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Minutes for To: Members of the Board From: Office of the Secretary April 27, 1964 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. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane r 11-14i; Minutes of the Board of Governors of the Federal Reserve SYstem on Monday, April 27, 1964. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson Mitchell Sherman, Secretary Kenyon, Assistant Secretary Cardon, Legislative Counsel Fauver, Assistant to the Board Hackley, General Counsel Brill, Director, Division of Research and Statistics Director, Division of Bank Farrell, Mr. Operations Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. Hexter, Assistant General Counsel Mr. O'Connell, Assistant General Counsel Mr. Shay, Assistant General Counsel Mr. Hooff, Assistant General Counsel Mr. Conkling, Assistant Director, Division of Bank Operations Assistant Director, Division of Goodman, Mr. Examinations Mr. Thompson, Assistant Director, Division of Examinations Assistant Director, Division Sprecher, Mr. Administration Personnel of Assistant, Office General Mr. Spencer, Secretary the of Miss Hart, Senior Attorney, Legal Division Mr. Young, Senior Attorney, Legal Division Mr. Collier, Chief, Special Assignment Section, Division of Bank Operations Mr. Egertson, Supervisory Review Examiner, Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. 4/27/64 -2Mr. Smith, Review Examiner, Division of Examinations Mr. Hart, Personnel Assistant, Division of Personnel Administration Mr. Mitchell, Examiner, Federal Reserve Bank of Atlanta Discount rates. The establishment without change by the Federal IleSerVA n Dank of Minneapolis on April 24, 1964, of the rates on discounts kid -KAvances in its existing schedule was approved unanimously, with the 1.11 Lerst5 1ding that appropriate advice would be sent to that Bank. Circulated or distributed items. The following items, copies of are attached to these minutes under the respective item numbers ated, were approved unanimously: Item No. 1!4 lter to Chase Manhattan Overseas Banking Corporation, TheNew York, granting consent to the purchase by ''.,1.:ae 3 Manhattan Trust Corporation Limited, Nassau, 4mhamas, of shares of a nominee corporation to be 118 The Chase Manhattan Trust Corporation (Nominees) :"ter 1 qite The Manes County Bank, Vienna, Missouri, llEkln:fsing no objection to a dividend declared on -44' 13, 1964. tette /‘01,k,rato, r ranklin National Bank, Franklin Square, New nYing its request for permission to maintain -e,4 reserves. tette eilillsLt° Corpus Christi Bank and Trust Company, Corpus Texas approving its application for membership ti 'PederalReserve ' System. te t thr t0 the Federal Reserve Bank of Dallas with regard aPPlication by Corpus Christi Bank and Trust C ,°rPus Christi, Texas, for membership in the talb, =.‘serve System. 1 2 3 4 5 4/27/64 -3Item No. Ipter to Chairman Robertson of the Senate Committee on faring and Currency concerning Senator Javits' request Proposal regarding S. 750, the "truth-in-lending" bill. 6 Letter to the Federal Reserve Bank of Cleveland approving Xe . -Islon of the salary structures applicable to employees 7 e head office and Cincinnati and Pittsburgh Branches. In connection with Item No. 3, Mr. Fauver pointed out that it Vas — Yussible the press would express an interest in knowing of the toarat S decision on the request of Franklin National Bank. He raised the , 1.11estion whether the Board's decision could be made known if a 1 inquiry were received prior to the publication date of the next " ' Veelo -4:Y11.2 release (Applications Received or Acted on by the Board). Poll °Iging discussion, it was understood that the decision of the Board e°1141 be released in the event of inquiry. the With respect to Items 4 and 5, Governor Mills pointed out that a l aft of letter to the Federal Reserve Bank of Dallas did not mention ' that 0, e--Pus Christi Bank and Trust Company had certain outstanding loans that dia -- not conform to the limitations imposed on member banks by o11s of the Federal Reserve Act. Three loans, secured by stock, exeee, the limitation of 10 per cent of capital and surplus specified ih se etiell 11(m), and two other loans were to executive officers of the bikat 4 hello+ aatoci excess of the limitation prescribed by section 22(g). Further, that the bank held share accounts in several savings and loan eti°14 bEtrtit that would be ineligible for investment by a State member 114der the provisions of section 5136 of the Revised Statutes. 1449 v2v64 -4In discussion, it was understood that the draft letter to the Ileeellre Bank that had been distributed would be revised to emphasize the need for Corpus Christi Bank to bring the loans in question into ortnity with sections 11(m) and 22(g). Mr. Solomon commented, with to the share accounts held by the bank, that since the shares legally acquired under the provisions of Texas banking laws and the aggregate dollar amount was not substantial, it had been recommended " 1 .e Reserve Bank that the bank be permitted to hold the accounts subto admittance to membership. Upon becoming a member of the Shtem the bank could not, of course, enlarge the share accounts. Messrs. Hooff, Conkling, Goodman, and Egertson then withdrew Nra th -e meeting. APPlications of First National Bank of Tampa and Union Security h"esti/lent Co. There had been distributed a memorandum from the Division Aeznanations dated April 15, 3.964, and supporting papers with respect the aPPlications by The First