The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for February 25, 1964
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
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. Mills
Gov, Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
,,c,c,13
Minutes of the Board of Governors of the Federal Reserve
SYstem on Tuesday, February 25, 1964.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman 1/
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Mitchell
Sherman, Secretary
Kenyon, Assistant Secretary
Bakke, Assistant Secretary
Fauver, Assistant to the Board
Hackley, General Counsel
Farrell, Director, Division of
Bank Operations
Mr. Solomon, Director, Division of
Examinations
Mr. Johnson, Director, Division of
Personnel Administration
Mr. O'Connell, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Sammons, Adviser, Division of
International Finance
Mr. Thompson, Assistant Director,
Division of Examinations
Miss Hart, Senior Attorney, Legal
Division
Mr. Egertson, Supervisory Review Examiner,
Division of Examinations
Mr. Hunter, Supervisory Review Examiner,
Division of Examinations
Mr. McClintock, Supervisory Review
Examiner, Division of Examinations
Mr. Sanford, Review Examiner, Division
of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Ratification of approval of application by Wells Fargo Bank
Item
.1 •
Mr. Solomon summarized the sequence of events sur-
l'°1111ding emergency approval of a telegraphic request from Wells Fargo
ritered meeting at point indicated in minutes.
gsy
-2-
2/25/64
San Francisco, California, for permission to establish a branch
in Covelo.
On Friday, February 21, he had received a telephone call
from Messrs. Hemmings and Galvin of the Federal Reserve Bank of San
l'rancisco and Mr. O'Kane, Superintendent of Banks for the State of
California.
The purpose of this call was to advise the Board that
O'Kane might have to close an insured nonmember bank in Covelo,
California, as of the opening of business on Monday, February 24; that
silloe this was the only bank in town, it was desired to insure immediate
continuity of banking services through establishment of a de novo branch
by
a reputable bank; that Wells Fargo Bank had indicated its agreement
t° cooperate in this matter; and that it was hoped the Board would grant
Fargo Bank emergency approval for establishment of the branch.
** Solomon suggested to the callers that a request from Wells Fargo
4111t) together with recommendations of approval by the Reserve Bank and
by
°Lv. O'Kane, be sent to the Board by telegram as soon as possible in
'
°I cler for the Board to have something concrete to act upon.
A telephone poll of all members of the Board who could be
reiched during the weekend (a majority) was conducted by Mr. Solomon,
slating in unanimous agreement by those contacted that telegraphic
not.
-Lee of approval be sent to Wells Fargo Bank on Monday, February 24,
Etzs
1411ing the anticipated telegraphic request and favorable recommenda-
tio.,
gs had been received. The telegrams were received at the Board's
qt.
Ices that morning, and the previously agreed-to telegraphic approval
61
2/25/64
-3-
establishment of the branch was immediately transmitted (copy
attached to these minutes as Item No. 1).
Mr. Solomon went on to say that he had been in touch again
Ifith Mr. Galvin after the Board's telegram of approval was sent, and
114a advised that while the Covelo bank had been allowed to open for
business (on Monday), it was probable that the closing would be ordered
8°171e, time later in the day, and Mr. O'Kane was still anxious that the
Wells Fargo branch be opened immediately after the taking of such
4ct3 on.
Mr. Solomon also noted that the Federal Deposit Insurance
C°rPoration was following the situation closely, and that solving the
Droblem by merger was evidently impracticable because of complications
ill regard to ascertaining the Covelo bank's true capital position, due
t° certain activities involving apparent self-dealing and other such
AZ'a
.ctices.
Thereupon, the action taken in sending the telegram of approval
14 l'eaponse to Wells Fargo Bank's request for authority to establish a
13rEtt1eh in Covelo, California, was ratified by unanimous vote.
Discount rates.
The establishment without change by the Federal
Res.-gve Banks of New York, Philadelphia, and San Francisco on February 20,
1964
) of the rates on discounts and advances in their existing schedules
aPProved unanimously, with the understanding that appropriate advice
1/0,0
be sent to those Banks.
Circulated items.
The following items, copies of which are
%,elled to these minutes under the respective item numbers indicated,
aPProved unanimously:
2/25/64
_)4._
Item No.
Letter to The County Trust Company, White
Plains, New York, approving the establishment
ct a branch in the Shrub Oak Shopping Center,
T°1,Tri of Yorktown.
