The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for December 27, 1965.
To:
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
th respect to any of the entries in this set of
711nutes 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
t_he Secretary's Office. Otherwise, please initial
,
low
If you were present at the meeting, your
initials will indicate approval of the minutes. If
You were not present, your initials will indicate
(341Y that you have seen the minutes.
Chm. Martin
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Minutes of the Board of Governors of the Federal Reserve
SYstem on Monday, December 27, 1965.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Robertson, Acting Chairman
Shepardson
Mitchell
Maisel
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Mr. Young, Senior Adviser to the Board and
Director, Division of International Finance
Mr. Holland, Adviser to the Board
Mr. Solomon, Adviser to the Board
Mr. Molony, Assistant to the Board
Mr. Fauver, Assistant to the Board
n
Mr. Goodman, Assistant Director, Divisio
of Examinations
of
Miss Eaton, General Assistant, Office
the Secretary
Mr. Furth, Consultant
, Bernard,
Messrs. Brill, Koch, Partee, Axilrod
n of
Divisio
the
of
Keir
Eckert, Ettin, and
ics
Research and Statist
n of
Messrs. Baker and Gemmill of the Divisio
International Finance
Money market review.
se-
Mr. Bernard presented a review of Government
rities market developments, referring in the course of his comments to
tables that had been distributed on money and capital market perspective,
on l'ecent interest rate developments, and on bank reserve utilization.
The
ataff then responded to various questions asked by members of the Board,
after which Mr. Gemmill reported on foreign exchange market developments
44d related
matters.
Ettin, Keir, Baker,
Messrs. Goodman, Axilrod, Bernard, Eckert,
Gernmii
and Furth then withdrew and the following entered the room:
12/27/65
-2-
Mr. Hackley, General Counsel
Mr. Solomon, Director, Division of Examinations
Mr. Hexter, Associate General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Kakalec, Controller
Miss Hart and Messrs. Heyde and Smith of the Legal Division
Messrs. Burton, Egertson, and Lyon of the Division of Examinations
Discount rates.
The establishment without change by the Federal
Reserve Banks of Philadelphia, Cleveland, Richmond, St. Louis, Minneapolis,
Kansas City, and Dallas on December 23, 1965, of the rates on discounts
and advances in their existing schedules was approved unanimously, with
the understanding that appropriate advice would be sent to those Banks.
Resort on com etitive factors
A report
Jacksonville -Boone
North Carolina
to the Comptroller of the Currency on the competitive factors
involved in the proposed merger of First National Bank of Boone, Boone,
North Carolina, into First National Bank of Eastern North Carolina,
Jacksonville
North Carolina, was approved unanimously for transmittal
to the Comptroller.
The conclusion read as follows:
The proposed merger of First National Bank of Eastern
North Carolina, Jacksonville, and First National Bank of
Boone would have no adverse effect on competition.
112plication of Barnett National Securities Corporation (Items 1
.
411d 2\
There had been distributed drafts of an order and statement
fleeting the Board's denial on November 3, 1965, of the application
Of B
arnett National Securities Corporation, Jacksonville, Florida, to
accitv
-Lre shares of First National Beach Bank, Jacksonville Beach,
4cks
onville Beach, Florida.
41
12/27/65
$••••
-3After a discussion during which several changes in the statement
were agreed upon, the issuance of the documents was authorized.
Copies
of the order and statement, as issued, are attached as Items 1 and 2.
Research •ro ect on links between monetar
demand •
olic
and
re ate
A memorandum dated December 21, 1965, from Mr. Brill, which
had been
to enter into
distributed to the Board, requested authorization
4 contract with the Social Science Research Council for a research project
the linkages between monetary policy and aggregate demand, that is,
on the effects of financial factors on spending and investing.
The
Project would be undertaken by a research team headed by Professor Franco
11(3digliani of the Massachusetts Institute of Technology and Professor
Albert Ando of the University of Pennsylvania.
