terminal Annex, Los An-
Atlanta, Georgia 30302
geles, California 90054, Chairman
GEORGE S. ECCLES
WILLIAM T. HEFFELFINGER
President, First Security Bank of
Federal administrative adviser
Utah, N.A., P. O. Box 390, Salt
and senior deputy manager,
Lake City, Utah 84110
A.B.A., Washington Office, Sec-
retary
DAVID ROCKEFELLER
Chairman and chief executive of-
ficer, The Chase Manhattan Bank,
TERM EXPIRING 1970
N.A., P. O. Box 65, Church Street
WILLIAM G. FOULKE
Station, New York, N. Y. 10008
Chairman and chief executive
ROBERT V. ROOSA
officer, Provident National Bank,
Partner, Brown Brothers Harri-
P. O. Box 7648, Philadelphia,
man & Co., 59 Wall Street, New
Pennsylvania 19101
York, N. Y. 10005
JAMES P. HICKOK
KENNETH V. ZWIENER
Chairman of board, First Na-
Chairman of board, Harris Trust
tional Bank, P. O. Box 267, St.
and Savings Bank, P. O. Box 755,
Louis, Missouri 63166
Chicago, Illinois 60690
FREDERICK G. LARKIN, JR.
TERM EXPIRING 1972
Chairman of board, Security
Pacific National Bank, P. O. Box
Robert M. Surdam, President
2097, Terminal Annex, Los An-
Chairman, National Bank of De:
and Chief Executive
geles, California 90054
troit, P. O. Box 116, Detroit,
Michigan 48232
Officer
JOHN M. MEYER, JR.
THOS. O. COOPER
Chairman and chief executive
officer, Morgan Guaranty Trust
President, South Des Moines Na-
Company, P. O. Box 495, Church
tional Bank, P. O. Box 2630, Des
Street Station, New York, N. Y.
Moines, Iowa 50315
10015
GAYLORD A. FREEMAN, JR.
WILLIAM S. RENCHARD
Chairman of board, The First
Chairman, Chemical Bank, New
National Bank, P. O. Box A, Chi-
York, N. Y. 10015
cago, Illinois 60670
RUSS M. JOHNSON
EMMETT G. SOLOMON
Chairman of board and chief
Chairman and chief executive
executive officer, Deposit Guar-
officer and chairman of executive
anty National Bank, P. O. Box
committee. Crocker-Citizens Na-
1200, Jackson, Mississippi 39205
tional Bank, P. O. Box 3066, Rin-
con Annex, San Francisco, Cali-
WILLIAM H. MOORE
fornia 94120
Chairman oj board, Bankers
Trust Company, P. O. Box 318,
Church Street Station, New York,
TERM EXPIRING 1971
N. Y. 10015
MILLS H. ANDERSON
WALTER B. WRISTON
President, Bank of Carthage,
President. First National City
P.O. Drawer 637, Carthage, Mis-
Bank, 399 Park Avenue, New
souri 64836
York, N. Y. 10022
68
FORD is LIBRARY GERALD
- 2 -
ADVISORY MEMBERS
EX OFFICIO
Charles J. Gable, Jr.
Clifford C. Sommer, President
Executive Vice President
Security Bank and Trust Company
First Pennsylvania Bank
P. 0. Box 467
P. 0. Box 7558
Owatonna, Minnesota 55060
Philadelphia, Pennsylvania 19101
(Vice President, A.B.A.)
John J. Larkin
J. Howard Laeri, Vice Chairman
Senior Vice President
First National City Bank
First National City Bank
P. O. Box 161, Grand Central Station
55 Wall Street
New York, New York 10017
New York, New York 10015
(Past President, A.B.A.)
Donald C. Miller
Douglas R. Smith
Senior Vice President
Chairman of Board and President
Continental Illinois National Bank
National Savings and Trust Company
and Trust Company
Washington, D. C. 20005
Lock Box H
(Chairman, A.B.A. Savings Bonds
Chicago, Illinois 60690
Committee)
Paul I. Wren
Nat S. Rogers, President
Chairman of Board and Chief
First City National Bank,
Executive Officer
P. 0. Box 2557
Old Colony Trust Company
Houston, Texas 77001
P. O. Box 2016
(President, A. B. A.)
Boston, Massachusetts 02106
Willis W. Alexander,
Executive Vice President,
A. B. A.
Dr. Thomas A. Atkinson,
Di rector, Economic Research Dept.,
American Bankers Association
90 Park Avenue,
New York, N. Y. 10016
FORD & LIBRARY GERALD
AGENDA
GOVERNMENT BORROWING COMMITTEE
THE AMERICAN BANKERS ASSOCIATION
July 28, 1970
Tuesday, July 28, 1970
9:15 a.m.
Committee meets in Board Room of
The American Bankers Association
815 Connecticut Avenue, N. W.
(Suite 1002)
10:00 a.m.
Committee to review slides in
Room 2334 of the Treasury
Department 1/
11:00 a.m.
Committee to meet with Under
Secretary for Monetary Affairs,
Paul Volcker, in Room 4426 of
the Treasury Department 1/
12:30 p.m.
Reception - - Cabinet Room
1:00 p.m.
Lunch - Pan American Room
Mayflower Hotel
2:30 p.m.
Committee to reconvene in Board
Room of The American Bankers
Association
3:45 p.m.
Chairman Burns
Federal Reserve Board
5:15 p.m.
Committee to report its recom-
mendations to Secretary Kennedy
and the Treasury Financing Group
in Room 4426 of the Treasury
1/ Treasury will use the regular projection room on the second floor
on Southwest corner of building (corner facing the Mall and the
White House). Conference with Under Secretary for Monetary Affairs
and report to the Secretary of the Treasury will be held in the
fourth floor Conference Room on West side of building near the
center elevators opposite the White House.
FORD & LIBRARY GERALD
Bit
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 1001
NAT S. ROGER
PRESIDEN
FIRST CITY NATIONAL BAN
HOUSTON, TEXAS 770C
July 28, 1970
The Honorable Arthur F. Burns
Chairman
Board of Governors of the Federal Reserve System
Washington, D. C. 20551
Dear Chairman Burns:
The purpose of this letter is to express the concern of The
American Bankers Association with regard to the discriminatory interest
rate differentials, as between Federally insured banks and non-federally
insured mutual savings banks in Massachusetts. In brief, the problem
now confronting all Federally regulated commercial banks in that state
is one of competitive unfairness resulting from the interest rate ceilings
of 4.5% on regular savings deposits and 5% on 90 day notice accounts
currently imposed by the Federal Reserve under Regulation Q (12 C.F.R.
217.7) and parallel Regulation 329.6 (12 C.F.R. 329.6) of the F.D.I.C.
while Massachusetts mutual savings banks not under Federal regulation
are permitted under state regulation to offer 5.25% and 5.5% on the same
types of deposits.
A review of the most recent legislation on the extension of
interest rate regulatory authority is in order to place the current
Massachusetts situation in proper perspective. Both the Senate and
House bills contained language providing for the extension of the
Federal interest rate control authority to non-Federally insured
financial institutions wherever state officials lacked comparable authority
and non-insured savings deposits in the state exceed 20% of the total
savings deposits. During the hearings before the Banking and Currency
Committees of both Houses of Congress, your agency as well as the
F.D.I.C. endorsed this provision. Such support was based, for the most
part, on the principle of competitive equality and fairness and
on the belief that to permit certain institutions to escape Federal
interest rate control would tend to undermine the reasons for
such control and also would be a disruptive force against regulated
institutions unable to compete. Notwithstanding the objections of
the Massachusetts savings banks and the Massachusetts Banking
Commissioner, this provision was adopted in both Houses.
GERALD FORD LIBRARY
THE AMERICAN BANKERS ASSOCIATION
CONTINUING OUR LETTER OF July 28, 1970
SHEET No.
