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609
Minutes for
To:
Members of the Board
From:
Office of the Secretary
December 30, 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
Minutes of the Board of Governors of the Federal Reserve
System on Friday, December 30, 1966.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Robertson, Vice Chairman
Shepardson
Daane
Maisel
Brimmer
Sherman, Secretary
Kenyon, Assistant Secretary
Holland, Adviser to the Board
Solomon, Adviser to the Board and Director,
Division of International Finance
Mr. Molony, Assistant to the Board
Mr. Solomon, Director, Division of Examinations
Miss Eaton, General Assistant, Office of the
Secretary
Mr. Morgan, Staff Assistant, Board Members'
Offices
Mr.
Mr.
Mr.
Mr.
Messrs. Brill, Koch, Axilrod, Eckert, Bernard,
Ettin, Fry, Keir, and Rosenblatt of the
Division of Research and Statistics
Messrs. Sammons, Hersey, Gemmill, and Ruckdeschel,
and Mrs. Junz of the Division of International
Finance
Money market review.
Mr. Bernard reported on the Government
securities market, Mr. Fry on bank credit projections, and Mr.
Ruckdeschel on foreign exchange markets.
Copies of the tables and charts
distributed at the meeting have been placed in the Board's files.
Following discussion, all members of the research staff except
Messrs. Brill and Sammons withdrew from the meeting and the following
persons entered:
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Federal Reserve Bank of St. Louis
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Mr. Hackley, General Counsel
Mr. Hexter, Associate General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Thompson, Assistant Director, Division of Examinations
Mr. Dahl, Assistant Director, Division of Examinations
Mr. Forrestal, Senior Attorney, Legal Division
Mrs. Heller, Senior Attorney, Legal Division
Mr. Egertson, Supervisory Review Examiner, Division of
Examinations
Messrs. Burton, Goodfellow, Lyon, and Poundstone, Review
Examiners, Division of Examinations
Ratification of actions.
Actions taken at meetings of available
members of the Board on December 27 and 29, 1966, as recorded in the
minutes of those meetings, were ratified by unanimous vote.
Discount rates.
The establishment without change by the Federal
Reserve Banks of New York, Chicago, and San Francisco on December 29,
1966, 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.
Approved items.
The following items, copies of which are
attached to these minutes under the respective numbers indicated, were
AREaf.s.1 unanimously after consideration of background material that
had been made available to the Board and clarification of points of
information about which members of the Board inquired:
Item No.
Letter to Dothan Bank & Trust Company, Dothan,
Alabama, approving the establishment of an intown branch.
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Federal Reserve Bank of St. Louis
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Item No.
Order granting motion of Whitney Holding Corporation, New Orleans, Louisiana, to withdraw its
application to become a bank holding company by
acquiring the stock of Crescent City National
Bank, New Orleans, Louisiana, and Whitney National
Bank in Jefferson Parish, Jefferson Parish,
Louisiana; and press release relating thereto.
Applications for foreign investment (Items 4-6).
2-3
The Company
for Investing Abroad, Philadelphia, Pennsylvania, and Wachovia International Investment Corporation, Winston-Salem, North Carolina, had
each applied for permission to acquire up to 35 per cent of the shares
of Banque Europeenne Pour Le Financement et Le Credit, Paris, France.
As pointed out in a distributed memorandum from the Division
of Examinations dated December 28, 1966, and as discussed at this
meeting by Mr. Goodfellow, the Board had as a matter of policy attached
certain conditions in granting its consent to applications by Edge
corporations to acquire a controlling interest in a foreign bank or
company.
In the present case neither of the applicants would itself
have a controlling interest in the foreign bank.
If either application
was being considered in isolation, the conditions would not, under
existing policy, be attached to the consent.
However, this was the
first case in which two Edge corporations between them would have a
controlling interest in a foreign bank.
In the circumstances, the
Board might wish to consider whether the proposed joint investment was
tantamount to a situation where a single corporation owned by two U.S.
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banks sought to acquire a controlling interest in a foreign bank and
whether the conditions to the consent therefore should be included.
Mr. Dahl noted that the Division had not made a formal recommendation.
The form in which the proposed letters to the Edge corpora-
tions were drafted implied that in the Division's view the attachment
of the conditions was not required under existing policy.
At the same
time, the Division did feel that the matter should be pointed up for
the Board's consideration.
Governor Brimmer commented that if this case was being presented
to the Board with implications of establishing a general policy for the
future, he would like to see more work done on it and the Board given
more time for study.
Governor Robertson pointed out that there was some question
Whether the Board should impose the conditions mentioned by Mr.
Goodfellow at any time.
He had tended to lean toward doing so, but
the question was not free from doubt.
In this particular case it seemed
Clear that the two institutions between them were going to control the
foreign bank.
Therefore, unless the Board changed its policy, it would
appear that the aforementioned conditions ought to be applied to the
investment by both banks.
In further discussion questions were raised by members of the
Board relating to the practical effects of imposing such conditions,
and staff brought out that the impact could vary from one situation to
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another.
Some of the Board members then made comments indicating that
they did not feel sufficiently conversant with the subject to reach a
reasoned judgment in the absence of a more thorough analysis by the
staff.
Unless the existing policy was to be changed, it appeared that
the circumstances of the present applications were such that the conditions probably should be imposed, and they would be reluctant to take
action at this time that would have the effect of changing the existing
policy.
Reference was made to the current staff study concerning the
foreign operations of U.S. banks, which it was assumed would include
recommendations pertaining to the question now before the Board.
Inquiry
was made as to when the report on that study would be available, and
Mr. Dahl indicated that at best the report would not be available for
a month or more.
It was pointed out, however, that the two Edge corpo-
on their applirations were anxious to have word of the Board's action
cations, since they would like to proceed with the investment, if
approved, shortly after the first of the year.
In these circumstances, Mr. Solomon (Examinations) suggested
that the Board might want to consider one of two courses of action.
It
could impose the conditions, but with indication to the applicants that
a general review was in process and that, pending completion of such
review, the Board would be prepared to consider modification of the
conditions should particular problems arise due to the special circumstances involved in the proposed investment.
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Federal Reserve Bank of St. Louis
Or the Board could decide
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not to impose the conditions but reserve the right to impose them at a
later date if that seemed appropriate following consideration of the
results of the special staff study.
Members of the Board expressed the view that the first course
of action suggested by Mr. Solomon would be preferable.
Accordingly,
unanimous approval was given to letters to the two Edge corporations
in the form attached as Items 4 and 5.
Consideration then was given to the capital position of FidelityPhiladelphia Trust Company, the parent bank of The Company for Investing
Abroad, it having been noted in the memorandum from the Division of
Examinations that the deterioration in the bank's capital position was
a matter of some concern to the Philadelphia Reserve Bank.
It was
agreed that a letter along the lines recommended by the Division of
Examinations should be sent to the member bank.
Accordingly, unanimous
AUE2,1T1 was given to a letter in the form attached as Item No. 6.
Report on competitive factors.
A report to the Federal Deposit
Insurance Corporation on the competitive factors involved in the proPosed merger of The Milledgeville Bank, Jeffersonville, Ohio, into The
Farmers Bank of Good Hope, Good Hope, Ohio, was approved unanimously
for transmittal to the Corporation, the conclusion stating that the
competitive effects would not be adverse.
Request for permission to accept drafts or bills of exchang
SItems 7 and 81.
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Federal Reserve Bank of St. Louis
Bankers Trust Company, New York, New York, had had
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permission from the Board since 1919 to accept drafts and bills of
exchange for the purpose of creating dollar exchange.
The bank had now
made application for permission to accept drafts or bills drawn upon
it by banks or bankers in the Republic of the Philippines.
That would
require the addition of the Philippines to the list of countries approved
by the Board "as countries whose usages of trade require the furnishing
of dollar exchange .
