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413 Minutes of actions taken by the Board of Governors of the Ileciel'el Reserve System on Friday, August 12, 1949. The Board met ill the Board Room at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman pro tem. Draper Vardaman Clayton Carpenter, Secretary Hammond, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Vest, General Counsel Thomas, Director, Division of Research and Statistics Mr. Leonard, Director, Division of Bank Operations Mr. Millard, Director, Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. Mr. There were presented telegrams to the Federal Reserve Banks or A. -°8t°11, Cleveland, Richmond, Chicago, St. Louis, Minneapolis, 448118CitY, and Dallas stating that the Board approves the estab41"Illerit without change by the Federal Reserve Banks of Cleveland, 1c44°11c1, Chicago, St. Louis, Minneapolis, Kansas City, and Dallas 4glist 11, 1949, and by the Federal Reserve Bank of Boston today th e rates of discount and purchase in their existing schedules. Approved unanimously. Reference was made to letters sent under date of August 8, 1949, kti 8 Mr• A. C. Hughes, President of the Monterey County Trust gS Bank, Salinas, California, to each of the members of the I 362 -2(except Mr. Clayton) and to Mr. Riefler, complaining of the 4";1°4 of the Comptroller of the Currency in granting permission to Ballik of America National Trust and Savings Association, to transfer bz'alleh of that bank from Camp Roberts, an abandoned Army post, to riza1.04 --8, California, where the Monterey Trust Company also operates 8.1)liailells The letter stated that the Board's consideration and eP1'"ould be greatly appreciated. bYthe A letter had also been received Chairman's office under date of August 10, 1949, from Con- €. 't'el88111ezi, Ernest K. Bramblett inquiring as to the status of the matter. During discussions before this meeting of the replies to be kdle uSr the Board to these letters, Mr. Clayton called Congressman Ii11441/1ett to direct his attention to the fact that permission for the e st ablishment of domestic branches of national banks was within the e Icclusive jurisdiction of the Comptroller of the Currency, and 11r. b 441'exab1ett stated that he would take the matter up directly with the n `'°D1Ptroller of the Currency. Mr. Clayton also called Mr. Folger, Ner National Bank Examiner, who confirmed the fact that permission ter r enloval of the branch to Gonzales had been granted. Following these conversations, drafts of replies had been prepared for con81 ( ler or Ettion at this meeting of the Board with the thought that copies hi the l'elolies might be sent to the Comptroller of the Currency for .111mation. hi the discussion at this meeting of the drafts of replies, 8/1449 -3- l'eference was made to the fact that in the consideration by the C°1111Aro1ler of the Currency of applications from Bank of America to estelaish branches, the Comptroller of the Currency was not followthe Procedure agreed upon by the three Federal Bank Supervisory des under which, whenever an application is made to any one of tj 41._ "'tree agencies for establishment of a branch, that agency checks " ' 4 11Y with the other two to see if there is any objection to e'llth°11zing the branch. During the discussion, suggestion was made that (1) that in , -Letter to the Comptroller of the Currency sending copies of the + - -0 Messrs. Hughes and Bramblett, the Board should reiterate the stetement contained in its letter of August 23, 1948, to the eNtr -011er of the Currency in which the position was taken that unt he Clayton Act proceeding against Transamerica was disposed of, It °lad be inconsistent for any Federal agency to approve further eki58.48 of the Transamerica group by any method, and (2) that a , Of Nhe the letter to the Comptroller of the Currency be sent to Mr. Or his confidential information. This suggestion was approved unanimously, with the understanding that the proposed replies would be redrafted in accordance therewith and submitted to the Board for further consideration. eet1/1 Derore this meeting there had been sent to the members of the 8- Mftorandum dated August 8, 1949, from Mr. Vest in which .A 8/12/49 -4- I'eference was made to a visit to Chairman McCabe on August )by 14r. L. M. Giannini, President of the Bank of America National Trust 441 Savings Association, in connection with the Board's letter of l'41Y 16, 1949, with reference to the establishment by the Bank of Alael'ica of three branches in Germany and the possible organization Or an Edge Act corporation to handle the bank's international and lign banking business. During the conference with the Chairman, Gianntni raised the question whether the capital for the Edge Act corporation could be supplied by the bank, and Mr. Vest's memostated that in the circumstances