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9161
Minutes for
To:
Members of the Board
From:
Office of the Secretary
August 80 1962
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.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
3019
Minutes of the Board of Governors of the Federal Reserve
SYstem on Wednesday, August 8) 1962. The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
King
Mr. Kenyon, Assistant Secretary
Mr. Hackley, General Counsel
Mr. Solomon) Director, Division of
Examinations
Mr. Chase, Assistant General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Bolling Powell, Jr.) Special Counsel
to the Board
Continental Bank and Trust Company.
Governor Robertson stated
that while he would remain in the room during this discussion of a matter
rbagarding The Continental Bank and Trust Company of Salt Lake City,
Utah, he would, in keeping with the position he had taken consistently
14 this case, not participate in the discussion or consideration of
alaY matters relating to it.
Chairman Martin commented that the record also should show
that Messrs. Hackley) Solomon, and Shay did not participate in this
discussion.
Chairman Martin then turned to Board Counsel in the matter of
Continental Bank and Trust Company (Messrs. Powell, O'Connell, and
Chase) and stated that the reason for this meeting was to bring Board
8/8/62
-2-
Counsel up to date in certain respects and to ask their advice.
The
Chairman went on to say that on July 21 1962, Mr. Kenneth J. Sullivan,
President of Continental Bank, appeared before the Board at Mr. Sullivan's
request.
While Mr. Sullivan made no specific suggestions of any concrete
8°rt, he indicated a willingness to try to see if some settlement of this
ease could be worked out.
Mr. Sullivan made it clear that he was acting
(34 his own and that he had come directly to the Board rather than through
Counsel for Continental.
Chairman Martin went on to say that the Board had had pending
before
it, and was now prepared to issue orders with respect to, certain
111°tions and demands that had been filed by Counsel for Continental. It
l'Ould not be appropriate for the Board to discuss the orders with Board
C°unsel; if it did, the Board would have to discuss them with Counsel
fOX the bank
also.
However, the Board would like the advice of its
eftisel on whether the Board's legal position in the Continental proceeding would in any way be prejudiced if, when the Board issued the
cartlers, it indicated informally to Mr. Sullivan that the orders were
t° be considered as separate and apart from any proposals for settlement
that Mr. Sullivan might wish to make. That, in essence, was the question
/11lich the Board wanted the advice of Board Counsel.
Chairman Martin further commented that it seemed clear in the
Acinlinistrative Procedure Act that the Board ought to be open to such
rters of
settlement as a party to a proceeding might wish to submit.
1
8/8/62
-3-
In other words, it seemed clear that the Board should not foreclose the
Possibility of settlement.
In the circumstances, the Board wished to
discuss with its Counsel what problem it might be getting into if
Mr. Sullivan were advised informally along the lines that had been
indicated.
Governor Mills commented that the orders to be issued would
be in response to the motions filed by Continental Bank and Trust
C°mPany and the replies to those motions that had been made by Board
He went on to say that when Mr. Sullivan appeared and broached
Counsel.
the slibject of settlement, Mr. Sullivan expressed the opinion that a
se
ttlement, if one were decided upon, would not be on a basis whereby
Continental would recede from its position that the Board was without
legal authority to make a capital demand.
Chairman Martin commented that he doubted whether one ought
to go quite that far in interpreting Mr. Sullivan's position. Each
Board member who attended the meeting with Mr. Sullivan might place
somewhat different interpretation on what Mr. Sullivan actually
Meant,
Governor Mills responded that that could be true.
However, he
felt that his
remarks would be borne out by reading the record of the
eeting.
Chairman Martin then expressed the view that in any event the
nature of a settlement ought not enter into the discussion today with
Ek)ard Counsel.
What the Board was concerned with today was the possibility
-f)
8/8/62
Of Prejudice
prejudice to its case if an informal indication should be given to
Mr. Sullivan that the Board's orders were to be considered as separate
ana apart from any proposals for a settlement of the matter that Mr.
Sullivan might wish to submit.
Mr. Powell commented that unless there was some peculiar wording
in the orders that would indicate foreclosure of any possible negotiations,
there would be no reason for anyone to interpret the orders as closing
the door to such negotiations.
As he saw it, there would certainly be
no prejudice, from the standpoint of the over-all aspects of the case
or ultimate judicial review, if someone acting on behalf of the Board
Ifere to indicate informally to Mr. Sullivan, when the orders were handed
d°1411, that their issuance was not intended to foreclose negotiations if
Mr. Sullivan wanted to come forward with a proposition.
Mr. Sullivan
Itlight interpret that gesture as extreme willingness on the part of the
13°ara and therefore an admission of weakness.
However, this certainly
Ifould not prejudice the Board in its position on the record of the case.
Re Ifaa assuming, Mt. Powell said, that the advice to Mr. Sullivan would
be strictly informal; that the advice would not be reduced to writing
14 a letter transmitting the orders.
Instead, he assumed it would be
Qral advice person to person, or by phone.
