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9
Minutes for
To:
Members of the Board
From:
Office of the Secretary
December 21, 1966
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. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Gov. Brimmer
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Federal Reserve Bank of St. Louis
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Minutes of the Board of Governors of the Federal Reserve
System on Wednesday, December 21, 1966.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Robertson, Vice Chairman
Shepardson
Mitchell
Daane
Maisel
Brimmer
Sherman, Secretary
Kenyon, Assistant Secretary
Bakke, Assistant Secretary
Holland, Adviser to the Board
Molony, Assistant to the Board
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Hackley, General Counsel
Solomon, Director, Division of Examinations
O'Connell, Assistant General Counsel
Smith, Associate Adviser, Division of
Research and Statistics
Mr. Leavitt, Assistant Director, Division of
Examinations
Mr. Thompson, Assistant Director, Division of
Examinations
Mr. Dahl, Assistant Director, Division of
Examinations
Messrs. Forrestal, Via, Cloth, Robinson, and
Smith, and Miss Hart of the Legal Division
Messrs. Golden, Shull, and Greenspun of the
Division of Research and Statistics
Messrs. Egertson, Burton, Guth, Lyon, Poundstone,
Rumbarger, and Kline, and Miss Greene of the
Division of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Approved letters.
attached
The following letters, copies of which are
under the respective item numbers indicated, were approved
litianimously following consideration of background materials that had
be
en made available to the members of the Board:
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Federal Reserve Bank of St. Louis
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-2Item No.
Letter to The Detroit Bank and Trust Company,
Detroit, Michigan, approving the establishment
Of a branch at West McNichols and Meyers Roads.
1
Letter to Community Bank and Trust Company,
Paoli, Pennsylvania, granting an extension of
time to establish a branch in Tredyffrin Townshin, Chester County.
2
Letter to Chase Manhattan Overseas Banking Corporation, New York, New York, granting an
extension of time to purchase shares of Banque
de Commerce, Antwerp, Belgium.
3
Letter to Continental International Finance
Corporation, Chicago, Illinois, granting permission to purchase shares of (1) Banque FrancoSuisse pour le Maroc, Casablanca, Morocco, and
(2) Societe Immobiliere Les Hesperides S.A.,
Casablanca, Morocco.
4
Messrs. Dahl and Poundstone then withdrew from the meeting.
Application of Baystate Corporation (Items 5-7).
On November 21,
1966, the Board approved an application by Baystate Corporation, Boston,
Massachusetts, for permission to acquire up to 100 per cent of the outs tanding voting shares of The Merchants National Bank of New Bedford,
New Bedford, Massachusetts, with the understanding that announcement
Of the action would await approval of the transaction by the Massachusetts
Board of Bank Incorporation.
Advice having been received that the State
au thorities had given approval, there had now been distributed a memofrom the Legal Division dated December 19, 1966, submitting drafts
of an order and statement reflecting the Board's November 21 action.
4Ppended thereto was a draft of a dissenting statement by Governor
Robertson.
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Federal Reserve Bank of St. Louis
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)
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Following discussion, during which certain editorial changes
were agreed to in the majority statement, release of the order and
statement was authorized.
Copies of the documents in the form released
are attached to these minutes as Items 5 and 6, respectively.
Governor
Robertson's dissenting statement is attached as Item No. 7.
Guaranty fund in Bank of the Commonwealth (Item No. 8).
At the
meeting on December 19, 1966, the Board considered a question presented
by the Federal Reserve
Bank of Chicago concerning the status, for reserve
Purposes, of a "guaranty fund" placed by the Federal Deposit Insurance
Corporation with Bank of the Commonwealth, Detroit, Michigan, following
merger of that bank with Public Bank, Detroit, Michigan, under the
auspices of the Corporation incident to a receivership proceeding instituted by reason of Public Bank's insolvency.
The question involved
Whether the "guaranty fund" should be considered a deposit against which
reserves must be carried pursuant to section 19 of the Federal Reserve
Act and the Board's Regulation D (Reserves of Member Banks).
The Board had considered whether the guaranty fund might not be
regarded as a loan to Bank of the Commonwealth for the duration of the
agreement between the Corporation and the bank, and carried on the books
°f the bank accordingly.
However, before making a final decision, the
Board felt it would be prudent to ascertain whether characterization of
the fund as a loan would present any question from the Corporation's
standpoint, and the staff was instructed so to do.
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Federal Reserve Bank of St. Louis
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There now had been distributed a memorandum from the Legal
Division dated December 20, 1966, summarizing discussions that had been
held with the Corporation's staff concerning this matter and reporting
that the Corporation would have no objection to the guaranty fund being
treated as a contingent obligation of Bank of the Commonwealth, rather
than as a deposit liability, and carried among the bank's "other liabilities."
Attached to the memorandum was a draft of letter to the
Chicago Reserve Bank advising that the fund should be treated in this
manner.
The letter was approved unanimously.
A copy is attached as
Item No. 8.
Application of First at Orlando Corporation.
At the meeting on
September 21, 1966, the Board considered an application by First at
Orlando Corporation, Orlando, Florida, for permission to become a bank
holding company by acquiring 80 per cent or more of the voting shares
of each of five banks:
The First National Bank at Orlando and four
smaller banks affiliated with First National through common majority
shareholders.
In a memorandum of September 13, 1966, the Division of
aminations had expressed the opinion that, while this group of banks
held 45
per cent of the total deposits in the combined primary service
areas, because of the existing affiliate relationship, and its probability of continuing, the proposed acquisitions would have no significant
e fect on present banking competition or concentration.
Accordingly,
the Division recommended approval, as had the Federal Reserve Bank of
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Atlanta.
