The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for
To:
December 13, 1960
Members of the Board
From: Office of the Secretary
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. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Minutes of the Board of Governors of the Federal Reserve System on
Tuesday, December 13, 1960.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 2:30 p.m.
Martin, Chairman 1/
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
King
Sherman, Secretary
Kenyon, Assistant Secretary
Fauver, Assistant to the Board
Hackley, General Counsel
Solomon, Director, Division of Examinations
Hexter, Assistant General Counsel
Hooff, Assistant General Counsel
Hostrup, Assistant Director, Division of
Examinations
Mr. Nelson, Assistant Director, Division of
Examinations
Mr. Landry, Assistant to the Secretary
Miss Hart, Assistant Counsel
Mr. Leavitt, Supervisory Review Examiner,
Division of Examinations
Mr. Troup, Supervisory Review Examiner,
Division of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Application by Bank Stock Corporation of Milwaukee.
On November
29, 1960, the Board considered an application from Bank Stock Corporation
Of Milwaukee, Milwaukee, Wisconsin, for approval, pursuant to section
3(a)(2) of the Bank Holding Company Act, of acquisition of
80
per cent
01" more of the common stock of The Bank of Commerce, Milwaukee, Wisconsin,
concerning which there previously had been distributed memoranda from the
tivision of Examinations dated July 18, 1960, and a memorandum from the
Legal Division dated November 23, 1960.
1/
It was the recommendation of the
Withdrew from meeting and reentered at points indicated in minutes.
12/13/60
-2-
Divi5i0n of Examinations that a Notice of Tentative Decision granting
the application be issued.
The recommendation of the Federal Reserve
Bank of Chicago was also favorable.
Questions arising under section 7
of the Clayton Act were discussed in the memorandum of the Legal Division,
vilich also made reference to statements filed by the Department of Justice
aM the applicant subsequent to the preparation of the memoranda of the
Division of Examinations.
At the November 29 meeting, the Board requested
the staff to communicate with the Federal Reserve Bank of Chicago to
Obtain additional information and comments to aid the Board in its further
consideration of the application.
Pursuant thereto, Mr. Allen, President
Of the Chicago Reserve Bank, had written to the Board under date of
December 2, 1960, commenting further on the information previously given
and expressing the opinion that:
(1) The present management of The Bank of Commerce under
the leadership of Mr. A. S. Puelicher is satisfactory and that
acquisition of the bank by Bank Stock Corporation of Milwaukee
would ensure continuity of such management,
(2) The acquisition of the bank would not result in any
material lessening of competition in the Milwaukee area but
that, conversely, the operation of the bank by competent and
agressive management would increase its competitive ability
both in relation to other banks in the area and with the
Present subsidiaries of the holding company and thus enhance
the public welfare, and
(3) The acquisition would not expand the size or extent
Of the bank holding company system involved beyond limits conslstent with adequate and sound banking, the public interest,
and the preservation of competition in the field of banking.
Allen's letter concluded with the statement that, for the reasons stated,
the
Chicago Reserve Bank reiterated its recommendation of June 24, 1960,
that
favorable consideration be given to the application of Bank Stock
Corporation.
12/13/60
-3-
Asked by Chairman Martin to comment, Mr. Hostrup said it was
the opinion of the Division of Examinations that the first three statutory
factors to be considered in applications of this kind, namely, the financial
condition and history, prospects, and character of management of Bank Stock
Corporation and Bank of Commerce appeared to be satisfactory.
With respect
to the fourth factor specified in section 3(c) of the Bank Holding Company
Act, relating to the convenience, needs, and welfare of the communities
and the area concerned, he noted that the Division felt that the area had
benefited from the improved service provided by Bank of Commerce since
acquisition of control in 1959 by Mr. A. S. Puelicher.
It was believed
by the Division, Mr. Hostrup said, that satisfactory management of Bank
Of Commerce and the improved services provided since 1959 would be continued
if it were acquired by Bank Stock Corporation.
However, if the application
vere denied and Bank of Commerce were sold to other interested parties
and continued as a separate bank, its prospects and management would depend
°11 the quality of the purchaser.
Mr. Hostrup went on to say, with
lieference to the fifth statutory factor in section 3(c) of the Bank
11°341-ing Company Act, that approval of the application would not so expand
1/ank Stock's system as to give it an undue concentration of deposits in
the area concerned, nor would the acquisition be inconsistent with the
13t1131ic interest or the preservation of competition in the field of banking.
