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PR 609
Minutes for
To:
Members of the Board
From:
Office of the Secretary
April 7, 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
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Federal Reserve Bank of St. Louis
1207
Minutes of the Board of Governors of the Federal Reserve
System on Thursday, April 7, 1966.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Robertson, Vice Chairman
Shepardson
Mitchell
Daane
Maisel
Bri_nutter
Sherman, Secretary
Kenyon, Assistant Secretary
Broida, Assistant Secretary
Holland, Adviser to the Board
Solomon, Adviser to the Board
Molony, Assistant to the Board
Fauver, Assistant to the Board
Hackley, General Counsel
Brill, Director, Division of Research
and Statistics
Mr. Farrell, Director, Division of Bank Operations
Mr. Solomon, Director, Division of Examinations
Mr. Kelleher, Director, Division of Administrative
Services
Mr. Kakalec, Controller
Mr. Schwartz, Director, Division of Data Processing
Messrs. O'Connell and Shay, Assistant General
Counsel
Associate Director, Division of
Sammons,
Mr.
International Finance
Messrs. Daniels and Kiley, Assistant Directors,
Division of Bank Operations
Mr. Leavitt, Assistant Director, Division of
Examinations
Mr. Langham, Assistant Director, Division of
Data Processing
Mrs. Semia, Technical Assistant, Office of the
Secretary
Messrs. Heyde, Sanders, and Smith of the Legal
Division
Messrs. Burton, Egertson, and Lyon of the Division
of Examinations
Assistant to the Controller
Millea,
Mr.
Senior Economist, Division of Data
Staiger,
Mr.
Processing
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
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Federal Reserve Bank of St. Louis
4/7/66
-2Approved letters.
The following letters were approved unani-
mously after discussion of background information that had been made
available to the Board.
Copies of the letters are attached under the
respective item numbers indicated.
Item No.
Letter to Bankers Trust Company, New York, New
York, approving the establishment of a branch at
49th Street and Grand Avenue, Maspeth, Borough
of Queens.
1
Letter to Marine Midland Trust Company of Western
New York, Buffalo, New York, approving the establishment of a branch (drive-in facility) in Medina.
2
Letter to Quincy Trust Company, Quincy, Massachusetts,
approving the establishment of a branch in Braintree.
3
Letter to Marine Midland Trust Company of Rockland
County, Nyack, New York, approving the establishment
of a branch in Spring Valley.
4
Application of BT New York Corporation (Items 5-8).
There had
been distributed drafts of an order and statement reflecting the approval
by
the Board on February 16, 1966, of the application of BT New York
Corporation, New York, New York, to become a bank holding company through
acquisition of all of the oustanding voting shares of Bankers Trust ComPanY, New York, New York; First Trust Company of Albany, Albany, New York;
The First State Bank of Spring Valley, Spring Valley, New York; and The
Fallkill Bank and Trust Company, Poughkeepsie, New York.
A concurring
statement by Governor Maisel also had been distributed, as had a dissenting statement by Governor Robertson.
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Federal Reserve Bank of St. Louis
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-3Mr. O'Connell described certain minor changes in the majority
statement that had been suggested subsequent to its distribution, and
there was agreement with these changes.
There was also discussion of
Other possible changes that were mentioned at this meeting, principally
with regard to defining the share of the New York City market held by
Bankers Trust Company and with regard to the general tone of the majority
statement, which one Board member felt might have been so devised as to
provide more positive support to the Board's decision.
After considera-
tion, however, it was decided not to pursue these points further.
The issuance of the order and statement was then authorized.
Copies of the documents, in the form in which they were issued, are
attached as Items 5 and 6.
Copies of Governor Maisel's concurring state-
ment and of Governor Robertson's dissenting statement are attached as
Items 7 and 8.
Applications for membership (Items 9 and 10).
The application
of BT New York Corporation contemplated the conversion from national to
State charter of the proposed subsidiary banks in Spring Valley and
Poughkeepsie.
The First State Bank of Spring Valley was to succeed The
First National Bank of Spring Valley, and The Fallkill Bank and Trust
Company, Poughkeepsie, was to succeed The Fallkill National Bank and
Trust Company of Poughkeepsie.
Applications for membership in the Fed-
eral Reserve System upon conversion to State charter had been submitted
on behalf of the two banks and were approved by the Board on February 16,
1966.
Copies of the letters in which the banks were informed of the
Board's approval are attached as Items 9 and 10.
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Federal Reserve Bank of St. Louis
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-4Application of Charter New York Corporation (Items 11-15).
On
February 16, 1966, the Board approved the application of Charter New
York Corporation, New York, New York, to become a bank holding company
through acquisition of all of the outstanding voting shares of Irving
Trust Company, New York, New York, and at least 80 per cent of the outstanding voting shares of The Merchants National Bank & Trust Company of
Syracuse, Syracuse, New York.
There had now been distributed drafts of
an order and statement reflecting the Board's decision, and also dissenting statements by Governors Robertson and Maisel.
During its consideration of the application the Board had given
attention also to the capital and liquidity position of Irving Trust
Company.
At today's meeting there was agreement upon a paragraph sub-
mitted by Mr. O'Connell for inclusion in the letter notifying Charter
New York Corporation of the Board's action.
There was also agreement
upon minor changes in the draft statement that had been suggested to
Mr. O'Connell before the meeting.
At the conclusion of the discussion the issuance of the order
and statement, with the suggested changes, was authorized.
Copies of
the documents in the form in which they were issued are attached as
Items 11 and 12.
Copies of the dissenting statements by Governors
Robertson and Maisel are attached as Items 13 and 14.
A copy of the
letter sent to Charter New York Corporation is attached as Item No. 15.
Messrs. O'Connell, Shay, Smith, Burton, Egertson, and Lyon then
Withdrew from the meeting.
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Federal Reserve Bank of St. Louis
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4/7/66
New York State Dormitory Authority bonds.
On September 22, 1965,
and March 21, 1966, the Board discussed a request from the Federal Reserve
Bank of New York for a ruling to the effect that the 10 per cent investment limitation of section 5136 of the Revised Statutes could be applied
separately to New York State Dormitory Authority bonds issued for particular colleges, provided that such bonds were in effect actually repayable
by the college.
(The seventh paragraph of section 5136 limits the extent
to which a national bank may invest in the obligations of one "obligor
or maker" to 10 per cent of the bank's capital stock and surplus; section 9
of the Federal Reserve Act makes the limitation applicable to State member
banks.)
The requested ruling turned upon the question whether the individual college or the Dormitory Authority was the obligor for the bonds.
The Comptroller of the Currency had ruled that the limitation could be
applied to the bonds of the individual colleges rather than to the aggregate issues of the Dormitory Authority, but the Board's Legal Division
took the position that the Authority was the obligor and the limitation
therefore must be applied to the collective issues.
At the conclusion of the March 21 discussion the Board's staff
was requested to discuss the matter with staff of the Comptroller.
Among
Other things, an apparent divergence was noted between the Comptroller's
ruling in regard to the New York situation and one that he had issued
in regard to a somewhat analogous situation in Kansas.
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Federal Reserve Bank of St. Louis
4/7/66
-6There had now been distributed a memorandum dated April 1, 1966,
in which the Legal Division reported the meeting with staff of the Comptroller.
The memorandum concluded by reiterating the recommendation that
the Board adopt the position that the limitation of section 5136 must
be applied to the aggregate of bonds issued by the Dormitory Authority,
and that the intention to adopt such a ruling be processed according to
the so-called "Dillon procedure."
Mr. Hackley, speaking in behalf of the Legal Division's recommendation, said he felt more strongly than earlier that the conclusion
reached was proper.
The New York Reserve Bank had submitted views of
its counsel that, in effect, took the same position as the Comptroller,
but apparently solely on the ground that the Bank's Examinations Department had indicated that it felt the bondholders relied on the credit of
each particular college.
In the opinion of the Board's Legal Division,
such a conclusion was based not on legal grounds but on subjective judgment.
The Legal Division considered it as unsound as the position taken
by the Comptroller, in view of the fact that the Dormitory Authority was
conceded to be obliged legally to pay interest and principal on the bonds
if a college defaulted, even if the Dormitory Authority had to borrow the
necessary funds.
Mr. Hackley also said that, although this particular case might
not be of great significance in itself, it had broad long-range implications in terms of the theory on which the Comptroller's ruling was based.
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Federal Reserve Bank of St. Louis
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4/7/66
He added that the Legal Division regarded its function as one of advising
the Board what it believed to be the correct legal position on any given
question.
In this case, it believed the recommended position was legally
correct.
Asked for his interpretation of the basic purpose of the statute,
Mr. Hackley said the Legal Division agreed with the Comptroller and the
New York Bank that apparently the purpose was to require appropriate
diversification in the investment portfolios of member banks, theoretically for the protection of depositors.
No matter what the purpose,
however, it seemed proper to apply the law as written--if it was clearly
written--and in this case the Legal Division thought the law was clear.
A member of the Board suggested that the Dormitory Authority
appeared tobe serving primarily as a conduit for the transmission of
funds and cautioned that the adoption of a strictly legalistic position
might run counter to the intent of Congress.
There followed a discussion
of hypothetical cases and the practical effects of a literal application
of the law in such circumstances, following which Governor Robertson
expressed the view that the Board should follow the rules of statutory
interpretation that had been well established over the years.
The Board
Should not cast itself in the role of law maker; it should seek changes
In the law if a law was not considered sound.
On the other hand, Governor
Daane commented that on various occasions the Board had looked back of
the law to the Congressional intent, and he expressed the view that this
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Federal Reserve Bank of St. Louis
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-8-
was necessary here in order to avoid an unintended application of the
statute.
Governor Maisel indicated that he found the arguments of the
Comptroller persuasive.
He noted that the naming of the Dormitory
Authority as obligor presumably strengthened, rather than weakened, the
bonds and expressed himself in favor of looking at the facts of any
given situation rather than at possibilities.
In his view, the existence
of a possibility meant very little when, as a matter of fact, the bondholders were looking essentially to the individual colleges for payment
on the bonds.
The discussion then turned to the resources of the Dormitory
Authority if it should be called upon to fulfill its obligation on the
bonds.
Some of the members of the Board felt that this aspect was of
critical importance in resolving the question, and they expressed the
view that additional factual information should be obtained.
At this point the views of Mr. Solomon (Examinations) were
requested, and he expressed himself as having considerable sympathy with
the position of the Federal Reserve Bank.
In substance, he thought the
bondholders were relying on the strength of the individual colleges.
Apparently there had been a tie-in with the Dormitory Authority in order
to make it easier administratively to float the respective issues.
But
the purchaser of the bonds seemed to be relying essentially on the individual college, with perhaps some kind of accommodation endorsement from
the Dormitory Authority.
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Federal Reserve Bank of St. Louis
1215
4/7/66
-9Chairman Martin then expressed the view that the Board should
be careful about overruling the recommendation of its legal staff.
In
this instance, because of the divergence of legal opinions, he raised
the question whether it might be desirable to retain outside counsel
to review the matter.
This possibility was considered in conjunction with several
Other possibilities, such as obtaining the views of the Attorney General
of New York State or of the Department of Justice.
As the discussion
proceeded, however, questions again were raised as to the resources
available to the Dormitory Authority to meet any obligations that might
fall upon it.
It developed to be the consensus that, before deciding
whether to seek additional legal opinions, it would be desirable for the
Board to obtain further information from the Dormitory Authority.
The
main question to be clarified would be whether, in point of fact, the
b ondholders
were entitled to rely on some additional support from the
Dormitory Authority if the occasion should arise.
It was understood
that an effort would be made to secure additional information along these
lines prior to further consideration of the question that had been presented to the Board.
Reports of interest payments to Treasury.
