Full text of Commercial and Financial Chronicle : July 11, 1963 : Investment Bankers Association of America, Second Municipal Conference, Vol. 198, No. 6280, Section 2

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Reg. II.S. Pat Oil.

THE

Volume 198

LEADINO

Number 6280

Your Investment Problem?
to

tax-exempt

municipal bonds.

These

bonds provide the inves¬
tor with
of

simple method

a

reducing his tax bur¬

den.

How?

municipal

Interest

bonds

law

present

on

under

is

exempt

from all federal income
taxes and generally from

state and local taxes
the

where

state

in

issued.

This provides the indivi¬
dual in the 38 per cent

bracket

tax

who

buys

municipal bonds yielding
Wz

per

with

cent

equivalent of

an

taxable

a

interest yield of 5.65 per
cent.

.

.

This is only part

of the story

pal

bonds

.

.

.

Munici¬

afford

investment

from
or

one

more,

great

flexibility.

Redemption dates

range

to twenty years

enabling the in¬

vestor to plan for his fu¬
ture financial needs. Not
to

be overlooked

is

the

security of these bonds,

generally considered

sec¬

ond only to U. S. Govern¬
ment Bonds. For

a

sound

and beneficial investment,
look to tax-exempt

nicipal bonds.




MOST INFORMATIVE

New York 7, N. Y„

Looking for the Answer to

Look

AND

mu¬

PUBLICATION

IN

THE

Thursday, July 11, 1963

F1NANCIALFIELD

ESTABLISHED

1839

In 2 Sections

—

Section 2

2




The Commercial and Financial Chronicle

.

.

.

Thursday, July 11, 1963

The bid is set...
The members of this
group account,
Manhattan

bid for

a

the bid is

Municipal Bond

immediately phoned to

a

up,

Chase correspond¬

presents it to the city's officials.

The members have blended

imagination to arrive at

a mass

a

culated to

satisfactory acceptance by value-

combine

full

measures

and informed market

of the nation's

U. S. GOVERNMENT INSURED

BONDS AND NOTES

MERCHANT MARINE BONDS

PUBLIC HOUSING AGENCY

INTER-AMERICAN

of

experience, organization

judgment With its role

as one

leading underwriters, distributors and

dealers of:

STATE, COUNTY, MUNICIPAL

BONDS AND NOTES

cost for

conscious investors. Chase Manhattan continues to

of information

competitive bid cal¬

produce the best possible interest

the borrower and

have just set the

city bond issue. As the meeting breaks

ent bank who then

with

men,

led by Chase

1

FEDERAL LAND BANKS
FEDERAL NATIONAL

MORTGAGE ASSOCIATION

DEVELOPMENT BANK

FEDERAL INTERMEDIATE
CREDIT BANKS

INTERNATIONAL BANK FOR
TENNESSEE VALLEY

RECONSTRUCTION AND

FEDERAL HOME LOAN BANKS

AUTHORITY BONDS

DEVELOPMENT (WORLD BANK)

BANKS FOR COOPERATIVES

THE

CHASE

MUNICIPAL BOND DIVISION

MANHATTAN
Head Office: 1 Chase Manhattan

BANK

Plaza, New York 15, New York

Volume

198

Number

6280

.

.

The Commercial and Financial Chronicle

.

the

to

Broadening the Municipal

investment

commercial
and _with

Investment Areas of Banks

fects

the

We

national

have

period

of

been

eight

the necessary
The

1936. In

revenue

tax-exempts is being pushed with utmost vigor;

visions

in

tion

joint participation of

investment

and

commercial

(3)

been

The regula¬

unchanged

since

the meantime there have

been great and imbstantial changes

in

dis¬

of

and the methods
as
all of you are

financing,

most aware

IBA's

answers

the economy

particularly.

The committee which we have
had to

ruling on investments enlarging banks' flexibility in investing for

and procedural aspects of invest-

account with

own

Saxon

also

a

explains revised

meaning

Further, he

and

corporations, public authorities, etc.

intent to establish

announces

£ardan

subdivisions"

of "political

on

a

in

this

broad program of

vision of the
cedures

engaged

re¬

rules, practices,

pro¬

administrative

ma¬

and

and

opinions governing

most

essential

one

activities

of-the
'the

in

country — commercial lending

ac¬

ganization.

We

This has been

these

have

corporate

r

completely

manuals

revised

affecting

practices,

procedures,

our

own

lending,

tion

generally,

revised
now

set

in

an

a

form,

structions,

both

and

new

manual

I

many

ex¬

in¬

of

commercial

many,

new

and

other

changes.

untouched for

Now

James J. Saxon

left

the
as

affecting such

much

areas

as

as

40 years,

the rules

investment
is

a

have

come

to

one

of

pleasant segments of the
area,

I

hope,

which

subject of extreme importance

Bank,

New

Shelton,

of

Bank, Dallas,
Franklin Stockridge,

I

do

not

held

want

to

suggest that

all of these

responsible

men

should

for what

here propose in case anyone

sure

sanguine

we

should

might
be

not

endorsement

enthusiastic

or

so

re¬

thrives
on

ideas...

Bond

about this
the

underwriting

bonds.

Last

hopeful

we

best

with

have done here

proposed regu¬

possible

the

aid

all consider to be

group of

a

job

we

what
top-flight
of

technicians in this field.

is

support,

is

a

that

substantial
national

to

believe
the

will

and

bonds

I

that

this

sure,

reve¬

prove

We

an

The
the

question

for

it?

is:

What

This

I

do

not want

to

is

a

need, that

will be improved, both

financing
as

to dis¬

cost, with the joint

participation of commercial banks
and

the

investment

banking

fraternity.
I

am

obliged
that

frankness

to

promote

vigor I

bill will not

bear

do

major

strongly

in

,

this bill
possess

this

state

to

will

I

and

area,

can

bring to

legislatively
on

page

1

new

are

Municipal underwriting and trading opportunities, anywhere in the country.

We'd be most

happy to work with

you.

,

TRUST

COMPANY

NATIONAL
OF

BANK

CHICAGO

Street, Chicago 90

Representative Office: 71 Broadway, New York 6

to

this being the

Continued

always looking for

all

with all of the

proposition

believe that in view of the grow¬

in

continue

convinced that creativity and the free
exchange of ideas and experiences, as well as prompt, efficient service, are
responsible for the position we hold in the Municipal Bond field.
Last year alone, Continental headed or participated in 100 Municipal offer¬
ings with a total value of more than $1,300,000,000. We are always interested
in

an

get too seri¬

the effectiveness of such

the

of

this

question.

but I do think there is

to have been overstressed.

are

is

question

ously into the competitive aspects,

am

as

And

members.

understandable

however, that in the

also, however,

banks, to combine in

,

first

need

ing

area

fraternity. I

a

distributional

and the capital of the

tribution and

the fears expressed

adoption of such

would work

we

enormous

this area.

pleasing to the in¬

aspects

the

commercial

a

bankk

not

Offer

combined with the talents of the

is

in

is

to

hope that if this bill

bond pros

authority in

deal

Commercial

Investment1 Banks

arises from the investment bank¬

it

member

and

vestment banking
so

for

ing fraternity and its great talents,

generally.

realize

need

facilities of the investment bank¬

form, and

of

That

Best

and

would

out

hope not too long

state

which will be

the

through under¬

chance, I expect,

be

Congress will

some

form,

underwrite

and

should be adopted there is a fair

expect

Senators, all promi¬

time—adopt

and

participate in financing the

Have

the bill itself, of five

personally

inevitable

re¬

banks,

capacity

I

increasing support for this.
I

to

their

Banks

a

nent; and I think generally there

231 South LaSalle




report

Municipal Bond people

do things. We

AND

Deposit Insurance Corporation

indeed

and

CONTINENTAL

Member Federal

get

Pennsylvania bears the
on

this

capital

all to

Using the

revenue

did

increasing interest in

six other

or

in

great

by the national and state member

this area, in my opinion. In fact,
the
bill
sponsored
by
Senator
of

financing

the

banks is important.

presented to the Congress,
There

total

that the entrance

■

Here at Continental, our

and better ways to

we

favorable

a

the

writing and dealing into this area

to the Congress. This year we are

that

to

growth of state and local facilities,

report
through
the
administrative, the Executive end,

competitive

the

bond

fi¬

bond

revenue

available

sources

Revenue

of

year

the

do,

obligational

favorable

very,

of

relation

vigorously pushing

—

run

could

municipal

in

country,

We have been, very frankly—
and I want to speak very frankly

long

lation

in¬

is of

Underwriting

not

a

the

this

Pushing

ception of all of it. We do think,
we

know

the

however, that

•

Our business

I

volume

nancing

we

to expect unanimous

as

of

Aggressively

aspect of it. I

any

ing

I

fraternity.

nue

disagree with
am

area.

in time—and I

Los Angeles.

in the matter of

we

more

Pfeffer,

Security First National Bank,

be

opera¬

Winston-

National

any one or

regulations

whole

of

City

Lockett

and

corporate

entirely

trust

of

effect,

amination

trust,

been

City,

personnel

machinery, administrative

System

National

York

Co.,

that,

subject relating to

Clark

Delmont

C.;

who

Wachovia

of

Trust

N.

Texas;
Complete Revision

this

Salem,
First

Clark

and

Republic

tivities by national banks.

chinery of this

had

Hawes of the Harris Trust

John

Bank
been

by

Savings Bank, Chicago, and

were

ing any security ruled "eligible" by the Comptroller of the Currency.
have

headed

was

consisted of four other men,

eligible for bank invest¬

as

in the technical

us

ent' operation

5% limit dn buying certain securities. Mr.

which encompasses municipal

advise

into

strong interest to the investment

months

regulations; and (4) invites critical examination of recently revised
their

office

a

(2) en¬

fears of, and arguments against, liberalization of banks' investment

We

for

bankers

growing volume of state-local financing which would use the

tributive talents and capital resources of each;

has

other

vestment

members

nine

or

subject.

admits commercial bank underwriting of

and

banks

getting

would like to touch briefly on the

revision of the in¬

vestment regulation.

(1)

it af¬

studying

burgeoning role of commercial banks in securities underwriting
and dealing is frankly endorsed by government's top official on the
Mr. Saxon:

office—

our

the latter—as

state member banks.

By Hon. James J. Saxon,* Comptroller of the Currency,
Washington, D.C.

fraternity,

respect to

particularly

Before

and

banking

banking

O'ss

23

The Commercial and Financial Chronicle

idea proved to be in reality is now

Up-Dating Underwriting

history.

It

relief

and

cedure

Practices and Procedures

sized

such

granted

and

today

procedures

til

has

been

He

comparatively unknown small
bought

California

in

ago
fear

P

ti

a r

i pants;

c

it

so

and

tion

PSIB I
■

*

that

^

;

m

.

repeti¬
in

jects

PUP V--'? " §§:

be-

as

tween

begin by going back
so

progress

fra¬

SSl

have

we

cognizant of

might do

some

$8

conservatism,

where

my

hope that

when

this

have

we

two

b

e

toward
of

Elmer G. Hassman

beneficial

our

possible solution of

a

problems.

Since

my

facets

and

one

those of
what

because

group

industry

—

may

—

the

have

so

not

problems

to

to

in

too

my

when

announced

the
a

a

we

had to

con¬

issues

that

of $25

excess

of

State

of

the

it

is

With

Illinois

biased

an

35 years' ex¬

one

logical

possible

this

brief

of

our

the,

life

to

visualize

cedures with

background,

view

a

of

a

I

few

best

that

our

devised

of trying to

they represent

industry is

approach sake of expediency,

or

we

ca¬

if, for the
have not

methods that, while

some

the

and

toward

account

an

the

to

manager

because

cally

syndi¬

rigidity

few, cannot really

a

ing banks and dealers throughout

be

the

who must labor in the vineyard.

How successful this

will

easily available
most

on

members

have

a

names

with

group

which to bid. This practice, how¬
ever,

act

can

as

hindrance

a

task
the

in

the

and

to

weed

out

non-producers.

should not have to be bound by a
system that fails to keep up with
the tempo of the times. Partici¬

pants that have developed under¬

writing
comed

financial

and

through the

stature

should be wel¬

years

by managers into

higher

a

bracket rather than have to fight
for it. By the same
token, man¬

should

agers

reduce

have

the

member's

a

to

even

those

drop

preceding

right

participation.
logical

and

member

gredients

It

would

the

that

underwriter,
to

make

the

Manager's

is to

written

instructions, by having price ideas
in

the

hands

time

ample

the

of

prior

meeting,

so

necessary

for the

_as_to

in

proxy

the

to

first

it

make

un¬

to call for

proxy

this information.

Obviously, if the member has
conviction about
for

reasons

scale and good

a

his

views,

his

then

ideas will be important and bene¬
ficial to the account; but if he is

in

turns

low

views

because

he

feels he

should, he is contributing
to
the
price meeting. I
might add here that the practice

considered

good for all

those

seem

that

such

Agency Securities

good

a

willingness

strong bid, loyalty to
experience
and

a

tion in future

accounts should be

determined by
it

does

tions

not

these factors; and

accounts
moved

same

the

last

these

be

that

that

of

can't

serving corporations,

institutions and individuals.

often

these

accounts probably are reactivated

by

in

personnel

whose

the

limited

qualify

evaluate

department

experience

them

the

to

through

merits

of

years;

naturally—namely,
account

600 South

HEADQUARTERS

exactly
held

in

ago. I

to

observation

make

the

would like

many

of the troubles of the

ager

might

that
man¬

eliminated

be

old

an

out

account

the

account

certain

first

bid

all,

at

If this

before

if

members

and

were

to

is

if

particular

and

the

on

would

or

only

drop later at the price meeting.
Proxy Arrangements
We

UNITED

CALIFORNIA
BANK

CITY Hi
MEMBER

FEDERAL

DEPOSIT

INSURANCE

move

of proxy

CORPORA+ION

on

to

cate operations of the IB A in
1961.

problem

with

underwriters
most

it

thought.

question

that

requested

generally

to

There
when

act

addi¬

some
can

al¬

be

no

someone

as

expresses

a

a

certain

confronted

daily, it deserves

tional

concerns

which

are

proxy

is

issue; so
in that

not

deal.

other

members.
times

that

proxy

for

numerous

is

several

asked

to

members

on

particular

a

On

those

occasions, should

everyone

elect

to

case

the

on

the

position.

tough

in

proxy

If

account,

the

bearing

of

an

views

the

man¬

drop

to

or

important

an

the account's bid and

on

responsibility that

a

in

his

to

have

can

good

a

vote

those

decision

along

unenviable

should

with

it places

ones,

controls

of

and

his

ager,

is

the

what

most

a

he

percentage

go

do

does, which is usually the

proxy

jority who

the

would

proxy

ma¬

just

as

avoid, I'm certain.

soon

Further, if the

has spe¬

proxy

cific reasons of his

for going

own

along with the account regardless
of scale, and the scale
may not be
to

the

liking of the

people

for

whom he is acting, he can't
help
but incur
some

eyebrow-raising

if the

deal

would

seem

turns

much

the

scale

his

use

if

make

the

managers'

life

member

every

judgment

own

reflect

and

dud. So it

a

would

and

simpler

would

up

that in fairness to all

it

concerned

proxies'

that

only

and his specific decisions

on

on

scale
limits

his proxy.

Syndicate Allocation Procedures
Because of the tremendous post¬

growth

war

in

our

industry,

tices in major account.
down

a

remember

past.

is

and

willingness

it,

is

a

thing

can

of

the

Designated orders and bank

priority brders
and

The take¬

meeting, for those who

the

commonplace;

are

group buyer has

become

dominant factor in the distribu¬

at

what
our

to.

As

process.

the

result,

a

who feel

many

prac¬

tices. This particular
subject was
adequately discussed and reported
on
by a sub-committee on syndi¬

because

the

buy

anyone

are

firm

in

arrangements and

However,

account is formed

an

and

influence
There

are

to the matter

now

try

mind, he should get out
early and gracefully, without al¬
lowing his unduly low price views

a

EXbrook 7-2022

Teletype: 415 393-9545

for

frame of

tion

Montgomery Street

reason

to

whole.

a

well

in distribution and allocation
prac¬

reason

Teletype: 213 683-0544 and 213 683-0546

issue

basic

be

to keep in mind that the

everyone

is

might

to

the

done, it might elimi¬
one

it

un¬

managers

number of changes have occurred

satisfactory.

another prefer not to bid

the

as¬

want

secondly,

indicated

think

a

sending

letter,

to

but also to the account as
I

to

if

consistent practice were developed
by all managers, as is now done
by some, of contacting members

MAc/ison 4-0111

FRANCISCO HEADQUARTERS

same

though that might have

even

only

was.

previous

been five years

nate those who for

Spring Street

it

up

meet¬

a

competitive bid is

a

not

comes

sets

as

the

he

so

everyone falls into the

he

or

under¬

an

the

does

properly

relative

accomplishments
writer

position
LOS ANGELES

be

because he must hold
Too

fair,

an

position that he had in
issue.

to submit

conflict

by

historical

he

says

a

qualifica¬

penalized

practice

up

the

right

seem

should

antiquated

of

Dealers

a

deliberately

who

price ideas at

ing because of the lack of desire

a

for

as

participants

tender low

in¬

distributing bonds, plus
financial
responsibility, his posi¬

,

U.S. Government and
Federal

if

record in

deal,

Municipal,

to

important

make

of

whenever

account,

Thus,




his

make

ways to do this

the

on

failed

reasonable

has

position

const* vc m

to

to

possible. One of

as

simplest

or

who

have

issues

to

position

perform commensurate with their

the

nivvvvi i*

possible

easy

flexibility
and
maneuver¬
ability of the manager in being merely accommodating the Man¬
able to reward good producers ager's request for price ideas and

most

405

as

adhere

automati¬

probably does that which

SAN

in

accounts, probably for
of
convenience, as it

sake

makes

the

of

industry has by prac¬

historical

not

they benefit

practically all underwrit¬

country.

The

tended

participant with

present practices and pro¬

large syndicate, which would

include

is

largest volum,<

ing, but also in the matter of dis¬ pable of producing,
seemed to be in the formation

before;

would now like to examine

was

million, the industry showed jus¬

The

sub¬

iq the foreseeable future.

going to require financing of $300

tribution.

of

of what would be required

the

manner.

now

municipals and corporate issue

that

million. How¬

bonus issue that

to

to underwrite the

procedure;

with

We

business, it is com¬
know that investment

of the risk involved in underwrit¬

of these subjects,

preclude

opinion to which

excess

cates.
tice

subject

historical

of

our

some¬

approach
a

ever,

seldom

available

ever

capital

determine whether

tried, however, whenever

persons on some
as

ourselves

than

tifiable concern, not only because

possible to get the views of other
so

was

cern

are

underwriters

means

of

consumers

dealers and banks today can pro¬
vide collective capital greatly in

1947,

was

and

occasions, provided

be

necessarily

another, I found it

difficult

many

segment of the

or

topics in too technical
I

"Members'

has

simple

for it

ran

subject

Responsibilities"
in

some

comparatively

the

be

,

important

satisfactory,

because

forting

municipal underwriting

points might

all

more

blood

Syndicates

bonus issues about the year

view¬

are

stantial

up-dating.

Prior to the advent of the large

happens, the

on

yields

When Underwriting Was Simple
To

More

that investable funds

and

is

It

.r

geared

billion.

in in size

would have to
occur.

the

all know, our in¬
to handle the

as we

is

proof demonstrated by

years,

made

areas

that

s

gratifying has been the consistent

underwriting issues and also be¬
come

i*? Illjllfi;

groups

16

some

1

e a

king-i

ever-increasing volume of new
financing which is currently run¬
ning at an annual rate in excess of

they will be better able to judge

the

sub-

honorable

dustry

ternity too long, I thought I might

would

follow
some

f

this

d

of

climate of unwarranted

a

Today,
any

of

couple

a

procedure conceived many years

a

>

procedures.,

members

un¬

estimating its underwriting
distributing ability by continuing

municipal fraternity realize how badly it

Managers and

commonplace.

to

seem

Thursday, July 11, 1963

.

operation

logical starting point would

reformation

.

Certainly, in
light
of
today's
little
and
underwriting volume, managers

discussions on the perience in the business might
problems confronting the Munici¬ feel entitled.
pal business must, by their very
Since there may be many in this
nature, be of concern to both profession who have not been
Certainly

frequent; and

more

municipal fraternity suddenly real¬

underestimating its underwriting and distributing ability
because of anachronistic

In

A

ized how badly it had been under¬

small, unknown dealer who bought two king-

to make the

sized issues

a

size

proud of the contribution Inderwriting has made, is

making and can continue to make with necessary corrections.

confidence.

followed, large is¬

almost

are

dealer

designated sales; cut

price sales; and advertising that does not reach principal investors.

notes that it took one

result, under¬

Interestingly enough, it wasn't

fallacy of taking for

as:

and automatically convening historic syndicate members;

The writer is

to become

was

a

and

became

sues

practices

As

the years that

of experience ranging from yesterday's simple

arrangements; allocation procedures;

proxy

issues.

anticipation

self-defeating syndicate

underwriting to today's complicated, large syndications. Mr. Hassman
probes

was

writers began to look forward to

practices gnawing away at the successful operation of a large syndi¬
cate reflects 35 years

pro¬

subsequent large issues with keen

correcting

on

the
time

the pattern for most future king-

Chicago, III.
paper

that
that

at

successful that it

so

By Elmer G. Hassman,* Vice-President, A. G. Becker & Co., Inc.,

Profoundly realistic

learn

to

devised

Historical Accounts

pleasant surprise

was a

.

there

uneasiness

an

allocation

processes

syndicates have evolved in¬

Some

concern

of

the

prime points of

center around the follow¬

ing:
(A)
banks

The

practice

in

group

a

of

dealer

asking for and

being granted takedown
er's concession
for orders

on

a

the

inconsistent.

priority

count is

deal¬

that involve bonds for

portfolio and retail.
seems

or

priority basis
This practice

Theoretically,

granted

by

the

granted to the bank

ac¬

as an

to do

institutional buyer, not as a com¬

and

peting

he

so, he is giving of his time
efforts; and, for this reason,

should

be

given

all

the

co¬

dealer.

If all

Continued

other
on

insti-

page

30

Volume

198

The

Number 6280

Commercial and

Chronicle

Financial

immediate

Meaning of Firm Policy to

a

increase

can

overall

scope

legislation

Manhattan Bank, New York

when

times

Called

for to meet

nh

on

sation of

personnel and automatic review for upgrading, and of
security program to attract and keep

a

What

,.

it,

re¬

I
the

topic for discussion should be

my

"Firm

Policy" I

several
b

first

concerned

was

counts.

I

on

and, if desired, divisional

to

and

nebulous

sub¬

It

ap¬

ject.

organization?

think

that

How
To

the

Flexible

in

adaptable
ficient

Should

efficient

be

results

should,

ic

Kncinocc

make

and

desired,

achieve

to

policy

firm

instances,

many

and

Be?

It

of

possessed

In

be
suf¬

flexibility to take advan¬

our
■a

consider

such

as

y o u r

selves,

ass

world

*

to

be in

from

ethical
order

any

o+o«rio^o

standards
The

confi-

.

.

writing and distributing municip

Policy

Firm

that

find

some

analysis of what might

constitute

my

case

we

p

for

necessary

professional

a

us
our

man-

4.1^

in

propriately with the

experience

of

with the

and

it

any

the

of

must

be

immediate

kept in mind

commitment

provide

The

and

map,

fears

If

us

"

most

develop

can

^

pose

result

a

requirements
requirements

should
snouia

be
De

In other cases,

jng

conditions,

operation

to

define

the

maximum

total

commitments, new issues as well
old, to be undertaken at

as

any

the

r

which will be

permitted.

moments

shall

we

definition

«•

.

11

/»

•

•

i

jicj

/»•

_

to

sound and efficient operating pro-

trQlg

Today I

th&t

the

makeup

of

act

afanv

louayl tau l.amK

no area

Type of Securities Operation to

of

over-

Firm

take

a

Undertaken

Be

Once

the

extent

once tne exi
its

limitations

on

of

capital and

commitments

terest

•

possible

regulations

happenings

induce

changes

which
in

some

of firm policy are many.

Substantial changes in the mar-

4o«na

define

the

ratios

rather

more

a

UNITED

of

management

GOVERNMENT

STATE

and

MUNICIPAL SECURITIES

be determined

It

group.

and

written

it

and acknowledged or

verbal

a

Each

BOND

can

can

informal

and

succeeding

be

BANKERS

be of

nature.

management

TRUST

level may

further define firm pol¬
icy in greater detail but, of course,
must do

passed

so

within the framework

COMPANY

to it.

on

DEPARTMENT

approved

formally

Why Is It Necessary?
16 WALL
Is firm
a

small

well-knit organization

as

jit is in

Of

course

a large complex one?
it is. It is necessary so

an

organization,

how large it
function

STREET, NEW YORK 15,

policy just as necessary

in

that

is

with

or

no

may

action

and

of

accomplish in the most efficient,
proper

and profitable manner the

purpose

for which it was formed.




Y.

Telephone: Area Code 212
577-2345

matter

how small,

unit

the

entire

has

dictated

that

banks

determine the narticular area of However, for those who nartieidetermine
the particular area of However, for those who partici

proprietor or a senior

a

in

pf a new issue.

many

STATES

made by a board of

are

than

or

house has in-

Banking law rather than firm
policy

ke* level will definitely affect the believe will protect them, but un- part in all the underwriting and

ing of course at the top where the
decisions

a

municipal activity upon which to pate in the busy area of revenue
other cases there are no Adequate focus our operations.
bonds there ate decisions to be
limitations. Certainly, lenders can
Those with the greatest re- made. Will you try to specialize
and do demand what margin they sources may well take an active and run active trading markets in

borrowing to capital, but in

level of management, start¬

directors,

alfknow

P™Per channel® s° all commitments to available cap- has been determined we are then should restrict their dealer actlvi? all affected parties are kept ital For SQme flrms Exchange in a position to more adequately ties to general obligation bonds,

informed.

Serving Corporations, Banks and Institutional Investors

can

in which

maturity range

few

us.

policy

You

activity to the exact maturities

at all times.

"" a?a T

relationsliiij of

time

the,

coupons

think of

can

„

how broad and active it is. It also
liability position is available provides the opportunity to limit
gQ

Capital

,.

,

The

cedure as well as sufficient con- Jo act at any time. You all know

Who Determines It?

at any

are slow

tied and
can do to
IUdllBSGrS

,

Good policy would also call for

full
Commitments and Working

of

try to see what it

and

mean

can

In

look at each part of this

detailed

^

To others the maintenance

the

commitments

financial

.

in

.

J"J®11
%ere nothing that

ob¬

ducted and the extent of the max¬
imum

a11

all

at

member of

Jf a number of the issues

necessary

undertaken,

be

as a

clearly °Pmion> can
very easily and
dollar Quickly find himself committed to

oenne tne maximum total aonar ^

the field of municipal fi- notes as wen as tor securities 01

fered.

alteration

policy would

This

kets-

which it will be con¬

in

.

participate

.

because of changan

nu—

underwriting syndicate.

an

jectives to be sought, the type of
manner

are

on

Firm

un¬

were

to

as

available

bidding

business I sup¬

decisions

of

return

before

' reached to
far greater degree than new issue

could say that it is the

we

best

ought ashould
be ex
decision is

,

oiiuat wi pended

unexpectedly

~

had to define firm policy

we

it applies to our

customers

represents

experience has shown
frequently that a loss situation

one.

as

principals

of

risk and

began

I

very

a

the

choices

respects it was a plan, a guide, a
road

kind

merous.

