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699
Minutes for
To:
Members of the Board
From:
Office of the Secretary
August 19, 1965
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. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Minutes of the Board of Governors of the Federal Reserve
System on Thursday, August 19, 1965.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Balderston, Vice Chairman
Robertson
Shepardson
Mitchell
Daane
Maisel
Mr. Kenyon, Assistant Secretary
Mr. Fauver, Assistant to the Board
Mr. Solomon, Director, Division of
Examinations
Mr. Johnson, Director, Division of Personnel
Administration
Mr. Hexter, Assistant General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Leavitt, Assistant Director, Division
of Examinations
Mrs. Semia, Technical Assistant, Office of
the Secretary
Mr. Heyde, Attorney, Legal Division
Mr. McClintock, Supervisory Review Examiner,
Division of Examinations
Mr. Hart, Assistant to the Director, Division
of Personnel Administration
Circulated or distributed items.
The following items, copies
of which are attached to these minutes under the respective item numbers
indicated, were approved unanimously:
Item No.
Letter to the Federal Deposit Insurance Corporation
regarding the application of Birmingham -Bloomfield
Bank,
Birmingham, Michigan, for continuation of
,
eposit insurance after withdrawal from membership
ln the Federal Reserve System.
1
Letter to the Federal Reserve Bank of Dallas
regarding an apparent violation of section 3(a)
°f the Bank Holding Company Act of 1956 by Briscoe
Ranch) Inc., Uvalde, Texas.
2
!
739
8/19/65
-2Item No.
Letter to the Federal Reserve Bank of New York
interposing no objection to proposed travel by
Peter Fousek, Assistant Vice President, involving
visits to the central banks in Australia and New
Zealand, and perhaps one or two other countries,
in connection with an assignment to lecture at the
Sixth SEANZA Central Banking Course to be held in
Wellington, New Zealand, this fall.
3
Letter to the Federal Reserve Bank of New York
approving the appointment of James H. Oltman as
Assistant Federal Reserve Agent.
4
Letter to the Federal Reserve Bank of New York
approving the appointment of Edward C. Young as
Federal Reserve Agent's Representative at the
Buffalo Branch.
5
Letter to the Federal Reserve Bank of New York
aPProving the further retention of Clifton R. Gordon
beyond normal retirement age for duty at the Bank's
relocation center.
6
Report on competitive factors (Worcester-Webster, Massachusetts).
A report to the Federal Deposit Insurance Corporation on the competitive
factors involved in the proposed consolidation of First National Bank of
Webster, Webster, Massachusetts, into Guaranty Bank & Trust Company,
Worcester, Massachusetts, was approved unanimously for transmittal to
the Corporation.
The conclusion read as follows:
The proposed consolidation of First National Bank of
Webster into Guaranty Bank & Trust Company, Worcester,
would eliminate competition between the two banks and the
Potential for future competition. Entry of Guaranty into
Webster would expose the remaining commercial bank in
Webster to the direct competitive capabilities of a substantially larger commercial bank.
8/19/65
-3Leave of absence for Mr. Schiff.
There had been distributed a
draft of letter to the Federal Reserve Bank of New York that would
indicate that the Board interposed no objection to an extension for one
Year of the leave of absence granted
to Frank W. Schiff, Assistant
Vice President, so that he might continue to serve on the staff of the
Council of Economic Advisers.
After discussion there was general agreement with a suggestion
by Governor Daane that the matter be deferred pending the obtaining of
certain additional information.
Southern Arizona Bank and Trust Company.
Mr. Solomon reported
for the Board's information the possibility that Southern Arizona Bank
and Trust Company, Tucson, Arizona, might be considering withdrawal
from membership in the Federal Reserve System, an inquiry having been
addressed by an economist for the bank to a Vice President of the Federal
Reserve Bank of Dallas (who had referred a copy to the Board's staff
with a request for comments or suggestions on a proposed reply) as to
the relative advantages and disadvantages of status as a national bank,
State member bank, or insured nonmember bank.
Mr. Solomon noted among
Other things that Southern Arizona Bank and Trust was a subsidiary of
Western Bancorporation, the largest bank holding company in the country.
After discussion, it was understood that copies of the economist's
letter and proposed reply would be distributed to the Board members prior
to further consideration of the subject.
The meeting then adjourned.
Assistant Secretar
•••
HOARD OF GOVERNORS
4
Item No. 1
8/19/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOAR°
August 19, 1965.
,
Honorable K. A. Randall, Chairman
ion,
orat
Federal Deposit Insurance Corp
Washington, D. C. 20429
Dear Mr. Randall:
er of July 29, 1965,
Reference is made to your lett
Birmingham-Bloomfield Bank,
concerning the application of
inuance of deposit insurance
Birmingham, Michigan, for cont
in the Federal Reserve System.
after withdrawal from membership
programs urged upon
There have been no corrective
h have not been fully conthe bank, or agreed to by it, whic
programs that the Board would
summated, and there are no such
itions of admitting the bank to
advise be incorporated as cond
as a nonmember of the Federal
membership in the Corporation
Reserve System.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 2
8/19/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 20551
ADDRESS OrrICIAL CORRESPONDENCE
TO THE BOARD
August 20, 1965.
AIR MAIL
Mr, Thomas R. Sullivan, Vice President,
Federal Reserve Bank of Dallas,
Dallas, Texas.
75222
Dear Mr. Sullivan:
This acknowledges your letter of May 5, 1965, addressed to
Mr. Frederic Solomon, Director of the Board's Division of Examinations,
in which you report on an apparent violation of section 3(a) of the
!!ank Holding Company Act of 1956 by Briscoe Ranch, Inc., Uvalde, Texas.
10u request a determination by the Board as to any action that may be
c°nsidered appropriate under the circumstances presented.
The relevant facts concerning Briscoe Ranch's apparent
nolation appear to be the following: Briscoe Ranch was organized
uecember 31, 1961, from the assets of the estate of Dolph Briscoe, Sr.,
who died in
1956. At April 15, 1965, the principal stockholder of Ranch
was Dolph Briscoe, Jr., owner of approximately 48 per cent of the stock
Of Briscoe Ranch. At the time Briscoe Ranch was organized, a portion
°
131 its assets consisted of 13,000 shares of the stock of First State
a
t_ilk, Uvalde, Texas ("First State"). Sixty-five hundred additional
s_uarad
-- of First State were obtained on October 9, 1964, by way of a stock
2 - vidend. On December 31, 1964, following sale by Briscoe Ranch of
50 shares of First State, Briscoe Ranch owned 19,250 shares of First
tate (64 per cent of the bank's outstanding 30,000 shares). At the
ame date Briscoe Ranch held stock in six other banks. In two of these
_nks its ownership represented slightly more than 10 per cent of the
rtstanding shares; its holdings in the remaining four banks represented
Per cent or less of the outstanding stock. On March 8, 1965, Briscoe
R.
,!flch acquired 543 shares of the 1,000 shares outstanding of Security
Qcate Bank, Pearsall, Texas ("Security State"), representing approximately
Per cent of that bank's voting shares. Subsequent to its acquisition
.1- Security State stock, your Bank's investigation disclosed that Briscoe
V
r
%.*
Mr. Thomas R. Sullivan
-2-
Ranch's only other bank stock acquisition was that of a fractional share
in First City National Bank, Houston, Texas, acquired on April 6, 1965,
thereby giving Briscoe Ranch ownership of .02 per cent of the stock of
this bank. Briscoe Ranch's nonbanking holdings as of December 31, 1964,
consisted of commercial real estate, ranch properties, livestock, and
shares in approximately 25 corporations. Briscoe Ranch's only nonbanking
a
ctivity subsequent to its purchase of the Security State stock was its
acquisition of 244 shares in American Enka Corporation, by way of a stock
!Plit. Following such acquisition Briscoe Ranch remained a. less than
"na per cent stockholder of American Enka,
On April 13, 1965, following advice by your Bank by letter
of
n April 8, that Briscoe Ranch had apparently become a bank holding
in violation of the Act through its March 8 acquisition of the
Stock of
Security State, Briscoe Ranch sold all of its stock in Security
ite to Dolph Briscoe, Jr., president and principal stockholder of
State
4 scoe
Ranch, as an individual.
T
Section 3(a) of the Act provides:
"It shall be unlawful except with the prior
approval of the Board (1) for any action to be
taken which results in a company becoming a bank
holding company under section 2(a) of this Act; • • • ."
Since Briscoe Ranch did not obtain the prior approval of the
Ilt!!td for its acquisition of Security State stock, it seems clear that
'ls was a violation of section 3(a) of the Act.
Briscoe Ranch's acquisition of a fractional share of stock
Pir
at City National Bank, although acquired after Briscoe Ranch
bec
tb_ama a bank holding company, did not require the prior approval of
07 Board since the acquisition did not result in Briscoe Ranch owning
lic
tv_controlling as much as five per cent of the stock of First City
`i°nal Bank (section 3(a)(2) of the Act).
ItanchiYour Bank's investigation revealed that prior to Briscoe
8 acquisition of the Security State stock, Briscoe Ranch had
ho,
,roup$150,000 from Security State. Section 6(a)(4) of the Act
pr
°vides:
• . .[I]t shall be unlawful for a bank - • •
to make any loan .. to a bank holding company of
which it is a subsidiary • • • •"
4:
3
1
Mr. Thomas R. Sullivan
.3.
Since this loan was made prior to Briscoe Ranch's acquisition of the
Security State stock, and thus, before Briscoe Ranch became a bank
holding company, Briscoe Ranch was not in violation of section 6(a)(4).
Also subsequent to its becoming a bank holding company,
Briscoe Ranch acquired 224 shares of American Enka Corporation through
a stock split. Section 4(a)(1) of the Act prohibits, in effect, a
bank holding company from acquiring ownership of any voting shares in
a nonbank company, but section 4(c)(5) exempts from such prohibition
"shares of any company which are held or acquired by
a bank holding company which do not include more than
5 per centum of the outstanding voting shares of such
company, and do not have a value greater than 5 per
centum of the value of the total assets of the bank
holding company • • • ."
Since Briscoe Ranch does not hold more than five per cent of
the stock of American Enka and the stock it does hold amounts to less
than five per cent of its total assets, Briscoe Ranch's acquisition of
this stock fell within the exemption cited.
On the basis of the foregoing analysis, it appears that
Briscoe Ranch's only violation of the Act was its acquisition of the
Security State stock whereby it became a bank holding company without
the prior approval of the Board. Immediately following your advice as
to this apparent violation of the Act, Briscoe Ranch divested itself
of its interest in Security State through sale of the stock to its
President as an individual. Briscoe Ranch was therefore a bank
holding company for only the period dating from March 8, 1965, to
April 13, 1965.
The Board has noted your Bank's conclusion that the violation
discussed herein was unintentional, due to an apparent lack of awareness
of the relevant provisions of the Bank Holding Company Act. The Act,
in section 8, provides for penalties only in cases where comNtnies or
individuals are shown to have participated willfully in a violation
of the Act. Since no evidence has been found which would support a
finding of willful violation by Briscoe Ranch or its officers, the
Board believes that no useful public purpose would be served in reporting
the violation to the Department of Justice.
It will be appreciated if you will transmit to Briscoe
Ranch the substance of the Board's views as herein set forth.
Very truly yours,
(Signed) KennethA. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 3
8/19/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
AOORICS• °maim. 001101t•PONDIENCE
TO Mg •0A1110
August 19, 1965.
Mr. Thomas 114 Timlen, Jr.,
Secretary,
Federal Reserve Bank of New York,
New York, New York 10045;
Dear Mr. Timlen:
ion
The Board of Governors interposes no object
d
outline
Fousek
to the travel arrangements for Mr. Peter
in your letter dated August 11, 1965.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 4
8/19/65
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
August 19, 1965.
Mr. Philip D. Reed,
Federal Reserve Agent,
Federal Reserve Bank of New York,
New York, New York. 10045.
Dear Mr. Reed:
your letter of
In accordance with the request contained in
tment of
appoin
the
A,ugust 6, 1965, the Board of Governors approves
the Federal
at
Agent
e
Mr. James H. Oltman as Assistant Federal Reserv
will retire.
who
Ringen
P.
Reserve Bank of New York to succeed Mr. John
that Mr.
This approval is given with the understanding
Agent and
e
Reserv
l
Oltman will be solely responsible to the Federa
duties,
his
of
the Board of Governors for the proper performance
l Reserve
Federa
the
of
except that, during the absence or disability
to the
be
will
ty
sibili
Agent or a vacancy in that office, his respon
Board of Governors.
duties as
When not engaged in the performance of his
the approval
with
may,
,
A ssistant Federal Reserve Agent Mr. Oltman
Bank, perform
the
of
ent
Presid
of the Federal Reserve Agent and the
his duties
with
istent
incons
such work for the Bank as will not be
aS Assistant Federal Reserve Agent.
fully informed of
It will be appreciated if Mr. Oltman is
of the staff of
the importance of his responsibilities as a member
he Federal Reserve Agent and the need for maintenance of independence
responsibilities.
rom the operations of the Bank in the discharge of these
'
OltmanIs appointment
It is noted from your letter that Mr.
is to become effective September 1, 1965, following approval by the
e the usual Oath of
▪°ard of Governors. Please have Mr. Oltman execut
'face which will then be forwarded to the Board.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
•-- 4
BOARD OF GOVERNORS
Item No. 5
8/19/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS
orriciAL
CORRESPONDENCE
TO THE BOARD
August 19, 1965.
Mr. Philip D. Reed,
Federal Reserve Agent,
Federal Reserve Bank of New York,
New York, New York. 10045.
Deer Mr. Reed:
61 19651 the Board of
As requested in your letter of August
C. Young as Federal
rd
Governors approves the appointment of Mr. Edwa
Branch to succeed Mr.
Reserve Agent's Representative at the Buffalo
A thur A. Randall.
r
nding that Mr. Young
This approval is given with the understa
the Board
11 be solely responsible to the Federal Reserve Agent and
that,
pt
exce
es,
!! Governors for the proper performance of his duti
or a
t
Agen
rve
Rese
Federal
uuring the absence or disability of the
stant
Assi
the
to
Y,4toancy in that office, his responsibility will be
Federal Reserve Agent and the Board of Governors.
his duties as Federal
not engaged in the performance of
the approval of
with
may,
rve
Rese
e Agent's Representative, Mr. Young
serv
charge of the
in
t
iden
,the Federal Reserve Agent and the Vice Pres
will not be
as
ch
Bran
Ifurfalo Branch, perform such work for the
Representative.
t's
Agen
rve
inconsistent with the duties as Federal Rese
Young is fully informed of the
It will be appreciated if Mr.
tmportance of his responsibilities as a member of the staff of the
maintenance of independence from
f!aderal Reserve Agent and the need for
responsibilities.
the operations of the Bank in the discharge of these
the usual Oath of Office which
Please have Mr. Young execute
Governors along with notificashould then be forwarded to the Board of
ent.
tion of the effective date of his appointm
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
Item No. 6
8/19/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRIVIS
°mow. CORRCIIIPONDENCE
TO Mt BOARD
August 19, 1965
Mr. William F. Treiber,
First Vice President,
Federal Reserve Bank of New York,
New York, New York. 10045
Dear Mr. Treiber:
As requested in your letter of August 5, 1965,
Mr. Clifton
the Board of Governors approves the retention of
Ithaca,
R. Gordon as Director of the Relocation Center at
anding
New York, until he attains age 72 with the underst
date
earlier
an
at
ted
termina
that his employment could be
at the discretion of the Bank.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER