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Minutes for To: Members of the Board From: Office of the Secretary August 20, 1965. of the Attached is a copy of the minutes System on Board of Governors of the Federal Reserve the above date. ement It is not proposed to include a stat set of With respect to any of the entries in this required to minutes in the record of policy actions ral be maintained pursuant to section 10 of the Fede Reserve Act. regard to Should you have any question with advise the minutes, it will be appreciated if you will ial the Secretary's Office. Otherwise, please init your ing, meet the at below. If you were present minutes. If Initials will indicate approval of the indicate will ials init You were not present, your tes. minu only that you have seen the 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 Friday, August 20, 1965. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Robertson Shepardson Mitchell Maisel Kenyon, Assistant Secretary Broida, Assistant Secretary Noyes, Adviser to the Board Fauver, Assistant to the Board Goodman, Assistant Director, Division of Examinations Mr. Furth, Consultant Mr. Morgan, Staff Assistant, Board Members' Offices Miss Eaton, General Assistant, Office of the Secretary Messrs. Brill, Holland, Partee, Bernard, Ettin, and Keir of the Division of Research and Statistics Messrs. Katz, Reynolds, Baker, and Dahl of the Division of International Finance Mr. Mr. Mr. Mr. Mr. Money market review. Reports on the Government securities market and on foreign exchange matters were given by Messrs. Bernard and Baker, and tables affording perspective on bank reserve utilization and on the money market were distributed, along with a chart showing dealer transactions in longer-term Government securities. After a general discussion of these reports, all members of the staff except Messrs. Kenyon, Noyes, and Fauver, and Miss Eaton withdrew and the following entered the room: Mr. Mr. Mr. Mr. Hexter, Assistant General Counsel Hooff, Assistant General Counsel Leavitt, Assistant Director, Division of Examinations McClintock, Supervisory Review Examiner, Division of Examinations -2- 8/20/65 Discount rates. The establishment without change by the 1965, and by the Federal Reserve Bank of Minneapolis on August 18, , St. Louis, and San Federal Reserve Banks of New York, Philadelphia discounts and advances Francisco on August 19, 1965, of the rates on with the underin their existing schedules was approved unanimously, to those Banks. standing that appropriate advice would be sent lasgow, Virginia). Report on competitive factors (Roanoke-G Comptroller of the There had been distributed a draft of report to the in the proposed merger of Currency on the competitive factors involved National Exchange Bank of Glasgow, Inc., Glasgow, Virginia, into The First Bank of Virginia, Roanoke, Virginia. isons were drawn between In a discussion of the conclusion, compar same national bank this case and another proposed merger involving the On which the Board reported on August 13, 1965. Governors Robertson and g with the conMaisel expressed a preference for consistency in wordin the view that the clusion in the previous report, which had expressed effect on competition would be "adverse." The other members of the cases Board felt there were grounds for distinction between the two warranting a conclusion in this instance that the effect on competition would be "somewhat adverse." Accordingly, the report was approved for as follows: tr ansmittal in a form in which the conclusion read exists between Because of the close relationship which Exchange Bank Bank of Glasgow, Inc., and The First National proposed merger of Virginia, Roanoke, consummation of the between the would not eliminate any effective competition ition two banks. However, it would foreclose potential compet should terminate. between them in the event the relationship . 51 8/20/65 -3- The instant proposal would expand Roanoke Bank's geographic coverage in western Virginia where, since 1960, Roanoke Bank has absorbed 12 banks. Despite the close relationship between the two banks, the overall effect of the proposed transaction on competition would be somewhat adverse. Reduction of bank's capital funds (Item No. 1). Following discussion in light of the information contained in a file on the subject that had been distributed, unanimous approval was given to a letter to the Federal Reserve Bank of San Francisco advising that the Board granted permission for a reduction in the capital funds of Farmers & Merchants Bank of Central California, Lodi, California. A copy of the letter is attached as Item No. 1. Coin situation. Governor Balderston noted that arrangements had been made for Assistant Secretary of the Treasury Wallace to meet at 9:00 a.m. on September 1, 1965, with the members of the Board and available Federal Reserve Bank Presidents for discussion of the current and prospective coin situation. The meeting then adjourned. Assistant Secretar BOARD OF GOVERNORS Item No. I 8/20/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRCIIII OFFICIAL CORREIPPONDENCIL TO THE SOAR° August 20, 1965. Mr. E. H. Galvin, Vice President, Federal Reserve Bank of San Francisco, San Francisco, California. 94120 Dear Mr. Galvin: Reference is made to your letter of July 8, 1965, with respect to the effect of the inability of Farmers and Merchants Bank of Central California, Lodi, California, to market its entire Proposed issue of capital notes. You will recall that on February 26, 1965, the Board gave its consent, under the proretirement visions of Section 9 of the Federal Reserve Act, to the of $1.5 million of preferred stock. While at that time the Board understood that the bank was planning to sell capital notes totaling $3 million, the Board's consent to the retirement of Preferred stock was not conditioned on the replacement of such Preferred stock by capital notes. As you know, this bank is subject to a condition of membership that requires the Board's permission for any reduction funds. Since capital notes totaling only about c1 4 n -1.21-tal ' 8 91.2 million have been sold, and $1.5 million of preferred stock 'gas retired, the Board's permission under this condition of membership is necessary. bank After considering the financial condition of this end the adequacy of its capital structure, the Board grants it Permission for this reduction in capital funds. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary.
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