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Treasures of Energy:
atural Resources of the Ninth
and Tenth Federal Reserve Districts
B y Dean A. M cG ee, Clwin nan of the B oard , K err-McG ee Corpora tio n , and Former D eputy
C lwim1w1 , B oard of Oirec to rs, Federo / R C'sen •f! /J {(11k. of K <111 sos C ity .
to talk to thi s gro up abo ut
I th e natural rcsour es of th e area comprisin g
T 1s A PL EASU R E
the Ninth and Tenth Federal R eserve Di stri cts,
and to highlight th ose r esources, the d evelopment of which will have a significant impact
on the economy o f th e area.
It is especially rewardi ng to look critically at
th e natural re ource base of our Di stricts at
thi s tim e b ecause th ey have the good fortun e
to contain an ab un da nce of three energy fu el.
th at arc better suited to ma n', future wa nt s
than th ey have bee n for hi pa st o r pre, cnt
needs.
Throu ghout th e hi story of ma n the ava il ability and usability of natural reso urces, especially energy resources, have to a great exte nt
determined those civilizations th at developed
and prospe red and those that did not. The discovery, d evelopment, and use by m an of a
natural resource h ave not necessar ily been a
ques tion of its a bundance in nature, but frequently a mate ri al ha s no t been used becau s
man lac ked th e knowledge and , co nsequentJy ,
the technology ncce ary to co nvert it to hi s
needs.
Th Ninth and Te nth Di stri cts co ntain very
la rge rese rve of three im porta nt ene rgy resources th at fall into thi s catego ry- o ne in the
initial stages of production and another on the
thres hold of Jarge-scal e development and production . These two a re ura nium for nuclea r
generated elec tric power a nd coal for synth etic
hydrocarbo n liquid fu els a nd pipeline gas.
The ex ploitati o n of th e third , oi l hale, is
probably a num ber o f yea rs aw,1y beca use its
dcvel pmc nt fac es un olved p litical, t chni ca l,
a nd e nvironm e ntal problem s.
In thi . country importa nt changes in ene rgy
use a nd fu el pattern arc eme rging. Uranium
h ,1s beco me a new ene rgy fu el and nucl ear generated electric power has become competitive.
Also , th e ra te o f di scovery of o il and gas in
this country h as not kept p ace with sharply
ri sing consumption. A s a consequence, the
r atio of do mestic oil a nd gas reserves to annu al
production ha s fallen, in the las t few years,
below traditional and acceptable levels. The
petrole um indu try has begun to look at alte rn ativ do m e tic sou rces for synthetic liquid
a nd gaseous hydrocarbon . The most im-
Thi s s ignifica nt sta tem e nt abou t th e na tu ra l reso urces of a la rge sec ti o n o f the Unit ed ta les wa s pre ented du ring
a jo int m ee tin g of th e Boards of Direc to rs of the Federa l R ese rve Ba nk s of K a nsas C it y a nd Minn ea p o li s, Octobe r
12, 1968, in Minn eapo lis, Minn eso ta.
Monthly Review • February 1969
3
Treasures of Energy
porta nt o f th e c so urces a rc coal and o il shale.
The inth and Tenth Di stricts have over 90
per cent of th e prese ntl y known U. S. uranium
rese rves, 52 per cent o f the kn ow n United
Sta tes coa l reserves and 85 per ce nt of th e
potentially pro du cti ve oil shal e land s in this
co untry. As th ese reso urces arc mined, processed, and mark eted , th e eco nomi cs o f orth
Dak ota, Montana , Wyo min g, Colorado, and
no rth ern New Mex ico wi ll be favorably and im port antl y aff ec tcd.
In addition to th e energy f ucls, o ur econo my
will continue to co nsum e large r quantities and
become mo re dependent on a Qrow in g variety
of oth er min cr;il s, man o f whi ch arc now produ ced in thL' Di ~tri ·h :111d nrnrc or whi ch
will be di scove red and deve lo p ·d as in creasingly so phi ~ti c.itcd explora ti on tools and tec hnique evolve in th (.; decades ahead. I shall
try to id entify th e more important o f th ese and
indicate bri efl y th eir grow th potential.
However, I shall devote most of my tim e to
a discussion of th e energy reso urces, the fossil
fuel s (oil, gas, and coa l), uranium , and edible
or living energy so urces, because in the world
in which we li ve today, energy is th e ba c on
which o ur sec urity, power, and wea lth arc
built. nergy use an d gross nati onal product
arc cl osely relat ed . Oppor tuniti es for rapid and
vigorous grow th of the eco nomy of th e two
Di stri cts re t in th e exp lo it ati on of th eir ab un dant energy re o urces.
Total U. S. energy demand has increased
sixfold since the turn of the century and is
forecast to increase by another 50 per ce nt
by 19 80. Thi s ex pected in crease in annu al demand is equ al to total U. S. consumption of
energy in 195 0.
Before we exa min e what thi s increase 111
demand for energy ca n mea n to th e inth and
Tenth Di stri cts, it ma y be o f intcre. t to loo k at
what th e Di stri cts arc presentl y producin g in
th e way o f energy fucl s.
In 19 67 th ey produced 15 per cent o f thi s
co untry's o il , principall y from Okl ahoma,
4
fo urth large t pro du cing tate in th e co untry;
Wyo min g, th e fifth larges t; Kansa . , th e seventh
large t; and from northern N ew Mex ico, Montana, Colorado, North Da kota, and Nebraska.
The sa me . late in th e two Di st ri cts produced
J 8 per ce nt of th e gas consum ed in th e cou ntry.
Th y pro du ced 3.5 per ce nt of th(.; total coal
used in th e United States, prin cipall y from
Co lorado, North Dakota , Wyomin g, north ern New Mex ico, Kansas, Oklahoma, and
Mont ana. Of th e 11 ,247 ton s o f uranium
ox ide produced in th e co untry in 1967 , 88
pe r ce nt ca me from the Te nth Di stri ct, principally from northern New Mexico, Wyo min g,
;i nd Colorado. These four encn.'.y fuels now
co mpri ~c ;1ho ut (l._J per ce nt o f th e total va lue
or all th (.; min eral s cx tr:1ctcd in th e two Di stri cts.