In a circulated memo-
randum of February 11, 1966, transmitting the usual monthly report of
Federal Reserve Bank interest payments to the Treasury on Federal Reserve
notes the Division of Bank Operations raised the question whether, in
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Federal Reserve Bank of St. Louis
121fi
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-10-
view of recent discussions of the volume of material members of the
Board must review, the Board might wish to change the procedure adopted
in 1957 of having such reports submitted monthly.
During circulation
of the memorandum Governor Maisel had suggested that quarterly reports
might serve the purpose.
It was agreed that quarterly reports would be submitted to the
Board, although monthly figures would continue to be available to any
Board member upon request.
New electronic computer.
Late in 1965 the Board approved enter-
ing into a contract with Communication Systems Incorporated for a feasibility study of a proposed remote computer operation.
The report of the
study, in two sections, was distributed to the Board with memoranda dated
March 28, 1966, from Mr. Schwartz and March 31, 1966, from Messrs. Schwartz
and Staiger.
The March 31 memorandum commented at some length on different
aspects of the study and recommended that:
(1)
A firm contract be directed to International Business
Machines Corporation for delivery on or about July 1,
1966, of an IBM 360-Model 50 electronic computer system,
to be installed in the Board's offices. The detailed
list of items to be included in the initial system,
together with their costs, was shown in Table I-A of
the memorandum. It was further recommended that arrangements be made for lease with purchase option, with the
understanding that the Board could make outright purchase
of the machine at any time during the first two years
following delivery.
(2)
The presently owned IBM 1410 computer system be sold
to the Department of the Treasury for use in the Bureau
of the Public Debt at the price of $130,000, for delivery
perhaps in late summer but in any event no later than
December 1, 1966, in accordance with their offer of
purchase dated March 1, 1966.
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Federal Reserve Bank of St. Louis
4/7/66
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(3) A letter of intent be furnished to International
Business Machines Corporation for initial expansion
of the new system 360-Model 50, as shown in Table I-B
of the memorandum. It was further recommended that
the letter of intent indicate desirability of delivery
on or about November 1, 1966.
The memorandum requested approval of estimated overexpenditures in the
budgets of the Division of Data Processing and the Division of Administrative Services totaling approximately $43,000 that would result from
implementation of the recommendations.
(At a meeting in the Board Room yesterday afternoon, attended
by members of the Board and appropriate staff members, Mr. Schwartz,
Vice President Smyth of the Federal Reserve Bank of Chicago, and Mr.
Byrne, incoming Director of the Division of Data Processing, presented
material relating to the significance and scope of data processing.
This
Presentation supported generally the recommendation for installation of
a new computer system.)
Introductory remarks by Mr. Schwartz at today's meeting were
followed by a discussion during which question was raised as to the proposed disposition of the present IBM 1410 computer system.
It was pointed
out that a substantially higher offer than that of the Treasury had been
made for the system by a private party, which suggested that perhaps
Offers should be invited generally.
the question to Governor Shepardson.
As a result, it was agreed to refer
The other recommendations in the
memorandum, and the expected budget overexpenditures, were then approved
unanimously.
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Federal Reserve Bank of St. Louis
121
4/7/66
-12Secretary's Note: On April 14, 1966, Governor
Shepardson approved on behalf of the Board a
recommendation in a memorandum of the same date
from the Division of Data Processing that the
contract with International Business Machines
Corporation for delivery of the new equipment
incorporate certain changes in components of
the computer system.
Mr. Schwartz pointed out that the Board's contract with Commu-
nications Systems Incorporated contemplated that payment would be made
when the firm's study was accepted.
He suggested that the study now
be accepted and the Controller authorized to pay the costs according
to the terms of the contract.
Payment for the study was approved unanimously.
Regional clearing arrangements.
At the meeting on March 10, 1966,
during discussion of the report made annually by the Federal Reserve Bank
of New York regarding the Nassau County and Bergen County check clearing
arrangements, question was raised as to whether the advance of automated
Procedures might have lessened the need for and advantages of such arrangements, and the Division of Bank Operations was requested to submit a memorandum directed to that question.
There had now been distributed a memorandum dated March 29, 1966,
in which Mr. Farrell reached the conclusion that operating experience
indicated that the present state of automation at the Reserve Banks had
not lessened the advantages of regional clearing arrangements where
circumstances were appropriate for such arrangements.
The same view,
Mr. Farrell noted, was apparently shared by the Conference of Presidents,
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Federal Reserve Bank of St. Louis
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which on September 27, 1965, approved a recommendation that the Federal
Reserve Banks take the initiative in investigating carefully all possibilities for the establishment of regional check clearing arrangements
or facilities.
The question whether Reserve Banks should subsidize
regional clearing arrangements had arguments both for and against, but
in the light of existing facts the arguments for subsidies in appropriate
cases seemed to Mr. Farrell somewhat stronger.
The memorandum was noted without objection.
The meeting then adjourned.
Secretary's Note: Following the meeting on
April 5, 1966, Governor Shepardson informed
the Secretary that during an executive session
on that date the Board authorized a Board-wide
survey of telephone equipment by the Division
of Administrative Services with the dual objectives of eliminating unnecessary equipment and
at the same time investigating the desirability
of making available new developments in telephone
equipment that would improve the efficiency and
convenience of the Board's operations.
Secretary's Note: Governor Shepardson today
approved on behalf of the Board the following
items:
Letter to Mr. Francis, Chairman of the Presidents' Conference
Committee on Sundry Operations, interposing no objection to continued
service by Innis D. Harris, Coordinator of Defense Planning, and
David B. Hexter, Associate General Counsel, as associate members of
the Subcommittee on Emergency Operations and the Subcommittee of Counsel
on Emergency Operations, respectively, and advising that the Board had
designated Kenneth A. Kenyon, Assistant Secretary, to serve as associate member of the new Subcommittee on Retention and Disposal of Records
and Sundry Operations.
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Federal Reserve Bank of St. Louis
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Memorandum from the Division of Data Processing recommending
the appointment of Walter E. Matthey as Programmer (Trainee) in
that Division, with basic annual salary at the rate of $5,523, effective the date of entrance upon duty.
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Federal Reserve Bank of St. Louis
1221.
Item No. 1
4/7/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS orraciAL OCHIRCIIIPONOCHOC
TO THC 1110ARD
April 7, 1966
Board of Directors,
Bankers Trust Company,
New York, New York.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Bankers Trust Company,
New York, New York, of a branch at the northeast corner of
49th Street and Grand Avenue, Maspeth, Borough of Queens,
New York, New York, 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.)
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Federal Reserve Bank of St. Louis
1222
BOARD OF GOVERNORS
Item No. 2
4/7/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
NDENCE
ADDRESS orriciAL CORRESPO
TO THE SOAR°
April 7, 1966
Board of Directors,
Marine Midland Trust Company
of Western New York,
Buffalo, New York.
Gentlemen:
The Board of Governors of the Federal Reserve
Midland
System approves the establishment by Marine
New York,
Trust Company of Western New York, Buffalo,
of a branch (drive-in facility) at 342 East Center
York,
Street, Village of Medina, Orleans County, New
months
six
provided the branch is established within
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.)
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Federal Reserve Bank of St. Louis
1 223
Item No. 3
4/7/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
NOCNCIC
ADORIC•111 °maw. CORRICIIPO
TO THIC SOAR°
April 7, 1966
Board of Directors,
Quincy Trust Company,
Quincy, Massachusetts.
Gentlemen:
The Board of Governors of the Federal Reserve
Trust
System approves the establishment by Quincy
at 845
branch
a
of
usetts,
Company, Quincy, Massach
d the
provide
usetts,
Massach
Granite Street, Braintree,
date
the
from
months
six
branch is established within
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.)
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Federal Reserve Bank of St. Louis
1224
BOARD OF GOVERNORS
Item No. 4
4/7/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 8, 1966
Board of Directors,
Marine Midland Trust Company
of Rockland County,
Nyack, New York.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Marine Midland Trust
Company of Rockland County, Nyack, New York, of a branch
at 5 Fairview Avenue, Spring Valley, Town of Ramapo,
Rockland County, New York, 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.)
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Federal Reserve Bank of St. Louis
1225
Item No. 5
4/7/66
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
BT NEW YORK CORPORATION,
NEW YORK, NEW YORK,
approval of action to become a bank
holding company through the acquisition
Of all of the outstanding voting shares
°f the following New York banks: Bankers
Trust Company, New York; First Trust Company
Of Albany, Albany; The First State Bank of
SPring Valley, Spring Valley; and The Fallkill
Bank and Trust Company, Poughkeepsie.
ORDER APPROVING APPLICATION UNDER
BANK HOLDING COMPANY ACT
There has come before the Board of Governors, pursuant
to section 3(a)(1) of the Bank Holding Company Act of 1956
(12 U.S.C. 1842(a)(1)) and section 222.4(a)(1) of Federal Reserve
Regulation Y (12 CFR 222.4(a)(1)), an application by BT New York
Corporation, New York, New York, for the Board's prior approval
Of action whereby Applicant would become a bank holding company
through the acquisition of all of the outstanding voting shares
Of the following New York banks:
Bankers Trust Company, New York;
/'irst Trust Company of Albany, Albany; The First State Bank of
SPring Valley, Spring Valley, proposed successor by conversion of
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Federal Reserve Bank of St. Louis
1226
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The First National Bank of sing Valley; and The Fallkill Bank and Trust
Company, Poughkeepsie, ,)roposed successor by conversion of The
Fallkill National Bank and Trust Company of Poughkeepsie.
As required by section 3(b) of the Act, the Board notified
the New York Superintendent of Banks of receipt of the application
and requested his views and recommendation thereon.
made no recommendation on the application.
The Commissioner
However, as discussed
the Statement accompanying this Order, the New York State Banking
Board advised this Board of its action, following a recommendation
of the Superintendent, approving an application filed by BT New York
Cor poration, pursuant to the New York Banking Law, involving the
same proposal submitted to this Board.
Notice of receipt of the application was published in the
Federal Register on September 16, 1965 (30 Federal Register 11887),
Ilhich Provided an onportunity for the filing of comments and views
tegarding the proposed acquisition, and the time for filing such
comments and views has expired and all comments and views filed with
the Board have been considered by it.
IT IS HEREBY ORDERED, for the reasons set forth in the Board's
Statement of this date, that the said application be and hereby is
roved, provided that the acquisition so approved shall not be
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Federal Reserve Bank of St. Louis
1227
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consummated (a) within seven calendar days after the date of this
Order or (b) later than three months after said date.
Dated at Washington, D. C., this 7th dAy of April, 1966.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Shepardson, Mitchell,
Daane, and Maisel.
Voting against this action:
Governor Robertson.
Governor Brimmer was not a member of the Board on
the date of the Board's decision.
(Signed)
Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
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Federal Reserve Bank of St. Louis
12020S
BOARD OF GOVERNORS
Item No. 6
4/7/66
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY BT NEW YORK CORPORATION, NEW YORK, NEW YORK,
FOR PRIOR APPROVAL OF ACTION TO BECOME A BANK HOLDING COMPANY
STATEMENT
BT New York Corporation, New York, New York ("Applicant"),
has filed an application, pursuant to section 3(a)(1) of the Bank
liclding Company Act of 1956 ("the Act"), for the Board's approval
of proposed action whereby Applicant would become a bank holding
c°111Pany through the acquisition of all the outstanding voting ohres
°f the following banks located in New York State:
Bankers Trust
Cornpany, New York ("Bankers Trust"); First Trust Company of Albany, Albany
("Albany Bank"); The First State Bank of Spring Valley, Spring Valley,
Pl.°Posed successor by conversion of The First National Bank of
SPring Valley ("Spring Valley Bank"); The Fallkill Bank and Trust
C°I1Tany, Poughkeepsie, proposed successor by conversion of The
Pallkill National Bank and Trust Company of Poughkeepsie ("Poughkeepsie
Bank"
)
Views of State and Federal authorities. - As required by
section 3(b) of the Act, the Board notified the New York State
sliPerinteadent of Banks of receipt of the application and requested
hi,
++
Views and recommendation thereon.