National Bank of Tampa, Tampa, Florida, kdli vtli°1-1 Security & Investment Co., Tampa, Florida, to become bank hoki companies through the acquisition by Union Security of shares c)t the s econd National Bank of Tampa, Tampa, Florida, a proposed new bkik. Union Security owned a majority of the outstanding shares of the 4"rop,,1 J National Bank of Tampa, and the stock of Union Security was hela „ b- ''rustees /14111t r Tampa. for the benefit of the shareholders of The First National The Division's recommendation was favorable, but Review 4/27/64 -5- 4azniner Smith recommended denial. If the applications should be %Toyed, the Division recommended that the letters to applicants indicate that the Board would not look with favor upon acquisition of sec°fla National's shares through borrowings. At the Board's request, Mr. Thompson made a statement regarding the .p 4act5 of the case and the reasons underlying the favorable recommendatioa °f the Division of Examinations, his comments being based substan'4411 -14'04 the information presented in the April 15 memorandum. Mr. Smith indicated that his principal reason for recommending that this case seemed to turn on the narrow question whether cl4trol - °33 per cent of the deposits and loans by a two-bank group in the 1 , 'bank Tampa area represented such undue concentration as to infer 8.4 14111erent anticompetitive potentiality. In his opinion, and using the SI4Dreth -e Court decision on the Philadelphia National Bank merger case as glAideline, the applicants' present competitive position in the Tampa 411//as sufficiently strong to militate against approval of further elq1644sion by that group, particularly in the absence of evidence of any NIting benefits. Further, while he believed that Second National '414111') 14 the event of denial, be operated in close harmony with First 411d. troaaway, the possibility of eventual actual competition between oria d the others, although remote, was certainly greater without 4N1 corporate stock ownership under a holding company setup. The 4Thility of eventual deconcentration was, in his view, more consistent 1401 4/27/64 -6- vith the legislative aims of the Bank Holding Company Act than the sanction of further expansion under the circumstances. He believed that the present heavy concentration was adverse to approval and felt the ProPosal was inconsistent with public interest concepts as embraced in the Act. Although recognizing that "open control," with its resulting rirlelleisl responsibility, might be more in the public interest than a 13c/se "chain" type of operation, Mr. Smith did not believe that this ecrtsideration was sufficiently strong to tip the scale toward approval. Mr. Solomon pointed out that the Division of Examinations viewed this case as a rather close one. Florida was a State that prohibited bres21 e"banking. If there was a clear alternative to the proposed holding e0 M13ezlY setup whereby an independent bank would be established, then he believed that the Board would be justified in denying this application. 11°1/ever, this was not a case where it was likely that an independent h411/t would be established, since the directors of First National would 1117°bab1Y purchase the shares of the proposed bank on an individual 818 ' While there would not be a technical affiliation between First kti Second under such an arrangement, it would be a situation that kteht be termed satellite banking. It seemed to him that, viewed realle'a 411. Qr. r, it would be difficult to provide true competition. So, That there was the question whether it would be better to have a bEtek `L°°r" arrangement (satellite relationship) or to have "open control" thr the holding company. Between the two, he believed that it would desirable to accept the holding company arrangement. 4k7/64 _7_ A number of questions of fact about the proposed transaction ee theri posed by the members of the Board, in response to which the " f made explanatory comments. During this exchange, Mr. OtConnell inclioated that he felt a Board decision of either approval or denial be likely to be sustained in the event of judicial review. At the conclusion of this discussion, Chairman Martin called an expression of views by the members of the Board. Governor Mills stated that he agreed with the position of the slon of Examinations and would approve the applications. He then Illented the following statement: 4 Although the case represented by the subject application 's a close one, an analysis of all factors required for review falls in favor of approval. Control of the future expansion ?! r bank holding companies lay at the heart of the Bank Holding 1\',°mPany Act of 1956 and focused on "whether the effect of a uank holding company proposal would be to expand the size or tent of the bank holding company system involved beyond .1mits consistent with adequate and sound banking, the public terest, and preservation of competition in the field of var , Iking•" The proposal submitted is not believed to be in .101ation of the statutory directive which the Board adminlcsters. The Board is charged with the responsibility of ontrolling the expansion of bank holding companies, which P tfesumes that unless a proposed expansion is contrary to t'2? Public interest, the wishes of the parties thereto, as in "ls instance, should be concurred in. l V d . The establishment of the bank holding company relationship hePleted in the subject application would not produce a bank b°1d1ng company of a size inconsistent with the commercial 07:11 