Mr. Powell also said he would think Mr. Sullivan, if he received
84ch advice, would ask what to do next; that is, he would be likely to ask
holf negotiations might be started.
Mr. Powell expressed the view, in that
_5..
8/8/62
"7:
connection, that a member of the Board who was going to participate
in the adjudication of the case, if the case were not settled by
negotiation, should take no part in any negotiations.
It is impossible,
Mr. Powell said, to negotiate without expressing opinions and taking
certain positions which, in the light of all the evidence that might
be introduced in the record, might not be the position that a person
would ultimately want to take. If there were negotiations, they should
be Performed by someone on behalf of the Board.
be prosecuting counsel.
Normally, that would
But it could be someone else--someone who
would, not participate in the final judging of the case.
Mr. O'Connell expressed concurrence with the view of Mr. Powell
that the Board would not prejudice its position in the administrative
Proceeding if informal advice of the kind mentioned was given to Mr.
Sullivan.
He would urge that the Board's emissary in no sense suggest
4 figure or method of procedure to Mr. Sullivan, but simply make it
clear to Mr. Sullivan that the road was open and that the Board would be
l'eceptive to any further statement, offer, or undertaking that Mr. Sullivan
ht wish to initiate.
liet
Although he agreed that one would not normally
the wrong impression from the issuance of orders such as the Board
'4e8 Preparing to issue, Mr. Sullivan might want assurance that the
isellance thereof was not to be interpreted as a final answer to his earlier
4iscussion with the Board.
('Weel
8/8/62
-6Mr. Powell said he would hope that any negotiations, if they came
about, would not be used by Continental Bank--or that Continental Bank
'would not be Folowed to use them--for the purpose of further delay of the
show cause hearing, now scheduled for September 10, 1962.
Information
°I1 which such hearings are based grows stale, Mr. Powell noted.
The
basic information in regard to Continental Bank's current condition and
requirements was found in the report of examination as of January 8,
1962. If the hearing was delayed too much longer, it might be necessary
to make another examination of the bank.
Governor Mills, referring to the comments by Mr. O'Connell,
said he would think the Board's mind would be open to consideration of
anY proposal that Mr. Sullivan might make, but not necessarily "receptive."
Mr. O'Connell replied that he had assumed receptiveness was
indicated by the fact that the Board had received Mr. Sullivan at the
julY 2 meeting. The word
VW
used in that sense, not as indicating
l'eeaPtiveness, necessarily, to any offer that Mr. Sullivan might make.
Governor King inquired how, if the Board representative contacting
I** Sullivan was as restricted in his approach as had been suggested, a
Meeting of the minds could be reached.
Mr. Powell replied that this was a pertinent question.
He had
in mind that in the initial conversation with Mr. Sullivan it would merely
be stated that if Mr. Sullivan wished to go forward with negotiations for
eoasible settlement he should, either himself or through his representatives,
8/8/62
_7_
contact some party such as, for example, Board Counsel or even Governor
Robertson, who was not participating in the adjudication of the case.
The person contacting Mr. Sullivan should not do anything more than
that. He should not, for example, suggest the amount of additional
stock to be issued.
Governor King said he assumed that subsequently it would be
ePPropriate for someone to go further, and Mr. Powell replied in the
affirmative.
At a later stage, he said, there could be bargaining
negotiations between representatives of the Board and representatives
Of Continental. There would be a report to the Board on the negotiating
sessions, what the bank was willing to do, and whether the Board's
negotiators felt that that would be adequate.
Mr. O'Connell commented that Board Counsel's participation
llould extend only to making recommendations on any offer made.
Any
e°nsideration of whether to accept such an offer would, of course, be
41) to the
Board.
Messrs. Powell and Chase then withdraw from the meeting and
the
following members of the staff entered the room:
Mr. Fauver, Assistant to the Board
Mr. Goodman, Assistant Director, Division of Examinations
Mr. Thompson, Assistant Director, Division
of Examinations
Mr. Spencer, General Assistant, Office
of the Secretary
Mr. Young, Senior Attorney, Legal
Division
3O2
8/8/62
-8Mr. Potter, Senior Attorney,
Legal Division
Mr. McClintock, Supervisory Review
Examiner, Division of Examinations
Mr. Hunter, Supervisory Review
Examiner, Division of Examinations
Mr. Thompson, Review Examiner, Division of Examinations
Mr. White, Review Examiner, Division of Examinations
Mr. Smith, Assistant Review Examiner,
Division of Examinations
Discount rates.
The establishment without change by the Federal
Reserve Bank of Atlanta on August
Bank of Boston on August
3, 1962, and by the Federal Reserve
6, 1962, of the rates on discounts and advances
in their existing schedules was approved unanimously, with the understanding that appropriate advice would be sent to those Banks.
Circulated or distributed items.
The following items, which had
been circulated or distributed to the members of the Board and copies
of which are attached to these minutes under the respective item numbers
indicated, were approved, the action being unanimous except with respect
to Item No.
