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609
Minutes for
To:
Members of the Board
From:
Office of the Secretary
April 26, 1966
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.
Chm. Martin
Gov. Robertson
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Gov. Brimmer
1 /1
1
Minutes of the Board of Governors of the Federal Reserve
System on Tuesday, April 26, 1966.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Robertson, Vice Chairman
Shepardson
Mitchell
Daane
Maisel
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Mr. Young, Senior Adviser to the Board and
Director, Division of International Finance
Mr. Holland, Adviser to the Board
Mr. Molony, Assistant to the Board
Mr. Farrell, Director, Division of Bank Operations
Mr. Solomon, Director, Division of Examinations
Mr. Johnson, Director, Division of Personnel
Administration
Mr. Hexter, Associate General Counsel
Messrs. O'Connell and Shay, Assistant General
Counsel
Mr. Smith, Associate Adviser, Division of
Research and Statistics
Messrs. Goodman, Leavitt, Smith, and Thompson,
Assistant Directors, Division of Examinations
Mrs. Semia, Technical Assistant, Office of the
Secretary
Mrs. Heller, Senior Attorney, and Mr. Smith,
Attorney, Legal Division
Mr. Lawrence, Economist, Division of Research
and Statistics
Messrs. Egertson, Supervisory Review Examiner,
Poundstone and Rumbarger, Review Examiners,
and Kline, Assistant Review Examiner, Division
of Examinations
Discount rates.
The establishment without change by the Federal
Rese
rve Bank of Boston on April 25, 1966, of the rates on discounts and
advances in its existing schedule was approved unanimously, with the
urlderstanding that appropriate advice would be sent to the Bank.
1 4 t"-W
-2-
4/26/66
Approved items.
The following items were approved unanimously
after consideration of background information that had been made available to the Board.
Copies are attached under the respective numbers
indicated.
Item No.
Letter to Peoples Union Bank & Trust Company,
McKeesport, Pennsylvania, approving the
establishment of a branch in Port Vue Borough.
1
Letter to Peoples Union Bank & Trust Company,
McKeesport, Pennsylvania, approving the
establishment of a branch at Sixth Avenue
and Walnut Street.
2
Letter to Chase Manhattan Overseas Banking
Corporation, New York, New York, modifying
the terms of the Board's consent to its acquisition of shares of Privat-und Kommerzbank,
Vienna, Austria.
Letter to Boston Overseas Financial Corporation, Boston, Massachusetts, granting consent
to acquire additional shares of Banco Europeo
de Negocios, Madrid, Spain.
4
Letter to the Federal Deposit Insurance
Corporation regarding the application of
l'eoples State Bank, Artesia, New Mexico,
for continuation of deposit insurance after
withdrawal from membership in the Federal
Reserve System.
5
Telegram to the Federal Reserve Bank of Boston
re garding classification of member banks for
he purpose of electing Class A and Class B
directors.
6
Letter to the Federal Reserve Bank of Chicago
?Proving the payment of salaries to the
ank's painters and electricians at specified
rates.
7
1463
4/26/66
-3International Banking Corporation.
An inquiry had been received
from the Treasury Department regarding matters under discussion between
the Canadian Ministry of Finance and the United States Embassy relating
to the acquisition of control of The Mercantile Bank of Canada, Montreal,
Canada, by International Banking Corporation, an "agreement corporation"
subsidiary of First National City Bank, New York, New York.
After discussion there was agreement with Vice Chairman Robertson's
s uggestion that the Treasury Department be furnished factual information
as to the date (August 29, 1963) of Board approval of the acquisition of
stock of Mercantile Bank by International Banking Corporation and the
Provisions of the Board's pertinent regulation (Regulation K, Corporations Engaged in Foreign Banking and Financing under the Federal Reserve
Act) in regard to establishment of additional branches by foreign subs idiary banks of Edge Act and agreement corporations.
Messrs. Young, Shay, Goodman, and Poundstone then withdrew from
the meeting.