ing structure of the area to which its operations and those 4.,lts subsidiary banks would extend. The city of Tampa, 141-41sborough, and Hillsborough County area in which operations e°111d be conducted seemingly are of sufficient population and c°4°mic importance to justify the operation of three commercial i453 4/27/64 -8- banking groups of considerable size, with smaller commercial banks supporting localized areas of the over-all community; and all in combination providing a well-rounded scope of commercial banking services. The statutory prohibition of branch banking in the State of Florida has in a financial sense necessitated a grouping of commercial banking operations in other forms, such as bank holding companies and chain banking operations, as the best means for providing appropriate commercial banking services within the State. The proposed bank holding company fits into the financial needs requiring to be served in the Tampa area. As a practical matter and considering the web of relationships existing among IllanY Florida commercial banks, a sound case can be made for approval of the subject application, in that it sets up a bank holding company whose operations will come under adequate and centralized public supervision to better advantage than the dispersed kind of supervision that otherwise is applied to the so-called "independent" commercial banks. Attention should also bear on the fact that establishment of the proposed bank h°1ding company viewed from a Statewide angle would not produce a.financial entity controlling an oversize proportion of finan!lal resources. This is an important consideration in view of l'he accessibility of commercial banking services from any point Ilroughout the State of Florida, where transportation and e°mmunication facilities are efficient. The fact that approval of the application would place aPProximately 34 per cent of the city of Tampa's and 31.6 per cent of Hillsborough County's commercial banking resources ItInder single control is not considered to be objectionable in he light of the area's needs for commercial banking institutions ?I' considerable size and where, as has also been previously Inclicated, there are many smaller commercial banking institutions alTailable to supply services to their more localized constite ncies. The United States Supreme Court's decision in the '2111adelphia case does not appear to be relevant to the instant ?Plication in that the financial) population, and economic ,naracteristics of the two areas and of the commercial banks ..11volved are unlike. For that matter, it would be a mistake accept the Supreme Court's 30 per cent market control by a lngle commercial bank as a criterion for judgment on this , ?Plication, or other bank holding company applications, because 0° c10 so would set a narrow definition of size as the focal point 1)J. decision, with the other factors required to be reviewed in a ank holding company application relegated to minor status. 2 4/27/64 _9_ Approval of the application should be contingent on the Proposed requirement that the Union Security & Investment Co. be adequately financed through equity capital rather than from borrowed funds. Governor Mills also commented that thus far the Board had not 411cNed its thinking to be overshadowed by the Supreme Court decisions Philadelphia and Lexington, Kentucky, cases. her Act Instead, it had to the responsibility imposed upon it under the Bank Merger lat,,1 the Bank Holding Company Act. He saw more and more evidence tiltit the Supreme Court, in cases considered by it under the Sherman 44clelaYton Acts, had not been consistent throughout the history of Its -cisions. This made it all the more important that the Board's ha A 'zits be independent and consistent with a responsible interpretati or the laws it was charged to administer. Governor Robertson stated that he agreed generally with the vieva expressed by Mr. Smith. While no existing competition was being elirairt ated, potential competition would be eliminated. It was evident ti4t th -e proposed bank would be located within First National's service kre PUrther, he saw no basis for assuming that the new bank neces41% /1°uld be a satellite institution because the statement had 1) cle ade by the applicants that in the event the applications were tIlea the stock of the new bank would be sold publicly. Therefore, %.e °1111- not say for certainty that the new bank would become a satel- 114 4-nstitution. 427/64 -10Governor Robertson vent on to say that, whether one liked them (111'11°t, the Supreme Court's decisions were the law of the land. The e°14t had indicated what it regarded as a competitive situation that sh°Q.(1 be avoided. In the present case, a substantial concentration elsted, in excess of the levels specified by the Supreme Court, thus 14itting the case under a cloud of doubt at the outset. To offset it, the should be favorable considerations. But it appeared that the rieeds of the community would be taken care of in any event. Accord- 144) he 'would deny the applications. Governor Shepardson stated that he aligned himself with Governor reasoning and therefore would vote for approval. Governor Mitchell stated that he concurred with the recommendatb (It Mr. Smith on the ground that potential competition would be oren, s'osed by the proposed transaction. Further, he had some reservatio4 11-th respect to the proposed holding company arrangement because it v "being forced upon the applicants by the exigencies of the situatioll 44d did not represent a positive attempt to provide any particular Q°411)1. x e °f services in the area concerned. Further, to approve would p hA r '--..