3:
Item No.
Letter to Chemical International Finance, Ltd.,
New York, New York, granting permission to
ellrchase capital stock of a proposed French
01°rPoration organized to hold a lease for
stiarters to be occupied by the Paris repreentative
of Chemical Bank New York Trust
C°MPany.
1
8/8/62
-9Item No.
Letter to Wells Fargo Bank, San Francisco,
California, approving an extension of time
to establish a branch at 447 Sutter Street.
2
Letter to Chairman Robertson of the Senate
Banking and Currency Committee reporting
°a H. R. 7796, a bill to amend section 24
of the Federal Reserve Act to liberalize
lending limitations on real estate and construction loans by national banks.
3
Letter4
to Martin P. Snyder, Counselor at
Philadelphia, Pennsylvania, regarding
'the plan of Dauphin Deposit Trust Company,
H
!
t
rrisburgy Pennsylvania, to request reconsIderation of the denial of its application
ticl merge with The First National Bank of
mount Holly Springs.
Item No. I was approved in a form that did not contain certain
language contained in the distributed draft of reply. The language in
qUestion would have stated that the Board's consent was being given
'11th the understanding that Chemical Bank New York Trust Company would
make payments to Chemical International Finance in amounts sufficient to
cover all expenses in connection with the lease, including amortization of the proposed investment by Chemical International Finance over
the life of the lease; and that should the management of the parent bank
determine that it would be preferable for the investment to be made by
Chenlical International Banking Corporation, the Board's consent should be
rege-rded as authorizing such investment by either Chemical International
Pinance or Chemical International Banking Corporation.
8/8/62
-10With respect to Item No. 3, Governor Mills asked to be recorded
as dissenting from a favorable report for reasons he had expressed at
the meeting on July 13, 1961 (and reflected in the minutes of that date)
When the same proposed legislation was discussed in connection with a
request by the House Bpnking and Currency Committee for the Board's views.
Reports on competitive factors (Elizabeth-Rahway-Hillside,
New Jersey).
There had been distributed to the Board drafts of reports
to the Comptroller of the Currency on the competitive factors involved
in (1) the proposed merger of The National State Bank, Elizabeth, New
Jersey, and The Rahway National Bank, Rahway, New Jersey, and (2) the
Proposed consolidation of The National State Bank, Elizabeth, New Jersey,
and The Hillside National Bank, Hillside, New Jersey.
A covering
taaMorandum dated August 3, 1962, from the Division of Examinations commented
further on the two proposed transactions.
During discussion of the Rahway report, it was suggested that a
sentence in the body of the report (relating to the prospective rates of
interest
to be paid by the resulting bank on savings deposits) be deleted
stnla that a changp be mmie in the phrasing of the conclusion. There being
sgreement with these suggestions, the report was approved for transmittal
to the Comptroller in a form containing the following conclusion:
The proposal would not have an
adverse effect on existing competition.
In connection with the report's conclusion, Governor Robertson
indicated that he would have preferred that it go on to state that the
8/8/62
-11-
merger would eliminate potential competition, in view of the size of
The National State Bank and the distance of only four and a half miles
between the two merging banks.
With respect to the draft of report on the competitive factors
involved in the proposed consolidation of The National State Bank and
The Hillside National Bank, unanimous approval was given to its transmittal to the Comptroller, the conclusion reading as follows:
The consolidation would result in a fairly substantial diminution of competition and the elimination
of an important alternative source of banking services
and credit.
Report on H. R. 12501.
Mr. Shay reported that the Bureau of
the Budget had indicated by telephone that the House Banking and Currency
Committee would hold hearings tomorrow on H. R. 12501, a bill "To amend
section 23A of the Federal Reserve Act."
It had been subsequently ascer-
tained, however, that the information was not accurate.
Mr. Shay then distributed copies of a draft of possible report
to the
Banking and Currency Committee, following which he discussed the
Ile48°118 for, and the nature of, the proposed legislation.
After some discussion, it was agreed to defer action on the
rletter in order that more time might be provided to the members of the
11°11.rot to review the proposed legislation.
Application of Trans-Nebraska Co. (Item No. 5).
There had been
distributed
a memorandum dated August 3, 19620 from the Legal Division
l'eg4rding the question of procedural alternatives that might be followed
8/8/62
-12..
by the
Board in the matter of the application by Trans-Nebraska Co.,
Lincoln) Nebraska, for prior approval of the formation of a bank
holding company through the acquisition of voting shares of The Martell
State Bank, Martell, Nebraska; The Sioux National Bank of Harrison, Harrison,
Nebraska; and Crawford State Bank, Crawford, Nebraska.
The memorandum discussed various aspects of the application and
Pointed out alternatives which were available to the Board; namely,
(1) consideration on the basis of staff analysis and recommendation;
(2) an oral presentation of views before the Board; or (3) a public
re'rmal hearing conducted by a hearing examiner.
The conclusion reached in the Legal Division's memorandum was
that from the point of view of the Board's having available an adequate
basis for reaching a sound and reasoned judgment on this application,
neither an oral presentation nor a formal public hearing would appear
tlecessary.
However, the number of letters received from Nebraska bankers
IleqUesting that a public hearing be held might be considered sufficient
JUstification to conduct some form of public proceeding. If the Board
hcAlld favor such a public proceeding, it was believed that a formal
Ilearing before a hearing examiner in the locale of the proposed holding
corn,
--vanY and subsidiary banks, rather than an oral presentation before
the Board in Washington, might be desirable.
Governor Robertson indicated that the Director of Banking for
the State of Nebraska had, during a personal visit, expressed concern about
8/8/62
-13-
the Trans-Nebraska application and requested that his letter of June 11,
1962, which recommended approval, be withdrawn.
Since sending his letter
to the Board, he had learned of several other holding company proposals
in Nebraska that were pending; in addition, he had received a number of
letters urging that a public hearing be held on this application.
Governor
Robertson
stated that he had advised the Director of Banking that it would
not be possible to withdraw the letter filed on June 11 pursuant to the
Provisions of the Bank Holding Company Act.
Those provisions stipulate
a 30-day time limit for receipt by the Board of the appropriate State
auPervisory authority's views and recommendations. If the State authority
dis
aPproves in writing within 30 days, then the Board is required to
give 'written notice to the applicant. In this particular case, however,
the time limitation would have expired.
The Director of Banking sub-
sequently wrote the Board on July 30, 1962, explaining his position with
leePect to the application and asking that a formal hearing be held.
'
Governor Robertson went on to say that from a public relations
int of view he felt it desirable for the Board to order a formal
'
Pc
hearing, held in Nebraska so that anyone wishing to do so might conveniently express his views.
Governor Mills pointed out that the holding of a public hearing
14 a case of this kind afforded an opportunity for opponents of the
h°1ding company application to express themselves vocally, principally on
the
ground that the holding company device was a vehicle for circumvention
spry,
1
,7
8/8/62
-14-
f State branch banking laws.
However, as indicated in a recent
memorandum from the Legal Division, the Board was bound by the provisions
Of the Bank Holding Company Act.
If a public hearing was held and the
Board then reached a decision contrary to the voiced objections of local
bankers, there was the question whether, from the standpoint of public
relations, the Board was not in a worse position than if no such hearing
had been
held.
He did not pretend to have the answer to this disturbing
problem.
Mr, O'Connell commented that in the recent Oklahoma case, in
'which he served as Board Counsel, he had asked many of the banlers who
testified at the public hearing whether they were aware of the provisions
of the Bank Holding Company Act.
were
in the negative.
In the majority of cases, the answers
This provided an opportunity to put in the record
statements concerning the Board's responsibilities under the statute.
In his Judgment, many of the witnesses were satisfied as the result of
such an exchange, and he felt that a purpose may well have been served.
After further discussion, it was agreed to order a formal public
hearg41143 with
respect to the application by Trans-Nebraska Co. It was
derstood that the hearing would be held at as early a date as feasible,
and
'that the Legal Division would go forward with the necessary arrangements,
111cluding arrangements for a hearing examiner.
Secretary's Note: Pursuant to this
action, the order of which a copy
is attached as Item No. 5 was issued
on August 13, 1962.
8/8/62
-15Mr. Goodman then withdrew from the meeting.
Application of Connecticut Bank and Trust Company. There had
been distributed a memorandum from the Division of Examinations dated
J41Y 31, 1962) analyzing and recommending favorably on an application by
the The Connecticut Bank and Trust Company, Hartford, Connecticut, for
consent to merge with The Wallingford Bank and Trust Company, Wallingford,
Connecticut, and incident thereto to operate a branch at the location
Of the
latter bank.
At the Board's request, Mr. McClintock reviewed in some detail
the circumstances of the case and the reasons underlying the recommendation
°f the Division of Examinations) his comments being based substantially
On
the information presented in the July 31 memorandum.
Following Mr. McClintock's remarks, Governor Robertson commented
that u _
11 would have been happier if an application had been received from
4 SalaUer
bank desiring to merge with Wallingford, thereby opening the
e°1421unitY--just as this merger would--to the establishment of branches
by
other banks and also providing for the needs of the community. However,
suell a proposal was not before the Board, and he would vote for approval
Of the
current application.
The application was then approved unanimously, with the understanding that the Legal Division would draft an order and supporting
statement for the Board's consideration.
Mr. White then withdrew.
eyf
8/8/62
-16Application of Lawrence Savings and Trust Company.
A memo-
randum from the Division of Examinations dated August 1, 1962, had been
distributed
recommending favorably on an application by Lawrence Savings
and Trust Company, New Castle, Pennsylvania, for consent to acquire the
assets of and assume the liability to pay deposits made in First National
Ilank in Wampum, Wampum, Pennsylvania, and incident thereto to operate a
branch at the location of the one office of the latter.
Following comments by Mr. McClintock based substantially on the
Memorandum that had been distributed, the application was approved
unanimously, with the understanding that the Legal Division would draft
an order and statement for the Board's consideration.
In connection with this application, Governor Balderston referred
to a portion of the report made by the Department of Justice on the
comPetitive factors involved. It was pointed out by the Department that
tile Purchase of stock in the selling bank by the president and two other
directors of the applicant bank, and the placing of two of its directors
on the board of the selling bank, placed the applicant "in a favorable
Pc'sition" to bring about the merger of the two banks. The report went
011 to state that the practice of commercial banks in acquiring stock
interests in competitors, through officers and directors and by other
Illeans, and in having interlocking directorates with competitors, appeared
t° arrant considerable concern by both the Department of Justice and
the bank regulatory authorities.
r
8/8/62
-17Mr. Solomon noted that in this particular case the acquisition
of shares of the Wampum bank occurred two years or more prior to the
enactment
of the Bank Merger Act of 1960.
However, the practices
referred to in the Justice Department's report constituted a matter
Of concern, one that had been discussed by the Board and staff from
time to time. The problem deserved continuing attention.
Messrs. Shay, Young, Hunter, and McClintock then withdrew.
Applications of First Virginia Corporation.
August
At its meeting on
3, 1962, the Board denied, Governor Mills dissenting, the appli-
cations of First Virginia Corporation, Arlington, Virginialto acquire
80 per cent or more of the voting shares of Farmers and Merchants
National Bank, Winchester; Southern Bank of Norfolk, Norfolk; Peoples'
1
44k, Mount Jackson; and Shenandoah Bank and Trust Company, Woodstock.
Mr. O'Connell, having asked to address the Board with respect
to this matter, said the Legal Division considered that its primary
filnetion in advising the Board on any matter requiring a decision was
(311e of formulating for the Board the soundest possible legal basis for
the Proposed action. It was in this context that the legal Division
again brought before the Board the matter of the applications filed by
Pillat Virginia Corporation.
In its present posture, this matter had
been referred to the Legal Division with the direction that a single
clz‘tier and statement be prepared to reflect the Board's denial of First
Vil*ginia's applications.
8/8/62
-18Mr. O'Connell went on to say that the discussion by the Board
on August 3, 1962, indicated that one factor was a principal basis for
denial of the four applications; namely, the Board's conclusion that
the proposal by First Virginia to issue Class A limited voting stock
in exchange for the common stock of the respective banks was contrary
to the
public interest, and that it reflected adversely on the character
Of
management.
With respect to one of the applications, it appeared from the
discussion that the Board would have denied that application in any
event on the basis that considerations relating to the statutory factors
14eighed against approval.
In connection with First Virginia's three other applications, however) it was not so clear to the Legal Division that a majority of the
/1c)ara would have denied those applications solely on the basis of consid"ations related to the statutory factors.
It was clear, however, that
the Board's dissatisfaction in the matter of the classified stock cut
acr08s other considerations and was a factor in the determination of
each of the four applications.
Inasmuch as announcement of the denial of the four applications
143111(1 establish a policy with respect to how a bank holding company's
t°ck structure should be arranged, particularly as such stock structure
14118
found by the Board to constitute in itself a sufficient basis for
4416.1 of an application, it was the belief of the Legal Division, and
8/8/62
-19-
thus its recommendation, that the Board's legal position would be
strongest if the Board issued a single order and statement on the
application concerning Farmers and Merchants National Bank, Winchester.
Denial in that case would be premised upon (1) the Board's disapproval
for reasons related to First Virginia's stock structure, and (2) specific
adverse findings related to the statutory factors.
Mr. O'Connell went on to say that if the application involving
the Winchester bank were denied and that decision appealed, the court
would have full opportunity to pass opinion on the Board's position on
First Virginia's issuance of limited voting stock and could affirm the
e3
13(:)arcl
Judgment.
On the other hand) if the court were to reject that
Position, it could still affirm denial of the application on the ground
that other substantial evidence supporting denial existed in the record.
If, however, a single statement and order were issued encompassing all
f°11r applications, First Virginia could contest what was believed to
be the strongest case for appeal; namely, denial of the application
with respect to Southern Bank of Norfolk. In that event, if the court
rejected the Board's stated position with respect to First Virginia's
classified
stock, the court might find that there was no other basis for
slistaining the Board's denial, Further, it was possible that the court
c°1-11d sustain in principle the Board's position on First Virginia's stock
structure and still hold that that consideration alone was not sufficient
basis for denial of the application, particularly not without having given
,101,Q
8/8/62
First Virginia an opportunity to revamp its stock structure along
clearly identified lines acceptable to the Board before denial of the
application.
Mr. O'Connell continued by saying that if the Board's order and
statement
related to the one application involving the Winchester bank,
it would contain a clear, strong statement indicating that, while the
Board found reasons other than the stock classification issue for denying
the application, nevertheless as to that application and all other
applications wherein the same type of stock structure was involved, the
13°ard would very likely disapprove on the basis that issuance of limited
v°ting stock as a vehicle to perpetuate minority control of a bank holding
c°mPanY was adverse to the public interest.
'ere
If such an order and statement
issued, and later the Board were to announce its denial of any or
411 of the three remaining applications, and should First Virginia appeal
44Y or all of those three denials, it could be argued on the Board's
behalf that First Virginia had by reason of the Winchester decision been
Pilt on notice as to the Board's position and had been given sufficient
o
Pportunity either to withdraw the three remaining applications or conform
its stock structure to meet the Board's stated objections.
The procedural recommendation now being made by the Legal
131-vi8ion would preclude First Virginia's ability, either in the form of
8.111°tiOn for reconsideration or in argument of appeal, from alleging
illegilitable treatment by the Board.
Such an allegation might be premised
30,4r7.4.,
8/8/62
-21-
on the fact that the applications were submitted separately, several
months apart, and, accordingly, had each application been denied
separately and in the order filed, applicant would have been put on
notice by the Winchester bank denial of the Board's position regarding
First Virginia's stock structure.
First Virginia could argue that if
the foregoing had been done, it would have avoided those adverse circumstances before submitting any of the other three applications. Further,
suPPort for First Virginia's position in this connection might be lent
by the
circumstances surrounding the staff's meeting with First Virginia's
lisPresentatives in July 1962. It was the staff's understanding that
Messrs. Holland and Beeton were to be advised orally, as they were in
litriting by the Board's letter of July 17, 1962, that the Board had
allbstantial question as to First Virginia's capital structure and its
e°11sistency with the public interest, and that First Virginia should
Pl'ssent whatever arguments and justification it might have for its stock
classification, and further, submit any offer it might wish respecting
44 adiustment of the respective voting rights of the two classes of
stoc
kholders.
Continuing his reference to the staff meeting with representatives
First Virginia, Mr. O'Connell said it was made clear that the staff
c°41a not indicate what adjustment, if any, would be acceptable to the
13card, but only that any proposal made would be conveyed to the Board for
it8 eC4nSideratiOn.
It seemed clear, therefore, that First Virginia had
8/8/62
reasonable grounds to expect that it would receive some further indication with respect to the Board's position on the stock structure question,
and that it might be forthcoming in a form other than a denial of all
four applications premised upon the stock structure issue.
Mr. O'Connell said he wanted to make it clear that the proposal
regarding an order and statement with respect to the Winchester bank
alone was premised on the assumption that there was some Board sentiment
at its meeting on August 3 favoring approval of one or more of First
Virginia's applications if viewed strictly in light of the statutory
factors and apart from the stock classification issue.
More specifically)
was the Legal Division's impression that the application involving
8°4thern Bank of Norfolk might have received favorable action were it
ac/t for the overriding consideration of the limited voting stock issue.
Concluding his remarks) Mr. O'Connell stated that if the Legal
bivision was incorrect in its assumption and was advised that the Board
11°1-11d have denied all four applications on the basis of findings related
tcl the five statutory factors, then the recommendation now being made
with respect to
the Board's order and statement in this case would become
111°°t and would be withdrawn. The Division would then proceed with the
13reParation of an order and statement reflecting denial, simultaneously)
cst all four applications.
In discussion that followed Mr. O'Connell's comments, Mr. Hackley
Pointed out that the proposal now being made was merely a procedural one.
'“14
8/8/62
-23-
It did not suggest that the Board reopen the decision made at the
meeting on August
3.
Governor Balderston expressed the view that Mr. O'Connell had
Presented a plausible case in favor of the Board's issuing an order and
statement on the one application involving the Winchester bank.
It was
important, if and when the matter should come before a court, that the
Board's decision not be overthrown on the basis of extraneous matters
rather than the central issue.
Chairman Martin remarked that he felt the Board should "put its
best foot forward" in all such matters. If the suggested procedure would
have that effect, he would favor the recommendation made by Mr. O'Connell.
Other members of the Board likewise indicated that they would
favor the suggestion, one Board member noting particularly that the
Pl'c'eedure would be eminently fair to the applicant corporation.
Accordingly, it was understood that the Legal Division would
ePare,for the Board's consideration, an order and statement in draft
'
151
t°rm relating only to the Board's denial of the application by First
Vil4ginia Corporation to acquire
80 per cent or more of the voting shares
t Farmers and Merchants National Bank, Winchester, Virginia.
Governor
Mills pointed out, in this connection, that he had dissented from the
Nority decision on August
3 and had voted to approve the applications
rst Virginia Corporation.
The meeting then adjourned.
8/8/62
-24-
:
Secretary's Notes: On August 7
approved
19621 Governor Shepardson
on behalf of the Board the following
items:
Letter to the Federal Reserve Bank of New York (attached Item No. 6)
!PProving the appointment of Louis M. Bellotti, Carl W. Bergel, Edmond
1'6 Hannigan, and James E. McDonough as assistant examiners.
Memoranda from the Division of Administrative Services recommendthe following actions relating to persons in that Division:
P
ent following military leave
.Itnstatem
Ray M. Reeder as Operator, Tabulating Equipment, with basic
annu.i salary at the rate of $3,8651 effective the date of entrance
,
"Pon duty.
Chan,"
.wo in employment status
Operator, Tabulating Equipment, from
Charles M. Wrenn,
.
tenr
orary to permanent status, with no change in basic annual salary
t the rate of $41040, effective August 51 1962. (Pursuant to the
:
ction taken by the Board on June 261 1962.)
Governor Shepard son today approved
on behalf of the Board a letter
to the Federal Reserve Bank of
Richmond (attached Item No. 7)
approving the appointment of Howard
S. Boote, Jr., as assistant examiner.
Assistant Secretary
BOARD OF GOVERNORS
Item No. 1
OF THE
8/8/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
August 81 1962
Chemical International Finance, Ltd.,
20 Pine
Street,
New York 8, New York.
G
entlemen:
In accordance with the request in your letter of
Jul-Y
16, 1962, transmitted through the Federal Reserve Bank
ic,f
) New York, and on the basis of information furnished, the
2oard of Governors grants consent for Chemical International
dalance, Ltd., to purchase and hold 100 per cent of the
?Altai stock of a French corporation ('Vendome") organized
'
1 the sole purpose of holding a lease for certain quarters
'12 Place Vendome, Paris, France, to be occupied by the
Representative of Chemical Bank New York Trust Company,
7
4 York, New York, at a cost not to exceed approximately
i4100,000, provided such stock is acquired within one year
l'om the date of this letter.
r
Very truly yours,
(Signed) Elizabeth L. Carmic
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 2
OF THE
8/8/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS
orriciAL
CORRESPONDENCt
TO THE BOARD
August 8, 1962
Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
The Board of Governors of the Federal Reserve
SYstem extends to December 28, 1962, the time within
which Wells Fargo Bank may establish a branch at 447
Sutter Street, San Francisco, California.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
Of
Item No.
8/8/62
FEDERAL RESERVE SYSTEM
WASHINC3TON
OFFICE OF THE CHAIRMAN
August 9, 1962
The Honorable A. Willis Robertson,
Chairman,
Committee
on Banking and Currency,
United States Senate,
Washington 25, D. C.
Dear Mr. Chairman:
This is in response to your request for a report on the
bill, H.R. 7796, which would amend section 24 of the Federal Reserve Act in order to liberalize lending limitations on real estate
and construction loans by national banks.
Under the first paragraph of section 24 a national bank
maY now make real estate loans in an aggregate amount not in excess
(3f the amount of the capital stock of the national bank paid in and
flimPaired plus the amount of its unimpaired surplus funds, or not
ln excess of 60 per cent of the amount of its time and savings deposits, whichever is greater. H.R. 7796 would increase the second
al
ternative to 70 per cent.
Under the third paragraph of section 24 loans by national
b.anks
to finance the construction of residential or farm buildings,
turing in not more than 9 months, are not subject to the limita1,1°ns and requirements of that section applicable to "loans secured
real estate." H.R. 7796 would increase the permissible maximum
aturity on such loans to 18 months.
j
This is to advise that the Board has no objection to fay°rable consideration of the bill.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
3
BOARD OF GOVERNORS
Item No.4
OF THE
8/8/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
AODRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
OAIMLIE ACIORICS•t “FICOREIBICRVIV,
August 8, 1962
Martin P. Snyder, Esq.,
/;1, °Pgan) Lewis & Bockius,
‘,011
nselors at Law,
2107 Fidelity
-Philadelphia Trust Building,
'Philadelphia 9) Pennsylvania.
Dear Mr.
Snyder:
In your letter of August 1, 1962, to Mr. Solomon,
Director
of
the Board's Division of Examinations, you advised
that you
had been retained by Dauphin Deposit Trust Company,
r
larisburg,
Pennsylvania, to prepare and submit to the Board
v request for its
reconsideration of the denial of the applicaH1
,?? by that bank to merge with The First National Bank
of Mount
B--LLY Springs, Mount Holly Springs,
Pennsylvania,
under
the
844k Merger Act of
1960. In this connection you referred to
p!ction 262.2(f)(6) of the Board's Rules of
Organization and
"
3eedure.
When received, the request for reconsideration will be
Pre
sented to the Board for its
consideration.
Very truly yours,
Kenneth A. Kenyon,
Assistant Secretary.
Item No.
8/8/62
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
ea.
In the
Matter of the Application of
TRANSNEBRAsia CO.,
Lincoln, Nebraska
Plarsuant to Section 3 of the
131-11: Holding Company Act of 1956
ORDER FOR HEARING
On May 18, 1962, there was published in the Federal Register
(27 p
*R. 4748) a notice of receipt by the Board of Governors of an
e'll)lication filed pursuant to section 3(a) of the Bank Holding Company
Act ofe,
J-b6 (12 U.S.C. 1842) by Trans-Nebraska Co., a corporation to
be 0
rganized under the laws of the State of Nebraska, for the Board's
PriOr
approval of action whereby Trans-Nebraska Co. would become a
batik
"°1ding company through acquisition of 50 per cent or more of
each
of the following banks located in Nebraska:
The Martell State
tame
'
1 Martell; The Sioux National Bank of Harrison, Harrison; and
Craw
“
)rd State Bank, Crawford.
It appears to the Board of Governors that it is appropriate
thp.
- Public interest that a hearing be held with respect to this
13131.i
ea kacn. Accordingly,
5
1'3.1
IT IS HEREBY ORDERED, That, pursuant to section 222.7(a)
of the Boardts Regulation Y (12 C.F.R. Part 222.7(a)), promulgated under the Bank Holding Company Act of 1956, a public
hearing with respect to this application beheld, commencing
October 2, 1962, at 10 a.m., in the Omaha Branch of the
Federal Reserve Bank of Kansas City, Omaha, Nebraska, before
a duly designated hearing examiner, such hearing to be conducted
in accordance with the Board's Rules of Practice for Formal
Hearings (12 C.F.R. Part 263). The right is reserved to the
Board or the hearing examiner to designate any other place
or date for such hearing or any part thereof which may be
determined to be necessary or aporopriate for the convenience
of the parties.
IT IS FURTHER ORDERED, That the following matters will
be the subject of consideration at said hearing, without
Prejudice to the designation of additional related matters
and questions upon further examination:
(1) the financial history and condition of
the company and the banks concerned;
(2) the prospects of said company and bank
(3) the character of their management;
(4) the convenience, needs, and welfare of the
communities and area concerned;
(5) whether or not the effect of such acquisitions
would be to expand the size or extent of the bank holding company system involved beyond limits consistent
with adequate and sound banking, the public interest,
and the preservation of competition in the field of
bankinr..
IT IS FURTHER ORDERED, That) any person desiring to give
testimony,
present evidence, or otherwise participate in these
Proceedings should file with the Secretary, Board of Governors
of the Federal Reserve System, Washington 25, D. C. on or before
September 17, 1962, a written request containing a statement
of the nature of the petitioner's interest in the proceedings,
the extent of the participation desired, a summary of the
matters concerning which petitioner wishes to give testimony
or submit evidence, and the names and identity of the witnesses
who will be offered. Such requests will be presented to the
designated hearing examiner for his determination, and persons
submitting them will be notified of his decision.
Dated at Washington, D. C., this 13th day of August, 1962.
By order of the Board of Governors.
(Signed) Kenneth A. Kenyon
(sEAL)
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
Item No.
OF THE
6
8/8/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
August 7, 1962
CONFIDENTIAL
(FR)
Howard D. Crosse, Vice President,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mr. Crosse:
In accordance with the request contained in your letter
JulY 271 1962, the Board approves the appointment of Louis M.
4°ellotti, Carl W. Bergel, Edmond P. Hannigan, and James E. McDonough,
l'ay assistant examiners for the Federal Reserve Bank of New York.
-Lease advise the effective dates of the appointments.
are
It is noted that Messrs. Bellotti, Bergel, and Hannigan
Indebted to banks as follows:
Louis M. Bellotti - Manufacturers Hanover Trust Company,
New York, New York.
Hamburg Savings Bank,
Brooklyn, New York.
Carl W. Bergel - Community Bank of Linden,
Linden, New Jersey.
Edmond P. Hannigan - First National City Bank,
New York, New York.
ACe0
rdingly,
the Board's approval of each of these appointments is
Iren With
with the understanding that the individual will not be permitted
to
in any examination of a bank to which he is indebted
611 such indebtedness has been liquidated.
.t
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
1
3
1
)c I ••
BOARD OF GOVERNORS
004,444
40144
.4t,
TTOVI%
Item No.
OF THE
8/8/62
FEDERAL RESERVE SYSTEM
;X
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
44
4 Mt
444.34*"
August
•
8, 1962
CONFIDENTIAL (FR)
Hr. John L. Nosker, Vice President,
Federal Reserve Bank of Richmond,
Richmond 13, Virginia.
Dear Mr. Nosker:
In accordance with the request contained in your
letter of July 31, 1962, the Board approves the appointment
5 Howard S. Boote, Jr., as an assistant examiner for the
rederal Reserve Bank of Richmond, effective today.
It is noted that Mr. Boote is indebted to The
Central National Bank of Richmond, and to State-Planters
Bank of Commerce and Trusts, both located in Richmond,
Virginia. Accordingly, the Board's approval of Mr. Boote's
aPPointment is given with the understanding that he will
lict participate in any examination of either bank so long
as his indebtedness to that institution remains unliquidated.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
7
@FedFRASER