T he Di stricts arc for tun ate in hav in g cdi mentary env iro nm ents favorable for th e occurrence of th e four primary fu els. The potenti al fo r additi onal di scovery of th ese fu els
within the Di st ri cts is excell ent . Thi s ha been
borne out in th e las t yea r by th e di scovery
of th e J SO-milli on-barrel Bell Creek oil fi eld
in south ca tern Montana in th e north end of
th e Powder Ri ver Basi n and th e developing
Rec lu se oil fi eld in th e sa me basin across th e
lin e in Wyoming, and in th e di scovery o f an
ex tensive uranium min erali zed area in th e
so uth ern end of the sa me basin and oth er
uranium discoveries in th e . tates o f Wyo min g,
Colorado, and nor th ern New Mexico .
Even though the di scovery of large addition al reserves of oil and gas can be anticipated
in the inth and T enth Di stricts and in other
known petrol eum provinces as well as in such
new ones as th e Arctic slope of Al as ka and
th e ontin ental hclf, it is becoming evi dent
th at it will be in reasingly diffi cult to prov ide,
domes ti ca ll y, th e oil and gas needed to meet
th e sharpl y ri sin g demand in th e yea rs ahead.
Oil and gas now suppl y 74 per ce nt of th e total
energy consum ed annu all y in th e nited States.
If th e petroleum indu stry fall short of meetin g
Federal Reserve Bank of Kansas City
The Ninth and Tenth Federal Reserve Districts
N. Dok .
NINTH DISTRICT
Nebr.
TENTH DISTRICT
Colo .
Kans .
Kansas City
N. Mex .
.....-..... Okla .
5
Monthly Review • February 1969
Treasures of Energy
the demand for petroleum from domestic
source , what arc the available alternatives?
We can import more crude oil or we can
look to such sources of synthetic hydrocarbons
as coal and oil shale. We arc presently importing about 20 per cent of our domestic
liquid hydrocarbon requirements. Any substantial increase above this figure will raise
crious questions about national security and
the balance of payments with many attendant
industry and political problem .
The ref ore, it appears that coal and perhaps
even oil shale may be called on in the next
decade or so to a~'.->ume a role in surplying
both synthetic liquid and gitseous hydrocarbons . The cxlrnl of the oil reserves thitt will
be developed on the /\retie slope in the next
few years, as well as now unanticipated discoveries, will have a bearing, of course, on
just when this occurs.
Technology for converting coal into both
liquid and gaseous fuels has been known since
1926, but the economics have not been commercially attractive. The emphasis presently
is on how to add hydrogen atoms directly to
the coal molecules. The oil industry has a
long experience in hydrogenation technology
and now is becomin!.!, interested in applying
it lo the problem of economically producing
synthetic liquid and gaseous hydrocarbons from
coal. It is reasonable to assume that the technology will advance rapi<lly and coal will become a long-range, competitive supply source.
Furthermore, there is already an existing, well
capitalized , experienced, and knowledgeable
coal mining industry.
Of the estimated 830 billion tons of coal
reserves in the Unite<l States recoverable
under present economic conditions, 430 billion
tons lie within the Ninth and Tenth Districts.
Although 52 per cent of U. S. coal reserves
fall within the ·e two Districts, they currently
supply only about 3.5 per cent of U. S. coal
production . Though the western coals arc not
particularly favorably located- even with the
6
new extra high voltage, low cost power transmission techniques- to meet a substantial portion of current power generation demand for
coal, they arc well adapted to feed giant coal
liquefaction and gasification plants that will
someday be the heart of a new synthetic fuels
industry in the two Districts. When this comes,
the economic benefits to the Ninth and Tenth
Districts will be very large. The cost of mining and preparing the coal feed for a conversion plant will be critical in determining its
economic viability. Thick coal scams, covering large areas, with thin overburden to permit
strip mining, will be the preferred deposits.
Much of the coal in the two Districts meets
thc...,c requircmrnt-;, c...,p ·ci .tlly in Nortlt 1);1kot;1,
Montana , Wyoming, itnd 1H)1 tit 'I'll New Mexi co. Current thinkin g is that coal hydrogenation
plants will have a minimum economic size of
perhaps l 00,000 barrels of liquid hydrocarbons per day. It is estimated that such a plant
will require 25,000 to 35,000 tons of coal per
day. The investment in mines and such a processing plant could be from $400 to $500
million.
If as much as IO per cent of the 18 million
barrels per day domestic nil requirements esti mated for 1980 should come from coal liquefaction, eighteen I00,000-barrel plants would
be needed.
The important oil shale deposits in the
United States arc in the Green River formation in Colorado, Utah, and Wyoming. About
85 per cent of the potentially productive areas
are in the two Tenth District states of Wyoming and Colorado.
There have been numerous public estimates of the quantity of in-place oil in these
shale oil deposits. The recoverable reserves
of economic interest under prevailing technology have been estimated al 80 billion barrels of shale oil.
But the development and production of
this 80 billion barrel reserve faces many obstacles. Th~ ones that loom the largest arc the
ec.ieral Res rve Bonk of Kon a
( ty
Treasures of Energy
cost of operating in remote areas and in rugged
terrain, mining and handling the extremely
large tonnages of shale, waste disposal, and
land restoration. Eventually this potential
source of liquid petroleum will be developed
to supplement other sources. This development could be accelerated greatly and the
economics changed dramatically if a technological brea kthrough such as the proposed
underground nuclear explosion to fracture th e
oil shale formation, followed by in situ retorting, should prove feasible .
Let us turn now to the new energy fuel ,
uranium . Until th e fir ·t self-sustainin g nucl ea r
reacti on was achieved in 1942, and a whole
n w so urce of en rgy becam e availabl , th e
un , a vast pow rhousc , was th e so ur e of
mo t of man's usable energy.