I could see that in many

founded.

background

the

of

greater than normal risk or with iaKe some action or tne account
nance. 10 otners tne maintenance *
marketability
is terminated.
°f a municipal business may be restricted marKetaomty.
nance

broaden the line of services of-

areas

undertake

to

tried
an

that

want to make

corporate bond pperation and to

legal
8

would

What Is Firm Policy?
I

Regardless
outlook

anticipated.

we

all

.

bonds-

As

the

"operation Jr?Ug,^

other type ot firm unae

sortof

determine

the invested capital.

^

position to service

a

that o£ th

Af the

should

will

14

under-

of any

be made that will fit in most apr

ing costs.

nf

of discussion frequently very necessary. Any f,rm pollcy as lmp0rtant and yet'
to institutions
r
u
* uTu 7'
in some instances, as overlooked
to institutions poilcy changes must be funneled

might find worthy

sac^ a® !Ty,

cimnW

lationships and the fulfillment of

that, because of my Some phase of firm policy is somebanking background, what little I times not only desirable but also

to

us

feeling

:"rlx/cIi;iv
would apply
solely

be dangerous.

extent of the firm's fixed operat-

hoinq

being

desired to complement a stock or

nicipal
my

can

and to be able to take care of one time, with appropriate adjust,a^e
any demands they may make upon ments for short-term bonds and
"
he
notpQ
wpll
fnr ^pnintip^ of free
himself until the
•

be

never

maintained at all times.

I
was
also
Conference.
greatly concerned because it was

question
frTv

for

chtacterofcultomerre-

John W. de Milhau

Mu¬

Second

business

should

highest

the

of

this

today.

But there

dential

this

for

o^rs

in

deviation

b 1 e d

e.m

here

I

place

rioxrio+iAr,

group

are we

i

also

of

a

rnocnn

narticular

own

•?

it

terpret and of
to

choose to place

policies in this respect
I would like to place particular
money, but how should we do it should be conservative and should
and what can we do to best pre- be directed to permit continuous ®mP"asis on this point for in todvent our losing it and to have our underwriting and trading in de- days markets even a minor parfirm continue in business.
clining as well as in rising mar- tlcJPant bidding cautiously, in his

difficult to in¬

interest

Why

reason

tho

Yes, of course

ner

general

Capital

considered.

profit.

a

customers in

little

This

The amount and availability of

in business is the simplest of all— and to

ing

be

to

of the pol-

without

one

tage of the frequent changes tak-

peared

ments.

a

number

business al-

our

may

to be undertaken as well as the they intend to cultivate and which

«

be

of

areas

though they

.

concerned

was

be

vague

opera-

tion.

glance it

seemed

^

It permits delegation of authority

at

e c a u s e

a

^

suggested that

com-

in business?

superior organization.

.

first

was

changes in

to

trading

the "When Issued" market or the
For those with more limited
excessive use of repurchase agree- 'capital the choice, of course, must

be

the objectives of a par-

are

ticular

in

When

in

will

some

are

decisions

icy

which to focus

operations. He similarly stresses the importance of adequate compen¬
tirement

will

Objectives

maximum underwriting and trading total dollar commitments, and of

a

amount, there is fre-

maximum volume of commitments

Now what

importance of clearly defining

pinpointing particular area of municipal activity

avenues

alteration

an

reasonable

the quently an over exposure to risk more emphasis on certain types
caused by unbridled operation in of issues than others.

there

procedures

nicipal underwriting and distributing firm is to be successful. Valu¬
able insight on determining and flexibly executing objectives is pro¬
Mr. de Milhau underscores the

n4w

and

by firm policy to

less limited

New

petition,

There's more to establishing a policy than meets the eye if a mu¬

vided.

operation.

of

may open

operating

City

capital

change

greatly

diversification

be

By John W. de Milhau,* Senior Vice-President, The Chase

decrease in the

account

of

An

operating outlook.

or

V

Continuing on page 29

The Commercial and Financial Chronicle

6

specific

Trading Desk Is the Heart

of

task

alerting

the

or¬

Of the Secondary Market

crease

Department, with

I

New York

Just

as

City

any

new

pur¬

(3) The desk provides

make his

trading desk the heart of his activities.

this central

In elaborating

on

individual

and' effective

aids rather than lessens the salesman's efforts.

us

who

are

en¬

gaged in the municipal bond busi¬
do

ness

not need

of the magnitude

to be reminded

of

our

secondary

the

$600,000,000 in
the

Blue

List,

can

for¬

who

get

bonds

The

not

desk.

heart

Let

us

syn-

ing center.

dicate.

But

discover

prove our

there, friends,

our

there.
It should be

industry

developed

today

desk

In

fact,

is

so

trading

doing,

way

value to
our

we
our

other

the

a

de¬

against inquiries,

care

saddle up

the boys

on

we

may

can

im¬

on

incentive

greater

potentials.

tutional

men

improve

ing syndicate operations.

for

trend

this

secondary

The

desk

quiries.
that
such

we

can

ket

aged,

provide

the

firm

intelligence

Such information

vital to those charged with
new

issues

or

engaged

can

ex¬

firms and

And with

buying

in setting

With

Municipal
drawn

Directly

With Trading Desk

community

executives

has

from

the

officers, heads of syndicate

and

sales

their

departments

careers

The

new

current

in¬

issue calendar

have does not always offer such choice.
highly An inventory diversified as to

man

than

on

the trading desk,

through

salesman

the

signed to the account.

trader

is

man.

The

and

This is

as¬
no

mar¬

be encour¬
of

expense

brokers

on

market

a

an

overbid¬

only lead

can

to

judg¬

ir¬

to

The professional
proud

a

com¬

bond

career

philosophy

the

of

practices.

Common

sense,

and

strict

decency

common

adherence to sound market funda¬

clerks,

mentals

make

the rest of his

up

tool kit.

Secondary Trading Must Grow
With Municipals' Growth

rather today transcends the efforts of the
most modern computers.

error

ethical

started

position

as

of

out

is

Golden Rule is still his basis for

Most of the part¬

ners,

A

His

through

responsibility.

exceptions, the

Bond

its

him

ment

'

loss

Dependency

bail

the Municipal

at the

even

ding.

favorite sub¬

a

few

very

trading desks.
Dealing

it,

Bond Business.

be

firm policy.
Institutions

desk.

for ject—education in

money.

judgment should

occasional

can

de¬

"caveat

of

thoroughly for what he
mitting his firm's

(7) This brings me to the final
secondary -j trading function of the secondary trading

up-to-date

rule

contract

contact and through inventory op¬

personnel

is

trader worth his salt should know

Training Junior Desk Traders

customers.

answer

old

erations,

the

sanctuary

develops,

emptor" should be encouraged.

the the tickets.

result of constant street

a

dependency

for

sources

trouble

current

A

the

plored and should be discouraged.

to write

one

other

on

maintain.

to

toward

when

But the dealer with

competitive

downgrading of the high stand¬

fighting

portfolios.

r

Sloppy,

ards which the entire industry is

ideas which

i

e

needed

are

groundwork.
the

a

out

Intelligent insti¬
becoming con¬

t h

in

practice

industry, includ¬

lazy and inefficient executions at
the apprentice level will result in

are

receptive to

stantly

search

of the

areas

the

Rather, it

to

ethical

in

taught at

the trading desk

on

age

result

depart¬

this

of

not

provides the sales force with

should be taken will usually be the

organizational information

secondary

the

does

of effort

area

with irrelevant chores.

(5) As

with

examine this operat¬

By

service to

salesmen

Henry Milner

pride through¬
the

these

development

this

those

by

Ethical practices

early

all

(6) In the past few years, we odd lot traders and dollar trad¬
(1) First, the secondary trading have found that institutional buy¬ ers. Over a period of many years
department should provide a di¬ ers have
foun4 it more practical to they developed that priceless in¬
versified
inventory from which discuss business directly with
^he gredient of experience which even

they're getting

out

of

some

they're getting

of

secondary market.

activities

as

accounts, compila¬

open

list

change.
dealer

matter

the investors,

Market Is the Trading Desk

yet out of

a

the fa¬

municipal bro¬

course,

that

decrease the

Salesmen

son.

The Heart of the Secondary

True,

are

the

of

and, of

these

it?

all

efforts

kers

business.

these

control.

development

an

tistics

of

the

ment.

will

rewarding source of
Once
again, I repeat

in¬

the

of

competence
disseminated

charged with the responsibility of

potentially

will

tion

cilities, which, in conjunction with

constitute the

With

efforts.

to provide the capital and

nec¬

wholesale, out-of-town dealer liai¬

markets revert by default to larger city dealers.
actively

for

center

on

the

pable of handling efficiently this

partments. Portfolio appraisal, sta¬

not to

Those of

the desk is

on

to avoid duplication of ef¬

service

training ground for future

Stressed is the need to promote investor education, and the importance
of not letting local

and
con¬

(4) The trading desk acts

traders, and contends that direct contact between institutional buyers
and the trading desk

secondary

Open orders, options,

fort

point, Mr. Milner outlines the dealer's function in the

He sees this operations center as a

syndicate,

agency.

essary

secondary municipal market and the vital functions of his trading
desk.

tions—

one

each and every dealer—no matter how small —to

that

suggestion

the

struction

alert dealer might do well to pre¬

firmations, under the direction of part of the salesman.

public with a growing, orderly secondary market, it is

incumbent upon!

inven¬

an

tory control center for all opera¬

'

the

offer

Thursday, July 11, 1963

.

upon

greatly in the coming years.

good idea if personnel pare his secondary desk to be ca¬

a

is available.

it is the responsibility of the municipal industry to provide

the investing

It's

news.

By Henry Milner,* Vice-President, R. S. Dickson & Co., Inc.,

trader-buyer relationship will in¬

ganization, particularly the Sales
chases, sales, or other vital market

.

.

The secondary

The sec¬

nicipals

ondary desk should be staffed not

must

market for

mu¬

volume

in

grow

and geographic scope as the coun¬
of the only with career traders, but also
try develops its internal frontiers
simply with additional personnel of the
sponsible arena for secondary ac¬ tion and revenue,; can catch the
and rebuilds its cities.
The dealer
a matter of expedience, especially
junior executive type. While op¬
tivity. And what is an even greater pulse of the current investor in¬
who attempts to underwrite new
when negotiating purchase or sale erating at the trading desk, these
source of satisfaction to us is the
issues without operating a com¬
terest. Turnover should be rapid
prices. Nowadays, institutions are executives-in-training can devel¬
fact that some dealers have been and
petent secondary market is walk¬
prices kept current in order
constantly changing their port¬ op not only a knowledge of issued
knowq to make an occasional Cel¬ to be effective. ;
The dealer bank
folios.
In a great many cases, a bonds, but also an ever-increas¬ ing on one leg.
lar while providing this service.
who expects to be worthy of the
(2) The Trading Department sale to an institution involves the ing knowledge of their counter¬
It is the responsibility of our
title of dealer would do well to
furnishes up-to-date markets on purchase from them of a like parts at other
firms; men of sim¬
develop his secondary position in
industry which devotes so much active issues and regular quota¬ amount of face value or
principal ilar stature with whom they some
the industry to the extent that its
energy to the underwriting of new tions
on
the
so-called
"dollar" in order to provide the funds for day may be
sharing syndicate
reputation as a distributor is not
issues, to provide the investing bonds. A constant flow of infor¬ the new acquisition. At this point commitments.
confused with that of an investor
public with a secondary market mation from the desk out to the negotiation often can be effected

competitive

and

a

financially

re¬

quality, maturity, general obliga¬

capable at all times of insuring organization is essential. The desk
the orderly redistribution of these is the liaison between the
retail
securities.
effort and the entire market. Some
It is the function of the dealer organizations detail a man to the

reflection

on

the

ability

salesman concerned.

It is

There

isn't

university in the

a

with dealer privileges. It has been

efficiently from the desk. Of country that can offer a course in
course, this type of operation will the
practical knowledge of what

more

not be valid for every

strongly

believe

that

firm, but I constitutes
the

direct

value.

You

that is,

solid

a

must

indicated by
that

municipal

trade

banks

bond,

a

retail it before its true value

the

there

is

train

a

entire

all,

this

we

Q

more

this

have

in

the

business

does

lyst

as

from

a

man

own

ana¬

recite

can

satisfaction

gained

erations,
in

bonds is

art as

brush,
pen,
a

that of
or

much

as

a

and

the

sume

work of

material

he is

The education of

Wertheim

&

Co.

bond

of

man,

a

this

ready, if need be,

JKCembers ZNjeu) York Stock

Exchange

In

other

form

or

YORK

any

productive

area,

if

the

of

that

he

business.

is
I

in
am
see

return of the local specialist.

per¬

will

such

action.

good

many

benefit
It

is

dealers

greatly

true
are

I

The

that

by
a

already

of

function

profitably engaged in these local
v'':

:

nationally

part

industry

to

trade.

words, qualified to

■

geographic

enthusiastically endorse this.

the firm.

NEW

in his

willing to establish an active

confident that the future will

qualified

analyze, sell, underwrite

that the local

some).

trader is the

fully

a

to the market in

come

leadership in the secondary

known

a

education

So

authorities

trading department and let it be

his

gains

are

issues.

known

other local political subdivi¬

market

previously non-existent market

(that is, assuming there

his

season

dealer may now go ahead and as¬

and the successful creation of

transcends

a

secondary op¬

further

the past few years,

analyz¬

with

at

as

experience.

districts,

new

sions have

painter with his

writer

a

a

for

market

and

nationally

many

ing, buying, and profitably mer¬
chandising a parcel of seldomseen

helpful

personnel with secondary trading

But the

from

be

substitute

local

own

quotation

a

efficient broker.

instituted

efforts

might

might well look to developing his

does the secondary trader.

an

re¬

The dealer in the smaller cities

a

be

even

time

limited

After

for the retail trade. Nowhere

Anybody




may

often have to be his

so

STATE, MUNICIPAL and REVENUE BONDS

and

I

qualified

importance, and that

educational

faced with pricing the issues once
else

OF

Where

not always

may

that

specialized field could be of

tremendous

place, then, to

issues someday!

streams.

submit

secondary trading departments in

By

who may be pricing

man

new

Regulation

UNDERWRITERS and DISTRIBUTORS

practical fact.
better

a

bond

revenue

spectfully
cus¬

tomer still makes the market.

a

the

in

can

Remember, the

his purchase, he makes a theoreti¬
cal value

fishing

be

may

sources

the dealer-

deeper, more mysterious waters of

actually buy it and then

be assessed.

authoritative

of these days

one

\

'

:.

-

;

Educating Ethical and Efficient

efforts.
names

And

as

a

result, the local

handled "become

more

Trading
If

also

these

widely known and distributed.,
thoughts

follows

that

are

the

valid,

use

secondary market effort

of

as an

it

the

edu¬

cational media must be contingent

I

congratulate those dealers who re¬
fuse to

permit their local markets
Continued

on

page

22

Volume

198

Number 6280

.

.

"undivided"

Running

Municipal

a

7

The Commercial and Financial Chronicle

.

"divided" liability

or

Syndicate Properly
By W. Neal Fulkerson, Jr.,* Vice-President, Bankers Trust

invaluable

advice

and

guidance.

discussion

deals

problems before and after

the "moral"

are

misunderstandings.

ing problems

of

customers

oversubscribed

face of

successful bid.

falling market.

a

industry is alerted to

some man¬

merit

first

Municipal

Conference

Serious

considera¬

if

they thing

be

the

it has been cus¬

tomary, particularly for the larger large

lent opportunity to focus attention

where bonds

have
in

evolved

attend, had

indus¬

our

try and it
obvious
there

least

the

were

was

that

actual

exist

able to

were

advantages. At

many

of

screams

the

effective

more

meeting,

alloted within

full view of all who

injured

during

the

carving than after the hor¬

rible

affair

is

accomplished

an

Conflict

of

machinery of the

to

function

if

the

issues, to supplement the syn¬

dicate agreement with a letter

instructions to

ing

in

detail

meetings,
proxies

the

are

the members

the

of price

times

manner

of

giv¬

in

which

to act for out-of-town

it

issues

is

vance

undoubtedly

sound

reasons

members, and the conditions
under which members may drop

average issue the majority
sion.

syndicates and

tion I feel that all members should

culiar to that issue and is subject

d

proce

when

u r e s

currently
it is

with

tribute

to the Munici¬

cisms,

the

W. N.

It

extent

while

is

concerned

management,

experience

no

in

the

actual

particularly

of

larger

of

the amount of time and effort

business/ Considering

our

the

complexities of our profession we
should be proud of the fact that
we

able to carry

are

on

briefly

ties

thoughts

on

some

syndicate

as¬

in

is

the

most

the

responsibilities

to

I

ager

could

am

that

every

man¬

times

speak

with

sure

at

greater feeling

two

can

either

If

it

area

is

Most

of

be

to

possible

covered

well

performed

important

more

very

capably by Elmer Hassman. Since

begin

it is obvious that every

known

functions

its

with

characters to deal with
lar issue

of bonds

environment of

a

syndicate
cast

own

in

of

or

the

market

soon

to

be

scheduled

since

early knowledge of

coming sale will give

relatively short

a

for

in

distinct

sale;

self

that might be applied
to all accounts. This

rules

we

may

never

namely,

a

typical competitive deal

with

unusual circumstances in¬

torical"

issue

problems

our

the

are

sues

new

ingly heavy burden
in

but

municipal is¬

on

all under¬

particular

upon

those firms which usually manage
a

large

percentage

counts. Years ago
bers had
prepare
a

new

of

their

syndicate

ac¬

ample time in which to

loan

most

and

settled

cratic

manner

in

a

problems

rather

demo¬

with all hands par¬




does

account

call

to

seem

to

partici¬

so-called

a

the

"his¬

coming

for changes

the

group?

Government Bond

in
Do

Department

Teletype 571-0200 (A.C. 212)

performance records for past

the members?

Will

participations

result

Municipal Bond Department

the suggested

in

poten¬

a

Teletype 571-0205 (A.C. 212)

tially strong competitive account
i

and

the

at

worthwhile
members

same

commitments
does

or

agreement

time

or

a

provide
for

immediate

with another account

the

"stand-by"
merger

seem

advis¬

mem¬

thoroughly for bidding on

were

ques¬

tive underwriting positions among

the result of

which is placing an increas-

writers

basic

deals indicate adjustments in rela¬

that many

rapid growth in both number

and volume of

more

is

it

additions

sales

Syndication Has Changed

of

If

pants.

or

we can agree

the

of

Authority Bonds and Notes

decisions.

of the account and initial

really encounter;

volved.

Perhaps

many

tions will involve the membership

im¬

agine but
no

Some

universally

discussion is

concerned with what

requires

Valley Authority Bonds

State, Municipal, and Public Housing

account

The formation of the syndicate it¬

ground

Tennessee

competitive advantage.

to

specific

Development Bonds

forth¬

period of time it is most difficult
suggest

and

is

many

a

an

Agency Obligations

International Bank for Reconstruction

is

They

issue

the

as

the

he

make.

to

before,

even

cases

particu¬

a

as

of

some

decisions

usually expected

Federal

recognized by

are

review

to

U. S. Government Securities

"Procedural"

the

assigned

by the manager

How¬

dealers in

likely that the joint venture

duties

I know that this part of the
be

YORK

he

be

will

NEW

a

members'
ever,

ment

categories—

"Moral."

and

in

group

all account members but it might

problem

is

re¬

portant subject of "syndicate

responsibilities."

sale

responsibili¬

general

deficient

results.

the equally im¬

on

we

manager's

will not achieve the best

syndicate is rather confining

since

that

"Procedural"

practices.

Limiting the discussion solely to
managers'

every

Duties

believe

I

syndicate

my

nearly

by circumstances pe¬

Morgan Guaranty
OF

able; and if
appears

tunity for
What
most

so,

what other group

to offer the best oppor¬
a

form

satisfactory merger?
of

syndicate

suitable for

the loan

seems
—

an

140

of

bonds

closing documents and

undertaking.

minimum of disagreements. This
will
be
an
attempt to outline

of

Since

Syndicate Manager's Procedural

a

pects

circulars.

d. Examination

service

and

successful bid are gen¬

Preparation of ads and

of

unaware

organize

to

an

throughout the country with

ness

are

enor¬

an

volume of day-to-day busi¬

mous

accounts,

quired
such

c.

the

do not strike at the fundamentals

responsibili¬

Group sale coverage.

that

cate members who have had little
or

a.

syndi¬

many

oc¬

strongest

b. Processing of orders.

entrusted

unquestionably de¬
serving Of our best attention, are
mostly with details and

the sub¬

a

by the whole group.

belief that

my

the

even

many

erally recognized and will include:

shared at least to

were

without

years
seen

procedural

about

come

is

for

ties resting with the manager fol¬

dealer

responsibilities

many

some

Fulkerson, Jr.

criti¬

on

a

time this will

in each deal.

Other

dozen or more

a

manager

formerly

industry

that the

half

on

different issues it has
that

pal

given day

any

bid

may

em¬

ployed. I think
a

on

firms

and

est in the account make the deci¬

surrounded

the

some

them abolished

some

business

erence

inter¬

mission of the bid. In this connec¬

of

con¬

"designated"

that

see

them. Still I have

for

from the account prior to

many

sure

perhaps

this, I would prefer that for the

oc¬

casions very large

our

of the sale. While there are

when

regarding

am

consider,

us

highly

happen. After all we did carry on

notify the members of the
priority classifications well in ad¬

of

ion

the

blue

a

to

ences

apt to have

as

issues. Let

troversial subject of

sometimes lowing

thought advisable by the manager

fact. But under today's conditions
are

new

example,

been casions when
of
the classi¬ opponents

differ¬

we

all

have

should

there

group

real

opin¬

on

for

and
ac¬

agreed upon. In the case of very

new

syndicate practices which

Source

successful

ticipating. For example, the old-

on some

with¬

to

if, in their

orders. I

How is the

also ob¬

expected

par¬
seem

industry to adopt

designed

would like to

fashioned

were

and

good risk.

a

concerning

last September provided an excel¬

"take-down"

minute

last

count

In recent years

Our

the

should purchase the issue? For one

be

not

print for the treatment of orders

evaluate conditions

sible estimate of potential business
may

that

committee to

portunity to be fully Competitive determined by majority consent
from this standpoint.
when the other release terms are

oncoming developments.

newer

that

desirable for the

of

does

it

source of serious conflict unless when they felt that their account
extremely close bids it is essential the matter is clearly defined and had made a particularly strong
that the manager do a thorough the
orders
handled with
great bid for the bonds. Therefore, I
job of pre-sale mathematics so care. It is my opinion that the think that this should be a deci¬
that his account will have the op¬ priority classifications should be sion arrived at by majority pref¬

All in all, syndicate operations today are given a favorable

verdict and the

issuer, its future plans

market

regulations

informatijon opinion, the bid does not represent

current

legal points

bonds

an

environment

the

the sale. Since many loans attract

a

list of group

a

the

any

have

to

ticular

bidders. determined in advance
such orders pre¬
probable fications of orders according to ferred to accept them rather than
competition to be encountered at priorities. This is a potentia 1 risk the possible loss of business

bonds to the dis¬

on

advantage of the small buyer and for failing to keep
sales.

and

should

members'

Mr. Fulkerson chides

for considerably undercutting list prices

to

as

the

He should also know the

maturities, of allotting bonds in the

priority orders, and of meeting the opposite challenge of

so

at

tain for the account the best pos¬

that

The latter include the annoy¬

outside dealer confirming bonds to

an

sizable balance in
agers

Dealt with also

responsibilities where differences of opinion easily

arise and lead to

in

a

meeting

draw from the account

ac¬

desire to

equal opportunity with the price
at

tion. The manager must

procedural responsibilities resting with the manager and the way to
settle

so

represented

sponsibility to have available

the

with

on

be

or

the bonds it is the manager's re¬

and

syndicate practices provide

Realistic

preparation for bidding

about

Managing the municipal syndicate today is hardly what it was like
on

In

curate

Company, New York City

Mr. Fulkerson's thoughts

permitted if they

final

Estimating Potential Business

years ago.

be

attend

account?

Broadway, New York 15; REctor 2-6400 (A.C. 212)

to

pay¬

issuer.

Continued

on

page

21

y

The Commercial and Financial Chronicle

project.
,

Revenue Bond Business

than

City

and

newer

newer

technical.

have

and

become

their income-earning base.

behooves all

used

areas

far beyond their traditional

Many of those bonds depend

than upon

is

gone

complicated

and

The

is

of

types of

pos¬

that

putting

resolutions

year

issues

to

bonds, it
of

more

new

seems

the

new

degree

some

are

dependent

provisions

degree of management. Of course,

which

be

can

lived

by the issuer of the bonds,

the

undue

the investors

upon

classic

(and of

the

course

example

water

a

Water,

of

revenue

by earn¬

revenue

necessity,

a

have to say at the outset that my
such
refundings,
including
the
well-known M e mp h is Electric

Plant

issue, where
refunding issue was

an

order to release

lien

the

is

system.

such

in

securing

4.40%

bonds
1967.

discussing the merits of

refundings, let it be said
outset

the

advanced

necessary

not callable until

are

Before

the

the

outstanding

which

relatively high

a

bonds is the issue secured

difficulties, and
still provide proper safeguards to ings of

provisions safeguard the investor and permit

and

develop

we

revenue

more

bond

and

as

Thursday, July 11, 1963

.

firm has been involved in several

pendent Upon Management Skills
Each

.

legal

grade

necessity.

a

Increasing Number of Bonds De¬

is

technical

that

difficulties

bond

without

Hence, Mr. Morgan advises, it

high

upon

trust indentures with appropriate
with

managerial skill

on

parties concerned to make certain that top legal counsel

that bond

so

more

more

into

scope

proj¬

today

and

before—if

ever

sible.

reliance

such

on

revenue bond business

complicated

together
have

considered

making the

By William F. Morgan,* Vice-President, Blyth & Co., Inc.,

bonds

debt

talent becomes

being

more

Revenue

the

*

The varied nature of such

ects

New York

retire

to

enues

Complexities in .Today's

.

that

the

best

plan

at

of

underwriter, before he gets all

excited 6n the prospects of
saving

involved, via an advanced
refunding, is to
sufficient, check with the
appropriate bond

and if

revenues are not
bankers) have in¬
rates can be increased. If
people
along with the other new
attorney as to whether he can get
do not pay their water
complexities of our business which
bills, it is a legal
the controversial problems they generate; the lack of identification
opinion for such refunding.
usually
provided
that
the
water
you will learn about at this Con¬
On this subject I have seeh varied
behind some industrial revenue bonds; and the need to improve the
can
be
turned
ference. These complexities also
off, and depression opinions of the
gentry who write
coverage of bond provisions which would permit better bond ratings.
lead up to my next point, which experience proves this threat is
legal opinions. I know one in¬
The investment banker, further, gives a breakdown as to what he
more than enough to
I cannot emphasize too
keep
such
strongly
stance
where
a
bond
believes are reasonable coverage ratios for revenue bonds.
attorney
to my fellow practitioners in the bills paid promptly. However, it
would give an approving opinion
is to be noted that such
revenue bond business.
types of for a bond issue
callable in 1968
son for considering revenue bonds
It seems to be the fashion these
facilities as parking {garages and
"Hire
the
bond
attorney
in
but the same attorney felt that on
days, when a community needs a to finance the needed—or if not whom
natural gas systems, to mention
you have faith early during
an issue first callable in 1971
that
heeded at least desired—improve¬
new improvement, be it a parking
only two examples, require a very
the period of setting
up a bond
he could not provide an
ment is fairly obvious and can be
unquali¬
garage, a swimming pool, a port
issue." All too often we hear from high type of management skill.
fied
legal opinion. One other at¬
summarized as:
facility, an
interested citizens, m u n i c i p a 1 This is especially true when such
torney is asking that legislation be
improved
(a) To the extent possible the authorities and others as to the facilities are financed on the basis secured in certain
other states, or
transit system,
community wishes to keep the desirability and need of a new of engineering estimates, and else a court
case
an
upholding the
office
when no trends or
cost of such improvement off the project.
All
this
discussion
is
operating ex¬ proposed advance
refunding is
building, or
tax rolls, thereby avoiding a gen¬ wasted if the
perience
for
particular
communi¬
community does not
necessary. In the case of another
even
new
in¬
eral tax increase;
have the legal basis for issuing ties is available. In such facilities
situation
where
the
bonds
are
dustry, to turn
revenue debt for
such a project. it appears that the conservatism
callable
for
(b)
refunding in 1964,
Perhaps
the
debt
limit
t o
municipal
and care with which the revenue
Perhaps the new facility (such as
much work was done

the issuer to live with them.

investment

Also scrutinized by Mr. Morgan is the

creased

growing trend of advanced refunding and industrial aid bonds and

.

bond

men

bond

and

neys

the

provides

or

we

nance

financing
certain

fi¬

William

F.

further

the

the

so

revenue

was

Pennsylvania

(c) It

Morgan

through issu¬
of

(this

to

debt,

bond
of

case

School

Au¬

thority issues),

this im-

provement

ance

obligation

community turns to

ask

question,

"Can

deterrent

a

general

attor¬

the

for

revenue

bonds?" The

rea-

such

good business

appears as
users

beneficiaries

or

improvement to provide

of

rev-

a

toll

bridge)

will

.

conflict

limitations which protect

already built

.

with

facility

a

which debt has

upon

bond

his

course,

will

clarify

the

situation and point out the steps
which must be taken to finance
the

insurance

and

Canadian

for

Secured by
of

the

bonds

revenue

and similar facilities.

eral class of

and

cured

Inquiries Invited

|

on

Large Blocks of Stock

or

Bonds

of

the

this

GOODBODY & CO.
ESTABLISHED

by

is

still

be

BROADWAY, NEW YORK 4,

had
2-6350

electric

n.y. teletype: wire Room 212 5711212 Trading Dept 212 5711215

cured

Athens, Ga.
Atlanta, Ga.