2
Letter to The Bank of Virginia, Richmond,
rginia, approving the establishment of a
uranch at 731 East Main Street, the branch
°Perations to be discontinued upon completion
a remodeling program at the bank's main
°ffice.
3
Letter to Wells Fargo Bank, San Francisco,
le
)lifornia, approving the establishment of a
tranch in the blocks bounded by Battery, Clay,
4vi8, and Washington Streets.
11.
vLe.tter to The Bank of Monroe, Union, West
Irginia, approving an investment in bank
Dr
emises.
5
1/cA ter to The Fidelity State Bank, Topeka,
,
611sas, approving an investment in bank
vreraises.
6
n
Leotter to National Bank of Commerce, Tulsa,
tkl3
/
4
a, granting its request for permission
° maintain reduced reserves.
7
from Mr. Young, Adviser to the Board
STandum
Director, Division of International Finance,
tecl February 11, 1964, recommending that Boris
4 41.1r1g, Senior Economist, Division of Inter1:
th.474-0nal Finance, be authorized (1) to address
:annual meeting of the Canadian Political
ac
ence Association at Charlottetown, Prince
(J4I'd Island, Canada, June 11-13, 1964, and
to spend a period of up to two weeks under
auspices of the Bank of Canada, studying
°.r14clian security markets and banking problems.
tette-r to
the Federal Reserve Bank of Cleveland
4DPr174
4a „?--ng the appointment of Robert A. Crouch
Alternate Assistant Federal Reserve Agent.
9
2/25/64
_5...
Messrs. Farrell and Sammons then withdrew from the meeting.
Report on competitive factors (Columbia-Darlington, South Carolina).
There had been distributed a draft report to the Comptroller of the
ettrrency on the competitive factors involved in the proposed merger of
0arlington County Bank and Trust Company, Darlington, South Carolina,
into The First National Bank of South Carolina of Columbia, Columbia,
South Carolina.
Following a brief discussion in which it was concluded that
the
Proportion of total deposits in the State that the resulting bank
hold
(8
per cent) would not merit adding a comment to the report
eoncerning the trend toward concentration of banking resources in the
Sta
te/ the report was approved for transmittal to the Comptroller with
eelUin changes in the language of the conclusion suggested by Governors
Mills and Mitchell.
The conclusion, as approved, read as follows:
There is virtually no competition existing between
The First National Bank of South Carolina of Columbia and
the Darlington County Bank and Trust Company. Consummation of the proposed merger would not significantly alter
First National's competitive capabilities in the areas in
Which it currently operates, but would add somewhat to its
geographical coverage of banking services in South Carolina.
The merger might have some adverse competitive effects on the
Citizens Bank of Darlington.
Application of Bordentown Banking Company (Items 10,11, and 12).
suant
to the decision reached by the Board at its meeting on February 19,
1964
/ to approve the application of Bordentown Banking Company, Bordentown,
Nel4
Jersey, to merge with The First National Bank and Trust Company of
fikt
-6-
2/25/64
Roebling, Roebling, New Jersey, there had been distributed drafts of an
c)rder and statement reflecting that decision.
After discussion, the issuance of the order and statement was
krthorized.
2:11111.
Copies of the documents, as issued, are attached as Items 10
A copy of the letter of advice to Bordentown Banking Company is
attached as Item No. 12.
Messrs. Shay, Egertson, Hunter, McClintock, and Sanford then
vithdrew
from the meeting.
Violations of section 6(a)(4) of Bank Holding Company Act
-t
No. 13
There had been distributed a memorandum dated February 20,
1964, from the Legal Division discussing several violations of section
(a)(4) of
6
the Bank Holding Company Act by subsidiaries of General Banc-
hares Corporation, a bank holding company headquartered in St. Louis,
Mise°uri•
The violations in question arose out of loan participations
ged after the initial extension of credit had been made, in contraof the statutory prohibition against loans, discounts, or
ettensions of credit by one holding company subsidiary to another.
In commenting on the subject matter of the memorandum, Miss Hart
licked that in 1958 the Board had issued an interpretation of the Act
11°16'ing the prohibition of section 6(a)(4) not to be applicable to
it
krticipations at the outset," and setting forth four alternative
111"j1°ds of arranging loan participations that would qualify as "outset"
trall
sactions.
The violations of section 6(a)(4) by General Bancshares'
diaries were attributable to the fact that the holding company had
2/25/64
-7-
Etdopted the most permissive of the alternative tests suggested by the
130ard for arranging "participation at the outset," had proceeded to
Qonstrue this alternative liberally, and apparently had established no
adequate safeguards to make sure that its subsidiaries' loan participations were genuine "outset" transactions.
Miss Hart then presented two courses of action that the Board
nlight pursue with respect to these violations:
first, the Board could
refer the matter to the Department of Justice for prosecution as a
criminal violation of the Bank Holding Company Act, pursuant to section
8
thereof; or second, a letter, along the lines of a draft appended to the
Illernorandum, could be sent to the Federal Reserve Bank of St. Louis,
Et8king that General Bancshares' procedures and instructions be reviewed
t° bring them into harmony with the criteria for "participations at
the outset" and to make sure they embodied both effective methods for
8*Ni-tainting its subsidiary banks with these criteria and adequate
e°ntrols for insuring that the requirements were met.
Mr. O'Connell
illterJected the comment that the draft letter also proposed that the
holri 4
-.Lng company be advised any further violations would be regarded as
Drtaa
facie evidence of willful conduct and referred to the DepaiLment
JUstice for prosecution.
It was stated to be the view of the Legal Division that the
s"ond alternative approach would be preferable, not only because in
the
Past the Department of Justice had been reluctant to institute
-lnal proceedings in cases involving technical violations of the
623
-8-
2/25/64
Rolding Company Act but also because to recommend prosecution of these
Iriolations might appear inconsistent with the Board's recommendation to
ec)ngress that the existing statutory restrictions on loan participations
between holding company subsidiaries be liberalized.
With reference to the reluctance of the Department of Justice
to prosecute technical violations of the Bank Holding Company Act,
1411. O'Connell observed that the statute requires a showing of willful
ceqlduct.
In light of this, he considered desirable the statement in
the draft letter that further violations of this nature would be regarded
bY the Board as prima facie evidence of willful conduct, in order to
1.1t the holding company on notice and to lay the ground work for dem°Iletrating the element of willfulness in any future violations of
section 6(a)()4) of the Act by its subsidiaries that might be referred
to the Department of Justice.
Governor Mills raised a question concerning this aspect of the
ProPosed letter, commenting that not only might it be construed as a
hreat but such a representation might appear inappropriate in view
r the Board's recommendation that the statutory provision under
consideration be amended to make its restriction on participations
1.
ees severe.
Governor Robertson responded that notwithstanding the Board's
l'eccftlendation that the statute be liberalized in regard to permissible
clew .
'lngs between subsidiaries of a bank holding company, until such
1:1`/rige was made by the Congress the Board had an obligation to enforce
the At
e in its present form.
4•11tA,41
4s
6
2/25/64
There followed a discussion of alternative language that would
be consistent with the Board's obligation to enforce the statute, yet
More moderate in tone than the representation contained in the draft
Several suggestions were advanced, with the consensus favoring
letter.
a proposal by Governor Robertson that the paragraph in question state
that the Board would feel obliged to bring any future actions of General
1341cehares evidencing deliberate disregard of the provisions of section
6
Of the Bank Holding Company Act to the attention of the Department of
JtIstice.
The letter to the Federal Reserve Bank of St. Louis was then
8.13
,zz
al, subject to this change.
A copy of the letter, as sent, is
attached as
Item No. 13.
Chairman Martin joined the meeting at this point.
and
the
Miss Hart
Messrs. Solomon, Johnson, Thompson, and O'Connell withdrew from
meeting, and the following staff members entered the room:
Mr.
Mr.
Mr.
Mr.
Mr.
Broida, Assistant Secretary
Noyes, Adviser to the Board
Molony, Assistant to the Board
Brill, Director, Division of Research and Statistics
Koch, Associate Director, Division of Research and
Statistics
Mr. Axilrod, Chief, Government Finance Section, Division
of Research and Statistics
Mrs. Sette, Chief, Economic Editing, Division of Research
and Statistics
Report of Manager of System Open Market Account.
There hnd
been distributed a report to the Federal Open Market Committee by the
14a.tir.
-ger of the System Open Market Account dealing with Account activity
14 d omestic securities during 1963.
It had been suggested that such a
1.13(3rt be considered for inclusion in the Board's Annual Report for 1963.