The splitting of the atom provided a second
important basic energy source. It has now
been amply demon strated that the fission reaction of the atom can be safely controlled . Its
development is just beginning and its potential
is almost unlimited.
The rapid growth in the rate of orders by
the electric utility indu try for nuclea r power
plants ha s resulted in a sharply grow ing commercial market for uranium. Approximately
50 per cent of a ll new power generati on ca pacity plants ordered or announced in the United
States in th e past few years has been nuclear.
There presen tly is projected a cumulative
U. S. uranium requirement for civilian power
through 1980 of approximately 250,000 tons.
At $8 per pound, this tonnage has a value of
$4 billion. The Tenth District should reap the
benefit of most of this production because
over 90 per cent of the 148 ,000 tons of
proven uranium reserves as of January 1,
1968 , that can be produced at a price of $8
or less per pound , is located in the Di strict.
The Ambrosia Lake area of New Mex ico has
the greatest proven reserves and should ultimately produce about $2 billion worth of
uranium. Wyoming is the second largest proMonthly Review • February 1969
ducing state with Gas Hills and Shirley Basin
presently being the principal producing areas.
It is estimated that to meet the requirement
through 1980 and have an eight-year forward
reserve, 500,000 tons of uranium must be
found and developed. The size and future
growth of the market has prompted the industry to step up sharply its exploration and
development effo rt and also has attracted many
large mining and oil companies to the industry.
The footage of exploratory holes drilled in
1967, one measure of the size of the effort,
was about two and one-half tim es that of 1966.
The uranium industry plans nea rly 100 million
feet of drilling in ca lend ar years 1968 through
197 I. Lt has b e n e ·tim atcd th at th e indu stry
will need to invest up to $ I billion by I 980
in exp lorati on, min e, and mill facilities to
meet uranium requirements. A gain , the Tenth
District should benefit most from this investment.
Agriculture, which contributes $7 to $8 billion annually to the economy of the Ninth
and Tenth Districts , must also be considered
an energy industry. It deals with live or edible,
rather than fossil, energy and is simply a busi ness of trapping the ene rgy of sunli ght and
harvesting and storing it for future use.
The quantities of so lar energy that reach
the ea rth 's surfa ce arc enormous. Growing
crops capture only a very mall fraction of
this, however. For example it has been calculated that the energy contained in a bushel
of corn is equivalent to only about 0.4 per cent
of the solar energy which fell on the corn
plants during growth. The poor efficiency of
the photosynthesis process in capturing and
storing energy offers great opportunity for
technological improvem ent. As the technology
is advanced and more efficient use is made
or the la rge areas of fine farm lands with which
the Districts are blessed , economic benefits
will follow.
The use of agriculture to exploit the sun
as a primary energy source is of long-term
7
Treasures of Energy
interest for a very basic reason. The extent
of the energy fuels - oi l, gas, coal, and uranium - is finite and they are irreplaceable.
Agriculture, on the other hand , is as durabl e
as the sun and has the advantage of being
virtua ll y untapped.
At the present time, efforts to improve
the efficiency of convert in g so lar energy
through pl ants into mo re useful forms o f energy has , for the mo st part , been throu gh the
use of fertilizers and by the ge netic improvement of plants.
We normally think of agri culture as an indu stry that suppli es o ur food need . H oweve r,
thi s is a very limit cl vi w fo r it ultimat
I ot ntial is still virtually untapred and we ca n
look f rw a rd to th d ay when ag ri c ultur w ill
be suppl yin g an increas in gly large r va ri ety of
our hum an wants, possibly such thin gs as ou r
motor fu els.
L et us consider now the non energy resources
of the Ninth and Tenth Districts. Even th o ugh
the Districts have substanti al income from
sand and gravel, stone, cement, clay and salt,
these resources are not sufficiently unique to
the Districts to warrant special di scuss ion. The
dollar va lu e o f these no nm etal , non energy
min e ra l produced in the two Di stricts i substa nti a l and total s about $ 350 milli o n annually .
H oweve r, thi s fi gure is o nly about seve n per
cent of th value of tota l U. S. production of
the~e min erals beca use th e ir occurrence is
so widespread .
Of greater significance are the resources
th at occur predominantly in the two Districts
for these are important, not only to the Districts, but also to the country as a whole. In
order of importance on a doll a r basis th e e
arc iron , copper, molybdenum, helium , trona
(soda a h) , zinc, go ld , vanadium , lead, and
sil ve r.
The Di stricts acco unt for almos t 80 per
cent of total United State production of iron
ore, 74 per cent of vanadium , 65 per cent of
helium , 62 per cent of molybdenum , 37 per
8
cent of gold, 26 per cent of trona and from
15 to 20 per cent of U. S. production of
copper, silver, tung ten, and zinc.
From 1946 throu gh 1957 Minnesota produced about 64 million ton s of iron ore per
year. In 1958 , as a re ult of declining gra de
a nd competition from new overseas operations,
production dropped to 40 million ton s for the
first time ince the I 930's. Since then natural
o re production has continued to decline, but
th ere has bee n a corresponding increase in
pellet production and in 1967 , production was
at the 50 milli o n ton level , over 20 million
to n · being pellets. A continued decline in
natural or' production is predicted, but p ll et
production is ' xpcct d to in r as' t th e 60
million to n I v I in s v ral yea rs. A possibl
future p rod uct io n of 90- 100 million ton per
yea r is envisioned . At thi ra te of production,
the re appea rs to be over a l 00-year supply.
The hi story of the L ake Superior iron ore
district is a n excell ent exa mpl e of how advancing technology can turn a vast low grade nonco mmercial resource into a valuable asset.
It is of inte rest to note th at pelletizing of
iron ore requires abou t 500,000 ton s per year
of bentonite clay a an agglom era tin g agent.
M st o f thi s co mes from Wyo ming and acco unt for about o ne third of the producti n
of Wyo ming bentonite, a $16 million -a-yea r
indu try for th at state.
Turni ng now to vanadium, the T enth Federal R ese rve Di strict has b ee n supplying about
three fourths of U. S. vanadium production .