Chicago, III. (2)

Birmingham, Mich.

Clearwater, Fla.
Cleveland, Ohio
Cocoa, Fla.
Coral Gables, Fla.

.

I Dallas, Texas, (2)
Detroit, Mich.
Flint, Mich.

Fort Lauderdale, Fla.(2)
Fort Worth, Texas
Houston, Texas
Huntsville, Ala.
Jacksonville, Fla.
Jamestown, N. Y.
Jersey City, N. J.
Louisville, Ky.
Memphis, Tenn.

Miami, Fla.

Milwaukee, Wis.
New London, Conn.
Niagara Falls, N..Y.

'

Orlando, Fla.

con¬

example, dur¬

days

of May

$237,000,000

generating

primarily

Detroit

Royal Oak, Mich.

facilities

by

a

Petersburg, Fla. (2)

pics
the

is

sched¬

Olym¬

are secured

by that City, and
prime security of such bonds

will

be

State of
52:

W*

contract

a

between

XvXv.™

of

UNDERWRITERS and DISTRIBUTORS

and

the

State

trend

states,

heretofore

marks to

1 4

I

STOCKS AND BONDS

has

not

the

do

the intent

think

that

call

lance of bond

H
Private Wire System to all of the

issuing

mentioned.

decry such

contracts

<

W&i

the

other

the

Pennsyl¬

vania

:

BROKERS IN

?

I

to

of

least of which has been the
many
School
Authorities
of

It is not

Ill
f

Authorities

Georgia,

spread

MUNICIPAL SECURITIES
j-

with

common

X'vX Xv':-;*:

various

of CORPORATE and

a

the

Michigan. Similar financ¬

ing has become

*■

V

WvXv

to

utilities. In

stadium

new

se¬

contracts

newly formed Authority and

*

we

bonds

uled to be built if the 1968

Sarasota, Fla.
Tampa, Fla.
Wilkes-Barre, Pa.
Winter Park, Fla.

Palm Beach, Fla.
Passaic, N.J.
Paterson, N. J.
Pittsfield, Mass.

the bonds

specific

take power by public

Pompano Beach, Fla.
Rochester, N. Y.
St.

In

scheduled for issuance to construct

Branches in

Boston, Mass.
Bradenton, Fla.
Bradford, Pa.
Buffalo, N.Y.
Charlotte, N. C.

some

10

facility.

for

a

For

source.

ing the first

WHitehall3-4141

STREET, NEW YORK 17, Murray dill

N. Y. Cable Address: Accurate

from

of these

re¬

trend, but

a

the

for

of

such

increased

vigi¬

use

attorneys and

men,

bodies. The

contracts

for

■

such facilities

Principal Cities in the United States

and

public

cilities

I

as

port

as

authorities,

generating

power

such

the

P. U. Ds

fa¬
of

Washington, to mention only two
examples, have become increas¬

111
Members New York Stock
Exchange

ill
11$$

Wa/ZQ^/r.e/

3/.

hi

Trading Teletype: 212 571-1740




•

II

It

seems

that

increasing vigilance

is necessary on the part

m dustry to

Telephone WHitehall 3-7600

III

make

sure

of bondholders and

Municipal Teletype: 212 471-1741
••I

many

only in reading, but in

developing of the various terms.
:

*C>

ingly complex and require
hours not

%•.

'

high¬

a

be

said

debt

of

available.
about

But

of

our

in¬

that interests

users

Advance

would
will

more

coverage

re¬

alike

are

properly safeguarded by the ulti¬
mately developed documents. In
this respect it appears that further

Refunding

did

revenue bond

not

mention

that

nothing
we

are

more

the

trends if
advance

controversial

working

these

upon

days than this subject. It became
so

1964

any

refunding prior to

refunding date. All I

am

trying to bring out is the all im¬
portant
bond

point

—

check with

attorney before

line up

Government

you

the

try to

Bonds, Cer¬

tificates of Deposit, or work out in
final detailed form the

prospective

sayings of

an

advanced

refunding.

Refers to Frank Carr's Letter

Advanced refundings have be¬
most

come

important

in

have low interest rates

pared to

refunding situation. There is prob¬
ably

the

we

Bonds

One would be remiss in discuss¬
he

thority for

this

period and likely1 will again when

Are Now With Us

ing recent

by many
underwriters before the approving
attorneys said there was no au¬

degree,

service

such

in¬

are

reasonable

a

quirements later.

the

recipients

or

the

security

case,

derived

tractual

60 EAST 42ND

users

of

output

to

coverage

se¬

between

1891

Members New York Stock Exchange and other principal Stock and
Commodity Exchanges

2

contracts

insurance

the estimates of revenues

find

we

bonds

more revenue

issuers and the

casualty

Security for

Today

users.

or

degree of cover¬
is available. In other words, if

correct

Contracts

number of years was secured

a

more

creative
RFSFARrHI

pro¬

the life

than average

er

desired facility.

The bulk

Securities

the

as

the basis of estimates that

these bonds is based upon a
gen¬

Unlisted

extent

Of

buyer will protect his policyhold¬
ers by assuring himself
that on

attorney

by water, light, sewers, turnpike

i

some

together

important.

bond

Bonds

i

to

puts

most

fessional investor such

Increasing Importance of Revenue

Municipal and Corporate Bonds

is

heretofore been issued. Usually a
quick check with a knowledgeable

age

Underwriters—Distributors—Dealers

underwriter

deal

important for awhile that

many

earlier

I

respect,

as com¬

periods.

sincerely

In

this

believe

an

opinion expressed by |Frank Carr
of John Nuveen & Co. in

a

recent

Bond Buyer letter to the editor is

appropriate.
advance
some

He

stated

refunding

extent

to

do

is
a

that

the

serving

to

piece of fi¬

nancing today which would

nor¬

mally be the bond man's business

of the revenue bond firms in New

of tomorrow.

York

difficult for many of us to put off

were

culating

wearing out their cal¬

machines

figuring

out

until tomorrow what appears to¬

various plans for refunding bonds

day

which

waited

are

not callable for refund-

ipg for quite

a

period of

years. I

However, it is most

as

a

sure

until

thing when if

the

bonds

could

we

be

refundable under normal redemp-

Volume

198

Number 6280

...

The Commercial and Financial Chronicle

tion provisions such a market op¬

sliould also state that such audit

portunity might not exist.

statement the question is asked, "What min¬
from the auditor to the effect that imum
coverage
should a bond¬

Tax-Exemption

reports would contain

of

Refunding Bond
Before

leaving this subject let

that

me say

firm recently par¬

my

ticipated in the advance refunding
of the bonds of the Tulsa Munici¬

pal Airport Trust. In this instance
it was deemed advisable by house
to

counsel

secure

IRS

an

that the interest on the
issue

tax

was

remarks

ruling

new

bond

As

these

exempt.

prepared

are

prior

to

securing of such ruling, one can
only conjecture
the

vorable

basis,

secured

on

and

bond

as

was

aware

opinion
nants

would

include

his

to whether such cove¬

as

to

considerable degree the con¬

will, it should put to rest

of

territory and

manage¬

iness."

further

As

made of the

Gas—1.75

history; if

if based

coverage,

on

basejl on estimates cov¬

for

has

use

revenue

financing,

cations

additional compli¬
mohe complex bond

and

am

can

or

gas

perfectly

revenue

aware

There

are

Water—1.20

other provisions which

service,

if

might also be improved, but I be¬

demonstrated

lieve these two indicate certain of

ment is shown.

pet

objections found all too

often when reading revenue bond

resolutions.

appears

Coverage Ratios

closing I would like to

some

rates

are

are

record

low
of

debt

and

a

manage¬

tors

the

basic and

are

first

item

indication

as

reasonable

as

to

what

coverage

collection

again if

reasonable, management
are

siders

history; if based

coverage

looked

to

by

the

purchase of

should

on

based

based

vary

on

the

the

sellers of

con¬

revenue

succinctly

as

financing

continuing.

have

to

The

revenue

continue

are

safeguard

bond

a

is

tax

two

are

and

exempt when there

bond

issues

ostensibly

and

if

possible

in order

the interests of the

buyer and

issuer alike.

"More

com¬

♦An address
by Mr. Morgan at the
Annual
Municipal
Conference
sponsored by the
Investment Bankers
Association, Chicago, 111., June 20, 1963.

Second

-

outstanding

secured

only

by

""^v.

This is such

that

ject

might

it

on

brought

that

believe

I

thoughts

controversial sub¬

a

in

out

further

better

be

discussion

open

later.
Industrial Revenue Bonds
>

In any

discussion of recent rev¬

trends

enue

should

controversial;

industrial

about
The

bonds.

revenue

something

probably

said

be

however,

thought which

is

subject

one

in

stands out

my

mind is the matter of full disclo¬
of information concerning

sure

such

of

which

circulars

bond

read

HARTFORD J?

DETROIT

I

woefully deficient

are

information

respects

^s

PROVIDENCE^

industrial

Most

bonds.

revenue

have

■ BOSTON

the

looked to as the backer

company

companies who

lessees of the

are

CLEVELAND

the

on

SAN

FRANCISCO

A similar lack of such

property.

information

partially

was

respon¬

sible, at least, for getting the SEC
into the

corporate securities busi¬

ness some

I

writer

years ago.

not

am

advocating

the

of

circular

bond

go

by SEC

quired

I

However,

is

as

prospectus

do

feel

information

more

revenue

far

as

that

is

the

that

industrial

re¬

rules.
unless

included

in

such circulars that sellers of such
bonds

asking

are

for

trouble

the form of recision suits.

of industrial

think

in

What¬
rev¬

ever

we

enue

bonds, may I say I hope that

those of
will

Houston

practicing in this field

us

protect themselves—and our

industry—by having at least rea¬
information

sonable
culars

their cir¬

in

concerning the

companies

looked to for debt service

ments

such

on

Provisions

Would

Ordinances

And

require¬

bonds.

Improvement of Bond

Be

Desirable
In
sues

the

preparation of bond is¬

for

competitive bidding, we
to time

failure

see

from

time

the

part

of financial advisors

include
not

be

onerous

the
we

bond

have

the

to

would

included

if

which

provisions

ratings.
noted

additional

bond

which

so

are

on

would

issuer but

help

improve

For

example,

bond

BEHIND

to

issues

THE

with

provision clauses

MACHINES

liberal that the rat¬

ing agencies refuse to rate the is¬
sues.

All too often if such provi¬

sions

had

the

in
.

i

written

been

first place,

would have been
additional

a

properly

bank

rating

possible and the
covenant

bond

concerned.
the field of reporting infor¬

In

mation

t6

in

issues

held

by

the

the

many

enue

bond

are

institutions

these

if each and every rev¬
indenture would

ports to be sent to
bondholders.

a




J. J. KENNY CO. C '
Where the

Secondary Market Comes First

pro¬

mailing list

The

capable of receiving and efficiently handlingi3000 or more bids a day.

is

vide for at least annual audit re¬

of

personnel. Together they

teletype operators and other

bond

days they all would appreciate it,
I am sure,

a

bond

instances

many

With

brief.

staff of 14 professional traders, backed by

Behind these machines is

was

bondholders,

ordinance
too

teletype network has 160 receiving machines in principal financial centers in the Nation.

could

have been workable so far as the

issuing body

Our

indenture

DIgby 4-9440

212-571-0020

and

bonds thus will

be made of

plexities in the revenue bond bus¬

property.

one

guide,

buyers

improve their vigilance
to

preceding remarks, it can be

stated

lease

is

Summary
If any summary can

estimates

a

and

are

bond issue.

adequate.

Electric—1.30 coverage, if
on

usually

experienced analyst when he
coverage,

such

Service) field. However,

ratios

good, and protective covenants for

Estimates of
Before

Sewer—1.30

of

coverage

rates

troversy surrounding whether in¬
terest

been

bond vehicle

(or were not) being tios shown below with logical jus-i tion may be stepping over into This trend, if the recent techniques
Dave Ellinwood's (Moody's Inves¬ illustrated by advance refundings
by the issuer of such tification. However, here goes:

bonds.

revenue

give

nature
ment.

were

observed

my

Often

bonds.

bond?" erage should vary based on nature provisions have been devised and
included in bond indenture by in¬
that experts of territory and management.
I realize including this tabula¬ genious bond men and attorneys.
disagree with each of the ra¬

electric
I

and

revenue

of holder: expect-! on a water, sewer,

indenture

attorneys

it

for

certain protective covenants of the

fa¬

a

feel
a

read

to the action of

as

If it is |

IRS.

had

he

ratios

a

l

10

The Commercial and Financial Chronicle

itself

Solving the Bond Coupon

is

sion.
up,

Problem With Magnetic Ink

the

ort

the

covers

last

entire

9"

and

page

6"

x

dimen¬

Bank

printed three-

and the thickness of the bonds

to

feel

are

depends,

of

turity

number of

or

course,

the

on

ma¬

coupons.

Boston banker suggests the use of magnetic ink character
tion

impressions

as the way

who do and do

not favor

replacing

points out that ail necessary infprmation
will

eventually lead to complete automation.

proposal made is believed to be
those

advanced

far, stayed out of reach until magnetic ink

can

much controversy

lately

over

the

which

we

iar every day on our own checks.

ing

We

One

coupons.

posed

was

to

of

regis-

bonds;

another,
of

use

pro¬

have

been

Harold

Randall

—who

participated

studies

the

a

larger

bonds.

magnetic
First

recently
with

up

tion

which
is

has

John W.

Agnew

feel

the

coupon

going

explain

me

as

well

as

efficient.

(Magnetic

Ink

Character

into

details

handled

are

bond

principle is simple: it utilizes

MICR

the

disadvantages
Thus,

our

complicated
pons

one

practical

The

ink.

Before

still

we

for

all

of

funda¬

processing
care¬

and

what

coupon

the

of

rather

how

cou¬

today, first let

an

and

measures

and just under 9"

to

present

face

area

than

present

is

coupons

1%", the

x

admittedly

sur¬

larger

However,

coupons.

easily and

com¬

aijid the overall storage

corresponds to present stor¬

requirements.

easier

efficiency
of

cause

11

automatic

characters

bankers

process¬

represent what

call

the

is

coupon

nine

and

number

bank

at.

us"

symbol—is

by

represent

at

us

the

6"

ap¬

wide

hi^h. The bond

public

sewer,
each

a

the

purpose

example,

works,

a par¬

etc.

will be assigned

number.

point

the

—

different

a

coupons
from

view

be¬

and

before¬

maturity date of

these two digits

are

classifying by due dates.
the

maturity,

handling municipalities, we
to

come

first "short-cutting"

our

procedure, and that is, to disre¬
gard the distinction between "is¬
sues"

and group

municipal bonds

by maturity only.

During
as

a

be counted

may

four times before be¬

many as

be

counted
feel

we

ten

into

itself.

characters,

fifth time.

a

that

be

sufficient,

needed

INCORPORATED

BONDS

for

can

be

ink.

Through the miracle

preprinted

report

any

in

magnetic
of

the coupon can be read onto
mag¬
netic tape in one pass.
Once the~

Y.

information
the

is

of

group

numbers

reports in any
I

sort

can

would

and

to

any

prepare

desired.

manner

like

by

emphasize the

concept at this point of "informa¬
tion

processing,"
rather
than
"paper handling." I can visualize
the day when there will be no

need

to

actually sort the

in

No

human

will be

fact, depending
nate

be

can

In

final

sys-

on the

the machine

sorting of

tained

the bank

at

cremation, the

reach

we

be

can

for

usual

eventual

So

too
it

far,

I

have

about

much

to be

seems

mentioned

not

cremation, since
practice of mu¬

a

nicipalities not to let the banks
cremate. In those cases where
do

"cremate,"

10 years ago

that

we

numerical record

paid

pons

the

sheet.

entry to
to

The first

times.

return

this

and

numbers

Thus,

cou¬

cremated

we

off

and

control

a

could

tell

mation

State, Municipal and Revenue Bonds

and

down

standing

coupons.

This

is

step

a

madi

"paying" function. Through MICR,
possible again to be in

it will be
a

position to prepare

outstanding
number.

Long Range
One

is

count

made

A

third

of

day's

made

month to

into

work

package

is

count

the

by

verify

for

the

at

each

consolidated

a

the

convenience

is

when

the

fourth count
at

times)

coupons

are

(which

is

made

the

counting

dures, the amount of
card

for

the

end

A

coupons.

mittee

collections

eral Reserve

cal

is

posted

each

of

proce¬

a

municipality.

the

month

of

the

Fed¬

System, the Techni¬

Committee

on

mechanization

Association, and the Of¬

fice Equipment

designing

Manufacturers in

routing-transit

a

num¬

At

when

separation

of

any

by company,

a

study,

result
a new

the

of

this

coordinated

routing-transit

Continued

on

num-

page 16

be

issue,
proper

BROKERS

State—Municipal—Public Revenue

"magnetic tape ledger card," and
prepare, periodic statements show¬
coupons

maturity. The
be

can

same

in

a

in

vault

random order in which

entered

were

sorter,

and

into

We

themselves

coupons

stored

Bonds

by issue and

the

eventually

they

Because
We offer

reader-

will

CHARLES KING & CO.

Present

Cumbersome

System

Members:

Toronto Stock Exchange

American Stock Exchange

Montreal Stock Exchange

61

Broadway

Canadian Stock Exchange

New York 6, N. Y

Telephone:
WHitehall

•

4-8980

Telex 012-6133

a

Now

let

look

at

used

WIRES:




NEW

YORK

—

TORONTO

—

MONTREAL

many

systems

vary

bank,

Twx 212 571-1353

go

the

bank to
our

PRIVATE

by

us

own

back

system
banks.

and

Actually,
from

I will draw

procedure for

depend

an

exam¬

the

amount

of

"short-cutting" each bank will

do.

on

coverage.

•

Prompt

•

Competent execution of "Dollar

•

Immediate "Dollar Bond" quotations.

•

Our

response.

assurance

Bond" orders.

of courteous service.

DRAKE

&

COMPANY

upon

ple. The differences from bank to
bank

Simultaneous

Wide National coverage.

presently

considerably
so

take

ideal

•
•

be

cremated.
Reviews

Solicit Your Business

the

111

Broadway, New York 6, N. Y.

Telephone: WOrth

4-4545

of

these items that inadvertently got
into the cash collection system.

paid
ledger As

coupons
on

amount

spent by the subcom¬

was

on

of these

considerable

permit the

Besides

day

improved procedures

packaged ber for these coupons that would

return.

each

of

collection process

Bankers
a

modified

ior

the

of of check
handling of the American

treasurers.

Finally,

in

of time

group

like to

touch upon is the long-range pos¬

the work of the first count.

end

Potentials

last point I would

sibilities
second

bond

by

the

as

proved to incoming totals.

The

report of

a

coupons

may

paying unit and

the audit unit and serves to

before cremation. In

coupons

other words, they rely on the sec¬

infor¬

the

maturity, post to the

ing unpaid

Canadian Stocks-Bonds

sort

the

actual coupon number of any out¬

happens:

count is
our

being

up

You

the amount of the

entered,

coupons

will

is

used to keep

of those

coupons

reader-sorter

a

prove

w.e

count

In fact, it is less than

necessary.

a

another

by company, issue, and ma¬
turity. In other words, the initial
used

a

re¬

peak

down

Underwriters and Distributors of

or

necessary.

be possible to elimi¬

may

even

changed

sorting

the ond count
performed during the

coupons

for

end

coupons

how

wonder

magneticl tape,

on

computer

but

suitable

four

counted

the

magnetic ink reader-sorter, every
number printed at the bottom of

BROADWAY

counts

and proving the work each

urers,

possible bit of in¬

every

grouping
teihi it

quickly review

me

picture

MICR.

Actually the

good

grouping these

form

a

two

at the end of the month to treas¬

are

Thus,

this

cross

paying procedure

our

municipal coupon

(represent time, the

bond

coupon.

formation

by

effi¬

an

However,

accordingly.

post

*

when

bols, represent the amount of the coupons enter

Malvern Hill & Company

how

relatively %mall prepared by hand. If
any one is¬ point where coupons

a

down to issue and

the

last

.The Coupon

Again, let

of the paper itself. The posting oper¬
issue. ation will be eliminated, since

practice to sort corporate is¬

sues

hand

the

No Human Hand Need Touch

number

cient operation. It is our custom¬

would

Finally,

N.

a

Thus, it is virtually impos¬
to group a particular ma¬

process of

determine

of

period.

year

load
turity, of a particular issue, of at the end of the month will be
a particular municipality in large
eliminated.

bracketed by two "amount" sym¬

6,

of

larger

and issuing

pose

we

number

breakdown by ma¬

bonds tend to cause the computer will post the rec¬
problems because of need for des¬ ords. Month-end summary state¬
ignating bonds for a specific pur¬ ments will no longer have to be

since

exact

a

turities for the most recent two-

ing returned to a treasurer. If we which has since been "short-cut."
were
performing
a
cremation Some banks have cut this
step
and function also, the coupons would even further by not re-counting

The next two characters

can

statement is prepared

summary

Municipal

represent the coupon number, and

the

YORK

to

bonds contained in any one

company

(or municipality) and the
of the bond. For

next

The

including the

—

'on

assigned

to

the bank the

payable

characters

"dash"

we

routing-transit

and identifies

area

paying

handle

to

ary

eventual

a

the

come

mit

useful in

NEW

I

enough batches to justify

The next six characters

115

take

sole

as

away

grouped by maturity,

coupons are

unnecessary.
us

mation that each coupon contains
in magnetic ink, which will per¬

each coupon,

MUNICIPAL

act

Thursday, July 11, 1963

which shows

municipal account

a

we

much

.

procedures

Corporate bonds and

sible

ing. From left to right, the first
i

are

Let

.

number of bonds for

examine the infor¬

us

of

same

point which should be elaborated

Compared

can

continue

we

the new style
ticular city may have a dozen
look like. The issues
outstanding—one for school,

complete bond is compact in

pearance

a

are

paper

Now let

first

need

with

which

of

feel

now

Right

agent.

on.

the

fully by experts from all angles.

solu¬

—

the

size

Information

Corey

the

system have been appraised

come

another

and

mentals of

National Bank

in

familiar

were

advantages

of Boston

at

Herb

minimum

Preprints All Necessary

machine language and

pmmon

who

and

concerning

denomination

The

fortunate

Incidentally,

sue.

First in having two men—namely,

the

istered

use

solution

we

which

be

characters,
w i t h
becoming so famil¬

are

of

a

as

that
some

other banks which

are

illustrate:

handled in automated equipment.

area

know, there has been Recognition)

the

pactly,

impossible possible.

most efficient method of process¬

increase

is

size

same

check.

the bonds? stack

along to make

came

sized

measuring 3%"

which have, so

uses

To

for

2%"—the

x

age

all

we

importantly, it

as

long-range potential

many

the

As

Paper details why

practical and efficient than

more

by others, and why, just

easily lend itself to
I

be preprinted which

can

that

which

maintaining

6"

piece

Mr. Agnew

con¬

coupons.

still

are

experience

essential; at the

time, there

situation

this

bonds with registered

coupon

of

pages

steps
are

Each individual coupon measures

pocket

to settle the controversy between those

and those who urge larger denomination bonds.

ones,

recogni¬

seven

For

from

banks have eliminated

the

tains

of Boston, Boston, Mass.

know

of

Coupons

example: A 20-coupon bond

By John W. Agnew,* Vice-President, The First National

I

many

.

Teletype: 212 571-1872

•

Volume

198

The Commercial and Financial Chronicle

Number 6280

the part of the foreign buyers

on

Toward

More

a

Widespread

because

cealed

Mr. Johnson is one of the

issues with

organization

go

reflects progress
the

Mr. Johnson sums up

Closings

way,

buyers

and recommends underwriters, both corporate

municipal, should take a

hard look at the issue instead

of

longer seek
primarily of regis¬

chosen because we no

issue

first

tered bonds.

This

is

that

corporates,

for
at

de¬

advantages

have

These

over

apply

municipals, and

auditing

ing,

to

gov¬

of

cremating

geable

be

good

costs

by

five to

one

or

holder.f

Russell H. Johnson

stolen

bonds

for

counterfeits

or

a

step

forward

in

fully

our

pro¬

registered

only.

(4) Interest is received by mail.

Permits direct communica¬

(6)

this country,

some

tion for

any

annually.

registered

The

bonds

comparison with

of

use

is

fully

minute

volume

by

coupon

Very few people, financial

otherwise,

are

aware

advantages that

holder

of

the

of

accrue

fully

to

registered

Treasury bonds throw off about
15 million of the 283 million

will

buyers

be sure

we

regis¬

buy

tered bonds?" Our committee has

letters from

and

tion

of

have

We

the first of

on

called

signed by the major Phila¬

delphia banks which reads

that

the

for

re¬

demption the previous July. This
she

that

meant

had

$5,000

not

earning interest for six months. I

acknowledged
if

asked
gave

that

friend

that

the

what

he

plea
same

that the size, shape

other product

making

buyer

and ] I

wants,

of a

the first thing many insurance com¬

panies

do

a

new

of

registered bonds?

for

exchange
no

back

to

point.

They

cou¬

terchangeable

Reduces

space

that

exchange

back to coupon because

it is their

for

thinking of the "little fellow".