2/25/64
-10Mr. Molony noted that the Manager's report contained two
Principal sections, the first entitled "General Review" and the second
"Chronology of Operations."
The first section contained material that
Ilas essentially duplicative of material contained in the policy record
°T the Open Market Committee and in other portions of the Annual Report.
Rovever, the Account Manager felt that this section was an essential
ecOPonent of his report as background to the discussion of Account
°Perations, and he had questioned a suggestion that it be omitted from
the
Manager's report if such were to be published in the Board's Annual
RePort,
Mr. Broida indicated, with the use of certain examples, that
the Principal difficulty lay in the fact that the "General Review"
section of the Manager's report contained comments concerning Committee
P°11°Y that differed to a degree from statements contained elsewhere
14 the Annual Report; the discrepancies were essentially in the area
°T tone and emphasis, he pointed out, rather than conflict of basic
rects.
Mr. Molony explained that the Federal Reserve Bank of New York
°Iltemplated publication of the Manager's report, or some part thereof,
-+
14i
468 Monthly Review.
This would be similar to the procedure followed
14et Year when the Manager's report was published by the Board (in the
4111 Federal Reserve Bulletin) and by the New York Reserve Bank (in its
14()rith1Y Review for April).
Mr. Molony pointed out that if the material
-11-
2/25/64
to be published this year in the Board's Annual Report was to be
identified as the Account Manager's report, it should not differ in
slAostance from any document similarly identified in the New York
Reserve Bank's Monthly Review.
After discussion, a consensus developed that, for purposes of
the Annual Report, the best procedure would be to publish only a
chronological review of open market operations, recognizing that this
should not be identified in the Annual Report as the Account Manager's
Official report to the Open Market Committee.
It was recognized that
lt would be undesirable for there to be differences in such a review
Of °Perations, as published in the Annual Report, and any document
that might be published by the Federal Reserve Bank of New York. It
114e also brought out that there should be appropriate clearance with
the Treasury Department (if this had not already been done by the
Ace°11nt Manager) of portions of the document included in the Annual
RePort that referred to Treasury operations.
The Secretary was requested, in company with other appropriate
illertters of the Board's staff, to discuss this matter further with the
Ace°11nt Manager by telephone and to report to the Board the results of
the conversation.
Secretary's Note: At the meeting on
February 26, 1964, Mr. Sherman reported
the results of a telephone discussion
with Mr. Stone by members of the Board's
staff. Mr. Stone had expressed satisfaction
with a procedure whereby only a portion
of his annual report to the Open Market
2/25/64
-12Committee would be included in the Board's
Annual Report, subject to the understanding
that this would be referred to in the Annual
Report simply as a report of operations.
Mr. Stone indicated that he would effect
clearance with the Treasury Department of
pertinent passages in the review of operations. It was understood that this procedure
would not preclude consideration, as a separate
matter, of the question of publishing a more
complete report of the Manager in the Federal
Reserve Bulletin and the New York Reserve
Bank's Monthly Review.
The meeting then adjourned.
Secretary's Note: Pursuant to the recommendation contained in a memorandum from
the Division of Data Processing, Governor
Shepardson today approved on behalf of the
Board the appointment of Janet Marie Cross
as Draftsman-Trainee in that Division, with
basic annual salary at the rate of $3,880,
effective the date of entrance upon duty.
Secretary
62H
Item No. 1
2/25/64
TELEGRAM
LEASED WIRE SERVICE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
February 24, 1964
GALVIN - SAN FRANCISCO
REURTEL FEBRUARY 23, 1964, BOARD HAS APPROVED APPLICATION
GP WELLS FARGO BANK, SAN FRANCISCO, CALIFORNIA, TO ESTABLISH
DE NOVO BRANCH AT COVELO, CALIFORNIA, SUCH APPROVAL BEING CONDITIONED
UPON PRIOR OR SIMULTANEOUS DISCONTINUANCE OF THE EXISTING BANKING
PACILITIES IN COVELO AND UPON ESTABLISHMENT OF THE BRANCH WITHIN
111"BaY
DAYS AFTER THE DATE OF THIS TELEGRAM.