set forth therein, the Illight consider permitting the bank to supply the necessary c4151tal which would be very inconsequential in amount in relation to the total capital of the bank. Mr. Vest stated that in discussing the matter with Mr. Itte 4&k, who was now on vacation, the latter expressed the view that the capital should be supplied from outside the bank and Ilrezt8 anlerica Corporation, that if that were not done the capital ah °1-1101 tc) have ve supplied by Transamerica, and that he would be reluctant the bank supply the necessary capital. The members of the Board who were present, after considering the matter, felt that in view of the applicable provisions of law and other circumstances outlined in Mr. Vest's memorandum, the Board should interpose no objection to y I36C 8/12/49 the capital for the Edge Act corporation being supplied by Bank of America, and in accordance with Mr. Giannini's request that he be informed of the Board's decision in the matter while he was still in the East, Mr. Vest was requested to call him by telephone and advise him accordingly. In connection with the above matter, consideration was also 11/7erl to a draft of reply prepared by the staff to the letter dated 41Y 19/ 1949, from Mr. Giannini commenting on the action of the 11°8'11 in denying the Bank's applications for permission to establish three b ranches in Germany. The draft had been prepared with the tIktght that it would contain a statement of the position of the 13()4rci th respect to the source of the capital for the Edge Act e°11Poration referred to above. The reply was approved unanimously, as follows: "Since receipt of your letter of July 19, 1949, relati-DE to the applications filed by your bank for permison to establish branches in Bremen, Hamburg and Frankfort„Ltl! 4a1DI Germany, Chairman McCabe has had a visit from you with members of the Board's staff, has discussed the 41,7.tter with you. Also, you have been advised that the Board 11 interpose no objection to investment by the Bank of st ! rica N. T. & S. A. of a reasonable amount in the capital elt of an Edge Act corporation organized for the purpose engaging in international or foreign banking. i, As was indicated in the course of the discussion dur1;g Your visit, the capital ratio figures used in the Board's aiIter of May 16, 1949, were based upon call reports of conl x 011 and these figures were used because they were taken V°111 Public information. In passing on the applications for ge establishment of the German branches, consideration was ven bY the Board not only to these figures but to various Z 4 8/12/49 -6— "other factors bearing upon the adequacy of the capital of Your bank and your letter contains no information not previously taken into account which warrants reconsideration Of the applications. The Board reached its conclusion after thorough consideration of all the facts of the case and the applicable statutory provisions and it followed the same procedures as it would have followed in the case °f an application from any other institution. There is no Justification for the statement that there was either unfair or improper disposition of these applications or 4 or any implication that the Board was interested in plac411g your bank in a secondary position in relation to its competitors. "In the circumstances, it does not seem necessary to !ePly to your letter in detail although, as indicated above, does contain some statements and implications to which ° - 1e Board would take exception. You may rest assured that lY applications or communications the Board may receive ' l°fla You are given the same careful consideration and ,ccorded the same unbiased disposition as applications or coMmunications from any other source." r T At this point Mr. Dembitz entered the meeting. Mr. Eccles stated that a letter dated August 10, 1949, had 'beet. l 'eceived from Senator Tobey urging, at the instance of Mr. a local attorney, that the Board extend until December the Ss ivuerit of Mr. John Exter, an economist in the Board's Division or tie : leal*ch and Statistics, as adviser to the Government of Ceylon hlc( 44ection with the establishment in that country of a central bejaki A suggested draft of reply to the letter had been prepared and was read at this meeting, and it was agreed unanimously that it should be revised along the lines of the discussion and resubmitted to the Board for further consideration. 