However, it is rapidly losing its position as the
principal U. S. supplier of this strategic m aterial , as production of uranium ore, from
which it is obtained in th e Uravan Min eral
Belt of Colorad , declines.
A for mo lybdenum , the
limax M o lybdenum Min e in Co lorado is con idcred the
large t underg round minin g operation in the
world. This mine accounted for more th an half
of th e world output of molybdenum between
1925 and 1963. Even today it still accounts
Federal Reserve Bank of Kansas City
Treasures of Energy
for 45 per cent of free world production and
abo ut 62 per ce nt of U. S. production.
Known U. S. rese rves of molybdenum ores,
a large percentage of which arc located in
Colorado, are in excess of five billion pounds
of molybdenum. Molybdenum has provided
Co lo rado with a $ I 00 million-a-yea r industry
which should grow eve n larger in the future.
In terms of doll ar value of production,
copper fo ll ows iron ore in orde r of importance to th e Ninth and Tenth Di. tricts. H oweve r, these two Di tricts acco unt for only
about 14 per ce nt of U . S. coppe r production,
with Mont ana and Mi chigan the onl y im po rtant co pper produ ·in r st~1tcs in the Di stri cts. Eve n so, th ' v, du ' or copper pr )du ced
in Mo nt ana is just under $ I00 million per
y ar, and that o r Michi ga n abo ut $55 milli on
per yea r. Cop per resources in Montana arc
suffi cient to support its $ 100 million-a-year
copper indu stry far into the future.
The remaining metal minerals of current
importance to th e two Districts are gold , silver,
lead, and zinc . The doll ar value of combined production of these four minerals from
the Di stri cts tota ls abo ut $73 milli on annually.
About 35 per ce nt of th e United Stat s tota l
gold utput comes from th e wo rld -famous
H omcstak Mine in South Dakota. Six of the
25 Jcading gold produ cing mines in the United
States arc in th e Ninth and Tenth Di ·tricts
and they produce 40 per cent of th e total.
Silver, lead, and zinc production from the
two Di stricts comes mostly from reserves in
Colorado and Montana. The Districts are fortunate in havi ng igneous rock environments in
the mountainou s areas where new deposits
of th e metal min erals will be found as well
as such areas as th copper-ni ckel minerali zed
region of no rth ca. tern Minnesota .
The largest known deposit of relatively pure
sodi um ca rbon ate minera l in the United States
was di scovered in Wyoming in I 938.
Today about one third of total U. S. production capacity for soda as h is located in
Monthly Review • February 1969
Wyoming, and thi s percentage is destin ed to
grow. Wyomin g already has existing or planned
capacity to support a $5 0 milli on a yea r soda
as h indu stry. Rese rves are suffi cient to suppl y
U. S. demand for more than I 00 yea rs at th e
present co nsumption rate.
A di sc uss ion of th e reso urces of th e Di stri cts wou ld not be co mpl ete without mentionin g helium, one of th e noble ga. e . Helium is
th e second li ghtest cleme nt- onl y hydroge n
is lighter-a nd helium has th e lowest boiling
point of any material. It is th ese two proper ti es, li gh t we id 1t and low boi li ng poi nt , th at
h~1ve made heliu m an important str~1t gic
mat ' ri al.
With th e poss ible ex ·c ption of the Sovie t
Uni on, no co untry has helium rese rves comparable to th ose in th e United Sta tes. U. S.
helium rese rves occ ur in helium -beari ng natural gas and arc es timated to be eq uivalent
to about I00-125 billion .cubic feet of recoverable helium . Last year production of refin ed
helium for use totaled about 900 million cubic
fee t of which over 500 million cubic feet were
produced in th e Tent]~ Di stri ct. The total dollar
value of crude and refined helium produced
annual ly in states in th e Tenth Federal Rese rve
Di stri ct amounts to abo ut $50 million.
The Di stri cts arc blessed by havin g a mantle
of sedim ents covering mos t of th eir area. Much
of th e minera l ex plorati on of th e future will
be done in se dim entary environments where
methods simil a r to those used in petroleum
exploration can be applied to the search for
other minerals. Few areas will be more attractive th an th e Ninth and Tenth Districts
for this type of exploration and many new
discoveries will undoubtedly be made.
With the grow ing demand for energy fuels
and mineral products, the future for these
natural re ourccs is bright. The Ninth and
Tenth Districts have been particularly touched
by good fortu ne by being endowed with many
resources for which mu shroomin g demands
are predicted.
9
Bank Holding Companies
- Tenth District States
By John F. Zoellner
corporations that
Bown or controlcompanies,
two or more banks, have
ANK HOLDING
been a part of the banking structure of the
United States since around 1900. They became significant in the latter half of th e 1920's,
when many of the leading bank holding companies were formed. Marine Midland Banks,
Northwest Bancorpo rat ion, First B ank Systems,
F ir t Security Corporatio n, Fir t Wi consin
Bank. ha res orpo rati n, a nd a pred ce s r of
Weste rn Bancorporation all were inco rporated
during th e late I 920's. ln ad diti n, bank ho lding co mpan ies acquired num ero us banks, parti cul arly b anks in ru ral areas wh ich were experiencing hard times.
Holding companies were fir st brought under
Federal regulation and supervision by the
B anking Act of 1933. However, the coverage
of the Act was limited and it did not regulate
th e expansion of bank holdin g companies. In
1956, ongres pa sed the Bank H olding Compa ny Act " to define bank ho ldin g compani es,
co ntrol their future expansion, and req uire divestm ent of th eir nonbanking in terests." Thi s
law expli citl y recognized bank holdin g companie as an integral part of American banking and subjected the expa nsion of holding
10
co mpany ba nkin g to control by the Boa rd of
Govern ors of the Federal R eserve System.
Following passage of the Bank H olding
Company Act, the growth of ho lding company
banking came to a halt and actually declined
sli ghtl y. The number of bank holding companies decl ined fro m 49 at the end of 1956
to 41 in 1961 ,1 as several small hold ing companies covered by the Act dropped out beca use th ey d id not wish to c mply with it
provi io ns. 1 h number o f banks in holdin g
co mpani es fell from 433 in 1956 to 41 3 .in
1959 and then ro e to 427 at th e end of 1961.