." pursuant to Regulation C (Acceptance by Member
Banks of Drafts or Bills of Exchange).
The New York Reserve Bank recommended not adding the Philippines
to the list of countries, for reasons set forth in a letter from Vice
President Holmes, a copy of which was attached to a distributed memorandum from the Division of Examinations dated December 21, 1966.
Among
the reasons cited by the New York Bank was the fact that a study in
depth of bankers' acceptances had been authorized in September 1966 by
the Conference of Presidents of the Federal Reserve Banks and was
Presently being conducted by the Subcommittee on Bankers' Acceptances.
One aspect of the study would be dollar exchange acceptances, including
the matter of usages of trade.
The Reserve Bank felt that until the
study had been completed, the current list of countries, which had
remained constant since 1922, should continue unchanged unless the
circumstances unquestionably conformed to the requirements of the existing regulations, rules, and interpretations of the Board.
The Reserve
sank did not believe that the circumstances relating to the application
by Bankers Trust Company met that test.
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Federal Reserve Bank of St. Louis
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-8-
For reasons set forth in the December 21 memorandum, the Legal
Division recommended that the request of Bankers Trust Company be
granted.
The Division felt, in essence, that denial of the application
on the ground that bankers in the Philippines followed the practice of
remitting in the form of checks and cable transfers would be discriminatory because other countries presently entitled to draw drafts for
dollar exchange also paid for external debts by check and cable transfers.
The Division recommended, therefore, that the Philippines be
added to the list of designated countries, and that the Reserve Banks
be advised that until completion of the current study of bankers'
acceptances the Board would add to the list those countries whose seasonal patterns of exports and imports indicated a need for the dollar
exchange acceptance facility for short periods of time.
Such action
would effectively rescind the Board's 1916 interpretation of the term
"usages of trade" as meaning an already-established banking practice
of using three-month bankers' bills in making payment of foreign obligations instead of remitting by checks or cable transfers.
It was noted
that the practice of using bankers' three-month drafts seemed to have
long since died out and that probably all of the countries now on the
Board's list followed the practice of making remittance in payment of
foreign debts by means of checks and cable transfers.
The Division of Examinations concurred in the recommendation
of the New York Reserve Bank for denial of the application, feeling that
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the addition of countries to the list at the present time would compound the existing anomalous situation and that it would prejudge the
issue prior to the completion of the acceptance study.
Representatives of the Legal and Examinations Divisions commented in amplification of the views of the respective Divisions, their
remarks being based generally on the distributed material.
Mr. Hackley
noted additionally, however, that under the Administrative Procedure
Act and court decisions the Board, in denying any request for permission,
was required to set forth its reasons.
Denial of the current request
could be regarded as arbitrary, he felt, if it was assumed that the
"usages of trade," as defined in 1916, did not obtain in any country
now on the Board's list.
In other words, denial of this application
Without at the same time removing other countries from the existing
list could be regarded as arbitrary.
The appropriate action, in his
°Pinion, would be to approve the request but at the same time put the
applicant on notice that the whole matter was under study and there
might be further action by the Board after that study had been completed.
Members of the Board then made comments indicating reluctance
to reach a policy decision or to rescind an outstanding interpretation
in the absence of a more comprehensive analysis of the pertinent issues
On the basis of which a more reasoned judgment could be made.
Questions
were raised as to when completion of the current Subcommittee study
might be anticipated, and staff replies suggested that it seemed
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unlikely that the overall study, which involved a number of complex
problems, would be completed within a matter of several months or a
year.
Questions also were raised regarding the apparent degree of
importance to the applicant of a decision for or against granting the
Permission requested.
It was noted by staff that thus far the applica-
tion had not been pushed vigorously.
In any event, however, it was the
Board's view that the applicant was entitled to have some expression of
Board attitude without undue delay.
There followed a lengthy further discussion of reasons for and
against approval of the request, after which the Vice Chairman suggested
that the discussion be terminated and that in the present circumstances
the applicant be advised through the New York Reserve Bank that action
on the application was being deferred pending complete study of the
question.
Inquiry then was made whether there was not some way in which
that part of the overall study of bankers' acceptances bearing on the
immediate question could be expedited.
The thought was expressed that
a special task force might be formed for that purpose, with a view to
having a report on the particular question available within a matter
of about 90 days.
It was suggested that a letter be written to the
Chairman of the Presidents' Conference explaining why the Board would
like to have that part of the overall study expedited.
At the conclusion of the discussion, general agreement was
e xpressed with proceeding along the lines that had been suggested.
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Accordingly, unanimous approval was given to a letter to the applicant
bank in the form attached as Item No. 7 and to a letter to the Chairman
of the Presidents' Conference in the form attached as Item No. 8.
In further discussion concern was expressed by some members of
the Board about the period of time that frequently appeared to be involved in completing studies referred to subcommittees of the Presidents'
Conference.
Question was raised whether it might not be feasible to
expedite such studies through the assignment of personnel who would be
relieved from other duties and whether members of the Board's staff
should not play a more active role.
It was suggested that discussion
With the Presidents at the time of the next meeting of the Conference
might prove helpful.
Application of General Bancshares Corporation (Items 9-10).
L
There had been distributed drafts of an order and statement reflecting
the Board's denial on October 5, 1966, of the application of General
Bancshares Corporation, St. Louis, Missouri, for approval of the acquisition of voting shares of First National Bank in St. Louis, St. Louis,
Missouri.
After discussion, during which certain suggested changes in the
statement were agreed upon, the issuance of the order and statement was
authorized.
and 10.
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Federal Reserve Bank of St. Louis
Copies of the documents, as issued, are attached as Items 9
12/30/66
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The meeting then adjourned.
Secretary's Notes: Later in the day (at
approximately 12:15 p.m.) Vice Chairman
Robertson informed the Secretary that he
had received a telephone call from Chairman Horne of the Federal Home Loan Bank
Board, who had called for the purpose of
consulting, under the terms of the recent
legislation regarding interest rate ceilings, about a change that was being made
in one of the Home Loan Bank Board regulations. Specifically, that Board was
raising the maximum rate that savings and
loan associations might pay in a county
in Texas from 4.75 per cent per annum to
5 per cent, in order that the associations
in that particular county might be on the
same competitive basis as associations in
the immediately surrounding counties.
Governor Robertson stated that he did not
indicate to Mr. Horne either approval or
disapproval of the change the Home Loan
Bank Board was making, but he did inform
him that he would regard this telephone
call as meeting the need for consultation
with the Board regarding the change.
Governor Shepardson today approved on behalf of the Board the following items:
Letter to the Federal Reserve Bank of St. Louis (copy attached as
Item No. 11) approving the appointment of Stephen Koptis as Assistant
Federal Reserve Agent.
Letter to Mrs. Renee Mikus, Washington, D. C., confirming arrangements for her to conduct a course in conversational French for members
of the Board's staff as an activity of the Board's Employee Training
and Development Program, a fee of $10 to be paid for each session
conducted.
Memoranda recommending the following actions relating to the
Board's staff:
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Federal Reserve Bank of St. Louis
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Appointments
Hadley Gene Nelson as Chief, Applications Analysis Section, Division of Data Processing, with basic annual salary at the rate of
$17,550, effective the date of entrance upon duty.
Inez Marie Wilson as Stenographer, Division of Personnel Administration, with basic annual salary at the rate of $4,936, effective the
date of entrance upon duty.
Willie R. Rutledge as Cafeteria Helper, Division of Administrative
Services, with annual salary at the rate of $1,927 (4-hour day), effective the date of entrance upon duty.
Meritorious salary increase
Mary L. Morris, Secretary, Office of the Secretary, from $5,859 to
$6,035 per annum, effective January 1, 1967.
Salary increases, effective January 1, 1967
Division
Name and title
Basic annual salary
From
To
Board Members' Offices
Dorothy Duke, Secretary
Mary P. Morris, Secretary
$ 8,948
5,867
$ 9,183
6,065
7,649
8,155
7,649
8,155
7,942
8,478
15,113
11,685
9,851
16,152
12,064
10,166
Office of the Secretary
Cornelia A. Bates, Supervisor, Noncurrent
Records and Records Disposal
Helen E. Cook, Supervisor, Bank and
Miscellaneous Records
Margaret J. Moister, Supervisor, Subject
Files
Research and Statistics
Normand R. V. Bernard, Economist
Wilellyn Morelle, Economist
Royal Shipp, Economist
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Federal Reserve Bank of St. Louis
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Salary increases, effective January 1, 1967 (continued)
Division
Name and title
Basic annual salary
From
To
International Finance
Yves Maroni, Senior Economist
Peggy H. Reaves, Supervisor, Information
Center
$19,371
6,659
$19,978
6,857
7,696
7,957
4,776
12,443
4,936
12,822
3,925
4,269
3,609
5,507
13,769
6,490
3,731
5,683
15,106
6,822
5,507
10,166
5,867
10,927
9,523
9,784
Bank Operations
Peter N. Sapsara, Analyst
Examinations
Grace Anne Burnes, Stenographer
Herbert H. Hagler, Review Examiner
Personnel Administration
Frances B. Loveless, Clerk-Typist
Administrative Services
Melvin E. Moore, Laborer
Luvenia Rogers, Teletype Operator
John D. Smith, Assistant to the Director
Abner Thompson, Pressman-Photographer
Office of the Controller
Helen L. Lee, Accounting Clerk
L. Waite Waller, Jr.,Supervisory Accountant
Data Processing
Helen A. Lupton, Graphic Illustrator Supervisor
-§2.12Ey increassj effective January 15, 1967
Carol M. O'Brien, Secretary, Board Members' Offices, from $6,461
to $6,877 per annum.
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Transfers
Adaline R. Beeson, from the position of Records Analyst to the
position of Chief, Records Section, Office of the Secretary, with an
increase in basic annual salary from $7,649 to $8,218, effective
January 1, 1967.
Helen K. Black, Statistical Assistant, Division of Data Processing,
from budget position No. 16 to budget position No. 12 in the Financial
Statistics Section, with no change in basic annual salary at the rate
of $5,507, effective January 1, 1967.
Edward L. Jewell, from the position of Messenger in the Division
of Administrative Services to the position of Messenger in the Board
Members' Offices, with no change in basic annual salary at the rate of
$3,609, effective upon assuming his new duties.
Acceptance of resignations
Carla S. Butler, Statistical Clerk, Division of Data Processing,
effective December 30, 1966.
Christine Cushman, Senior Clerk, Division of International Finance,
effective the close of business December 31, 1966.
Margery Fisher, Research Assistant, Division of Research and Statistics, effective January 3, 1967.
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Federal Reserve Bank of St. Louis
Item No. 1
12/30/66
BOARD OF GOVERNOF;th
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL
CORIRIESPONOENCE
TO THE BOARD
December 30, 1966
Board of Directors,
Dothan Bank & Trust Company,
Dothan, Alabama.
Gentlemen:
The Board of Governors of the Federal Reserve
& Trust
System approves the establishment by Dothan Bank
Company, Dothan, Alabama, of a branch at 814 South Oates
is estabStreet, Dothan, Alabama, provided the branch
lished within one year from the date of this letter.
It is the Board's understanding that the
Superintendent of Banks of Alabama has approved your
the
application for subject branch conditioned upon
and
number
sufficient
a
in
stock
of
sale of new shares
$300,000.
amount to produce additional capital funds of
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
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UNITED STATES OF AMERICA
Item No. 2
12/30/66
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
WHITNEY HOLDING CORPORATICN
for approval of its becoming a bank holding
company by acquiring the stock of Crescent
City National Bank, New Orleans, Louisiana,
and Whitney National Lan::: :In Jefferson Parish,
Jefferson Parish, Louisiana.
•••
ORDER GRANTING MOTION TO
WITHDRAW APPLICATION
By Order dated January 24, 1966, the Beard of Governors
continued the proceeding herein, pending a final decision in the case
Of Pilitimy National Bank in Jefferson Parish
et al. v. A. Clayton James,
State Bank Commissioner of the State of Louisiana, No. 6745 in the Court
Of Appeal, First Circuit, State of Louisiana (Whitney v. James).
On or
about June 13, 1966, the Louisiana Court of Appeal concluded that the
Provisions of the Louisiana anti-bank holding company statute, particularly
Section 3(5) of Louisiana Act 275 of 1962, LA. R.S. 6:1003(5), were not
unconstitutional and were applicable to the Whitney proposal.
On
14n vember 7, 1966, the Supreme Court of the State of Louisiana denied a
of Appeal in
ll' tition to review the decision of the Louisiana Court
14hit
---_au
v. James.
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Following the aforesaid decision of the Supreme Court of
Louisiana, the attorneys for Bank of New Orleans and Trust Company, New
Orleans, Louisiana, Guaranty Bank and Trust Company, Lafayette, Louisiana,
and Bank of Louisiana in New Orleans, New Orleans, Louisiana, participating
in this proceeding in opposition to the Whitney proposal, requested the
Board to deny the Whitney application pending before the Board.
Attorneys
for Whitney Holding Corporation filed a motion, dated December 3, 1966,
to withdraw the application for approval of its becoming a bank holding
company, for the stated reasons that Whitney National Bank in Jefferson
Parish has not yet been opened for business and would not be opened in
the foreseeable future. The Whitney motion suggests that the Board of
Governors vacate its Order of May 3, 1962, which had granted Board approval
to the Whitney proposal.
That Order is now before the Board on reconsidera-
tion, after remand from the United States Court of Appeals for the Fifth
Circuit.
No opposition to the Whitney motion to withdraw has been received
by the Board.
After due consideration of the motion on behalf of Whitney, and
of the interests of all participants in this proceeding, the Board has
•
concluded that the Whitney motion should be granted and the Board's aforeInentioned Order of May 3, 1962, should be vacated.
Accordingly,
IT IS HEREBY ORDERED that:
1. The motion of December 3, 1966, of Whitney Holding Corporation
to vithdraw its application for approval to become a bank holding company
is granted,
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Federal Reserve Bank of St. Louis
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2, The Board's Order of May 3, 1962, in the matter of the
application of Whitney Holding Corporation to become a bank holding
company is vacated.
3. The proceeding before the Board, on remand (by Order dated
March 1, 1965) from the United States Court of Appeals for the Fifth
Circuit, is concluded and the record closed.
Dated at Washington, D. C., this 30th day of December, 1966.
By order of the Board of Governors
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
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Federal Reserve Bank of St. Louis
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itss• RAI.
.o..0
.
.
Item No. 3
12/30/66
For immediate release
December 30, 1966,
The Board of Governors today announced action granting a
request by Whitney Holding Corporation, New Orleans, Louisiana, to
withdraw its application for approval to become a bank holding company.
Today's action granting Whitney's request also vacated the Board's
Order of May 3, 1962, approving Whitney's formation.
By the Board's
Order of this date, a copy of which La attached s the proceeding before
the
Board involving Whitney Holding Corporation 'has been terminated.
Attachment
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Federal Reserve Bank of St. Louis
Item No. 4
12/30/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 30, 1966,
Wachovia International
Investment Corporation,
Wachovia Building,
Third and Main Streets,
Winston..Salem, North Carolina.
Gentlemen:
As requested in your letter of November 4, 1966, the Board
of Governors grants consent for your Corporation ("WIIC") to purchase
and hold 35 per cent of the shares of Banque Europeenne Pour Le
Financement et Le Credit ("BEFC"), Paris, France, at a cost of approximately US$889,875, provided such stock is acquired within one
year from the date of this letter. In this connection the Board
also approves the purchase and holding of such shares in excess of
15 per cent of your Corporation's capital and surplus.
The Board's consent to the proposed purchase and holding
of shares of BEFC by WIIC is granted subject to the following conditions:
That WIIC shall not hold, directly or indirectly, any
shares of stock in BEFC if BEFC at any time fails to
restrict its activities to those permissible to a
corporation in which a corporation organized under
Section 25(a) of the Federal Reserve Act could, with
the consent of the Board of Governors, purchase and
hold stock, or if BEFC establishes any branch or
agency or takes any action or undertakes any operation
in France or elsewhere, in any manner, which at the
time would not be permissible to a corporation organized under Section 25(a) of the Federal Reserve Act
not engaged in banking;
(2)
That, when required by the Board of Governors, WIIC
will cause BEFC (a) to permit examiners selected or
auditors approved by the Board of Governors to examine
BEFC and (b) to furnish the Board of Governors with
such reports as it may require from time to time;
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Wachovia International
Investment Corporation
(3)
-2-
That WIIC shall not carry on its books the shares
acquired of BEFC at a net amount in excess of its
proportionate share of the book capital accounts
of BEFC, after giving effect to the elimination of
all known losses; and
(4) That any share acquisitions or dispositions by BEFC
be reported under Section 211.8(d) of Regulation K
in the same manner as lf BEFC were a corporation organized under Section 25(a) of the Federal Reserve Act.
Subject to continuing observation and review, the Board
suspends, until further notice the provisions of subparagraph (1)
of the second paragraph of this letter so far as they relate to
restrictions on loans granted by BEFC in France in the currency of
that country.
The above conditions are those attached to the granting
of consent for investments, by corporations operating under Section
25 or 25(a) of the Federal Reserve Act, wherein control of a foreign institution is acquired. These conditions are currently being
reviewed in general. Pending completion of this review the Board
is prepared to consider modification of these conditions should
particular problems arise due to the special circumstances involved
in your proposed acquisition.
Upon completion of the proposed transaction, it is requested that the Board of Governors be furnished a translation of
the Articles of Association and By-Laws of BEFC.
The foregoing consent is given with the understanding
that the investment now being approved, combined with other foreign
loans and investments of your Corporation and Wachovia Bank and
Trust Company will not cause the total of such loans and investments
to exceed the guidelines established under the voluntary foreign
credit restraint effort now in effect and that due consideration is
being given to the priorities contained therein.
Very truly yours,
Kenneth A. Kenyon,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
Item No. 5
12/30/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 30, 1966.
The Company for Investing Abroad,
Fidelity-Philadelphia Trust Building,
Philadelphia, Pennsylvania. 19109
Gentlemen:
As requested in your letter of November 3, 1966, the
s grants consent for your Corporation ("Comma")
Governor
Board of
to purchase and hold 35 per cent of the shares of Banque Europeenne
Pour Le Financement et Le Credit ("BEFC"), Paris, France, at a
cost of approximately US$889,875, provided such stock is acquired
within one year from the date of this letter. In this connection
the Board also approves the purchase and holding of such shares in
excess of 15 per cent of your Corporation's capital and surplus.
The Board's consent to the proposed purchase and holding
of shares of BEFC by Comina is granted subject to the following
conditions:
(1)
(2)
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Federal Reserve Bank of St. Louis
That Comina shall not hold, directly or indirectly,
any shares of stock in BEFC if BEFC at any time fails
to restrict its activities to those permissible to a
corporation in which a corporation organized under
Section 25(a) of the Federal Reserve Act could, with
the consent of the Board of Governors, purchase and
hold stock, or if BEFC establishes any branch or
agency or takes any action or undertakes any operation in France or elsewhere, in any manner, which
at the time would not be permissible to a corporation
organized under Section 25(a) of the Federal Reserve
Act not engaged in banking;
That, when required by the Board of Governors, Comina
will cause BEFC (a) to permit examiners selected or
auditors approved by the Board of Governors to examine
BEFC and (b) to furnish the Board of Governors with
such reports as it may require from time to time;
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
The Company for Investing Abroad
-2-
(3)
That Comina shall not carry on its books the shares
acquired of BEFC at a net amount in excess of its
proportionate share of the book capital accounts of
BEFC, after giving effect to the elimination of all
known losses; and
(4)
That any share acquisitions or dispositions by BEFC
be reported under Section 211.8(d) of Regulation K
in the same manner as if BEFC were a corporation organized under Section 25(a) of the Federal Reserve Act.
Th
Subject to continuing observation and review, the Board
suspends, until further notice the provisions of subparagraph (1)
of the second paragraph of this letter so far as they relate to
restrictions on loans granted by BEFC in France in the currency of
that country.
The above conditions are those attached to the granting
of consent for investments, by corporations operating under Section
25 or 25(a) of the Federal Reserve Act, wherein control of a foreign institution is acquired. These conditions are currently being
reviewed in general. Pending completion of this review the Board
is prepared to consider modification of these conditions should
particular problems arise due to the special circumstances involved
in your proposed acquisition.
Upon completion of the proposed transaction, it is requested that the Board of Governors be furnished a translation of
the Articles of Association and By-Laws of BEFC.
The foregoing consent is given with the understanding that
the investment now being approved, combined with other foreign loans
and investments of your Corporation and Fidelity-Philadelphia Trust
Company will not cause the total of such loans and investment's to
exceed the guidelines established under the voluntary foreign credit
restraint effort now in effect and that due consideration is being
given to the priorities contained therein.
Very truly yours,
Kenneth A. Kenyon,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
1.864
Item No. 6
12/30/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 30, 1966.
Fidelity-Philadelphia Trust Company,
Philadelphia, Pennsylvania.
Gentlemen:
The Board has today approved the application of your
bank's wholly-owned subsidiary, The Company for Investing Abroad,
to invest in Banque Europeenne Pour Le Financement et Le Credit,
Paris, France. Enclosed is a copy of the Board's letter to the
Corporation.
Before approving the application the Board gave
to the deterioration in your bank's capital
consideration
serious
position.
It is the Board's understanding that your stockholders
have approved the sale of up to $25 million in capital debentures
but that action in this regard has been postponed due to recent
market conditions. The Board urges that a capital increase program be undertaken as soon as practicable and further urges careful
consideration be given in the interim to other means of improving
your bank's capital position such as improvement of liquidity by
realignment of your bank's asset structure.
Very truly yours,
Kenneth A. Kenyon,
Lssistant Secretary.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Item No. 7
12/30/66
BOARD OF GOVERNORS
.....
.,0ov coy4.47
4
,
o•
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
.
REs
January 6, 1967
Bankers Trust Company,
280 Park Avenue,
New York, New York. 10017
Gentlemen:
Reference is made to your letter of June 28, 1966,
addressed to the Federal Reserve Bank of New York, requesting
permission of the Board of Governors "to accept drafts or bills
drawn upon ourselves by banks or bankers in the Philippines for
the purpose of furnishing dollar exchange" which would require
the addition of the Republic of the Philippines to the list of
countries which have been designated by the Board "as countries
whose usages of ttrade require the furnishing of dollar exchange,
so that member banks may accept drafts drawn upon them by banks
or bankers in such countries."
A study in depth of bankers' acceptances is currently
underway within the System. One aspect of the proposed study
will be dollar exchange acceptances, including the matter of
usages of trade. Until that portion of the study related to
dollar exchange acceptances is completed, it is not believed
that any country should be added to the Board's list; and in
the circumstances, the Board is deferring action on your applica_
tion at this time.
In the meantime, any views which you might wish to submit for consideration in connection with this or any other aspect
of the study will be welcome, and may be submitted through the
Federal Reserve Bank of New York.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
Item No. 8
12/30/66
BOARD OF GOVERNORS
....
GOvtz.
•v
."
Mb*.
•0
'
1
Or- THE
FEDERAL RESERVE SYSTEM
'0
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL COIARESPONOICNCE
'
'‘1111.11
•:Z<`,5\47;.:4,0
TO THE BOARD
•fRAL ns%•
••.•••
January 6, 1967.
Mr. Edward A. Wayne, Chairman,
Conference of Presidents,
c/o Federal Reserve Bank of Richmond,
Richmond, Virginia 23213.
Dear Mr. Wayne:
The Board has recently had presented to it an
application by a member bank for permission to accept drafts
or bills drawn upon the bank by banks or bankers in the
Philippines for the purpose of furnishing dollar exchange.
This would require the addition of the Republic of the Philippines
to the list of countries that have been designated by the Board as
countries whose usages of trade require the furnishing of dollar
exchange, so that member banks may accept drafts drawn upon them
by banks or banker6 in such countries.
The Board noted that the subject of bankers' acceptances
was currently under study by a committee of the Conference of
Presidents, and in turn by a subcommittee designated for that purpose. Although dollar exchange acceptances would be only one
aspect--and a relatively minor aspect--of the proposed study, the
Board preferred to defer action on the pending request until the
committee of the Conference of Presidents had had an opportunity
to report on the subject.
The Board hopes that the Conference might find it practicable
to request the subcommittee now studying this subject, perhaps through
a special task force, to single out the subject of dollar exchange
acceptances, including the matter of usages of trade, and submit a
report within approximately the next 60 days.
Very truly yours,
Secretary.
Copy to Mr. W. T. Cunningham, Jr.
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Federal Reserve Bank of St. Louis
Item No. 9
12/30/66
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
GENERAL BANCSHARES CORPORATION,
ST. LOUIS, MISSOURI,
for approval of the acquisition of
voting shares of First National Bank
in St. Louis, St. Louis, Missouri.
ORDER DENYING APPLICATION UNDER
BANK HOLDING COMPANY ACT
There have 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),
as amended by Public Law 89-485), and section 222.4(a) of the Federal Reserve
Regulation Y (12 CFR 222.4(a)), applications by General Bancshares
Corporation, St. Louis, Missouri, a registered bank holding company,
for the Board's prior approval of the acquisition of 80 per cent or
raore of the voting shares of each of First National Bank in St. Louis,
St. Louis, Missouri, and St. Louis Union Trust Company, St. Louis,
418souri.
Subsequent to the filing of the applications, an amendment
to the Bank Holding Company Act changed the definition of "bank" so as
to exclude therefrom St. Louis Union Trust Company.
Consequently, the
aPPlication by General Bancshares Corporation to acquire St. Louis Union
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Federal Reserve Bank of St. Louis
-2-
Trust Company is not appropriate for action by the Board under section 3(a)
of the Act.
As required by section 3(b) of the Act, the Board notified
the Comptroller of the Currency of receipt of the application and
requested his views and recommendation.
The Comptroller recommended
approval of the application.
Notice of receipt of the application was published in the
Federal Register on June 17, 1966 (31 Federal Register 8508), which
Provided an opportunity for submission of comments and views regarding
the proposed transaction.
Time for filing such views and comments has
expired 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 Statement of this date, that said application by General
Bancshares Corporation to acquire stock of First National Bank in
St. Louis be and hereby is denied.
Dated at Washington, D. C. this 30th day of December, 1966.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and Governors
Robertson, Shepardson, Mitchell, Daane, Maisel, and Brimmer.
(Signed)
(SEAL)
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Federal Reserve Bank of St. Louis
Merritt Sherman
Merritt Sherman,
Secretary.
I
BOARD OF GOVERNORS
Item No. 10
12/30/66
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY GENERAL BANCSHARES CORPORATION
FOR APPROVAL OF ACQUISITION OF SHARES OF
FIRST NATIONAL BANK IN ST. LOUIS
STATEMENT
General Bancshares Corporation, St. Louis, Missouri ("Applicant"),
a registered bank holding company, has filed with the Board, pursuant to
section 3(a) of the Bank Holding Company Act of 1956, as amended ("the
Act"), an application for approval of the acquisition of 80 per cent or
more of the outstanding voting shares of First National Bank in St. Louis,
St. Louis, Missouri ("First National").
Applicant controls one bank in Tennessee, three banks in
Illinois, and six banks in Missouri,
Its 10 subsidiary banks operate
a total of 15 offices, and had total deposits of $367 million as of
1/
Applicant's six Missouri subsidiaries, with deposits
December 31, 1965.
Of about $276 million, are all located in the St. Louis metropolitan
2/
area.
First National, with deposits of about $712 million, is the
second largest bank in St. Louis and in the State of Missouri.
The
acquisition of First National by Applicant would make Applicant, in
terms of total deposits held, the largest banking organization in the State.
i
f Unless otherwise indicated, all banking data noted are as of this date.
771 Missouri law prohibits the operation of branch offices by commercial
°anks other than one limited drive-in or walk-up facility located no
more than 1000 yards from the main banking office.
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Federal Reserve Bank of St. Louis
-2--
IStt-'1!
Simultaneously with its filing of the subject application,
Applicant also applied, pursuant to section 3(a) of the Act, for approval
of its proposed acquisition of 80 per cent or more of the voting shares
of St. Louis Union Trust Company, St. Louis, Missouri ("Union"), a nondeposit trust company which owns 29 per cent of the stock of First
National.
By reason of the July 1, 1966 amendments to the Act, Union
is no longer a "bank" for purposes of the Act, and its acquisition by
Applicant would require Board approval under section 4(c)(8) after due
notice and hearing, rather than under section 3(a).
At the goares sugges-
tion, Applicant submitted a draft request for a preliminary determination
by the Board that the proposed acquisition of stock of Union would be
Permissible under section 4(c)(8); Applicant withheld filing a formal
request pending disposition of its application to acquire First National.
BY Applicant's own decision, its acquisition of either Firnt National
or Union is contingent upon Board approval of both acquisitions.
According17, since the application to acquire First National is being
denied, it is presumed that the application under section 4(c)(8) will
not be pursued.
Even if the proposed acquisition of Union were not contingent
upon approval of Applicant's acquisition of First National, it is the
Board's view that its disapproval of the latter acquisition would
Preclude approval of the former.
stock of First National.
Union owns about 29 per cent of the
If the Board were to approve Applicant's
Proposed acquisition of control of Union, it would, in effect, approve
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Federal Reserve Bank of St. Louis
-3-
the indirect acquisition by Applicant of more than 25 per cent of the
stock of First National - which is the precise proposal that the Board
is denying in the accompanying order.
Views and recommendation of supervisory authority. - As
required 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 recommended approval of the application.
Statutory considerations. - The Act prohibits Board approval
of any proposed acquisition which would result in a monopoly, or further
any combination or conspiracy to monopolize or to attempt to monopolize
the business of banking in any part of the United States.
Nor may
approval be given if 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, unless such anticompetitive effects are clearly
outweighed by the probable effect of the transaction in meeting the
convenience and needs of the area to be served.
The Board is also
required to consider the financial and managerial resources and prospects
of the holding company and the banks concerned, and the convenience and
needs of the communities to be served.
Competitive effects of proposed acquisition. - Applicant is
°ne of two registered bank holding companies with subsidiary banks in
Missouri,
It controls about 3 per cent of the total deposits of all
Missouri banks, and the other holding company controls less than 1 per
cent.
Applicant is the sixth largest banking organization in the State,
and if it acquired control of First National, it would be the largest
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Federal Reserve Bank of St. Louis
-4-
and would control nearly 12 per cent of the deposits of all Missouri
banks.
There are 655 banks in Missouri, and the 10 largest banking
organizations hold about 43 per cent of all deposits.
There are now four commercial banks situated in the St. Louis
central business district.
In 1950 there were nine commercial banks
in that area. Five "downtown" banks have been eliminated through
mergers since that time, the most recent being the merger in 1965 of
Mercantile Trust Company National Association ("Mercantile Trust") with
Security Trust Company.
That merger is the subject of a pending anti-
trust suit instituted by the United States.
The four banks located in downtown St. Louis include
Mercantile Trust, with deposits of $929 million, representing 45 per
cent of the total deposits of the four banks; First National, with
deposits of $712 million, representing 35 per cent; Boatmen's National
Bank, with $258 million of deposits, representing 12 per cent; and
Bank of St. Louis ($160 million deposits, representing 8 per cent),
which is presently Applicant's largest subsidiary. If the proposed
acquisition were accomplished, Applicant would control about 43 per
cent of the deposits of the four banks in downtown St. Louis, and the
number of competing banks located there would be reduced to three.
First National derives 93 per cent of the number of its
posit accounts of individuals, partnerships, and corporations ("IPC"),
totaling 80 per cent of the dollar amount of its total IPC
cron an area comprising the City of St. Louis, all of St. Louis
Count, and
Y
part of St. Charles County, Missouri, and parts of Madison
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Federal Reserve Bank of St. Louis
-5-
and St. Clair Counties, Illinois.
(1.873
In that area, which was designated
by Applicant as First National's primary service area, there are 95 banks
with IPC deposits aggregating $3.4 billion. First National's IPC deposits
are about 14 per cent of that total, and those of First National, plus
Applicant's subsidiaries located therein, equal about 20 per cent of
the total for the 95 banks.
From the smaller geographical area consisting of St. Louis
and St. Louis County, First National derives 77 per cent of its IPC
balances and 89 per cent of the number of its IPC accounts.
Inasmuch
as (1) only about 3 per cent of the amount of First National's IPC
deposits and 4 per cent of its IPC deposit accounts are derived from
the aforementioned areas outside the City and County of St. Louis, and
(2) the Board has customarily considered a bank's "primary service area"
as being that area from which about 75 per cent of its IPC deposits
arise, the smaller area consisting of the City and County of St. Louis
Will be considered as First National's primary service area.
First National's primary service area is coextensive with
that of Bank of St. Louis, and it completely encompasses the primary
service areas of Applicant's five other Missouri subsidiaries. First
National is the second largest
of 67 banks in that area, and it holds
19 per cent of the total deposits of those 67 banks.
subsidiary
Applicant's six
banks located in the area hold in the aggregate 7 per cent
c'f the deposits of the 67 banks.
If the proposed acquisition were
consummated, Applicant would emerge as the largest banking organization
in the area, and
it would hold 26 per cent of the deposits of all banks
located therein.
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Federal Reserve Bank of St. Louis
-6-
Analysis of the competitive effects of the acquisition
necessarily involves a study of the services being provided by the
competing units. First National is one of three major "wholesale"
banks in the St. Louis area - that is, it engages principally in
serving banks and large corporate customers whose activities are
national and international in scope.
Bank of St. Louis and Applicant's
smaller subsidiary banks in the area, on the other hand, engage
Principally in "retail" banking.
To the extent that First National
is a "wholesale" bank and Applicant's banking activities are "retail"
in nature, it could be concluded, as Applicant urges, that the joining
together of these two forces would be complementary rather than
anticompetitive.
However, it appears that significant competition exists
between First National and Applicant's banks for banking business in
the "retail" category.
Although First National holds a rather substantial
amount of deposits of other banks, and while, in 1964, about two-thirds
of the amount of its IPC demand deposits were represented by accounts
having balances over $100,000, First National is also a rather strong
competitor for "retail" banking services in St. Louis and the surrounding
area.
First National's IPC demand deposits in accounts having balances
belcm $100,000 are about $100 million, which is nearly three times the
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Federal Reserve Bank of St. Louis
-7-
total IPC demand deposits in Bank of St. Louis and more than all the IPC
demand deposits held by Applicant's six subsidiary banks located in the
area.
First National's IPC time and savings deposits equal about 23 per
cent of its total deposits, with 48 per cent of such deposits being
represented by savings accounts.
Such savings deposits exceed the total
savings deposits held by Applicant's six subsidiary banks in the St. Louis
area.
With reference to First National's loan portfolio, in various
3/
"retail" categoriesthe total of such loans made by First National far
exceeds the aggregate of similar loans in Applicant's six St. Louis-area
subsidiaries.
Although First National is one of the principal "wholesale"
banks in the St. Louis area, the foregoing data indicate that it is also
a very important competitor for "retail"
banking business. Regardless
of whether Applicant's subsidiary banks in the area, either individually
or as a group, constitute a significant competitive force as far as
First National is concerned, it is clear First National is a very substantial
competitor to Applicant's banks.
Competition between Applicant's system and First National
aPParently is not limited to "retail"
services. As previously noted,
Bank of
St. Louis, Applicant's largest subsidiary, is one of the four
Y
Includes real estate loans secured by residential property, loans to
:
i nd
ividuals to purchase consumer goods (excluding automobiles) on an
instalment basis, instalment
loans to repair and modernize residential
!,7Perty, and single payment loans for household, family, and other
Pesonal expenditures.
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Federal Reserve Bank of St. Louis
-8-
downtown banks in that city.
Although it may be too small to compete
for certain of the very large commercial accounts which First National
seeks, it is, by Applicant's admission, a strong competitor for business
of medium-size and small commercial enterprises in the area.
In the
Board's judgment, the significant competition between First National and
Bank of St. Louis for this business would be substantially, if not wholly,
eliminated if the acquisition proposed were permitted.
Further evidence of the competition existing between First
National and Applicant's banks is reflected in a study of the amounts of
deposits drawn by First National from the primary service areas of
APplicant's banks.
As of November 19, 1965, and excluding deposit accounts
of large organizations, First National derived the following deposits from
those areas (figures rounded):
bePosits originating
14 Primary
service
4ea of.
Number of
Deposit
Accounts
Average
Balance of
Accounts
Applicant's
Subsidiary Bank
(Named in left column)
Average
Number of
Balance of
Deposit
Accounts
Accounts
tank of
St. Louis
64,000
$ 4,000
45,000
$ 1,700
3effer
son-Gravois Bank
15,000
3,000
26,000
1,300
Northwestern Bank
arid
Trust Company
18,000
6,000
17,000
1,500
2,300
1,700
25,000
1,100
10,000
3,000
5,600
1,000
1,400
1,500
10,600
500
First National
1/aden Bank
of St. Louis
NIttercial Bank of
8t. Louis
County
4mbergh Bank
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Federal Reserve Bank of St. Louis
4
.
0“
-9-
`ICI
In asserting that the proposed acquisition would have no
substantial anticompetitive effects, Applicant appears to assume that
the banks involved fall within three size categories, and that no
competition exists between banks in these different categories.
It
maintains, in effect, that First National competes only with the two
other large downtown "wholesale" banks, that Bank of St. Louis'
competitive force should be viewed only with reference to six other medium.size retail banks in tLe St. Louis area, and that Applicant's other subsidiary banks, for purposes of competitive analysis, should be considered
as competing only with other small neighborhood retail banks.
In the Board's opinion, such a classification is not realistic.
that
Although large "wholesale" banks may compete for certain accounts
are not available to smaller institutions, large banks generally, including
those in St. Louis, are "full-service" institutions that compete with all banks
'within a limited geographical area.
Similarly, although a small neighborhood
bank,
bank alone may not offer signiticant competition to a "wholesale"
the collective competitive force of a number of neighborhood banks may be
relatively strong.
answer filed
The latter point was advanced by Applicant in its
in response to the views of the Department of Justice with respect to the
asserted
Probable anticompetitive effects of the proposal. Applicant
that the Department failed to give proper consideration to the strong
competitive impact on the large downtown banks of the area's medium-size
and small neighborhood banks.
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Federal Reserve Bank of St. Louis
This assertion, though directed at, and
-10-
intended to mitigate the impact of, conclusions by the Department based
on the concentration of deposits in downtown St. Louis that would be
under Applicant's control if the proposed acquisition took place,
substantiates the Board's view that significant competition presently
exists between First National and Applicant's subsidiaries and would
be eliminated by the acquisition.
As earlier noted, Applicant's request for permission to acquire
control of First National is coupled with a plan to acquire Union Trust
Company.
Union, which does not accept deposits, is believed to conduct
a larger volume of trust business than any other institution in the State.
Although none of Applicant's Missouri subsidiaries presently solicits
trust business, four of them have been authorized to act in fiduciary
capacities.
Acquisition of control of Union by Applicant would foreclose
the possibility that competition between the two organizations for_trust
business might develop hereafter.
Another aspect of the proposed acquisition relates to its
Probable effect on the competitive position of other banks.
In the down-
town area of St. Louis, Mercantile Trust holds the largest volume of IPC
depos 44."So
The IPC deposits of First National, Boatmen's National Bank,
and Bank of St. Louis, amount to 72 per cent, 30 per cent, and 16 per cent
of those of Mercantile Trust, respectively.
Otherwise stated, the
relative sizes of these four banks, in terms of IPC deposits, are 100,
72, 30) and 16.
In terms of total deposits, the relative sizes of
these four banks can be stated as 100, 77, 28, and 17.
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Federal Reserve Bank of St. Louis
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If First National were acquired by Applicant, combining the
deposit figures for the two banks that would be under Applicant's control,
the relative sizes of the three banking organizations in downtown St. Louis
could be stated, in terms of 1PC deposits, as 100, 88, and 30, and in
terms of total deposits, as 100, 94, and 28.
As evidenced by this analysis, the relative positions of the
4/
largest and second largest competing units--
located in St. Louis would
be somewhat altered by the proposed affiliation; however, the size disparity between the second and third banking organizations, already
considerable, would be significantly increased.
The acquisition, if
consummated, might increase competition between the two largest banks,
but, in the Board's judgment, its effect on the competitive force and
position of the third wholesale bank in the area would be detrimental.
Applicant contends that no anticompetitive results would stem
from its acquisition of First National, for the reason that there would
Still remain an adequate number of independent banking alternatives in
the St. Louis area.
It is not the reduction in the number of alternative
banking sources that is of principal concern to the Board; rather, it
is the elimination of competition that will occur from Applicant's
acquisition of a large competitor, together with the further resulting
i
mbalancing in the competitive situation.
-474-plicant's system is considered as a single competing unit. However,
l'hen dealing with the downtown St. Louis area, consideration is given
2nly to
Applicant's one bank located in that area; when dealing with
Louis and St. Louis County, all of Applicant's banks located in that
area are
considered as a single competitor.
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Federal Reserve Bank of St. Louis
-12-
Justification for the Board's concern is believed to be
reflected in the following concentration comparisons involving the
City and the County of St. Louis.
The relative sizes of the six largest
competing units in that area, in terms of total deposits, may be stated
as 100, 73, 28 (Applicant), 27, 15, and 11.
Following the acquisition
of First National by Applicant, the relative sizes of the remaining
five could be stated as 100 (Applicant), 99, 26, 14, and 11.
In terms
of IPC deposits, the relative sizes could be stated as 100, 68, 30
(Applicant), 28, 15, and 14 before the proposed acquisition; and 100, 93
(Applicant), 28, 15, and 14 thereafter.
Here again, although the effect
of the acquisition might be to increase the degree of competition between
the two largest competing units in the area, it would also tend to increase still further their competitive advantage over the smaller institutions.
Subsequent to filing its application, Applicant submitted
additional arguments in support of its contention that the proposed acqui5/
sition would have no significant anticompetitive effects.
For the most
Part, these arguments are cumulative of assertions in the application, the
Purpose of which is to lessen the apparency of adverse impact related to
the concentration of deposits that would result from the joining together
Qf First National and Applicant's St. Louis-area subsidiaries.
finds unconvincing Applicant's arguments in this respect.
The Board
In particular,
the adverse nature of the resulting concentration of resources is not
ameliorated by the fact urged by Applicant that greater deposit-concentration
5/ Letter to the Federal Reserve Bank of St. Louis dated September 29, 1966.
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Federal Reserve Bank of St. Louis
-13-
ratios are found to exist in other major metropolitan areas.
The
attention herein given to the issue of resulting deposit concentration
should not lessen the emphasis earlier given to the Board's concern
with respect to the substantial amount of competition between First
National and Applicant that would be eliminated by consummation of this
proposal.
Rather, these considerations together constitute a compelling
basis for the Board's denial action in this case.
Regarding the question as to the extent to which Applicant's
proposal would result in elimination of competition, the Board recognizes
that other financial institutions in the St. Louis area provide important
competition to the commercial banks for certain types of deposit and
loan business.
However, in view of the extent to which existing com-
petition will be eliminated and potential competition foreclosed between
First National and Applicant's subsidiaries as a result of the proposal,
it is the Board's judgment that the conclusions outlined above obtain
whether or not competition from sources other than commercial banks is
taken into account.
Summarizing, it is the Board's judgment that First National,
although principally a "wholesale" bank, is a strong competitor for
"retail" banking business in the primary service area of each of
APPlicant's Missouri subsidiary banks.
Consequently, consummation
ef the proposed acquisition would result in a substantial lessening
Of competition between First National and Applicant. Further, the
acquisition of First National, the second largest of 67 banks in the
area consisting of St. Louis and St. Louis County, by Applicant, now
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Federal Reserve Bank of St. Louis
-14the third largest competing unit in that area, would resul
t in a
further increase of an already substantial size disparity betwe
en
the large and small banking organizations, with the two large
st
organizations thereafter controlling 50 per cent of the depos
its of
all banks.
These results, in the Board's judgment, are sufficiently
anticompetitive that the application may not be approved unles
s such
anticompetitive effects are clearly outweighed in the publi
c interest
by the probable effect of the transactio
n in meeting the convenience
and needs of the area to be served.
Convenience and needs. - The St. Louis Standard Metropolit
an
Statistical Area, with an estimated population of about 2,300
,000
Persons, ranks tenth in size of such metropolitan areas
in the country.
The area possesses a number of impor
tant natural and man-made advantages.
It is the second largest rail center in the natio
n and a major center
for highway, air, and water transportation.
St. Louis is situated in
the only area in the country producing six basic
metals, and it is a
Principal grain market and the second largest hog marke
t in the world.
It ranks behind only Detroit in automobile production
; and other important
industries
include the processing and marketing of agricultural products,
hewing, chemicals, metal products, transportation equipment, and
electrical machinery.
Among the many national firms that operate in
the area is a
corporation that employs over 42,000 persons in the proc1
ucti°n of military aircraft, space capsules, and related produ
cts.
There are four unive
rsities located in the St. Louis area, each of
Ilhich is reported by Applicant to be engag
ed in multimillion dollar
e)g/ension projects.
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Federal Reserve Bank of St. Louis
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Applicant alleges that the City of St. Louis, especially
its central business district, is, and has been for a number of years,
undergoing a general economic decline, evidenced by decreases in
population, decreases in the number of retail and manufacturing businesses, decreases in the number of employees, declines in property
valuations, and declines in retail sales.
There has been, according
to Applicant, a significant out-migration of industries from the area,
and few new firms have been attracted.
However, in an effort to
reverse this trend, a substantial rebuilding program has reportedly
been in effect since 1959, and a number of apartments, office buildings,
and highways have been recently completed or are nearing completion,
Applicant's arguments relating to the convenience and needs
of the area are basically fourfold.
According to Applicant, there
are needs for, first, a greater supply of local credit to finance the
expansion of existing businesses, to attract new industries, and
thereby to provide new jobs; second, larger banks which can make
larger commercial and industrial loans to businesses; third, means of
financing the growing volume of required municipal services and facilities,
and finally, another
bank in the area of sufficient size to make a major
contribution toward the development of a healthy economy for the St. Louis
area.
More specifically, the metropolitan area is the home office
location of many large national firms whose credit needs are substantial
and are increasing.
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Federal Reserve Bank of St. Louis
Applicant contends that, with the exception of
-16-
iSH4
Mercantile Trust, the local banks are not large enough to meet the
demands of these firms for credit and other services.
To the extent
that these credit needs are not being met, Applicant asserts, loans
and large "compensating balances" are leaving St. Louis for other
financial centers.
It is the Applicant's contention that the area
needs larger banking institutions to meet these growing credit needs
and that the proposal would bring together the combined $3.3 million
proposed lending limits of Applicant's subsidiary banks with the
$5 million lending limit of First National, and that this added
capacity for making large loans would lessen the frequency with
which credit would have to be sought outside the area.
This argument, in the Board's judgment, is difficult to
reconcile with the actual banking situation in St. Louis. First
National's ratio of loans to deposits was 65 per cent at year-end
1965, and its daily average for the first three months of 1966 was
reported to be 73.5 per cent.
At December 31, 1965, Applicant's six
local banks had loan-to-deposit ratios ranging frem 63 to 72 per
cent.
Thus, either individually or in combination, these banks
are not, in the Board's judgment, in a position to acccmmodate any
substantial
additional credit requirements at the present time.
does it appear likely that these banks will be able to accommodate
"
11
additional substantial loan requirements in the foreseeable future
unless they
take steps to restructure their loan portfolios.
If
this is done, there could arise situations in which deserving loan
demands of individuals and small commercial enterprises might be
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Federal Reserve Bank of St. Louis
-17-
neglected in order that the banks could accommodate the large-business
credit needs.
On balance, such occurrences would not appear to provide
a net benefit to the community.
Applicant points out that First National's share of the
area's deposits has declined due to the exodus of persons and
businesses from the downtown area, the establishment and substantial
growth of a number of new banks in the St. Louis area in recent
years, and the loss of compensating balances of firms that have moved
out of the area or have shifted their banking business to other cities.
This decline, according to Applicant, has been further intensified by
Missouri's prohibition of branch banking and the intense competition
provided by savings and loan associations.
In the last 15 years,
First National's share of the market of total deposits has dwindled
from 19 per cent to less than 15, and its share of IPC deposits has
decreased from 18 to 14 per cent.
Applicant urges, in effect, that
First National should be permitted to recapture its lost share of the
deposit market by the proposed affiliation with Applicant's holding
company system.
The Board believes that there are potentially
advantageous consequences inherent in efforts on the part of a bank
to recapture, maintain, or improve its market position.
However,
"here the vehicle for such action would produce the adverse
co nsequences apparent in Applicant's proposal, license to effectuate
such a proposal must be denied in the public interest.
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Federal Reserve Bank of St. Louis
-18SiLif 2
Applicant proposes to make the services provided by the bond
and international departments of First National available on the premises
of its present six subsidiary banks in the area.
To this extent, such
services would be more conveniently provided to certain of the area's
residents and businesses.
The affiliation of Applicant's banks
vith Union Trust Ccmpnny might also make certain trust services
more conveniently available.
These favorable considerations, however,
do little to offset the severe anticompetitive effects heretofore
discussed.
In the Board's judgment, the record does not reflect a need
for banking services in the St. Louis area which are not presently available through the banks located there.
On the basis of the record, the
Board concludes that considerations relating to the convenience and needs
of the area offer only slight support to approval of the application,
and do not "clearly outweigh" the anticompetitive aspects of Applicant's
proposal. Finally, Applicant's contention that the slow economic growth
of the St. Louis area might be partly due to the local banking structure
is not supported by either the evidence of record or by other evidence
available to the Board.
Prior studies dealing with the determinants
of plant location indicate that variables such as the availability of
raw materials and
labor, land prices, tax structures, and geographic
price differentials are far more important factors determining industrial
location than are the availability or size of local banking facilities
and
services.
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Federal Reserve Bank of St. Louis
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Financial and managerial resources and prospects. - The record
indicates that the financial condition of Applicant and each of its ten
subsidiary banks is generally satisfactory, and that each is soundly
managed.
The financial condition of First National is also considered
satisfactory, and it is staffed by competent and experienced management.
It was proposed that following Applicant's acquisition of control of
First National, the present executive management of First National would
become active in the affairs of Applicant.
This consideration, although
entirely consistent with approval of the application, adds no substantial
affirmative support to Applicant's proposal.
The earnings and deposit growth of Applicant's St. Louis-area
subsidiaries have been satisfactory.
Applicant's prospects and those of
its subsidiaries as presently constituted are also considered satisfactory.
Although First National's loan and deposit growth has been below the
national average, when considering the bank's size and the nature of the
area it serves its prospects are regarded as favorable.
There is no
reason to believe that its prospects would be enhanced substantially
through affiliation with Applicant's holding company group.
Although Applicant's subsidiary banks are presently in
generally satisfactory condition, it appears likely that some of them
141-11 be in need of additional capital in the near future, if their
present growth rate continues.
The fact that Applicant, following
acquisition
of First National, would probably be better positioned to
obtain
additional capital for its subsidiary banks is a factor offering
some weight
toward approval of the application.
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Federal Reserve Bank of St. Louis
However, since
-20-
Applicant's system is presently comprised of ten well-established
subsidiary banks, controlling deposits in excess of $350 million, it
is the Board's judgment that the proposed acquisition is not essential
to Applicant's ability to raise additional capital funds for the purpose
of strengthening the capital structures of its banks as such needs arise.
On balance, while the evidence relating to the financial and
managerial resources and prospects of Applicant, its subsidiary banks,
and First National is consistent with approval of Applicant's proposal,
it offers no strong weight toward approval thereof.
Conclusion. - On the basis of all relevant facts contained in
the record, and in the light of the factors set forth in section 3(c)
of the Act, it is the Board's judgment that the anticompetitive effects
of Applicant's proposal clearly outweigh any benefits to the public
likely to result therefrom. Accordingly, the application should be
denied.
December 30, 1966.
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Federal Reserve Bank of St. Louis
4889
BOARD OF GOVERNORS
.•• • • ••.
.•;0 Of CON'
Item No. 11
12/30/66
OF THE
FEDERAL RESERVE SYSTEM
.•
itifi
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 30, 1966
Mr. Frederic M. Peirce,
Chairman of the Board
and Federal Reserve Agent,
Federal Reserve Bank of St. Louis,
St. Louis, Missouri. 63166
Dear Mr. Peirce:
In accordance with the request contained in your letter of
December 22, 1966, the Board of Governors approves the appointment of
Mr. Stephen Koptis as Assistant Federal Reserve Agent at the Federal
Reserve Bank of St. Louis to succeed Mr. Marvin L. Bennett.
This approval is given with the understanding that Mr. Koptis
Will be solely responsible to the Federal Reserve Agent and the Board of
Governors for the proper performance of his duties, except that, during
the absence or disability of the Federal Reserve Agent or a vacancy in
that office, his responsibility will be to the Board of Governors.
Federal
Reserve
Bank as
Reserve
When not engaged in the performance of his duties as Assistant
Reserve Agent, Mr. Koptis may, with the approval of the Federal
Agent and the President of the Bank, perform such work for the
will not be inconsistent with his duties as Assistant Federal
Agent.
It will be appreciated if Mr. Koptis is fully informed of the
importance of his responsibilities as a member of the staff of the
Federal Resrve Agent and the need for maintenance of independence from
the operations of the Bank in the discharge of these responsibilities.
It is noted from your letter that Mr. Koptis' appointment is
to become
effective January 1, 1967, following approval by the Board of
G overnors.
Please have Mr. Koptis execute the usual Oath of Office
whlch should then be forwarded to the Board.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
@FedFRASER