Logically, it is
an

individual to

bond,

so

own

opposed

as

beneficial for
registered

a

to

a

bond, that I don't think
send

to

you

out

a

million

coupon
we

have

question¬

naires to satisfy ourselves on this

only defense against the price dif¬
ferential that

Let's

Differential

Price

examine

for

bonds:

the

the
up

three

seg¬

the matket

pric^

differential

three

conditions

same

is
that

transfer

Permits

bondholder rela¬

Tends

to

eliminate

Common practice has dic¬
that only a coupon bond is

a

good delivery, although this is

not

seller, the under¬

actually the

case

Continued

Recognizing this
the

American

tion

appointed

a

problem,

Bankers

Associa¬

a

as

Special Commit¬

tee, of which I am chairman, to
promote

the

use

of

fully

regis¬

be

to find.

completely ob¬

We

j

a

departure from

ac¬

cepted practice.
80% of the offering
finally sold in registered form.
Nate:

was

(2)

asking for similar

are

from

pe¬

Probable

Dealers

reso¬

There is, of

Chicago banks.

The

Distributors

question that the trust

lessened

interest

Philadelphia Plan

Philadelphia

is

Plan

one

I'd like to review. This Plan per¬

mits
the

These were not

(1) Issue possibly harder to sell
of

Underwriters

Bonds

settlement

handling partial calls." ;•

The

my

registered bonds.
easy

ar¬

registered bonds.

committee tried to de¬
termine the disadvantages of fully

because

bonds.

to

on

"(c) Adequate provision is made

Disadvantages
order

be

the departments of banks highly favor

price differential.

In

Registered

4-day

holders

of

bonds of

coupon

City of Philadelphia to send

these

to

them

for

the

City

and

exchange

registered bonds at

no

cost. It also provides an exchange
in

at

reverse

certainly

was

direction

in

later

a

date.

This

step in the right

a

many

it relieved coupon

because

ways,

bondholders of

storage problems and of the task
of

cutting

cause

WEEK5*]

this

plan

all it really did was

bonds

coupon

\H0RNBU0WER AMD

about

cannot get

I

coupons.

enthusiastic

and

vault

bank in

one

them

in

Philadelphia.
waste

The

of

The coupons

counted,

cut,

does not

the

Municipalities

manpower

continues.
be

bank's
another

The overall

to

mated, etc.

be¬

to take

remained

problem

storage
same.

out of

put

still have

audited,

cre¬

The end result of this

help to solve the major

Public~Revenue Authorities

problems:

Elimination

(1)
million

in

the

(2)
From Coast to Coast You

can

depend

ence

pieces
form

of

of paper

of

300

some

coupons.

annually

\

Private and Interim

Get bondholders to experi¬
all of the advantages of

fully

registered bonds.
on

the

People, the Ideas, the Facilities of...
The Individual Investor

Corporations

HORNBLOWER & WEEKS
1

CHASE MANHATTAN PLAZA, NEW YORK 5-DI 4-6600




buyers

are

to take

most

institutional

moment to consider the

a

individual
of

and

important, but I'd like
investor.

quality

About

issues

are

85%
pur-

•

by

been

(1)

"(b) The seller receives interest

course, no

jective,

its

of

the

have

tated

writer, and the buyer. The buyer

and

authentication

for

issue. The

caused

dogmatically accepted:

lutions from New York banks and

r

tions.

municipal bonds about 112

156 million.

The issuing Company

and regis¬

coupon

tered bonds of the

point.
The

traditionally has ex¬

isted between

with

coupons,

that

letter permitting a free

saying thank

account, provided that:

"(a)

require¬

ments substantially.

(12)

for

in¬

an

want

letter closed by

our

concession in market price

for

(11)

for

to

again

coupon

charge. Now this is

teresting

the

them

permitting

issue Corpo¬

appropriate

on

They ask*

letter from

a

fully registered, not in¬

purposes,

Decreases unproductive ef¬

fort.

(10)

Bonds

would

we

new

bonds

coupon

issue is to exchange them

corporation
at

their

receiving

upon

massive pile

thing had happened to her. The

to date of settlement.

disaster.

(9)

that

state

"We

willing to buy

conclude

correspond¬

istered bonds. Are you aware that

fol¬

as

result

known

that I have had with profes¬

ence

however,

that

say

sional buyers that they prefer reg¬

for

asked

me

from the voluminous

and

her

had

from

She

also be included because the

to

to

he is buying.

that is sold in this country,

letter

permission, and
elderly
widow

an

seems

quote her.

her

could

I

me

added

em¬

resolu¬

a

told

was

been

phatically that they favor regis¬ ments that make
bonds.

couple

a

One woman with $5,-

had

bonds

fifty major in¬

over

companies declaring

surance

Reader",

she brought coupons to her

January

proves

The first two fears
can

million and corporate bonds about

t£</.

package

riod.

bonds.

tered

that

investigated

that

within

reason.

(7) Closes tax loopholes.

pons,

issue

unwarranted.

really ask "how
the

for

The Firestone

carefully

this question.

for

might

one

earlier

be

to

bid

as

an

both.

of

fears

ranges

■

(8) Increases safety in the event

the

or

mentioned

have

We

(5) Call notices are received by
mail.

at 3 cost of 452 man years of ef¬

many

these

no

283 million coupons cut each year

or

I

the

issue

bid

a

issue

some

rate

(3) Protects against the use of

The Problem

bonds.

as

coupon

and

80%.

option
was

insurance

Reduces

mailing

There are, in

fort

the

lows:

(2)

towards

gram

bonds

other

coupons.

loan collateral.

major

that

not

tered

count¬

cutting,

and

-

coupons

This

bonds

Eliminates

(1)

in

e x

the

of the

the

at

ernments for the most part:

registered

form,
a n

made

have

we

bonds.

coupon

which
be

look

registered

of

sale

and

progress.

Let's

19,

livered

h

first

Advantages

Firestone

to

issues

to tackle the corporate

now

June

issue,

game

some

reality with

1963

the

fear

and

registered

the

registered

had

.The committee decided early in

buy

institutional

fully

issue

The title of this presentation was

the

the

a

thinking.

that

Or,

another

thing

same

won't

bonds

and answers price differential, cost, and other

problems;

sort of

c

would

we

million

leaning on tradition and the "we have always done it this way"

is

think

I

of

by major

issues

to

and

the

issuance

that it is due to fear—

fear

story

our

our pro¬

fear that the issue won't sell.

technical

the

as^Why

public

the

published

bank for collection

heartening note of the June 19th Firestone Tire & Rubber Co. $75

say

"Investor's

months ago.

hasn't been able to promote

have to say

the

that

to

were

one

corporations,

initially made in fully registered form;

the

000 worth of bonds \wrote to say

fully registered

in this paper the "pro" and "con" arguments

debenture offering

be

manner.

regarding the switch to, and issuance of, registered bonds; takes

municipal issues;

a

usual

the

widespread

realistically examines what can be done to meet problems posed by

a

in

not

could

c_

gram

catalytic New York State Bankers Trust Operative Committee.

and

tion,

Thex

made, and being made, since 1956 when he chaired

about

etc.,

surely he

something

ments.

If

has seen that

companies,

have

and content of any

i

Bonds and

on

should

It

pioneers in the campaign to replace coupon

Special Committee

should be first because

15% by the public. Merrill Lynch,

handled

from the study stage to promoting the change which

professional

Pierce, Fenner & Smith's publica¬

registered bonds. He is Chairman of the American Bank¬

Association's

ers

so-called

by

investors, that is, banks, insurance

The possibility of delayed

(4)

Company of New York

easily.

chased

deliveries due to transfer require¬

By Russell H. Johnson,* Executive Vice-President, United States
Trust

identity could not be con¬

as

(3)

Use of Registered Bonds

11

Financing

under
on

the

page

15

The Commercial and Financial Chronicle

12

the situation will correct itself

Is

Competition Pushing

soon

knocks.

if

But

going to be

Profits Over the Brink?
Company, Chicago, III.

profit-plight of municipal underwriters who competitively have

The Chicago bank's mu¬

what should be done about it.

nicipal securities' expert endorses Jim Reilly's suggestions on curing
what ails the

There

always

seem

to

be

practices

problems with us, big or little. But
months there has

in recent
a

the

greater and greater buildup of

on

in

conditions

which

have

it

more

made

do

things

ment tells us

business

our

competitive
to

in underwriting

financing needs

simple way. All that is re¬

quired is the use of a little "com¬
mon

profit¬

Now,

we

many

been

it

a

have

the

John M. Maxwell

—

no

way

we

have
diffi¬

leeway to correct our
labor

problems and

more

not

or

less be¬

be

to

do

so,

ridiculous.

Problems

Affecting

Profits

the problems that we

of

Some

are:

(1) What should be the

bers

who

real

normally

mem¬

should

distribution for

the

(2)

have
in

name

be

can

done

about

ings at cut prices during the life

produces

which

intelligence"

"normal

"sound, practical judg¬

specific

our

problems,

I

want to be the first to admit that

solutions

definitive

yond

of the

joint account? Shouldn't all

special offerings be made by the
syndicate manager, or with his

permission,

Now, when we get down to an¬
alyzing

keep

I

me.

are

my

friends in the business, "How can

get)

adequate

yond their control. We are doing

we

it to ourselves. We know perfect-

gin?" and the usual

an

profit

answer

mar¬

after

majority

has approved the cut?
account member be

commission

often be¬

asking

on

vote

Should

paid

selling

a

ers' concession?
to this

answer

dealer

or

I will venture

banks

an

Only dealers

one.

with

bona

fide

be done to control

can

reduce expenses?

or

This applies

to the operation of our individual

shops

Of course,

well

joint

often

delays

in

getting bidding views from mem¬
to mdke a thorough

Members

an

account's strength.

are as

managers

fully

the

aware as

when

td

as

sale

a

is

taking place and should be willing
to

volunteer

time,

proper

them.

CO., INC

AX-EXEMPT BONDS

Also,

New York

Tel.:

HAnover 2-S252

TWX:

5, N. Y.

212-571-1745

drag

the

at

making

them

it greatly

operations if the

form.

preferred the divided

I feel that

a

dealer who

does

much

a

can

no

If

confidence that he

uphold his end

can

pf the selling,

why should he be in the account?
The

is

argument

advanced

that

don't get the best bid out of

you

divided

of

many

account.

accounts

haven't

But

problems

our

come

over-bidding?

It

from

seems

William

A.

Illinois

to

that, if all

me

divided,
in

line

be

Noonan,

National

Jr., Continental
& Trust

Bank

Company, Chicago

bidding competition

the

would be

accounts were

more

realistic and

where

with

more

bonds

could

have

often

readily sold.
Serial

been

maturities

cited

as

difficult

a

maturities
to this
form

obstacle

Bracketing of

simple solution

seems a

problem. True, the divided

gives managers much

work

in

ities,

etc.,

more

keeping track of liabil¬

but perhaps

takedowns

and

commissions
these extra

could

many more

Mr.

are

take

care

of

chores.

are

most.

adequate

possibly oversales

excellent

Reilly's address, but

the

that impressed

ones

And he has been kind

enough to give

me

permission to

emphasize them again.
In

conclusion, I repeat, our in¬

dustry is doing
nancing

ever

-

improvements at
to
we

great job in fi¬

a

expanding
a very

the borrowers^

adopt

a

more

But

public

small cost
why don't

enlightened

Woodcock, Moyer, Friche
French, Incorporated, Philadelphia

Gordon W. Pfau,

ap¬

&

it
of

out

facilitates

person

express¬

ing the views is prepared to make
the commitment for his firm.

(6)

Shouldn't

check

40 Wall Street

views

without

to

necessary

RIPP &

their

1963.

in Chicago

certain number of bonds.

me

appraisal of

us

a

these

managers

by Mr. Maxwell at the Sec¬
Municipal Conference spon¬
IBA, Chicago, 111., June 20,

should

western

or

most of

dealer has

important role.

annoying

talk

Annual

think the

too

ing

tion could play a more and more

Syndicate

*A

sored by the

do

the end of his liability by sell¬

There

(5)

his

before

joining

manager

of

we

size

on

an

the

As

practice

historical

ac¬

given credit when the

a

doesn't

require

the

expanding
bers.

alignments

syndicate?

a

follow

confirming

count

underwriter

an

historical

reducing

number

of

or

mem¬

Anyone should feel free to

change syndicate associations but
it

ORIGINATORS

•

UNDERWRITERS

would

simplify

job if he
of

DISTRIBUTORS

were

the

manager's

notified promptly

change before the letters

a

go

out.

NEW JERSEY-MUNICIPAL

Endorses' Jim Reilly's Suggestions
I

expect

Reilly's

of you heard and

some

of

many

have

you

excellent

Jim

read

address

the

at

Texas

AUTHORITY REVENUE
IjP

•

irioNs

you

Group Meeting in April. If
haven't read it, I recommend

that you do.

edly with

He

(1)

makes

Gordon & Sautter
Established 1920

64 WALL

STREET, NEW YORK 5, N. Y.

Bell System Teletype—212 S71-10SS




that
all-

are

if

they merely

their

cars

and

manu¬

pushed

them off the assembly line?
way

of

WHITEHALL 3-1570

point

Where would General

Motors be
factured

the

distribution

and

important.

Boland, Baffin,

of the views he

in this speech, i

expresses

selling

I agree whole-heart¬

many

to

broaden

the

and
^

1 Full

text

more houses develop
of

Mr.

peared in the April
the Chronicle.—Ed.

LEBENTHALf? COjINC.
ONE CHASE MANHATTAN PLAZA

The

distribution

municipal securities is to have

more

con¬

cerned, including ourselves?

com¬

who

see

ideas in

as

selling

aggressive job when he

ventures.

as

to do a

all

opinion at
spread

account

distribution

more

bers in time

BONDS

I

of

divided

This is the realm where automa¬

experience

PUBLIC REVENUE

form

to divided accounts.

cut-price sale?

a

(3) Who is entitled to the deal¬

(4) What

AND

as

account.

of

the

be

an

is that bond departments.

STATE, MUNICIPAL

my

gross

members

the

to

standard

a

What

us

for

syn¬

consideration

more

given to including only

job

(3) He recommends the divided
form

a

dicate? Should
be

proper

underwriting

our

efficient

more

the selling.

has

It question?

prob¬

our

In

the

of

have always

ment." The solution of

culties than many industries con¬

other conditions

continue

can

mission

account.

normal

ment."

business is in
unique. In my opinion,

municipalities

syndicate members making offer¬

ly

mu¬

fronted with

my

lems doesn't require genius, mere¬

nicipal

more

sense

and

intelligence; sound, practical judg¬

prof¬

squeeze, so

that

"Common

read:

experi¬

encing

of

one

daughter's school dictionaries.

all

types of

business

sense." I looked up the mean¬

ing of this phrase in

that

know

we

let's

but

ill-considered

a

a

states

might look at

and more dif¬

o n

get paid for it.
half

Thursday, July 11, 1963

sejlls the bonds should

us

ficult to carry

able operation.

growing

national economy

operations could be eliminated in makeup of
very

financing

the ever-growing

better judg¬

npt to do.
these

of

Most

11

pushes

drive
our

of

in

to result

bound

are

fellow who

should be allowed

smaller profits, or even losses, but

been

going to be

at the narrowest of profit spreads.

ly well that many of our current

some

not

were

.

ond

(2) Mr. Reilly believes that the

volume

And

customers

institutional buyers to ex¬

of

least

our

of

depend upon the standard

enough bonds to bid on, with the

of

municipal industry which he recapitulates.

list

list

own

.

organizations proach that will permit

selling

own

their

and not

in

the brink? It isn't

over

there

persist

we

by year.
Our industry has
performed a great service for our

bemoaning but a vigorous assessment of the problem and a practical
on

do

year

pushed themselves to a perilous point receives not a sympathetic
outline

if

as

con¬

their
and

pushing the market tinguish their liability.

why

pushing it

By John M. Maxwell,* Vice-President, The Northern Trust

The

far,

is

this

know

we

as

hard

some

the unpleasant

of

sequence

too

have

we

as

.

Reilly's address ap¬
25, 1963, issue of
,

•

NEW YORK

5, N. Y.

HA 5-6116

Oldest House in America Specializing in
ODD LOT MUNICIPAL BONDS

Volume

198

6280

Number

.

.

The Commercial and Financial Chronicle

.

frowned

Beware of Legal Pitfalls in

tion

i

(

Telling

regarding

observations

posed

by

of issues from the

ence

narrow

pitfalls in advanced refundings;

existence;

visor's conflict of interest when
advised

submitting

need for a law to

upon;

bid

a

/

eliminate third party

against issuer in default, and validation for proposed bond issue;
and existing

applicability of SEC laws to sale of municipal bonds.

enter

bid,

a

between

and

for

greater

and

cooperation

fairly priced, and legally defensible

He, also, notes difficulties as a result of Supreme Court

corporate

which

in

anything

not

law,

by

existence

be

can

pro¬

issuance

the

of

secu¬

expressly

securities

securities

of

necessitates

authority

legal

proposed to be is¬

this

For

among

reason,

indus¬

issue

should

amined and determined

decision

ibility

well

as

present law.

be

business

the

of

1930

rapidly into

grown

complicated

big

a

has

period

complex and

today,

business

relations

public

bond
counsel, corporate counsel, local
counsel, consulting engineers and

is

accounting firms,

the

experts,

to

nothing

say

legality

as

real

a

lation

great

a

states and

few

majority

ties

spective underwriting syndicates.
Undoubtedly, at • least one New

itive

$8,000,000,annually.

Frontier has really been attained.

tween the date of the

000

This figure as

predicted

by

expected to

reach

$15,-

000,000,000

by

annually
the

It

been

that

needed

was

basis

a

book

and

an

the

Vol¬

business.

municipal

present and an¬
together with the in¬

of

course,

ticipated,

industry

in

the

fundamental

which

the

established.

In

issues and the

part of

some

securities

nicipal

characterized

tiple
use

to

ness

supplemental
tailed

cheon

use

in

it

is
on

this

at

station

to

We

As

100-page

a

date

refunded

the

ida.)

Certain

the

on

with the securities is¬

denominations

of

$5,000

each, Madison Avenue executives,

or

some

prior to the delivery of and pay¬

(See 55 N. W.

body of fa¬

or a

the

The

bonds.

of such law suits

is,

oi

object

course,

our most re¬

it

is

briefly for
f

underwriters

and

in

has

no

practically every instance
tound that there is

been

merit in such law suits. Under

of

Continued

issue

bond

the

W. H. Morton

on

page

&

Co.

INCORPORATED

20
1'- '>■

"

'

'

Exchange Place, New York 5, N. Y.
-

;

'.-'C

'.

J

V

.

HAnover

2-6900

re¬

the

Underwriters

—

Dealers

the

of

periods

being

state, municipal and

five

So. 2d. 371, Flor¬
other

corporate bonds

questions,

to invest the

refunding issue in

a

thie

Government. securities,

dis¬

in

judicially

and it may

would

the

have

determined

DEALERS IN

well be that the courts

take, in at least
view

dismal

a

indenture

trust

a

be

to

some cases,

this

of

device

on

U. S. Government,

that the fundamental

theory

public

purpose

nicipal

or

issuing

in

mu¬

is

bonds

revenue

to

State, Municipal and

provide funds for capital improve¬

basis?

ments and not to make money

legal princi¬

bonds

for

the general fund of the issuer.

significant

has

of the

taken

fairly

that

•

It

Comp¬

the

Public

Housing Securities

State of New York

similar

a

in

view

a

criticising

opinion

recent

directly expressed in the the issuance of non-callable Bond
legal

express power.

tant to note that
states

limits

from

It is impor¬

our

courts in the

have

consistently

Anticipation Notes
making

device

through

an

a

money

the

issuer

as

for

investment of the pro¬

ceeds in Government securities or
time

deposits
of

ance

the

pending

issu¬

Chemical

municipal bonds.

Investment Advisor's Possible

I

Conflicting Role
With

the

great

the

matters

the

origination

municipal

to

complexity

of

considered

in

be

issuance

and

securities, the

of

importance.

increasing

NewYork
CHEMICAL BANK NEW YORK TRUST COMPANY

of

role

Financial Advisor has become

of

one

As

a

BOND DEPARTMENT

general rule, the state legislatures
have

ignored

the

of

problem

20 Pine

a

Street, New York 15

possible conflict of interest when

Correspondents in principal cities throughout
,

a

Financial Advisor submits

for

the United States and Canada

the

bonds

for

pensated
nancial

DEALERS IN

STATE, MUNICIPAL

AND PUBLIC AUTHORITY BONDS

is

and

his

The

for

a

the

MUNICIPAL BONDS

Tel: 770-2541

Fi¬

as

Tel: 770-2661

that

a

TWX: 212-571-1414

TWX: 212-571-1416

private negotiated

sale of bonds which also
for

GOVERNMENT BONDS

com¬

Supreme

Court of Florida has ruled

contract

bid

a

also

services

Advisor.

services

the

of

provided
bidder

Over 100 Branch Offices in the New York Area

as
.

Financial

contrary

Dominick

&

Dominick

Members New York, American & Toronto Stock

Exchanges

the

Chicago, 111.

Buffalo, N. Y.




NEW YORK

Portland, Ore.

Seattle, Wash.

state

Advisor

to

the

63

So.

The

court

to

out,

however,

point

passing only

on

lar contract and in

a

as

policy

public

(See

void

was

Florida.)

was

14 WALL STREET

to

prevent the delivery of the bonds

decisions, it would it

light of the foregoing

for

ment

"reasonable,"

these

power

proceeds of

clause

re¬

necessarily implied within

strictest

several

the

as

strongly that the authority to is¬
must l be

the

be¬

of

language

of

(See 93

photographs, free lun¬
inspection

in¬

of

given except to

the

years.

yet

revenue

more

of outstanding bonds and the pos¬
to sible abrogation of the defeasance

Forgetting the

municipal and

in

longest

troller

sue

in the

or

award

maturity

date

have been held to be

industry, it cannot be stressed too

information

seem

court

the

in

gen¬

proposed
the

and

be

can

that

say

graphs

cocktail

the

few decisions certain time

is

charts,

generally

vorable

one

bonds to the successful bidder but

such fundamental

redemption

or

government

explosion,

fundamental

lation

by

after

the Fi¬

In the absence of legis¬

outstanding bonds proposed to be

services

pause

Legal

proving legal opinions printed
in

types

argued,

identification.

Are

law

sued

time

2d. 905.)

brought

dividuals

the

and charge of the lien possessed by the

perhaps the better part of wisdom

tours of the proposed project, ap¬

the bonds,

population

municipality.

case

industry

No defin¬

the realtionship

as

funding bonds

ple underlying the conduct of the

on-the-site

meetings,

new

to

answer

questions

containing de¬

statistical

and

be

the

on

untried

questionable

order,

meet the demands

of split or

coupons,

statements

and aerial

to

appears

of

by the use of mul¬

attempted

official

mu¬

face

desire

originate

sometimes
issues

rates of interest, the

coupon
or

issuing

the

has

members in the busi¬

cent

and

under¬

of this device.

use

rapidly increasing volume of such

new

sulting in part from

As of today, the business

of

obligations

revenue

that simple and perhaps

originating

principle

business

competition has radically changed

of

in

not

distributing munici¬

and

and

legal

at all levels for

picture.

is

dangbr of losing sight of

creasing pressures resulting from

nostalgic

some,

beginning to wonder

fact

this

good old days all one

affinity for Lady Luck and he was
in

the

been

Russell Mclnnes

in

the so-called

ume,

whether

pal

has

said

are

writing

period.

presentation,

on

however,

on

early 1970

the pro¬

all of this necessary em¬

phasis

experts

some

is

With

the

was

even

the agent of

the view that

took

nancial Advisor

the

of

decisions

court

eral

excess

In this

sale.

of the states which

would appear to support

in

court

bid

under

many

at least the managers of

of

public

not

the

ex¬

|lack of authorizing legis¬

in

of the highly specialized staffs of

out¬

an

at

Advisors could

by

It should be pointed

put of securi¬

with

troublesome

more

to feas¬

as

out that at the present time there

municipal

simple

relatively

the

faced

raising among the

sophisticated in the

proposed

issues.

placing bondholders' suit in State Courts.
The

of

problems

op¬

try, and it is submitted that each

order to

new

of

which is

more

understanding

issuers, underwriters and municipal attorneys in

create marketable,

issuance

eye

Mr. Mclnnes hits hard at the need for increased vigilance in deciding
to

One

Wisconsin,

others, the trend toward what is to be good business judgment for present state law, there is nothing
popularly known as "advance re¬ those
employed as Financial Ad¬ to prevent the repetition of such
funding" has caused a certain
visors not to attempt to act as an action following the dismissal
amount of

suits, to allow trustee to represent composite bondholders' claims

i

Unlike the matter of

ing bonds.

sued.

nuisance

in

case

today is caused by litigation which

the

bonds he had

on

inating.

earlier

an

In

is

for the procedure and the form of

possible financial ad-

which they have assisted in orig¬

(See 77 So. 2d. 788, Florida.)

cial

the

confines of the legal basis for their

bonds at competitive public sale.

posite view, holding that Finan¬

municipal

growth and complexity of municipal offerings comments on: diverg¬

implied

the issuance of municipal refund¬

hibited

phenomenal

interpreta¬

any

however, the court took the

done

problems

of

use

in the issuance of munici¬

rities

New York City

•

liberal

a

pal bonds, especially in the case of

the

By Russell Mclnnes,* Partner, Wood, King, Dawson & Logan,

on

the

of

power

Municipal Business

13

was

2d

of

916,

careful
that

it

that particu¬
later decision

the court held that Financial Ad¬

visors

could,

bid

for

municipal

:•

'•

■

■

•

\

•.

London Branch: 25-31

.

■

i

■

'

'

■

Moorgate, London, E.C. 2

Representative offices in Mexico City and Paris
Correspondent Banks with 50,000 branches
throughout the world

'

17

The Commercial and Financial Chronicle

Blyth & Co., Inc., Chicago; Carl H.
Oilman, Dean Witter & Co., Chicago

W. W. Lewis,

John

F.

Boney,

Gerity, Jr., Goodbody & Co., Detroit; W. G. Inman, John Nuveen & Co., Chicago;
Ryan, Sutherland & Co., Toledo; Lawrence H. Brown, Northern Trust Company,

Jack R.
Chicago

.

.

.

Thursday, July 11, 1963

Ji C. Tripp, Tripp & Co., Inc., New York; Ray
Robinson, Hornblower & Weeks, Denver

iiiP;

*<>■•■■■■

4S|Sk
,

fff

jB*
/

v

m.

t

•*%1

^1 *
Lawrence E.
St.

Paul;

Shaughnessy, Shaughnessy & Co., Inc.,
Edward F. Wrightsman, Ira Haupt
& Co., New York

Gilbert

Hattier, Jr., Hattier & Sanford, New Orleans, La.; George W. Hall, Wm. E.
New York; R. J. Cook, Ball, Surge & Kraus, Cleveland; J. C. Fitterer,
Wertheim and Company, New York

Pollock

&

Co.,

,

Lloyd B. Hatcher, White, Weld & Co., New York;
Donald C. Patterson, Chemical Bank New York
Trust Company, New York

#16

% aft

v
U!.

®ers'10''> Mullaney,

Chicago;

W. G.

De

Wells

&

Witt Davis, Mullaney,
Company, Chicago

Unitei.facfor!li?,3?nk',

Company,
Wells

«OS

LAn»eleV

Schalke, Seattle First National Bank, Seattle




Stuart

D.

Stevenson,

Bankers

Company, New York;

&

Trust

Comptmy,

New

York;

Cecj1 L. Schultz, Trust Company of Georgia, New York; John

York;

C.

P.

Anderson,

Julius

M.

Caccapola,

Robert Sturla, Hallgarten & Co., New York;
Valley National Bank of Arizona, Phoenix

Goodbody

&

Co.,

Chicago;

James

F.