The Superintendent advised
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Federal Reserve Bank of St. Louis
1229
that Applicant had filed with the New York State Banking Board,
Pursuant to Article III-A of the New York Banking Law, an application
Or approval involving the same proposal and that, inasmuch as the
SuPerintendent was required by State law to make a recommendation to
the Banking Board on the application pending before it, he would
abstain from comment on the application pending before the Board of
Governors.
Thereafter, the Superintendent recommended favorably to
the Banking Board on the application before it, and the application
was approved by the Banking Board.
A copy of the Superintendent's
Ilitten recommendation was transmitted to this Board.
Notification of the Board's receipt of this application
Was
given also to the United States Department of Justice and the
Co mptroller of the Currency.
The Department of Justice posed the
tt
question whether the possible benefits from approving the proposed
f°rmation are likely to outweigh the possible adverse competitive
effects".
These competitive effects, according to the Department,
Ilere the possibility that Applicant's formation "would foreclose
11 Possibility of competition between the participating banks",
444 "would prevent the participating upstate banks from forming
[Up
state] holding companies which might afford competition to the
larqo m
-- "OW
York City banking institutions in some credit markets".
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Federal Reserve Bank of St. Louis
-3-
1230
The Comptroller of the Currency submitted a statement to the
Board recommending that BT New York Corporation's application be disapproved and stating that the same considerations applied to the pending
application by Charter New York Corporation to form a bank holding company
c°mPosed of Irving Trust Company, New York, and The Merchants National
Bank & Trust Company of Syracuse.
As a basis for his recommendation, the
enmPtroller referred to an earlier Board letter addressed to a national
bank located in New York City expressing the Board's view that the proPosed ownership by that bank of a majority of the stock of an upstate
bank would appear to violate provisions of Federal law prohibiting the
establishment and operation of branch offices by national banks.
The
C°IgPtroller expressed the view that the Board, having taken the aforeMentioned position in reference to the acquisition by a national bank
Of the stock of another bank, was estopped from approving applications
involving the acquisition of bank stocks by nonbank bank holing companies,
for
the stated reason that such acquisitions "would enable State banks to
circumvent the prohibitions of the branch banking statutes of the State
Of New
York."
The Board has had occasion to treat with the Comptroller's
Pcaition in its recent Statement issued in connection with approval of
the application by Security New York State Corporation, Rochester, to
be^
'clue a bank holding company.
The Board's view there stated, equally
applicable to the applications by BT New York Corporation and Charter
Nev York
Corporation, was that the proposals involved in the three
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Federal Reserve Bank of St. Louis
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-4-
ePPlications were clearly distinguishable from that involving the
Proposed acquisition by a national bank of the stock of another bank.
The latter case, in the Board's opinion, involved bank ownership, control
and, thus, operation of another bank in an area where a "direct" branch
office would be prohibited to the acquiring bank.
In the BT Corporation
and Carter Corporation applications, not only are the holding companies'
°14nership and control of the banks involved not prohibited by Federal or
State law but, on the contrary, are expressly authorized by the Bank
Rolding Company Act of 1956 and Article III-A of the New York Banking Law.
BY provisions of the National Bank Act (sections 5136 and 5155 of the
Revised Statutes), Congress made clear its intention to restrict and
egulate the extent to which a national bank may own and control additional
banking offices.
The national bank proposal that was the subject of the
Comptroller's letter fell, in the Board's opinion, within the scope of
C°4gre38ional prohibition.
As indicated, the MO applications pending
before the Board under the Bank Holding Company Act are clearly of the
tYPe approval of which is permitted under both Federal and State law.
The Board concludes that the legislative history of the
}lank Holding Company Act clearly establishes Congressional intention
that
Proposed bank holding company formations and operations not be
subjected to statutory limitations imposed on branch banking.
4
Further,
similarly clear intention is evidenced by the enactment in the State
Of
New York of bank holding company legislation, pursuant to which the
thr
ee New York bank holding company proposals were approved by the State
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Federal Reserve Bank of St. Louis
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-5-
Banking Board upon the recommendation of the Superintendent of Banks.
For the foregoing reasons, the Board is unable to concur in, or make
applicable to the cases before it, the rationale urged by the Comptroller.
Statutory factors. - In determining whether to approve
this application, the Board is required by section 3(c) of the Act to
"nsider the following factors: (1) the financial history and conof the proposed holding company and the banks concerned;
(2) their prospects; (3) the character of their management; (4) the
convenience, needs, and welfare of the communities and the areas coneetned; and
(5) whether or not the effect of such acquisition would be
to e%Pand the size or extent of the bank holding company system involved
bcY°nd limits consistent with adequate and sound banking, the public
interest, and the preservation of competition in the field of banking.
Financial history and condi.tion, and prosDects. - Applicant,
riewly organized corporation, has no financial history.
Its pro forma
fitlemial condition, as projected by Applicant, is satisfactory and its
P"sPects, viewed in light of the prospects of its proposed subsidiary
bank_ 2
u
are considered favorable.
In the four-year period ending
4cember 31, 1964, the combined deposits of the four proposed subsidiary
134nk8 increased $838 million, or about 28 per cent, while their combined
net Profits for the three years 1962-1964 averaged about $32 million per
Year.
Each of the proposed subsidiary banks has a financial
his
"rY dating back more than 60 years.
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Federal Reserve Bank of St. Louis
Bankers Trust, with deposits
12:33
-61/
s3f $4 billion, is the sixth largest bank in New York City and the
seventh largest in the nation.
SI-18 million,
Albany Bank, with deposits of
is the third largest of five commercial banks, and the
fifth largest of all banks, headquartered in the City of Albany.
SPring Valley Bank and Poughkeepsie Bank are substantially smaller
ialS
titution
having deposits of $40 million and $16 million, respectively.
The financial history and condition of each of the proposed
subsidiary banks are considered satisfactory.
This conclusion appears
N'slid despite Applicant's assertion, hereafter discussed, that Spring
Ilalley Bank has been unable to maintain, through earnings, adequate
Ca
Pital in relation to its rapid deposit growth.
The prospects for continuing satisfactory growth and earnings
by
Bankers Trust, Albany Bank, and Spring Valley Bank are favorable
subsidiaries of Applicant or as independent institutions.
Scslevhat less satisfactory are the prospects of Poughkeepsie Bank.
While it
is in financially sound condition, a majority of its
"ficer. are
approaching or have passed normal retirement age and,
due
t° management's apparent lack of aggressiveness, the bank's
dp
-11"it growth since 1950 has been substantially less than that
Of
any of
its local competitors.
In that period, the Poughkeepsie
1144k has droppAd from second to fourth in deposit volume of the four
ercial banks in Poughkeepsie.
Y
Applicant's proposal and
„,414 of June 30, 1965. Unless otherwise indicated, all banking data
-Led are as of this date.
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Federal Reserve Bank of St. Louis
1234
-7-
ability to provide more aggressive management for bank measurably
Proves its prospects, a fact that weighs in favor of approval of
the
application.
Management. - Applicant's management will be essentially
that
of Bankers Trust and is, therefore, equally competent as, and
Probably more broadly experienced than, the respective managements
Of Albany Bank and Spring Valley Bank.
While Poughkeepsie Bank's
ma
it
nagement is considered sound, for the reasons earlier stated,
is the Board's judgment that the likely management improvements with
tesPect to that bank support approval of its acquisition by Applicant.
In
general
are conconsiderations relating to the management factor
8istent with approval of the application.
Convenience, needs, and welfare of the areas concerned. The nature of Bankers Trust's operation is highly diversified in
that it provides a full range of services both to banks and large
international
ecIrP°rate customers whose operations are national and
in
scope, and to large segments of the general public served by its
59 o
ffices in New York City and four offices in Nassau County.
sankers
Trust's national and international business originates
PrimarilY outside New York City, while its local business is
lerived largely from New York City and Nassau County, its primary
8erv1ce area.21
of the
Th A
Z/
tot - area from which Applicant estimates about 91 per cent
of the
volume,
ba
number, representing 68 per cent of the dollar
ns
corporatio
c s deposit accounts of individuals, partnerships, and
,
(q,
deposits') originate.
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Federal Reserve Bank of St. Louis
-8-
1235
Applicant concedes and the Board :finds that Bankers Trust's
service area will be virtually unaffected by the acquisitions proposed
and that only certain
areas within the Third and Fourth Banking Districts in
Upstate New York will be significantly affected by this proposal.
The
f°110wing are the principal among numerous benefits that Applicant
asserts will be realized by all or certain of the proposed upstate subsidiaries and their customers:
a more certain and immediate source of
capital and management; augmentation of the supply of credit in certain
Upstate areas to meet increasing and assertedly unserved loan demands
tesulting from business and population growth; the availability of
a wider range of trust and investment services; and implementation
ef numerous specialty services.
the Present availability
Consideration must now be given to
or the need for some or all of these services
within the relevant upstate market areas.
Albany Bank, the largest of Applicant's proposed upstate
bsidiaries, operates in New York's Fotwth Banking District.
81.
It has
offices in Albany County - five in the City of Albany and one in
C010nio, a suburb of Albany; one each in Johnstown and Broadalbin, in
1\11to
-n County; and one each in Windham and Tannersville, in Greene County.
Thus
) Albany Bank's primary service area (area from which Applicant
estimates approximately 73 per cent of the bank's IPC deposits originate)
e°11aists of three separate areas, with the major portion of its business
eiginating in the City and County of Albany:
The Fourth Banking District contains fifteen counties, extending
north from the Uid-Hudson Area to the Canadian border, and includes the
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Federal Reserve Bank of St. Louis
1236
-9-
highly industrialized Albany-Schenectady-Troy Metropolitan Area and
the resort and agricultural areas of the eastern Adirondacks and the
nor theastern Catskill Mountains.
The district reportedly has experienced
whole.
less Population and business growth since 1950 than the State as a
According to Applicant, the lack of population growth in the Albany area
Principally impelled bank's recent entry by mergers into Fulton and
Greene Counties.
Johnstown, the seat of Fulton County, is about 45 miles
northwest of
Albany and is a center for the manufacture of gloves and
Other leather products.
Its population of about 10,000 has changed
little in
the past ten years.
Broadalbin is a small dairy farming
eclzmunity about ten miles east of Johnstown.
The Tannersville and Windham
cIffices of Albany Bank,serving a combined population of about 3,500, are
tlearlY 45 and 60 miles, respectively, southwest of Albany, in an area of
the Catsitill Mountains which is being developed for year-round resort
°Pc
rations.
A principal portion of Albany Bank's business is derived from
the city
t Albany and the adjoining suburb of Colonie, with an estiof
Illated combined population of 160,000.
S
Albany's economy is relatively
table, due for the most part to the fact that the State Government is
the area's major employer.
Significant economic stimulus is anticipated
Over the next few years, however, with the development in the heart of
the city of a South Mall Project, comprised of a number of new Government
buildings and a shopping concourse with parking facilities for 3,000
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Federal Reserve Bank of St. Louis
-10-
1237
vehicles, all to be situated on an 85-acre tract.
Total costs for
the project through 1970 are estimated at $480 million.
Development of the South Mall Project is expected to give
rise to increased demands for commercial and residential construction
loans in the Albany area.
Applicant enumerates a variety of additional
credit requirements that are asserted to exist or will arise in Albany
Eank is service area, fulfillment of which will, according to Applicant,
be facilitated and
more assured under its proposed ownership of Albany
I/ank.
Applicant concedes that existing credit demands arising in Albany
Bank's service area are presently being met.
The Board is unable to conclude that the banks operating in
the Albany area, either alone or in conjunction with other financial
illst
itutions, cannot satisfy the area's future credit requirements,
hatever their nature, including those related to the proposed Albany
redevelopment.