The Division felt that in an overall view of the present application in
tile
lieht of the five statutory factors to be considered under the
154,
12/13/60
Bank Holding Company Act, favorable indications outweighed the possible
unfavorable effects on bank competition.
In this latter connection, he
Observed that the acquisition of Bank of Commerce by Bank Stock Corporation would not reduce the number of banking offices in the area
concerned, although it would reduce by one the number of competitors.
Mr. Solomon commented that any reduction in area competition
resulting from the proposed acquisition of Bank of Commerce by Bank Stock
would not be substantial.
Although it would be possible to take the
IP°sition that the reduction by one in the number of competitors constituted
4
reduction in competition if the surrounding circumstances were not
considered, taking these circumstances into account revealed that Bank
Commerce, which had as of the latest examination IPC deposits (i.e.,
clePosits of individuals, partnerships, and corporations) of around 0.9
was one of the two smallest banks in the immediate area concerned,
14h1ch generates a large volume of deposits.
Should Bank of Commerce be
acqUired by Bank Stock Corporation, Mr. Solomon said, there would remain
in the area ten banks of appreciable size with IPC deposits ranging from
1 3 million to 4;40 million. In his opinion, approval of the application
°
/7°104 neither be contrary to the standards in the Bank Holding Company
Act nor to the provisions of the Clayton Act.
Mr. Hackley stated that the instant application presented
difficulties, since it involved a question of judgment as to whether
the beneficial effect of the proposed stock acquisition by Bank Stock
45i9
12/13/60
-5-
Corporation outweighed the effect on competition.
It was the Legal
Division's view that either approval or denial of the application could
be substantiated as being consistent with prior determinations of the
Board under the Bank Holding Company Act.
He referred to the fact that
acquisition of Bank of Commerce by Bank Stock Corporation would not only
eliminate one competitor from the relevant area and thereby cause some
diminution of competition but would also increase the size of the second
largest bank holding company in the Milwaukee area, where three holding
companies, including the applicant, now control approximately 80 per cent
Of bank deposits.
On the other hand, as indicated, it was not clear that
competition would be diminished to a substantial degree.
Mr. Hackley went
on to say that it could be argued that the proposed acquisition would
intensify competition by permitting Bank of Commerce to compete more
effectively in Milwaukee and by enabling Bank Stock Corporation to compete
More effectively with the largest bank holding company, First Wisconsin
Eankshares Corporation.
He recalled that on September 3, 1959, the
11°erd approved the application of Bank Stock Corporation of Milwaukee to
become a bank holding company and that subsequently it acquired two
811bsidiaries, Marshall and Ilsley Bank and Northern Bank, both of
Milwaukee.
He thought it pertinent to ask whether, if at the time of
acquiring these subsidiaries Bank of Commerce had been suggested as a
third subsidiary of the holding company, the Board would have given its
e°nsent to the 1959 application.
If the answer to this question was
12/13/60
-6-
in the negative, apparently the same answer should be given to the
current application.
With respect to the bearing of the Clayton Act upon the present
aPPlication, Mr. Hackley said that the Board was on record as saying
that it would take into account Clayton Act standards regarding
substantial effects on competition of bank holding company applications
Wider the fifth statutory factor of the Bank Holding Company Act.
Were
this not the case, he observed, the Board could find itself in the
Paradoxical position of approving an application under the Bank Holding
C°mPany Act and then being under an obligation, if it felt there was a
sUbstantial lessening of competition involved under section
7 of the
ClaYton Act, to prevent the same transaction that it had approved under
the Bank Holding Company Act.
Since, however, there appeared to be no
substantial lessening of competition in the present case, it was the
°Pinion of the Legal Division, Mr. Hackley said, that there was no
Problem of the Board's being bound by the Clayton Act or the recent
decision under that Act against a merger in the steel industry which
.4°U:td. have joined the second and fifth largest integrated steel
41111Pallies in the United States to create a competitor with 20.1 per cent
°r
industry capacity to offset United States Steel's 29.7 per cent
(U. S. V. Bethlehem Steel Corporation, 168 F. Supp. 576, S.D.N.Y. 1958).