Charlie

Bankers

Trust

P. Toolan, Hornblower & Weeks, New
Reilly,

Goodbody

&

Co.,

New

George

L. Hamilton,- Dominick

York;

E. James,

York

W.

F.

Miles

0

&

Dominick,

Kenneth K. Mackey, Stone <ft
Securities Corp., New York

New

Webster

Morgan, Blyth & Co., Inc., New York;
Pelikan, John Nuveen & Co., New York

Volume

198

Number 6280

.

.

The Commercial and Financial Chronicle

.

T.

Ward Phillips, Central National Bank & Trust
Company,
Des
Moines,
Iowa;
Richard
Phillips,
White-Phillips Company, Inc., Davenport, Iowa

Daniel

P.

Whitlock, Ladenburg, Thalmann & Co., New York; Bill Simon, Weeden
Co., New York;
Rand, Rand & Co., New York; T. Anthony Goculo, Fidelity Philadelphia Trust Company,

Dick

a

More

Widespread

rules

of

the

waive

York

New

Stock

to

There

exchange

or

is

usually

coupon

charge

a

for registered

registered fqr coupon, particu¬

larly in the latter

bonds

a

a

time

transfer of reg¬

from

one

name

to

another.
The

fallacy

of

number

waive

all

Already 27

float

a

charges,

of

educating

bonds

tages

that

to

to

of

create.

particularly

one

is

This

since

agreed to waive charges,
next time

consider

ac¬

they
the in¬

combating the

second condition with

a

campaign

persuade large corporations to

they issue they should

issuing

simply

stock certificates.

bonds

only

in

at all" because the real way

ing

fully

know of

issues,

Since the only exist¬
registered

are

issues

really don't have

we

more

have

ever,

two
have

lower

with

The

less. We do, how¬

or

that

major
stated

bonds.
tric

a

is

CORPORATE DEPARTMENT
James J. McAtee, Partner

50%

Walter E. Gemenden
Alvin W.

William W. Hoeschle

Fred T. Seving, Jr.

Thomas D. Zoidis

Howard Butcher IV

than

istered

Sherrerd

to

factual

as

ing

in

or

All

bonds in

pieces

$5,000 to meet this unit of trad¬

ing suggestion.

the

promote

of this is

in

of

sues

of

use

New

of

York,

coupon

$5,000 denominations. Is¬
municipal

bonds

during

January, February and March of

line with the rules covering stocks

Continued

on

page

Underwriters, Traders & Distributors of General
Market

Municipal Bonds of the Fifty States

Specialists in Bonds of the subdivisions of New York State

to

possible,

one

of

note

companies

volume

costs

ap¬

bond, regis¬

per

the MARINE TRUST COMPANY of western new york
Municipal Securities Department offices

are

located at 120 Broadway, New York 5

•

237 Main Street, Buffalo 5

fully engraved and

volume,

would

be

State, Municipal and Revenue Bonds

municipal
its

be

a

good

the

Exclusively

tion

industry

subject

Securities

Investment

Municipal
cers

CO.

the

bonds

use

*

Bankers

of

use

would

of

stolen

crimes
±

another

ickA ft ft ft ft ft ft ft ft ftftft:ftftftftftrftftftftftftftrft:ftftft:ftftrft"ft-ftrft ftftftftftftftftft:ftr:ftft:*ft* need

Agency Issues

Corporate and Foreign Bonds

Mu¬
of

Associa¬

*

Dealers

Distributors

#

Underwriters

Association, the
of

New

fully
protect
of

York,

to

registered

as

reason

and

or

thief,

add forgery to his

it

work.

why

registered bonds.

Hanseatic

CORPORATION

Established 1920

the

collateral,

counterfeitor,

make

NEW YORK

against

bonds

bonds

would have to

Teletype: 212-571-0231

the

Committee

Forum

because the

115 Broadway, New York 6

for

U. S. Government and

settle
would

Municipal Finance Offi¬

counterfeiting

Members New York and American Stock Exchanges

to

Association.

The

Established 1892

ar¬

consider and discuss with

to

the American Bar

and

Securities

face

other

Perhaps this

own.

nicipal

Serving

the

on

or any

This is something for

rangement.

on

Municipal

and

should be fully

engraved

lithographed

the

State

bond. It

to suggest whether

me

the bonds

not

and

Brokers in

flat

some

introduced, the cost
registered bond could get

engraved,

"ALL MARKETS ON ONE CALL




$5,-

Bank

to

spot.

and

down to about 12V2C per

Telephone: RE 2-2820

over

eral Reserve

was

is not for

^

on

same

coupon

costs

reduced, and

were

per

J

sistant Vice-President of the Fed¬

so

000 would be split back to
of

waged by Mr. Felix T. Davis, As¬

sell

about 20c per bond. If the engrav¬

printing

I'

denominations of

do

campaign

that

or

the

the

here

comment

of

while printing cou¬

in

tered bonds, if

BArclay 7-4641

use

the

on

with

bank

that

us

ordered

J

In

to

successful

to the Trust

the

right

proximately 40c

Exchange • Philadelphia-Baltimore Stock Exchange
Stock Exchange (Assoc.) • Boston Stock Exchange (Assoc.)

J

sense,

could

basis.

like

very

they have

man

a

bonds

bonds

pon

Members: New York Stock

&

$5,000

lot

would
the

in

vault and issue reg¬

our

major

that

cancel

continue

as

the

1500 WALNUT ST., PHILADELPHIA 2, PA.

MA BON

than
odd

on

delivered
stocks?"

as

coupon

enthusiastic about the

so

tells

!

less

and

wishing to buy

I

sug¬

and

manner

same

less than they would be if

bonds in

Established 1910

Dealers and Dealer Banks

further

We

unit of trading would

registered bonds be traded,

transferred

were
coupon bearing.
fact, Pacific Gas and Electric

be

American

a

more

"why

bonds

To

New York

unlimited.

$5,000,

refer

thought

Company states that because
number of their fully reg¬

Company

Jordan, Jr.

•

and
that

us

less to process

bonds

offered to send

i

Henry P. Glendinning, Jr.
Joseph E. Labrum

PH-4

in denominations of $1,000,

We

the

costs

Telephone

registered bonds

Teletype•

fully reg¬

to

corpora¬

that

The Pacific Gas and Elec¬

year

all
In

•

a

originally printed

down.

more

istered bonds outstanding, the in¬
terest processing costs are $30,500

LOCAL CORPORATE ISSUES

PEnnypacker 5-2700

broken

This

is

municipals

60

BROAD

STREET

•

NEW YORK

Telephone: 363-2000
BOSTON

CHICAGO

an

than 100 must

more

of the

AUTHORITY BONDS

&

be

lot, and

can't

suggest that

we

normal

a

registered bonds.

American

registered

utcher

any

experience to guarantee whether
it costs

it costs them

James W. Heward, Partner

we

small corporate

very

odd

tions,

istered issue be

100 shares is

trading unit, less than 100 is

and

an

Telegraph Company tells

PENNSYLVANIA MUNICIPAL

the matter of denominations

issuer is

an

that

and record date. As to denomina¬

perhaps best be $5,000

particular interest to
that of cost.

are

cou¬

cover

someone

of the factors of

one

in which

problems

have been discussed in New York

and

Costs

Naturally,

tions

I stress "no

technical

gest that

fully registered form—NO COU-

MUNICIPAL DEPARTMENT

cor¬

speed that they presently process

PONS AT ALL.
pons

problem of having

a

and

the many advan¬

they

Two

porate transfer agents get into the
habit
of
processing
registered
bond certificates with the same

regis¬

tivity is instilling in the corporate

mind,

O'Brien, Baker, Watts & Co., Baltimore;
Norman E. Reed, Jr;,' Curtiss, House & Co., *
Cleveland
f-V-'W yv''.:

Technical Problems

is

price.

one

creating

bonds

holders

in

ma-

agreed

thus

registered
the

tered

further discussion.

The committee is

to

exchanges

price differential

only

As to the third condition, it is

teresting thought that perhaps the

obvious and I don't think it needs
any

either direction.

case.

(3) There is potentially
lag in effecting
istered

for

j or corporations have

Exchange.

(2)

charges

the

beat

to have

Use of Registered Bonds
Continued from page 11

Richard

'Philadelphia

to

Toward

15

4, N. Y.

Teletype: 212-571-1234
•

SAN

LOS

ANGELES

FRANCISCO

PHILADELPHIA

16

The Commercial and Financial Chronicle

16

.

.

Thursday, July 11, 1963

.

V
\
Ellwood

S.

Philadelphia;

W. Niebling, Merrill Lynch, Pierce, Fenner & Smith Incorporated, New York;
Edward
Meyers, Baxter & Co., New York; Harvey Franklin, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, San Francisco; Bob Sturla, Hallgarten & Co., New York

Walter

Robinson, Penington, Colket & Co.,
Robert C. Brussat, The Milwaukee
Company, Milwaukee

■■■■■■

John

J.

JUt"

*

r

;wf'

de Milhau, The Chase Manhattan Bank,
York;
Russell
M.
Ergood,
Jr.,
Stroud
&
Company
Incorporated,
Philadelphia

W.

New

y.

v ?v

over is for people to get together
apathy and the "we have always
the and look hard at the many cogent done it this way" sort of thinking.

laws and discussing with munici¬

Toward

More Widespread

a

pal

officials

steps that

and

are

necessary

the door to the

Use of Registered Bonds
O

Continued from page 15
this

of this

ance

The

has

indicated

year

do

accept¬

technical

with

the

problem
date.

record

My committee suggests that con¬
sideration be given to the advan¬

of

tages
One

unifonyi record date.

a

might

say,

record date for

interest

for example, the
a

registered bond

should

always

be the tenth business day

prior to

payment

the due date of interest.
I

am

aware

that

to

municipal

many

corporate
people

in

issuer

of

the

seem

bonds,

rightly

there

and

to

is

are
are

central

a

fiscal

if

office

such

as

less

possible lower costs

counterfeiting
but

name

and

problems,

to

two, to make the use of

(1)
there

sum

We
are

up

the

much aware, too,

state

use

of

statutes

anything

pro¬

other

bonds. It would

coupon

me

any

very

certain

hibit

to

are

seem

that if others begin to share

of the optimism that I have

for the wider

registered

use

leaning

bonds—and

tradition

on

the

address

by

Investment

Johnson

Mr.

Bankers

and

before

Association

America, Second
Municipal
Chicago, 111., June 21, 1963.

of

Conference,

what I have said:

have
no

established

losers

in

this

that

plan,

and the investor both benefit. The
investor should have something to
say

about the product he is buy¬

make
We

fully

Summary
Let's

ing and I believe he is going to

registered bonds logical.

reasons

*An

of

stop

ca
called
upon to finance.

corporate paying agent
or

to open logical

of fully reg-

bonds for communities you

that

me

large enough to

use

within the state of issue, then we that this plan is not just for banks
and brokers, and that the issuer
believe
benefits
would
accrue,

to than

would

a

seem

is

major financial center,

a

that

thoughts I have expressed

apply

the

if

require

principle.

second

to

large? It would

wide

^

attorneys,

(2)

himself

We

heard

have

before

established

long.

that

Solving the Bond Coupon
Problem With Magnetic Ink
Continued from page 10
ber

system

There

developed

was

from

which

the professional buyers, the ones

these coupons. However, the for¬

coupon

that buy 85%

mat of the number is the

automation.

of the issues, want

that

registered bonds.

(3)

We

have

established

that

for

used

by

banks

items

cash

and

same

as

is

checks

on

thereby

several

are

advantages

for

is

that

conducive

more

size

new

semi-related to

are

One

additional

the

size

the

human

to

counting rather than the present

per¬

small, awkward size. (Have any
project, they will conclude
of you ever tried counting large
lieve in this project and indicate equipment to sort these coupons
what our thoughts are concerning that the registered bond is even¬
quantities
of
small
coupons?)
their belief by their willingness at high speed.
municipal
bonds.
In*- the
first tually going to become the stand¬
Another long - range
to waive charges.
potential Furthermore, the small size is dif¬
ard
thing
and
that,
instead
of
place, I want to make it( abun¬
that should accrue when a large ficult to use with such counting
(4) We believe that, from a
dantly clear that we do not think selling at a discount when com¬

like

that

a

little

fully

more

comment about

registered

bonds

are

ideal for all municipalities. To go
a

step further, I would

registered

bonds

are

say

that

probably

in this

pared to

a

coupon

good chance of selling at

a

a

pre¬

mium at some future date because
of the sheer logic

bonds.

It is not too

nicipalities. What do we mean by

to

start

favoring its

earl'y, in

examining

my

use.

opinion,

local finance

issuers

corporate

be¬

safety point of view, it is of na¬
interest

tional
wider

only practical for the large mu¬




bond, it has

important

Let
all

use

to

of fully

promote

the

registered

mits

present

of these

volume
in

are

is

the

the

this

conclude by saying that

the

elimination

of

the

envelopes.

program

needs to put it

an

To

the

on

'■

endorsement,

so

positor of the item

this

In

designed

that the de¬

on

be imme¬

than
to

ing

elimination of the

the

customer

ing these
there
new

is

the

great

As

use, we

efficiencies

clearing and paying of

which
as

coupon

functions,
have

been

elimi¬

being impractical under

consuming human labor.

the

♦An

address

Second

the

by

Annual

Mr.

Agnew

Municipal

COMPANY,

20,

1963.

INCORPORATED

Members: New York Stock

Exchange

Philadelphia—Baltimore—Washington Stock Exchange

Underwriters
unlisted

PHILADELPHIA TRUST COMPANY

municipal
railroad

Municipal Bond Division

utility,

and

stocks

bonds,

of

distributors

and

bonds

...

authority

listed

industrial

and

Specialists

in

bonds,

revenue

equipment trust certificates

railroad and

...

Public

securities,

and

Philadelphia bank stocks.

Philadelphia 9, Pa.

x

Telephone 985-8071
PHILADELPHIA

For direct

PITTSBURGH

•

NEW

YORK

dialing from N.Y. to Phila.: WAIker 5-1990

•

LANCASTER

the

sponsored by the IBA, Chicago, 111., June

coupons.

STROUD
&

at

Conference

Dealers in1

MUNICIPAL BONDS

pay¬

proce¬

as

should
in

and

present systems, limited by time-

prepar¬

of

accurate

more

cremation

nated

saves

soon

volume

large

style bonds in

obtain

it

of

job

envelopes.
a

but

new

banks

before. We shall be able

ever

dures

envelope help the collecting banks

paying agents,

a

the

enable

put back into the

the document itself. Not

only does the
and

perform

feel

we

will

coupon

..

efficient reconciliation of coupons

diately identified by his endorse¬
ment

^'4

summary,

MICR

side

reverse

can

"tickometer."

a

Summary

of

use

to
for

as

V'.v

public

make

coupon was

area

machines

style bonds

new

of

possible each
with

sorting

-

hands

coupon
me

reading

•

ALLENTOWN

•

DOYLESTOWN

Volume

198

Number 6280

.

.

.

The Commercial

L. Beck, Commercial & Financial Chronicle,
York; Sherman Ellsworth, Wm. P. Harper

Son

&

&

Co.,

Seattle

M.

J.

to

The
of

a

suit and there

the

abandoned

poned

or

indefinitely

post¬

will

underwriting
in

unless

that

It

way

by

of

bonds
is

remedy

suggested

for

consideration that legislation

a

underwriter.

the

and

opinion

this

of

would

risk

of

also

legislative

be

considered,

enactment of
states

bring

a

a

proposed bond issue. The
and

would

constitute

way

with

between

a

contract entered into

two

parties, in this case

tion,

also

as

to

proceeding for the valida¬
a

decree

party to interfere in any

the

issuer

the

conclusive

third

wit,

to

law in the various

authorizing

tion of

One

should

step

validation

a

long

a

suits.

nuisance

further

crime for

a

go

toward the elimination of the

be introduced in the various state

legislatures making it

observer,

law, which would make it

contracts,

could

made

be
a

decree

an

injunc¬

such

provided in the law,

venting the bringing of

any

the

of

time

pre¬

suit

Law's

to

Applicability

Municipal Sales

and

light oi: the anticipated
increase in volume in the coming
it is also suggested that the

years,

loss

upon

and

1934

the

of

suance

of

Act

origination and is¬

municipal and revenue

securities will take

increas¬

on an

ing significance. How often have
heard

we

ambitious

some

declaim

salesman

subject

are

require¬

material

the

to

misrepresentation of

fact

or

the

failure

material fact in

a

securities

of

possible
fact

latter

to

the

and

was

the

tween

check

issue

until

last

the

is retired

or

bond

the

of

redeemed.

"

only

of

in

will

issuers,
new

co¬

be¬

underwriters
in

and

order

to

issues that will be not

marketable

public

a

price

at

fair

a

and
in

those

but

purpose

interests of

appear

and

necessary

which the purpose of

suggested that in the light

foregoing, it would

be

attorneys

reasonable
Need for Greater Vigilance

also' that

seem

understanding

operation

to

individual

and

issue is truly

in

the

best

thp people and not for

private benefit.

that not only increased vigilance

Problem of State Jurisdiction

the

Since
"Great

experiences

Depression"

of

when

Continued

on

the
the

page

18

^Jlllllllllllllllllllllllllfllllllllllllllll!llllll»llll!llllllllllllllllllllllilllllllllllllIII8£

=

that

well

acceptance

upon

his

as

E

Pennsylvania and General
Market Municipal

=

Bonds

E

E

Specialists in Pennsylvania

E

Authority Obligations

E

E

the

is

It

of

document the underwriter

a

own

responsibility for all
representations contained

E

Industrial, Utility and Rail

|

E

Bonds, Common & Preferred Shares

E

assumes

the
the

sometimes

plead
avail

1

official

WOODCOCK, MOYER, FRICKE & FRENCH

1

E

INCORPORATED

E

the

=

underwriter
or

E
E

short

E

prospectus

or

Nor

ignorant

ignorance
of

li'eve himself

of

law
a

limitations
of

the

misrepresentation.

availing

himself

afforded

by

investor

has

a

can

the

of

himself

statute




greater

is to

industry

responsibilities

investors. It would

of

removed

profit

the

its

institutional

create

pre¬

relieve

liability.

offering statement.

York, New York

the

if

and

does

Nor

document

adopts the document

New

liability
not

t

to

up

to

the

risks

severe

underwriter
from

settled

such

Philadelphia, Pennsylvania

is

other

years

offer¬

an

subjects

penalties.

that

the

to

One Chase Manhattan Plaza

possible

the

In

Bonds issue but even more than merely
so-called ordinary diligence in the investi¬

pared by the issuer and delivered

Broad and Chestnut Streets

sale.

both

is¬

bond

revenue

Section of the Securities

"Fraud"

underwriter

Representatives

ing
live

his customer that Municipal

ing

iiii01NJilk

the
any

ond

will be required in the com¬

him

used in connection with the offer¬

Ln-nJ pihi LAI )EIJ>

in

sustained

preparation and filing of in determining whether or not to
a
registration statement but our submit a bid at public sale or to
salesman friend forgot to remind lend one's name to a
negotiated

ing prospectus or other document

Municipal Bonds

the

all

of

of

state

i

has

sues

municipal

It is

from the

he

and

of the

exempt

municipal

bring

deposited, but it will remain with

are

ment

damages

recover

preparation

and

prospective underwritings of

the sale and delivery of the

exempt from the Securities Act"!
True,

gation

from the

bonds—to

underwriter

bonds

tele¬

"But Municipals

phone:

misrepre¬

years

bond

the

over

the

of

that

words,

Securities

Exchange

10

through

the

a

in

to

event

relationship between the Federal
and

the

discovers

suit to rescind the contract of sale

the

In

Act and that

Dealers

he

offering

extremely costly to interfere with

severe

unreasonable de¬

is

the

such

in the future

adequate

In

such

tactics.

suffered

be

delivery

the
an

established.
your

these

groups

because of these

lays

instances

been

of

issuer

the

has

real danger

a

damage

are

financing

because

There is

13

validity

sentation—not

SEC

Municipal Business

Continued from page

where

Pitfalls in

the

contest

bonds.

Los Angeles

Lloyd B. Hatcher, White, Weld & Co., New York; Robert C. Tengdin,
Allison-Williams Company, Minneapolis; Floyd W. Sanders,
White, Weld & Co., New York

G. Hassman, A. G. Becker & Co., Incorporated,
Chicago;
Maxwell, The Northern Trust Company, Chicago; W. Neal
Fulkerson, Bankers Trust Company, New York

Elmer

James F. Rose, Howard, Weil, Labouisse, Friedrichs & Co., New
Orleans; Richard J. Franke, John Nuveen & Co., Chicago; Clarke J.
Robertson, Chapman, Howe & Co., Chicago; D. Dean Kaylor,
National Bank of Detroit, Detroit, Mich.

Beware of Legal

George E. Barnett, Jr., First National City Bank,
New York; John Kelsey, William R. Staats & Co.,

Richard O'Brien, Baker, Watts & Co., Baltimore; Christopher P. Sweeny, John Nuveen & Co., New
York; Richard F. Mulligan, Robert Garrett & Sons, Baltimore; Charles J. Martin^ Folger, Nolan,
Fleming & Co., Washington, D. C.; Henry J. King, Jr., Robert Garrett & Sons, Baltimore

Edwin
New

17

ancf Financial Chronicle

to

the

by =

remedy

Business

s

Founded

1842

jEj

-

|

MEMBERS
New York Stock

s

liability for =

Moreover,
of

re-

__

Exchange

American Stock
123

S. BROAD

•

Phila-Balto. Stock Exchange

~

E

Exchange (Associate)

|

STREET, PHILADELPHIA 9, PA.

t-1 New York: WAlker 5-0312 Teletype PH 160
telephones

^ Philadelphia: KIngsley 6-5000

*

s
—

court of equity the
10

years

from

the

nllllllf llllillllllllllllll IIIMMIMIIIIIIIlllllllll mill lllllllllllllllll IMIIIinilllllllim:

The Commercial ana Financial Chronicle

18

James

Tom W. Masterson, Underwood, Neuhaus &
Co.,
Inc., Houston, Texas; Donald L. Gumbiner, Stern
Bros. & Co., Kansas
City, Mo.

Richard

C. Swagler,-First Alabama Securities, Inc.,
Birmingham; William J. Riley, E. F. Hut ton &
Company, Inc., New York

The

Bond Business
Continued from page

keep

tinctly questionable in the minds
of

the

Tompkins (304 U. S.

in

place of costly and long drawn

Railroad

v.

64),

United

the

that

in mind

of Erie

case

States

Court

has

court

exercising

held

the grounds of

17

that

Supreme
a

Federal

jurisdiction

on

diversity of citizen¬

out

It is submitted that

jury.

too

in the past

bondholders

of

because

the

court.

In overruling the

holders and bondholders' commit¬

sthe order of the day, little
thought has since been given to

in the

case

Pet.

the

of

problem.

By

and

large, tax

collections have been satisfactory
and

tax

been

paid when due. As far

supported

history

of

cerned,

revenue

a

new

have

bonds

enforcement

as any

is

con¬

bonds constitute

the

land

distinct
in

for

Federal

a

joyed

by

great

extent

would

would
not

seem,

be

however,

that

lax, indeed, if

we

we

did

attempt to prevent difficulties

en¬

to

a

is

It

important to note that most of the
results

pression

It

has

disappeared.

bondholders in

payment.

the

formerly

bondholders

date

in

generations,

court

have bedn relatively untouched to

default

Tyson (16

advantage of bringing suit

type of security and they favorable

by

v.

Federal

and

period
courts

obtained
after

were

the

by
de¬

gained

in

sitting without

a

the

bondholders

too

often

were

from

arising in the future by keep¬

regarded by the members of the

ing

abreast

jury

of

these

times.

changing

tees

whose

rights,

if

any,

were

dis¬

be

empowered

in

suer

to

effect

default

protracted

and

to

litigation.

would, of

course, re¬

quire remedial legislation in
of the states

tions

in

the

power

well

as

trust

to

to

act

em¬

his

in

new

a

who

would

pro¬

Congress

(i)

public works proj¬
authorized

which have been

works

areas

bonds

and

bonds

to

use

and

(ii)

public

governments for which Federal
of financial assistance is authorized

substituting

under

be

areas

initially
sec¬

an

existing programs. Eligible
are

area

those designated

of substantial

(i) as

unemploy¬

lem

the

ceding 12 months by the Secretary

is

stage

quire

still

of

in

discussion

preliminary
and

will

re¬

the

of

of

The

5(a) or

Redevelopment

Area

Labor

or

(ii)

as

a

"redevelop¬

President delegated to

the

the

re¬

of

Secretary

Commerce

sponsibility for prescribing rules
and procedures

which will insure
the

that consideration is given to
relative needs of

projects of states and local

ment for at least nine of the pre¬

The

eligible

authorized

Act

areas.

an

aggre¬

gate of $900 million. Congress in
1962

appropriated

and in

$400

million

May, 1963 appropriated an

additional $450
the

Under

Facilities

Housing

million.

Act

the

Community

Administration

and

iHome

great deal of investigation

a

experts, there is

out

one

legal aspect

problem which should not

ignored.
that

It should be pointed

under

Uniform

the

provisions

Negotiable

of

Instru¬

ments Law and court decisions

an

THOMAS & COMPANY
PORTER

BUILDING

instrument, to be negotiable, must
be payable to bearer.

payable

to

would not be

a

as

to

a

the

a

bond

holder

negotiable instru¬

ment per se. It is

fore, that

Thus

registered

a

suggested, there¬

careful study be made

effect

that

the

law

of

negotiable instruments would have
on

the

bonds
*A
ond

talk

marketability of municipal
registered form.

in

by Mr. Mclnnes

Annual

Chicago,

111.,

IBA

June

before

Municipal
20,

1963,.

the

Sec¬

Conference,

PITTSBURGH

19.

PA.

of

the

Finance

by qualified market and financial

the




eligible

While the prob¬

be

Municipal Bonds

by

in

ondary market.

of the

Underwriters and Dealers

President to initiate and

izes the

look to the municipal

eliminating the

(b)
Act.

ects

conclusion, it is rumored that

Acceleration Act

Adopted in 1962, the act author¬

direct Federal

some

participation in municipal activities.
ment area" under Section

Public Works

work to the definite ad¬

are

presentation makes one want to pause and reflect upon

the extent of Federal financing

long

issued and later traded in the

PITTSBURGH, PENNSYLVANIA

this succinct

accelerate

there

in'Congress.

conditions, purposes and amount expended so far. The net effect of

procedure would in the

vantage of the bondholder.

different areas where such

ten

Handy pocket outline details dollar volume authorized, interest rate

that this

In

covers

many

capacity, but it is believed
run

municipalities

modifica¬

as

indentures

Trustee

registered

Members New York Stock Exchange

Eckrich, Mullaney, Wells & Company,
Richard G. Muench, Mullaney, Wells &
Company, Chicago

financing is taking place and two programs now pending

out

work

costly

and

This remedy

coupon

Company

J.