-5The Banking Markets Section of the Division of Research and
Statistics, however, had recommended denial in a memorandum of
September 8 because:
(1) denial would prevent the existing affiliation
from becoming permanently solidified, whereas approval would foreclose
the possibility of control over one or more of the four affiliate banks
being dissipated over time, thus precluding the development of any degree
of competition among them; (2) the creation of an additional holding camPanY in the Orlando market would not only solidify the present high
degree of concentration, but could well encourage an increase in concentration in the future; and (3) no apparent short-run benefits to the
Public in terms of convenience and needs would result, and, in the long
run, convenience and needs might be impaired to the extent that the
further development of active competition would be hindered.
The Legal
sion had expressed the opinion that either approval or denial of
the application would be legally supportable.
During discussion at the September 21 meeting certain members
of the Board had expressed the view that before acting on the applicati°n it would be desirable to hav
more detailed information, based on
a field survey, on the degree of banking concentration in the pertinent
market and on whether there was any reasonable prospect that the banks
in the group might become disaffiliated at some later date if the holdcompany application were to be denied.
In light of this, further
consideration was deferred pending development of the desired information.
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There had now been distributed a memorandum from the Division
of Examinations and the Banking Markets Section dated December 16,
1966, transmitting two additional memoranda dated December 15 providing information regarding the banking market structure of the Orlando
area and the prospective permanence of the relationship between The
First National Bank at Orlando and its four affiliated banks.
Mr. Smith reviewed the proposal embodied in First at Orlando
Corporation's application.
He then summarized the additional informa-
tion that had been gathered, basing his comments substantially upon
the text of the December 15 memorandum from the Banking Markets Section,
Which stated the following conclusions:
1. The new data show substantially greater overlap
in the areas served by the four small affiliate banks than
was shown in the application and also confirm the overlap
between the lead bank and its affiliates. The customers
of the four affiliates are not concentrated in neighborhood areas close to each bank but rather are derived from
Wide areas of Orlando.
2. While the lead bank, rather than the affiliates,
serves the banking needs of the larger businesses in the
Orlando area, both the lead bank and the affiliates serve
substantial numbers of smaller businesses and household
customers. The lead bank is more dependent than are the
affiliates upon business customers for demand deposit
balances and has business customers throughout the area.
The affiliates serve primarily smaller business customers
located near their banks. The household customers of the
affiliate banks are widely dispersed in the Orlando area.
3. Both the extent of market overlap and the similarity in classes of customers served indicate that the
appropriate measure of the group's position in the Orlando
area is the sum of the market shares of the five banks, or
45 per cent of total deposits. The remainder of the area's
business is divided among nine banking organizations.
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4. Although the four affiliates presently benefit
substantially from their close operational relationships
with the lead bank, each probably could survive as an
independent unit if the affiliations were terminated.
The affiliate banks appear to be well established in the
rapidly growing Orlando area. Further, each of the banks
is large enough, with deposits of from $7 to $16 million,
to operate efficiently on its own. Termination of the
affiliate relationships would, however, require numerous
changes in directors and require that presidents of two
of the affiliates and the comptroller of one either be
replaced or leave their posts with the lead bank. Termination would also require readjustment of the operations
of the affiliates which are now closely tied to those of
the lead bank by means of joint weekly meetings of officers.
Denial of the application would not, of course, result in automatic termination of the affiliate relationships. On the contrary, we concur with the Division of
Examinations that there is little likelihood that the
affiliate relationships would be terminated even if the
proposal to form the holding company were not approved.
Governor Daane observed that it appeared, on the basis of the
foregoing conclusions, close working relations between the banks
involved in the proposal would continue regardless of the action taken
by the
Board on the application.
re asonable inference.
Mr. Smith replied that this was a
In addition to the common stockholders the banks
had substantial overlap in officers and directors, and weekly meetings
were held.
Governor Daane then inquired whether the Banking Markets SecWas still disposed to recommend denial of the application, as it
had in its September 8 memorandum, and Mr. Smith replied that while the
economic factors involved militated toward reiterating the recommendati°4, the facts developed confirmed the improbability of disaffiliation
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Federal Reserve Bank of St. Louis
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among the banks.
Therefore, under the circumstances, the Section would
no longer urge denial.
Governor Maisel inquired whether, if the present affiliate relationship were found to be anticompetitive, the fact of interlocking
directors and officers of the banks might violate the antitrust provisions of the Clayton Act notwithstanding the common ownership of more
than 50 per cent of the stock of the banks.
He added that this was,
to him, an important consideration to bear in mind, since he felt the
Board, as a regulatory agency, had an obligation to consider the appliesbility of the Clayton Act to relationships between institutions
subject to its jurisdiction.
In this connection, he also inquired
Whether First National Bank at Orlando and its four smaller affiliates
were not running afoul of the Clayton Act when their managements conferred with each other.
Mr. O'Connell replied that this might be the case if there were
meetings held between the common officers and/or directors of the banks
that were conspiratorial in nature leading to overt acts such as agreements on
market allocation.
Significant interlocking directorates would
invite close scrutiny into the nature and purpose of any meetings between
the individuals involved, but the applicability of the Clayton Act would
depend upon the particular circumstances
Governor Mitchell observed that meetings of banks having corre8P°ndent relationships were held regularly, with propriety so long as
the topics of discussion were not collusive.
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Federal Reserve Bank of St. Louis
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Governor Maisel commented that while bank holding company
systems were permitted under Florida law, and therefore there was no
barrier to a proposal for formation of one being submitted to the
Board, he felt that affiliate relationships such as were involved between the banks in this case were frequently employed as a device for
circumventing State laws against branch banking.
In his opinion, the
Board should be careful not to condone arrangements that were employed
as a subterfuge.