Miss Hart called attention to the apparent intent of Congress
the't the Board consider the concentration of the bank holding company
4
12/13/60
-7-
system in considering the fifth statutory factor in the Bank Holding
Company Act.
She noted that the Senate Committee on Banking and
Currency (in Senate Report 1095, First Session, 84th Congress), stated
0/1 July 25, 1955:
...The factors required to be taken into consideration by the
Federal Reserve Board under this bill also require contemplation of the prevention of undue concentration of control in
the banking field to the detriment of public interest and the
encouragement of competition in banking. It is the lack of
any effective requirement of this nature in present Federal
laws which has led your committee to the conviction that
legislation such as that contained in this bill is needed.
Under its provisions, the expansion of bank holding companies
in the banking field would not be prohibited, but would be
regulated in the public interest."
Since the Board has an administrative role to play under the provisions
of the Clayton Act, she said, Congress had put the Board in a difficult
Position, as indicated by Mr. Hackley's comments.
In the present case,
the Legal Division had tried to analyze the competitive aspects of Bank
Stock's application with this fact in mind, especially in light of the
clecision in the Bethlehem Steel Corporation case.
However, it was the
1/iew of the Division that it was possible to distinguish the lessening
01' c
ompetition in the present application from that in the Bethlehem
case.
The Board could find in its discretion that the lessening of
celePetition was not substantial in the instant case, thereby making
13°esib1e its approval without consideration of section 7 of the Clayton
Act.
-
1'
ILy()
12/13/60
-8-
Noting that both the Bank Holding Company Act of 1956 and the
Bank Merger Act of 1960 had become law many years after the passage of
the Clayton Act, Governor Mills said this suggested a presumption that
the two more recent Acts set special standards applicable to banking
situations.
In his view the Clayton Act held precedence with respect to
competitive factors.
In any application under the Bank Holding Company
Or Bank Merger Acts, the provision of section 7 of the Clayton Act
relating to stock acquisition where the effect might be substantially
to lessen competition and to tend to create a monopoly, would be of
obvious relevance.
This being the case, Governor Mills said, since both
the fifth statutory factor in the Bank Holding Company Act and the
corresponding factor in the Bank Merger Act focused on the competitive
cillestion, it seemed apparent that Congress intended by such emphasis
that this factor be of pre-eminent importance compared to the other
factors to be considered relating to bank holding company expansion and
b atik mergers.
In the discussion of this point that followed, Mr. Hackley noted
that the reason the Legal Division had brought up the question of the
relevance of the Clayton Act to the present application was that the
JUstice Department had filed a memorandum with the Board opposing approval
°4
the ground that the Clayton Act would be violated.
Governor Mills remarked that his own analysis of the application
lecl him to accept the favorable recommendation of the Division of Exami44ti°ns, since he believed the Board should focus its consideration on
41
12/13/60
r
r-
-9-
all five factors in the Bank Holding Company Act with proper deference
to the fifth factor relating to competition.
He observed that the
application if approved would permit an extension of banking facilities
in the downtown Milwaukee area, which was well populated with alternative
banking offices) and that the net result would not expand Bank Stock
Corporation's control of banking resources to a point contrary to the
Public interest.
Governor Mills stated that, as on similar occasions
in the past when bank holding company applications were under consideration,
he would distinguish in this case between a holding company's desire to
"Mad its services beyond the metropolitan area through penetration of
a new region and expansion into a contiguous area.
He observed that
Penetration of a new region was not present in the instant case and that
acquisition of Bank of Commerce by Bank Stock Corporation would, under
the circumstances, be similar to establishment of a branch in a State
that permitted branch banking expansion.
Governor Robertson stated that competition would be diminished
by
approval of the application, since a 49 million bank presently
e°41Peting with other banks, including those of the applicant, would be
eliMinated.
In the absence of offsetting favorable factors, he said, a
cierlial of the application would be indicated.
With respect to mention
°t Mr. Puelicher's management of Bank of Commerce as a favorable factor
44cl the question whether the good management would continue if Bank Stock
Ce'llooration did not acquire the bank, he thought it likely that an
4
12/13/60
- r-
-10-
efficient institution of this kind would be easily salable to some other
buyer.
Therefore, since he could find no adequate offsetting factor to
the diminution that would occur in competition, and in view of the
finding of the Justice Department that consummation of the planned
acquisition would violate the Clayton Act, he would vote to deny the
application.