Up-to-date compact summary of Federal programs involving the fi¬
nancing of

refunding program in the best

business by

ESTABLISHED 1891

a

interest of both in order to avoid

vide

A. E. Masten &

Chicago;

Washington, D. C.

bondholder creditors with the is¬

foreigners and capitalists

as

Herman

Counsel, Investment Bankers Association of America,

composition of the claims of the

new

jury and not in state courts, where

J.
Saxon,
Comptroller of \ the
Currency,
Washington, D. C.; George Wendt, First National
Bank of Chicago

By Gordon L. Calvert,* Municipal Director and Assistant General

involved in prosecuting the

claim, the Trustee for the bond¬

a

James

Current and Proposed

ex¬

enforce defaulted municipal bonds

of Swift

Thursday, July 11, 1963

not

were

problem of trying to collect and

1), which had been the law

.

satisfactory financially to the

pense

decision

.

litigation, with results that in

many cases

ship must apply the state law as
declared by the highest state

was

Co.,

X. Coleman, Dempsey-Tegeler & Co., Inc., New York; F. E. Carter, Jr., Equitable Securities
Corporation, New York; Daniel E. Fitzpatrick, Fitzpatrick, Sullivan & Co., New York;
Ellsworth M. Shafto, Geo. B. Gibbons & Co., New York

in the decision in the

Municipal

Juran & Moody, St. Paul, Minn.; John J. Clapp, Jr., R. W. Pressprich &
Clayton F. Brown, The Northern Trust Company, Chicago; D. L. Pettis,
Kirkpatrick-Pettis Co., Omaha

Klingel,
York;

Francis

should

We

Legal Pitfalls in

E.

New

.

Volume

198

Number

6280

.

.

The

.

Commercial and Financial Chronicle

George Partlow, J. J. B. Milliard & Sons, Louisville;
A. J. Warner, Stein Bros. & Boyce, Louisville

Agency is making grants to
nicipalities
of

for

of

50%

construction

of

cost

for this

works

Total

(except educational facilities and
housing

projects)

initiated

which

accelerated

or

ble

(in

area

a

few

unless

municipalities receiving such
grants are unable to finance the
market

sonable"

terms," they

mined

"reasonable

on

technically eligi¬

are

the

and

rate

five years

turity,

II

(V4

Community Facilities Loan

bonds)

Community
of

Finance

Agency.

Housing

Authorizes

College

Home

and
loans

with

interest
fiscal

each

3% %

population

rate

year,

de¬
cur-

in

redevelopment

to

municipalities with population

up

to

loan

150,000)
shall

areas

provided,

be

made

financial assistance
otherwise

not

sonable

to

use

states,

tion

rea¬

by operation

and

related

educational

and

or

munici¬

lease in

the

urban

areas

terms
as

service

areas,

with

parking and other
facilities in such

$50

facilities

if

probability
could

million

of

Housing

there

that

the

undertaken

be

the

control

lowable

million

containing
lands.

large

1962

(b)

ect, to be eligible for grant, must
be

included

in

the

national

air¬

through

fiscal

1961

year

total

ter-municipal
limited

Finance

Home

30%

reasonable

thorized

extension

with

au¬

$75 mil¬

that

which

ending June 30, 1964.

one

Pollution

will

Control

the

Grants

Surgeon

case

of

serve

be

may

as

1961

and

project

more

the

high

(than

maxi¬
as

$2.4

amendments

authorized for fiscal years $80
million in

1962, $90 million in

Continued

General.

of

year

1961 ag¬
Housing

authorized

1961

additional

$300 million

1

in

of

each

in

on

page

of

by $10 million to

the

on

1961

of $58

million.

in¬

Amendments

Housing

total

a

j4.Cd//i/n dCo.

I

.

VI

Public

Housing

Program

MEMBERS

not

conditions

billion.

$1,675

creased

Administered

sources

favorable." Authoriza¬

through fiscal

through

is

funds

Authorized

started.

is

July

years

1961

Public

by

ing Administration.

housing
PHA

contracts

Hous¬

to

local

the

thority
pose,

to

housing

public

such

for

American Stock Exchange

au¬

UNDERWRITERS

December

1962

aggregated

iv

122 South La Salle

$3.8 billion.

•

45 Wall
VII

Area Redevelopment Act of 1961
available

which qualify as

opment

areas"

on

the

Urban

only

DEALERS

basis

of

Planning
Capital

30 Federal Street, Boston,

HAncock 6-4250

Renewal

advances.

Loans.

Relocation

grants.

pay¬

ments.
VIII

Highway Act of 1956

Administered
Public

UNDERWRITERS • DISTRIBUTORS

Street, Chicago, 341-3412

Street, New York City, DIgby 4-0909

in

"redevel¬

unemployment.

•

DEALERS

(a) Interestate

Bureau

system:

for

cost.

ILLINOIS

by

of

Roads.

grants

90%

Federal

project

of

Originally

authorized

aggregate of $25 billion Fed¬
eral

and

funds

1957
aid

General Market

•

Corporate and Municipal Securities

over

'

areas

DISTRIBUTORS

sold under such contracts through

1964.

Assistance

•

pur¬

debt service. Bonds

pay

(Assoc.)

contribu¬

pay

available

Midwest Stock Exchange

bonds.

tions necessary, with other funds
of

New York Stock Exchange

Local public

issues

authority

Federal

Municipal

fiscal

for

through

1969.

Underwriters and Distributors

years

Federal

of

Corporate and

Highway Act of 1961 in¬
authorization

creased

and Rcvfiniifi Rnnds

$11.56

billion to total of

$37 billion.

Interstate

planned

include

system

41,000

miles.

Tax-Exempt Securities

to

Presi¬

dent Kennedy in budget mes¬

in 1963 stated that

sage

miles

13,000

of

over

system

are

completed and another 15,700
miles

are

in various

stages of

William Blair &
135 South LaSalle

Company

Street, Chicago 3, Illinois

development.
Members:

(b) Federal-aid primary, second¬
ary,

urban highway systems;

Federal

grants

for 50%,

re¬

quire 50% matching funds by
120 So. La Salle Street, Chicago 3




(except

a

advances for

Agency. Authorizes

i

Financial 6-3344

$600,000,

or

municipality

million).

by

cost

the

in

lion for each of three fiscal years

Administered

project

estimated

of

whichever is smaller

amendments

Community
of

to

to

in¬

or

inter-state

or

agency. Grant for any

million.

1961

$5

year

construction

state, municipality

mum

b y

fiscal

each

grant agreements aggregated $573

X

Administration

authorized

1961

for

Grants
any

Amend¬

through 1968.

public

of

areas

Airport development proj¬

pollution

Water

for

assist in

maintaining

and

programs.

of

ments

project cost, except that

Grants

Planning

and

adequate

Authorizes Federal

Agency.

grants, limited to 50% of the al¬

V
Works

in

and for use in coordi¬

transportation

other

an

nating highway, bus, surface-rail,

underground,

tion

establishing

Avia¬

port plan. From adoption in 1954

grant.

a

(but not class¬

financing

from

Amendments

au¬

Federal

dormitories

if

equally

equipment

transportation

of

for

.

mass

Act

S%%)

colleges

"upon

the

public agencies to fi¬
and

Program

mined annually (presently

gregated
also

1961

interest

an

available

'
in

facilities

nance

for

loans
or

on

Loan

Housing

deter¬

rooms)

no

applied for is

terms."

thorized

palities

that

in

hospital facilities

at 3y2%

"unless

available

Amendments

rea¬

on

in Federal grants

in

case

at

without the assistance of such

Public

Authorizes

at

certain

(or

to 50,000

up

public
little

project

3%%

rate

to

municipalities

to

for

Administered by Federal

Matching grants to state and
interstate agencies to

1950, administered by Community public works planning, to be re¬
Administration of paid without interest if contract
H.H.F.A.

ent 1 y

million

(a)

Airport Act

Facilities

with

loans

termined

available

Facilities

Housing

Authorized

lic

r

than

Federal
facilities

terms.

$75
is

ma¬

by

,

Federal

at

a

for

Administered

maturities up to 40 years for pub¬
facilities

for

years or

Ill

Adminis¬

Facilities

tration

4%

(c)

rea¬

Federal

Water

Administered

1955.

obligations

at

financing is not

sonable

pres¬

not

Trohan, Chicago Tribune, Chicago; George
Wendt, First Ntztional Bank of Chicago

grant may be 75% in some states

public

otherwise

deter¬

lower in each

1%

Authorized by Housing Amend¬
of

if

redevelopment areas).

Program

ments

3 V2 %

at

as¬

is

available

million

$100

The "rea¬

less for each

less

not

(b)

for

shorter maximum

but

or

1%

of

is

for

terms.

loans

maturity of 30

Vs

or

sonable

sources

interest,

general

revenue

more,

Program described below.

assistance
other

terms."
of

(for

maximum

Facilities i Loan

Community

from

administratively,

is

ent

ble for loans from the CFA under

financial

"reasonable

on

balance of the project cost in the

private

the

available

not

financial

applied

otherwise

loan be made

no

to 65% of

up

if

cost

sistance

commercial

or

projects,

project

of Dec.

as

industrial

usage

$650 million.

Key to applicability of program
is condition that

the grants ;

cases

aphorized:

for

B.

IX

(a) $200 million in Federal loans

assistance.

of

a

be made for up to 75%). If

may

auJfaorization ear-marked

tyj|e

Walter

Clauson, Goldman, Sachs & Co., Chicago; William C. Glasser, Goldman, Sachs & Co., St. Louis;
Faust, Kidder, Peabody & Co., Chicago; Bill Armstrong, Kidder, Peabody & Co., Chicago

31, 1962: $198,690,000.

eligi¬

an

N.

Total net commitments

be

can

within

reasonably short time in

John

total

mu¬

the

public

John K.

19

312 222-0429

state. Authorized $925
annual

rate

1962 and

for

1963.

million

fiscal

years

New York Stock

Exchange, Midwest Stock Exchange

20

20

The Commercial and Financial Chronicle

_

Sampson Rogers, Jr., McMaster Hutchinson & Co.,
Chicago; Newman L. Dunn, Robert W. Baird &
Co., Inc., Milwaukee ,'Y
YY Y'

Hill, Malvern Hill & Co., Inc., New York; T. Anthony Coculo, Fidelity-Philadelphia Trust
Company, Philadelphia; Edmund G. O'Leary, Eastman Dillon, Union Securities & Co., New York;
Steve Brown, Barret, Fitch, North & Co., Kansas City, Mo.

New

Programs Pending in

Proposed "N

Numerous

1963,
year

least

be

in

of the

funds

used

struction

each

provided

1964-1967;
50%

19

million

$100

for
of

for

grants

treatment

con¬

serving

at

municipalities

125,000 population

or

1 Education

aid

programs

in

580

the

into

of

parts

IBA

a

or

revenue

bond

state

its

bonds is¬

face

guarantee any

that

favorably

ommended

expressly
the

bill

the

issuer

House

by the

as

not

Rules

House

(H. R.

sideration

the

cleared

Committee for

con¬

the House.

in

r

speak¬
Municipal Con¬
IBA, Chicago,

♦Outline used by Mr. Calvert in

ing at the Second Annual

sponsored by the
Illinois, June 21, 1963.
ference

The

April 9

bill

President, but

yet

ex¬

emption for the interest on such
bonds.

on

a

public 3881) similar to the proposal rec¬

local

shall

Committee

Currency

reported

proviso that to be
a

Urick, Continental Illinois National Bank
Company, Chicago; Henry W. Peters,

Peters, Writer & Christensen, Inc., Denver

and

Banking

opposing

Act

proposed

the

Trust

Thursday, July 11, 1963

at hearings

in the House and Senate

those

revenue

states

bodies, with

on

&

single has waived the Federal tax

a

The

Senate.

statements

submitted

duPont
I. & Co.

this

education

to

by

.

aggregate of $375 mil¬

eligible for such

bill, H. R. 3000 in the House and
S.

Francis

1963"

Act of

lumped

were

of

under.

o n a

proposed

for Federal

works
year

shall

t i

a

Improvement

an

of transit

sued

Federal Financing Programs
Continued from page

antee of

lion

Congress

.

Charles A.

Malvern

Current and Proposed

.

authorize!:

which would

(a) $1.5 billion in Federal grants

Stocks

Bonds

.

next four

the

over

the

Commodities

of

cost

elementary

for

years

50%

of

construction

of

salaries

teachers'

or

Sanders

secondary

and

school facilities.
Underwriters, Distributors, Dealers in

REPUBLIC

loans

Federal

Christiana Securities

fiscal

three

Company, Common and Preferred

York Stock Exchange

ONE W ALL STREET
Tel.: DIgby 4-2000

•

Cable: Rhetpont

Over 90

that

at

fi¬

be

non-Federal

from

nanced

Offices Nationwide and Abroad

higher

construction

the

of

BLDO•

Dallas

one-quarter of the cost

least

Teletype: 212-571'1862

aca¬

for

requiring

versities),

NEW YORK 5, N. Y.

next

Exchange

BANK

(colleges and uni¬

education

Principal Security and Commodity Exchanges

the

for

over

years

facilities

demic
Members New

NATIONAL

(b) $1 billion in low interest rate

CORPORATE AND MUNICIPAL SECURITIES

Company

&

Members New York Slock

sources.

D:

Proposed "Urban Mass Transpor¬
tation

1963"

Act of

President

Kennedy

QUOTED

recom¬

mended adoption of an Act to au¬

TJ3SrDER.WR.ITEK,

ing

million

$500

three fiscal

DISTRIBUTOR

grants aggregat¬

Federal

thorize

and local

next

the

over

years

to assist states

public bodies and agen¬

DEALER
cies thereof in financing facilities

Republic
State, Municipal, County 8e [District Boxicls

Obligations of Authorities
IPublio Utility & Industrial

and

equipment for use, by opera¬

tion

or

lease

service

Preferred & Common Stook.s

with

hearings
House

goutfuoedt

highway

submitted

IBA

COMPANY

On

in

in

areas.

Dallas,

Texas

and

Senate

the

S. 6 which would authorize
DALLAS

DEALERS IN

The

statements

Senate

the

4

Rl 2-6181,

such

and other

at

MUNICIPAL SECURITIES

the

opposing the proposed Act.
April

Bldg.,

urban

coordinating

transportation in such

Bank & Insurance Stocks

FIRST

service

in

arid

areas

Bank

otherwise, in mass

or

transportation

Bonds

National

passed

FIRST NATIONAL BANK
OF

FORT

WORTH

(a) an

aggregate of $375 million in Fed¬
eral

grants

fiscal

years

of the net

H18 i I




■i3l

not

be

over

for

the

up

next

three

to two-thirds

project cost which can¬

reasonably financed from

revenues

and

(b)

Federal

guar¬

NUMBER ONE BURNETT PLAZA

FORT WORTH, TEXAS
817 891-8105
EDison

The Bank Wire

6-9161

Volume

198

Number 6280

.

.

.

The Commercial and Financial Chronicle

Donald

Frank P.

Trust

George C. San-is, White, Weld& Co., New York;James A. Hurley, L. F. Rothschiltf & Co., Chicago

C.
Patterson, Chemical Bank New York
Company; George B. Wendt, First National
Bank, Chicago; Russell M. Edgood, Jr., Stroud
&
Company Incorporated, Philadelphia

however, that

mean,

Running

Municipal

a
n

1 •

centage

of

e.

7.

properly

classification.

members.

manager

f.

Carry arrangements.
g. Settlement of account—clos¬
consider

us

"moral"

It

important

is

now

in

this

differences

of

the

area

that

of

opinion

arise which lead to many mis¬

can

a

different

scriptions, including his
unbiased

manner,

own,

in

to

manager

subscriptions.
own

Most

the

that

and his terms of the syndicate agreement

of

his

own

adhered to.

are

At last year's con¬

of the

one

panelists stated
have

certainly his mained essentially unchanged

sales organization should not
access

the duty

see

that the usual contracts

to the detailed record

of members'
"Moral" Responsibilities

the

of

ference

character

orders.

the years.

re¬

over

I believe that this is so

and that they will still serve

isfactorily if all parties

sat¬

the

agreements.

ing to commit to the account ade¬

side the account confirming bonds
to members' customers in maturi¬

quate and well-trained personnel

ties that have been oversubscribed.

contracts

who

While this is impossible to control

to and because of this the door is

entirely,

an

left

minimize

the

the

first

place

the

manager

should have available and be will¬

capable of providing the

are

necessary

leadership

for the group.
venture
ager

in

I

and

service

Since this is

believe

should be

that

frank

joint

a

the

man¬

alert

manager

can

possibilities of this

occurring.

respective

they

The

disclosing to the account at the

sometimes presented when prior¬

the

ity orders

in

proper

time the extent and nature

of the presale interest

as

it.

an

I believe that it

is

he

sees

obliga¬

tion of the manager to treat
pri¬

ority orders
has

been

sist any
ness

in

the

manner

agreed upon and to

that
re¬

temptation to retain busi¬

for

his

own

account

that

available

are

likely to

bonds

without

exhaust

ing it is
a

It

to me that
poor

generally speak¬
policy not to reserve

fair percentage of bonds for in¬

dividual

retail

members'

demand

subscriptions.

through
I do not

cases

times

problem

the

bid

a

it

that

and

doubtful

is

his

on

integrity.

I believe the

other

opinion rather than

obligation

an

for

the

Nothing

group.

irritating than for
sell bonds

sion

of

that

calls

all

the

be

at

that

any

long

expenses

sonable

limits

within

and

Continued

bid

to

on

rea¬

items

page

22

& Co.,

Inc.

Exchange

Midwest Stock Exchange

Bank

Insurance

and

Company Stocks

course,

Public

Utility, Railroad and Industrial

Bonds

•

Preferred Stocks

Dallas

lf Texas

for

Except

exists

excuse

Mercantile

without

AUSTIN

.

the

over

CORPUS CHRISTI

•

HOUSTON

majority

opinion,

Dallas

.

Building
Riverside 8-0111

.

for

to confirm bonds at

my

Common Stocks

•

approval

where time pressure

prices
In

Holding

to

Municipal Bonds

the

agreement

majority

valid

approval.

c.

mdre
a

settlement

after

with the issuer.

Sto^k Exchange (Assoc.)

be

resourcefulness

changes.

manager

special

is

level below

a

American

key factor it is seldom

a

customers

assume

account

an

of

redelivery

prompt

bond to members and group

when

focus

syndicate

cases

may

The

b.

seek

on

for

price

rare

interest in the event of legal

problems affecting the issue.

in

Member: New York Stock

occasions is
to ignore the usual provi¬

prone

The protection of members'

a.

Rauscher, Pierce

anxious to reduce the balance but

unfortunately

of mention:

man¬

to

responsi¬

moral

of

that he always knows what is best

balance

He is, of

still

other

bilities the following seem worthy

account

proposition,

falling market.
circumstances

Among

some

can

sizable

a

the

has

these

of

which

matter

a

that

cases

previously

Other Responsibilities

been

considering.

ager

always adhered

tests

has

a

would not expect him to report a

ridiculous

made

been

report.
has

manager

when

had

but which the manager failed to

com-

made for bonds which he himself

entirely justified.

are

which

the

as

these

upon a manager occur

and his

the

Distributors

At

to complaints which in

spotlight

the

•

not

account has

a

of

Underwriters

provisions

are

These

consid¬

ering members' orders at all.
seems

soon

which

under

Unfortunately,

severest

placed

obligations

assumed

basic

open

many

In allotting bonds a problem is

as

have

the

of

possible

as

as

conveniently

out

carry

There are few things more an¬
noying than to find a dealer out¬

In

made

be

A. G. Becker & Co., Incorporated,
Chicago; Alan N. Weeden, Weeden & Co., New York

municated to them.

judgment

It should certainly be

members should not influence the
or

has
can

Granted

Agreement

amount

have

understandings.

Sticking to the Terms of the

strict obligation to

a

account

details

does not feel is worth

Needless to say, the

briefly the knowledge of orders filed by other

responsibilities

manager.

has

in

This is

upon the manager

allot bonds against members' sub¬

an

ing statements.
Let

belongs

Redelivery to customers and

per¬

should

basically an
an account
account problem but

l

byndicate rroperly
Continued from page

fixed

a

maturity

each

necessarily be available.

TV

»

Walter A. Hintz,

Magoun, III, National Shawmut Bank, Boston; Robert J. Mullens, J. J. Kenny Co., New York;

•

LUBBOCK

ALBUQUERQUE,

•

FORT

•

MIDLAND

•

WORTH

ODESSA

NEW MEXICO

•

SAN

•

HARLINGEN

•

ANTONIO

•

TYLER

FAYETTEVILLE, ARKANSAS

nothing of value is gained

run

by failing to discuss mutual prob¬

State, Municipal and Housing

lems

with
in

and

mation

Authority Bonds

the

the

account

members;

fact much valuable

is

often

tedious

of

process

Of

group.

acquired

polling

in

course,

infor¬

m

mmmm

i

have

Makejjj§r

business within certain limits and
in

effect

gives him the

Censures

the

FIRST NATIONAL BANK IN DALLAS

could

properly

censured.

bonds

P. O. Box

6031, Dallas 22, Texas

Telephone Area Code 214, Riverside 8-5471




•

Teletype 214-899-8664

siderably

This

ings.

I

stances

am

of

not

referring
sales

below list but to spreads
more

basis

points.

circumstances
may

the

be

due him.

advised

of 20

Under

all members

Bon d s

MERCANTILE NATIONAL BANK at Dallas

or

these
buyer

should

special sales

i ci p af

in¬

to

slightly

small

un

offer¬

In this connection I be¬

of

M

con¬

not receive the consideration

lieve that

.

the

the manager

published

volume

..

our

is

negotiate sales

under

Mercantile

one

occasions

on

but giving

authority to

BOND DEPARTMENT

on

practice of maintaining list prices
on

mmmmm

rtorlite

for which I think

industry

im

Industry

I should like to comment

procedure

m

nec¬

majority consent.

essary

,,

au¬

thorized the manager to negotiate

this

WMmmmmmm

-

a

in¬

many

stances the account may

mm

during

that

be

the

Dallas
Area Code 214
TWX

Representative
•

Riverside 1-4181

214 899 8581

Ar^iili|«
TWX

212

2if571

•

—

40 Wall Street

BOwling green 9-5393

0388

The Commercial and Financial Chronicle

22

Arthur

E.

H. Davis, John Nuveen & Co., Chicago;
Edward J. Dempsey,
Bacon, Whipple & Co., Chicago; W. F. Morgan, Blyth & Co., Inc.,
York; D. M. Ellinwood, Moody's Investors Service, New York

Manhattan

I

Listing Group Sales

from page 21

W. M.

Charles L. Ledger, Schwabacher & Co., San Francisco; B. Newton
Barber, W. H. Newbold's Son] & Co., Philadelphia; Richard Murphy,
B. J. Van Ingen & Co., Inc., New York; G. Philip Whitman,
Hartford National Bank & Trust Company, Hartford, Conn.

Murray Mumma, Warren W. York & Co., Allentown, Pa.; Norman
B. Ward, Jr., Singer, Deane & Scribner, Pittsburgh; Harvey L. Zeve,
Singer, Deane & Scribner, Youngstown, Ohio; Edwin F. Scheetz, Jr.,
Moore, Leonard & Lynch, Pittsburgh

Continued

National

First

to allow his name to be

Ewing,

properly

chargeable

to

the

believe

seems

d. The

prompt

syndicate
proper

settlement

accounts,

statements

of

with
of

ex¬

a

last

point

about

sales deserves emphasis.

group

account.;

the

to

group

me

sale

taking

some

bonds

every

that

is

of

since

in

It

effect

accomplished by
each

member's

participant

in

the

account is entitled to know what
penses,
records

sales
and

performance
list

of

group

sales.

happened
also

to

This

should

apply to designated sales

cept where

v

them.

ex¬

the customer refuses

and

the

that

basis.

—

Distributors

them

Dealers

ing.

•

the

•

i

to

work

common

a

a

•

to-

.

interests

i

spirit of fair play.

,

..

,

_

__

■.

„

address by Mr. Fulkerson at the
Second

Annual

sponsored

by

Association
of
21, 1963.

Conference

Municipal

the

Investment

Bankers

Chicd§[Oy

Ani6i^iC3)

JLll*^

june

rapid

the

is

5,000

de¬

Trading Desk and Secondary Market

accepted

now

without question and this is prob¬

Continued from page 6

default

to revert by

developments which will lead

traders in the larger cities.

efficient

merchandise.

We

amazing
will

chines

are

business.

era
ma¬

major role in

a

In these

areas

where

great improvements are bound to

sound

believe

l

manager

the

syndicate

should be alert to

new

to the active

sponsor

ideas which will bene¬

better

Promoting Better Public Relations
Before

closing, I offer the sug¬

gestion that the dealers
prove

im¬

their functions in the sec¬
market

ondary
better

can

promoting

by

public relations through the

Publications such

as

"The Bond

carry

excellent cov¬

erage of secondary

activities. The

Buyer"

now

and the

a

result of
the

between

press,

the public

beginning to get the idea that

the municipal market
what

is

no

called

it

a

He likened it to

a

writer

one

days ago.

Mortgage

nicipal

the

blame

them to do
After

local press.

as

cooperation

traders
is

appar¬
an

computing

play

to

handling

threshold of

the

on

of

means

activities, and

our

ably just the forerunner of other

evolve

SECURITIES

instance,

For

nomination bond

our

MUNICIPAL and CORPORATE

ii

in

re-

v.:

,.

of

many

the

from

,.

i

Obligations

spective

there gether for their

years

technological

business,

our

stemming

ently

—

on

increase in state and local borrow¬

where

Underwriters

recent

great

changes in

our

1917

In

been

Wright, Jr., Kidder, Peabody & Co., Philadelphia; Robert W.
A. E. Masten & Co., Wheeling, W. Va.; R. Gerald Coghill,
Bank & Trust Company, Winston-Salem, N. C.;
J. B. Shumate, First National Bank, Miami, Fla.

given up the members recognize their

accepted

was

•

have

more

ESTABLISHED

order

Thursday, July 11, 1963

Wachovia

..

I

.

Leland E. Tanner, American Fletcher National Bank & Trust Co.,
Indianapolis; Saralyn B. Marcum, Bache & Co., Chicago; Jerry K.
Pickell, Continental Illinois National Bank & Trust Company, Chicago

National Bank,
Chicago;
John J. Ward,
Bank, New York;- William M. Durkin,
Bank of Chicago, New York

First

Gorman,

Chase

New

t

.

all,

Let's

few

Mu¬
Don't

market.

writers.
a

longer

h

e

1 p1

better reporting job.

customers

read

news¬

papers.

—

fit the entire investment field.

STERNE, AGEE & LEACH
Members
New

American

York

Stock

Exchange

Stock Exchange

(Assoc.)

In

Montgomery

dicate

operations

realized that

will

Between

is

in

New

York

expressed greater interest in

♦From
Second

an

June

address by Mr. Milner at the
Bankers Association

Investment

Municipal

20,

Conference,
1963.

Chicago,

Illinois,

functioning

typical account

a

of

dealers with diverse

Offices

Goldman, Sachs & Co., New York

geographical

interests

There are,

derstandable

ion
we

mijght

or

opin¬

Still

cates.
most

it

of

to

would

tend

bility

which

ditions.

ing

I

Columbus, Mississippi

EXCHANGE

than

through industry-wide rules which

evolved

First Columbus National Bank Bldg.

STOCK

settled

rather

account

—

PHILADELPHIA-BALTIMORE-WASHINGTON

that

me

be

can

MEMBER

or

syndi¬

our

seems

problems
each

efficient

more

to

remove

is

flexi¬

the

essential

so

meeting constantly changing

Mississippi's Oldest Municipal Bond House

CORPORATE SECURITIES

recommendations which

result in

within

Investment Bankers

of

practices and

some

fairer-operations

CADY & COMPANY

MUNICIPAL BONDS

course, un¬

differences

regarding

local

and

of

should welcome any informed

opinion




have

writers

bring together many differ¬

customs.

Telephone FAirfax 8-1370

financial

particularly when it

pretty well,

ent kinds
Private Wires
Direct Private Wire to

that

say

the present machinery of our syn¬

is

Birmingham

conclusion, I would

Our
as

as

the best

specific

confident

usual,

lenges
age.