-torsement by the Board of the financial arrangements of the DtoDo 8ed transaction. He would vote to disapprove. Governor Balderston said that he found this case difficult, he source of this difficulty was the State statute prohibiting 4/27/64 ranch -11- banking. The applicants were forced to submit a proposal 811ch as this one to circumvent the statute. However, he preferred See an arrangement of "open control" rather than have the newlyto tIrlded bank operated by the applicants through indirect methods. Por, he reasons set forth in the Division of Examinations' memoranwila presented orally by Mr. Solomon, he would approve the appli- cwion. Chairman Martin stated that he also would vote for approval. Thereupon, the applications of The First National Bank of Te411)a and Union Security & Investment Co. were approved, Governors kbev.4 81311 and Mitchell dissenting. N.81 °11. It was understood that the Legal would prepare an order and statement reflecting this decision t° the 7) ,- ,oard's consideration, and that a dissenting statement or 4tateraerits also would be prepared. Messrs. Smith and Mitchell then withdrew from the meeting. 4 Itienio Reports on H.R. 10668 and S. 2561. There had been distributed ' l ariclura dated April 23, 1964, from the Legal Division with regard tvo 341entical bills, H.R. 10668 and S. 2561, that would amend the klakno to kent lding Company Act of 1956 so as to bring within its scope testa- e r trusts and charitable and educational foundations that control L' ELscets of $100 million or more. The two bills would also, by 4d1rir, , —5 tne Bank Merger Act, require each Federal bank supervisory 145.7 4/27/64 -12- eal leY to take into consideration the possible inconsistency of a pro113sed Merger with the purposes and objectives of the Bank Holding COlq*ItY Act when passing upon an application for approval under the 8841i: Merger Act of a transaction that would remove a company from the 11-117view of the Holding Company Act. The Board had been requested to comment on both the House and 8ellets bills. After an examination of the purpose of the proposed legislation, the T 'gal Division memorandum suggested that the Board might want to ec/Ilsider recommending as a substitute for the word "testamentary," as c31111644ed in the bills, the word "perpetual." The memorandum went on to State that the bills were phrased in terms of a trust "which controls assets of $100 million or more." kt Under the Bank Holding Company the definition of "control" had given trouble; therefore, it was 4114gsted that the Board might wish to recommend substituting the 1141114gs "if the total assets at the end of the most recent calendar Or the banks with respect to which it is a bank holding company eeci'$100 million." E41 Further, the Board might also wish to suggest kclitional amendment to the Bank Merger Act, namely, one that would 11)eeitically require the banking agencies to consider whether the merger t) a banking subsidiary of a bank holding company with an independent 1441k /4:11-11d be consistent with the purposes and objectives of the Bank 11(11411g COnipany Act. 4/27/64 -13A draft of letter for transmittal to the House and Senate Banking 1111cl enr2ency Committees expressing the views indicated in the memorandum lias attached. In connection with this subject there also had been distributed atemorandum from the Division of Examinations dated April 24, 1964, 14iesenting certain information with regard to the Florida National group a that were awned by a testamentary trust and would be brought the scope of the Bank Holding Company Act if the proposed legislation were enacted. At the Board's request, Miss Hart commented in supplementation t the information contained in the Legal Division's April 23 memorandum. Po ' 4ing Miss Hart's review, Mr. Cardon commented that Chairman Patman c)t thp House Cormittee on Banking and Currency had scheduled hearings b egin tomorrow on the House bill. While Chairman Patman had upon Ntleat also introduced H.B. 10872, which was the Board's bill to amend ''enk Holding Company Act) it appeared that he would handle H.R. 10668 Nxkrately. During the ensuing discussion, question was raised by Governor khe s°11 whether the word "perpetual" was an adequate substitute for 4test eatary." Also, the provision in the proposed legislation that bring under the scope of the Bank Holding Company Act trusts that --LLed bank assets of $100 million might be questioned because the 13°tentipci44. —4-6Y for abuse did not exist only in instances where a large N.11:1010 or banking assets was controlled. V27/6L. Governor Robertson went on to speak of the proposed amendment to the _ Banit Merger Act that would require the Comptroller of the Currency alld the Federal Deposit Insurance Corporation to take into consideration the Possible inconsistency of a proposed merger with the purposes of the 1144 }folding Company Act. As he saw it, each agency would be interpreting the 11°1cling Company Act, which Act the Board was charged by law with Ettbaliaistering. There followed a lengthy discussion of various aspects of the 11148 in light of the questions raised by Governor Robertson, and it 114s --..