Governor Shepardson expressed agreement with the favorable recomIllendation of the Division of Examinations on this application, adding
that he did not believe a case had been made for regarding the decrease
in competition that would result as being substantial.
Furthermore, he
/7 impressed by the importance of the management factor in this case.
"
While Governor Robertson had indicated there was no assurance that Bank
Of Commerce could not be sold readily- by Mr. Puelicher to interests that
llould continue strong management, on the other hand there was no assurance
that a sale would be made that would provide this kind of management.
Like Governor Mills, he believed that acquisition of Bank of Commerce
13Y. Bank Stock Corporation would be analogous to authorizing a branch
in the Milwaukee area, and in all the circumstances he would vote to
4PProve the application.
Governor King said that as he understood the intent of Congress
14 Passing the Bank Holding Company Act, the Board was not expected to
1)1'event mailer bank holding companies from expanding to a size that
14°11.1d enable them to compete more effectively with larger holding companies.
5
12/13/60
-11-
He too was concerned about the tendency for smaller banks and businesses
to disappear, but he did not believe that an administrative agency could
correct that development by denial of an application of the kind before
the Board.
He also shared Governor Mills
belief that, in effect, what
waS involved in this case was creation of apbranch" bank in a large
City where alternative banking facilities were well established.
Accordingly, he would vote to approve the application.
Governor Szymczak said that he would vote to deny the application
although he recognized the case as a close one and that the courts would
Probably sustain a decision either way.
In reaching his conclusion, he
14as influenced by what he felt was a definite trend for three large bank
holding companies to dominate banking in the area involved, a trend that
he believed to be undesirable.
Upon indication from Governor Balderston and Chairman Martin
that they also favored the recommendation of the Division of Examinations
approval of the application, the staff was requested to prepare for
the Board's consideration a Notice of Tentative Decision and a Tentative
Statement that would approve the application.
Governors Szymczak and
Robertson dissented from this action.
Mr. Hostrup and Miss Hart withdrew from the meeting at this
Point.
Reconsideration of application of Deposit Guaranty Bank & Trust
arly
Jackson
Mississippi (Item No. 1).
On November 16, 1960, an
12/13/60
-12-
oral presentation before the Board was made by representatives of Deposit
Guaranty Bank & Trust Company, Jackson, Mississippi, and Bank of Hazlehurst,
Hazlehurst, Mississippi, with respect to the merger proposal that had
been denied by the Board on October 12, 1960.
Representatives of Merchants
and Planters Bank of Hazlehurst, which opposed the merger, and other
individuals also testified at the meeting.
A stenographic transcript of
the statements made at this meeting had been reviewed by the staff of
the Division of Examinations, which had prepared a memorandum distributed
under date of November 25, 1960.
It was indicated in the memorandum that
with the exception of letters supplied by Deposit Guaranty from business
People in Hazlehurst, a number of banks in Mississippi, and State officials
favoring the merger, the presentation by representatives of that bank and
Bank of Hazlehurst added little to the information previously made available
*with the original application under the Bank Merger Act of 1960 and in
44 °ral presentation to members of the staff as outlined in a memorandum
to the Board dated October 26, 1960.
As stated in the November 25 memorandum,
the presentation made by representatives of Merchants and Planters Bank of
REtzlehurst in opposition to the merger emphasized that the two banks in
Razlehurst had supplied adequate banking services in the community and
Igc3t116- continue to do so.
They contended, moreover, that if the merger were
Permitted Merchants and Planters would be unable to compete effectively
//lth the branch of a bank 30 times its size.
It was the conclusion of
the Division of Examinations, as expressed in its November 25 memorandum,
S
-13-
12/13/60
that no important new factors were presented during the oral presentation
before the Board to warrant a reversal of the Board's original disapproval
of the transaction.
However, the Division felt that weighing of the
arguments outlined during the presentation necessarily involved an
exercise of judgment, since opinions on this matter might differ.
With reference to the memorandum of the Division of Examinations,
11r. Solomon said that technically the question before the Board at this
stage was whether in weighing the various points of view expressed at the
°ral presentation on November 16, the Board wished to grant the request
(3f Deposit Guaranty for reconsideration of the decision by the Board on
October 12, 1960, to deny the application by Deposit Guaranty to merge
141th Bank of Hazlehurst.
Chairman Martin left the meeting at this point.
Mr. Hackley recalled that at the time Deposit Guaranty made its
lisquest for reconsideration of its application, he had distinguished
between such a request and the act of reconsideration itself, having in
that the latter would involve participation by opposing parties in
the presentation of their views.
Since the Board on November 16 permitted
slIch expression of views by opposing parties, it could be said that
ee°nsideration had been accomplished, since there had been an oral
Presentation with both parties present.
Mr. Solomon replied that he had not intended to give the impression
t44.
Merely a procedural question was presented at the present time.
Should
12/13/60
the Board agree to reconsideration of Deposit Guaranty's application
under the Bank Merger Act, it would be superfluous to have another hearing
aS was implied by Mr. Hackley's comments.
Mr. Hackley said that he thought it clear that the Board could
nw say that it had reconsidered Deposit Guaranty's application on the
basis of the oral presentation on November 16 participated in by both the
applicant and opponents and that, on that basis, the Board had decided
either to reverse or to reaffirm its decision of October 12.
Governor Mills stated that after careful study of all the
information produced regarding this case he found no reason to change
1118 original judgment that the application should be denied and that,
consequently, the Board's October 12 decision should stand.
Governor Robertson referred to the close nature of the case,
indicating as a favorable aspect the strengthening of Deposit Guaranty's
eaPital structure that would result from acquisition of Bank of Hazlehurst.
11°Tiever, he did not regard this favorable aspect as being sufficient by
Itself to warrant changing the Board's original decision.
He referred to
the Precedent that might be created by a reversal of the Board's position
°n this case which could suggest that appeal of the Board's decisions by
Illeans of oral presentations would cause the Board to reverse itself.
P°r these reasons, he would vote to affirm the Board's original decision.
Recalling that originally he had voted against approval of the
641)P1ieation by Deposit Guaranty, Governor Shepardson said that in his
12/13/60
-15-
opini0n there had been additional important information provided during
the oral presentation.
Although originally it had appeared to him that
extension of Deposit Guaranty's influence might cause it to blanket the
State of Mississippi, he had subsequently learned of the Mississippi
statute limiting the scope of a bank operating within that State to a
radius of 100 miles and 15 counties.
He said that, as he had stated
before, he was sympathetic with the need in the South for stronger
financial institutions.
In his estimation Deposit Guaranty was a major
ipank competing with other banks as large and even larger from some
Ileighboring States.
Therefore, in the light of the restriction imposed
on Deposit Guaranty's growth by the Mississippi statute referred to, he
reitjustified in voting for approval of the application at this time.
Governor King indicated that he continued to abstain from
e°nsideration of this case.
Governor Szymczak said that he would vote to reaffirm the Board's
Position to deny the application.
Governor Balderston said that he had been impressed during the
heal'ing by reference to the capital factor previously noted by Governor
Robertson.
With reference to Governor Robertson's fear of establishing
e" Precedent, he did not feel that the Board should be influenced by this
e°4s1deration should it decide to reverse its decision following an oral
Pl'esentation, since this would suggest that the rehearing had not been
tlridertaken in good faith.
So far as his opinion of the Board's original
12/13/60
-16-
decision was concerned, on balance, he had the feeling that the
community of Hazlehurst and the State of Mississippi would be served
by approval of Deposit Guaranty's application.
Here was a large,
aggressive bank that had grown too fast for its capital.
It was now
being given an opportunity to strengthen that capital and at the same
time to provide more effective banking services for the community of
Razlehurst.
Therefore, he would vote to reverse the Board's original
aecision and approve the application.
Chairman Martin having reentered the room at this point,
Governor Balderston informed him of the views of the Board members
expressed during his absence.
Chairman Martin stated that he had found the oral presentation
Y representatives of Deposit Guaranty Bank and Trust Company and by
°PPonents to the proposed merger both interesting and broadening to
13erspective on the general problem, not only for the area involved in
thie application but for the country as a whole.
He had turned the
matter over in his mind at length and would favor reversal of the Board's
October 12 decision denying Deposit Guaranty's application.
Since
Governor King had indicated that he would continue to abstain in the
13°Etra's consideration and decision on this case, the Chairman said that
this
meant that the Board wasP evenly divided on the question whether to
atrirM or reverse the decision of October 12.