(Signed) Merritt Sherman
SHERMAN
Item No. 2
BOARD OF GOVERNORS
2/25/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
February 25, 1964
Board of Directors,
The County Trust Company,
White Plains, New. York,
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment of a
branch in the Shrub Oak Shopping Center, Settlement
of Shrub Oak, Town of Yorktown, Westchester County,
New York, by The County Trust Company, provided the
branch is established within one year from the date
of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
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.)
63()
Item No. 3
BOARD OF GOVERNORS
2/25/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 25, 1964
Board of Directors,
The Bank of Virginia,
Richmond, Virginia.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment of a branch by The
Bank of Virginia, Richmond, Virginia, at 731 East Main
Street, Richmond, Virginia, provided the branch is
established within six months from the date of this
letter and provided further that branch operations at
731 East Main Street are discontinued upon completion
of the remodeling program for The Bank of Virginia's
main office.
Very truly yours,
(signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
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.)
Item No.
BOARD OF GOVERNORS
4
2/25/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 25, 1964
Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment of a
branch by Wells Fargo Bank, San Francisco,
California, in the blocks bounded by Battery, Clay,
Davis and Washington Streets, San Francisco,
California, provided the branch is established
within one year from the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
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.)
)t
Item No. 5
2/25/64
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS
OFFICIAL
CDRR(ePONOENCE
TO THE BOARD
February 25, 1964
Board of Directors,
The Bank of Monroe,
Union, West Virginia.
Gentlemen:
The Board of Governors of the Federal Reserve
/Stem approves, under the provisions of Section 24A of the
Jderal Reserve Act, an investment in bank premises of not
,t
,
() exceed $125,000 by The Bank of Monroe, Union, West
virginia, for the purpose of constructing new banking
quarters.
Very truly yours,
(Signed) Elizabeth L. C
Elizabeth L. Carmichael,
Assistant Secretary.
Lchael
633
BOARD OF GOVERNORS
Item No.
6
2/25/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS
orrociAL
CORRESPONDENCE
TO THE BOARD
February 25, 1964
The Board of Directors,
The Fidelity State Bank,
Topeka, Kansas.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves, under the provisions of Section 24A of
the Federal Reserve Act, an investment in bank premises
by The Fidelity State Bank, Topeka, Kansas, of $79,500
for the acquisition of an adjoining building.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
684
BOARD OF GOVERNORS
Item No.
7
2/25/6+
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 25, 1964
tOlitrd
of Directors,
*rtional Bank of Commerce,
'
4443a) Oklahoma.
ttlemen:
With reference to your request submitted through the Federal
-4-ve Bank of Kansas City, the Board of Governors,
acting under the
tocrqsions of Section 19 of the Federal Reserve Act, grants permission
National Bank of Commerce to maintain the same reserves against
eiVits as are required to be maintained by nonreserve city
banks,
itp4eetive with the first biweekly reserve computation period beginning
the date of this letter.
Your attention is called to the fact that such permission
.,
'
110Ject to revocation by the Board of Governors.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman)
Secretary.
Item No. 8
2/25/64
BOARD OF GOVERNORS
O r THE
FEDERAL RESERVE SYSTEM
filee
Correspondence
Dee February 11, 1964
of GovernorsSuldect: Foreign travel:
1,41L\s_p
h A. Young
Mr. Boris Swerling
Mr. Swerling has been invited to address the annual
l&ting of the Canadian Political Science Association at
uriarlottetown Prince Edward Island, Canada, from June 11-13,
- is recommended that he be authorized to accept this
1964• It
,
41vitation, and to undertake the travel to Canada that would be
invcaved.
It is also recommended that we take advantage of this
"Portunity to enable Mr. Swerling to spend a period of no more
uhan two weeks in Canada under the auspices of the Bank of Canada
udYing Canadian security markets and banking problems. The
ank of Canada arranges for guests to visit Canadian financial
rkets in Toronto and Montreal as well as spending time at the
?ank ls offices in Ottawa. The entire trip would be approximately
-11°111 May 24 to June 140
P
r
It is proposed that elr. Swerling be allowed the per diem
lieu of expenses prescribed by the Standardized Government
'avel Regulations.
4l
(
BOARD OF GOVERNORS
Item No. 9
2/25/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 25, 1964
Joseph B. Hall,
'ederal Reserve Agent,
,?,eolleral Reserve Bank of Cleveland,
L leveland, Ohio 44101.
'
1)e ar
Mr. Hall:
In accordance with the request contained in your letter of
*.--Lary 6, 1964, the Board of Governors approves the appointment of
Robert A. Crouch as Alternate Assistant Federal Reserve Agent at
thee
Federal Reserve Bank of Cleveland to succeed Mr. Donald Clink,
eb
This approval is given with the understanding that Mr. Crouch
11111
of G be solely responsible to the Federal Reserve Agent and the Board
dur °vernors for the proper performance of his duties, except that,
va ing the absence or disability of the Federal Reserve Agent or a
44heY in that office, his responsibility will be to the Assistant
eral Reserve Agent and the Board of Governors.
When not engaged in the performance of his duties as Alternate
tant Federal Reserve Agent, Mr. Crouch may, with the approval of
le8is
the ,
4111jederal Reserve Agent and the President, perform such work for the
?el as will not be inconsistent with his duties as Alternate Assistant
eral Reserve Agent.
It will be appreciated if Mr. Crouch is fully informed of
the 4_
Pecie'Tortance of his responsibilities as a member of the staff of the
40111ral Reserve Agent and the need for maintenance of independence
the operations of the Bank in the discharge of these responsibilities.
ehota
Please have Mr. Crouch execute the usual Oath of Office which
of .0,1 be forwarded to the Board of Governors along with notification
e effective date of his appointment.
'
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
4,11).4
Ot.)
Item No. 10
2/25/64
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
14 the
Matter of the Application of
)111)ENTOWN BANKING COMPANY
approval of merger with
17e First National Bank and
ust Company of Roebling
ORDER APPROVING MERGER OF BANKS
Governors, pursuant to the
There has come before the Board of
11E111k Merger Act of 1960 (12 U.S.C. 1828(c)), an application by Bordentown
arktrig Company, Bordentown, New Jersey, a State member bank of the Federal
SQr
merger of that
ve System, for the Board's prior approval of the
batik
4e1,7
and The First National Bank and Trust Company of Roebling, Roebling,
Jersey,
under the charter and title of the former.
As an incident
tho
he merger, the sole office of The First National Bank and Trust
Catlr,
Bordentown Banking Company.
yanY of Roebling would become a branch of
11/tice of the proposed merger, in form approved by the Board, has been
Iliblished pursuant to said Act.
Upon consideration of all relevant material in the light of
the ,..
zactors set forth in said Act, including reports furnished by the
vtroller of the Currency, the Federal Deposit Insurance Corporation,
638
and the Department of Justice on the competitive factors involved in
the Proposed merger,
forth in the
IT IS HEREBY ORDERED, for the reasons set
114rd's Statement of this date, that said application be and hereby
ated
is aPproved, provided that said merger shall not be consumm
(0 Within seven calendar days after the date of this Order or
(b)
later than three months after said date.
of February, 1964.
Dated at Washington, D. C., this 25th day
By order of the Board of Governors.
Voting for this action:
Unanimous, with all members present.
(signed) Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
Item No. 11
2/25/64
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY BORDENTOWN BANKING COMPANY
FOR APPROVAL OF MERGER WITH
THE FIRST NATIONAL BANK AND TRUST COMPANY OF ROEBLING
STATEMEN
town
Bordentown Banking Company, Bordentown, New Jersey ("Borden
t441,0 N
))
with total deposits of about $11 million, has applied, pursuant to
the sank Merger Act of 1960 (12 U.S.C. 1828(c)), for the Board's
klol" approval of the merger of that bank and The First National Bank
4tici
&rust Company of Roebling, Roebling, New Jersey ("Roebling Bank"),
lqth
total deposits of about $6 million.
As an incident to the merger the
of
k3erlt office of Roebling Bank would be operated as a branch
tord
Bordentown Bank
Qt1tC)Wn Bank, increasing the number of offices of
t° throe.
, as to each
Under the Act, the Board is required to consider
"thQ
the
banks involved, (1) its financial history and condition, (2)
Etdew
earnings prospects,
acY of its capital structure, (3) its future
(4)th
e
e general character of its management, (5) whether its corporat
arP consistent with the purposes of 12 U.S.C., Ch. 16 (the
kcies_
r41 Deposit Insurance Act), (6) the convenience and needs of the
Posit figures as of September 30, 1963.