Expenditures under the
contract were estimated at $90,000, of which about 40 per cent would be
year
spent in the calendar year 1966 and the remainder in the calendar
This expenditure would be in addition to the $20,000 included
1967.
in the 1966
Statistics for conbudget of the Division of Research and
research
tion of the Social
to be undertaken under the administra
Science Research Council.
proposed project and of
Following a discussion of the presently
the
P°ssibility that other economists holding somewhat different points
Of v.
projects, it was
lew might likewise seek financial aid on research
reed
that it was important to gain as much information as possible on
the 1.
research proposals in this
lnkage process and that any additional
12/27/65
-4-
area should be evaluated on their merits.
Unanimous approval then was
given to the proposed contract with the Social Science Research Council,
as
described in Mr. Brill's memorandum, with the understanding that
this action also authorized any resulting overexpenditure in the approPriate account of the 1966 budget of the Division of Research and
St
atistics.
Commingled investment account (Item No. 3).
In a letter to the
Board dated November 24, 1965, Chairman Patman of the House Banking and
Currency Committee stated that he had asked the Attorney General to
consider criminal action against First National City Bank, New York,
New York, if its plan to launch a proposed commingled investment account
was carried out "in contravention of section 2l, of the Banking Act of
As a result of the request, Mr. Fred M. Vinson, Assistant Attorney
1, had asked the Board in a letter of December 14, 1965, to supply
411Y information
it might have concerning the proposal of First National
CitY Bank, including copies of all documents submitted by the bank in
84PPort of its proposal.
The letter also stated that the Justice Depart-
Itient would be pleased to receive any comments or opinions of the Board
colic
ning the legality of the proposed action.
A distributed memorandum prepared in the Legal Division under
date of
and
December 21, 1965, submitted a draft of reply to Mr. Vinson
refe,_
'
red to various enclosures also proposed to be sent. The memorandum
t oted
wlth respect to a Legal Division memorandum previously sent to
12/27/65
-5-
Chairman
Patman on this subject, that it was not customary to release
un published documents prepared for a Congressional Committee to other
Persons or agencies, but in view of Chairman Patman's interest, as
indicated
by his letter to the Attorney General, it was felt the Board
might like to make an exception in the present case.
Unanimous approval was given to furnishing the suggested material
to th
a
e Justice Department.
A copy of the letter sent to Mx. Vinson is
ttached to these minutes as Item No. 3.
Chase Manhattan proposal.
In response to a question regarding
the status of the proposal of The Chase Manhattan Bank (National Association), New York, New York, to acquire stock of Liberty National Bank
and Trust Company of Buffalo, Messrs. Hackley and Hexter recalled that
Chase's request for a section 301 determination, or in lieu thereof a
143ting permit, was being held in abeyance pending receipt by the Board
from
counsel for Chase of a brief on the voting permit matter. Meanhowever, the Comptroller of the Currency had advised Chase that
the Proposed transaction could not be consummated without his approval
uhde
r the Bank Merger Act. The Legal Division had now received from
ecslinsel for Chase a copy of an application addressed to the Comptroller.
That
application therefore was now before the Comptroller, who presumblY llould request competitive factor reports, and until his decision
Ilas made the Board apparently had no reason to take action.
If the
C°mPtroller should approve the application, the matter of Chase's
ecitiest for a voting permit would again become active.
A
12/27/65
-6-
After discussion of various facets of the matter, it was
generally agreed that no action on the part of the Board was called
for at this time.
The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
a memorandum from the Division of Bank
Operations dated December 21, 1965,
recommending that Robert B. Haycock,
Analyst in that Division, be designated
as a witness to the mutilation of facsimile signature plates of Reserve Bank
officers in lieu of Daniel E. Lucas.
Secre
,
[2f7
1 '
44
Item No. 1
12/27/65
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
Itt the
Matter of the Application of
8ARNETT NATIONAL SECURITIES CORPORATION,
JACK
SONVILLE, FLORIDA,
tar
sharapproval of the acquisition of voting
eJ3
of First National Beach Bank,
nville
Beach, Jacksonville Beach,
4.0rida,
ORDER DENYING APPLICATION UNDER
BANK HOLDING COMPANY ACT
There has come before the Board of Governors, pursuant
to
section 3(a)(2) of the Bank Holding Company Act of 1956
(12 U.S.C.
1842(a)(2)) and section 222.4(a)(2) of Federal Reserve
Y (12 CFR 222.4(a)(2)), an application on behalf of
84rtlett
a
National Securities Corporation, Jacksonville, Florida,
t
tegis-ered
bank holding company, for the Board's approval of the
c11(14isi t-4
---40n of 80 per cent or more of the voting stock of First National
11401 13
-11 2 Jacksonville Beach, Jacksonville Beach, Florida.
As required by section 3(h) of the Act, the Board notified
41Q co
rliPtroller of the Currency of receipt of the application and
(111set d
e
h
'Lis views and recommendation thereon.
The Comptroller voiced
- 442f
-2-
Notice of receipt of the
4° objection to approval of the application.
41'111ication was published in the Federal Register on August 25, 1965
(3o Federal Register 11006), which provided an opportunity for subnliesien of comments and views regarding the application. Time for
fiat,
"g such comments and views has expired and all comments and views
ftled with
the Board have been considered by it.
IT IS HEREBY ORDERED, for the reasons set forth in the Board's
Stat
etnent of this date, that said application be and hereby is denied.
Dated at Washington, D. C., this 27th day of December, 1965.
By order of the Board of Governors.
Voting for this action:
Unanimous, with all members present.
(Signed)
Merritt Sherman
Merritt Sherman,
Secretary.
(sEAL)
41,4,
Item No. 2
12/27/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY BARNETT NATIONAL SECURITIES CORPORATION FOR APPROVAL
OF THE ACQUISITION OF VOTING SHARES OF FIRST NATIONAL BEACH BANK,
JACKSONVILLE BEACH, JACKSONVILLE BEACH, FLORIDA
STATEMENT
Barnett National Securities Corporation, Jacksonville, Florida
..
(11A1101
leant" or "Barnett"), a registered bank holding company, has
Company Act of
aPPlied to the
Board of Governors, under the Bank Holding
1956
("the Act")
of the
for permission to acquire 80 per cent or more
11°ting stock of First National Beach Bank, Jacksonville Beach, Jacksonville
Florida ("Bank").
Views and recommendation of supervisory authority. - As
ed
tile
by
Comptroller
section 3(b) of the Act, the Board notified the
Currency of receipt of the application and requested his views
alldrecommendation
44rova1
thereon.
The Comptroller voiced no objection to
of the application.
requires the Board
Statutory factors. - Section 3(c) of the Act
to tak
(1) the financial
e into consideration the following five factors:
histon,
concerned;
-I and condition of the holding company and the banks
(Z) heir
management; (4) the
Prospects. (3) the character of their
topive
communities and the area concerned;
Ilience, needs, and welfare of the
-2-
atici(5) whether or not the effect of the proposed acquisition would be
to
eXPand the size or extent of the bank holding company system involved
"Q limits consistent with adequate and sound banking, the public
igter
est, and the preservation of competition in the field of banking.
The Board has this date announced approval of an application
by t
arnett to acquire controlling stock ownership of its affiliate,
tattle
tt First National Bank of Jacksonville, Jacksonville, Florida.
First National
kee()rdinglY, for purposes of this Statement, the Barnett
11411k oc
k
Applicant.
Jacksonville will be treated as a subsidiary bank of
Applicant's holding company system is comprised of six
1/
had combined deposits
subsidiary banks which, at December 31, 1964,
(341)tlt $235 million.
Three of the banks are in Jacksonville and
the °ther three are located, respectively, at St. Augustine, DeLand,
aocl
to acquire
--(3°°a. By this application, Applicant seeks permission
0
nlY bank in Jacksonville Beach, located about 18 miles east of
44eks()tiville.
ot
Bank has deposits of $9.4 million.
management
lInancial history and condition, prospects, and
A Dii
ant and Bank. - The financial history and condition of
Ap
°lea
nt are satisfactory. Its prospects, viewed in the light of
the
8°114d condition and satisfactory deposit and earnings growth of
Its -Qu°sidiary banks, appear favorable. Its management is regarded
.aPable and experienced.
8
as of this date.
otherwise indicated, all banking data noted are
-3-
Bank was chartered as a State banking institution in 1938
arid
converted to a national bank in 1960.
StenA
Bank's growth has been
-"Y and its operations reasonably profitable.
and condition are satisfactory.
kture
scWad
Bank's financial
Based thereon, and on the
growth potential of its service area, prospects for Bank's
growth, eitl;er continuing operation independent of Applicant's
e°11tr°1 or as a subsidiary of At.plicant, ap,pear favorable.
Bank's principal ocni -;er and chitaf executive officer,
41thou,
g" 74 years of age, is regarded as a competent bank officer.
Icecuttve vice president, who is 54 years of age, has had more
44 25 Years' banking experience (11 years with Bank) and is also
e°11sidered
competent.
Although the latter-mentioned officer has
Suffe
ted ill health, it is not made to appear that his earlier illness
Vould
Prevent his taking charge of Bank when the chief executive retires.
Applicfmt asserts that the age and health factors respecting
these
tv° princioal officers will soon present a management succession
Nbien,
— that cannot be sOlved internally and that Bank, because of its
tize
unable to attract and retain qualified top management personnel.
i8
t
he Board recognizes that Applicant could, with its pool of
eed managerial talent, readily solve management succession
hoblem
8
stich
which Bank might encounter, it does not agree that Bank could
an independent institution, provide its own solution to any
management
131.°blems. Apart from the fact that the problem of
klecess
time to be conjectural,
l°n or replacement in Bank appears at this
-4even ,
suould Bank have need to seek management succession from outside,
it aPPears to the Board that Bank's efforts would prove successful.
i8a
SW
million-asset institution with a good earnings record.
Bank
It is
8it4ated only 13 miles from Jacksonville and within that city's metropolitan
4". These considerations should give Bank reasonable, and perhaps
"vantageous,
access to qualified managerial talent within and beyond the
State
ur Florida. Nothing in the record before the Board suggests a contrary
ec)nelusion.
Accordingly, while Applicant's acquisition of Bank could
"Wide Bank
with a convenient and reasonable solution to any future
Ptobi
ems of management succession, for the reasons given this consideration
cic
es n
-°L weigh significantly in favor of approval of the application.
Convenience, needs
and welfare of the communities and
ncerned. - Bank's primary service areais delineated roughly
44
4 rec t.
- -angular area extending along the Atlantic coastline for
44toxi
—matelY 15 miles from north to south and 2-1/2 to 4 miles from
east to
- 'west. The area has a population of about 33,000 persons,
reke
senting an
annual growth rate of about 10 per cent since 1940,
4titi e
4"mPasses, from north to south, the cities of Atlantic Beach,
11QAtua
,
- 44ench, Jacksonville Beach, and Ponte Vedra (hereafter somet41
es r
billlati efarred to collectively as "tfeBeaches"). There is one other
1144 e
n the area, Ocean State Bank (deposits $4.4 million), which
st4
Beach, 1-1/3 miles to the north
ut 41114.blished in 1962 in Neptune
Th
e are
deposits
-41divirla
from which Applicant estimates virtually all of Bank's
derived.
are
deposits")
--4als, partnerships, and corporations ("IPC
1
-5-
a large
At the northern end of the primary service area is
nayEa
V
harbor, Mayport Naval Station.
Atlantic, Neptune, and Ponte
edra Beaches are, for the most part, residential beach areas, while
tourist
sacks
onville Beach is primarily a small business, motel, and
The cities are linked together along the coast with no rural
area.
areaS
separating their respective corporate limits.
It is Applicant's
4lief that the area will continue to grow residentially as the
sacks
onville
area and as more
suburbs expand away from the downtown
all4 faster highways are constructed connecting the city and outlying
c°rIllamnities.
residing in
According to Applicant, many people now
Atlantic and Neptune Beaches are employed in the City of Jacksonville.
generally
Applicant, while conceding that Bank is now
aervi
g the convenience, needs, and welfare of its service area, asserts
that
) under Applicant's ownership, Bank will be able to provide two
additional important services.
As a result of affiliation with
that
llarnett First
National Bank of Jacksonville, Applicant asserts
k
/411 provide trust services and, with access to National's
e3tiltl.Q1ce and knowledge respecting securities investments, Bank will
be
able to
for its
Provide improved and expanded investment services
e4omers.
nt
As to the proposed provision for trust services, Applica
4tates
no intention either to have Bank seek fiduciary powers or,
sunl.
-" are sought and granted, to install in Bank a trust department.
01,
*$
-6-
available
Ilathet)
Applicant intends that Bank utilize the trust services
atAPPlicant's large Jacksonville Bank.
Save for a closer and more
ttimate
affiliation,
relationship that would be provided by such an
tani
Presently has available to it the services of the trust departments
the three largest banks in Jacksonville, including Barnett First
Natio
tial Bank, on a correspondent bank relationship.
to
With respect to Applicant's proposal to give Bank access
atuett First National's securities investment assistance, it is not
PrOno
r sed that Applicant will install an investment department at Bank,
tiot 4
3-s there evidence of a need for such installation. Further, the
toar i
S of the view that whatever may be the need of Bank's customers
tor
vestment advice or portfolio management, such need can be reasonably
k M a,
'
4equately met by Bank through recourse to available commercial
source
s) or through the large Jacksonville banks, only 18 miles distant,
three
°f which have deposits in excess of $100 million. In the circumsta
Presented, the slightly greater assurance of assistance offered
1)Yth
the
Proposed affiliation does not weigh significantly in favor of
41)pro.
val of Applicant's proposal.
Other services which would be rendered by Applicant to Bank,
sUbsidiary,
management,
include assistance on providing successor
toder4
accounting and check processing, automation, and periodic audit
Vice
ttlitht
tom
s. Although such services would be of some benefit to Bank and
holding
l'esult in more efficient internal operations, Applicant's
these services.
sYstem is not the only convenient source for
-7Advi
ce and assistance in such internal matters are generally available
throuri,
:
4 "
from
banks, and
appropriate supervisory authorities, correspondent
not as
qualified professional organizations, though perhaps
fl°1:11ically from the latter two sources as they would be through a
Parent holding company.
respecting
For the foregoing reasons, while considerations
the t
°nvenience, needs, and welfare of the communities and area conBoard
appear consistent with approval of the application, the
ed
finds
that such considerations offer only limited support therefor.
public interest,
Effect on adequate and sound banking, the
.
and b
record
"king com etition. - On the basis of the evidence of
shcwi
Bank
g (1) the areas within which Applicant's subsidiaries and
t1Qt4
rate, (2) the geographic and business characteristics of those
areas,
and (3) the banking alternatives reasonably available to the
tesidents of Bank's service area, the Board concludes that the
4ekacinville Metropolitan Area is an appropriate market within which
to
the adequacy
evaluate the probable effect of Applicant's proposal on
44(1 8°undness
of banking, the public interest, and the preservation
°thanking
competition.
Consideration is also to be given to certain
t°11ateral, but relevant, aspects of the proposal having State-wide
4ect.
(4)
groups and
There are five registered bank holding company
°the„
operating in
banking group (the "Florida National Group")
1°rida.
the banks and
The six groups control about 13 per cent of
-823 per
cent of all bank deposits in the State.
Applicant's subsidiary
banks constitute 1.2 per cent of the State's banks, and they control
about 3.4 per cent of the deposits of all banks in the State.
14e°sured on a State-wide basis, the addition of Bank to Applicant's
holding company system would not appear to expand the extent of
control of banking resources either by Applicant or by all Florida
banking groups combined to a degree inconsistent or incompatible
Vith
the preservation of banking competition.
Turning to the Jacksonville Metropolitan Area, it is noted
that
this area is coextensive with Duval County.
Of bni,
a --s operating in the County:
There are three groups
the Atlantic Group, with five banks;
lorida National Group, with six banks; and the Barnett Group with
the
three
banks, one of which is its largest subsidiary.
three
banks held, at June 30, 1965, 22 and 23 per cent, respectively,
Let
Of
Applicant's
otal deposits and loans held by all banks in the County.
The
114hanks controlled by the three groups hold, combined, 81 per cent
Of
the IPC
per
deposits, 82 per cent of the total deposits, and 79
cent of the
batiks
loans held by the 24 banks in the County.
Otherwise stated,
that are not associated with the three groups represent about 40
Per cent of all banks in the County, but hold less than 20 per cent
(If th
e dePosits of all banks.
If Applicant's acquisition of Bank were
ns
"TtImated, Applicant's position in the segment of Duval County
e°111Pr
degree of
ising Bank's primary service area would approach the
dorm.
Acquisition
nance occupied by the three groups' banks in Duval County.
1 '7
-9-
Bank would give Applicant control of deposits and loans equal to twohirds of the total deposits and loans now held by the two banks in that
.
area
Consummation of the proposed acquisition would reduce by
°fle the number of non-group banks in the County.
In view of the dominant
Position now held by group banks in Duval County, any further increase
ill
this
position through acquisition by one of the groups of an existing
indePendent bank should be permitted only if favorable considerations
clearly
Board
outweigh the patently adverse competitive consequences.
The
is unable to find such overriding favorable considerations in this
Case.
There are, in the Board's opinion, discernible differences
betvie
en the present proposal and prior acquisitions by bank holding
5/
°11113anies in the Jacksonville area which have received Board approval.-4ch
of
the
earlier cases involved the establishment and acquisition
01
4
new bank.
Board approvals in those cases did not permit, as
aPproval of this application, an immediate increase in the
°Ileen
tration of banking deposits under holding company control,
QIIIIiination of an independent bank, and a decrease in the number of
Ellttllative banking sources. Further, in each of the earlier cases
the
establishment of a new banking outlet was found to be of potentially
Nhificant benefit to the convenience, needs, and welfare of the
4ks°11ville area.
5./
.
Atle,, the Matter of The Atlantic National Bank of Jacksonville and
olhcTrus
t Company, 1959 F. R. Bulletin 1353 (Nov.), In the Matter
ae A tlantic National Bank of Jacksonville and Atlantic Trust
ty, 1961 F. R. Bulletin 917 (Aug.), and In the Matter of Barnett
vi44-,,-,
-"1 Securities Corporation, 1964 F. R. Bulletin 1138 (Sept.).
N
-10-
As earlier stated, Jacksonville Beach is in the Jacksonville
Metro
Politan Area, only 18 miles from Jacksonville.
A substantial
Illirriber of the Jacksonville Beach residents are employed in Jacksonville,
thus
resulting in daily travel between the two areas.
The relatively
short distance, and the fact that two highways connecting the areas
129cc lde the residents of Jacksonville Beach with direct and rapid access
to j
ac sonville, warrant the conclusion that Jacksonville constitutes a
eon— •
vrixent situs for the business and shopping requirements of the
Jacks
-onville Beach residents. It follows, in the Board's judgment, that
the
Jacksonville banks constitute reasonable alternative sources of
4114,,
-g services for these residents. While the record reflects that
a rel. .
National Bank's total deposits
atIvelY small portion of Barnett First
cri
of loans obtained
•n
'glnates I
the Jacksonville Beach area, the volume
by t_
arnett First National Bank from Bank's primary service area is not
4184
from Bank's service
'g uficant.
.r
Barnett First National Bank derives
area
commercial and industrial loans and consumer loans equal in dollar
vutum
respectively, of the total
e to approximately 40 per cent,
c].al and industrial and consumer loans held by Bank.
cance
c)
that
light of the fact
these data becomes more pronounced in the
total loan
"asumer loans comprise nearly 80 per cent of Bank's
10,
St
The signifi-
would eliminate the
Consummation of Applicant's proposal
for loans arising in Bank's
A4icant competition that is evidenced
IIIIITI4tY service area.
-11-
Further, residents of Jacksonville Beach, particularly the
Segnent of the working population employed in Jacksonville, would
be deprived of a reasonably accessible alternative source of banking
service.
The importance of this consideration is to be appraised in
the light of the potential development of the area between Jacksonville
and
Jacksonville Beach.
It may be reasonably assumed that Jacksonville
/3each will increasingly develop as a suburb
of Jacksonville.
As this
and
Occurs, the potential for increased competition between Bank
jneksonville banks, including Applicant's Jacksonville subsidiaries,
1411 increase. The benefits of such increased competition to the
banking
Public would be foreclosed by approval of this application.
14hile the Board cannot predict with certitude the precise nature and
banks of the two areas,
"lume of competition that will develop between the
the evidence of record satisfies the Board that approval of Applicant's
volume of future
Pt°P°sel would foreclose a sufficiently meaningful
CO
Petition as to be inconsistent with the preservation of competitioft in
the field of banking and contrary to the public interest.
On the basis of all the relevant facts as contained in the
l'e"rd before the Board, and in the light of the factors set forth
in section 3(c) of the Act, it is the Board's judgment that the prokcied transaction would not be consistent with the public interest and
that t,e
napplication should therefore be denied.
becember 27, 1965.
At
'A
e
Item No. 3
12/27/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS
OFFICIAL
CORRESPONDENCE
TO THE BOARD
December 28, 1965.
14r. Fred M. Vinson,
.
As sistant Attorney General,
Criminal Division,
Department of Justice,
Washington, D. C.
20530
Dear Mk. Vinson:
h
of December 14, 1965, in whic
This refers to your letter
Governors may have conIlu ask for all information the Board of
City Bank, New York,
onal
t Nati
,yer ning the proposal of the Firs
,
"commingled investment account"
York ("First"), to operate a
ort
submitted by the bank in supp
including copies of all materials
enclosed herewith, together with
Of its
proposal. Such copies are
its proposal and
Copies of Board correspondence to First regarding
a
Patman of the House Banking
legal memorandum supplied to Chairman
discussing the legal
and Currency Committee pursuant to his request,
under section 32 of the Banking
rneiderations relating to the proposal
"let of 1933.
copies of certain documents
The Board has been supplied
Commission in the proceeding
filed with the Securities and Exchange
1940 now pending before that
der the Investment Company Act of
ver, that
proposal. It is assumed, howe
y mBliasion, involving First's
cial
offi
the
in
rence to materials
r°ur letter does not have refe
eniently
conv
more
can
your Department
!"rd of that proceeding which
01
.
lete
comp
e file would be
tai from the Commission, whos
articles that have appeared in
Except for some of the
Aew
equally available to your Department,
spapers and other periodicals,
e-described
erld not, of course, of any real probative value, the abov
matter.
this
rmation of the Board in
terials comprise all the info
asked the Board last March for its
As you are aware, First
Act of
whether section 32 of the Banking
1,,ws on the single question
the
bank
een
betw
ice
interlocking serv
193 (12
U.S.C. 78) would forbid
t
r
I t. Fred M. Vinson
-2-
Following rather
d, on the basis of
lude
conc
Prolonged study of the matter, the Board
the commingled
that
it,
to
the information which had been submitted
ent company"
estm
"inv
an
account, although required to register as
the Investment
of
ns
isio
under the quite different and distinct prov
section 32
of
oses
purp
Company Act of 1940, should be regarded for
nal banking
itio
trad
on
n
atio
a.s nothing more than a somewhat novel vari
t
trus
department
the
of
part
runctions, to be conducted essentially as
er dated
a
lett
in
t,
Firs
rmed
cf the bank. Accordingly, the Board info
y to
appl
not
d
woul
32
ion
sect
JIllY 22, 1965, that the prohibition of
‘
.
osal
prop
that
'he proposal, as the Board understood
'and its proposed commingled investment account.
whether the prohibition
In order to resolve the question
between First and
service
section 32 would apply to interlocking
the Board's initial
unt,
acco
1
:t8
proposed commingled investment
rests in the account
!?nsideration was whether participations of inte
es" within the meaning
nould be regarded as "other similar securiti
long-established position
Of
that section. In view especially of its
oses resemble
!lat shares in ordinary mutual funds (which for many purp
r considering
afte
and
securities,
11e proposed participations) are such
.
',
luded that
d
conc
Boar
n before it, the
Special aspects of the situatio
r
that
unde
section.
red
rities cove
'"o participations would constitute secu
of
to the Board the pertinence of an
This conclusion indicated
t
inan4
or not the proposed action of Firs
1-.LrY into the question whether
1933
of
Act
ing
Bank
;Ight constitute a violation of section 21 of the
the Board suggested in its letter
2 U.S.C. section 378). Accordingly,
consult your Department
Of
July 22, 1965, that First might wish to
and was informed subsequently that
before proceeding with the matter,
August 10, 1965, a copy of which
the
bank had done so, in a letter of
48 included among the enclosed materials.
long-established policy of not
The Board has, however, a
arising under section 21, a criminal
Pressing an opinion on questions
d
in an interpretation publishe
al
ute. This policy was explained
stiat
Banking Act of 1933, as follows:
°rtlY after enactment of the
to the Federal Reserve Board
"The section does not give
matters with
discretion regarding the
any jurisdiction or
section provides
the
,
hand
other
Which it deals. . . . On the
ment for any violation of its
a penalty of fine or imprison
n of the question whether a
Provisions and the determinatio
n is a matter
for such violatio
Person should be prosecuted
tion of the Department of Justice.
entirely within the jurisdic
umstances, an expression of
"In view of these circ
her
rve Board on the question whet
opinion by the Federal Rese
from
afford protection
the section is violated would not
ice upon consideration
Just
of
rtment
prosecution if the Depa
position that a corporation had
of the matter should take the
ecute
should feel it necessary to pros
violated the statute and
41)
etin
Bull
ral Reserve
for such violation." (1934 Fede
.46
Mr. Fred M. Vinson
-3-
ession by the
in
of
the
ss
criminal activity could have serious implications, regardle
legal correctness of the opinion.
that any expr
qually important, of course, is the fact
5Boar
itution was engaging
inst
an
d of an opinion that a person or
rked that in another
In addition, it might be rema
umstances
interpretation, also published in 1934 when the circ
the minds
surrounding enactment of the statute were still fresh in
view that "certificates
of commentators, the Board pointed out that its
issued in series, and other
°f participation based on mortgages, notes
s which are not ordinary mortgage
similar obligations secured by mortgage
s, be regarded as "securities"
notes" might, depending on the circumstance
Or purposes of section 32.
d as an expression of
. . . should not be construe
ons
mortgage notes and other obligati
Opinion by the Board that
ed
ider
cons
be
[or should not]
secured by mortgages should
other securities' within the
or
s,
'bonds, debentures, note
the Banking Act of 1933. Said
meaning of section 21(a) of
of fine or imprisonment for
section 21 provides a penalty
and the interpretation of the
violation of its provisions,
the
is a matter entirely within
provisions of that section
nt of Justice."
Jurisdiction of the Departme
302)
(1934 Federal Reserve Bulletin
eves that the question whether a
The Board, therefore, beli
bant. in
function, may be "engaging in the
.-,
performing the proposed
d
for the purposes of section 21, woul
rsiness" of issuing securities
and
ts,
that
cour
the
and
Department
!!e within the jurisdiction of your
Board to take a position on the
the
for
It would not be appropriate
matter.
ce
enclosed materials will be of assistan
It is hoped that the
d
the
that
Boar
feel
you
if
or
to,
further questions,
n Jou. If you have any
do
not
se
plea
way,
any
staff in
ts staff can assist you or your
hesitatea
to so advise us.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
Enclosures
@FedFRASER