As it beca me evident th at th e policies of the
Board of Governors under the Act would not
be especially restrictive, prospective bank holding companies proceeded to organize and
ex isting holding companies carried out planned
1
T he numbers ar for epara te bank ho ldin g compa n.ies
or group.. For examp le, on December 3 J, 1956, there
we re- 55 bank ho lding o mp a nics, but in 6 in la nces o ne
bank holdin g comra ny was co nt ro lJ ed by a nother bank
ho lding co mp a ny. T he da ta for 1956 include Amalgama ted loth in g Worker of Am erica a nd the First N ationa l Ba nk of t. Jose ph (Mo.) wh ich were h olding
comp a nies at the tim e but did not register with the
Boa rd o f Gov ern ors until 1959.
Federal Reserve Bank of Kansas City
Bank Holding Compan ies
acquisitions. By the end of 1965 there were
48 bank holding compan ies with 468 bank . In
the past two or three years the pace of holding
company expansion has accelerated, so th at at
the end of 1967 there were 65 bank holding
companies with 603 banks. 2 Th ese holding
company gro ups had total dcpo its of alm ost
$50 billion , or I 2.6 per cent of th e to tal deposit at al l commercia l bank s in th e United
States.
Holdin g company bankin g in Tenth Federal
R ese rve Di tri ct state ha s fo ll owed a simil ar
course of growth over the years.~ Bank hold in g
companies first bega n operati ng in Di st ri ct
stat . in the lat 19 O's. Growth was slow
until ju st prior to p~1ssa or the 13 ,rn k l Ioldin g
ompan y A t, wh ·n West rn Ban corp< ration
a quired a num b r o f bank in olorado, N w
Mex ico, and Wyo min g. Follow in g passage of
th e 1956 Act, holding company banking declined somewhat. Growth resum ed with the
approval of the formation of First Colorado
Bankshares in ]ate 1961 , and recently the expansion of holding company banking has been
gain in g mom entum.
Thi s articl e briefly reviews the grow th of
holdin company bank in g in Tenth Di lri ct
states sin ce 1956 and su rv ys th e r1Jat iv
po iti on of bank hol din g ompa ni s in the
structur o f Di trict bankin g. Bccau e th e
growth of holdin g company banking has been
shaped by Federa l and late law exp ressly
regul ating bank hold ing companies, these laws
are su mm ari zed fir st.
1 •
2
Certain exemptions fr o m the coverage o f the Ba nk
H o ld in g Company Ac t were elimina ted when it was
ame nd ed in July 1966. The dat a fo r 1967 is based on
th e amend ed definition of' a b:111k holdin g compa ny,
wh il th e d a ta for 196:i :i nd c:i rli cr is h:ised on th e
le f'initi o n in the original 1956 Ac t.
"Th e Tenth Federal Rese rve District e ncom passes all of
th e s ta tes o f Kan sa'i, Nebraska, Colorado, Wyoming, a n d
m o t o f Ok la homa. the northern h al f of New Mexi co,
a nd th e western tier of coun ties in Misso uri. Bec,n1se
of th e sta tewide nature of m any h olding companies, this
a rti cle co ns iders deve lo pments for e ntire state .
Mo nth ly Review • February 1969
LAWS REGULATING BANK HOLDING
COMPANIES
The Bank Holding Company Act of 1956,
amended in 1966, is th e sole Federal law
directly regul ating bank holdin g companies.
The amended Act defines a bank holding
company as " ... any company (1) that directly
or indirectly owns, controls, or holds with
power to vote 25 per ccntum or more of the
voting shares of each of two or more banks .. .
or (2) th at cont rols in any manner the election
of a majo rity of the directors of each of two or
more banks .. .. " A bank h ldin company so
dcfin d is freq uently rcfcrr d to as a registered
b;ink ho ldin ' ompa ny sin ce it mu st r gistcr
wi th th e Board or (,( v rn )L. 1 hi s d finiti n
docs not en mpa s a om pany th at ow n or
controls nl y one bank- the one-bank holding
company. Hence, th e one-bank holding compan ies which have been multiplying rec ntly
are not covered by the re tr ictions of th e Act. 1
The Act goes on to define a company as
" . .. any corporation, business trust, association, or similar organization, or any other
I long-term l trust . . . . " r. Explicitly excluded
from th e defini tio n is any partnership. Al so
excl ud ed, of course, i any indi vidual or group
of indi vidu ·il s. Thus , any individual or partnership th at wns or control two o r more banks,
th e o-callcd banking chain , is not a bank
holding company and is not covered by the Act.
A bank is defin ed as " . .. any institution that
accepts deposits that the depositor has a legal
right to withdraw on demand . . . . "
1
•
Th e ba nk h o ldin g co mp a ny gro up differs from a branch
banking rga n iza tio n ll1 that the s ubsidia ry banks of a
h o ldin g co mpan y arc independently inc o rp ora ted with
separa te bank c hart e rs. T he bran c h bank wi th its mu ltiple
o ffi ces is a s in g le co rp rate en tity o perating under one
bank c harter.
"A bank is a compa ny and therefore ca n be a bank
holding co mpany if it directly or ind irec tl y contro ls tw o
or m ore other bank s. First Nationa l B ank of St. Joseph
i an exa mpl e.
ll
Bank Holding Companies
Under the Act, the prior approval of the
Board of Governors is required for any company to become a bank holding company and
for any bank holding company to acquire more
than 5 per cent of the voting shares of a bank.