Application of Denver U. S. Bancorporation.
There had been
distributed a memorandum dated April 18, 1966, from the Division of
.4aMinations, with other pertinent papers, regarding the application
Of Denver U. S. Bancorporation, Inc., Denver, Colorado, to acquire shares
Qf The Mercantile Bank and Trust Company, Boulder, Colorado.
At the time the application was filed, the Board received protests from The First National Bank of Denver and The Central Bank and
1.4M
4/26/66
-4-
Trust Co., both of Denver, Colorado.
that a public hearing be held.
The latter bank also requested
The Colorado State Bank Commissioner
advised that the Banking Board recommended that the application be
disapproved and requested that a public hearing be held.
Because of
lack of timeliness of the latter request, the Board was not required
to order a public hearing, but did so under its discretionary authority.
The public hearing was held in Denver in October 1965.
In his
Report and Recommended Decision, the hearing examiner, Mr. David London,
concluded:
"On the entire record, I find that the financial history and
condition, prospects, and character of management of Bancorporation and
Mercantile are satisfactory and consistent with approval of the application.
The findings heretofore entered with respect to the convenience
and needs of the area principally involved, though not heavily weighted
in favor of approval, are nevertheless sufficient to recommend such
a pproval.
The increase in the size and extent of Bancorporation's system
resulting from the proposed acquisition will not be inconsistent with
adequate and sound banking, the public interest, or the preservation of
banking competition.
By reason of all the foregoing, and in the light
of the factors set forth in section 3(c) of the Act, I conclude that the
Proposed acquisition would be consistent with the public interest and
that the application should, therefore, be approved."
Central Bank and Trust Co. filed a brief on exceptions to the
hearing examiner's report and requested an opportunity to appear before
14ar
4/26/66
-5-
the Board and present oral argument.
The Colorado State banking
authorities filed a statement indicating that their absence of exceptions to the hearing examiner's report was intentional, but was not to
be construed as concurrence therewith.
On the basis of the record made at the public hearing, the
Division of Examinations recommended that the proposed acquisition be
aPproved.
The Division also recommended that the request for oral
argument be denied.
After summary comments by Mr. Thompson based principally on the
material that had been distributed, the staff responded to questions
by members of the Board directed principally toward the request for
oral argument.
Agreement was expressed with the recommendation for
denial of the request.
Statements by members of the Board then disclosed that all were
favorably disposed toward approval of the application except Vice Chairman
Robertson, who found a lack of valid arguments in favor of the proposal.
In his view, consummation of the transaction was not warranted as a soluti°n of Mercantile Bank's management succession problem or future capital
or by the convenience of the Boulder community, where banking
needs were already being met adequately.
The State had objected to the
further expansion of Denver U. S. Bancorporation, one of the subsidiaries
°I which was the second largest bank in Colorado, and he believed great
eight should be given to the views of a State in considering what kind
4/26/66
-6-
of banking structure should be permitted.
Those views should not be
overruled unless the public interest would clearly be benefited, and
he could not see that this would be true in the present case.
The application of Denver U. S. Bancorporation was thereupon
aEiay_tci, Vice Chairman Robertson dissenting.
It was understood that
an order and statement reflecting this decision would be prepared for
the Board's consideration, along with a dissenting statement by the
Vice Chairman.
Application of United Bancshares of Florida.
There had been
d istributed a memorandum dated April 20, 1966, from the Division of
Elcaminations, with other pertinent papers, regarding the application
of United Bancshares of Florida, Inc., Miami Beach, Florida, to become
a bank holding company through the acquisition of 80 per cent or more
of the outstanding voting shares of The Miami Beach First National Bank,
Beach, Florida, and United National Bank, Miami, Florida.
(Appli-
cant already owned a controlling interest in Coral Gables First National
8ank, Coral Gables, Florida.)
The Division recommended approval, as had
the Federal Reserve Bank of Atlanta.