I

current

of

present

that

the

meet
a

will,
chal¬

that

methods

can

mechanized
most

of

work

FIRST

am

future

highly

believe

I

our

quite

well if the syndicate manager and

MAYES

&

Incorporated

of meet¬

and

industry

the

HENDRIX

procedures

means

problems

in

con¬

NATIONAL

BIRMINGHAM
Bell

Teletype—205

328-1311

BUILDING

3, ALABAMA
Telephone—322-6664

Branch—Montgomery, Ala.

Volume

Winston

Henry

Number 6280

.

.

.

The

Commercial and Financial Chronicle

L.

J.

Walter

198

H.

Molander, Northwestern National Bank, Minneapolis';
Kieper, New York Hanseatic Corporation, New York;
Stohl, Fidelity Union Trust Company, Newark, N. J.

John

Rowland

A. Radford, Jr., The
Robinson-Humphrey Company, Inc.,
Atlanta; Walter E. Knowles, III, First Boston Corporation, Chicago;
Alan C. Snodgrass, First National
Bank, Fort Worth, Texas

23

J. Ward, The Chase Manhattan
Bank, New York; George
Brooks, Dick & Merle-Smith, New York; John E. Stalford,
The Chase Manhattan Bank, New York

Robert

Albert

Broadening the Municipal

made

Investment Areas of Banks
which

I

seek

to

Register"

accomplish

or

have accomplished.

pleasing

to all members of IB A municipal

but

might

I

well

as

tell you

this frankly; I hope
will appreciate that much.
There
course,
are

to
a

interested,

very

you

which

on

some

we

action. But

important

able

of
we

hope

this is

one.

This is

Now, if I may, I would like to

lation

has

to the investment regu¬

over
as

we

been

here

filed

in

propose

the

have

our

here

easy

proposed
work¬

more

a

intelligible

no

a

regulation.

task. We did start

regulation

standpoint

grapple
has

it.

It

"Federal

with.

amounted

which,

and

that

from
the

of

years

a

It

amounts
to

confusing

for

to

all

of

of

useful

standards.

It

has

eight

nine

or

review
We

months

would

banks,

investment
will

hope

lawyers,

and

care

ments,

that

with

Bank

Burns,

of

Rhode

Corbett

&

Island,

Providence,

R.

for

Underwriters

Firm Bids

a

:

+■'■,

Distributors

Firm

Offerings

Dealers

Quotations

and

com¬

recom¬

they

as

United States

Government Securities

General

Market

Municipals

or necessary.

5% Investment Limit

Substantively
certain

have made

we

number

which would

of

changes

enlarge, to

a

here

THE

some ex¬

tent, the flexibility of commercial
do

asoect to

with it in its present form.

refer

I

First N<

il Bank

dealing with this area,
not

here

refer

OF

this

in

MEMPHIS

underwriting. What I do
is

to

the

enlarged,

modestly enlarged,
vestment for

the

TELETYPES

(Area Code 901)
WIRE

account by such

own

TELEPHONE

278-1591

525-8521

in¬

for

scope

SYSTEM

—

BANK

THE

WIRE

banks in securities up to a limited

percentage, the first time this has
been
IKE

D. SCHARFF

JAMES E. RODDY

JOHN J. ZOLLINGER, JR.

employed

generally,

of

qualified

vestment

and

and

an

what

best,

TELEPHONE

CARONDELET ST.

here

we

504-822-5200

504-524-0161

NEW ORLEANS 12, LA.
SHREVEPORT, LA.

department

ground
exist

ROUGE, LA.




this

that

certainly

by

in¬

reflected

the

Northern, the

on

and

LAFAYETTE, LA.

other

from

own

AND COMPANY

211

on

Carond.let
Now

to

ap¬

and

page

34

(~

<~)ecUtlt<luiSt.

Orleans,

—

B24-2711

La.

MEMBERS NEW YORK STOCK EXCHANGE

of profes¬

able

standpoints, the

Continued

crAnvedment

would

engineering

investment

Howard, Weil, Labouisse, Friedrichs

or

the

on

there

group

a

their

MUNICIPALS

n

California,

order,
here

MISSISSIPPI

bond

JACKSON, MISS.
praise,

BATON

the

of

Wells Fargo, United

sionals
'

"established"

Harris, the Continental, the Chase,

of

AND

by

mean

department is

illustratively,

banks

L O U1SIA NA

terminology

understandable form,

"qualified" and
vestment

a

in¬

bond

or

have struggled hard to

we

frame in

140

*

the basis

established

departments

departments. This is
which

TELETYPE

on

limiting it to those banks hav¬

ing

INCORPORATED

5%

a

limitation of certain securities.
We have done this

Scharff L Jones

'v'.v

utmost

such

change

warranted

may see

in

—Editor.

I.;

Pickard, Inc., Chicago

the

of

the

submit

criticisms

mendations

and

at

Jr;, Stern, Lauer & Co., New York; John Howard,

National

Pickard,

affected

members

it

will

extremely difficult for this
office through the years to grapple

appear

reached

banking fraternity, all

examine

banks

of proposed new regulations
end of Mr. Saxon's remarks.

Sipp,

Art

I

proposed rule making.

as

been

1 Full text

half

a

L.

Industrial

have

we

and

year

Paul

point of publishing this ruling for

and

collection

the

in

have been in this office, this being
the last major area, we have after

these

rulings, interpretations, prohibi¬
tions, limitations, as well as a
lack

Proposed Investment Regulation

get

we

and

with

offi¬

appear

banks, has been very difficult to

are
other
matters,
legislatively, in which

secure

What

will

and

June 21.1

on

mainly is to make

I know this is not very

fraternity

cially

Jones, The Columbian Securities Corp., Topeka, Kansas; John D.
Cleland, Seltsam-Hanni & Co., Topeka, I^ansas; Bob Schadffer,
The Columbian Securities Corp.,
Topeka, Kansas

C. Winfield, A. G. Becker & Co.
Incorporated, New York;
Stortz, National Boulevard Bank, Chicago; R. C. Garraway,
Deposit Guaranty Bank & Trust Co., Jackson,1 Miss.

In line with the efforts

Continued from page 3

Ed

H.

Branches

in:

Magnolia,

Arkansas

—

Monroe,

Alexandria,

Lake

Charles, Baton Rouge, Covington, Shreveport, Louisiana—Jackson,

Laurel,

Natchez,

Vicksburg,

Mississippi

—

Memphis,

Tennessee.

The Commercial and Financial Chronicle

Sherman

Ellsworth, Wm. P. Harper & Son &

Co., Seattle; David J.

York;
Hauptfleisch, Goldman, Sachs & Co., New York

Barry, Manufacturers Hanover Trust Company, New
*

Louis A.

G. Schelke,
Seattle First National Bank, Seattle; T. Russell
McConchie, Virginia National Bank, Charlottesville, Va.; Jack D.
Howe, F. W. Craigie & Co., Richmond, Va.
W.

.

.

Thursday, July 11, 1963

.

Newell
S. Knight, First National
Bank of St. Louis; Charles E.
James, Valley National Bank of Arizona, Phoenix; Joseph E. Refsnes,
Refsnes, Ely, Beck & Co., Phoenix

Paul E. Uhl, United California Bank, Los Angeles; Thomas E. Morris,
United California Bank, Los Angeles; Claude C. Richards,

Joseph M. Luby, Paine, Webber, Jackson & Curtis, New York;
T. Norris Hitchman, Kenower, MacArthur & Co., Detroit; Parks B.
Pedrick, Jr., Howard, Weil, Labouisse, Friedrichs & Co., New Orleans

Thomas

R. H.

W.

&

Moulton

Ca., Los Angeles

W. Hanlon, First National Bank of Denver, Denver; Aaron
Pleasants, First National Bank of Denver, Denver; Arthur P.
Quinn, Quinn & Co., Albuquerque, New Mexico

Broadening the Municipal

by such authorities.

Prudent

paragraph 7 of 12 U.S.C. 24. These

23

quality of securities and afford it,

Corporate and Municipal

proposed here, this flexibility.

as

Public

Investment

and

have

We

the

of

also

meaning

revision

a

the

„of

term

"political subdivision" by includ¬
ing within
term

municipal

have

New York

Washington

Baltimore

Philadelphia

Wilkes-Barre

Newark

Pottstown

New Canaan

Bethlehem

Clifton

and

recognition of what

a

been

doing

recognition
thus

Montclair

corporations

public authorities. This is, in fact,

simply

Exchange

of that

the definition

issued by such

porations
of

which
brace

a

here

are

cor¬

term

new

using to

obligations

general

United

securities

organizations,

security,

we

regulation,

the

to

a

authorities the status

or

public

basically,

this

in

affording

we

em¬

the

of

ex¬

the

define

we

I

noted

municipal

earlier,

corporation,

owned

entity

term

state,

a

include

to

a

public

a

authority and generally
licly

pub¬

any

which

instrumentality of the state

is

an

in fact,

of

the
a

subdivi¬

sion thereof, we have heretofore

it

obligation

to

mean

faith and credit of the
terms

of

fulfill

to

supported by

is

can

indirect commitment

an

decision underlying jome of the

recent

Issues,

the

publicly

Underwriters & Dealers in the

are

to

Several

States and their Municipalities

owned

here, of

the whole, so far as we

found

are

have

other

have

We

the

for

established

a

new

first

time

test

with

obligor in respect to all securities, whatever

certain securities

by municipal corporations

issued

or

pub¬

lic authorities. This would include

their

character:

vestment

is

subject

namely, that

to

the

exercise

made

revisions

point

reorganized it to give
suitable

more

a

should like to

now

out. We first

Area Code 617

TWX 617-451-3701

think

this

observed

hope—and

we

as

will

be

"investment
term

mean

an

will

—

the

.

define

EXCHANGE

UNDERWRITERS

-

DISTRIBUTORS

-

DEALERS

to

not sub¬

.

STOCK

term

security"

obligation ".

MEMBER

PHILADELPHIA-BALTIMORE-WASHINGTON

security." We

"public

1920

Johnston, Lemon & Co.

be

examination.

on

ESTABLISHED

under¬

and

We have here defined

the

MUNICIPAL SECURITIES

regulation

which I

I

Telephone LAfayette 3-6800

this

in

MARYLAND, VIRGINIA, and GENERAL MARKET

of

number

a

area,

standable form,

Street, Boston 6, Mass.

We

referring only

Southern

Building, Washington 5, D. C.

ject to limitations and restrictions
as

to

dealing,

purchasing."

The National

underwriting
define

We

securities" to

mean

(a)

an

x

Telephone: STerling 3-3130

and

"public

Bell

Teletype:

tion of the United

States; (b)

general obligation of

of Boston




any

other

obligations

any

state

political subdivision thereof;
(c)

Dept. 202-965-0887

obliga¬
Direct

Shawmut Bank

Municipal

listed

or
our

and
in

Private

Phone

to

CARL M. LOEB, RHOADES &
New York

in¬

underwriting of any

or

of

dealing with the investment

it

40 Water

authorities."

course,

legally

acceptable.

an

full

the

on

advised,

are

other

or

public securities.
We

General Obligations of the

"subdivision

term

corporations

there

which

with

not be total agreement; but

States, states and munici¬

municipal

This is

essential basis in principle of

palities, and including within the
latter

cer¬

be and,

full faith and credit.

a

defining the general obliga¬ which

defined

Georgia Securities and

tain others that there

may

tion of any state or any

principal under¬

lying recent rulings of this office

or any

subdivision thereof.
In

get promptly, therefore, into

the matter of the

in the

empt by statute.

as

made

specifically

"political subdivision" of

Security

Securities

Members New York Stock

the securities

are

Then

Defines

Auchincloss, Parker & Redpath

Securities
We

Continued from page

of

Banking Test For All

Investment Areas of Banks

Underwriters and Distributors

is¬

securities

obligation

general
sued

CO.,

Correspondent

of

a

Volume

198

Number

6280

.

.

The

.

Commercial and

William

H. Thayer,
Woodard-Elwood Co., Minneapolis; James M.
Kinsman, Jr., The Kentucky Company, Louisville; Ralph M. Pierce,
McDougal A Condon, Inc., Chicago

this

also have

we

And

defined.

chinery
tion

W.

P.

Ruled Eligible

by the

that

Comptroller
There
and

of

is

other

one

course

I

am

deal with this in

We

member

rity,

a

class

eligible

security

investment

trying to

great detail here.

establish

further

investment

category,

not

of

for

by national and state

banks,

being

investment

secu¬

any

security,

ruled

eligible by the Comptroller of the
Currency.
We

lating

to

with

retained,

previous

changes,

some

provisions

re¬

securities,

convertible

amortization of premium and cer¬
tain

other

We

matters.

provided for the first time
cedure

request
We

are

whereby
a

would

be

of

regulation

have
a

bank

a

providing

the

Bergquist, First National Bank of Chicago; Theodore
Griffinger, Bank of America, N. T. A S. A., San Francisco;
Lewis F. Lyne, Mercantile National Bank, Dallas

it

a

serious

this
were

would

the

bonds generally.

case.

all;

Banks"

mis¬

rev¬

This is not

This must be obvious to

otherwise, we would not be
so vigorously the legis¬
which

would

authorize

underwriting and dealing in
enue

bonds

case.

all;

powers,

"There

rev¬

a

pro¬

Securities

Register.

may

ma¬

FROM

NEW YORK TO
WAIker

FROM

limit

the

of National Banks

and

laws

Continued

on

page

26

PHILADELPHIA

BALTIMORE DIAL:

5-5553

TO

MArket

BALTIMORE

DIAL:

7-1121

FROM WASHINGTON TO BALTIMORE DIAL:

737-5386

generally. This is not

otherwise,
so

we

would

not

be

vigorously the legis¬

J<|in C. Legg

lation which would authorize gen¬

in

of

Reg¬

published June

was

banking

and

revision

This must be obvious to

promoting

erally

H. Kerley, Jr., First Southwest Company, Dallas; William G
Chestnut, Jr., Eppler, Guerin A Turner, Inc., Dallas; Dan A. Almon
Almon, McKinney A Dudley, Dallas

invest¬

consideration

in the Federal

authority

James

A.

herewith:

appears

Investment

"The

of

their

proposed

ulation which
21

Milwaukee; Philip W.

is attached for your in-

comment,
the

L. Carter, Loewi A Co. Incorporated,

K. Sweet, Jr., The Northern Trust Company, Chicago;
Thomas J. O'Connor, Hammill A Co., Chicago

Member

text

in

to formation,

taken

authorize

promoting
lation

ment

State

and

along with

revision

posed

proposed

underwriting and dealing in
enue

National

underwriting

revenue

bonds by

and

dealing

!■

the banks.

pro¬

ruling from this office.

also

it

if

that

mean

Alden

point out here

to

understanding

the

have

it

United California Bank, New York; William
IV. L. Lyons A Co., Louisville; John S. Haertel,
Northwestern National Bank, Minneapolis

request for ruling.
like

Thomas

Couffer, Jr.,

Crawford,

for prompt disposi¬

now
a

would

I

That

of

G.

James

Paul Stephens, Paine, Webber, Jackson A Curtis, Chicago; George
Johnston, Paine, Webber, Jackson A Curtis, Chicago; Phillip W.
Davis, Paine, Webber, Jackson A Curtis, Chicago

prudent banking judgment.

Financial Chronicle

Co.

a

ESTABLISHED 1899

Text of Proposed New Regulations
ED.

NOTE:

addressed

to

Mr.

Saxon's

"Presidents

all

NEW YORK

BALTIMORE

letter
of

Specialists in
Tax

LE

3-9630

WH

9-3400

Exempt

Underwriters,

Bonds

distributors
and dealers
in corporate

and
Southern and
General Market

^NATIONAL

Municipal Securities

STATE BANK
NEWARK, N.J.
ESTABLISHED

Members New York Stock

1812

!

securities.

ROBERT GARRETT & SONS
BALTIMORE

ESTABLISHED 1840

South & Redwood Streets

Exchange

municipal

HAnover 2-6140

MUlberry 5-7600
ATLANTA

NEW YORK

404 527-0148

212 571-1791

Member Federal

Deposit

Insurance Corporation




NEW YORK

One Chase Manhattan Plaza

TELETYPE:

301

955-1134

Members: New York Stock Exchange, American

Stock Exchange

(Associate), Philadelphia-Baltimore-Washington Stock Exchange

The Commercial and Financial Chronicle

Parks

New

B.

Walter A. Hintz,
H. C. Green,

Pedrick, Jr., Howard, Weil, Labouisse, Friedrichs & Co.,
George W. Hall, Wm. E. Pollock & Co., Inc., New
John C. Fitterer, Jr., Wertheim & Co., New York;

Orleans;
R.

J.

Cook, Ball, Burge

& Kraus,

Cleveland

Thursday, July 11, 1963

.

Arthur

A. G. Becker & Co., Incorporated, Chicago; George
Jr., Liberty National Bank & Trust Company,

Kirtley, First Boston Corporation, Chicago; George H. C.
Green, III, The Liberty National Bank & Trust Company, Oklahoma
City; Fred D. Stone, Jr., Marine Trust Company of Western
New York, New York City

Oklahoma City; Albert G. Langer, Girard Trust
Corn Exchange Bank, Philadelphia

York;

.

.

i
m

Joseph Valeriano, Eastman Dillon, Union Securities & Co., New
York; Arthur G. Hageman, Childs Securities Corporation, New York;
Frank S. Du Bell, Granbery, Marache & Co., Inc., New York

Robert Morrison, J. H. Hilsman & Co., Inc.,
Atlanta;
Ladd Dinkins & Co., New Orleans, La.; Frank C.
&

Chicago;

Co.,

James

term

T.

'political

example,
public

Investment Areas of Banks
Continued from pag e 25

a

State member banks to engage in
securities transactions.
Bank s
may,

however,

purchase

ment securities for their
count to

dition,

a

invest¬
own

limited extent.

the

limitations

ac¬

In ad¬

their

on

authority to purchase and hold in¬
vestment
hibitions

securities and

against

underwriting
not

such

the pro¬

dealing

in,

securities

or
are

applicable to public securities

such

the

as

obligations

of

the

United States and the general ob¬

ligations of state and local gov¬
ernments.

simple interpretation of the le¬

licly

is

authorities

to

and

for

include

the

pub¬

instrumentalities

owned

state and local governments.
term

'general

been defined

as

to

of

The

obligation'

so

effect

of

has

permit the

inclusion of

the

The definitions relating to

emptions contained in the bank¬

ment.

ing

public securities represent

laws

securities

relating

to

th

e s e

transactions

by banks.
The proposed regulation attempts
to meet this need.

To

a

large

ex¬

ment of the

applied

in

Georgia

state¬

a

principles which
such

State

rulings

were

as

the

Authorities,

the

tent it restates the statutory re¬
quirements in simplified form and

Chicago Civic Center Courthouse,
and the Virginia Public School

provides

Authority.

useful

standards

f

o r

their application to particular se¬

'

curities.
"The

some

spect

to

public

securities.

of

re¬

The

of

limit

and

sell

as

to

public

a

security is recognized.
ever,

bank

a

in, underwrite, purchase, hold

posed

The pro¬

regulation

requires, how¬
that this authority as well

ercised

in

accordance

dent banking
tain
are

STATE, MUNICIPAL AND REVENUE BONDS

with

judgment and

investment

"Special
a

in

somewhat

a

of judgment with

paragraph

5136,

standards

bank with

a

is

are

also

requests for rulings by the Comp¬

holding

troller

by

ible

(b)

purchase

securities

and

of

(c)

convert¬

"Your

mitted

to

the

Currency,

on

should

pro¬

be

sub¬

envelope

Washington

were

25,

D.

C.,

It would

marked

SAXON"

to

qualified in¬

thereto

which

are

thereof,

given

submitted

25,

Idaho i Montana i Alaska

State and

of

and

RULE

It

Comptroller of the Currency

pur¬

authority contained

All

National

member

interested

banks

parties

is

contemplated that the
on

or

such

about

Aug.

revisions

FOSTER

1963,

10,

light of comments submitted.

amend
Code

the

proposed

revision

would

Part

Title

of

of

I

of

Federal

United

States

12

Regulations

BOND DEPARTMENT

Seattle 24,
1505

NORTON

SEATTLE

4. WASHINGTON




i

MAin 4-4550

•••

Seattle-First

Washington

National Bank

BUILDING

"...

AREA CODE: 206

,

Telephone MAin 2-3131
'

Teletype 206 998-0295

....

TELETYPE: 206-998-0673

MEMBER

FEDERAL

DEPOSIT

INSURANCE

the

of

by remember-

Bonds

BANKERS

as

be deemed appropriate in the

& MARSHALL INC.

INVESTMENT

pro¬

thereof

U. S. Government

Bonds

are

posed revision will enter into ef¬

The

hereby given that the

notice.

state

invited to submit such comments.

may

MAKING

this
and

other

with

Regulation

Municipal

to

C., within 30

D.

Specializing in Issues of
Washington | Oregon

to

pertaining

Comptroller of the Currency,

fect

[12 CFR Part 1]

suant to the

be

comments

Banks

Investment Securities

PROPOSED

adoption

will

days after the date of the publica¬

Comptroller of the Currency

which

the

Washington

'Invest¬

Department of the Treasury

OF

to

the proposed regu¬

written

the

"Comptroller of the Currency"

NOTICE

to

consideration

Security Comments.'
J.

securities

Pursuant

member banks.

Prior

helpful if the outside of the

ment

Banks.

U.S.C. 335,

state

the

Comptroller of the

prior to July 21, 1963.
be

investment

lation would also be applicable to

comments

regulation

posed

of

National

12

amortiza¬

tion of premiums.

pru¬

made

R.S.

limited portion of its considering the adoption of a re¬
portfolio.
Provisions vision of Part I relating to the
included relating to (a) purchase, sale, underwriting and

Notice is

provision

of

a

ex¬

cer¬

Seventh

amended, 12 U.S.C. 24, is

as

investment

set forth.

permit

department
range

respect to

the authority to purchase other

investment securities must be

UNDERWRITERS-DISTRIBUTORS

broader

tion

authority

proposed regulation defines without

investment securities and

vestment

"JAMES

"The
deal

N. Murray, Jr., The Illinois Company, Inc., Chicago; J. H.
Kramer, Braun, Bosworth & Co., Inc., New York; Bert Nelson,
The Illinois Company, Inc., Chicago

Nuveen

subdivision,'

defined

William

Ladd Dinkins,
Carr, John Nuveen
& Co., Chicago

John

obligations indirectly
authorizations,
prohibitions, limitations, restric¬ supported by the full faith and
tions, provisos, exceptions and ex¬ credit of a state or local govern¬
gal

the terms used in the law with

"There has long been a need for

Stewart,

CORPORATION

Volume

Gordon

L.

198

Calvert,

Investment

Accelerated

ing

§§1.1

§§1.5 -1.21
-

Number

.

banks
335

PART 1

—

Investment

The

.

securities

and

Chronicle

National gation of

by

12 U.S.C.

pursuant to

by state member banks.

§1.3

Definitions,

"bank"
and

Sec.

includes

state

(a)

The term

National

member

banks

State or of

any

obligation
includes

It

Authority.

1.2

Scope and application.

purchase

on

and

or

restrictions

sale

of

a

debenture

regarded

rity.

public security.

special fund when the full

a

purchase of

an

investment

as

which

commonly

investment

an

sufficient

quired
with

predominantly

on

on

or

any

(c)
restrictions

holding investment

secu¬

rities.

means

to

provide

limitations

con¬

be

all

re¬

purchase and sale of

purchase
account

dealing

security

purchase in

a

any

invest- j

ruled eligible for

in

published ruling of

pose

Obligations

of

any

of

a

10%

total amount

of

the amount of

security is to

holding investment securities,

(a)

obligor in

excess

the

in,

u

sell

its

for

be

an

determined

Continued

one

on

own

on

1.9

Requests for rulings.
Convertible

1.11

Amortization

1.12

Exceptions.

States.

require

securities.

of

(2)

premiums.

any

Any

general

of

obligation

State of the United States

or

source

of any

political subdivision thereof.

cient

payable

is

or

to

Underwriters

determination that the

a

obligation

from

a

suffi¬

funds

of

source

Distributors

provide for all required

Other obligations listed in payments in connection with the
sued under paragraph Seventh of paragraph Seventh of 12 U.S.C. 24. obligation and all other obliga¬
AUTHORITY:

R.S. 5136

as

§§1.1 to 1.12 is¬

sued

by

Currency

(3)

amended, 12 U.S.C. 24.

§1.1 Authority.
the

This part is is¬

Comptroller

of

under the authority

the

(d)

The term

vision

"political subdi¬

state"

any

municipal

includes

corporation,

licly

entity

owned

any

which

pub¬
is

an

§1.2 Scope and Application. This instrumentality of the state
a municipal corporation.
part applies to the purchase, sale,

or

underwriting,

obli-

and

holding of in¬

(e)

payable

The

phrase

"general

or

the

from

same

sources.

a

§1.5 Limitations and restrictions

public

a

of authority and generally

paragraph Seventh of 12 U.S.C. 24.

tions
source

of

purchase

on

of

investment

an

security.

of

Minneapolis

(a) Evidence of obligor's ability
to perform. A bank may purchase
investment

an

security for its

account when in its

judgment

ing

there

is

it

own

prudent bank¬

determines

that

evidence

that

adequate

the obligor is able to perform all

SECURITY

it

that

DEALERS

undertakes

connection with

SPECIALIZED—PROMPT

perform

in

security, in¬

cluding all debt service require¬

Indianapolis Bond & Share

ments, and that the security may

CORPORATION

be

sold
at

ness

CLEARINGS

to

the

reasonable

with
a

=

prompt¬

price which corresponds

i

:,

MEIrose

-

-

Pittsburgh

-

Cleveland

-

Toledo

-

-

(b)

Chicago

Cincinnati

which

chase

Loans

partment.

and

Securities

De¬

Teletype: 216 574-9254

its

maintains

an

own

mines

investment
account

may

pur¬




$1,600,000,000

ISO

■

:

E. MARKET

ST.

2-4321

Investment Service

h

security for

when,

in

its

reliable estimates, it deter¬
that

perform

UNDERWRITERS

•

DEALERS

•

BROKERS

the

obligor is able to

in

with

connection

the

Municipal Bonds

Corporate Bonds

Over-Counter Stocks

Listed Stocks

Mutual Funds

security, including all debt service
may

Over

•

in¬

qualified

a

department

requirements and that the security
Assets

"•

:.

.

ob¬

of

perform all that it undertakes to

OHIO'S LARGEST BANK

■.

prudent banking judgment based
upon

Bank Wire: NCLV.

estimates

■

ligor's ability to perform. A bank
vestment

California and West Coast

Address

Reliable

"

BUILDING

INDIANAPOLIS 4, INDIANA

reasonably to its fair value.

We clear for dealers in

New York

■

INDIANA

be

sold

promptness at
responds
value.

with
a

reasonable

price which

reasonably

to

its

cor¬

fair

Member Midwest Stock

Exchange

pur¬

investment

ing of specified obligations.

1.10

bank's

capital and surplus. For this

Comptroller of the Currency.

§1.6 Limitations and restrictions
on

time investment securities of

any one

public security subject

a

1.8

to

purchase

deal in,jjnderwrite,

and

purchase, sale and hold¬ underwriting and purchasing for only to the exercise of prudent
banking judgment. In the case of
its own account, investment secu¬
an
obligation of a State or a
Prudent banking judgment; rities." Public securities include:
political subdivision thereof pru¬
credit information required.
(1) Any obligation of the Uni ted dent
banking
judgment
will

"as

ment

public

a

Limitations and restrictions

therein

A bank may

the

obligor. A bank may not hold at
any

connection

1.7

tained

Securities ruled eligible by

Comptroller of the Currency.

obligation.