In considering applications, the Board is to
apply a set of antitrust standards. As stated in
the amended Act: "The Board shall not approve "(]) any acq ui siti on or m erger or co nsolidation .. . which would result in a monopoly, or
which would be in furth e rance of any combination or conspiracy to mon opolize or to attempt
to monopo li ze the busincs of banking in any
part of the United States , or
"(2) any olh r proposed acquisi ti on or merg r or consc lidati o n . . . whose effect in any
sccl io n of th e ou nlry may be substant ia ll y to
lessen compctiticm , or to tend to create a
monopoly, or which in a ny other manner would
be in restraint of trade, unl ess it finds the
anticompetitive effects of the proposed transaction are clearly outweighed in the public
interest by the probable effect of the transaction in m eeting the convenience and needs
of the community to be served.
" In every case, the Board shall take into
conside ra ti o n the financial and ma nage ri al resou rces and future prospects of the company
or companies and lh e banks concern ed , and
the convenience and needs of the community
to be served.,.
The Act also provides that no bank holding
company shall directly or indirectly ". . . engage in any business other than that of banking or of managing or controlling banks or of
furnishing services to or performing services
for any f subsidiary l bank .... " The one-bank
holding company, though , is free to engage in
almo t any kind of business.
Two provisions of the Bank Holding Company Act reserve rights to states. Section 3 (d)
of the Act provides that no bank holdin g company shall acquire any additional bank located
outside th e state in which the operations of
12
its banking subsidiaries were principally conducted on the date of the amended Act or the
date of the holdin g company formation, whichever is later, unless the acquisition of a bank
by an out-of-state holding company is specifically authorized by the laws of the state in
which the bank is located. Since no state has
enacted such a law, bank holdin g companies
have not been able to ex pand across sta te Jin es.
Out-of-state hold in g companies, however, can
continu e to own o r control banks acquired
prior to passage of the Act. For example,
Western Bancorporation, whose principal banking operations arc in Ca liforni a, can continue
to own its three sub sidi a ry ban ks in o lorado,
but ca nn o l acq uire any additional banks .
Sc one.I, ccti o n 7 f th e Act cxp li itly slates
that th e Act do s not prevent " . . . any State
from exerci sing such powers a nd juri sdi ction
which it now has or m ay hereafter have with
respect to banks, bank holding companies, and
subsidiaries thereof."
Three District states-Kansas, Nebraska ,
and Oklahoma-have exercised their states'
rights and passed laws prohibiting the expansion of holding company banking. Kan sas
passed a Jaw patterned after the origin al Bank
Holding Compa ny Act which m akes it unl awful for any company to become a bank holding
co mp any and for any bank holdin g co mp any
to acquire more than 25 per cent of the voting
shares of a bank. A bank holdin g company is
defined as in the original Act. Nebraska passed
a similar law in 1963.
Oklahoma enacted a somewhat different law.
A bank holding company is defined as " . .. any
company (A) which directly or indirectly owns,
controls, or hold s with power to vote fifteen
per cent (15 % ) o r m re of th e voting shares
of each of two or m ore ban ks .... " A company
is defined to include partnerships and joint
ventures. The sta tute then prohibits the formation of a bank holdin g co mpany so defined and
the acquisition by a holding company of more
than 5 per cent of the voting shares of a bank.
Federal Reserve Bank of Kansas City
Bank Holding Companies
The other Di strict states- Colorado, Missouri, N ew M ex ico, and Wyo ming-h ave no
statutes spec ifica lly regul atin g bank holdin g
compani es.
GROWTH OF BANK HOLDING COMPANIES
IN DISTRICT STATES
At th e end of ] 956 th ere were eight bank
holdin g co mp ani es o pera tin g in T enth Di stri ct
states, with 36 sub sidia ry ba nks loca ted in
every Di strict state. Four of the holdin g compa nies had th eir principal b ankin g o perati ons
in states outsid e th e D is tri ct. Western Banco rpo rat io n, with headq uarte rs in Los A n 1 clcs
and prin ipal o p ra ti o ns in
alifo rni a, had
thrc sub sidi a ry bank s in
o lora do, fi ve in
N w Mcx i o , and thr c in Wyo min 1 • 0 ft had
acquired its sub sid iary ba nk s in th e l 950's
prior to passage of the Ban k H old in g Co mpa ny
Act. F irst Sec urity Co rpo rati on of Salt Lake
City, with principal opera ti ons in Utah , h ad a
subsidiary b ank in W yo ming. N orth western
Bancorporati on , Minneapoli s, with principal
operation s in Minn esota, owned five ban ks in
Nebraska. Bo th First Security Co rporation and
N orthwest Bancorporation had acquired th eir
banks in th e late I 920's or ea rl y I 930's. Farmers and Mc hani cs T ru st om pany, hildress,
T ex ., owned o ne ba nk in Ok laho ma. These
out-of-sta te hold in g co mp ani es were legall y
ba rred from ex pand in g th eir o perati o ns in
District states.
The other four bank holdi ng companies had
their m ajor banking operations in Missouri.
General Bancsha res Corporation , St. Louis,
had four subsidiary b anks in the St. Loui s
area. It a lso o wn ed three b anks in lllin o is and
one in T enn essee. T he Kemper ln vcstm cnt
Co mp any , K an as C ity, held interests in fi ve
7
0
fn 1956, W este rn Banco rpora tio n was Tra nsa meric a
Co rpora ti o n . It was Firsta mer ica Co rporation in 1958
a nd 1959.
7
G e nera l Ba ncs ha res was Ge ne ra l Co ntrac t Corpora ti on
until 1958.
Mo nthly Review • February 1969
banks in Mi ssouri and two banks in Kansas;
while K eystone Co rporation , Kan sas City, held
interests in fo ur banks in Mi ssouri and one in
Kan sas. First N ati o nal Bank o f St. Jo seph h ad
two subsidi ary banks in St. Joseph. These
Missouri ho ldin g co mpanies could expand
their o perati.o ns o nl y in Mi ssouri.
In 1959, The K emper Inves tm ent Company
and K ey to ne Co rpo rati on reduced th eir ownershi p of th e vo tin g shares o f b ank s and ceased
to be bank ho ldin g co mpani es. Th en, in 19 60,
Fa rm ers and M ec hani cs Tru st Comp any of
C hildress, T ex ., d ro pped o ut , leav in g o nly five
ba nk hold in g co mp ani c with 23 sub sidi a ry
ba nk s. Bank ho ld in r co mp ani es no longe r o pcrn lcd in Kan sas a nd O kl ,th o ma.
