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Dear A* P . : This i s i n reply to your l e t t e r of August 17, 1942, with r e f e r ence to the action of the Board of Governors i n denying the application f o r the establishment of branches a t Temple C i t y and Alhambra by the F i r s t Trust and Savings Bank of Pasadena, which i s controlled by Transamerica Corporation through the ownership of a majority 0 / the Tour l e t t e r came i n Jua* ao li wmn for^ Mr. Clayton advised you i n faiw aeknawlodgnop* stock. vacation, as August 21, 1942* Since returning from my vacation, i t has been necessary f o r me and the other members of the Board to devote p r a c t i c a l l y a l l of our time to pressing problems concerned with Treasury financing and steps to combat i n f l a t i o n a r y developments* Consequently, I have only recently had an opportunity to consider with Governor McKee, to whom you r e f e r i n your l e t t e r , and the other members of the Board and members of the Board's s t a f f , c e r t a i n statements and impressions contained i n your l e t t e r , with which we can not possibly agree. You w i l l r e c a l l that i n January 1942 the F i r s t Trust and Savings Bank of Pasadena wrote a l e t t e r to the Federal Reserve Bank of San Francisco s t a t i h g , among other things, that i t had "under consideration the establishment of several branch banks", Temple C i t y and Alhambra being mentioned s p e c i f i c a l l y . This was shortly a f t e r Transamerica Corporation obtained control of the bank* t r o l l e r of the Currency had ^epeatedly^wtibsd ^ expansio^^branche S €K5tdMM*s of important national banks i n the Transamerica Corporation group. On February 14* 1942, the Board requested A that the bank be ad- vised, before i t took any f u r t h e r steps to consummate i t s plans, that the Board had given careful consideration to the information submitted and to other pertinent information i n i t s f i l e s and had reached the conclusion - 2 that i t should not approve the establishment of the proposed branches on the basis of tho information before i t * I n view of previous discussions and understandings, the Board was somewhat surprised to l e a r n of these expansion uuHsifriuu. Accordingly i t was considered desirable f o r the Board t o ^ a i ^ e ^ p ^ ^ ^ i t s views i n the matter* This was done i n i t s l e t t e r of February 14, 1942, i n which the Board advised Transamerica Corporation of the action taken and stated: "Should your Corporation have any plans f o r the f u r t h e r expansion of i t s i n t e r e s t s i n banks, e i t h e r d i r e c t l y or i n d i r e c t l y , through the mechanism of extending loans to others f o r the purpose of acquiring bank stock, or i n any other manner, you are requested to advise the Board through the Federal Reserve Bank of San Francisco before any such plans are consummated. "The Board's position i n t h i s matter i s i n accord with the p o l i c y , upon which there i s unanimous agreement by the Board, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, t h a t the Federal bank sxjpervisory agencies should, under e x i s t i n g circumstances, decline permission f o r the acquisition d i r e c t l y or i n d i r e c t l y of any a d d i t i o n a l banking o f f i c e s or any substantial i n t e r e s t t h e r e i n by Transamerica Corporation, Bank of America H.T. & 8 . A . , or any other u n i t of the Transamerica group." Thereafter the F i r s t Trust and Savings Bank of Pasadena -jiii'irjMsHy continued i t s plans and on February 28, 1942, entered i n t o a contract to assume deposits and take over assets of the Temple C i t y National Bank with a view to operating a branch a t t h a t l o c a t i o n . On June 10, 1942, the bank f i l e d a formal application f o r the establishment of branches a t Temple C i t y and Alhambra* On July 1Q, 1942, the Board declined t h i s a p p l i c a t i o n and requested t h a t the bank and Transamerica Corporation be advised accordingly• For some time the Comptroller of the Currencyr-i'oi 1 l'ua^Olis HwliliU Uu euHtilflWit aflequafflb has been unwilling to approve f u r t h e r - 3 expansion, through the establishment of a d d i t i o n a l branches, by the Bank of America N. T . & S. A . , and other important national banks i n the Transamerica system* JSsseffii advised that the Federal Deposit Insurance Corpora- t i o n has declined to insure any newly organized State nonmember bank i n which Transamerica Corporation has an i n t e r e s t or any bank i n the group which may withdraw from the Federal Reserve System. I t i s our understanding that both the Comptroller of the Currency and the Federal Deposit Insurance Corporation consider a f A e f f o r t s of Transamerica Corporation to continue i t s expansion program through the organization of new State banks, the acquisition of control of existing State banks, or the conversion of national banks to State banks^and the establishment of branches thereof^ aD QQftglQ^wlJ UPHWiiiMlBI WO fl^ff^ has f e l t t h a ^ i t has been necessary or sound f o r banks to convert or change f r o ^ on^ j u r i s d i c t i p i f to another i n orde# ^to av|>id r e s t r i c t i o n s or req^irj^ent^\ of any^ove of supervising sui^bank. with^tlfie responsifejJLity The other members of the Board and I are i n thorough-aeeos^ w^^^ This view and the action of the Board upon each application has been based solely upon what i t believed to be the best i n t e r e s t s of a l l concerned, i n the l i g h t of the information before i t and the i n t e n t and purposes which Congress apparently intended should be carried out when i t placed upon the Board c e r t a i n important r e s p o n s i b i l i t i e s f o r the superv i s i o n of bank holding company groups• I am sure that the Comptroller of the Currency and the Federal Deposit Insurance Corporation likewise have acted solely on the basis of what they believed to be the best i n t e r e s t s of a l l concerned under the circumstances involved* - 4 The Board lias not been convinced up to t M s time that the needs of the communities involved cannot be served adequately by existing f a c i l i t i e s or by the provision of f a c i l i t i e s that would be wholly independent i n ownership and management of Transamerica control, or that the public i n t e r e s t would be served best by the approval of these applications. Tftxtil a showing i s made that i s convincing, i t w i l l continue to withhold favorable action. Very t r u l y yours, C1C 10-24-42
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