The Division further recommended
that, if the application were approved, the letter so informing the
a pplicant include a statement to the effect that the applicant's debt,
Which was short-term and for which no definite plans of refinancing had
been formulated, was considered sizable and the Board would look with
dis
favor upon any action on the applicant's part that would result in
1 el h'71
4/26/66
-7-
incurring more debt prior to a relatively significant improvement in
the present debt to net worth ratio.
Mr. Thompson commented on the salient features of the application, after which members of the Board posed a series of questions
regarding the financial structure of the applicant and the condition
of Miami Beach First National Bank, which would be the principal subsidiary.
It was brought out that the bank had been operated conserva-
tively, yet profitably, and that it had a strong capital position; also,
that the management of each of the banks involved in the proposal was
headed by an individual who would serve additionally as president of
the applicant holding company and who had exhibited a high level of
competence.
The members of the Board then stated their positions, which
indicated that all agreed with the recommendation of the Division that
the
application be approved.
Governor Mitchell, however, expressed reservations as to the
Jus tification for the recommended caveat regarding debt position, which
seemed to him unnecessary in view of the operating record.
Vice Chairman Robertson expressed the view, on the other hand,
that
the admonition as to debt position was warranted and should not
elise any great problem to the parties concerned in view of the growth
Potential
and earnings of the subsidiary banks.
Per
As to the application
se) he said that he was willing to go along with approval because
1 114/26/66
-8-
the proposal would, to some degree, provide greater competition to the
dominating bank in the area, it would in effect merely tie into a holding company structure components that were now in a chain banking structure, and there had been no objection from the State authorities.
The application of United Bancshares of Florida was thereupon
-altaElclmsi. unanimously, it being understood that an order and statement
would be drafted for the Board's consideration.
Messrs. O'Connell, Smith (Research and Statistics), Thompson,
Lawrence, Smith (Legal Division), Egertson, Kline, and Rumbarger and
Mrs. Heller then withdrew from the meeting.
Examination of Kansas City Reserve Bank.
Mr. Smith summarized
information disclosed through the examination of the Federal Reserve
Bank of Kansas City made by the Board's field examining staff as of
January 4, 1966, his comments being based on the report of examination
and related memoranda that had been circulated to the Board.
Among
Other things, he commented on the borrowing record of particular member
banks in the Tenth District and the steps being taken by management of
the Reserve Bank.
After discussion, it was agreed that, aside from a question
raised in regard to the Denver Branch building project, there were no
Illatters that appeared to warrant action on the part of the Board.
Denver Branch building (Item No. 8).
During discussion of the
eamination report of the Federal Reserve Bank of Kansas City, question
.14
4/26/66
x
-9-
was raised whether, in view of present inflationary pressures, it might
be advisable to postpone construction projects such as the new Denver
Branch building.
While no firm conclusions were reached, there appeared
to be general agreement that such projects should be reviewed carefully
under existing circumstances.
It was noted that a letter had been received from the Federal
Reserve Bank of Kansas City asking authorization to call for bids for
the Denver project, and agreement was expressed with a suggestion that
the Bank be asked to furnish views bearing upon the justification for
Proceeding with the project at this time.
A copy of the letter sub-
sequently sent to the Bank is attached as Item No. 8.
Luncheon for research group.
The suggestion by Mr. Brill in a
memorandum of April 21, 1966, that a luncheon be given on May 13, 1966,
in the Board's dining rooms, in connection with the forthcoming meeting
of the Social Science Research Council's Subcommittee on the Monetary
Ilechanism was approved unanimously.
The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
memoranda recommending the following
actions relating to the Board's staff:
intments
Harold C. Barnett as Summer Research Assistant, Division of
ernational Finance, with basic annual salary at the rate of $5,702,
'
fective the date of entrance upon duty.
Harry Tarbell, III, as Sumner Research Assistant, Division of
bata
Processing, with basic annual salary at the rate of $5,181,
'
fective the date of entrance upon duty.