In addition to Albany Bank, with deposits of $118 million,
there are headquartered in Albany County two commercial banks, each with
"sits near $500 million; three mutual savings banks, with deposits
'ranging from $100 to $200 million; and four additional banks, with
de
"
sits ranging from $20 to $75 million.
A significant, additional
sotll
'ce of credit supply within the county is represented by three offices
Of m
'arine Midland National Bank of Troy, which has deposits of nearly
$
9° million.
Even assuming the limits imposed on the Albany area
by their deposits of public funds,
the Board is of the
vta._
w that
asserted credit demands do not constitute a significant
/ State
se
funds held on deposit are required to be fully secured; conavcaintlY, no portion of the dollar equivalent of such deposits is
'
able for lending.
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Federal Reserve Bank of St. Louis
1238
-11-
factor impelling approval of this application.
It can be assumed
reasonably that satisfaction of certain large credit needs will be
scught directly from the larger New York City banks.
Even if these
borrowers apply directly to the Albany banks, to the extent necessary,
the
banks will utilize the New York City banks or other metro-
Albany
Politan area banks to satisfy these credit demands.
Although the handling
Of large lines of credit on a participation basis with a correspondent
bank may present problems not to be found in participations between and
aracng subsidiary banks of a holding company system, in nearly every case
such problems would affect only the facility of participation, not the
fact
thereof.
In general, the foregoing rationale is equally applicable, in
he
Boards judgment, to certain of the major services which Applicant
asserts it could provide through or to Albany Bank, such as trust and
estate
involving
planning assistance, and advice with respect to matters
reign banking and investments.
While Albany Bank's affiliation with
Bankers Trust would undoubtedly benefit Albany Bank and its customers
Ilith
It
respect to improvement in and expansion of the services mentioned,
appears
to the Board that any present or foreseeable limitation in
the hank's ability to provide these service;; constitutes a situation
sus
ceptible to remedy by present management.
On the record presented, the Board concludes that there has
not been established that any major banking requirement in Albany Bank's
se"-oe area is going unserved, or that the immr2diate future will give
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Federal Reserve Bank of St. Louis
-12-
1239
rise to a situation where such needs could not be served by the large
New York City banks, the banks local to the area, or a combination
of the two.
Accordingly, while considerations relating to the con-
venience, needs, and welfare of Albany Bank's service area are consistent with approval of the application, they do not lend significant
support to such approval.
Spring Valley Bank's ten offices are all situated in
Rockland County, which, with an estimated population of 174,000,
i8
one of the most rapidly growing parts of the State.
Although
the county, which is part of the New York City Metropolitan Area,
18 Principally residential and rural, it is developing rapidly in
e°mmerce and industry.
In the period 1950-1960, employment in
4ekland County increased 43 per cent and retail sales increased
110
Per cent. Since 1960, a number of enterprises engaged in a
national or international business have located in Rockland County,
and a number of additional concerns are reported to be actively conaiderIng locating there.
Nearly 90 per cent of Spring Valley Bank's
1PC dePosits originate in Rockland County.
As before noted, Spring Valley Bank's capital growth has
not kePt pace with its deposit and loan growth, despite sales of
additional stock by the bank on five separate occasions since 1955.
._
new of Spring Valley Bank's reluctance to follow so immediately
•
its most recent sales of stock (1963 and 1964) with another public
c)f
ring, Applicant has committed itself, subject to approval of this
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Federal Reserve Bank of St. Louis
1240
-13-
action, to provide $500,000 of capital to meet current needs, and
asserts that it will assure Spring Valley Bank of adequate capital
t° meet future needs.
While Applicant's proposal to augment Spring
Valley Bank's capital is a factor supporting approval of the application,
the
weight toward approval is lessened somewhat by the fact of Spring
Valley Bank's previous successful sales of stock and the suggestion,
nut contradicted by the record, of its ability to conclude similarly
successful future stock sales.
An additional principal assertion
m4de by Applicant in support of approval of its application is that
the Rockland County banks, among them the Spring Valley Bank, are of
ills ufficient size to respond adequately to the increasing demands
f° funds incident to the growing commercial and residential developWithin the county.
The evidence of record supports Applicant's
statements and estimates as to Rockland County's present and potential
t'at
e of growth.
Conceding that, as Applicant asserts, the Rockland
C°44tY banks generally are unable to satisfy demands for credit incident
"the development within the county, there is no evidence that these
Ileeds are, therefore, going unserved.
The Superintendent of Banks
Of New York, in recommending favorably to the State Banking Board
on
APPlicant's proposal, made no finding as to any unserved credit
tieeda; rather, he found that "the credit requirements of local residellts, businesses, and municipalities could be met with greater conVet,:
'
4-ence if additional loanable funds were available within Rockland
C°411tY".
In view of the fact that Rockland County is situated within
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Federal Reserve Bank of St. Louis
-14-
1241
the New York Metropolitan Area and that its residents and businesses
have convenient access to credit sources in New York City and adjoining Westchester County, as well as to the Rockland County banks, the
matter of credit requirements, large or smell, need be considered only
with respect to convenience of access.
As concluded with respect to
Albany Bank, to the limited extent that affiliation with Bankers Trust
14c)nld facilitate Spring Valley Bank's access to loanable funds beyond
that
now obtainable by the bank through its bank correspondents, such
tesult is consistent with approval of Applicant's proposal.
Poughkeepsie Bank, with deposits of $16 million, is the
smallest of four commercial banks headquartered in Poughkeepsie,
It oPerates two offices, both in the City of Poughkeepsie, its
Primary service area.
had
Poughkeepsie, the seat of Dutchess County,
a 1960 population of about 38,000 persons, a slight decrease
frcm its 1950 population, as contrasted with a significant population
gr(11,7th in the remainder of the county.
Dutchess County is principally
sgticultural and residential in nature, but is undergoing rapid
business and light industrial development, as exemplified by the
emP1°Yment of about 12,000 persons by the International Business Machines
Cor
poration.
Considering Poughkeepsie Bank's decline from second to
fourth in size of the four commercial banks in the city - its deposits
creased both actually and proportionately at a significantly lesser
rate than the deposits of its local competitors, despite the business
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Federal Reserve Bank of St. Louis
1242
-15-
and residential growth in the area surrounding the city - it is apparent
that Poughkeepsie Bank has not aggressively positioned itself either
to serve fully its primary service area or to extend the scope and
nature of its operations beyond the boundaries of the city.
The Board
believes that Applicant's control of Poughkeepsie Bank will improve in
several respects the bank's service rendition.
Even though certain
of these improvements could be effected apart from the affiliation
Proposed, the relative certainty of their accomplishment under Applicant's direction constitutes a circumstance favorable to approval
Of the proposal.
On the basis of the entire record, and as indicated in
the foregoing findings, the Board concludes that the formation of
the holding company system proposed will result in no significant
con tribution to the convenience, needs, and welfare of the areas
Primarily served by Bankers Trust and Albany Bank; however, the con—
ve
nience and needs of the areas served by the Spring Valley Bank and
Pou
ghkeepsie Bank will be better served and met by the two banks
un(ler Applicant's ownership and operation.
Accordingly, considerations
bearing on the fourth statutory factor weigh in favor of approval of
the application.
Effect on adequate and sound banking, the public interest,
and bankinp competition. - If the proposed holding company formation
Ilere consummated, Applicant, in terms of total deposits, would be the
Ilaticm's second largest, and the State's largest, bank holding company.
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Federal Reserve Bank of St. Louis
1243
-16-
Applicant would, however, rank only sixth in size among New York
banking institutions, the relative position now held by Bankers Trust.
Among such banking institutions, Marine Midland Corporation would rank
seventh, and Charter New York Corporation, the formation of which
the Board has today approved, would rank eighth.
On the basis of December 31, 1964 data,
hold
j
registered bank
Jug companies controlled about six per cent of the deposits of
c°111mercial banks, and four per cent of the deposits of all banks, in
the State.
Those respective percentages will be increased to about
18 and 12 assuming Applicant's formation and that of the two other
414 York holding company systems earlier mentioned.
None of Applicant's proposed subsidiary banks holds, or
approaches, a position of dominance within its area of operation,
ntlr are any of the banks larger than third in size among the banking
illstitutions located within such area.
Bankers Trust, the sixth
la gest bank in New York City, holds about eight per cent of the
dePtlaits of commercial banks, and six per cent of the deposits of
II banks, headquartered in the city.
Albany Bank is the third
larn—
b'st of five commercial banks headquartered in Albany County,
Ilith 11 per cent of the deposits of such banks, and the third in
size of the 40 commercial banks in the district.
York,
justed to include the merger of Grace National Bank, New
" Marine Midland Trust Company of New York in 1965.
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Federal Reserve Bank of St. Louis
1244
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Spring Valley Bank is the third largest of seven banks
headquartered in Rockland County, and the tenth in size of more than
SO banks in the Third Banking District; its total deposits represent
18 and 1 per cent, respectively, of the deposits of all banks headquartered in those two areas.
the
Poughkeepsie Bank is the smallest of
four commercial and one mutual savings banks headquartered in
4ughkeepsie.
Its deposits are equivalent to five per cent of those
all banks headquartered in Poughkeepsie, and less than one-half of
clle per cent of those of all banks in the Third Banking District.
Con-
slillaation of Applicant's proposal and that of Charter New York
C°rporation would result in the following concentrations of bank deposits
ullder holding company control:
in New York City, 11 per cent; in
Albany, Fulton, and Greene Counties, combined, 6 per cent; in Rockland
eQutItY, 18 per cent; and in Dutchess County, 28 per cent.
The relatively
hither percentage shown for Dutchess County reflects Marine Midland
cor poration's control of the largest commercial bank in the county.
Consummation of Applicant's proposal would not, in the Board's
11142ment, result in an undue concentration of banking resources under
47)
Plicant's control or the control of all holding company systems in
tlY of the relevant areas.
As e2r1ier noted, Bankers Trust is engaged in local,
ti4tional, and international banking; the other proposed subtaries engage primarily in local retail banking.
In view of
this fact, and the lack of impact that this proposal would have on
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Federal Reserve Bank of St. Louis
124_5
-18-
tankers Trust's New York City competitors, the Board's analysis of
the competitive effects of this proposal is appropriately limited to
the local, or retail, business of the banks affected.
Respecting the probable effect of Applicant's proposal on
"mpetition between and among the four proposed subsidiary banks, the
Primary service area of none of the banks overlaps that of another.
Despite the proximity of New York City to Rockland County, the record
eflects that the deposits and loans that Bankers Trust and Spring
Valley Bank derive from each other's service area are insubstantial
in relation to the total deposits and loans of either bank.
The data
cl record establish further that no significant amount of deposit or
1°411 business in any of the proposed subsidiaries is derived from the
Ptimary service area of any of the others.
Accordingly, approval of
his application would not eliminate any significant existing competition
hetAleen or among the proposed subsidiary banks.
A determination as to what extent approval of this application
ill foreclose future competition between and among the proposed sub"ary banks is difficult.
The ability of the two Third District
114t1 s to expand further within that district, the possibility of the
tlIc) Third District banks or Bankers Trust establishing branches in
/1Q01.
'Lchester County, and of Bankers Trust generally expanding the scope
ts service, where possible, to additional areas of the State, all
(34er potential for increased competition. However, on the basis of
the
Present lack of meaningful competition between and among these
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Federal Reserve Bank of St. Louis
1246
-19-
banks, the rather clearly established pattern of operation on the part of
the two Third District banks, and the distance that separates the banks
last mentioned, as well as Bankers Trust, from Albany Bank, the
Board is unable to conclude that any significantly increased competition
'
41-11 be foreclosed by approval of this application.
Turning to a consideration of the likely impact that Applicant's
Proposal will have on the banks competing with the four proposed subsidiary
banks, as the Board earlier noted, Bankers Trust's affiliation under holding
company ownership with the three upstate banks will have, in the Board's
judgment, no impact on Bankers Trust's competitive position within its
1)timary service area.