Mr. Hackley recalled that this general question had been considered by the Board on several occasions, and it had been concluded that
such affiliations were permissible under the law as presently written.
However, there was a loophole in the wide scope of the provision of
section 8 of the Clayton Act permitting interlocking directorates
between banks if 50 per cent of the common stock of one was owned
d irectly or indirectly by persons owning directly or indirectly more
than 50 per cent of the common stock of the other.
The Board had con-
sidered requesting legislation toward the end of the 89th Congress to
Close
this loophole, but no action was taken in this direction because
of the impending adjournment.
A corrective amendment could be incorpo-
rated into the Board's legislative program for 1967 if the Board so
desired.
Governor Shepardson observed that the question of affiliations
between banks raised a troublesome supervisory question, and that such
artangements were particularly prevalent in those States where branch
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banking was forbidden.
However, with respect to the pending applica-
tion, the existing relationship seemed not to contravene the present
law.
Also, he felt it was necessary to recognize that the smaller
banks involved had been established at the initiative of First National
Bank at Orlando to meet the needs of a rapidly expanding community;
indeed, he could see no valid argument, in the absence of legislative
Prohibition, against the establishment of new affiliates if justified
by market conditions.
Since the relationship already existed, he could
Perceive no adverse result from allowing it to be formalized; in fact,
there would be some virtue in formalizing the arrangement under the
Bank Holding Company Act so that the Board could exercise its authority
with respect to any future plans for expansion that might be proposed.
Accordingly, he would approve the pending application.
Governor Mitchell noted that if Florida law permitted branch
banking and First National Bank at Orlando had presented applications
for permission to establish branches at the locations where the present
affiliated banks were operating, such applications no doubt would have
been approved.
While he disliked the fact that the banks involved
collectively held a 45 per cent share of the market, the affiliated
banks were established de novo by First National's own efforts, under
a grey area in the law that enabled such actions without specific
su pervisory approval.
He would find it difficult to reject a proposal
t° cement a relationship that in effect involved the equivalent of a
head office and branches.
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Federal Reserve Bank of St. Louis
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Governor Daane indicated that he would approve for substantially
the same reasons as given by Governors Shepardson and Mitchell.
Governor Maisel expressed the opinion that this case presented
a critical point for decision.
In his view, if existing or potential
banking competition in the community would be lessened by formalizing
the affiliate relationship between the banks involved, the law required
that the proposal not be approved in the absence of affirmative benefits
to offset such anticompetitive considerations.
Approval of the proposed
transaction would cement the present affiliation and preclude the possibility that future independent competition might develop between the
banks involved.
The precluding of that possibility was in fact cited
by the applicant as a reason for submitting the application.
He could
ascertain no countervailing benefits that would be derived, and therefore would deny the application.
Governor Brimmer stated that he would approve the application,
albeit reluctantly in view of the points raised in the Banking Markets
Section's memorandum of September 8.
about the
He was not particularly happy
fact that approval of this transaction might seem to place
the Board in the position of encouraging establishment of affiliated
ins titutions de novo, followed by a proposal for formation of a bank
h°1ding company system to cement the share of the market thus developed.
Nevertheless, in view of the fact that the Banking Markets Section now
c°ncluded that there seemed to exist little likelihood of disaffiliation
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between the banks here involved even if the proposed holding company
were not to come into existence, he doubted whether a useful purpose
would be served in denying this particular application.
Governor Robertson commented that he would disapprove the
a pplication.
Apart from the fact that some competition now existed
between the banks concerned, there was no way of knowing what the
future might hold in the way of disaffiliation and the development of
further competition.
To allow formation of the holding company would
Preclude this possibility.
Furthermore, while the Board could exercise
itR
- regulatory authority to prevent the holding company, if established,
from acquiring additional banks, he perceived a fallacy in placing too
much weight on this argument as justification for approving the pending
aPPlication.
There would be no reason why First National Bank at
Orlando could not establish additional affiliates in the same manner
that it had established those now existing.
Under these conditions,
and carrying the rationale of the majority view to its logical concluSi
an application seeking permission to incorporate such additional
affiliates into the holding company system could hardly be denied in
light of the precedent now established.
Question was raised whether the situation would be essentially
different from allowing First National to expand by branching if Florida
State law permitted branch banking, to which Governor Robertson replied
that in his opinion, if the present affiliates of First National were
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Federal Reserve Bank of St. Louis
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12/21/66
branches, there might be justification in refusing to allow the establishment of additional branches in view of the share of the market
already controlled.
The application was thereupon approved, Governors Robertson
and Maisel dissenting, and the staff was instructed to prepare drafts
of an order and statement, with a dissenting statement also to be
drafted.
Governor Maisel then expressed again the view that approval of
the application of First at Orlando Corporation suggested tacit approval
for establishment of affiliate relationships through common ownership
of stock as a subterfuge for avoiding State laws prohibiting branch
banking, and said he felt it would be well for the Board to review its
Philosophy concerning affiliations of this nature in States having such
s
tatutes.
Governor Brimmer noted that he was working with the staff in
the
Preparing a study of loopholes in the Bank Holding Company Act for
Purpose of developing information that might suggest recommending
remedial legislation, and that perhaps the question raised by Governor
Maisel could be dealt with as part of this study.
Mr. Hackley commented that one aspect of the staff analysis
llould be to develop information concerning "tied" ownership of bank
stock by a corporation and by individuals, in order to determine whether
some amendment to the Bank Holding Company Act to comprehend such situati°hs would appear feasible.
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Federal Reserve Bank of St. Louis
The question of affiliations between banks
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arising out of common ownership of shares by individuals, however, was
essentially one involving the Clayton Act rather than the Bank Holding
Company Act.