8/12/49 -7At the meeting of the Board on August 5, l949, approval was " vet to an arrangement under which the assignment of Mr. David L. 4°76) an economist in the Board's Division of Research and Statictic 8/ as adviser to the Central Bank of the Philippines would be et ended for a period not to exceed three months from August 26, 1949, with the understanding that the Board would attempt to find stIceessor for Mr.Grove and that he would be released as soon as kIssible after the arrival of the new man in Manila. It was sUbse- Illellt4 ascertained by cable correspondence that Mr. Cuaderno, Goiter ibr of the Bank, did not wish to have a successor appointed. Acco,,.3 4'4ingly, the following cable to Governor Cuaderno had been preConsideration by the Board: "Following discussion with Ambassador Cowen and bles with Grove, who we understand consulted with you, :oard has formally reconsidered your July 6 request for ,,tansion Grove's leave beyond August 26 and has decided r grant extension for period not exceeding three months. SeZ/ever Board trusts you will arrange termination Grove's rvices in Manila earlier if possible because urgently edsd here. Board members will welcome discussion 111iPpine Central Bank progress with you during your : -Lor thcoming Washington visit." it to Mr. Vardaman stated that while he was opposed in principle l'iliftlrther extension of Mr. Grove's assignment, he would interDote 40 objection in view of the position taken by Ambassador Cowen Ne.rci trig the urgent need of Mr. Grove's services. Thereupon, the proposed cable to 1369 8/12/49 -8Governor Cuaderno was approved unanimously. Messrs. Baumann and Cherry entered the meeting at this point, and Mr. Dembitz withdrew. Mr. Eccles referred to H. R. 1689, a bill to increase rates c/f compensation of the heads and assistant heads of the executive dePartMentS and independent agencies, which passed the House of Repro.3er1tative3 on July 8, 1949, and had been reported to the Senate with "ain amendments on August 9, 1949. He pointed out that the Ilaries of members of the Board aould be fixed by the bill at :$16,000, 4-e the salaries of Cabinet members would be fixed at .425,0001 under 8eeretaries at 120,000, and certain other department and agency l'eicers from a7,500 to $20,000. He outlined the discussions which he h aLz had with respect to the bill, referred to letters ahich had bee, " sent by Chairman McCabe to Chairman Maybank of the Senate Bankand aurrency Committee under dates of March 14, 1949, and August 5, 103., I4Y, and to Senator Robertson on the same dates, and raised for -uoration what further steps should be taken by the Board in conrieet; -1-c'n with the matter, having in mind that if the bill were approved init present form, the salaries of members of the Board would be eatlY reduced in relation to many other salaries in the Government. Various actions that might were discussed, and upon motion Vardaman and by unanimous vote, was referred to Yr. Eccles with be taken by Mr. the matter power to 1 8/12/49 —9— act, with the understanding that he would inform Chairman McCabe of developments in connection with it. M. Riefler stated that he had had a telephone call from sftator Robertson in which he asked for an informal expression of t118 Board's views on a suggestion that the bill authorizing national banief, to convert into or merge with State banks be amended to perr1148 national bank to purchase the assets or merge another bank and toretain any branches of the latter bank regardless of when the brariches were established or acquired and regardless of whether the brallciles could be established or acquired under State law. Mr. Riefler had discussed the matter with Mr. Vest, and at this teeting the latter stated that it would appear that the proposed ezaekiz. 84t would authorize a national bank by means of purchase or kerfie t° engage in State-wide and even interstate branch banking retaraie 88 of the provisions of State law and, therefore, would be a evertb.,. -— e from the policy of existing law under which national banks bbay -8tslolish branches only to the extent that the establishment of 'Ittlehes by State banks is expressly permitted by the laws of the 14 —, wuich the national bank is located. Mr. Vest also stated that 111a4rstood that the Comptroller of the Currency had taken the positick i 4 connection with the amendment that it was piece-meal legisla404 414 ' should be considered only as a part of an overall study of t118 Dr oblem of branch banking. v12/49 -10The members of the Board agreed unanimously that Mr. Riefler should inform Senator Robertson that the Board would be opposed to the amendment and would send him a letter stating the reasons for its position. Secretary's Note: The letter sent to Senator Robertson under date of August 15,1949, in accordance with this action, was as follows: "This refers to your conversations with Mr. Riefler conthe question whether H. R. 1161, a bill to authorize iblational banks to convert into and consolidate with State ,!Ilke, should be amended by adding a provision relating to :.:'4tional bank branches which was proposed by Representative 'llawford when the bill was considered by the House. "Under existing law, it is the general rule that a ational bank cannot establish and operate new branches if 'he lof the State in which the bank is located do not a thorize 1U State banks to do so. There is one exception, of ttle practical importance, which provides that where a btate bank converts into or consolidates with a national tallk or two national banks consolidate, any branches operaby the converting or consolidating banks which were ;Btablished on or before February 25, 1927, may be retained ithout regard to State law. The proposed amendment would !!eLtly broaden this exception by authorizing the retention all branches in connection with conversions and consolintions without regard to the date of the establishment of branches, and by authorizing the retention of branches LI a bank where the bank's assets are purchased by a national T Lo'lle r„ "The proposed amendment would make it possible for ; c"lional banks, through consolidations and purchases of t: ets, to establish branch systems without regard to the limissts"1-0118 prescribed by State law. Thus, for example, in a 14!te which permits State banks to establish branches only in : 1 ulited areas, such as the city, county, or banking district e;vhich the head office is located, a national bank could vlstEaaish a State-wide branch system by acquiring other banks ' 10/1 were operating branches. to 4.,"The Board questions the desirability of this amendment national bank branch laws. Moreover, the Board 8/12/49 -11- "believes that, if such an amendment is to receive consideration, it should not, in any event, be acted upon merely as an incidental matter in connection with H. R. 1161 but, instead, should be considered as a part of a thorough study Of all of the statutory provisions governing branches of national banks." At this point Messrs. Riefler, Vest, Thomas, Leonard, Millard, 14.1)44104n / and Cherry withdrew, and the action stated with respect to Etch ed' the matters hereinafter referred to was taken by the Board: Minutes of actions taken by the Board of Governors of the 'al Reserve System on August 5, 1949, were approved unanimously. Minutes of actions taken by the Board of Governors of the Ners1 Reserve System on August 8, 9, 10, and 11, 1949, were approved ellci the actions recorded therein were ratified unanimously. Telegrams to Mr. Wilbur, Federal Reserve Agent at the Federal lie Bank of San Francisco, authorizing him to issue limited \ q11r, Permits, under the provisions of Section 5144 of the Revised ttut es of the United States, to the "Transamerica Corporation", Sala ralleisco, California, entitling such organization to vote the ttoek /111-ch it owns or controls of the "First National Bank of liqz0 4a, Phoenix", Phoenix, Arizona and "The Temple City National 4410 qu. ' -1 111Ple City, California, and at any time prior to December 1, ' 1949, to increase the capital stock of such banks, to amend the es of association of such banks to conform to articles recomINacie4 b3r the Comptroller of the Currency, and, in the case of the 1373 -12National Bank of Arizona, Phoenix", to authorize the abtion of such bank of the business of the Phoenix Savings Bank 8,14,11 st Company by statutory consolidation or otherwise. The tele_ m-cara regarding the "First National Bank of Arizona, Phoenix" 4180 stated that since Occidental Life Insurance Company, Premier 411. --ance Company, and Pacific National Fire Insurance Company are 1101A4 -411g company affiliates of First National Bank of Arizona, the Stock of that bank o ed or controlled by such companies, and in(lire „ c'l-Y controlled by Transamerica Corporation, cannot be voted /111-1.es such companies obtain voting permits. Approved unanimously. Letter to Mr. V. C. Arnspiger, Executive Vice President, 4cly "cloPaedia Britannica Films, Inc., Wilmette, Illinois, reading 4 r°11ows: "This refers to the proposed production by Encycloaeclia Britannica Films, Inc. of a motion picture on the , 14-111113oses and functions of the Federal Reserve System, and i4Iticularly to your letter of July 28, 1949, to Mr. George c Vest, General Counsel to the Board, and your telephone t°flversation of August 9 with Mr. Elliott Thurston, Assist to the Board, in that regard. "There are enclosed herewith two copies of an agreement both Of which have been executed by the Board. We believe 4.,flat .the agreement reflects the substance of the understandreached during your telephone conversation with Mr. urston on August 9, and we trust you will find it satisyn°rY. If the agreement meets with your approval, we appreciate your executing both copies thereof and `111rning one executed copy to us. tis "You are notified herewith that, for the purposes of "e agreement, Mr. Elliott Thurston will be the Board's p 374 8/12/49 -13- "designated representative referred to therein." Approved unanimously. ved: Chairman pro tem.
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