A bank may

subject to the

restrictions

and

will

for

in

payments

the

The term "public security" security.
an obligation described in

12 U.S.C. 24 as not

which

the

of Chicago; Russell M. Ergood, Jr., Stroud & Company,
performance in arranging the IBA Municipal Conference

Bank
star

§1.4 Limitations and restrictions

speculative in nature.

security.
Limitations and

State

a

amounts

secu¬

include invest¬

are

of

fund

which is

It does not

Limitations and restrictions ments
on

the

by

(b) The term "investment se¬
political
subdivision thereof
is
curity" means a marketable obli¬
obligated for payments into the
gation in the form of a bond, note

1.3 Definitions.
1.4 Limitations a nd

means

obligation payable

an

(c)

any po¬

supported

faith and credit of

1.1

1.6

B. Wendt, First National
Incorporated, Philadelphia—A

full faith and credit of the obligor.

from

banks.

George

on

litical subdivision thereof"
an

.

Securities

Regulation

1.5

Commercial and Financial

vestment

revising

by

follows:

as

.

Bankers Association of America, Washington, D. C.—Speaking
Works Programs for Eligible Areas in connection with
Federal Financing of Municipalities

Public

and

1.4 to read

6280

page

on

28

The Commercial and Financial Chronicle

John

G. Robert
Brooks, Schmidt, Roberts & Parke, Philadelphia; George G. Harrison,
Harrison A Austin, South Bend, Ind.

Gene

Norman

Marx, Bear, Sf earns A Co., New York; William F. Fuller,
White, Weld A Co., New York; Ellsworth M. Shafto,
Geo. B. Gibbons A Co., New York

New

K.

York;

E. William

the basis of reliable estimates. A

the basis of the par or

bank

of

the

(b)

security.

not hold

may

investment

Obligations

purchased

on

at

securities

any

time

in

of 5 %

prudent

making

a

eligibility

rulings.

Phone:

326-2527

Bell

Fleming
Des

may not

at

any

§1.7 Limitations and restrictions

319

hold

or

deal

Such

a

Reconstruction
the

and

and

Develop¬

notes and other

BIdg.

obligations of the

Tennessee Valley
may

2-1456

not hold at

obligations

Teletype—515 285-4723

of

obligors in

Distributors

cess

and

of

Authority but it

any one

any

one

time the
of

such

total amount in

a

10%

stock

be

in,

which

purchase
it

a

bank purchases an invest¬

security

convertible

for

sell

to

its

or

own

holds,

or

desires

to

write

security
senting

down

to

a

the

cost

price

of

level

yield which reflects the

a

investment

value

considered

independently

conversion

of

the

feature

security
of

stock purchase warrants. Purchase

as

a

to

a

ruling should

appraisal

of

the

Comp¬

the

necessary

(2)

the bank's

the

§1.11 Amortization of premiums.

information

(1)

enable

make

prohibited.

When

par or face

information

furnished.

investment

an

purchased

(a)

at

a

security is

price

exceeding

value, the bank shall:

Provide

for

the

regular

amortization of the premium paid

Convertible

securities.

or

of

that

ex¬

portion

of

premiums

of the bank's capital

surplus.

credit information required. Every

We invite your

offerings

bank

shall

credit

maintain

information

in

its

i.

files

adequate

to

demonstrate that it has exercised

MUNICIPAL BONDS

GOVERNMENT BONDS

Municipal and Corporate Bonds and Stocks
FEDERAL AGENCY SECURITIES
★

PARKER

Teletypes: 816 556-0416-17 (Municipal);

/ EISEN / WAECKERLE /

Telephone

—

816 556-3422 (Gov't)

Victor 2-7500

ADAMS & PURCELL, INC.

(ommerce Trust (ompany

INCORPORATED

Member

1012

Telephone BAltimore 1-4090
I




'

Midwest

BALTIMORE AVE.,

Stock

Exchange

Kansas

KANSAS CITY 5, MISSOURI
Municipal
Trading

Dept.:

Dept.:

Teletype 816
Teletype

816

556-0314
556-0490

the

attached

or

§1.8 Prudent banking judgment;

MARKETS

such

repre¬

purchase, of securities convertible into stock
public security. at the option of the issuer is

determination and

§1.10

to

IOWA-ILLINOIS-WISCONSIN MUNICIPALS and
GENERAL

into

with stock purchase war¬

or

underwrite,

supported by

troller

holds,

investment security;

request for

sufficient

it

Inter-American

Development Bank and all bonds,

322-0026

which

specified obligations. A bank may

gations of the International Bank

Teletype:

or

security

deal

pnd underwrite the obli¬

transactions

the Currency to rule on the
application of this part, or para¬
graph Seventh of 12 U.S.C. 24, to

purchase, sale and holding of
in

the

When
ment

of

as an

the

of

in
and

rants attached, a charge to un¬
§1.9 fRequests for rulings. Any divided profits must be made by
bank may request the Comptroller the bank at the time of purchase

account

excess

judgment

described in §§1.4 and 1.5.

to

on

IOWA

out

desires

in

amount

an

specified limitation.

x

DAVENPORT,

Underwriters

specified

Ebbitt, Shelby Cullom Davis & Co., New York; William
C. J. Devine & Co., Chicago; Joseph G. Cross, Jr.,
C. J. Devine & Co., New York

C.

determinations

in

Moines, Iowa

ATlantic

a

an

for

Thursday, July 11, 1963

Brown,

banking

any

ment
BLDG.

to

bank

a

ruled

eligible

.

A. Gaskell, Hayden, Miller & Co., Cleveland;
T. Norris
Hitchman, Kenower, MacArthur & Co., Detroit; Homer Berryman,
The Marine Trust Company of Western New
York, Buffalo, New York

the

carrying

.

Theodore

time thereafter hold such security

for
NATIONAL

security

subject

limitation,

BONDS

FIRST

the

When

ruling

published

a

purchase

MUNICIPAL

in

Comptroller of the Currency has
investment

BjlllLIPS

excess

prescribed

Limitations

(c)

purchased

pursuant to paragraph (b) of §1.5

total amount in

of the bank's investment account.

in

✓

T.

Foley, Continental Illinois National Bank A Trust Co.,
Charles Gerken, Salomon Brothers A Hutzler, Chicago;
Darmstatter, Stifel, Nicolaus A Co. Incorporated, St. Louis

Continued from page 27

face value

Kenneth

W. de Milhau, Chase Manhattan Bank, New York;
Salvador
Rodriguez, Government Development Bank for Puerto Rico, New
York; Henry Milner, R. S. Dickson & Co., Inc., New York

Frederick G. Leech, Arthurs, Lestrange A Co., Pittsburgh;

.

City,

Missouri

Capital Funds Exceed Fifty Million Dollars
Member Federal

Deposit Insurance Corporation

Volume

Ladd

198

Number

Dinkins,Ladd Dinkins
Lttdd

Dinkins

A

J. J.

that such premium
shall

guished at

or

including

portion

or

entirely extin¬
before the maturity
the security,

and

premium,

shall

at

intervening date be carried at
amount in
the

excess

obligor

security;

(b) Set

redeem

number

Do you

dollar

issues

aid
it

Will

confine

tional

market

cialize

in

do not

part

apply to securities acquired

through foreclosure

on

collateral,

compromise of

your

will

or

opera¬

having

area?

not

overlooked

is

to

spe¬

be

decision

to

as

the

the

a

And
im¬

mini¬

quality security which

mum

na¬

securities confined to

geographic

portant

a

you

particular

to

or

a

avoid
debt

a

loss

in

connection

J.

^Remarks of Mr. Saxon

ond

Annual

Organizational Development
It

is

not

the

thoughts
Firm

Investment Bankers Association of Amer¬

than just a few of




wish

to

about

conclude
without

the

vital

my

some

area

Policy which should be

cerned with personnel.

1963.

of

con¬

self-confident

not

are

but

let

*An

Let us take a lesson from these

famous words of Patrick Henry—

no way

of judging of

the past."

address

by Mr. de Milhau before
the Second Annual Municipal Conference
of the Investment Bankers Association of
America, Chicago, 111., June 20, 1963.

For

defined

to

prevent

this from

as

example,

the

in

organization,

larger

a

will gradu¬

done

drastic

as

training

would be set up

a

MUNICIPAL UNDERWRITERS

program

which would not

only indoctrinate

AND

employees

new

DISTRIBUTORS OF CORPORATE

but would also prepare older ones
for

lamp of experience. I
of

the future hut hy

us

be greedy.

the

know

alert, 'venturesome

SECURITIES

assignments.

important

more

Personnel Compensation

Policy concerning person¬
as

to the pos¬

HANIFEN, IMHOFF 8t SAMFORD, INC.

ment

levels

also

and

-INVESTMENT

to

as

BANKERS—

compensation to be paid. It is to
most

do

firms

definite

much

as

experienced

advantage to

possible to retain

as

associates.

Where

salary is the main basis of

pensation,

should

care

be

WESTERN

FEDERAL

TELEPHONE

SAVINGS

534-0221

BLDG.

•

DENVER

•

303

TWX

2,

COLO,

292-1399

a

com¬

taken

OVER 40 YEARS INVESTMENT EXPERIENCE

that it is at least competitive with
that paid outside for similar work.
It is

important that the salary be

reviewed
that

on

regular basis

a

adjustments

time

to

well

as

time

both

length

made

be

and
from

merit

for

as

ojf service.

Retirement benefits today have

become very important in reduc¬
ing

them, but
they
firms

sub¬

We

are

pleased tb

announce

that

behind

must be taken that

care

not

will

service

of

years

with

those

of

turnover

stantial

be

drain

a

on

a

Robert Powell

assets.

In many instances a

bonus

or a

profit sharing plan or a combina¬
tion of the two could

has been elected Assistant Vice President

provide ade¬

quate incentive. The compensation
of

salesmen

subject

in

covered

by

is

a

most

itself

interesting

will

and

Fred White

be

speaker.

another

Assistant Secretary

Conclusion
If

all

these comments

ing Firm Policy
marized

were

briefly,

could be said

it

is

life. It should represent

which does

X

sons

EXEMPT

If

GENERAL OBLIGATIONS

not

concern¬

to be sum¬

think

I

that

aggressive

a

that

it

way

of

Wallace Westerman

keen and

forward

Comptroller

planning

overlook the les¬

to be learned from the past.

propertly

formulated

and

I
:

t

,

thoroughly understood, Firm
Policy should be a series of guide-

'

I

ica, Chicago, 111., June 20,

not

but

are

is

us.

be

sibilities of promotion to manage¬

possible at this time

more

observations

before the Sec¬

Municipal Conference of

and

us

and in time, die.

nel should be clear

would

Comptroller of the Currency

well

firm

a

be

can

of

case

effect

away

happening.

Firm

make up Firm Policy. However, I

SAXON

Let

lamp by which

you

previously contracted. the
important points which should

JAMES

Much

clients.

to discuss

with

ally shrivel

will offer and recommend to your

doubtful claim

a

longer with

one

feet are guided, and that

my

provide adequate talent

anything

acquired in good faith by way

or

of

restric¬

of this

those issues

to

of

composed

of people. If steps

groups

and

changed?

amortization under paragraph (a)

The

in¬

on

bonds

revenue

be

you

privately?

Policy

is

in

for the future

whole

tions to

Exceptions.

which

place

What is your Firm

less than the amount required for

§1.12

firms

taken

should

tions and limitations

issues?

have the time, the ability

dustrial

section.

bond

industry

and the personnel to seek out and

thereof, said account to be credited
amount not

of

Our

"I have hut

many of these
points of policy and which are no

never

a

to

Alden
Bergquist, First National Bank, Chicago;
Thomas A.
Griffinger, Bank of America N. T. A S. A., San Francisco; W. Neal
Fulkerson, Bankers Trust Company, New York
P.

paid little heed to

Meaning of Firm Policy to a
Municipal Bond Organization

amortize the premium or portion

of this

Chronicle

G. H.

an

such

up a reserve account

an

Financial

Tom Rife, Blewer, Glynn & Co., St. Louis; Elzey G.
Burkham, Jr.,
Walker & Co., St. Louis; Robert W. Holland, Rotan, Mosle &
Co., Houston; Arthur Tresch, A. E. Masten & Company, Pittsburgh

Lee F. Murphy,
J. Kenny,

Continued from page 5

or

periodically with

Commercial and

no

of that at which

may

The

.

un¬

by §1.10

be

the security,

of

.

Co.* New Orleans;

divided profits required

thereof

.

Co., New Orleans; John
Kenny & Co., New York

remaining after the charge to
so

6280

mf JETfcrrBJ™ MMJm

posts

that

its scope
Ko<m •

ATTL& • 4,

will

keep

us

on

the

right track. If it is inadequate in

c*nn*Y:.
-MAIA

Mi SAME :LOCAT*OH'SINOE <tS33 Ml

of

or

stress, just when

it should be most

are

Company, Inc.

adherence to

important, noth¬

ing but trouble can lie ahead. The
records

and

disregarded in times

filled with

names

that

INVESTMENT BANKERS

•

SECURITY BLDG., DENVER 2, COLO.

Member of the Midwest Stock Exchange

• AM 6-1981 •

Teletype 303 292-1952

The Commercial and Financial Chronicle

30

L.

Walter

Smith, Stockyards National Bank, Wichita, Kansas; Bill T.
Wall, Parker/Eisen/Waecherle/Adams & Purcell, Kansas City, Mo.;
Victor H. Zahner, Zahner and Company, Kansas City, Mo.
Duane T.

count, if

Designated Sales

Up-Dating Underwriting

regard to designated sales, I

tutions who buy

ority basis pay

bonds

open

discussion

September

net price, then it

a

the group should also.
also

appears

The

prac¬

unfair to

com¬

commercial

peting

bond

without

bank

buyers

departments

and

could be indirectly a contributing
for the sudden surge by com¬

cause

banks

mercial

than

is

for

of

privilege

portfolio

at

on

for

bonds

follow that it

derwriter

unfair

his fellow

over

If

only

gives the bank

an

un¬

advantage

members, in that

he is assured of certain bonds that

other

members

seem

to

be

account,
an

deprived

are

of

The fair practice would

getting.

that bonds be left in

all; the

giving

members

equal opportunity to get bonds

to fill

The most recent practice of

an

account that

an

account

is formed

rassing

strip

of

salesman

down with the

at

on

the

a

take¬

right of reoffering

agreeing

but

to re¬

sell to members of the account at

the

dealer's concession.

means

This is

a

of simply taking away mer¬

chandise that should be

available

account

to

argument

all

the

at

rightfully

members
full

most

of

profit.

generally

an

helps

the

embar¬

firms

contacts

when

a

ad¬

bid,

although




there

enough, I

could make
correcting

that account that suchbank

or

dealer

had

yet been devised of losing the

should be
such

on

to

that if for

granted to such

a group

basis, then other mem¬

a

either have the right

should

bers

me

it is felt that priority

reason

any

to

participate in that group, should

they

desire,

so

taken

the

of

in

who

can

our

not

the

and

bank

vital

the

of

he

however,

recognition

casualty

does

he

era

de¬

of big

company

buy¬

Because of this, he is more

ing.

times than not the forgotten man
when

the

grinds
be
to

out

well

allocation

machine

product.

It would

its

for

us

to

importance

when

we

to

rely

tion

to

on

in

mind, for

the

future,

will again be compelled

his method of distribu¬

put over deals,

over-emphasized.

slighted.

are

In

undivided

an

those

on

not

a

mission

to

net

price, with

the

no com¬

designees. _Much

has been written and said

subject; but if
cere

as

in

well

we

are

on

this

really sin¬

trying to protect minority
as

majority interests, more

flexibility

in

thinking

our

is

called for.

about

has

a

deal

of

lack

not

met

and

process;

to

necessary

we say

descriptive

with buyer

Cutting

ance.

are

that, shall

more

price is
when
do

accept¬

painful

a

becomes

it

bonds

while

so

for

termsj

still in account, it becomes a

problem

as

pain-proof

well.

devised for doing

most

and1

can

this.

common

if

doubt

I

method

ever

a

be

The usual

method

em-

ac¬

pride, is the loss

the takedown that

accrued

to

able

get

to

where.

them

might have

had

bonds

they

been

sale

else¬

for

However, in

count, there

divided

a

the

at

are

takedown

not

c'annot

be

bond security

de¬

only

of

getting bonds because
precedence rule over mem¬

of the

orders;

but

they

sewer

the

reduce

to

not

are

offers

taken

and

allowed

designated

prived
ber

are

Transite Pipe

ac¬

serious dis¬

are more

advantages. If the bonds
out

other

designated,

than that of hurt

retain

full

liability in the bracket, but in less
desirable
this

maturities.
other

and

good for

a

there

a

is

Because

practices that

of
are

few but unfair to many,
large group in

dustry who would like to

our
see

in¬

des¬

ignated orders eliminated entire¬
ly.

It

constantly try

keep this fellow in

his

filled at

maturity will be

business, of course, is what to do

those

for

liability in the bracket, then those

merits in this

or

all orders in that

maturity,

designated, but not for those who

designees

share

distribute bonds in small

get

the

of

be allowed to

business is the dealer

Unfortunately,

understanding that

conflict exists in any

Sales

One of the unpleasantries in our

designated

wonderful

are

prog¬

some

some

Obviously,

we

pro-rata

One

bonds.

cogs

or

their

down

sales

of

support of your sales force.
seem

abuses.

a

the

with

but

Price

Cut

buyer wishes to desig¬

a

probably the count, probably the only hardship

is

quickest and surest way that has

It would

do little to eliminate the prac¬

in

a

as

subject with the idea that

can

we

and-such

opinion,

the

ress

M. Marlin, Bache & Co., New York; Alfred J. Bianchetti,
A. Hogle & Co., New York; Gerry MacLeod, Pacific Northwest
Company, Seattle; Willys P. Jones, Allison-Williams Company,
Minneapolis

nate, his order should be accepted
if

Company, Oklahoma City

William

J.

that mat¬

approached

we

tice,

buyer

is told by

my

Possibly, if

and,

a

certain strip of maturities is out,

in

future!

his account that

The

vanced for its justification is that
it

Besides be¬

prove

can

after he informs

within

priority

maturities

immediately

it

other

to

serves

getting

valid

seemed

con

believe many will agree

all

amounts, | in good times and bad.

orders.

(B)

unfair,

ing

a

in

because,

the most saleable.

are

basis

priority

a

for retail purposes, it can

are

the

of

concession.

some

this,

in-j just offered them the bonds. This,

purpose

themselves

buying

taken

bonds

other

no

avail

to

de¬

open| bond
which in many

partments
stances

to

While the arguments pro

Forum.

likeli¬ ter was not quite resolved; and I
hood, it involves maturities that question that it will be in the near

bate

pri¬

a

logical that dealer-banks in

seems

tice

on

people who will de¬

last

took place here at the

and
numerous

are

the

believe

Practices and Procedures
Continued from page 4

First National Bank & Trust

Knowles, III, First Boston Corporation, Chicago; Robert
Holland, Rotan, Mosle & Co., Houston, John M. Greer,
McClung & Knickerbocker, Inc., Houston

In

Thursday, July 11, 1963

.

B. Hutchinson, Hutchinson, Shockey &
Co., Chicago; Frank
Toplikar, Zahner & Company, Kansas City, Mo.; Felix N. Porter,

A.

E.

W.

.

Frank

Faath, Jr., A. C. Allyn & Co., New York; William S. Magnus,
Magnus & Co., Cincinnati, Ohio; E. M. Bancroft,
Stranahan, Harris & Co., Toledo

'Bob"

Cavanaugh, Philadelphia National Bank, Philadelphia; Haven
Zebold, Prescott & Co., Cleveland; Alex R. Beard,
Philadelphia National Bank, Philadelphia

J. Jay

.

our

if

certainly

would

simplify

allotment system considerably

this

were

however,
wishes

it

of

done.
runs

most

Unfortunately,
counter
group

Therefore, it would

seem

fairness to all members of

to

communities

after

year

As

a

are

Transite® Pipe

assured of

is chosen for

year.

corrosion.

that in
ac¬

lines,

;

matter of

fact, Transite will continue to perform long after

the bond indebtedness is satisfied. You see, this
cement pipe is at home in the ground. It resists
and

sewer

truly economical and reliable service

And

it won't

leak!

For

white, asbestosrusting, rotting

details, write to Johns-

Manville, Box 362, CF 7, New York 16, N. Y. Cable: Johnmanvil.

the

buyers.

an

When Johns-Manville

JOHNS MANVItLg

Johns-Manville

!/3|

Volume

198

Number

ployed by accounts to
particularly in
hit

to

bonds,

move

weak market, is

a

The

bids.

6280

account

waits for bids to

in

come

tively solicits them.

either
or

ac¬

I would

.

.

The

.

ployed

Commercial and

to

more

vantage by

applied

ad¬

productive

dealers and banks if
their own house ad¬

to

vertising programs.

say

Chronicle

Financial

31

but the glory has never yet been

of

known to

of small

I

pay

suppose

group

of

overhead!

that

to

underwriters

a

certain

who

dis¬

course, must lead tribute bonds in large blocks to
thing and that is somewhat restrictive accounts, the
agers make a conscientious effort profit riiargins. I appreciate that small spread is compensated for
to do the best job possible when in
the
competitive
market
in by volume. However,
there is

that

often

more

situations

these

when

below

bonds

when

are

consent

this, of

only

which

|

one

operate,

we

possible

way

to

there

lay

is

down

no
any

ground rules or, for that matter,

How¬

even

into the

comes

All of

to

block

a

list price.

bid

a

man¬

and

occur

bid is received for

a

ever,

not

majority

by

governed
of

than

ment

to

get

on

a

another group, and they are by no
means

a

minority from the stand¬

point^of numbers, who must de*
gentlemen's agree¬ pend to a large degree on the
but

profit margins;

we

assistance

of

a

sales

force

to

syllable of what he thinks

one

profit deals. It is for this
that

reason

underwriters

many

the

security business, has reached
maturity and today makes a most
vital

contribution

who must pay salesmen's commis¬

investments

sions

as

are

the

more

forces

on

being denied
support
many

the

meager

this

is

when

not

we

healthy

consider

all the distribution

only
are

now
to

sales

deals, because of

spreads.
a

and

more

their

of

condition,

our

we

can

need

get not

get

thrpugh

the

field

the

country

of

have, by necessity,
changes in our methods

doing business and will have to

make

but in the future, if we

successfully

of

in
to

We

made many

Certainly,

that
we

well.

and

many more

future

represent

segment of

all,

'

as

the

Because)

only

our

therefore,

responsibility

we

unregulated

business,
assume

than

continue

we

progress.

we

a

must

greater

before,
develop be
sound of
would seem that the common sense. We have all been are familiar with the way a sales¬ in store for us.
principle, fair to all, and
can
In closing, I would like to make above reproach.
sell
manager should not request
or guilty at various times of being man's mind works—he
most
this
observation:
our
field
of
expect to get a commission on the willing to buy a deal just for the
anything if the profit is
account

unsolicited,

tainly,

sale.

the

On

has

other

hand,

decided

to

solicit bids at

of this, and

down

a

should

members

if the

actively

all

be

guided by the rule of

distribute bonds. I'm

sure

you

all

the volume of new issues that are

that

believe

member

deals

are

recent

good

two

Treasury

examples of this;

good; but he is the first to give
you a

curbstone opinion in words

endeavor, which
was

considered

short time back
step-child of

this

of

unaware

original

terms,

DISPOSITION OF

a

fact

PUERTO RICO'S

to take

of bonds

amount

smaller

down

BUDGET DOLLAR

should

he

1962-1963

This will allow

price.

if

determine

to

member

he

feels his customer should pay the

price penalty because he does not
classify

as

This is

large buyer.

a

indeed dangerous ground on

which

not

done,

this

when

tread

we

because it

can

lationship

in

put

is

member's

a

re¬

with

jeopardy

his

client if he fails to disclose to him

that

other

Last, but

for

least,

means

no

member to go out and

bids

encourage
down

bought

have

buyers

bonds at cheaper price.

by

group

a

solicit and
at

bonds

for

a

price expecting to make a

commission

the

on

sion to do

from the manager, is

so

in direct violation of the

and

agreement

without

sale,

explicit permis¬

having obtained

syndicate

assumes

which

he

not

does

this

cause

liability
Be¬

possess.

erosion in the

can cause

price structure of

right

a

another participant's

over

any

account, the

manager

should have the right to

not only

turn

bid down but also

a

severely criticize the action.
Advertising
We

all too well

are

constant rising

ness,

but there
the

underwriting groups

on

it

deal.

a

is
of

some

fiscal

in
all

are

an

all

would

we

both

impossibility

the built-in

costs

However, there is

of

some

possible

to

the

lavishly

expensive

gives

Education, health and welfare account for almost
49% of Puerto Rico's outlay for public expenditures.

a

sort

of

accomplishment," it is felt that

it

produces

actual

little

business.

know of

no

willing to

the

in

Quite

high

such

sell

of

how

these
on

made

an

ment

letters

some

costs have

run,

Puerto Rico's

on

through the medium

To give you

Committee

are

on a

dynamic,

the needs of the

economy.

evident throughout the Commonwealth.

This low debt is

ad¬

product that is next to impos¬
to

being wisely spent

a

basic factor in the soundness of

other business that is

assume

employed.

The results

of

way

frankly, I

vertising "cost-to-profit ratios"

sible

revenues are

diversified program to meet

"pride

of

a

Public

Other than the fact that it
managers

budget.

curtail

advertising that is indulged in at
times.

principal and interest, requires only about 5% of

an

is

it

policies, the cost of its debt service has been kept

the Commonwealth

ever-growing group of people who
believe

steadfastly pursued sound

exceedingly low. Total annual debt service, including

to the over-all

Certainly,

that

cut

incurred

expenses

of proportion

agree

to

Because Puerto Rico has

who feel

are many

that

spread.

of the

aware

cost of doing busi¬

some

out

\

general obligation bonds. Free from both

federal and state income taxes,
returns at current

prices,

as

they provide attractive

do the

revenue

bonds of

idea
the

the various Puerto Rican Authorities.

Municipal Practices

analysis

of

chosen

dating back to 1960.

100
at

settle¬

random,

This survey

GOVERNMENT DEVELOPMENT BANK

showed that advertising expenses

ranged from $.00 to $.71 per bond
for

an

average

Certainly,
that

ever

we

An address by Mr. Hassman before
Second
IBA
Municipal Conference,
Chicago, 111., June 21, 1963.
the

have

special price and

be informed that sales were made
a

a

the

be entitled

bonds

when
a

is

a

the

glory!—the

apprised

and goes into the manager
down

at

practices

those successful in ob¬

been sold at

the

that the

compensation. Further, I

some

at

can

price, then

be

taining orders should
to

cer¬

it

account

all

then,

this

it

of $.26

would

money

seem

could




FOR PUERTO RICO
Fiscal Agent

bond.

per

to

be

me
em¬

1311

for the Commonwealth of Puerto Rico

Ponce de Leon Avenue

San(;juan, Puerto Rico

,

45 Wall Street
New York 5.

N. Y.

32




i

\QOy,

The Commercial and Financial Chronicle

.

.

.

Thursday, July 11, 1963

For 100 years:

always at your service!

We're

looking forward to greeting

when business brings you to

you

personally

STATE

Chicago. From here,

MUNICIPAL
we serve

the

underwriting requirements of states,

U. S. GOVERNMENT

counties, municipalities and the investment needs
of individuals,

banks, dealers, corporations and

BONDS

financial institutions from coast-to-coast.

Building with Chicago and the nation for 100

years

The First National Bank
of

Chicago

Chicago 90, Illinois
FRanklin 2-6800

MEMBER

FEDERAL

DEPOSIT

INSURANCE

CORPORATION

Teletype CG-987