If States that prohibited branch banking should feel that
the existence of bank holding companies represented a means of getting
around the branch prohibition, such States could prohibit bank holding
companies as well.
Governor Maisel replied that this raised a question whether, if
a State prohibited both branches and bank holding companies, affiliate
re lationships between banks through common ownership of stock should not
also be prohibited, and Governor Robertson suggested that the study being
conducted under Governor Brimmer's direction be broadened to encompass
this point as well.
Governor Brimmer advised that an initial memorandum
On the study would be presented to the Board shortly.
Governor Shepardson inquired whether, in advising First at
Orlando Corporation of approval of its application, there would be virtue
in including an indication that the Board's action did not necessarily
mean that the establishment of additional affiliates would permit further expansion of the holding company.
Mr. O'Connell recommended against this suggestion, observing
that two different statutes, the Clayton Act and the Bank Holding ComPanY Act, were involved.
If First National Bank at Orlando were to
establish further affiliate relationships and an application was subseluehtlY filed by the holding company for permission to add the affiliate
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as a subsidiary, the Board would have to consider the application under
the provisions of the Bank Holding Company Act.
However, the affiliate
relationship might be permissible under the provisions of the Clayton
Act.
Governor Maisel then inquired whether, if a high concentration
of banking resources were to be built up in a chain banking system,
Such a development could be reached by the antitrust laws.
Mr. O'Connell responded that if the concentration resulted in
an anticompetitive or monopoly situation the antitrust laws would
apply, although he commented, in response to a question from Governor
Mitchell, that to his knowledge there had been no cases of antitrust
action having been taken against a chain banking structure.
Governor Maisel asked further whether the Board, upon consideration of an application for formation of a bank holding company to
embrace an existing chain banking system, could deny the proposal upon
an independent finding of violation of the antitrust laws even though
the Department of Justice had not taken action thereunder.
In this
connection, he commented that in his opinion the Board had not focused
enough attention on the matter of concentration in considering bank
holding company and merger applications where there was an existing
affiliation of some sort.
Mr. O'Connell responded that under the Bank Holding Company Act
°°neentration was a statutory factor to be taken into account and the
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Federal Reserve Bank of St. Louis
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Board could, if it found an existing situation to be anticompetitive,
decline to sanction the relationship in the form of a bank holding comPanY even though the Department of Justice had not taken action under
the antitrust laws.
Mr. Solomon (Examinations) observed that a distinction should
be borne in mind between a de novo proposal for association of independent banks under a bank holding company or by merger and the situation
Where formalization of an existing affiliate relationship through merger
or a holding company structure was proposed.
In the latter case the
d uration of the common interest in the banks involved was a pertinent
consideration, the Board having taken the position with respect to a
number of situations that, where purchase of the shares giving rise to
the relationship had been fairly recent, the affiliation should be
given less weight in considering the application from the standpoint
of its competitive implications.
Governor Shepardson suggested that as long as Congress had not
acted to provide legislation with regard to chain banking the Board
would not seem to be under any mandate to regard such relationships as
intmical to the public interest in considering applications under the
Eank Merger Act or the Bank Holding Company Act.
Governor Robertson observed that the inaction of Congress in
this area might reflect the fact that no regulatory agency of Government had, to his knowledge, sought remedial legislation.
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Federal Reserve Bank of St. Louis
If, however,
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Governor Brimmer's study included investigation of this area, it might
develop that some legislative proposal could be submitted.
The meeting then adjourned.
Secretary's Notes: On December 20, 1966,
Governor Shepardson authorized the establishment of an additional messenger position
for the Board Members' Offices, the authorization being an interim one pending study by
the Controller's Office of further needs and
possible desirability of reassignment of
duties of the messengers presently assigned
to the Board Members' Offices.
On December 20, 1966, Governor Shepardson
approved on behalf of the Board acceptance
of the resignation of Robert J. Stonebraker,
Summer Assistant, Division of Research and
Statistics, effective the close of business
December 20, 1966.
Governor Shepardson today approved on behalf
of the Board the following items:
Item
Letter to the Federal Reserve Bank of Richmond (copy attached as
approving the appointment of Claude R. Taylor as examiner.
_
Letter to the Federal Reserve Bank of Kansas City (copy attached
ds Item No. 10) approving the appointment of Perry Alexis de Valpine
aS
examiner.
Memoranda recommending the following actions relating to the
Board' staff:
teok•
----z.„
11§l..on of ,,appointment
in the
Joseph C. Golden, Senior Economist (visiting professor)
.
.
liking
through
Research
and
Statistics,
of
s
Markets Section, Division
ePtember 1968.
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Federal Reserve Bank of St. Louis
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Meritorious salary increases
Name and title
effective January 1
Division
1967
Basic annual salary
From
To
Office of the Secretary
Ruth W. Eschmeyer, Senior Records Clerk
M. Elizabeth Jones, Technical Assistant
Mary Anne Lostaunau, Secretary
Jeanne K. Semia, Technical Assistant
$ 6,211
10,796
6,263
10,796
$ 6,387
11,111
6,461
11,111
6,263
7,451
6,461
7,649
15,629
16,675
16,675
16,675
7,066
9,221
8,479
5,256
16,152
17,198
17,198
17,198
7,305
9,536
8,740
5,416
14,217
13,769
5,859
14,665
14,217
6,035
14,217
14,217
8,218
14,665
14,665
8,479
5,507
5,683
Legal
Virginia A. Callahan, Secretary
Verna P. Ryon, Secretary
Research and Statistics
Edward C. Ettin, Economist
Nathaniel Greenspun, Economist
Dorothy S. Projector, Economist
Orville K. Thompson, Economist
Cornelia Motheral, Economist (5-hour day)
;James L. Kichline, Economist
Nancy1)
McCaslin, Technical Editor
'`am°na K. Harlow-Rao, Statistical Clerk
International Finance
Charles
C. Baker, Jr., Economist
1!°dneY H. Mills, Jr., Economist
'°semary V. Jordan, Secretary
Examinations
Robert C. Burton, Review Examiner
'
t&il M. Poundstone, Review Examiner
'uward W. Healey, Assistant Federal
Reserve Examiner
Personnel Administration
?atricia E. Cardosik, Secretary
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Meritorious salary increases (continued)
Name and title
Division
Basic annual salary
To
From
Administrative Services
Mary M. McDowell, Editorial Assistant
Clayton B. Stinson, Assistant Head Messenger
Clifford H. Wallace, Guard
Geraldine M. Venable, Clerk-Cashier
Phillip M. Wiggins, Lead Messenger
$ 7,055
4,413
4,269
4,989
4,058
$ 7,253
4,557
4,413
5,122
4,191
9,262
9,523
12,064
10,927
8,740
12,443
11,306
9,001
4,413
4,557
Office of the Controller
Susie T. Oros, Senior Accountant
Data Processing
Donald B. Fitzhugh, Analyst
James D. Goetzinger, Senior Programmer
,
"
-nofred F. Altshuler, Senior Chart
Machine Operator
Gloria A. Chapuis, Keypunch Operator
;
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 1
12/21/66
WASHINGTON, O. C. 20551
ADDRESS orriciAL CORRESPONDENCE
TO THE EIOARD
December 21, 1966
Board of Directors,
The Detroit Bank and Trust Company,
Detroit, Michigan.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by The Detroit Bank
and Trust Company, Detroit, Michigan, of a branch at the
southwest corner of the intersection of West McNichols
and Meyers Roads, Detroit, Michigan, provided the branch
is established within six months from the date of this
letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
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Federal Reserve Bank of St. Louis
a 14.
BOARD OF GOVERNORS
Item No. 2
12/21/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, ID. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 21, 1966
Board of Directors,
Community Bank and Trust Company,
Paoli, Pennsylvania.
Gentlemen:
The Board of Governors of the Federal
Reserve System extends to January 14, 1968, the
time within which Community Bank and Trust Company,
Paoli, Pennsylvania, may establish a branch at the
northeast corner of the intersection of Routes 202
and 363 in Tredyffrin Township, Chester County,
Pennsylvania.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No. 3
12/21/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 21, 1966.
Chase Manhattan Overseas
Banking Corporation,
1 Chase Manhattan Plaza,
New York, New York. 10005
Gentlemen:
As requested in your letter of December 2, 1966,
the Board of Governors extends to January 4, 1968, the time
within which your Corporation may purchase up to 50 per cent
of the shares of Banque de Commerce, Antwerp, Belgium, at a
cost of approximately US$5,400,000, as authorized in the
Board's letter of January 4, 1966.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No. 4
12/21/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 21, 1966.
Continental International
Finance Corporation,
231 South LaSalle Street,
Chicago,
Illinois. 60690
Gentlemen:
As requested in your letter of November 18, 1966, the
BOard
of Governors grants consent for your Corporation to purchase
and hold approximately 1,980 shares
of Banque Franco-Suisse pour le
Iaroc, Casablanca, Morocco, and approximately 2,448 shares of Societe
mal°biliere Les Hesperides S.A., Casablanca, Morocco, at a total cost
() approximately US$600,000, provided such shares are acquired within
°Ile Year from the date of this letter.
The foregoing consent is given with the understanding that
investments now being approved, combined with other foreign loans
investments of your Corporation, Continental Bank International,
an
w d Continental Illinois National Bank and Trust Company of Chicago,
not cause the total of such loans and investments to exceed the
gelrlidelines established under the voluntary foreign credit restraint
fort now in effect and that due consideration is being given to the
Priorities contained therein.
the
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
)
Item No. 5
12/21/66
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
the Matter of the Application of
BAYSTATE CORPORATION,
BOSTON, MASSACHUSETTS,
approval of the acquisition of
ii tiag shares of The Merchants
!
iitional Bank of New Bedford, New
eclford, Massachusetts.
ORDER APPROVING APPLICATION UNDER
BANK HOLDING COMPANY ACT
There has come before the Board of Governors, pursuant to
section 3(a) of the Bank Holding Company Act of 1956 (12 U.S.C.
1842(a),
48441ended by Public Law 89-485) and section 222.4(a) of Federal Reserve
44Alat.4
Y (12 CFR 222.4(a)), an application by Baystate Corporation,
toato
-ns Massachusetts, a registered bank holding company, for the Board's
Pproval of the acquisition of up to 100 per cent of the voting
share
a of The Merchants National Bank of New Bedford, New Bedford,
Nasac
husetts.
As required by section 3(b) of the Act, the Board notified the
NIPtr---4-er
nil
of the Currency of receipt of the application and requested
lit
ews and recommendation.
1 of the application.
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Federal Reserve Bank of St. Louis
The Comptroller interposed no objection to
11 4,11
Lk ii.)
-2-
Notice of receipt of the application was published in the
NIeral Register on October 12, 1966 (31 Federal Register 13183), which
Provided an opportunity for submission of comments and views regarding
the
Proposed acquisition. Time for filing such comments and views has
elqqred and all those filed with the Board have been considered by it.
IT IS HEREBY ORDERED, for the reasons set forth in the Board's
44rement of this date, that said application be and hereby is approved,
hovided that the acquisition so approved shall not be consummated
(4) before the thirtieth calendar day following the date of this Order
()
3 later than three months after said date.
Dated at Uashington, D, C., this 21st day of December, 1966.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Shepardson, Mitchell, Daane, Maisel, and Brimmer.
Voting against this action:
Governor Robertson.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
CSEAL)
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Federal Reserve Bank of St. Louis
4
Item No. 6
12/21/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY BAYSTATE CORPORATION, BOSTON, MASSACHUSETTS,
FOR APPROVAL OF ACQUISITION OF SHARES OF
THE MERCHANTS NATIONAL BANK OF NEW BEDFORD,
NEW BEDFORD, MASSACHUSETTS
STATEVENT
Baystate Corporation, Boston, Massachusetts ("Applicant"),
a
r
-egistered bank holding company, has filed with the Board, pursuant
to section
3(a) of the Bank Holding Company Act, as amended ("the
Aot ti\
1, an application for approval of the acquisition of up to 100 per
of the voting shares of The Merchants National Bank of New
iled°r(1) New Bedford, Massachusetts ("Bank").
Applicant, one of the two registered bank holding company
1/
Rroups
(adjusted
operating in Massachusetts, at December 31, 1965,
for.
equisition on May 31, 1966, of Lynn Safe Deposit and Trust
Co
'''n3r) controlled 11 banks, which operated 130 offices with total
4Po
slts of about
$700
million.
Bank, with total deposits of $40.5 million, operates six
Of E
tees in
the City of New Bedford, Bristol County, Massachusetts.
NA47
DI
'
edford is situated approximately 56 miles south of Boston, and
33
les southeast of Providence, Rhode Island. Bank's primary service
uni
dat -J-ess otherwise indicated, all banking data noted are ns of this
Q.
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Federal Reserve Bank of St. Louis
-22/
area
consists of the City of New Bedford and the contiguous towns
of Acushnet, Dartmouth, and Fairhaven.
Views and recommendation of supervisory authority. - As
l'equir0 by section 3(b) of the Act, notice of receipt of the application
was given to, and views and recommendation requested of, the Comptroller
of the Currency. The Comptroller interposed no objection to approval
°f the application.
Statutory considerations. - The Act prohibits Board approval
Of
any proposed acquisition which would result in a monopoly, or
further any combination, conspiracy, or attempt to monopolize the
business of banking in any relevant area.
Nor may approval be given
Where the
Board finds that the effect of a proposal may be substantially
to lessen competition, or in any other manner be in restraint of trade,
11141ess such anticompetitive effects are clearly outweighed by the
1313bable effect of the transaction in meeting the convenience and
n"da of the area to be served.
The Board is also required to consider
the financial and managerial resources and future prospects of the
ballk holding company and banks concerned, and the convenience and needs
Of the
community to be served.
Competitive effects of the proposed acquisition. - There
are
two bank holding company groups operating in the State of
/laasachusetts,
Shawmut Association, Boston, Massachusetts, and
APP1
icant, which, respectively, rank second and third among the
/
l'rld:he area from which Bank derives 94 per cent of its deposits of
'widuals, partnerships, and corporations.
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Federal Reserve Bank of St. Louis
1'1, 1
-3-
largest commercial banking organizations in the State.
Combined,
Shawmut and Applicant control 27.4 per cent of the offices and 20.3
Per cent of the total deposits of commercial banks in the State.
APPlicant's acquisition of Bank would increase those percentages,
esPectively, by only .1 and .6 per cent.
Applicants control of
97 Per cent of the aforementioned total deposits would be increased
to 10.2 per
cent.
Applicant is the only bank holding company operating in
atol County.
Its only subsidiary in the county is Manufacturers
°at:tonal Bank of Bristol County, which has its head office in North
Att
leborough some 35 miles northwest of New Bedford, with total deposits
$15 million, representing 5 per cent of the total deposits of the
Co011ercial banks in the county.
Acquisition of Bank would increase
to 2° Per cent Applicant's control of the deposits held by all
el3lIalercial banks in Bristol County.
Within Bank's primary service
there are three commercial banks, including Bank, with aggregate
t°tal deposits of $87 million.
Bank
is
the largest of these three,
11°14ing approximately 47 per cent of their aggregate total deposits.
4°c/ild in size of the three banks, and Bank's principal competitor, is
the Pirst National Bank of New Bedford which, with total deposits of
$3g
m xllion, controls 45 per cent of such aggregate deposits. The
4411eat of the three banks in Bank's service area has total deposits
Of $7
million.
Three other commercial banks located in Fall River,
13 tail
4-es from New Bedford, also compete within Bank's primary service
44a, These banks hold deposits of $39 million, $33 million, and
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Federal Reserve Bank of St. Louis
-4-
$24 million, respectively.
Bank controls 22 per cent of the
sagate deposits held by the six New Bedford area and Fall River
tormercial banks.
In addition to the aforementioned six commercial banks, at
least six other commercial banks, four located in Boston, 56 miles
north of New Bedford, and two in Providence, Rhode Island, 33 miles
Of New Bedford, each substantially larger than Bank, also compeul
for the large business accounts originating within Bank's primary
service area.
Competing with the aforementioned commercial banks for
business originating within Bank's service area are four savings banks
located therein which, in the aggregate, hold 58 per cent of the
3/
(I(
g'csits of all banks.— in the Fall River - New Bedford area, compared
414 9 per cent thereof controlled, respectively, by Bank and First
Naticnal
Bank of New Bedford. The evidence of record supports the
eonclusion that consummation of Applicant's proposal would not result
in a
Licmopoly, nor appear to be in furtherance of any combination or
cons
Piracy to monopolize the business of banking in the State of
has
'
I'dchusetts or in any relevant section of the State.
The aforementioned Manufacturers National Bank of Bristol
e°141tY is the closest of Applicant's subsidiary banks to New Bedford,
The
Primary service areas of Manufacturers and Bank do not overlap
414
'according to Applicant, Manufacturers has but one account originating
tth
-n Bank's primary service area,
eference herein to "all banks" includes savings banks.
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Federal Reserve Bank of St. Louis
-5-
1`;',12
The absence of meaningful competition between Manufacturers
arld Bank is established in the record before the Board.
The unlikeli-
hood of significant future competition arising between those banks is
t'easonably concluded in view of the disparity in the sizes of the banks,
the distances separating their closest offices (35 miles), and the
umber of banking offices located between them.
Considering next the probable effect of Bank's acquisition
by
APPlicant on the banks with which Bank competes, Bank's primary
84-vice area is served by five banks in addition to Bank.
Two of the
five banks
are located in the area, and the remaining three are in
Pall River,
some 13 miles from New Bedford.
com
petitors have
$7 m
illion.
deposits
Bank's New Bedford area
totaling, respectively, $39 million and
The record reflects further that at least six commercial
banks, four located in Boston, Massachusetts and two in Providence,
11/1"e Island, each substantially larger than Bank, also compete for
the larger business accounts originating within Bank's primary service
Vigorous competition for savings is offered by four savings
batiks) three of which, with deposits ranging from $50.7 million to
$117
are larger than Bank.
Although it is possible that Bank's $7 million New Bedford
at." competitor may initially experience a different, and perhaps
"Illelthat increased, competitive force from Bank's affiliation with
Apo,
''cant, it is the Board's judgment that the total impact on that
blItk
'4i11 not be significantly greater than that now faced by it from the
es:Itch,
'etcial and savings banks with which it is presently in competition
itivarying degrees.
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Federal Reserve Bank of St. Louis
-6-
On the basis of the evidence presented, the Board concludes
that consummation of Applicant's proposal will not result in any substantial lessening of competition, nor will it in any other manner be
in restraint of trade.
Financial and managerial resources and future prospects. APPlioant's financial resources are regarded as satisfactory, and its
Ptospects favorable, premised in the main on the sound financial history
sIld condition and the satisfactory deposit and earnings growth of its
subaidiary
banks. The managements of Applicant and of its subsidiary
banks are considered to be satisfactory.
Bank's financial resources are likewise viewed as satisfactory.
Its
management, apparently less aggressive in operations than its local
c111Petitors, is nevertheless capable. Bank's chief executive officer
is Past retirement age, and the ages of three of Bank's four vice
"esidents range from 62 to 75 years.
While Applicant is in position
to strengthen Bank's present management and to attract potential
illsnagement replacement, no immediate change in management personnel is
ecIntsmplated.
Moreover, Bank's size and location would appear to offer
8kifficient inducement as to enable Bank, apart from Applicant's assistance,
to attract executive level personnel capable of filling future vacancies.
'uingly, the sole aspect of Applicant's proposal relating to manageSuccession that offers weight toward approval of the application is
the ,
'
-ikelihood that a less conservative attitude toward extension of
batik
irlg service might more immediately be reflected in Bank as a
ba idiary of Applicant than would otherwise be the case.
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Federal Reserve Bank of St. Louis
-7-
P
In summary, the Board finds that the evidence bearing on
the banking factors is consistent with, and offers slight weight toward,
aPproval of the application.
Convenience and needs of the areas to be served. - Bank's
Primary service area, earlier delineated, has a population of
4PPr°ximately 140,000, 100,000 of which reside in and around New Bedford,
the situs of Bank's six offices.
New Bedford is an important port city
for the movement of area products including food, fuel
electrical machinery, and rubber products.
oil, textiles,
According to the most
recent data available, some 2,400 New Bedford area business firms,
ilicluding 261 manufacturers, employed nearly 40,000 persons.
4
Acushnet
a relatively small manufacturing and agricultural town, and Dartsmouth
arid Fairhaven are residential suburbs of New Bedford.
No showing has been made that the banks serving the businesses
44d residents within Bank's primary service area are lacking for any
Illaior banking service.
While Bank could, and as a subsidiary of
Apn i,
r'Leant apparently would, expand somewhat the scope and nature of
its a
ervices, such an occurrence would, by the nature of the service
14411.(Ivements indicated, benefit primarily Bank, and less significantly
he Public.
This result offers but little weight for approval, but
is
'unsistent therewith.
Summary and conclusion. - In the light of the factors set
forth
facts
terlit
in the Bank Holding Company Act, and on the basis of the relevant
Of record, the Board concludes that Applicant's acquisition of
will net have significantly adverse competitive consequences,
that considerations relating to the banking factors, and to the
enience and needs
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Federal Reserve Bank of St. Louis
of the area to be served, together offer some
-8-
8141Port for approval of the application.
Accordingly, it is the
hardis judgment that the proposed acquisition is in the public
illtexest and that the application should be approved.
De
cember 21, 1966,
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Federal Reserve Bank of St. Louis
Item No. 7
12/21/66
DISSENTING STATEMENT OF GOVERNOR ROBERTSON
I do not agree with the conclusion of the majority that
IlaYstate's proposed acquisition of The Merchants National Bank of New
41ford would be in the public interest.
Baystate presently controls
18 pe
r cent of the offices and 10 per cent of the aggregate deposits of
11 commercial bans
k in the State.
The five largest commercial banking
(14Anizations in the State, among which are included Baystate and Shawmut
48°ciation, also a registered bank holding company, control about 65 per
cent of the aggregate deposits of commercial banks.
Merchants National
13k14 is the largest commercial bank in Bristol County, controlling nearly
15
Per cent of the deposits of commercial banks therein. These deposits
/'llen added to those held by Baystate's present subsidiary located in
tri...
"°1 County would give Baystate control of 20 per cent of the deposits
ectr-mercial banks in the county.
Within Bank's primary service area,
4ecluisition of Bank by Baystate would give the holding company control of
abou
t 47 per cent of the deposits of commercial banks in that area.
In the face of the foregoing evidence of present and prospective
entration of bank deposits, both in a few large banking organizations
'
arld
More particularly, under Applicant's control, the statutory requireis clear - approval of Applicant's proposal can be given only upon
4 sh
°Iling that the anticompetitive effects evidenced in the proposal are
clea
outweighed in the public interest by the probable effect of the
trki
saction in meeting the convenience and needs of the communities involved.
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Federal Reserve Bank of St. Louis
-2-
1
- ,`•44'
Nothing in the record before the Board suggests an existing
lac of
major banking services.
Nor is the majority's approval premised
°4 a finding of any such deficiency.
tota
lpopulation
The communities here involved, with
of 140,000, have immediately available three commercial
bani.
two of which are of $40 million size, and four savings banks,
tilree of which are larger than Bank.
In addition, the businesses and
residents
of these communities are served in varying degree and nature by
4't
least nine other commercial banks near the size of or much larger than
Ili41at. In
the foregoing circumstances, Applicant's burden of establishing
that
Consummation of its proposal is related to any existing community need
i3 SUbStantial -
and has not been satisfied in this case.
Accordingly, I would deny the application.
11Qce.rnber 21, 1966.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No. 8
12/21/66
OF THE
OW,
\\t-.
• •;/%4,4..0.
t•
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 21, 1966
Mr, Paul C. Hodge, Vice President,
General Counsel, and Secretary,
Federal Reserve Bank of Chicago,
Chicago, Illinois. 60690
Dear Mr. Hodge:
This is in reply to your letter of November 2, 1966,
inquiring whether a $10 million "guaranty fund" placed by the
Federal Deposit Insurance Corporation ("FDIC") in the Bank of
Commonwealth, Detroit, Michigan ("Bank"),
in connection with the
Bank's purchase of assets and assumption of liabilities of the
Public Bank of Detroit, is a deposit liability against which
reserves must be carried pursuant to section 19 of the Federal
Reserve Act and Regulation D.
In the Agreement dated September 19, 1966, between
the FDIC and the Bank, relating to the rights and obligations
of each with respect to the aforementioned purchase of assets
and assumption of liabilities, it is agreed that, upon the
appointment of the FDIC as receiver, the Bank would purchase
from the FDIC all of the assets of the Public Bank for a gross
Purchase price to be arrived at in accordance with certain guidelines specified in the Agreement. The Agreement provides further
that on a "settlement date" - 18 months from the date of the
execution of the Agreement, i.e., "closing date" - the gross
Purchase price of the assets is to be increased or decreased in
the manner specified in the Agreement to provide a "net purchase
Price".
In order to afford the Bank some protection against
Potential losses on
the assets of Public Bank that it has purchased,
the FDIC has further agreed to place with the Bank a so-called
guaranty fund of $10 million. Under the terms of this additional
undertaking, the fund is to be maintained continuousl until
y
the
settlement date. The Bank has the right to intermingle
the full
!mount of the fund with its assets but has no obligation to pay
interest to the FDIC on
the fund. At settlement date, if the net
Purchase price of the assets is a negative dollar amount, the FDIC
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Federal Reserve Bank of St. Louis
Mr. Paul C. Hodge
-2-
is obligated to pay frawthe fund to the Bank a sum equal to that
dollar amount not in excess of $10 million. The Bank is to pay
interest on any remaining balance at the rate of 5 per cent for
the period from the closing date to the settlement date. The
Bank has the further right to require FDIC to withdraw all or
Part of the fund at any time, but in that event the funds withdrawn are to bear interest at the rate of 5 per cent from the
Closing date. A certain percentage of the fund is to be maintained
after the settlement date in accordance with a schedule in the
Agreement, and these funds will also bear interest at 5, per cent
annually.
The fund here involved was established pursuant to
agreement between the parties in order to facilitate the purchase
°f assets and the assumption of liabilities of the Public Bank of
Detroit by the Bank. In view of this fact, and the unique nature
of the fund, the Board has concluded that the fund is not a deposit
liability but should be considered essentially as a contingent
°bligation of the Bank to the FDIC. It is the Board's opinion,
therefore, that the fund should be carried on the books of the
Bank as "other liabilities" during the period that the fund is
held by the Bank pursuant to the Agreement between it and the
FDIC,
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
't tot:
BOARD OF GOVERNORS
Item No. 9
12/21/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE PICARD
December 21, 1966
Mr. John L. Nosker, Vice President,
Federal Reserve Bank of Richmond,
Richmond, Virginia.
23213
Dear Mr. Nosker:
In accordance with the request contained in
your letter of December 12, 1966, the Board approves
the appointment of Claude R.. Taylor, at present an
assistant examiner, as an examiner for the Federal
Reserve Bank of Richmond, effective December 23, 1966.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
1731
BOARD OF GOVERNORS
OF THE
Item No. 10
12/21/66
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE HOARD
December 21, 1966
Mr. George D. Royer, Jr., Vice President,
Federal Reserve Bank of Kansas City,
64106
Kansas City, Missouri.
Dear Mr. Royer:
In accordance with the request contained in
your letter of December 16, 1966, the Board approves the
appointment of Perry Alexis de Valpine, at present an
assistant examiner, as an examiner for the Federal Reserve
Bank of Kansas City, effective January 1, 1967. Please
advise the salary rate.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
@FedFRASER