Although an even division
4 such question might seem to be unfortunate, it had the effect of
("I
12/13/60
-17-
letting the October 12 decision stand and thus of denying the application
by Deposit Guaranty for permission to merge with Bank of Hazlehurst and
to establish a branch in the town of Hazlehurst.
It being understood that the Board's October 12 decision to
disapprove the application of Deposit Guaranty Bank & Trust Company,
Jackson, Mississippi, to merge with Bank of Hazlehurst, Hazlehurst,
Mississippi, was reaffirmed, approval was given to a letter to Deposit
Guaranty to this effect.
A copy of the letter is attached as Item No. 1.
Application by Deposit Guaranty Bank & Trust Company (Item No. 2).
Distribution had been made before the meeting under date of December 13,
196°) of a memorandum from Mr. Solomon regarding an application of Deposit
011aranty Bank & Trust Company, Jackson, Mississippi, to merge with Rankin
CoUnty Bank, Brandon, Mississippi, and to establish branches at the
locations of the present offices of Rankin County Bank.
In addition there
had been distributed previously memoranda from the Division of Examinations
dated October 12, 1960, and November 15, 1960, relating respectively to
the Proposed merger and oral presentation to the staff on October 31,
196°) by representatives of Deposit Guaranty in connection with the
application.
The Division of Examinations recommended disapproval of
he application, whereas the Federal Reserve Bank of Atlanta recommended
a
pproval.
Speaking with reference to his December 13 memorandum, Mr.
S°10mon noted that Mr. W. P. McMullan, Jr., Vice President of Deposit
12/13/60
-18-
Guaranty, had provided additional information relating to the competitive
situation in Rankin County during a visit to his (Mr. Solomon's) office.
He said that Mr. McMullan had also brought with him a resolution of the
Rankin County Chamber of Commerce endorsing the proposed merger and
urging the Board of Governors of the Federal Reserve System to give its
approval thereto.
He noted that the first point concerning which Mr.
McMullan had information related to a statement on page 34 of the original
application that "the Citizens Bank L-Of Florence, Mississippi, located
13 miles southwest of Brandon in Rankin CountY7 is owned and controlled
by
certain officers of the Deposit Guaranty Bank & Trust Company."
Mr.
McMullan had stated that this was an error, since his father, who is
Chairman of the Board of Citizens Bank, and his family own only about
20 per cent of the stock of Citizens, whereas Mr. McKell, the President
°f Citizens, and his wife own around 37 per cent of the stock, fully
Paid for and unpledged, and there were no other shares owned by officers
Of Deposit Guaranty.
The second matter mentioned by Mr. McMullan, Jr.,
Mr. Solomon said, was a recent opinion of the Mississippi Attorney
General dated December 12, 1960, regarding the branch banking laws of
that
State which provide that "no parent bank be permitted to establish
a branch bank in any town or city of less than 3,100 population...where
slleh town or city has one or more banks in operation."
He noted that the
lon of the Mississippi Attorney General, of which a copy was attached
t0 his memorandum, stated that this prohibition applies only if the bank
12/13/60
-19-
in the small city or town is a unit bank, but does not apply if the bank
is a "branch bank."
From this Mr. McMullan argued that acquisition of
Rankin County Bank by Deposit Guaranty would actually open up Rankin
County to competition because the presence of the former as a unit bank
in Brandon now prohibits any other bank from establishing a branch there.
Should that bank be converted to a branch of Deposit Guaranty, then other
banks in Mississippi would be able to open branches in Brandon.
Mr.
Solomon said that the additional information relating to ownership of
Citizens Bank might influence the opinion that had been expressed by
the Federal Deposit Insurance Corporation regarding the proposed merger
Of Rankin County Bank into Deposit Guaranty, since the Corporation had
rePorted "...the effect of the transaction is concluded to be seriously
adverse for the people of Rankin County, as 100 per cent of the banking
re
sources of this county would then rest in the hands of one management
rc3u1) and such control is deemed to be monopolistic."
For this reason,
the Board
might wish to resubmit the application to the Federal Deposit
In
surance Corporation for a new report in the light of the additional
inf
ormation regarding ownership of Citizens Bank.
Mr. Solomon said that
it Ifts not clear as to the weight the Justice Department would attach
to this
new information.