Ho ldin g comp:111y bankin g bega n to gro w in
196 1 and has b een gro win g ever sin ce, so th at
th ere arc no w 13 b ank ho ldin g compani es with
53 subsidi ary b anks in T enth District states.
M ost of th e growth occurred in only two of
th e District states- Colorado and Missouri.
Th e current expan sion of b ank holding companies started with the fo rmation of First
Colorado B ankshares, E nglewood, Colo. Its
a pplicati o n to beco me a ba nk holdin g company
th ro ugh the acq ui siti o n o f three ba nks in th e
D enve r area was a pproved by th e Boa rd of
Gove rn o rs in O ctobe r 196 1. 8 In November
1963, it received a pproval to acquire a n ewly
o rga nized bank in downto wn D enver.
Ano th er Colorado holdin g company, Denver U . S. Bancorporation , D enver, also was
approved in November 1963. It was formed
with the acqui sitio n of D enver United States
N ational B ank, the second largest bank in
D enver and C olorado, and two small banks
in th e D enver a rea. Sin ce its form ati on, Denver
8 T he re is so m e a m b ig uity in ela ting th e form a ti o n o f a
ban k ho ldin g compa ny. 171ere a re three alte rn a ti ve dates
to ch oose fro m : ( 1) w he n the app li ca ti o n is a pproved,
(2) w hen th e t ransac ti o n takes pl ace, a nd (3) when th e
holding com pa ny registers. T he d ate of approva l is u sed
in th is a rticle.
13
Bank Holding Companies
U. S. Bancorporation has expanded rapidly. It
acquired th e third largest bank in Greeley in
1965 and the third largest bank in Boulder in
1966. In 1967, its subsidiary bank in Littleton
merged with anoth er bank.
A proposed bank holdin g company, MidContinent Bancor poration , Leadville, was
denied by the Board of Governors in ea rly
1966. In late 1967, though, the Board approved Colorado CNB Bankshare , Denv er,
as a bank ho ldin g compan y. It was formed
with Colorado National Bank, the third largest
bank in D enver and Colorado, and two small ,
a ffili ated bank s in D enver. T he formati on of
F irst N a ti na l Bancorpo ration , l enve r, invo lvin g th e la r 1 s l bnnk in D hnv r and th e
tat - First Nati ona l Bank of Denver- and
three mall , a ffili ated banks in th e Denver
area, was approved in May 1968.
Mi ssouri follows Colorado in the amount of
bank holding company activity. G eneral B ancshares Corporation started th e action by acquiring two small banks in the St. Louis area in
1962. It proposed to acquire First National
Bank of St. Louis, the second largest bank in
St. Louis and Mi ssouri, but its application was
deni ed by th e Boa rd o f G overn ors in December
1966.
Another proposed bank holdin g co mpany
involvin g three banks in the St. Louis area,
Clayton Bancs hares Corpo ration, Clayton, was
deni ed in October J964. With th e amendm ent
of th e Bank Holding Company Act in 1966,
the Joe W. Ingram Trust B , a long-term charitable tru st, became the third bank holding
com pany in Missouri. It owns two small banks
in Bynumville and Salisbury. Commerce Bancshares, Kansas City, was approved as the
fourth bank holding company in July 1968.
It wa formed with Comm erce Trust Co mpany ,
the larges t bank in Kan sas City and the third
largest in the state, and banks in Springfi eld ,
Joplin , and Brun swick. Northland B ancshares,
Bridgeton , with three sub sidiary banks in the
St. Louis area, was approved as the fifth
14
Mi ssouri holding company in January 1969. 0
There has been comparatively little holding
company activity in the other District states.
The formation of First Okl ahoma Bancorporati on, Oklahoma City, with First N ational Bank
and Trust Company, Okl ahoma City, and Idabel N at ional Bank, Idabel , as sub sidiari es, was
approved in November 1962. Subsequently, th e
Oklahoma legislature pas ed a law prohibiting
furt her expansion o f holdin g company bankin g.
In October 1968, F irst Oklahoma Bancorporation sold its interest in Idabel National Bank
and became a one-bank holding co mpany. A
proposed ho ldin g com pany in N ebraska, Tran sN eb ra ka Co ., Lin co ln , was d ni d by th e
Boa rd o f JO Vc rn ors in Ma y 1963. T he Board
in J anuary 1969 approved 13ank cc urit1 s,
Al amogo rd , as th e seco nd bank ho ldin g co mpany in N ew M ex ico . It was form ed with banks
in Alamogordo, Cuba, and Vaughn.
POSITION OF BANK HOLDING COMPANIES
At present 13 bank holding companies operate in Tenth Di strict states, with 53 subsidiary
banks located in every Di strict state except
Kansas and Okl ahoma . Three of the holding
co mpani es- Western Bancorporation , N orthwest Banco rporation, and First Security Corporat io n- have th eir p rin cipa l bankin g operations
in states o utside th e Di trict. Western B ancorporation has sub sidi ary banks in three Di strict
states, while th e oth er two holdin g companies
h ave banks in one state each. Ten bank holding companies have their major banking operations in District states-four in Colorado, five
in Missouri, and one in N ew Mexico. Only one
of th ese, General Bancshares Corporation, has
out-of-state sub sidiary banks.
Holdin g company banking is most prevalent
in Colorado. A s shown in Table ] , five bank
holdin g compani es operate in Colorado, one
of which is Western B ancorporati on. They own
19 banks, 8.7 per cent of the 218 insured
0
Northland Ba ncs ha res plans to ch a nge its name to M a rk
Twa in Bancsha res .
Federal Reserve Bank of Kansas City
Table 1
SIN TE TH DISTRICT
BA K HOLDI GC
June 30, 1968
Percentage of
Percentage of
All Insured Banks
All Insure d Banks
Total
Banks
Total
Deposits
Banks
Deposits
(I n millions
(In per cent)
of dollars)
COLORADO
All Insured Banks
Bank Holding Companies
(Including proposed
acquisitions)
Colorado CNB Bank shar s,
Donver
D nv r U. S.