1470
4/26/66
-10-
Acceptance of resignations
Raymond L. M. Holmes, Digital Computer Programmer, Division of
Research and Statistics, effective at the close of business April 22,
1966.
Paul F. Quirante, Statistical Clerk, Division of Research and
Statistics, effective at the close of business April 29, 1966.
1471
BOARD OF GOVERNORS
Item No. 1
4/26/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDREBB OFFICIAL CORRESPONDENCE
TO THE BOARD
April 26, 1966
Board of Directors,
Peoples Union Bank & Trust Company,
McKeesport, Pennsylvania.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Peoples Union Bank &
Trust Company, McKeesport, Pennsylvania, of a branch in
the vicinity of the intersection of Washington Boulevard
and Romine Avenue, Port Vue Borough, Allegheny County,
Pennsylvania, provided the branch is established within
one year from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 2
4/26/66
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 26, 1966
Board of Directors,
Peoples Union Bank & Trust
Company,
McKeesport, Pennsylvania.
Gentlemen:
The Board of Governors of the Federal Reserve System
approves the establishment by Peoples Union Bank & Trust Company,
McKeesport, Pennsylvania, of a branch at the intersection of Sixth
Avenue and Walnut Street, McKeesport, Allegheny County, Pennsylvania,
provided the branch is established within six months from the date
of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
BOARD OF GOVERNORS
t,i
Go.
,7,4114-t-3 •.
(;;Ipo.%,\
OF THE
O
•
FEDERAL RESERVE SYSTEM
Item No. 3
4/26/66
WASHINGTON, O. C. 20551
AOORCIIII OPTIMAL OORRILIIPONOENOC
TO MC •OAPIO
April 26, 1966.
Chase Manhattan Overseas
Banking Corporation,
1 Chase Manhattan Plaza,
New York, New York. 10005
Gentlemen:
Reference is made to the Board's letter of
April 11, 1966, granting consent to your Corporation to
purchase and hold up to 100 per cent of the shares of
Privat-und Kommerzbank, Vienna, Austria, provided such
shares were acquired within one year from the date of
the letter.
As requested in your letter of April 14, 1966,
the proviso at the end of the second paragraph of the
Board's letter of April 11, 1966, is amended to read:
"provided that not less than 75 per cent of such shares
are acquired within one year from the date of this letter."
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 4
4/26/66
WASHINGTON, D. C. 20551
ADDRESS orriciAL CORRESPONDENCE
TO THE NOARD
April 26, 1966.
Boston Overseas Financial Corporation,
67 Milk Street,
Boston, Massachusetts. 02106
Gentlemen:
As requested in your letter of April 5, 1966, the Board
of Governors grants consent for your Corporation to purchase and hold
10,000 additional shares, par value Pesetas 1,000 each, of Banco
Europeo de Negocios ("Eurobanco"), Madrid, Spain, at a cost of
approximately US$170,000, provided such stock is acquired within one
Year from the date of this letter.
The Board also approves the purchase and holding of shares
of Eurobanco within the terms of the above consent in excess of 10
Per cent of your Corporation's capital and surplus.
The foregoing consent is given with the understanding that
the investment now being approved, combined with other foreign loans
and investments of your Corporation, The First National Bank of
Boston and Bank of Boston International, will not cause the total of
such loans and investments to exceed the guidelines established under
the voluntary foreign credit restraint effort now in effect and that
due consideration is being given to the priorities contained therein.
The Board considers that compliance with the priorities expressed in
Guideline 4 would require that total nonexport credits to developed
countries in Continental Western Europe not exceed the amount of such
loans and investments as of the end of 1965, unless this can be done
Without inhibiting the bank's ability to meet all reasonable requests
for priority credits within the over-all target.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
I (1';
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 5
4/26/66
WASHINGTON, D. C. 20551
AOORCSII OFFICIAL COPINCIIPONOCNICC
TO TMC •OANO
April 26, 1966
The Honorable K. A. Randall, Chairman,
Federal Deposit Insurance Corporation,
Washington, D. C. 20429
Dear Mr. Randall:
Reference is made to your letter of April 14, 1966,
Artesia, New
concerning the application of Peoples State Bank,
withdrawal
after
ce
Mexico, for continuance of deposit insuran
from membership in the Federal Reserve System.