Mr. Hackley observed that there was no legal necessity for the
11c)all to resubmit the application to the other Federal bank supervisory
Etelleies and the Justice Department; this was solely a matter of judgment
12/13/60
for the Board.
-20In this connection, he noted that reasons for approval
of bank merger cases needed to be published in the Board's Annual Report
and that should the Board approve the application, its approval could
carry greater weight if it were indicated that the Justice Department
and the other Federal bank supervisory agencies had supported the
Board's action.
Governor Mills said that inasmuch as the final responsibility
regarding this application rested with the Board, and since he believed
there had been no additional information of substance to justify resubmitting the application by Deposit Guaranty to the other agencies indicated,
he believed it would be desirable to settle the case on the basis of
4
4-410rmation now before the Board.
He then expressed himself as opposing
the application, pursuant to the recommendation of the Division of
Exezinations, since the facts involved were not substantially different
from those present in the application of Deposit Guaranty to merge with
44k of Hazlehurst.
It being indicated that the other members of the Board were of
Similar
view, the application by Deposit Guaranty Bank & Trust Company,
4eks°11, Mississippi, to merge with Rankin County Bank, Brandon,
Miss; .
'*saIPpi, was thereupon disapproved.
In taking this action it was
lInderstood that the letter to Deposit Guaranty containing the Board's
cleei8ion would refer to provision by the applicant of additional
12/13/60
-21-
1nf0rmation subsequent to the application.
A copy of the letter sent
to Deposit Guaranty Bank & Trust Company is attached as Item No. 2.
Governor King abstained from participation in the decision on this
matter.
With reference to the informal request made of Mr. Solomon by
a representative of Deposit Guaranty that an opportunity be given for
°4 aPpearance before the Board if the Board should be inclined to deny
the application, it was agreed that such a hearing should not be granted
in the absence of an indication that the bank had substantial additional
information to
present beyond that already available to the Board.
The meeting then adjourned.
BOARD OF GOVERNORS
OF THE
Item No. 1
12/13/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25, O. C.
AOCHIEBS
orrictm. CORRESPONDENCE
TO THE SWAPO
December its, 1960
Board of Directors,
Deposit Guaranty Bank & Trust Company,
Jackson, Mississippi.
Gentlemen:
The Board has reconsidered on the basis of all
available information, including that submitted during
the oral argument on November 16, 1960, the application
of your bank for consent under the provisions of section
18(c) of the Federal Deposit Insurance Act, as amended,
to merge with Bank of Hazlehurst, Hazlehurst, Mississippi,
and for approval to establish a branch at the present
location of the office of Bank of Hazlehurst.
However, after careful consideration of the
matter in the light of all the factors set forth in the
, statute, the Board has concluded that it would not be
warranted in changing the position stated in its letter
of October 12, 1960.
Very truly yours,
4/11-27/railA
Kenneth A. Kenyon,
Assistant Secretary.
4s,4.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item,' No. 2
12/13/60
ADDRESS OFFICIAL CORRESPONOCHCC
TO THE •DARD
December 14, 1960
Board of Directors,
Deposit Guaranty Bank & Trust Company,
Jackson, Mississippi.
Gentlemen:
Reference is made to your request submitted through the
Federal Reserve Bank of Atlanta for consent of the Board of Governors
of the Federal Reserve System under the provisions
of section 18(c)
of the Federal Deposit Insurance Act, as amended, to the merger of
ankin County Bank, Brandon, Mississippi, into Deposit Guaranty Bank
Gc Trust Company, Jackson, Mississippi, and for approval
of the establishment of branches at the present location of Rankin County Bank,
and its two branches located in Pelahatchie and Pearl, Mississippi.
After reviewing the proposal in the light of all the factors
to be
considered under the provisions of section 18(c) of the Federal
DePosit Insurance Act, as amended, including information submitted
ubsequent to the application and as recently as December 13, the
2ai'd of Governors does not feel justified in giving its consent to
bae proposed transaction.
Z
It is the Board's judgment that the favorable factors are
--ficient to counterbalance other aspects of the transaction, inoludina the elimination
of one alternative source of banking services
thebarea and a further
increase in the already high concentration
banking resources in the area in your bank and another large bankig institution. In the circumstances, the transaction would not
PPear to be in the public interest.
Z
Very truly yours,
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER