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9161 Minutes for April 16, 1962 To: Members of the Board From: Office of the Secretary Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, please initial below. If you were present at the meeting, your initials will indicate approval of the minutes. If You were not present, your initials will indicate Only that you have seen the minutes. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell Minutes of the Board of Governors of the Federal Reserve SYstem on Monday, April 16, 1962. The Board met in the Board Room at 10:00 aiall• PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson King Mitchell Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Thomas, Adviser to the Board Molony, Assistant to the Board Fauver, Assistant to the Board Spencer, General Assistant, Office of the Secretary Messrs. Noyes, Garfield, Holland, Koch, Williams, Brill, Eckert, Gehman, Partee, Wernick, Yager, Altmann, Freedman, and Peret, and Miss Dingle of the Division of Research and Statistics Messrs. Furth, Irvine, Maroni, Reynolds, Gekker, Gemmill, Mills, and Klein of the Division of International Finance Messrs. Swan, President, and Einzig, Vice President, Federal Reserve Bank of San Francisco Economic review. The Divisionsof International Finance and ilesearch and Statistics presented a review of economic and financial (lelleloloments in the United States and abroad. At the conclusion of this presentation, all of the members or the staff except Messrs. Sherman, Kenyon, Molony, Fauver, Noyes, hy and Spencer withdrew from the meeting, as did Messrs, Swan and Ein . zlgy and the following entered the room: 4/16/62 -2Mr. Cardon, Legislative Counsel Mr. Goodman, Assistant Director, Division of Examinations Distributed items. The following items, which had been distributed to the members of the Board and copies of which are attached to these minutes under the respective item numbers 14dicated, were approved unanimously: Item No. Letter to Chase International Investment Corporation New York, New York, granting extension to February 1, 1963, of the time vithin which certain investments may be .1.111 de in Arcturus Investment & Development ! Montreal, Canada. 1 Letter to Marine Midland Corporation, Buffalo, 1 4 York, regarding its request for confidential 7 ! `dreatment of a portion of the application to ?quire stock of Security National Bank of Long sland, Huntington, New York. 2 Letter to Congressman Patman regarding the i?Plicability of section 3(d) of the Bank °141ing Company Act to certain bank mergers. 3 The members of the staff then withdrew and the Board went into executive session. Position of Adviser to the Board. The Secretary was advised later that during the executive session the Board discussed the plans °t Woodlief Thomas, Adviser to the Board: for retirement within the tiet few months, and his request to be relieved of his duties as c°11.0]ftl1st of the Federal Open Market Committee at the close of the Coollnittee meeting on April 17, 1962. The Board concluded that 4/16/62 at _3_ such time as Mr. Thomas retired from active service with the Board of Governors, his position as Adviser to the Board would be discontinued. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board a letter to the Director of the Center for Latin American Monetary Studies, Mexico City, Mexico, designating Miss Janet Hart, formerly of the Board's staff and presently residing in Mexico City, as an ad hoc representative of the Board to attend this year's sessions of CEMLA. The letter also indicated that the Board would have no objection to Miss Hart's leading one or two discussion sessions, with the understanding that the views expressed would be understood as her personal views. 378, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 1 4/16/62 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 16, 1962 ,Cliase International Investment Corporation, Chase Manhattan Plaza, -elf York 5, New York. Ge ntlemen: y 19, 1962, transReference is made to your letter of Januar ing the Board's regard 1 York through the Federal Reserve Bank of New authorized which er s) letter letter of February 21, 1957 (and subsequent :71,t r investfurthe make to ions, argar Corporation, subject to various condit (in Canada al, Montre Ltd., to t in Arcturus Investment 8c Development, ng existi the with which, amount ,:n1 of stock or obligations), up to an of letter s Board' The . 00,000 p'4estment, would not exceed US$7,5 time within which it uarY 27, 1961, extended to February 1, 1962, the sa : en investment might be made. r investment Your letter of March 14, 1962, stated that a furthe in Arct stock, urus had been made in the form of 8,300 shares of common with $83001,1,t nominal or par value, for a total consideration of Canadian of th J'°0 (US$790 575) which was to be used for future capital needs at cam_ common us 50,000 --making your total investment in Arctur share8,"I'PanY enting paid-in capital of Canadian $5,000,000 (US$5,115,085.11). repres CIIC had made the Your letter of March 26, 1962, advised that to outsiders and ments investrrl in March because Arcturus had made commit had t stated that ents; agreem its of the ° respond in accordance with the terms ted reques as 9, March by in approval of the Board had not been received the of ion extens an aut °11r letter of January 19, 1962, applying for Board's approval Y; and, in the circumstances, you requested the on a re troactive basis. letter dated In this connection, it has been noted from your APra r 23, 1961, offering to slabs° 4, 1962, that CIIC wrote Arcturus on Octobe common stock at Canadian $100 ribe for an aggregate of 10,000 shares of October 25, 1961, resol Per share; that the Directors of Arcturus on ate of 10,000 shares; lied to accept subscriptions of CIIC for an aggreg ' BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 2. Chase International Investment Corporation that on December 1, 1961, CIIC subscribed to 1,700 shares of Arcturus for the regate of US$163,093.75; that on January 19, 1962, CIIC applied to Board of Governors for extension of the right to make further investin Arcturus; that on March 9, 1962, CIIC subscribed for the remaining .)uti shares of stock of Arcturus at a cost of $790,575; and that on 'larch 14, 1962, you wrote the Board of Governors advising of the subscription 1 further investment. Your letter of April 5, 1962, advised that Arcturus been authorized .to increase its outstanding shares to 75,000 and that 4:_u are considering increasing your investment by, possibly, the maximum Z eu"mnt (Canadian $2,500,000). In accordance with your request and on the basis of the infor.Lurnished in your letters of January 19, March 14, March 26, th." 2, and April 5, 1962, the Board grants consent retroactively to sto Purchase of 8,300 shares, without nominal or par value, of the common ' 4 C Of Arcturus Investment & Development, Ltd., Montreal, Canada, for consideration of Canadian $830,000 (US$790,575), which was 0471Imated on March 9, 1962, pursuant to the offer made by CIIC on 1963, the time vitner 231 1961. The Board also extends to February 1, & Investment Dev-111 litlich further investment may be made in ArdAumas which, amount an to vit: 2Pment, Ltd. (in form of stock or obligations), up - the existing investment, would not exceed US$7,500,000. oation In reviewing the report of examination of CIIC as of July 17, 1961 plar it has been noted on page 21-(5) that "in April of 1961, Arcturus e sed 897 shares with proceeds of the redemption of its 15,935 Partes Benc arias (founders shares)" of Concreto Redimix do Rio de Janeiro, c,41p2 inc reasing its holdings to 12,301 shares of common stock of the the carried in the aggregate at Canadian Dollars 90,451. While ti71°11nt involved is small and within the percentage limits permitted that .7.1,813ardis General Consent of January 20, 1960, it does not appear q th:" Board was informed promptly in writing as required by Condition 1 -v ueneral Consent. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS 7 20 Levip CO G01: -14'• 041.; OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 2 4/16/62 ADDRESS OFFICIAL CORRESRONDE N r. TO THE EIOARD 411**4. ti, April 16, 1962 Charles G. Blaine, Esq., Phillips, Mahoney, Lytle, Yorkey & Letchworth, Marine Trust Building, Buffalo 3, New York. Dear Mr. Blaine: This will acknowledge your letter of April 4, 1962, addressed to Chairman Martin, in which, on behalf of your client, Marine Midland Corporation, you refer to the proposed application by Marine to be filed with the Board under the Bank Holding Company Act of 1956 in which prior approval will be sought for Marine's acquisition of the outstanding stock of Security National Bank of Long Island. In this connection you have submitted a proposed Exhibit E(3) to the application, concerning the character of management of Marine Midland Corporation and Security National Bank, and have inquired as to whether the Board would accept and treat as c?nfidential that portion of the application. Your inquiry is understood to relate both to the proposed Exhibit E(3) and, in the event a Public hearing on the application is held, to any testimony that may be received on the same subject. In view of the nature of the disclosures relating to management of the Bank, the Board will receive Exhibit E(3), as proPosed, as confidential. It is to be understood that the Board's a?quiescence in your request for confidential treatment of the material relating to character of management constitutes an assurance °1:11Y that the material will not be made public as may be other port1.-°ns of the application. The Board believes inappropriate a comMitment, as you have requested, as to whom access to the proposed °nfidential material may be given. Decisions in this regard will ue made on the basis of the Board's judgment as to what best serves the public interests. In the event of a public hearing, Board counsel will request the hearing examiner conducting the hearing to receive at a nonpublic se3sion testimony relating to management that is believed by Applicant BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Charles G. Blaine, Esq. -2- to require confidential treatment. If so received, this material would not be available to the public except to the exteat that the I.30ard should consider its disclosure appropriate in connection with 1.!,s action on the application or in connection with any judicial revIew that may follow such action. Very truly yours, c, Merritt Sh Secretary. 1381 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON Item No. 3 4/16/62 OFFICE OF THE CHAIRMAN April 171 1962 The Honorable Wright Patman, Chairman, Select Committee on Small Businss, House of Representatives, Washington 25, D. C. Dear Mr. Chairman: This refers to your letter of April 7, 1962, regarding the recently approved merger of Bank of Idaho, Boise, Idaho, and The First National Bank of Bonners Ferry, Bonners Ferry, Idaho. Bank of Idaho is a subsidiary of Western Bcncorporation, a bank holding company. You inquire as to the application of section 3(d) of the Bank Holding Company Act of 1956 to the merger, and also as to application of the section to a possible merger of Walker Bank & Trust Company, Salt Lake City, which also is a subsidiary of Western Bancorporation, with The First National Bank of Price, Price, Utah. Section 3(d) of the Bank Holding Company Act, to which You refer, provides in part: .. . no application shall be approved under this section which will permit any bank holding company or any subsidiary thereof to acquire directly or indirectly, any voting shares of, interest in, or all or substantially all of the assets of any additional bank located outside of the State in which such bank holding company maintEins its principal office and Place of business or in which it conducts its principal operations . . ." (underscoring supplied) requires Section 3(a) of the Bank Holding Company Act may company Board holding approval under that Act before a bank a before also and ), n°I.aire bank stock (with certain exceptions bank," a than "other es, ding company or any of its subsidiari Y acquire "all or substantially all of the assets of a bank." 'he underlined exception allows a bank in a holding company sYstem to absorb another bank without prior approval under the 138, The Honorable Wright Patman -2- Bank Holding Company Act, and no application would be made under that Act with respect to such a transaction. Accordingly, section 3(d) of the Bank Holding Company Act does not apply to such a merger of banks, even though the continuing bank is to be a subsidiary of a bank holding company. The general subject of the relationship of the Bank Holding Company Act to a merger involving a bank in a holding company system is discussed at pp. 98-99 of the Board's Annual heport for the year 1960, and an excerpt is attached for convenient reference. Sid-merely yours, (Signed) Wm. McC. Martin, Jr. Wm. 1.cC. iartin, Jr. Enclosure 1381 EACERPT FROM ANNUAL REPORT OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM FOR THE YEAR 1960 (pp. 98-99): "Under present law, a bank in a holding company system may expand by absorbing another bank without obtaining the prior approval of the Board of Governors under the Bank Holding Company Act. In its May 7, 1958 Report, the Board expressed the view that effectuation of the purposes of the Act required that a holding company bank's absorption of an independent bank, by merger or otherwise, should be subject to the provisions of the Act. "On May 13, 1960, Section 18(c) of the Federal Deposit InsuranceAct (12 U.S.C. 1828) was amended to provide that, in practically all cases, bank mergers and absorptions must have the prior approval of one of the Federal bank supervisory agencies and that those agencies must take into consideration factors that are substantially similar to those enumerated in the Bank Holding Company Act. In view of the provisions of this so-called Bank Merger Act, the Board believes that extending the coverage of the Holding Company Act to comprise bank mergers involving holding company banks would produce an unjustified duplication of supervision. Accordingly, the Board withdraws its recommendation (Recommendation 15 of the May 7, 1958 Report) that the Holding Company Act be mended in this respect." •••••... gote: Recommendation 15 of the May 7, 1958 Report, referred to above, was published in the July 1958 issue of the Federal Reserve Bulletin, beginning at page 78717
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