____ agreed that the draft of letter to the Senate and House Banking and ellrliencY Committees should be revised to incorporate certain suggestions a*eeti upon during the discussion for consideration at tomorrow's Board ' reefing. The meeting then adjourned. Secretary's Notes: A letter was sent today to International Banking Corporation, New York, New York, acknowledging receipt of notice of the intention of The Mercantile Bank of Canada, Montreal, Canada, to establish the following additional branches in Canada: (1) in Calgary, Alberta, at the corner of Eighth Avenue and 6th Street, West, on or about September 1, 1964; and (2) in Winnipeg, Manitoba, on Portage Avenue between Fort and Garry Streets, on or about June 1, 1964. Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board the following actions relating to the Board's staff: 146 4127/64. -15- AIV" The following persons as Summer Research Assistants in the alt! sion of Research and Statistics, each with basic annual salary ' Aae rate of $5795 effective the respective dates of entrance ' v°11 duty: David T. Hulett James L. Kichline James J. Sullivan Edward H. Rastatter Alan K. Severn ,1 t11 Eaton, from the position of Secretary to the position 11er0.1 Assistant in the Office of the Secretary, with no change 1/11:1, 1964.v•81e annual salary at the rate of $713551 effective April 271 Of GeMariOrie MarY Anne Lostaunau, from the position of Secretary in the al°11 of Research and Statistics to the position of Secretary 111 th 4.181,:Ctfice of the Secretary, with an increase in basic annual -J from $41850 to $5,2351 effective upon assuming her new duties. Nte„ -&2.' leave without pay C. Wing, Technical Editor (Economics), Division of Research Stati -sties from April 15 to October 11 1964. 1461 BOARD OF GOVERNORS Item No. 1 4/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 27, 1964. Chase Manhattan Overseas Banking Corporation, 1 Chase Manhattan Plaza, New York 5, New York, Gentlemen: In accordance with the request and on the basis of the information furnished in your letter of April 22, 1964, the Board of Governors grants its consent to the Plsiirchase by The Chase Manhattan Trust Corporat ion Limited ( CMTCL"), Nassau, N.P., Bahamas, of all the shares of a nominee corporation to be organized under the laws of the Bahama s and to be known as The Chase Manhattan Trust CorPnration (Nominees) Limited, at a cost of approximately £10. It is understood that the nominee corporation is i to be organized and maintained solely for the purpose of actas nominee for the registration of securities held in custody, or in trust, or as collateral by CMTCL and of accepting and complying with any and all instructions of CNTCL with respect to the disposition of shares so registered; end that all shares of the nominee corporation are to be ?Tied by CMTCL, except such shares as may be held by indilidnals, for account of CMTCL, in order to meet Bahamian 'Legal requirements as to number of shareholders. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. ) BOARD OF GOVERNORS Item No. 2 4/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 271 1964 Board of Directors, The Manes County Bank, Vienna, Missouri. Gentlemen: The Board of Governors of the Federal Reserve System has received a copy of a letter written by Mr. Travis E. John, Cashier and Director of The Manes County Bank,regarding the declaration and payment of a dividend by the bank on January 13, 1964. The declaration of this dividend was in contravention of the provisions of paragraph 6, Section 9 of the Federal Reserve Act and Section 5199(b), United States Revised Statutes, as you were previously informed by the Federal Reserve Bank of St. Louis. Under the statutes, the Board's approval is required prior to the declaration of the dividend. Prior approval cannot e given in this case since the dividend has already been paid. "c4lever, the Board, after consideration of the facts, interposes 40 objection to the declaration of the dividend. This letter cl°es not authorize any future declaration of dividends. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS Item No. 3 4/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 27, 1964 : 1 3411(1 of Directors, -Dre ' llklin National Bank, wreakaiu Square, New York. Ge atlemen: This relates to the application from your bank, submitted thro 14 4.11Igh the Federal Reserve Bank of New York, for a delay of one year 411e imposition of reserve city reserve requirements against your bah1, Upon the establishment of three branches in New York City. The Board has considered the information submitted with Yollr c urrent application, and has concluded that, except for your eh, 8 continued growth and increased services, the situation has not since 1961 when your bank made a similar suggestion for a delay : 0 111-1c1 it establish a branch in New York City. The Board is of the 4.14011tha that the character of your bank's business, as reflected in the other banks, la rlt of its total demand deposits and its competition with than that of City York New in banks city be like that of the reserve „r118 to which the Board has granted permission to maintain reduced rethat it vom es• Accordingly, the Board reaffirms its previous decision 1 not be justified in granting your bank permission to continue to ca;" establishment of b17 country bank reserves, even temporarily, upon the 11ch in New York City. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. t1434 Item NO. 4 BOARD OF GOVERNORS 4/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 27, 1964 kard of Directors, Corpus Christi Bank and Trust Company, Corp Christi, Texas. Gentlemen I The Board of Governors of the Federal Reserve System 14:P)Proves the application of Corpus Christi Bank and Trust Company, bala:P,u8 Christi, Texas, for stock in the Federal Reserve Bank of as, subject to the numbered conditions hereinafter set forth. 1. Such bank at all times shall conduct its business and exercise its powers with due regard to the safety of its depositors, and, except with the permission of the Board of Governors of the Federal Reserve System, such bank shall not cause or permit any change to be made in the general character of its business or in the scope of the corporate powers exercised by it at the time of admission to membership. 2. The net capital and surplus funds of such bank shall be adequate in relation to the character and condition of its assets and to its deposit liabilities and other corporate responsibilities. In connection with the foregoing conditions of membership, Partie„-, llego --Lar attention is called to the provisions of the Board's the ?tion H, regarding membership of State banking institutions in ther!ederal Reserve System, with especial reference to Section 208.7 e°f. A copy of the regulation is enclosed. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM C°rPus Christi Bank and Trust Company -2- It appears that the bank possesses a power which is not be-4,13 exercised and which is not necessarily required in the conduct ; It a banking and trust business; that is, the power to guarantee Ajekej bills of exchange, bonds, mortgages and other securities. w2,enti0n is invited to the fact that if the bank should desire to .1.'!Tcise any powers not actually exercised at the time of admission membership, it will be necessary under condition of membership extillibered 1 to obtain the permission of the Board of Governors before th"cieing them. In this connection, the Board understands that t:ye has been no change in the scope of the corporate powers cised by the bank since the date of its application for memberah ChartIf at any time a change in or amendment to the bank's tiler is made, the bank should advise the Federal Reserve Bank, 415111 ehing copies of any documents involved, in order that it may at rtermined whether such change affects in any way the bank's auue as a member of the Federal Reserve System. Acceptance of the conditions of membership contained in this , boo letter should be evidenced by a resolution adopted by the be 4d cr directors, and a certified copy of such resolution should ' ll'ansmitted to the Federal Reserve Bank of Dallas. Arrangements 1411 thereupon be made to accept payment for an appropriate amount res ederal Reserve Bank stock, to accept the deposit of the required lietlerve balance, and to issue the appropriate amount of Federal erve Bank stock to the bank. Fecte,_ The time within which admission to membership in the 41 Reserve System in the manner described may be accomplished 41-1111ited to 30 days from the date of this letter, unless the bank 80Ves to the Board and obtains an extension of time. When the tild is advised that all of the requirements have been complied 11431,and that the appropriate amount of Federal Reserve Bank stock torm:?en issued to the bank, the Board will forward to the bank a certificate of membership in the Federal Reserve System. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM PUS Christi Bank and Trust Company The Board of Governors sincerely hopes that you will find baszb itea in the System beneficial and your relations with the rve Bank pleasant. The officers of the Federal Reserve Bank th'. be glad to assist you in establishing your relationships with a Pederal Reserve System and at any time to dismiss with repre " rutAtives of your bank means for making the services of the System 41Qat useful to you. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. Al Item No. BOARD OF GOVERNORS 5 4/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 27, 1964. Watrous H. Irons, President, Pederal Reserve Bank of Dallas, °alias, Texas. 75222 13ear 'jr. Irons: The Board of Governors of the Federal Reserve System 1:1Proves the application of Corpus Christi Bank and Trust R°111PanY, Corpus Christi, Texas, for membership in the Federal eserve System, subject to the conditions prescribed in the enclosed letter, which you are requested to forward to the board of directors of the institution. TWO copies of such let er,. are also enclosed, one of which is for your files and e other of which you are requested to forward to the anking Commissioner of Texas for his information. r It is noted that the bank is operating temporary dr ive-in facilities in violation of the Texas banking code, bw,ut that permanent drive-in facilities, now under construction, 1 11 eliminate this violation. The Board, of course, expects . : ,.; "Ile bank to complete such facilities as promptly as possible. It is also noted that the bank's attention has been called to certain loans which do not conform to the limitations f Sections 11(m) and 22(g) of the Federal Reserve Act and o, ° lilLt:e Board hopes such loans will be brought into conformity with ch statutes within a reasonable period of time. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. flclosures, e4tuq** BOARD OF GOVERNORS OF THE Item No. 6 4/27/64 FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN April 30, l964 The Honorable A. Willis Robertson, Chairman, ICI°ItTlittee on Banking and Currency, : 1 11ted States Senate, "Thingt°11, D. C. 1)(4 Mr. Chairman: views In your letter of April 10, 1964, you asked for the Board's tonic on certain matters that have been raised by Senator Javits r?ing the recommendations for transfer from the Board to the : 4de S. 7;a1 Trade Commission of the responsibility for administration of the "Truth-in-Lending" bill. You enclosed copies of a letter Cortril8, 1964, and its enclosure, to you from the Federal Trade l'res;srlsi°n supporting the recommendation for such transfer in the kellt'ential Message of May 15, 1962, and submitting proposed amend8 t° the bill to effectuate the transfer. Your letter also referred to the Board's reply of March 31, You concerning S. 750 which, as reported to your Committee on 1964, by the Subcommittee on Production and Stabilization, "to designate the Board as the agency to administer the bill. 146' 1114 bY th:t reply, the Board strongly urged, in line with earlier reports rQspo- Board on the legislation, that the bill be revised to place dsibility for its administration in the Federal Trade Commission, 4rld an the vised that the Board would not favor enactment of the bill in -rm reported by the Subcommittee. 1964, March lqa As you related, the first matter raised by Senator Javits request that the Board reconsider the position stated in its ' s,s3f March 31, 1964, and accept the responsibility for administer. You explained that Senator Javits' request is based on ' .1.siefs that the Board would be familiar with the kinds of probNrg ' uat would arise under the bill because of its experiences during Periods of the 1940's and the early 1950's in administering (t7rn W, and that the Board already has jurisdiction in one way over many of the institutions that would be subject to 750) s his One of the main reasons for the Board's position that ration of S. 750 would be inappropriate for the Board is BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM The Honorable A. Willis Robertson -2- that since the bill is a measure for the regulation of trade practices, tt.lch a function would be foreign to the Board's present responsibilites, which are principally in the field of regulating money and credit 1„rclugh the banking system to meet the varying needs of the economy. I:I:marked contrast to S. 750, Regulation W was a measure for the conof consumer credit. This was brought out during my testimony on s!nl 5, 1960, and July 19, 1961, at the hearings of the Subcommittee 2755 and S. 1740, predecessors to S. 750. As explained at those :;ngs, in administering Regulation W the Board was very careful to syinvolvement in the trade practice aspects of consumer credit. The therefore, cannot agree that its temporary experiences , B°ard, vitl auti: Regulation W --which has not been in effect since May of 1952 and an,°ritY for which was repealed in June of that year--would provide cit'isPecial competence in dealing with the many problems of essentially 4erent kinds that would arise under S. 750. j The Board wishes to emphasize that such jurisdiction as it has 0 wo,a ver some of the institutions that, as mentioned by Senator Javits, traA d be subject also to S. 750, is not for the purpose of regulating sco'e Practices. Accordingly, the Board disagrees that the nature or otije °f its activities provides any significant reason for singling heart Board as particularly qualified to administer S. 750. At the stat rigs of the Subcommittee on April 5, 1960, mentioned above, my htveement in behalf of the Board stressed, among other things, that if business loans were exempted, the proposed regulation [contem viakated by the bill] would apply to hundreds of millions of indik:al transactions, carried out by over 50,000 financial institutions un /40411(lidreds of thousands of retail outlets . . . [The bill] . . . 11144 tequire the Federal Reserve to police the trade practices of INZeda'cof thousands of credit granters over which it now has no 37 authority. The major activities of most of these are far realo v ed from basic Federal Reserve responsibilities, and their operatot;-si entail practices and problems with which the Federal Reserve is 41Y unfamiliar." transf Considerations such as the foregoing clearly support the theb er of administrative responsibility for S. 750 recommended in ' residential Message of May 15, 1962. That Message expressly N:0 ahlerizes that the bill would not control prices or charges, but is bifled sPecifically at activities closely related to and often comTrade lqth other types of misleading trade practices which the Federal Commission is already regulating. . 2755 Since the legislation in question was first introduced as Ti 1960, the Board, as you know, has had several opportunities tt eon fot adsider whether it would be appropriate to place the responsibility ministering the bill in the Board. On each occasion the decision BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM lbe Honorable A. Willis Robertson -3- 1148,been that such responsibility should not be vested in the Board. AS otr.ndicated herein, the matters raised by Senator Javits have previ' 1Y tion. been among the various points that have been taken into considera- The Board has again reviewed its position and the various e"side sit,v_ rations that have been involved, including those mentioned by in 4Enr Javits. The Board has concluded that it would not be warranted ofnarting from the position of which you were advised by its reply ' 14reh 31, 1964, noted above. is am Your letter of April 10, 1964, related also that if S. 750 to give the Federal Trade Commission responsibility for %entrlis tering the legislation, Senator Javits would propose an amendt° "require the Board to take jurisdiction over banks and other gneial institutions". Milli ended Such an amendment, of course, would bring under the of the Board many institutions which are not regulated ir he tleen'ie Board. Difficulties that would arise if this were done have Objecrnentioned previously in this letter. There are, however, other ti0ns as well. 4114.4 The best means of assuring comparable information concerning ta foce charges as a basis for intelligent decisions by users of credit Nnit 411 extenders of credit to be subject to the same laws and tive utions administered by the same agency. Diffusion of administras.°1' regulatory power, especially in an area such as that covered tOi 75°) would give rise to the probability of divergent interpretalkth and requirements in the disclosure of information to the public !lore 41:041d make comparison of costs among various sources of credit °tin ' fficult. Certainly such a division of authority clearly would tobeefficient and more costly than would be the case if the law were ,)tperi : d ministered by a single agency already having broad regulatory ;;110487" in the area of trade practices. Obviously the consideras42:"ich Prompted the recommendation in the 1962 Presidential Previously mentioned, also apply against the suggested divires ponsibility for administration of the bill. 4 th „tt Purthermore, the Board feels that it should underscore the "tttlpi. il " (It both the Board and its relatively small staff are fully 4i ed bY a heavy work load arising from present statutory responsiittD w. ties to which have increased substantially in recent years. Assign`Ile Board either full or partial responsibility for the essen" un QI1A el related' untested and highly complex regulatory task under ry '"e x.'ly would not be consistent with the demands on time and 4 • ens°r the effective performance of either the Board's present or for the new program envisaged by the bill. O BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Honorable A. Willis Robertson Accordingly, in addition to the foregoing reaffirmance of position stated in its reply of March 31, 1964, the Board would traTrimend against the proposed division of responsibility for adminisF ion of S 750 and would not favor enactment of the bill if it were -c amended to incorporate such proposal. the Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC. Martin, Jr. 42 BOARD OF GOVERNORS Item No. 7 4/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 27, 1964 C°41DENTIAL FR Mr w Braddock Hickman, President, --eta' Reserve Bank of Cleveland, Cleveland, Ohio 44101. Dear Mr• Hickman: Reference is made to Mr. Thompson's letter of March 17, 1964, saiar -h your Bank requests the approval of upward adjustments in the Y structures covering each of your offices. The Board approves the following minimum and maximum salaries 'the tive respective grades at the various offices in your District effecLlaY 1, 1964: Qr4A 1 2 3 4 5 6 8 9 lo 12 13 14 ls 16 Cleveland Minimum Maximum Cincinnati Branch Minimum Maximum Pittsburgh Branch Minimum Maximum $ 2,925 3,055 3,263 3,536 3,822 4,186 4,550 4,992 5,447 5,941 6,630 7,410 8,307 9,243 10,257 11,297 $ 2,652 2,756 3,068 3,224 3,484 3,835 4,238 4,680 5,148 5,642 6,214 6,955 7,800 8,736 9,750 10,790 $ 2,782 2,938 3,068 3,354 3,614 3,978 4,394 4,888 5,382 5,941 6,630 7,410 8,307 9,243 10,257 11,297 $ 3,939 4,147 4,433 4,784 5,148 5,590 6,110 6,708 7,319 8,047 8,970 10,062 11,193 12,441 13,767 15,275 $ 3,432 3,692 4,004 4,316 4,732 5,161 5,642 6,240 6,864 7,514 8,398 9,373 10,452 11,700 13,026 14,534 $ 3,718 3,874 4,160 4,446 4,862 5,382 5,954 6,604 7,254 8,047 8,970 10,062 11,193 12,441 13,767 15,275 The Board approves the payment of salaries within the limits for the grades in which the positionsof employees are classified. Hickman 2 In reviewing the material submitted, the Board noted that the that 160rY positions in the Protection Department are classified in grades 8%4! eelm inordinately high in relation to other positions of greater retioris&bilitY in the Cleveland Bank and branches and, externally, with posiLLO. 011 the Protection Force at other Reserve Banks. Attached is a table beimi-ng the titles and classifications grade for members of the Protection c time nt at ' each Federal Reserve Bank and branch. been The Board is aware that this disparity in grade classification has the ' ll ecognized by your Bank to the extent that the Captains of the Guard at trati : ad Office and the two branches have been reduced one grade by adminisable ! " d action, effective March 18, 1964. However, there remains a consider4/14 lfferential between the grades for similar positions in other Reserve stiperl7d branches and grades of the position of Captain, as well as other that ti, 18c/r3 positions on the Protection Force. Consequently, it is requested tecogj ese positions be studied with a view to realignment, including the Npoti,n °n of a difference in level of Protection Department supervisory 'aloilities between the Head Office and the branches. be„ Accordingly, the Board also requests that the salaries of incumoffice-4- the supervisory positions of the Protection Department at all three 4implets in the Cleveland District not be raised to the new minimums pending el n of the Bank's study. The Board would appreciate an opportunity grw the results of the study before any action is taken on their sala8Ali other employees whose salaries are below the minimum of their hiate a result of structure increases should be brought within approranges by August 1, 1964 Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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