:
Under this authority, the F.D.I.C. can only prevent rate
increases on the deposits of these non-Federally insured insti-
tutions above 5.5% until July 31, 1970. After that date, the
Federal agencies would have complete authority unless a state
gave its Banking Commissioner full authority to establish maximum
rates in which case it would be exempt from Federal authority.
Massachusetts has now passed legislation authorizing the State
Banking Commissioner to control interest rates of these non-Federally
insured institutions. The Commissioner has announced her intention
of establishing rates of 5.25% on regular savings accounts and
5.5% on notice accounts -- thus creating a differential of 3/4
of 1% more than the rate allowed on savings deposits of commercial
banks and 1/2 of 1% more than the rate allowed on commercial bank
90 day notice accounts. This compares to a 1/2 of 1% spread on
savings deposits and a 1/4 of 1% spread on 90 day notice accounts.
generally prevailing in all other states.
The American Bankers Association has long advocated the
elimination or narrowing of this rate differential in favor of
thrift institutions. Such differential should not exceed 1/2
of 1% and preferably, 1/4 of 1%.
Accordingly, in view of the announced intention of the
Massachusetts Bank Commissioner, the American Bankers Association
on behalf of our member banks in Massachusetts, both state and
national, respectfully requests that the Board review their current
interest rate regulations in light of the circumstances now
prevailing in Massachusetts and that all Federally insured banks
in that state be authorized to pay 4.75% on regular savings accounts
and 5.25% on 90 day notice accounts. Such action would thus
permit Federally insured commercial banks to compete for savings
deposits on the same comparable basis as commercial banks in other
states. We firmly believe that such action is imperative for the
continued viability of the commercial banking system in Massachusetts
and is justified under both the Federal Reserve Act (12 U.S.C. 371(b))
and the Federal Deposit Insurance Act (12 U.S.C. 1828(g)) which
both provide in part:
"
The Board of
may prescribe different rate
limitations for different classes of deposits,
for deposits of different amounts or with
different maturities or subject to different
conditions regarding withdrawal or repayment,
according to the nature or location of
...
banks or
their depositors, or according to such other
reasonable bases as the Board of
may deem
desirable in the public interest. "
FORD & LIBRARY GERALD
(underscoring added)
Sincerely,
not A Rogers
OF
JO-BOARD
CHAIRMAN OF THE BOARD OF GOVERNORS
SYSTEM
FEDERAL RESERVE SYSTEM
THE
WASHINGTON, D.C. 20551
August 27, 1970.
Mr. Nat S. Rogers, President
American Bankers Association
815 Connecticut Avenue
Washington, D. C.
20006
Dear Mr. Rogers:
I am responding to your letter of May 25, 1970, requesting
the Board to issue a statement of policy in support of the billion-
dollar commitment of the banking industry to assist in developing
minority business enterprise.
We believe the proposed program of the banking industry is
worthwhile and are pleased to see that the Association's undertaking
has the needed support of the commercial banks. The problems of the
nation's cities and its disadvantaged minorities are areas in which
commercial banks can make a most important contribution to progress.
In the Board's judgment, the more loans to disadvantaged
minorities the better, provided they are sound. Implicit in this
policy is the understanding that banks will furnish guidance and
assistance to members of minority groups in connection with their
borrowings. However, in examining banks, a loan to a disadvantaged
person or firm must be evaluated just as any other loan - that is,
on the basis of the ability of the borrower to make timely repayment
and his record of performance.
We hope that your program will be successful.
Sincerely yours,
as 23m
Arthur F. Burns
FORD & LIBRARY GERALD
BH
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 10016
NAT S. ROGERS
PRESIDENT
FIRST CITY NATIONAL BANK
HOUSTON, TEXAS 77001
May 25, 1970
Please reply to:
815 Connecticut Avenue, N. W.
Washington, D. C. 20006
The Honorable Arthur F. Burns
Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C.
Dear Doctor Burns:
Earlier this month, The American Bankers Association, through its Urban
Affairs Committee, announced the banking industry's intention to achieve a goal
of $1 billion in minority business lending. Much of this lending activity will take
the form of "soft" loans, for which traditional credit requirements have been
relaxed so as to encourage maximum prudent utilization of credit by minority
entrepreneurs.
A number of these loans will be written in conjunction with guaranty programs
of the Small Business Administration. We are aware that a policy regarding examin-
ation of such guaranteed loans was enunciated by the Comptroller of the Currency
in a January 3, 1969, memorandum to all examining personnel and the regional
administrators of national banks, and by the Federal Deposit Insurance Corporation
in a January 24, 1969, memorandum from the Chief, Division of Examination,
FDIC, to all FDIC examiners and assistant examiners.
To the best of our knowledge, however, the federal examining agencies have
not yet established a policy concerning "soft" minority business loans which do not
possess the guaranty of an agency of the Federal Government. We believe such
loans are consistent with the Administration's commitment to encourage the develop-
ment of minority enterprise.
In each case where credit is advanced, the lending bank feels there exists
reasonable ability to repay the loan on the basis of terms prescribed. Yet, because
FORD i LIBRARY GERALD
THE AMERICAN BANKERS ASSOCIATION
CONTINUING OUR LETTER OF May 25, 1970
SHEET No. 2
of the greater risks involved, such loans cannot be judged by the same standards as
the normal business loans banks are accustomed to making.
Several bankers have already expressed concern as to how federal bank
examiners will view the marginal credit aspects of these loans. To allay such
concerns, and to assure maximum bank participation in fulfilling the expectations
of minority enterprise, it would be very helpful if a favorable policy S tatement
regarding the attitude of your organization toward these loans could be issued by
your office to the examining staffs and, in turn, passed on to the banks.
If you agree that such a statement of policy in support of the commitment to
assist in developing minority business enterprise is desirable, we shall appreciate
receiving a copy which can then be disseminated to participating banks.
You may be interested in the enclosed statement concerning the industry's
commitment to minority business enterprise.
Sincerely yours,
nat
Nat S. Rogers
cc: Thomas W. McMahon, Jr.
Chairman, Urban Affairs Committee
Enclosure
1
FORDO & GERALD LIBRARY
STATEMENT BY THOMAS W. McMAHON, JR.
EXECUTIVE VICE PRESIDENT, THE CHASE MANHATTAN BANK, N. A.
CHAIRMAN, URBAN AFFAIRS COMMITTEE OF
THE AMERICAN BANKERS ASSOCIATION
It has been about five years now since the attention of the nation has been
sharply focused on the problems of its cities and its disadvantaged minorities.
During that period, many solutions have been tried by both the public and private
sectors of our society. Some programs have been successful, others were not.
It has been a trial-and-error process on a variety of fronts -- such as providing a
minimum level of family income, working for physical neighborhood rehabilitation
and stimulating economic development.
Many commercial banks have been at the forefront of these attempts to
improve the quality of life for the less advantaged. Banks are at the heart of the
nation's economic system and their success is inextricably tied to the well-being of
the communities they serve.
Indeed, a survey released earlier this month by the A. B.A. Urban Affairs
Committee revealed that 81% of the 188 banks responding are firmly committed to
policies aimed at improving the cities, reducing poverty, providing equal opportunity
for all and fostering an improved quality of life. And most of these banks have
undertaken specific programs in these areas.
But it is in the areas most germane to banking -- the lending of money -- that
commercial banks can make a most important contribution. During recent years,
the banks that have made loans to minority enterprise have learned much about how to
maximize the borrower's -- the individual minority entrepreneur's -- chances for
success.
FORD is LIBRARY 9ERALD
-2-
We believe that we have come far and are confident enough in our knowledge
and our ability to transmit it throughout the industry. Therefore, we -- representing
the American commercial banking industry -- have committed ourselves to a goal of
$1 billion in loans to minority businesses over the next five years.
The loans we are talking about often involve abnormal risks because the
applicants lack the entrepreneurial "know-how" or capital normally required to
qualify for bank credit. The loans will be made -- a billion dollars worth -- at normal
interest rates.
The term "minority enterprise" is frequently thought of as denoting only very
small businesses located in and serving disadvantaged areas of the nation's cities.
We have to broaden that definition to include profitable, minority-owned manufacturing,
retail and service businesses capable of competing in the economic mainstream.
Granting loans such as these involves far more than merely approving the
credit of a customer who walks through the door of the bank and fills out an application.
Because the applicants are men and women who often lack the necessary experience and
training to go into business "on a standard-risk basis, granting these loans requires
a significant investment in manpower by the lending banks to provide managerial
counseling and assistance. This includes special guidance in such areas as operations,
accounting and marketing.
The American Bankers Association is, therefore, adopting a "key cities"
approach, identifying a number of major cities -- about fifty -- where the need is
greatest. Under the "key cities" program, in each of the cities identified for a sharply
focused and localized effort, bankers collectively will be encouraged to organize
a bankers committee on urban affairs. It is hoped that because of differences from
GERALD FORD VIBRARY
-3-
city to city, this approach will have maximum impact. Local bankers urban affairs
committees already exist in New York, Philadelphia, and Chicago.
Another problem area that we've learned about from our experience is that,
because of the difficulties involved in starting a business today, which are often
compounded for blacks and other minority group members, there is lacking a sizable
backlog of loan prospects. Add to that other factors such as inadequate capital and
preparation, and it is understandable why there is not greater call for this type of loan.
However, we as an industry plan to aggressively seek out potential minority-group
entrepreneurs.
The American Bankers Association also feels that it is important at this time
to reaffirm the basic principles of its urban involvement. The A. B.A. has therefore
adopted an Urban Affairs Policy Statement which reaffirms the commercial banking
industry's commitment to an aggressive policy of equal opportunity employment, to
local economic development, to better housing, to support of community organizations
and to cooperation with federal, state and local efforts to overcome the highly complex
and interrelated problems of our cities.
Copies of this policy statement are available for you. I think this is a
significant document, for it spells out in no uncertain terms the commitment of
commercial banks -- an important segment of the economic fiber of our nation -- to
programs to solve some of 1 the important problems facing the nation and its cities, and
the people who live and work in them.
In the last five years, we have learned much. We have seen which programs
work and which do not. We have identified the vital conditions and ingredients for
FORD & LIBRARY GERALD
-4-
effective programs. And we have learned that no matter how lofty the intentions of a
national headquarters, effective programs can be carried out only with the dedication,
the organizationæd the know-how at the local level.
To encourage local action in a concrete way, we have planned a series of
Urban Development Seminars in each of the key cities. Teams of visiting specialists
will meet with senior management to convey the rationale and the type of organization
necessary for an effective urban affairs program. They will also meet with middle
management on a nuts-and-bolts basis, to present the proper program strategy and
organization, case studies, information on supportive government programs, relation-
ships with senior management, with the community and with outside organizations,
and distribute materials to help them get the job done.
Since banks do not ordinarily segregate their loans by race or by neighborhood,
dollar figures for the industry's present commitment are, at best, an approximation.
The 90 banks that answered this limited survey's questions relating to lending activities
had made more than 21, 000 loans totaling almost $100 million to minority businesses
during the year ending June 30, 1969 and almost 37, 000 loans of $1.3 billion for low-
income housing during the same period. Because so few banks were surveyed and loan
records have not been maintained on a racial basis, actual outstanding loans for the
industry cannot now be ascertained.
The experience of bankers who have been engaged in this type of lending
activity thus far has demonstrated that while there are indeed great risks involved,
there is also an opportunity for entrepreneurship and profit that frequently makes
the risks worthwhile. Moreover, in terms of potential economic impact on the
nation's racial and urban problems, they are risks that we as bankers want to take.
FORD & LIBRARY GERALD
-5-
I have mentioned some of the problems that we will face in meeting our billion
dollar goal. Undoubtedly, we will encounter many more before the goal is met.
However, we recognize the importance of the task that we have undertaken and we are
confident that we have the strength of commitment, as well as the technical knowledge,
to succeed. And I am confident that we will.
And now, ladies and gentlemen, if you have any questions about this program,
I shall be happy to try to answer them.
FORD & LIBRARY GERALD
L6BD
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 10016
NAT S. ROGERS
PRESIDENT
FIRST CITY NATIONAL BANK
HOUSTON, TEXAS 77001
September 4, 1970
The Honorable Arthur F. Burns
Chairman
Board of Governors of the
Federal Reserve System
Washington, D.C.
Dear Mr. Chairman:
I had hoped to be able to present this letter in
person. However, since the effective date of the Home
Loan Bank Board Regulation is September 14 and there is
a need for prompt consideration, I am having it delivered
today. I hope to have the opportunity to visit with you
in person when I am in Washington next week.
Sincerely,
nats. Nat S. Rogers Rogers
called for appointment FORD
on Indry 9/11/70
i LIBRARY GERALD
yes
-
mo
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 10016
NAT S. ROGERS
PRESIDENT
FIRST CITY NATIONAL BANK
HOUSTON, TEXAS 77001
September 4, 1970
Dr. Arthur F. Burns
Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Re: Federal Home Loan Bank Board
Regulation 12 C.F.R. 545, 555
Dear Mr. Chairman:
The Federal Home Loan Bank Board has recently adopted amendments
to its regulations, effective September 14, which will permit Federal savings
and loan associations to honor non-negotiable authorizations by account
holders in Federal savings and loan associations for payment to third
parties, including direct transfers to the savings account of third parties,
periodically or otherwise.
The American Bankers Association along with others protested to the
Federal Home Loan Bank Board regarding the issuance of these regulations.
Nevertheless, the Board put the regulations into effect a year after their
first publication in the Federal Register. The American Bankers Association
urges the Federal Reserve Board to use its influence to bring about the
withdrawal of these regulations for the following reasons:
(1) The regulations of the Federal Home Loan Bank Board exceed
the authority granted in the Housing and Urban Development Act of 1968 to
permit "withdrawal of savings accounts upon non-transferable order or
authorization. " The legislative history makes it clear that this provision
was not intended to permit Federal savings and loan associations to accept
demand deposits or to establish a new type of payment mechanism which has
many of the attributes of checking accounts.
(2) Under these regulations the distinction between demand and
savings deposits would be blurred and the effectiveness of the Federal
Reserve Board in controlling monetary conditions could be impaired.
FORD & LIBRARY GERALD
Dr. Arthur F. Burns
Page 2
September 4, 1970
Payment of interest on deposit balances available for transfer to
third parties will be attractive to private individuals and corporations where
this type of deposit is made available. This ability to attract additional
deposits will encourage many Federal savings and loan associations to offer
this type of payment mechanism. These advantages could reduce the need
for demand deposits and could permit Federal savings and loan associations
to acquire funds which otherwise would go into demand deposits of commercial
banks. Under these circumstances, there would be decreases in commercial
bank deposits which are subject to monetary control while at the same time
the accounts of savings and loan associations would in effect operate as part
of the money supply, but would do so outside the direct control of the Federal
Reserve. Thus, the effectiveness of the Federal Reserve in exercising its
monetary policy would be frustrated.
(3) The new regulations permitting payment of interest by Federal
savings and loan associations on deposits that are essentially demand in
character would involve a major change in the payments mechanism and the
relationship of financial institutions. We believe that questions of this
importance should not be acted upon until the Presidential Commission on
Financial Structure and Regulation has had an opportunity to consider the
proposal along with other problems involving our financial system.
If, however, the Federal Home Loan Bank Board persists in retaining
the regulations with respect to transfer payments, we urge the Federal
Reserve Board and the Federal Deposit Insurance Corporation to recognize
the inequities which may result and, therefore, to extend comparable
authority to commercial banks.
As indicated above, the ability of Federal savings and loan associations
to offer payment transfer services from interest-bearing accounts will afford
a powerful attraction to the development of new accounts from both individuals
and corporations. These associations will be able to develop many arrange-
ments for handling consumer and corporate payments through interest-bearing
savings accounts with required reserves (lower than bank reserves) invested
in earning assets. Electronic equipment and computer technology may add
further impetus to direct transfer arrangements. In order for commercial
banks to maintain a fair degree of competitive equality, it is essential that
they be permitted to offer comparable services. Moreover, if the commercial
banking system and the Federal Reserve are to continue to play the central
role in the payments system, it is most important not to encourage the
diversion of large volumes of payments and transfers into new channels.