Of
On the other hand, the Board views consummation
the proposal as involving h_oth favorable and unfavorable consequences
Ilith respect to the upstate areas involved.
big
Applicant's proposal would
together under common ownership a $4 billion New York City
institution and the third largest of 40 commercial banks in the Fourth
Dis
trict.
This aspect of Applicant's proposal, viewed alone, is of
c°neern to the Board, inasmuch as the competitive potential of an already
sizable institution will be strengthened, and customers of Albany Bank
not having other banking connections will be foreclosed from likely
4(leess to more than one large New York City correspondent bank.
The
fc 'egoing adverse considerations are substantially offset, in the
lloatd's judgment, by the increased competition that may be offered to
kibanY Bank's two much larger competitors headquartered in Albany, to
the two mutual savings banks in Albany County that are larger than
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Federal Reserve Bank of St. Louis
124'
-20-
Albany Bank, and to Marine Midland Corporation's subsidiary bank
°Perating in the Fourth District.
The extent to which Albany Bank's
competitive ability may be enhanced through affiliation with Bankers
Ttuat is not readily foreseen as unduly enhancing its position with
resPect to the two much smaller commercial banks headquartered in
Albany, or the
six smaller banks located in Albany County with deposits
4rIging from $20 to $110 million.
These institutions are presently
"14Peting in varying degree, depending on their size and nature of
8er.v1ce offered, with Albany Bank's four larger competitors.
It does
"
11 appear that Albany Bank's affiliation with Bankers Trust will sigcantly increase the competitive force faced by these smaller
inst
itutions.
Spring Valley Bank is the third largest of six commercial
"4s headquartered in Rockland County and the tenth in deposit size
°f more than 50 commercial banks headquartered in the Third District.
Its
two larger competitors headquartered in Rockland County are
'tcland National Bank of Suffern ($85 million of deposits) and
'lie Midland Corporation's Nyack subsidiary ($44 million of deposits).
The
hem
dePosit size of Spring Valley Bank's three smaller competitors
quartered in Rockland County ranges from $12 to $24 million.
°g1ficantly, an additional primary source of competition from within
th
county is offered Spring Valley Bank by three offices of The
Cola
titY Trust Company, headquartered in White Plains in adjoining
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Federal Reserve Bank of St. Louis
1248
-21-
Westchester County, holding nearly $700 million of deposits.
The
extent to which Spring Valley Bank's competitive position with respect
to its
larger Rockland County competitors would be enhanced is a consideration that outweighs, in the Board's judgment, the minimal adverse
i Pact that Spring Valley Bank's affiliation with Bankers Trust is likely
to
have on smaller banks in Rockland County or the Third District.
The
li
kelihood of any severe impact on these smaller banks is improbable
in
view of the fact that they are, for the most part, prQsently faced with
competition from the large banks located in New York City and
Westchester
County.
The Board finds that, similarly, with respect to Poughkeepsie
aank, the likely strengthening of its competitive position within
its
its
be
.
service
area will be achieved with negligible adverse effect on
smaller competitors.
Poughkeepsie Bank, the smallest of five
headquartered in the City of Poughkeepsie, competes principally
14ith these four larger banks, one of which is a subsidiary of Marine
Corporaticn and has deposits of $118 million.
Of the 14
renlaining banks headquartered in Dutchess County, the 11 that are
srnaller than Poughkeepsie Bank are well established and, for the most
ktt, are
located in and serve different localities some distance from
location.
On balance, it appears to the Board that banking
e°1.flPetition in the Poughkeepsie area will be expanded and strengthened by
the
Poughkeepsie Bank's affiliation with Applicant, with resulting
benefit
to the public.
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Federal Reserve Bank of St. Louis
1249
-22-
the public
A final and pertinent consideration bearing on
tion of the three
interest is the question of the effect of the affilia
of banking
uPstate banks with Bankers Trust on alternative sources
service.
each of the
The number of bank alternatives available in
ation of
service amets affected would not be changed by consumm
APPlicant's proposal.
However, within the Third District the
humber of independent alternatives would be reduced by one.
The impact
remain
Of this reduction would appear negligible in that there would
(I'ver 50 alternative bank sources.
The adequacy of such alternative banking
outlets within the upstate areas involved serves at the same time to
adequate number
secure to the customers served by these outlets an
°f large New York City correspondent banks.
While it may be
aries
ssumed that customers of Applicant's proposed upstate subsidi
single
will hereafter be limited through those subsidiaries to a
bly
New York City bank, such customers will continue to have reasona
convenient access, through other upstate banking outlets, to the
services of other New York city banks and large upstate banks.
BT New York
It is the Board's judgment that the acquisition by
Corporation of Bankers Trust, Albany Bank, Spring Valley Bank, and Poughkeepsie
Bank would not result in the creation of a bank holding company system
e
Whose size or extent would be beyond limits consistent with adequat
corn(1 sound banking, the public interest, and the preservation of
44
Pe tition in the field of banking.
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Federal Reserve Bank of St. Louis
-23-
1250
Conclusion. - On the basis of all the relevant facts as
contained in the record before the Board, and in the light of the
factors set forth in section 3(c) of the Act, it is the Board's
Judgment that the proposed transaction would be consistent with the
Public interest and that the application should therefore be approved.
April , 1966,
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Federal Reserve Bank of St. Louis
1251
CONCURRING STATEMENT OF GOVERNOR MAISEL
Item No. 7
4/7/66
I concur in the Board's action in approving the application
of BT New York Corporation to form a bank holding ccmpany, although
I believe the proposed holding company would better serve the needs
of the State if it were at this time more limited in size.
that
I agree
Applicant's acquisition of the Spring Valley Bank and Poughkeepsie
terilt will confer significant benefits on the businesses and residents
served by those banks, without any significantly adverse competitive
Consequences.
I am unable to conclude similarly concerning, and thus
414 °PPosed to, the affiliation of Applicant's proposed $4 billion New
(3rk City subsidiary with the $118 million Albany Bank, located in the
kurth District.
My objection to the size and nature of an affiliation such
48 that proposed between Bankers Trust and Albany Bank has compelled
ne
today to dissent from the Board's action in approving an applica-
ticll by Charter New York Corporation involving the proposed affiliation
tying Trust Company, a multi-billion dollar New York City bank,
1/ith The Merchants National Bank & Trust Company of Syracuse, a
430 million bank.
The rationale of my opposition to Charter's forma-
404 is set forth in my Dissenting Statement acccmpanying the Board's
St
sitement and Order in that case.
The similarity of the objectionable
'feature of Charter's proposal and that of BT New York Corporation's
h°Posal relating to Albany Bank warrants a summary here of my reason14a 1n the Charter matter.
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Federal Reserve Bank of St. Louis
1252
-2-
My appraisal of the banking needs in upstate New York leads
to the
conclusion that, at the present, large New York City banks of
the size of Bankers Trust should be permitted to affiliate only with
Upstate
banks considerably smaller than Albany Bank.
A rapid growth in bank holding companies is taking place in
114/ York.
The questions raised by this growth have been well docu-
mented in the recommendations of the New York Superintendent of Banks
to the Banking Board with respect to this case.
There are a limited
number of banks with over $75 million in deposits in the upstate bankdistricts.
If the State is to maintain a competitive structure
144ch will give adequate choice to businesses in the upstate area, it
Is necessary that the amount of choice now available not be seriously
corktracted.
During the initial growth period, I believe that the
fnl
'
rnation of new holding companies should take place in such a manner
as t° increase, not to reduce, the possible banking alternatives.
Each
time a sizable upstate bank joins with one of the large New York City
allks
tL e probability that several strong regional holding company
sYstems will be established is reduced.
It is too early to predict
be ultimate
impact of the new holding companies.
In the interim, sound
114blic policy should maintain the largest number of possible options
14ith respect to
the form growth will take.
As I have earlier indicated, it is my judgment that approval
Of ET
New York Corporation's application offers important benefits to
the
'
17° Third District cities which should not be precluded because of
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Federal Reserve Bank of St. Louis
-3-
125.'
the Potentially adverse features inherent in the Corporation's
acquisition of Albany Bank.
However, any proposal involving such
adverse features, but lacking overweighing beneficial features,
should
not, in my judgment, have the Board's approval.
April 7,
1966.
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Federal Reserve Bank of St. Louis
1254
Item No. 8
4/7/66
DISSENTING STATEMENT OF GOVERNOR ROBERTSON
In my opinion, the Board's action in approving the applications
by ET New York Corporation and Charter New York Corporation to form
bank holding companies, consisting each of a major New York City bank
and °fle or more upstate banks, is contrary to the stated policy of
the New York legislature in its enactment of the State's bank holding
ccalPanY law, and the clear intent of Congress in enacting the Bank
ding Company Act of 1956.
Article III-A of the New York Banking Law, the State's
"bank holding company act", was enacted into law in company with a
declaration of State policy, a portion of which is as follows:
"After full consideration of the complex issues
involved it is hereby declared to be the policy of the
State of New York that appropriate restrictions be
inVosed to prevent statewide control of banking by a
few giant institutions; * * * that competitive as well
as banking factors be applied by supervisory authorities
in approving or disapproving * * * the operations of
bank holding companies * * * that healthy and nondes tructive competition be fostered among all types of
banking organizations within natural economic and
trade areas".
The
oeard's actions in approving the applications of BT New York
CcrPoration and Charter New York Corporation are, in my judgment,
in direct conflict with the declared policy of the State of New York.
Approval of these applications can have but a single
tOq.
"qUenCe -
the
the establishment of a precedent that will disenable
Board later to deny to other major New York City banks similar
411Plications that will inevitably lead to State-wide control of
attic.
'lig resources by these few giant institutions.
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Federal Reserve Bank of St. Louis
1255
-2y inconsistent
I find the Board's approval actions to be patentl
Ilith the further stated policy of the State in favor of fostering
healthy and nondestructive competition within natural economic and
trade areas.
multi-billion
I cannot conceive that the affiliation of
institutions having
dollar New York banking institutions with upstate
in excess of $100 million of deposits will foster healthy or nondeCity . upstate
structive competition, nor do I consider the New York
4reas involved to constitute "natural economic and trade areas".
in approving
I recently joined in the Board's unanimous action
the formation of Security New York State Corporation, a proposed bank
banks, one a
h°14ing company that would own two upstate New York
$260 million bank and the other an $11 million bank.
I found in that
Proposal not only a consistency with the public policy of the State,
but a likelihood that the two banks involved, both located in upper
New
expanded
York State, could, in combination, provide improved and
involved, with
s"vices to certain customers of the smaller bank
tions.
r"ulting increased competition to the larger upstate institu
of
The Present two applications involved, in my judgment, have none
these benefits.
d are
The major banking needs of the areas affecte
Pr"cntly being served.
any
Therefore, only in the clear absence of
adverse competitive effect should these applications be approved.
to be drawn
evidellee of record and the most reasonable inferences
l.
th"efrom, in my judgment, preclude such approva
April 7, 1966.
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Federal Reserve Bank of St. Louis
The
4256
BOARD OF GOVERNORS
Item No. 9
4/7/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS
orriciAL
CORRESPONDENCE
TO THE BOARD
April 7, 1966
Board of Directors,
The First National Bank of Spring Valley,
Spring Valley, New York.
Gentlemen:
The Board of Governors of the Federal Reserve System approves
the application of The First State Bank of Spring Valley, Spring Valley,
New York, made on its behalf by The First National Bank of Spring
to
Valley, for stock in the Federal Reserve Bank of New York, subject
forth.
the numbered conditions hereinafter set
1.
2.
and
Such bank at all times shall conduct its business
of
safety
the
to
regard
due
exercise its powers with
the
of
on
permissi
the
with
except
its depositors, and,
such
System,
Reserve
Federal
the
Board of Governors of
in
bank shall not cause or permit any change to be made
scope
the
in
or
business
its
of
r
the general characte
time of
of the corporate powers exercised by it at the
admission to membership.
be
The net capital and surplus funds of such bank shall
of
adequate in relation to the character and condition
other
and
ies
liabilit
deposit
its
to
its assets and
corporate responsibilities.
operation by
The Board also approves the establishment and
out-of-town
seven
and
-town
in
two
the resulting State member bank of
Valley.
Spring
of
Bank
National
branches now operated by The First
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Federal Reserve Bank of St. Louis
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
1257
Board of Directors
-2-
In connection with the foregoing conditions of membership,
Particular attention is called to the provisions of the Board's
Regulation H, regarding membership of State banking institutions in
the Federal Reserve System, with especial reference to Section 208.7
thereof. A copy of the Regulation is enclosed.
It is noted that under authority granted by the State of
New York, the bank may exercise full fiduciary powers, although such
Powers are not currently being exercised by the converting national
bank. Should the State bank at any future time desire to broaden its
scope of corporate activities or exercise any powers not exercised at
the time of admission to membership, it will be necessary, under
condition of membership numbered 1, to obtain permission of the Board
of Governors.
Acceptance of the conditions of membership contained in this
letter should be evidenced by a resolution adopted by the board of
• rectors of the national bank on behalf of the State bank. After the
di
conversion is accomplished, the board of directors of the State bank
should ratify, by resolution, the action of the directors of the national
the
13ank, and a certified copy of such resolution should be filed with
,
certificate
rederal Reserve Bank. Arrangements will be made to issue a
re presenting the appropriate amount of Federal Reserve Bank stock to
l'hich the bank is entitled.
The time within which admission to membership in the Federal
Reserve System in the manner described may be accomplished is limited
to the
O 30
days from the date of this letter, unless the bank applies
that
advised
is
J3oard and obtains an extension of time. When the Board
appropriate
the
all of the requirements have been complied with and that
!mount of Federal Reserve Bank stock has been issued to the bank, the
20ard will forward to the bank a formal certificate of membership in the
Federal Reserve System.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
Enclosure.
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Federal Reserve Bank of St. Louis
1
Item No. 10
4/7/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS
arricsAL
CORRESPONDENCE
TO THE BOARD
April 7, 1966
Board of Directors,
The Fallkill National Bank and Trust Company of
Poughkeepsie,
Poughkeepsie, New York.
Gentlemen:
The Board of Governors of the Federal Reserve System
approves the application of The Fallkill Bank and Trust Company,
Poughkeepsie, New York, made on its behalf by The Fallkill National
Bank and Trust Company of Poughkeepsie, Poughkeepsie, New York, for
stock in the Federal Reserve Bank of New York, 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.
The Board also approves the establishment and operation by
the resulting State member bank of the branch now operated by The
Pallkill National Bank and Trust Company of Poughkeepsie.
In connection with the foregoing conditions of membership,
Particular attention is called to the provisions of the Board's
Regulation H, regarding membership of State banking institutions in
the Federal Reserve System, with especial reference to Section 208.7
thereof. A copy of the Regulation is enclosed.
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Federal Reserve Bank of St. Louis
1259
Board of Directors
- 2
Acceptance of the conditions Of membership contained
in this letter should be evidenced by a resolution adopted by the
board of directors of the national bank on behalf of the State bank.
After the conversion is accomplished, the board of directors of the
State bank should ratify, by resolution, the action of the directors
of the national bank, and a certified copy of such resolution should
be filed with the Federal Reserve Bank. Arrangements will be made to
issue a certificate representing the appropriate amount of Federal
Reserve Bank stock to which the bank is entitled.
The time within which admission to membership in the
Federal Reserve System in the manner described may be accomplished
is limited to 30 days from the date of this letter, unless the bank
applies to the Board and obtains an extension of time. When the
Board is advised that all of the requirements have been complied with
and that the appropriate amount of Federal Reserve Bank stock has
been issued to the bank, the Board will forward to the bank a formal
certificate of membership in the Federal Reserve System.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
osute.
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Federal Reserve Bank of St. Louis
1260
UNITED STATES OF
nERICA
Item No. 11
4/7/66
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
CHARTER NEW YORK CORPORATION,
4E14 YORK, NEW
YORK,
Or
approval of action to become a bank
'
oof ding company through the acquisition
0; 411 of the outstanding voting shares
'
y Irving Trust Company, New Ycrk, New
(IQ*, and at least 80 per cent of the
tillitstanding voting shares of The Merchants
sational Bank & Trust Company of Syracuse,
Yracuse, New York,
ORDER APPROVING APPLICATION UNDER
BANK HOLDING COMPANY ACT
There has come before the Board of Governors, pursuant to
section 3(a)(1) of the Bank Holding Company Act of 1956
(1*Z U.S.C. 1842(a)(1)) and section 222.4(a)(1) of Federal Reserve
g
.
4.ation y (12
CFR 222.4(a)(1)), an application by Charter New York
4-Poration, New York, New York, for the Board's prior approval of
aeti°n whereby Applicant would become a bank holding company through
the
acquisition of all of the outstanding voting shares of Irving Trust
ColliPanY, New York, New York, and at least 80 per cent of the outstanding
ng shares of The Merchants National Bank & Trust Company of Syracuse,
acuse, New York.
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Federal Reserve Bank of St. Louis
-2-
1261
notified
As required by section 3(b) of the Act, the Board
the New York Superintendent of Banks and the Comptroller of the
views and
Currency of
receipt of the application and requested their
tecommendations thereon.
the application.
The Superintendent made no recommendation on
accompanying
However, as discussed in the Statement
his Order, the New York State Banking Board advised this Board of its
4CtiOn, following a recommendation of the Superintendent in approving
44 application filed by Charter New York Corporation, pursuant to the
Ilew York Banking Law, involving the same proposal submitted to this
objection
4ard. The Comptroller initially replied and interposed no
to approval of the application.
Cu
4
he
Sublquently, beyond the period within
an adverse recommendation on the application would have required
submitted an additional
thereon under the Act, the Comptroller
sta
for reasons set
tement recommeuding disapproval of the application
forth and discussed in the above-mentioned Board Statement.
in the
Notice of receipt of the application was published
11006), which
etle'ral Register on August 25, 1965 (30 Federal Register
Provided
regarding
an opportunity for the filing of comments and views
the Proposed acquisition, and the time for filing such comments and
have
viel/a has expired and all comments and views filed with the Board
been considered by it.
the Board's
IT IS HEREBY ORDERED, for the reasons set forth in
Sta
approved,
tement of this date, that said application be and hereby is
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Federal Reserve Bank of St. Louis
1262
Provided that the acquisition so approved shall not be consummated
(a) Within seven calendar days after the date of this Order or
(b) later than three months after said date.
Dated at Jashington, D. C., this 7th day of April, 1966.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Shepardson, Mitchell, and Daane.
Voting against this action:
Governors Robertson and Maisel.
Governor Brimmer was not a member of the Board on the
date of the Board's decision.
(Signed)
Merritt Sherman
Merritt Sherman,
Secretary.
SEAL)
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Federal Reserve Bank of St. Louis
126:i
-Item No. 12
4/7/66
BOARD OF GOVEM;ORS
OF THE
FEDERAL RESERVE SYSTEM
NEW YORK, NEW YORK,
APPLICATION BY CHARTER NEW YORK CORPORATION,
HOLDING COMPANY
BANK
FOR PRIOR APPROVAL OF ACTION TO BECOME A
STATEMENT
York ("Applicant"),
Charter New York Corporation, New York, New
Bank
has filed an application, pursuant to section 3(a)(1) of the
approval of
Rolding Company Act of 1956("the Act"), for the Board's
company
k°Posed action whereby Applicant would become a bank holding
of Irving
through acquisition of all of the outstanding voting shares
80 per cent
TI.ust Company, New York, New York ("Irving"), and at least
Trust
f the outstanding voting shares of The Merchants National Bank &
("Merchants").
CcIllPanY of Syracuse, Syracuse, New York
As required by
Views of State and Federal authorities. and nationally
section 3(b) of the Act, inasmuch as both a State
chartered bank are involved, the Board notified the New York State
receipt
Superintendent of Banks and the Comptroller of the Currency of
Of the application and requested their views and recommendations thereon.
The
nt, concurrently with
Superintenint of Banks advised that Applica
New York State Banking
its filing of this application, had, filed with the
4ard, pursuant to Article III-A of the New York Banking Law, an appliinasmuch as
cation for approval involving the same proposal and that,
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Federal Reserve Bank of St. Louis
1264
-2-
the Superintendent was required by State law to make a recommendation
to the Banking Board on the application pending before it, he would
abstain from comment on the application pending before the Board of
C°Ifernors.
favorably to
Thereafter, the Superintendent recommended
the Banking Board on the application before it, and the application
was approved by the Banking Board.
A copy of the Superintendent's
Imitten recommendation was transmitted to this Board.
the Comptroller
Responding to the Board's request for views,
, stated, in
the Currency, while making no expressed recommendation
Part) the view that:
has placed
.. The rapid expansion of the Syracuse area
to compete
tierchants at a disadvantage in its attempts
industrial
larger
the
of
s
successfully for the busines
organizations now located there. • • •
'Jr
not only
"The expansion of Merchants' capabilities will
also
will
serve to improve its service to the community but
offerthe
in
counter the monopoly now held by Marine Midland
t.
distric
ing of large bank services to the sixth banking
prothe
of
To this extent the over-all competitive effect
posed holding company would be most beneficial."
the
Subsequent to his original transmission of views,
„
on the pending
roller submitted to the Board a statement of views
41)1511cation of BT New York Corporation for approval of the formation
Of a
York,
bank holding company composed of Bankers Trust Company, New
arld tt,
uree upstate New York banks.
tT
The Comptroller recommended that
that
"ell York Corporation's application be disapproved and stated
It
e same considerations apply to the Irving Trust [Charter New York
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Federal Reserve Bank of St. Louis
_3-
1265
Corporation] application aow pending before the Board."
As a basis
for his recommendation, the Comptroller referred to an earlier
Board letter addressed to a national bank located in New York City,
eltPressing the Board's view that the proposed ownership by that bank
Of
a majority of the stock of an upstate bank would appear to violate
Prov
operation
isions of Federal law prohibiting the establishment and
Of branch
offices by national banks.
The Comptroller expressed the
view that the Board, having taken the aforementioned position in
re
ference to the acquisition by a national bank of the stock of
another bank, was estopped from approving applications involving the
acquisition of bank stocks by nonbank bank holding companies, for
the
to
stated reason that such acquisitions "would enable state banks
circumvent the prohibitions of the branch banking statutes of
the State
of New York."
The Board has had occasion to treat with the Comptroller's
"sition in its recent Statement issued in connection with approval
Of the application by Security New York State Corporation, Rochester,
to bec°me a bank holding company.
The Board's view there stated,
equallY applicable to the applications by Charter New York Corporation
444 BT New York Corporation, was that the proposals involved in the
thre
e applications were clearly distinguishable from that involving
the
Proposed acquisition by a national bank of the stock of another
baro,
'• The latter case, in the Board's opinion, involved bank
area
ovinership: control and, thus, operation of another bank in an
here a "direct" branch office would be prohibited to the acquiring
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Federal Reserve Bank of St. Louis
1266
-4bank. In the Charter Corporation and BT Corporation applications,
tot
°A,1Y are the holding companies' ownership and control of the banks
involved not prohibited by Federal or State law but, on the contrary,
are expressly authorized by the Bank Holding Company Act of 1956 and
Article „Iii-A of the New York Banking Law.
By provisions of the
National Bank Act (sections 5136 and 5155 of the Revised Statutes)
Cellgress made clear its intention to restrict and regulate the extent
to which a national bank may own and control additional banking
the
Efices. The national bank proposal that was the subject of
Cornptroller I s letter fell, in the Board's opinion, within the scope
(3 C°ngressional prohibition.
As indicated, the two applications
Act are
Pending before the Board under the Bank Holding Company
eleatly of the type approval of which is permitted under both Federal
4A4 State
law.
The Board concludes that the legislative history of the
tato,
'
Holding Company Act clearly establishes Congressional intention
hat
be
Proposed bank holding company formations and operations not
biected to statutory limitations imposed on branch banking.
._
4mllarly
N
el4
Further,
State
clear intention is evidenced by the enactment in the
York of bank holding company legislation, pursuant to which the
thre
e New York bank holding company proposals were approved by the
State
Superintendent
Banking Department upon the recommendation of the
Of
anks.
in,
For the foregoing reasons, the Board is unable to concur
make applicable to the cases before it, the rationale urged by the
Cc/mPtroller.
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Federal Reserve Bank of St. Louis
1267
-5-
Notification of the Board's receipt of this application
14as given
also to the United States Department of Justice.
The
DePartment posed the "question whether the possible benefits from
aPProving the proposed formation are likely to outweigh the possible
dverse competitive effects".
These competitive effects, according
tc) the Department, were the possibility that Applicant's formation
144341d foreclose all possibility of competition between the
Patticipating banks", and "would prevent the participating upstate
b4rIks from forming [upstate] holding companies
•
•
. which might afford
"111Petition to the large New York City banking institutions in some
eleclit markets".
Statutory factors. - In determining whether or not to approve
thi
'
application, the Board is required by section 3(c) of the Act
to consider the following factors: (1) the financial history and
ec414ition of the proposed holding company and the banks concerned;
(2) their prospects; (3) the character of their management; (4) the
cilence, needs, and welfare of the communities and the areas conand (5) whether or not the effect of such acquisition would
e to
expand the size or extent of the bank holding company system
vulved beyond limits consistent with adequate and sound banking,
the Public interest, and the preservation of competition in the field
C)
batiking
Financial histor
trIco
and condition
and
ros ects. - Applicant,
rp°rated
on March 12, 1965, has no financial history.
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Federal Reserve Bank of St. Louis
Its pro
-6-
1268
IcTma financial condition, as proected by Applicant, and judged in
Part
by
the satisfactory financial condition of its proposed sub-
sidiary banks, is satisfactory.
Irving, established in 1851, has deposits in excess of
$2.6 bill0.iJ and is the seventh largest commercial bank in New
Irving serves primarily banks and large corporate
York city.
cust°mers whose operations are national and international in scope,
and competes for such wholesale business throughout the world.
financial history and condition are considered satisfactory.
Pro
Its
Applicant's
forma financial statement reflects a proposed strengthening of
additional
Irving's capital structure through Applicant's purchase of
stock to be
Applicant's
issued by Irving with funds to be raised through
Sale of long-term capital notes.
million,
Merchants is the oldest and, with deposits of $130
fcurth largest of five commercial banks headquartered in Syracuse.
It conducts essentially a "retail" business in that it provides all
illaj°r banking services to large segments of the general public.
Mer,,L
`"ants
financial history and condition are satisfactory.
respects
Applicant's prospects, depending as they do in major
Ill/n4 the prospects of its proposed subsidiary banks, are considered
able.
banks, together
The growth and earnings records of those
Ilith the favorable economic outlook for the areas they serve, lead
banking data
, of June 30, 1965. Unless otherwise indicated, all
"Led are as of this date.
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Federal Reserve Bank of St. Louis
1269
-7to the conclusion that the banks' prospects, operating either as
subsidiaries of Applicant or as independent institutions, are
favorable.
Management. - The record establishes, and the Board finds,
the management of both proposed subsidiary banks to be well qualified
e" exPerienced, and that neither bank is now encountering or has
exPectations of any significant management problems.
The Board con-
a5 that the banks' managements are satisfactory and that since
APPlioant's management will be drawn from the two proposed subsidiary
banks,
Applicant will be soundly and capably managed.
Convenience..., needs
ed
and welfare of the coplunities and areas
- Although Irving's 13 domestic offices are located in
Ilanhatt
approximately
an, its primary service area - the area from which
7
Per cent of its deposits of individuals, partnerships, and corporattc418 ("IFC deposits') originate - encompasses the six-State area
Of
York, New Jersey, Connecticut, Massachusetts, Pennsylvania,
and
deposits
°40. Irving derives in excess of 60 per cent of its total
fro.,
'" within New York City. It operates a branch office in London, as
as representative offices in three principal foreign cities.
Its
Prominent position in the field of international banking is
evidenced
by its maintenance of accounts for more than 60 central
bsrats
establishes
and some 1,1:00 foreign commercial banks. The record
that Irving
does not actively solicit retail banking business, but
ather engages almost exclusively in wholesale banking.
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Federal Reserve Bank of St. Louis
1270
-8-
Sixth Banking
Merchants operates 16 offices in New York's
County.
4strict, of which 15 are in Onondaga County and one in Oswego
per cent
Its Primary service area (the area from which more than 85
County.
Qf the dollar volume of its IPC deposits originate) is Onondaga
than 460,000
The Population of Onondaga County is estimated at more
1950.
Persons, representing an increase of about 120,000 since
Popula-
by 1980.
tic'n projections are for 520,000 persons by 1970 and 640,000
The
employing some
county contains about 600 manufacturing concerns,
56,Onn
UU
including
persons in a widely diversified group of industries
Corporation,
4111()ng the largest, General Electric Company, Carrier
Allied Chemical,
etticible Steel Company of America, and divisions of
Bristol-Myers Company,
C4Ysler, and General Motors Corporations, and
14 the period 1950-1960, the Syracuse metropolitan area, of which
population,
(41°Ildaga County is a part, was reported to be first in
emni
metropolitan
0Yment, and personal income growth of all the standard
statistical areas in upstate New York.
A major portion of Merchants'
be
ices is located in or near the City of Syracuse and appears to
serving principally the Syracuse area.
consummation of
With respect to the probable effect of the
the
APPlicant's proposal on the convenience, needs, and welfare of
Pro
concludes that
Posed subsidiary banks' service areas, the Board
ApT,1•
change in the
riacant's formation will not produce any significant
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Federal Reserve Bank of St. Louis
1271
-9_
scor.
I e or nature of banking services available in the New York City
,
area.
This conclusion is reached despite Applicant's assertion that,
throu,Th
6
Irving's access to Merchants' experience in the retail banking
field) Irving would undertake to extend to its New York City individual
and small business customers similar retail banking services.
The
41/orab1e weight to be assigned this aspect of Applicant's proposal is
Minimized by the facts that Irving's present and potential New York
eitY customers now have available to them an abundance of retail banking
°tItlets
and that Merchants could add little, if at all, to Irving's
sting ability to provide whatever retail banking services would be
Proposed.
The factors within the Syracuse area to which Applicant
aisserts its proposal is principally responsive are the extensive
expanilldustrial development, population growth, and related economic
In respect to these factors, principal among the benefits that
Aohl
'r4-1-cant states would be provided to or through Merchants as a result
Of i
ts affiliation with Irving are provision for a necessary, alternative
demands
source of funds to meet existing and anticipated credit
Of the
area's commercial and industrial concerns; rendition of more
el
nsive and specialized international banking services; and expansion
Of IlerChants' service offerings in the personal and corporate trust
fields.
additional
With regard to the need in the Syracuse area for
c) improved credit sources, notwithstanding the significant economic
area,
)t'Pansion that has occurred and is likely to occur in the Syracuse
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Federal Reserve Bank of St. Louis
1272
the Board is unable to cohcur in Applicant's position that any
substantial deficiedcy exists in this respect.
There are five
eftmerciai badks headquartered in Syracuse and four of these each has
'
leild8its in excess of $100 million. One of the four is a subsidiary
Of Marine Midland Corporation, a bank holding company system controlling banks with total deposits of some $3 billion.
There are also two
savings banks headquartered in Syracuse, each of which has deposits
totaling in excess of $200 million.
While the record does reflect
that Merchants and the other three large Syracuse banks have a relatively
high ratio of total loans to deposits, thus indicating their inabilities
t° meet alone any substantial new demands for credit, Applicant has not
sati3fied the Board that present credit demands of any size are not,
in fact, being served by the area's banks together, or in conjunction
ith their larger correspondents.
Assuming the continued healthy
eeenftic and industrial expansion in the Syracuse area earlier mentioned,
it may be also assumed that growth will also occur in the deposit
st ucture of the Syracuse banks, thus enabling them to continue to
meet
foreseeable credit requirements.
In any event there is no reason
to believe that the Syracuse banks, in conjunction with other financial
itlatitutions located in the Syracuse area or in New York City, could
"t adequately serve any reasonably foreseeable demand for funds
in the Syracuse area.
With respect to Merchants' ability to
1141tioipate in the furnishing of such credit, while the foregoing
eellelusions are also applicable to it, affiliation with Irving, as
1114/Posed, will likely make more certain and perhaps easier, than would
4011 1
e the case, participation of excess loan demands that may arise.
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Federal Reserve Bank of St. Louis
-11-
1273
More certainly beneficial to Merchants and ultimately to its
customers would be the assistance that Irving will offer in expanding
the nature and extent of Merchants' international banking services.
There is evidence of a growing requirement for such services in the
Syracuse area, particularly in the electrical equipment industry where
"Ports of such equipment have risen sharply in recent years.
Increased
activity in foreign markets is also evident among other of the area's
ind ustries.
While bank services normally incident to export activity
4ra now available in the Syracuse area, either directly from the banks
located there or through their correspondent banks in New York City,
irving's extensive experience in all aspects of international banking
14°111d, in the Board's judgment, constitute an immediate and significant
cont
ribution to the area's requirements.
As to Applicant's proposal to expand the existing nature
and volume of Merchants' trust services, the record fails to establish
that Merchants is not presently responding adequately to the apparent
litni ted
demand made of it for corporate trust, investment, and related
vices, all of which Applicant states it is ready to provide to or
tht°ugh Merchants.
It is the Board's judgment that any limitation on
that bank's ability to provide such services, either now or in the
tutu
re, is negligible and does not require assistance from outside the
bank
for solution.
t'esPects,
Accordingly, the assistance proffered in these
while consistent with approval of the application, does not
Ileith significantly toward such approval.
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Federal Reserve Bank of St. Louis
1274
12-
Effect on adequate and sound bankini4, the public interest,
and
banking COM
etition. - Approval of this application would constitute
APO-leant the eighth largest banking institution in New York State - a
Pnsition now held by its proposed principal subsidiary, Irving.
When
including BT New York Corporation, the formation of which was today
nPloroved by the Board, Applicant would be the fourth largest bank holding
COPany
system in the nation, and within the State of New York would be
thitd in size behind BT New York Corporation and Marine Midland
Corporation.
2/
On the basis of December 31, 1964, data
registered bank
holding companies controlled about six per cent of the deposits of comIlletclal banks, and four per cent of the deposits of all banks, in the
State.
Those respective percentages would be increased to about 18
and 12 assuming formation of Applicant, Security New York State
Co,
110ration, approval for which was given by the Board on March 25,
'
196c
u) and of BT New York Corporation.
The Board is unable to perceive any significant effect on
the banks or banking in New York City from consummation of Applicant's
131.°13°snl.
The deposits controlled by bank holding companies presently
rating in New York City, when combined with the deposits under the
(Ititrol of BT New York Corporation and Applicant, would represent
17 Per cent of the deposits of all commercial banks and 11 per cent
°f the deposits held by all banks.
The deposits held by Irving repre-
"five and four per cent, respectively, of such deposits.
se
In the
1,14, Justed to include the merger of Grace National Bank, New York,
" Marine Midland Trust Company of New York in 1965.
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Federal Reserve Bank of St. Louis
-13-
1275
context of the New York City banking structure, the aforementioned
c"trol of banking resources does not represent such an undue concentration,
either in Applicant or in all holding company systems combined,
as to be a cause for concern.
This conclusion is more reasonable in
light of the number of large banks in New York City with which existing
Or Proposed bank holding company subsidiaries must and will compete.
nrther,
in view of Merchants' small size in relation to Irving's,
he Board is unable to foresee that any measurable strengthening of
Irving's competitive position in any phase of its operation will result from the proposed affiliation.
Merchants, the fourth largest of six commercial banks and
8iXth
largest of nine commercial and savings banks headquartered in
(14°ndaga County, holds 18 per cent and 10 per cent, respectively, of
the total deposits of such banks.
Marine Midland's subsidiary in
04ondaga County holds about 27 per cent and 16 per cent, respectively,
°f the
deposits of all commercial banks and of all banks headquartered
the county.
The largest and third largest commercial banks head-
quartered in the county - First Trust and Deposit Company and Lincoln
tonal Bank & Trust Company - neither of which is affiliated with a
bawl_
'Lc holding company, together control 53 per cent and 31 per cent,
tea
Pectively, of the total deposits of commercial and all banks.
A
nntial portion of the remaining deposits of all banks headquartered
the county is held by the two savings banks located in Syracuse,
04e
of which is as large as, and the other considerably larger than,
any
°f the aforementioned commercial banks.
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Federal Reserve Bank of St. Louis
-14-
1276
The foregoing data make apparent the fact that a substantial
Portion of the total banking resources in Onondaga County is concentrated in a few large banking institutions - a consideration of some
siftent to this Board.
Realistically viewed, however, the potential
f°r adverse competitive impact offered by this concentration of re4°Ilrees will not be increased by consummation of Applicant's proposal.
'lather, it is reasonably anticipated that the affiliation of Merchants,
he smallest of the six major banks headquartered in Syracuse, with
n to
lirving will enable nerchants to offer more meaningful competitio
of
its numerous larger competitors for the deposit and loan accounts
he area's major commercial and industrial concerns.
The Board foresees little, if any, adverse effect of Merchants
three small
"illation with Irving on the competitive abilities of the
ballks located in Onondaga County.
eftPetition,
These banks have been and are now
to a limited extent, with the large Syracuse banks.
48P1te this competition, each of the smaller banks has shown a steady
4 reasonable growth.
"
The Board is satisfied that consummation of
APPlioant's proposal will not readily jeopardize the continued
Ic.c)INth of these banks operating within their more limited product and
1(1)graphic markets.
As to competition between Irving and Merchants, there is
4° evidence of any existing significant competition between them,
rlor is
e
there likelihood that such will develop in the foreseeabl
Nture.
The nearest offices of the two banks are separated by some
27° miles.
offices
The State law prohibits either from opening branch
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Federal Reserve Bank of St. Louis
1277
-15-
in the other's banking district,
As earlier discussed, Irving's
business is principally wholesale in nature, while that of Merchants
Is predominantly retail.
These considerations are sufficient for
4 judgment that the minimal extent to which competition between
Irving and Merchants would be eliminated or foreclosed offers no
iniPediment to approval of this application.
There remains to be determined the effect that Merchants'
affiliation with Irving will have on the availability within the
relevant areas of alternative sources of banking service.
There
/411 be no reduction in the number of separate bank alternatives
available in Onondaga County or in New York City as the result of
e°rIsummation of Applicant's proposal.
Although Merchants' customers
1441) following that bank's affiliation with Irving, be limited
through it to a single principal New York City bank, their access
through other Onondaga County banks to the correspondent services
Of the New York City and large upstate banks represents a continued,
easonably convenient alternative source for such services.
It is the Board's judgment that the affiliation of
ng and Merchants under Applicant's ownership and control would
"r result in the creation of a bank holding company system the
size or extent of which would be beyond limits consistent with
"equate and sound banking, the public interest, ar,d the preservation
°f competition in the field of banking,
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Federal Reserve Bank of St. Louis
-16-
1278
Conclusion. - On the basis of all the relevant facts as
contained in the record before the Board, and in the light of the
factors set forth in section 3(c) of the Act, it is the Board's
judgment that the proposed transaction would be consistent with the
Pnblic interest and that the application should therefore be approved.
APril 7, 1966.
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Federal Reserve Bank of St. Louis
1279
Item No. 13
4/7/66
DISSENTING STATEMENT OF GOVERNOR ROBERTSON
In my opinion, the Board's action in approving the applications
by
BT New York Corporation and Charter New York Corporation to form
bank holding companies, consisting each of a major New York City bank
and one or more upstate banks, is contrary to the stated policy of
the New York legislature in its enactment of the State's bank holding
"mPanY law, and the clear intent of Congress in enacting the Bank
41ding Company Act of 1956.
Article III-A of the New York Banking Law, the State's
4bank
holding company act", was enacted into law in company with a
dee
laration of State policy, a portion of which is as follows:
"After full consideration of the complex issues
involved it is hereby declared to be the policy of the
state of New York that appropriate restrictions be
Imposed to prevent statewide control of banking by a
few giant institutions; * * * that competitive as well
as banking factors be applied by supervisory authorities
in approving or disapproving * * * the operations of
bank holding companies * * * that healthy and nondestructive competition be fostered among all types of
banking crganizations within natural economic and
trade areas".
The
Board's actions in approving the applications of BT New York
cot.
Pnration and Charter New York Corporation are, in my judgment,
41 direct conflict with the declared policy of the State of New York.
Approval of these applications can have but a single
orlseguence - the establishment of a precedent that will disenable
the
Board later to deny to other major New York City banks similar
cations that will inevitably lead to State-wide control of
batik
ing resources by these few giant institutions.
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Federal Reserve Bank of St. Louis
1280
-2to be patently inconsistent
I find the Board's approval actions
fostering
14it'll the further stated policy of the State in favor of
within natural economic and
healthy and nondestructive competition
ion of multi-billion
trade areas. I cannot conceive that the affiliat
itutions having
dollar New York banking institutions with upstate inst
or nondeill excess of $100 million of deposits will foster healthy
New York City f• upstate
structive competition, nor do I consider the
areas involved to constitute "natural economic and trade areas".
g
unanimous action in approvin
I recently joined in the Board's
a proposed bank
he formation of Security New York State Corporation,
ate New York banks, one a
holding company that would own two upst
ion bank. I found in that
260 million bank and the other an $11 mill
ic policy of the State,
Proposal not only a consistency with the publ
located in upper
but a likelihood that the two banks involved, both
and expanded
11a14 York State, could, in combination, provide improved
ler bank involved, with
services to certain customers of the smal
upstate institutions.
testilting increased competition to the larger
my judgment, have none of
Present two applications involved, in
affected are
these benefits. The major banking needs of the areas
The
Ptesently being served.
absence of any
Therefore, only in the clear
applications be approved.
competitive effect should these
inferences to be drawn
evidence of record and the most reasonable
adverse
oval.
th"efrom, in my judgment, preclude such appr
April 7, 1966.
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Federal Reserve Bank of St. Louis
The
1281
Item No. 14
4/7/66
DISSENTING STATEMENT OF GOVERNOR MAISEL
I would deny approval of the proposed affiliation of Irving
Trust Company with The Merchants National Bank & Trust Company of
S yracuse under control of Charter New York Corporation.
This affili-
ation structures a banking combination the size and nature of which
IS, in my
judgment, at the present, not consonant with the long-range
in
terests of the upstate banking public.
Consummation of Applicant's proposal will affiliate a New
York City institution holding nearly $3 billion of deposits with a
$130 million bank in Syracuse, thus foreclosing the later possibility
of the Syracuse bank playing a more constructive role as the hub or
rilember of a strong regional holding company system competing in
upstate New York.
A rapid growth in bank holding companies is taking place
in New York.
The questions raised by this growth have been well
1°cumented in the recommendations of the New York Superintendent of
tanks to the Banking Board with respect to this case.
There are a
limited number of banks with over $75 million in deposits in the upState
banking districts.
If the State is to maintain a competitive
str ucture which will give adequate choice to businesses in the upstate
area,
it is necessary that the amount of choice now available not be
eriously contracted.
that the
During the initial growth period, I believe
formation of new holding companies should take place in such
a
manner as to increase, not to reduce, the possible banking alterna-
tives.
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Federal Reserve Bank of St. Louis
1282
-2-
4ch time a sizable upstate bank joins with one of the large New
York City banks, the probability that several strong regional holding
to
Company systems
will be established is reduced.
It is too early
Predict the ultimate impact of the new holding companies.
In the
interim, sound policy should maintain the largest number of possible
Options with respect to the form growth will take.
My opposition to a proposal that would permit affiliation
Of a large New York City bank with a relatively large upstate bank
i8 also set forth in a Statement I have issued today concurring in
the Board's action in. approving an application by BT New York Cor7oratimr1 involving the proposed affiliation of Bankers Trust Company of
Nel7 York with three upstate banks, one of which is the $118 million
Pirst
Trust Company of Albany.
In the BT New York Corporation matter,
exPressed agreement with the Board's approval of Applicant's acquisiti
°n of the two smaller upstate banks, principally because of the
significant benefits to be derived by the businesses and residents
served by those banks and the ab3ence of any real, adverse competitive
"Asequences. I could not in that case, nor can I here, concur in
BoA A
action that would permit the affiliation of a multi-billion
d°11ar New York City bank with an upstate bank holding over
q00
million of deposits.
Charter New York Corporation's proposal
Port
competitive
eAds no benefits sufficient vo outweigh the adverse
c soquences that I find inherent in the proposal.
"
14Qu1d deny the application.
Digitized for April
FRASER7,
http://fraser.stlouisfed.org 1966.
Federal Reserve Bank of St. Louis
Accordingly, I
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 15
4/7/66
WASHINGTON, O. C. 20551
AnnReam
OFFICIAL CORRESPONDENCE
TO THE 00ARO
April 7, 1966.
REGISTERED
TURN RECEIPT REQUESTED
Charter New York Corporation,
One Wall Street,
New York, New York. 10015
Gentlemen:
Federal Reserve System
The Board of Governors of the
n
has approved the application of Charter New York Corporatio
all
of
n
sitio
to become a bank holding company through the acqui
New
ny,
Of the outstanding voting shares of Irving Trust Compa
cent of the outstanding
York, New York, and at least 80 per
nal Bank & Trust Company of
v°ting shares of The Merchants Natio
accompanying
S yracuse, Syracuse, New York. The Board's Order,
S tatement, and press release are enclosed, together with the
l.
Dlssenting Statements of Governors Robertson and Maise
of the enclosed Board's
It will be noted that page six
Statement refers to Applicant's proposal for strengthening the
ny through purchase of
capital structure of Irving Trust Compa
additional stock of Irving Trust Company with funds to be raised
al notes. The details of
bY.Applicant's sale of long-term capit
ary 11, 1966,
thls proposal were set forth in a letter dated Febru
of Irving
Board
addressed by Mr. George Murphy, Chairman of the
Reserve
al
Feder
the
Trust Company, to Vice President Piderit of
feasibility
the
in
f
Bank of New York. Mr. Murphy expressed a belie
bly in
possi
,
notes
long-term
of Applicant's sale of $60 million of
the
ase
incre
to
used
mid-1966, the proceeds of which would be
Merchants National
capital of both Irving Trust Company and The
action in approving
's
Bank & Trust Company of Syracuse. The Board
York Corporation
New
the application of the formation of Charter
Company's capital
Trust
is premised on the assumption that Irving
urges that suitable
also
will be appropriately increased. The Board
ing of Irving
gthen
stren
steps be taken to effect a substantial
Trust Company's liquidity position.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
12S4
Charter New York Corporation
In connection with the provision of the Board's Order
requiring that the acquisition be consummated no later than three
months from the date of the Order, advice of the fact of consummation should also be given, in writing, to the Federal Reserve Bank
of New York.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
@FedFRASER