(A0
-2effect of the transaction on
e(3/11munity to be served, and (7) the
monopoly). The Board may
ec)inPetition (including any tendency toward
after considering all these factors,
11c)t approve the transaction unless,
public interest.
it linds the transaction to be in the
banks have satisfactory
Banking factors. - Both of the
condition. The
flmancial histories and are in sound financial
d be satisfactory. The
4set condition of the resulting bank woul
satisfactory. While the
caPital structure of Roebling Bank is
rable
is somewhat below a desi
eal)ital structure of Bordentown Bank
tal
s of strengthening the capi
le//ell management is considering mean
P4iti0n of the bank.
generally have been below the
Bordentown Bank's earnings
Federal Reserve District.
alerage for banks of comparable size in the
Bank lacks
been good. Bordentown
earnings of Roebling Bank have
Bank has a management
1/41-time executive leadership and Roebling
d permit
the proposal, which woul
succession problem. Consummation cf
l of the two banks,
utilization of the combined managerial potentia
841-,
gement situation and enhance
'Id result in a more balanced mana
the
bank.
earnings prospects of the continuing
the powers of the banks
There is no indication that
1111),,
the purposes of 12 U.S.C. Ch. 16.
utved are or would be inconsistent with
communities. - The City of
Convenience and needs of the
about 5,000, is located in the
esrclentown,
with a 1960 population of
y
e%treme
ington County, New Jersey, approximatel
northern section of Burl
-3G141
Nht miles south of Trenton,
the State capital.
It is surrounded by
the Township of Bordentown, with a 1960 population of about 6,000.
The
additional population of 15,000.
rounding trade area has an estimated
the economy
Industry has supplanted agriculture as the major contributor to
(3f the area.
McGuire Air Force Base
Employment is also provided by the
miles south of Bordentown),
U. S. Army's Fort Dix (both located ten
"
Fuel and Iron Corporation (four
jcthn A. Roebling Sons Division of Colorado
Plant of the United States Steel
tililes south of Bordentown), the Fairless
)3ordentown, in Pennsylvania), and
C°rPoration (about fifteen miles west of
in Trenton (eight miles north of
the offices of the State of New Jersey,
13°rdentown).
town, with a 1960 population of
Roebling is an unincorporated
ove
four miles southwest of Bordentown
r 3,000, located in Burlington County
Burlington, New Jersey. The town of Roebling,
Six miles northeast of
"
on the continued operation of
largely dependent for employment
its
is
Colorado Fuel and Iron Corporation.
401111 A. Roebling Sons Division of
population of about 225,000, is a rapidly
Ilrlington county, with a 1960
population but also suburban construction
area not only in terms oF
"11 industrialization.
Bordentown Bank is $60,000 and that of
The lending limit of
merger is consummated the
4ebling Bank is $40,000. In the event the
$105,000, would be in position to
4sulting bank, with a lending limit of
rapidly growing community. There
4tve the needs of larger borrowers in a
customers of Roebling Bank a
141111d also be available to the present
range of banking services.
e ter variety of loans and a broader
the two banks
Competition. - The service areas of
moderate degree of competition
°Verlal
) to some extent resulting in a
642
-4-
between the two institutions which, of course, would be eliminated if
the merger is effeced.
however, the resulting bank would be a
elatively small bank, and would not have a dominant position in
the over-all competitive area.
The fact that one banking alternative would be eliminated
4
not particularly significant because of the numerous banking
choices otherwise conveniently available to the public.
These include
four banks in nearby Trenton, three of which are substantially larger
than would be the resulting bank. Consummation of the merger should
enable the resulting bank to compete more effectively with these
14raer institutions.
Summary and conclusion. - Consummation of the proposed
Illetger would alleviate the management problems presently existing
at each of the banks and would provide a broader range of banking
aervices in the combined service area.
While some competition between
the two banks would be eliminated, the over-all effect on competition
11°uld not be significantly adverse.
Accordingly, the Board finds the proposed transaction to
be
in
the public interest.
4btuarY 25, 1964.
64.3
BOARD OF GOVERNORS
Item No. 12
2/25/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
oft
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 25, 1964.
REGISTERED - RETURN
REQUESTED
Bordentown Banking Company,
Bordentown, New Jersey.
Gentlemen:
The Board of Governors has approved the application,
under the Bank Merger Act of 1960 (12 U.S.C. 1828(c)), for the
Boare s prior consent to the merger of The First National Bank
and Trust Company of Roebling, Roebling, New Jersey, into
Bordentown Banking Company, Bordentown, New Jersey.