If new transfer methods are to be authorized, they should also be available
through the existing payments mechanism.
FORD i LIBRARY GERALD
Dr. Arthur F. Burns
Page 3
September 4, 1970
If the regulation is permitted to take effect, The American Bankers
Association urges the Federal Reserve Board and the Federal Deposit
Insurance Corporation to permit commercial banks to make comparable
payments and transfers from interest-bearing savings and time accounts
to third parties and to accept corporate deposits in savings accounts.
Sincerely yours,
not s. Rogers
Nat S. Rogers
FORD is LIBRARY 938870
FEDERAL HOME LOAN BANK BOARD
No.
70-94
Date: August 4, 1970
TITLE 12 - BANKS AND BANKING
Chapter V - Federal Home Loan Bank Board
Subchapter C - Federal Savings and Loan System
Part 545 : Operations
Part 555 - Board Rulings
AMENDMENTS RELATING TO SERVICES RENDERED BY FEDERAL
SAVINGS AND LOAN ASSOCIATIONS
RESOLVED that, notice and public procedure having been duly afforded
(34 F.R. 13481) and all relevant material presented or available having
been considered by it, the Federal Home Loan Bank Board, upon the basis
of such consideration, determines to amend Parts 545 and 555 of the
Rules and Regulations for the Federal Savings and Loan System (12 CFR
Parts 545 and 555) for the following purposes:
1. To implement the last sentence *subsection (b) (1) of
section 5 of the Home Owners' Loan Act of 1933 as added
by Section 1716 of the Housing and Urban Development Act
of 1968, Public Law 90-448, 90th Congress, approved
August 1, 1968, by providing for the withdrawal or trans-
fer of savings accounts in Federal savings and loan asso-
ciations upon nontransferable order or authorization.
2. In order to increase the effectiveness of Federal savings
and loan associations in encouraging thrift by making their
facilities available to the public generally, to authorize
such associations to provide for the sale of checks, includ-
ing travelers checks and money orders, thereby extending the
scope of such activity previously permissible under the
ruling referred to in item 3 hereof.
3. To revoke an existing ruling in paragraph (d) of $ 555.8
of said Part 555 which would be supplanted by the regula-
tion amendments herein.
FORD & LIBRARY GERALD
Accordingly, the Federal Home Loan Bank Board hereby amends said Parts
545 and 555 as follows, effective September 14, 1970:
FEDERAL HOME LOAN BANK BOARD
No. 70-94
Page Two
1. Part 545 is amended by adding a new § 545.4-1, immediately after
§ 545.4 to read as follows:
§ 545.4-1 Payments to third parties by withdrawals or transfer
of savings accounts; checks and money orders.
(a) Withdrawals and transfers. Savings accounts in a Federal
association shall not be subject to check or to withdrawal or
transfer on negotiable or transferable order or authorization to
the association. However, withdrawal requests" may be in the form
of nontransferable orders or authorizations to the association
for the payment of amounts in savings accounts to third parties
periodically or otherwise. Any such order or authorization which
may be honored as a withdrawal request for payment to a third
party may, if so authorized by the third party, also be honored
as a transfer to a savings account of such third party. The
association may charge a fee for its services in making any
payment or transfer pursuant to this section. Any form for
such orders or authorizations shall contain language in bold-
face type of reasonable size to the effect that the order or
authorization is not negotiable or transferable.
(b) Sale of checks and money orders. As an incident to
its principal activities and for the convenience of its members
and others, a Federal association may provide for the sale of
checks, including travelers checks, and money orders on which
the drawee is a Federal Home Loan Bank, commercial bank, or
other organization engaged in the business of handling such
instruments.
2. Part 555 is amended by revoking paragraph (d) of § 555.8.
(Sec. 5, 48 Stat. 132, as amended; 12 U.S.C. 1464. Reorg. Plan No. 3
of 1947, 12 F.R. 4981, 3 CFR, 1943-48 Comp., P. 1071)
FORD
GERALD
LIBRARY
By the Federal Board
DEC 11 1969
TO:
Board of Governors
SUBJECT: Proposed authorized
payment plan and deposit transfer
FROM: Division of Research and Statistics
Power for Savings and Loan
(Mr. Struble)
Associations.
The Home Loan Bank Board has published a proposed change in
regulation which would give savings and loan associations authority
to honor shareholder requests in the form of nonnegotiable or non-
transferrable orders or authorizations to pay amounts in savings
accounts to third parties; transfer affected by checks or other nego-
tiable instruments would continue to be prohibited. The nontransferrable
orders or authorizations could designate payment of a single obligation.
In addition, orders or authorizations instructing the association to
pay a member's periodic obligations--such as a utility bill--could be
honored even if the amounts to be paid were not specified.
A second important part of this FHLBB proposal is that these
orders or authorizations could be honored by direct transfer to a
savings account of a third party, if the third party agreed to this
arrangement.
The comments to follow offer an analysis of the economic
implications of this proposal including its implications for the pay-
ments mechanism and for monetary policy. Before proceeding to this
discussion, it might be worth summarizing two of its major points.
Those aspects of the proposal reviewed in the first paragraph above
will, if adopted, significantly increase the substitutability of
deposits at savings and loan associations with demand deposits at
FORD & LIBRARY GERALD
-2-
commercial banks. The aspect of the proposal reviewed in the
second paragraph, if adopted, would make possible the development of
a payment system wholly independent of the present payment system
based on demand deposit accounts at commercial banks and the mechanism
for clearing checks written on these accounts.
How Will These Plans Develop?
Before any evaluation of the economic implications of the
FHLBB proposal can be made, it is necessary to formulate some conception
of how these plans will work and how extensive they might become.
The immediate discussion to follow offers some tentative answers to
these questions.
Activities prohibited. It appears that only those payment
transactions in which a check--a negotiable instrument--is used to
make payment on an obligation to a third party would be prohibited.
While such a restriction may have been important in past years, it
should be emphasized that it will not necessarily be so in the future.
After all, most projections of the evolution of the payments mechanism
contend that the check is scheduled for eventual obsolescence. Thus,
the long-run development of these payment plans at savings and loan
associations would not appear to be particularly confined by this
restriction.
Near-term development. It seems unlikely that these payment
plans would assume major significance in the near term following their
authorization. Part of the rationale for this conclusion is that, to
date, preauthorized payment plans based on demand deposits at commercial
FORD i LIBRARY GERALD
-3-
banks have not proven to be very popular, as most people seem
reluctant to have payments automatically deducted from their account.
Moreover, a large number of S&L's will in all probability be quite
reluctant to offer these plans to the public because of the prospective
increase in costs to be incurred in servicing accounts. Support
for this latter assumption is provided by several letters the FHLBB
received from S&L's in which they objected to this proposal on the
grounds that the industry could not bear the added costs associated
with operating these plans.
While these factors will serve to hold back an immediate
burgeoning of these plans, it seems unlikely that they will retard
their development entirely. The opportunity to earn interest on a
"transactions" balance should overcome the reluctance which many
people have to entering into this type of arrangement. And, some
S&L managers will probably conclude that the costs of operating
these plans will be more than covered by the revenue to be derived
from the additional deposit funds generated. Thus, it seems likely
that during the initial period of introduction these payment plans
will take hold and begin growing but at a comparatively moderate
pace. Although the extent of the development which will occur over
these early years cannot be foreseen with any degree of accuracy,
one thing seems certain to occur: commercial banks will observe
the potential competitive challenge of these plans and will urge
strongly that they be given the opportunity to offer similar plans
based on their savings deposit accounts.
FORD & LIBRARY GERALD
-4-
Longer-run developments. Despite an initial reluctance,
it seems likely that plans of this kind probably would be destined
to assume increased importance with the passage of time. Developing
forces such as the unfolding computer technology, for example, will
both permit and encourage a payment mechanism based upon some form
of money transfer other than a check. The mounting volume of paper
work generated by the present check clearing system can also be
cited, for it has led to considerable bank interest in alternative
types of payments arrangement. Finally, expansion of charge account
purchases- of which increasing credit balances associated with bank
credit cards and other revolving credit arrangements are the most
dramatic--should be mentioned, since the growing practice of per-
mitting repayment of account balances on an instalment basis would
appear to be well suited to the operation of these plans. The
shareholders, for example, could simply authorize the S&L to pay the
minimum balance due on his revolving credit arrangement with a
department store or commercial bank. If to these basic forces one
adds the opportunity to obtain an interest return on what are
essentially "transaction" balances, then it appears that these plans--
whether based on deposit accounts at S&L's or on savings accounts
at commercial banks--are sure to spread.
A fairly detailed sketch of the potential activities of
these S&L plans can be presented which meets the test of reasonableness
in the sense that it does not appear to be in conflict with existing
laws and appears entirely feasible on operational grounds.
GERALD R. FORD LIBRARY
-5-
After operating these payment plans on a limited basis
for a period of time needed to gain experience, some savings and loans
might well opt to expand its activities by advertising something like
the following plan.
1. Arrange with your employer to have at least part of your paycheck
automatically credited to your savings and loan account.
2. In return for placing these funds with us, we will pay in-
terest daily on the balance you maintain with us. (It seems quite
unlikely that the interest rate offered under these arrangements
will match that being offered on other types of savings accounts,
because the expenses of operating this payments mechanism will have
to be met. Alternatively, S&L's may offer uniform rates on all
their savings accounts but charge specific fees for the services they
provide in making payments.)
3. We will, after receiving your authorization, pay amounts
from your account to meet your periodic bills.
4. In addition, you may sit down once or twice a month and
fill in pertinent information with regard to your other bills on
one of our authorization slips. After we receive this authorization
in the mail, we will carry out your instructions.
(Presumably, the obligations handled through these payment
plans will encompass the vast majority of all payments which have
to be made by an ordinary household during the month, since most
retail purchases, including even grocery store purchases, might well
be' transacted through charge accounts by this time.)
FORD i LIBRARY CERALD
-6-
5. If you need any cash during this period simply come
to our office. Or, if that is not convenient, simply mail in an
authorization slip and we will send you a money order which you can
conveniently turn into cash. In fact, if you wish, you may authorize
us to send you periodically a money order of a given amount. (This
discussion assumes that another change in regulation, proposed by
the FHLBB at the same time as the one under discussion in this
memorandum, is adopted. This proposal would permit a Federal savings
and loan association to "provide for the sale of checks, including
traveler's checks, and money orders on which the drawee is a Federal
Home Loan Bank, commercial bank, or other organization engaged in
the business of handling such instruments.")
This is but one sketch of the type of arrangement which
S&L's could conceivably offer to a customer. Many others would be
possible, for if present proposed regulations are adopted, the S&L's
will have great flexibility in designing these plans. And, given
this flexibility, it is logical to assume that the associations will
develop arrangements capable of handling most types of consumer
payments. Consequently, these plans could become extremely popular.
Savings and Loan Payments Transfer System
When these payment plans are first established, S&L's will
carry out the payment instructions of their shareholders by debiting
the shareholder's account for the amount of the payment in question.
The S&L will then present a check, written on its deposit account at
a commercial bank, to the designated third party specifying in the
process that the check is to serve as payment for the bills of the
FORD & LIBRARY GERALD
-7-
shareholder. Thus, initially the completion of payments under these
payment plans will be closely tied to the existing check clearing
system. But as these plans evolve, it seems quite possible (and
indeed quite likely) that they will begin to break away from the
use of checks and could eventually become essentially divorced
from the check clearing system. This potential course of development
would appear to be made possible by the last sentence in the FHLBB's
proposal-- that is, that transfers can be made to the account of a
third party in payment to that party, if the third party agrees.
For example, it would appear likely that S&L's would attempt
to encourage business firms in their immediate area to whom large
payments for household customers are made to hold deposit balances
with them. There is nothing in existing laws to prohibit firms of
this type from holding balances with S&L's, and it seems quite
possible that S&L's would induce these firms to do so as a convenience
to all concerned. Indeed, the S&L will offer to pay an interest
rate as an inducement to the establishment of such accounts, and
might even agree to transfer an account balance after it reaches
a certain level. The transfer could be made to commercial bank
accounts or perhaps to the account of a security dealer--who may also
have an account with the S&L--to pay for securities acquired in the
name of the deposit customer. The precise nature of the transfer
would, of course, be established by agreement. No matter to whom
the transfer is made, it seems a reasonably safe presumption that,
as time passes, such transactions would tend increasingly to take the
form of a direct transfer of credit balances rather than a trans fer
of funds through the mechanism of a check.
GERALD
LIBRARY
-8-
Coinciding with these developments on a local level, it
also is conceivable that S&L's in different regions of a State or
in different sections of the country would begin entering into
arrangements which would facilitate the transfer of funds among
associations. Separate service corporations could be established
to aid with the process of clearing intra-State transfers, while
interstate transfers arrangements might be developed in several ways.
For example, facilities could be developed at the Federal Home
Loan Banks for inter-District settlements, just as banks now clear
through the Federal Reserve Banks.
The sketch presented above is, of course, but one possible
course of development. But despite its tentative nature, it does
serve to illustrate that the potential would exist for the
development of a payment system independent of one operated through
transactions based on deposit accounts at commercial banks. What is
envisioned, is an arrangement not too different from the "post giro"
systems which operate independently of the check clearing system in
many European countries.
Economic Implications
Improved efficiency of check clearing. It seems reasonably
clear that authorized-preauthorized payment plans whether operated by
S&L's or by commercial banks will improve the efficiency of the
is LIBRARY GERALD
existing check clearing system. To illustrate this point, consider a
hypothetical situation in which initially 100 households are making
monthly payments to the same 10 business firms and that each house-
hold pays each bill with a check on its demand deposit account. Under
this arrangement a total of 1,000 checks would have to pass through
-9-
the check clearing system. Then assume that these households decide
to utilize the payment plan service of a savings and loan association.
Each household would then send one check to the S&L to cover its total
monthly liabilities. The S&L, in turn, would send one check drawn on
its bank account to each of the 10 firms to pay the bills of its 100
household customers. The total number of checks required to clear
though the check clearing system under this arrangement would be 110.
Thus, a significant reduction in items to be cleared is achieved.
Admittedly, the degree of conformance between the firms to be paid and
the customers of a single S&L, as described here, is probably larger
than would normally occur in actual practice. Yet, this example does
indicate the potential economies to be gained by consolidating the bills
of a large number of customers and discharging these obligations with
a single payment. It should be stressed that similar economies would
be obtained from bank operated payment plans, whether these plans are
based on savings deposits or demand deposits.
Other possibilities for cutting back the volume of checks
could also arise from the operation of payment plans. For example,
household wage earners might direct their employers to deposit their
paychecks directly in S&L accounts. This would eliminate the need for
householders to write checks on their bank account in order to increase
their S&L deposit account. And if S&L's are successful in inducing
firms to establish accounts with them, then the payment of bills to
these firms could be completed without any check being written at all.
GERALD FORD LIBRARY
-10-
An even further possible source of reduction in check clearing
activity might arise from this arrangement, for it is just possible
that once firms are able to earn interest on a transaction balance
they may be less inclined toward the practice of attempting to economize
cash balances by shifting from deposits into open market instruments.
The decrease in the volume of paperwork to be cleared by the
financial system as a whole will not be as extensive as might appear
from the focusing only on the drop in the volume of checks to be cleared.
The S&L's and banks offering the services of these plans will, after
all, experience a sharp step-up in paperwork in performing these
services. But on net balance some cost reduction should be achieved.
Deposit instability. It appears likely that individual
savings accounts used as a basis for these payment plans will fluctuate
more than they do presently. However, whether this will result in a
substantial increase in the volatility of aggregate savings and loan
accounts will depend upon the success these institutions have in
synchronizing the volume of their deposit inflows with the volume of
their deposit outflows. Payments could be staggered by arranging to
pay utilities on one day, insurance companies on the next, etc., or
by arranging to pay on any one day the bills of only a proportionately
small number of deposit customers to these various firms. This would
reduce the tendency for payment obligations to bunch up on a given day.
In addition, payments could be scheduled to coincide with deposit in-
flows, and the volume of inflows could be evened out by obtaining
deposit customers who receive their paycheck on different days. Thus,
GERALD LIBRARY
-11-
while it is clear that the activity and fluctuation associated with
individual accounts are certain to rise, the extent of increase in
the volatility of deposit accounts in the aggregate remains a matter
for conjecture. In addition, assuming that the funds to establish
these S&L payment plan accounts are attracted from commercial bank demand
deposits, then during this transition period, deposit instability at
commercial banks could also increase. It also seems likely that sub-
stituting payments based on S&L accounts for payments based on demand
accounts at banks will alter (perhaps significantly) traditional
seasonal (and perhaps cyclical) patterns of deposit fluctuations at
commercial banks.
The liquidity problems generated by this augmenting of
deposit instability are obvious. Savings and loan associations will
have to develop procedures for minimizing the instability of their
total deposit balances and to expand existing arrangements for obtain-
ing cash to meet unexpected deposit outflows. The liquidity problem
facing commercial banks will be no less acute, particularly during the
transition period, for presumably banks will experience a steady erosion
in their demand deposit accounts--assuming that traditional restrictions
on demand accounts are retained--and will have to develop procedures for
meeting these deposit declines.
Implications for economic stability and monetary policy
Preauthorized-authorized payment plans based on savings
deposits will reduce demand for money (defined as demand deposits
GERALD FORD LIBRARY
-12-
adjusted plus currency) relative to a given volume of transactions or
a given level of income, unless major changes are made in existing
regulations which would permit banks to pay interest on their demand
balances. However, during the early stages of development this de-
cline will be moderate for two reasons: a) because these plans will
not be offered in all areas of the country and even where they are
offered they will presumably restrict the types of payments which can
be made so that households will continue to need money to pay for a
large proportion of their transactions; and b) because S&L's will need
to increase their demand deposit balances at commercial banks in order
to complete the enlarged volume of payments they will have to make.
However, S&L's presumably will be able to handle a given volume of
transactions with lower average demand deposit balances than those
maintained by households so that, on net, demand for money will decline,
but only moderately. Such moderate changes in demand for money, and
related changes in velocity, would not appear to present any significant
problem in the administration of monetary policy.
However, as time passes and these payment plans become more
pervasive, it seems clear that demand for money, as presently defined,
may begin to erode significantly, because these payment plans do appear
to have the potential to become important substitutes for demand
deposits. As discussed above, the importance of the check as a means
of payment seems destined to diminish considerably with the onset of
new technology. And in an age in which charge account purchasing is
FORD i LIBRARY GERALD
-13-
spreading steadily, the possibility of having to wait 30 days before
gaining control over funds held in a savings account will not be con-
sidered much of a handicap, particularly if, as seems likely, the
probability of such a development is thought to be quite small.
Traditional relationships between money, bank credit, and
developments in other financial aggregates may become distorted as a
result of this substitution process as will the relationship of any of
these aggregates to GNP and other economic variables. This will tend
to increase the difficulty of evaluating the significance of monetary
aggregates, particularly in the transition period. Once the transition
period is concluded, new relatively stable--at least no less stable
than now--relationships between monetary aggregates, other assets, credit
market conditions and economic activity presumably will emerge. But
the transition period may be fairly lengthy and conditions during that
period may be quite turbulent, as more and more household cash balances
are shifted to savings account forms in more and more associations or
shifted to savings accounts at banks, if banks were given the same
authority as S&L's.
Distinctions between money and other liquid assets, for
example, will become decidedly blurred during this transition period.
This, of course, is not an entirely new phenomenon, particularly when
one considers the long standing post-World War II trend in which time
deposits at commercial banks and mutual savings banks and savings
shares at S&L's have been substituted for demand deposits at banks.
But this trend of developments has been reasonably steady and orderly
GERALD FORD LIBRARY
-14-
so that, even though the implications of this trend have not been
entirely understood, they have had their impact on a fairly gradual
basis. During the early stages of the evolution of preauthorized
payment plans it is to be expected that this substitution process will
remain gradual. But as time goes on, it is possible that these plans
could begin to catch on with a rush, resulting in sharp structural
changes over short periods of time.
Competitive Equity
If savings and loan associations are given the authority to
operate preauthorized-authorized payment plans several issues will be
raised regarding the impact of this change on competitive arrangements
between associations and commercial banks and between savings deposit
accounts and demand deposit accounts. Moreover, depending upon how
these issues are resolved, several problems with regard to determining
the type of regulations to apply to different types of accounts at
different institutions and the means for coordinating the implementation
of these regulations will be encountered.
If S&L's receive authority to operate these plans then it
seems certain that commercial banks will request authority to operate
similar plans based on their savings deposit accounts. But if payment
plans based on savings accounts prove popular--and at least eventually
this seems likely to occur--then the issue of why interest can be paid
on what are essentially transactions balances held in savings accounts
but cannot be paid on demand deposit may well be raised. In addition,
FORD i LIBRARY GERALD
-15-
there will be the question of why reserve requirements against transactions
balances held in demand deposits should be higher than reserve require-
ments against similar balances held in time deposits. And more will be
involved here than simply the question of reserve ratios: the types of
assets to qualify as reserves will have to be considered. Why, commercial
banks are sure to ask, must we hold reserves in the form of deposit
balances at Federal Reserve Banks which provide a zero interest return
while S&L's are permitted to hold their reserves in the form of
interest-bearing Treasury securities.
Finally, assume for the moment that a proposal is offered to
resolve these various issues by requiring S&L's to hold reserves in the
form of zero interest earning deposits at the Federal Home Loan Banks,
that reserve ratios on all deposits are equalized, and that the in-
terest prohibition on demand deposits is eliminated. At least one
additional issue would remain which is, what relative rates of growth
in reserves would be allowed by the Federal agencies generating these
reserves. At a minimum it seems likely that very close coordination
of reserve policies will be required.
FORD is LIBRARY GERALD
-16-
CONCLUDING COMMENT
Preauthorized-authorized payment plans will quite probably
play an important role in the completion of payments transactions in
the future. The evolution of computer and electronics technology will
permit and indeed should promote such payments arrangements. Expansion
of purchases financed through credit card plans and other revolving
credit arrangements should also help to promote the applicability and
thereby the growth of payment plans.
The introduction of these plans will reduce the volume of
checks required to complete a given volume of transactions so that
some improvement in efficiency of the payment system is to be expected
even over the fairly short-run future. Over the longer-run these plans
could easily lead to the development of a credit transfer payment system
operated by commercial banks and S&L's. If S&L's are given permission
to make credit transfers the result could eventually be the development
of a payment transfer system which operates essentially independently
of the commercial bank system.
During the period in which these plans would be introduced
and established it seems certain that financial institutions would
encounter increased difficulty with deposit instability. The monetary
authorities would be confronted with problems no less difficult, as
traditional relationships among financial variables and between financial
variables and other economic variables will be distorted. And the in-
creased difficulty encountered in interpreting financial developments
BERALD FORD LIBRARY
-17-
will be accompanied by equally acute problems with regard to influencing
these conditions, since the reins by which the monetary authority has
traditionally exercised control will be loosened. But perhaps the most
difficult problems generated by the proposal to give S&L's the authority
to operate preauthorized-authorized payment plans are those involving
questions of the competitive position of various financial institutions
and various types of deposits.
Prudence would appear to demand that, in consideration of
these many potential problems and issues, considerable caution should be
exercised in their adoption. Preferably this would seem to point to
the need for prior study and resolution of all the technical and
regulatory issues to be created by the introduction and operation of
these plans. If this ideal approach is not acceptable, however, it
would seem wise to at least move gingerly. One course of action meeting
this criteria might be initially to prohibit S&L's from making credit
transfers among their accounts. Another may be to limit the debits
(and also credits if these are permitted) to certain types of trans-
actions, such as mortgage or rent payments, or payments on utility
bills.
FORD & LIBRARY GERALD
September 10, 1970
To:
Board of Governors
Subject: Permitting business
From: Legal Division (R. F. Sanders) corporations to have savings deposits.
This memorandum, prepared at Governor Maisel's request, is
designed to furnish some background material that might be helpful to
Board members in connection with the anticipated discussion of this
topic by the Federal Advisory Council at its meeting with the Board
tomorrow. (See ABA's letter of September 4, 1970, page 3.) It is
assumed that Board members will not wish to discuss the merits of the
arguments, outlined below, for and against the Board amending Regula-
tion Q to permit business corporations to have savings deposits.
However, it is hoped that the material will give the Board some idea
of the issues involved.
In my opinion, amending Regulation Q to permit business
corporations to have savings deposits would be a valid exercise of
the Board's authority to define the terms used in section 19 of the
Federal Reserve Act. (In 1963, Comptroller of the Currency Saxon
published an interpretation indicating that national banks could,
despite Regulation Q, offer savings deposits to business corporations;
however, Comptroller Camp has withdrawn that interpretation.)
Arguments for the change are:
(1) Savings and loan associations accept comparable accounts
from business corporations; all federally insured financial institutions
should be subject to the same rules governing savings and time deposits,
except for the differential in rate designed to avoid undesirable shifts
of funds from one class of institution to another. This is implicit in
the interest-rate-control legislation enacted by the Congress in 1966.
(2) Unlike the situation when the Board drew the distinction
between persons eligible for savings deposits and those who are not,
the Board now permits a higher rate of interest on time deposits than
on savings deposits. Although the original concept underlying savings
deposits was to encourage thrift, that is an anachronism in view of
the present rate structure.
(3) Prohibiting business corporations (and municipal corporations)
from having savings deposits is a distinction based on the nature of the
depositor that cannot be justified on the basis of economic considerations.
In some respects, the distinction appears to be arbitrary; for example, a
school district may have a savings deposit but a board of education may not.
Maintaining the distinction has taken an inordinate amount of the time of
the Board and its staff over the years. The reasons for maintaining the
distinction do not justify the effort involved.
FORDO i LIBRARY GERALD
Board of Governors
-2-
Arguments against the change are:
(1) The number of corporations that maintain savings deposits
in S&Ls is nominal compared with the number that could be expected to
open such accounts in member banks. This is true today and would remain
so after the FHLBB regulations regarding preauthorization of payments
from savings deposits in S&Ls become effective. The desirability of
one-stop banking will still favor deposits in commercial banks.
(2) Permitting business corporations to have savings deposits
would result in a marked decline in the amount of demand deposits.
Although it might not be worthwhile for an individual to make daily
transfers from his savings account to his checking account to meet his
needs for funds on a daily basis, large business corporations probably
would find that procedure worthwhile. If so, corporations would tend
to retain the bulk of their funds in savings deposits. (It would
seem advantageous to member banks to have corporations shift their
funds from demand to savings deposits, because that would reduce sub-
stantially their reserve requirements, unless the Board only permits
corporate savings deposits for the purposes of Regulation Q and not
for the purposes of Regulation D.) This possibility is sufficiently
likely to raise a legal question whether permitting corporate savings
deposits is consistent with the statutory prohibition in section 19
against payment of interest on demand deposits.
(3) It is unnecessary to permit member banks to have corporate
savings accounts to eliminate much of the present administrative burden
involved. Excluding only corporations operated for profit from having
savings deposits and permitting all municipal authorities to have such
deposits would substantially reduce the amount of time required to
administer this aspect of Regulation Q.
FORD & LIBRARY GERALD
CHAIRMAN BURNS
For Information Only
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date September 9, 1970.
To
Board of Governors
and
Subject: New regulations of FHLBB
providing fund transfer authority for
From
Robert C. Holland
payment of accountholders' bills.
As mentioned in the memorandum dated September 8, 1970
from the Office of the Secretary, the Federal Advisory Council has
added to the agenda for its upcoming September 11 meeting with the
Board, the subject of the new regulations of the Federal Home Loan
Bank Board providing fund transfer authority for payment of account-
holders' bills.
For reference in connection with that discussion, there
is attached a letter on this matter received today from the American
Bankers Association. Staff memoranda on the subject are in preparation
for distribution to the Board for consideration at a reasonably early
date.
Attachment
FORD & 07VR70 LIBRARY
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 10016
NAT S. ROGERS
PRESIDENT
FIRST CITY NATIONAL BANK
HOUSTON, TEXAS 77001
September 4, 1970
The Honorable Arthur F. Burns
Chairman
Board of Governors of the
Federal Reserve System
Washington, D.C.
Dear Mr. Chairman:
I had hoped to be able to present this letter in
person. However, since the effective date of the Home
Loan Bank Board Regulation is September 14 and there is
a need for prompt consideration, I am having it delivered
today. I hope to have the opportunity to visit with you
in person when I am in Washington next week.
Sincerely,
nats
Nat S. Rogers
GERALD FORD LIBRARY
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 10016
NAT S. ROGERS
PRESIDENT
FIRST CITY NATIONAL BANK
HOUSTON, TEXAS 77001
September 4, 1970
Dr. Arthur F. Burns
Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Re: Federal Home Loan Bank Board
Regulation 12 C.F.R. 545, 555
Dear Mr. Chairman:
The Federal Home Loan Bank Board has recently adopted amendments
to its regulations, effective September 14, which will permit Federal savings
and loan associations to honor non-negotiable authorizations by account
holders in Federal savings and loan associations for payment to third
parties, including direct transfers to the savings account of third parties,
periodically or otherwise.
The American Bankers Association along with others protested to the
Federal Home Loan Bank Board regarding the issuance of these regulations.
Nevertheless, the Board put the regulations into effect a year after their
first publication in the Federal Register. The American Bankers Association
urges the Federal Reserve Board to use its influence to bring about the
withdrawal of these regulations for the following reasons:
(1) The regulations of the Federal Home Loan Bank Board exceed
the authority granted in the Housing and Urban Development Act of 1968 to
permit "withdrawal of savings accounts upon non-transferable order or
authorization. " The legislative history makes it clear that this provision
was not intended to permit Federal savings and loan associations to accept
demand deposits or to establish a new type of payment mechanism which has
many of the attributes of checking accounts.
(2)
Under these regulations the distinction between demand and
savings deposits would be blurred and the effectiveness of the Federal
GERALD FORD LIBRARY
Reserve Board in controlling monetary conditions could be impaired.
runu
GERALD
LIBRARY
Dr. Arthur F. Burns
Page 2
September 4, 1970
Payment of interest on deposit balances available for transfer to
third parties will be attractive to private individuals and corporations where
this type of deposit is made available. This ability to attract additional
deposits will encourage many Federal savings and loan associations to offer
this type of payment mechanism. These advantages could reduce the need
for demand deposits and could permit Federal savings and loan associations
to acquire funds which otherwise would go into demand deposits of commercial
banks. Under these circumstances, there would be decreases in commercial
bank deposits which are subject to monetary control while at the same time
the accounts of savings and loan associations would in effect operate as part
of the money supply, but would do so outside the direct control of the Federal
Reserve. Thus, the effectiveness of the Federal Reserve in exercising its
monetary policy would be frustrated.
(3)
The new regulations permitting payment of interest by Federal
savings and loan associations on deposits that are essentially demand in
character would involve a major change in the payments mechanism and the
relationship of financial institutions. We believe that questions of this
importance should not be acted upon until the Presidential Commission on
Financial Structure and Regulation has had an opportunity to consider the
proposal along with other problems involving our financial system.
If, however, the Federal Home Loan Bank Board persists in retaining
the regulations with respect to transfer payments, we urge the Federal
Reserve Board and the Federal Deposit Insurance Corporation to recognize
the inequities which may.result and, therefore, to extend comparable
authority to commercial banks.
As indicated above, the ability of Federal savings and loan, associations
to offer payment transfer services from interest-bearing accounts will afford
a powerful attraction to the development of new accounts from both individuals
and corporations. These associations will be able to develop many arrange-
ments for handling consumer and corporate payments through interest-bearing
savings accounts with required reserves (lower than bank reserves) invested
in earning assets. Electronic equipment and computer technology may add
further impetus to direct transfer arrangements. In order for commercial
banks to maintain a fair degree of competitive equality, it is essential that
they be permitted to offer comparable services. Moreover, if the commercial
banking system and the Federal Reserve are to continue to play the central
role in the payments system, it is most important not to encourage the
diversion of large volumes of payments and transfers into new channels.
If new transfer methods are to be authorized, they should also be available
through the existing payments mechanism.
Dr. Arthur F. Burns
Page 3
September 4, 1970
If the regulation is permitted to take effect, The American Bankers
Association urges the Federal Reserve Board and the Federal Deposit
Insurance Corporation to permit commercial banks to make comparable
payments and transfers from interest-bearing savings and time accounts
to third parties and to accept corporate deposits in savings accounts.
Sincerely yours,
not s. Rogers
Nat S. Rogers
FORD i LIBRARY GERALD
September 9, 1970.
Mr. Nat S. Regers, President,
The American Bankers Association,
90 Park Avenue,
New York, New York. 10016
Dear Mat:
1 want to be quick to acknowledge, in Chairman Burns'
absence, your letter of Suptember 4, 1970 concerning recent
regulatory emendments adopted by the Federal Home Loan Bank
Board.
The Board of Governors has been following developments
in this area closely, and I can assure you the Board will give
prompt and careful consideration to the views set forth in your
letter.
Yours sincerely,
Robert C. Holland,
Secretary of the Board.
be: Mr. Sanders
Mr. Kenyon
Mr. Axilrod
Mr. Eckert
Mr. Leonard
Mrs. Mallardi (2)
FORD is LIBRARY GERALD
L6BH
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 100
NAT S. ROGEI
PRESIDE
FIRST CITY NATIONAL BA
HOUSTON, TEXAS 77C
September 4, 1970
The Honorable Arthur F. Burns
Chairman
Board of Governors of the
Federal Reserve System
Washington, D.C.
Dear Mr. Chairman:
I had hoped to be able to present this letter in
person. However, since the effective date of the Home
Loan Bank Board Regulation is September 14 and there is
a need for prompt consideration, I am having it delivered
today. I hope to have the opportunity to visit with you
in person when I am in Washington next week.
Sincerely,
nats. Nat S. Rogers Rogers
called for appointment FORD
on Inday 9/11/70
is LIBRARY GERALD
yes
-
no
THE AMERICAN BANKERS ASSOCIATION 90 PARK AVENUE, NEW YORK, N.Y. 10016
NAT S. ROGERS
PRESIDENT
FIRST CITY NATIONAL BANK
HOUSTON, TEXAS 77001
September 4, 1970
Dr. Arthur F. Burns
Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Re: Federal Home Loan Bank Board
Regulation 12 C.F.R. 545, 555
Dear Mr. Chairman:
The Federal Home Loan Bank Board has recently adopted amendments
to its regulations, effective September 14, which will permit Federal savings
and loan associations to honor non-negotiable authorizations by account
holders in Federal savings and loan associations for payment to third
parties, including direct transfers to the savings account of third parties,
periodically or otherwise.
The American Bankers Association along with others protested to the
Federal Home Loan Bank Board regarding the issuance of these regulations.
Nevertheless, the Board put the regulations into effect a year after their
first publication in the Federal Register. The American Bankers Association
urges the Federal Reserve Board to use its influence to bring about the
withdrawal of these regulations for the following reasons:
(1)
The regulations of the Federal Home Loan Bank Board exceed
the authority granted in the Housing and Urban Development Act of 1968 to
permit "withdrawal of savings accounts upon non-transferable order or
authorization. 11 The legislative history makes it clear that this provision
was not intended to permit Federal savings and loan associations to accept
demand deposits or to establish a new type of payment mechanism which has
many of the attributes of checking accounts.
(2)
Under these regulations the distinction between demand and
savings deposits would be blurred and the effectiveness of the Federal
Reserve Board in controlling monetary conditions could be impaired.
FORD & LIBRARY GERALD
Dr. Arthur F. Burns
Page 2
& LIBRARY 9ERALD
September 4, 1970
Payment of interest on deposit balances available for transfer to
third parties will be attractive to private individuals and corporations where
this type of deposit is made available. This ability to attract additional
deposits will encourage many Federal savings and loan associations to offer
this type of payment mechanism. These advantages could reduce the need
for demand deposits and could permit Federal savings and loan associations
to acquire funds which otherwise would go into demand deposits of commercial
banks. Under these circumstances, there would be decreases in commercial
bank deposits which are subject to monetary control while at the same time
the accounts of savings and loan associations would in effect operate as part
of the money supply, but would do so outside the direct control of the Federal
Reserve. Thus, the effectiveness of the Federal Reserve in exercising its
monetary policy would be frustrated.
(3)
The new regulations permitting payment of interest by Federal
savings and loan associations on deposits that are essentially demand in
character would involve a major change in the payments mechanism and the
relationship of financial institutions. We believe that questions of this
importance should not be acted upon until the Presidential Commission on
Financial Structure and Regulation has had an opportunity to consider the
proposal along with other problems involving our financial system.
If, however, the Federal Home Loan Bank Board persists in retaining
the regulations with respect to transfer payments, we urge the Federal
Reserve Board and the Federal Deposit Insurance Corporation to recognize
the inequities which may result and, therefore, to extend comparable
authority to commercial banks.
As indicated above, the ability of Federal savings and loan associations
to offer payment transfer services from interest-bearing accounts will afford
a powerful attraction to the development of new accounts from both individuals
and corporations. These associations will be able to develop many arrange-
ments for handling consumer and corporate payments through interest-bearing
savings accounts with required reserves (lower than bank reserves) invested
in earning assets. Electronic equipment and computer technology may add
further impetus to direct transfer arrangements. In order for commercial
banks to maintain a fair degree of competitive equality, it is essential that
they be permitted to offer comparable services. Moreover, if the commercial
banking system and the Federal Reserve are to continue to play the central
role in the payments system, it is most important not to encourage the
diversion of large volumes of payments and transfers into new channels.
If new transfer methods are to be authorized, they should also be available
through the existing payments mechanism.
Dr. Arthur F. Burns
Page 3
September 4, 1970
If the regulation is permitted to take effect, The American Bankers
Association urges the Federal Reserve Board and the Federal Deposit
Insurance Corporation to permit commercial banks to make comparable
payments and transfers from interest-bearing savings and time accounts
to third parties and to accept corporate deposits in savings accounts.
Sincerely yours,
Nat s. Rogers
Nat S. Rogers
FORD i LIBRARY GERALD
BYT
WILL
NCP
TUND
1
FR 373
new mallards
BOARD OF GOVERNORS OF THE FEDERAL reserve SYSTEM
Date 9/9/70
To
Mr. Holland
From Catherine
Dr. Burns would like to have your
opinion on an appointment with Mr.
Rogers and Mr. Alexander.
Haushore READ by a/9
FORD & LIBRARY GERALD
General
GON
Gerald R. Ford Presidential Materials Project
Services
National Archives and
326 E. Hoover Street
Administration
Records Service
Ann Arbor, MI 48109