Bancorporation, Den v r
(In cludin g propos d
acquisitions)
3,384
19
1,504
(21)
8.7
(1,545)
44.4
(9.6)
(45.7)
3
263
l.4
7.8
5
470
2.3
13.9
(7)
(511)
(3.2)
(15.1)
4
112
l.8
3 .3
First National
Bancorporation, Denver
4
486
1.8
14.4
3
1.4
173
9,610
Bank Holding Companies
18 *
(Including proposed holding
companies and acquisitions) (27)
1,038
First National Bank
of St. Joseph,
St. Joseph
General Ba ncshares
Corporation, St. Louis
Joe W . Ingram Trust B,
Kansas City
Northland Ban cshares,
Bridgeton
Firs t National
Charter Corporation,
Kansas Ci ty
(proposed)
Midw st Bancorporation,
Kansas City (propos d)
Total
Deposits
(In per cent)
3
84
0.5
0 .9
(2)
(331)
(0.3)
(3.4)
(2)
(14)
(0.3)
(0.2)
NEBRASKA
All Insured Banks
434
2,724
5
271
1.2
10.0
5
271
1.2
10.0
51
1,103
8
188
15.7
17.0
Western Bancorporation,
Los Angeles
5
162
9.8
14.7
Bank Securities, Alamogorclo
3
26
5.9
2.3
69
612
4
102
5.8
16.6
(8)
(128)
(11.6)
(20.9)
9
1.4
1.4
3
93
4.3
15.2
(4)
(27)
(5.8)
Bank Holding Companies
Northwest Bancorporation,
Minneapolis
5.1
All Insured Banks
Bank Holding Companies
657
Commerce Bancsha res,
Kansas City
(Including proposed
acquisition s)
(In millions
of dollars)
Banks
NEW MEXICO
MISSOURI
All Insu red Banks
Total
Deposits
MISSOURI (Cont.)
218
First Colorado
Bank shares, Englewood
Western Bancorporation,
Los Angeles
Banks
4
(9)
3*
6
2
(1,488)
2.7
(4.1)
(15.5)
0.6
5.8
All Insured Banks
(6.9)
Bank Holding Companies
(Incl uding proposed holdi ng
company)
561
(666)
(1.4)
69
315
9
10.8
0.7
First Security Corporation,
Salt Lake City
3.3
Western Bancorporation,
Los Angeles
0.1
Wyoming Bancorporation,
Cheyenne (proposed)
0 .5
0.9
0.3
* First Nati onal Bank of St. Joseph is included.
Note : The bank hold ing companies and subsid iary
banks are
those
banks in the state a. of J unc 30, I 968. A four
f the five largest bank s in Colorado arc owned
by bank holding companies, they control 44.4
per cent of th e to tal dcpo its in the state. The
importance of bank holding companies is likely
to grow. D enver U. . B anco rporation currently
Monthly Review • f c bruary 1969
WYOMING
(4.4)
approved to datG.
ha s applicati ns pending to acquire bank in
Fort Collins and Pueblo which, if approved,
would incrca c ho lding company control to 9 .6
per cent f the banks and 45.7 per cent of the
total deposits in Colorado. Additional applications to form bank holding companies and for
15
Bank Holding Companies
holding companies to acquire banks are probable. At least three planned h olding companies
h ave been announced in recent weeks.
Missouri has the same number of bank holding companies- five- all of which operate
principally in Missouri. Eighteen Mi s ouri
banks are in holding companies, which represents 2. 7 per cent of th e 657 in sured banks
in th e state. Bank holdin g companies control
l 0.8 per cent of th e total depos its.
Two applicati o ns have been fil ed to for m
bank holdin g companies in Mi ssouri. First
N at ion al Charter Corporation , K ansas City,
has fil ed to acq uire First Nationa l B ank of
ity , the co nd lar es t bank in Kan sas ity and fo urth larges t in Mi sso uri , and a n
affili a ted bank in Kan sas it y. Midw st Banco rpora ti o n, K a nsa
ity, a l o has fil ed t
acq uire two sm a ll banks in th e K ansas ity
area . In additi o n, Commerce Bancshares has
applications pending to acquire three banks
in the St. L o uis area and banks in Kirksville
and St. Jo seph. If all of these applications are
approved, bank holding companies would be
much more significant in Mi ssouri banking.
They would control 4 .1 per cent of the banks
and l 5.5 per cent of th e to tal d eposits.
First Security Corporation and Western Ban-
16
corporation have four subs idi ary banks in
Wyomin g with total deposits of $102 million.
Thi s represents 5 .8 per cent of the 69 banks
and 16.6 per cent of the total depo sits in
Wyoming. Wyo min g Bancorporation, Cheyenn e, h as a pplied to beco me th e first in-state
holdin g co mpany with three subsid iary b anks
in Cheyenne and o ne in Wheatland . If approved , bank ho ldin g companies would control
11 .6 per cent f the banks and 20 .9 per cent
o f the deposits in Wyomin g.
Two bank holdin g companies o wn eight subsidi ary banks in N ew Mexico, wh ich represents
15 .7 per cent o f the banks. They co ntrol 17.0
per c nt of th e total depo its in N ew M ex ico
banks. Northw st Ran o rp ration o perat s in
N bras ka, wh r it has fiv ba nk s with $2 71
million in dcpo sits- 1.2 p r c nt o f th banks
and I 0.0 per c nt o f th e depos it in N ebraska.
Holdin g company banki ng h as been expandin g rapidly in Colorado and Missouri, and indications are that it may continue to increase
in importance. P erhaps it is starting to expand
in N ew M exico and Wyoming. Holding company expansion currently is prohibited in Kansas, Nebraska , and Oklahoma, and any development of bank holding companies in th ese
states would require a change in state laws.
Federal Reserve Bank of Kansas City
@FedFRASER