subject
The Reserve Bank's transmittal letter to the
March 22,
of
as
tion
bank in connection with the report of examina
bank's
the
improve
1965, urged the bank's board of directors to
loans.
zed
critici
Position with respect to its large volume of
The letter also recommended that unless the bank's capital
risk assets and
Position was improved by a material reduction in
to the sale
given
be
should
Problem loans, serious consideration
of additional capital stock for cash.
urged
There have been no other corrective programs
fully
been
not
have
which
it,
Upon the bank, or agreed to by
that the Board would advise
consummated, and there are no programs
ng the bank to membership
admitti
of
ons
be incorporated as conditi
Federal Reserve System.
the
of
er
nonmemb
in the Corporation as a
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
Item No. 6
4/26/66
AM
TELEGR
WIRE SERVICE
LEASED
M
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTE
WASHINGTON
April 26, 1966
Ellis - Boston
Relet April 11 from Mr. Stone and subsequent telephone
staff,
conversation between him and Mk. Daniels of Board's
Board has changed the classifications of member banks
Class A
in the First District for purposes of electing
and Class B directors to the following:
Group
1
2
3
Banks with capital and surplus of:
$6,000,000 and more
,000
$1,000,000 and more, but less than $6,000
,000
Less than $1,000
(Signed) Merritt Sherman
SHERMAN
I 4';
Item No. 7
4/26/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS orriciAL CORRESPONDENCE
TO THE BOARD
April 26, 1966
CONFIDENTIAL (FR)
Mr. Charles J. Scanlon, President,
Federal Reserve Bank of Chicago,
Chicago, Illinois. 60690.
Dear Mr. Scanlon:
Board
As requested in your letter of April 13, the
at
rs
painte
to
salary
of
t
paymen
of Governors approves the
rates,
ing
follow
the
at
o
Chicag
of
the Federal Reserve Bank
effective retroactive to April 1, 1966:
$9,568.00
Head Painter
8,611.20
Painter
to
The Board also approves the payment of salary
ive
effect
.40
Class B Electricians at the rate of $8,382
contract,
April 18, 1966. Since this is part of a three-year
and
1967,
18,
April
ive
effect
further increases to 8,694.40
ed.
approv
are
1968,
18,
$9,006.40 effective April
accepted
It is noted that these rates, which were
are above
by the Building Managers Association of Chicago,
are
ons
positi
the
which
in
the maximums of the grades
Classified by the Bank.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
.1.478
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 8
4/26/66
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 27, 1966
Mr. George H. Clay, President,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri. 64109.
Dear Mr. Clay:
This refers to the new building for the Denver Branch, and
in Particular to your letter of April 18, 1966, asking that the Board
authorize your Bank to call for bids on this project on the basis of
the final plans and specifications that have been submitted.
Before acting on this matter, the Board would like to have
comments from your Bank as to whether or not, in the light of existing inflationary pressures, it would be appropriate at this time to
call for bids on the new Denver building.
The Board recognizes that there has long been a pressing
need for new quarters for the Denver Branch, and that the economic
!actors bearing on inflation vary throughout the country. Accordingly,
it would be most helpful if your comments included information with
respect to the following points:
(1)
The effect on the operations of the Denver Branch if
the start on the new building were delayed several
months.
(2)
The present employment situation in the building
trades in the Denver area--i.e., whether there is
unemployment, a scarcity of labor, or a normal market.
(3)
The experience Denver contractors are having with
buildings now under construction in regard to the
availability of supplies, and especially in regard to
whether scarcities are inflating costs.
Any other comments which you believe might be helpful to the
}30
ard would, of course, be greatly appreciated.
Very truly
o rs,
Merritt
an,
Secreta-.7y.
@FedFRASER