Enclosed are the Board's Order of this date, the
accompanying Statement, and the press release on this action.
It is understood that your bank is considering the sale
of additional capital stock to strengthen its capital position.
While consummation of the subject merger would improve the capital
s tructure of your bank, effectuation of the merger will not alter
the need for augmenting capital through sale of stock.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Enclosures
BOARD OF GOVERNORS
Item No. 13
2/25/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORREE3PONDENCE
TO THE BOARD
February 25, 1964.
Mr. 0. 0. Wyrick, Vice President,
Pederal Reserve Bank of St. Louis,
ells O. Box 442,
"t. Louis, Missouri. 63166
pear Mr. Wyrick:
This refers to your letter of April 17, 1963, enclosing
report from Mr. Daniel S. Hapke, Vice President, Secretary, and
eneral Counsel of the General Bancshares Corporation ("Bancshares"),
'
,13ncerning certain transactions between Northwestern Bank and Trust
`4/111Pany, Lindbergh Bank, and Commercial Bank of St. Louis County, all
j
s ibsidiaries of Bancshares, which involved violations of Section 6 of
tV Bank Holding Company Act of 1956 ("the Act"). The Board has viewed
b 18 report with particular concern because on two prior occasions
4411king subsidiaries of Bancshares were found to have been involved
;11 similar violations, and on each occasion, the holding company
sured the Board that it would take steps to prevent such events from
'
centring again.
As you know, section 6(a)(4) of the Act makes it unlawful for
Bank n to
hol .
make any loan, discount or extension of credit to a bank
ding
company
of which it is a subsidiary or to any other subsidiary
of
ce 8neh bank holding company." In its Statement in the matter of
Corporation, 1958 Federal Reserve Bulletin 260, the
1011191..cp_ntract
-31
(1 held that the nonrecourse purchase of installment paper constitutes
110 d iscount" within the meaning of the section. The Board said,
ainver, that "when one bank seeks participation by another bank to
in meeting the credit needs of a borrower, there would seem to be
:
I
illak?nnflict with section 6 if the second bank joined at the outset in
ban ng its portion of the loan, since this would not involve the second
in either a direct loan to the first bank or a purchase of paper
f,
'
Gm it.fl
4
in an interpretation issued in response to a request by
Boaral Contract Corporation (1958 Federal Reserve Bulletin 1059), the
114 rd held that four specific procedures for arranging interbank
Licipations would amount to "joining at the outset" in the resulting
Mr. 0. 0. wyrick
-2-
loan, within the meaning of this language. However, in 1960, the Board
&earned, in a letter of July 22, 1960, from Mr. George E. Kroner, of
of the Bank of
Bank, that a review of the report of examination
having
succeeded to
ares
(Bancsh
t. Louis, a subsidiary of Bancshares
t
tion)
Contrac
Corpora
General
Isthe banking interests formeriy held by
pating
banks
ry
partici
subsidia
;1 acl revealed several instances in which
the
with
,
records
credits
4;1 loans had not joined at the outset in the
Owing variances in dates ranging up to fifteen days.
the
Although, according to the report of examination,
were
based, in
es
Bancshar
of
hocedures adopted by the subsidiary banks
in the
set
forth
examples
four
al, upon the most permissive of the
to
said
were
question
in
s
hilterpretation mentioned above, the instance
of
certain
part
the
on
ss
promptne
e:ve been "the result of a lack of
Illoyees in carrying out the participation procedure prescribed in the
sties drawn by' Bancshares. According to management of the Bank of
„s• Louis, in a letter to Mr. W. Sidney West, FDIC Examiner in Charge,
to, special controls
6irlee we have learned of the situation referred
in clerical handling
delays
0:ve been installed to avoid recurrence of
dated
Kroner,
s!. Participations." The Board's reply to Mr.
are
members of holding
cePtember 21, 1960, remarked that "banks which
by
d
situation (4)
,1111PanY systems adopting the procedure suggeste
i°
Ede
Bulletin 1059]
Federal
Reserve
1958
at
tation
interpre
in the
:tad be particularly careful to carry out all the requisite steps
the bank states that the delays in
111PtlY. . ." but continued "Since
:
(111
controls
stion were the result of clerical failures, and that special
:
ha
Board
b,",e been installed to prevent recurrence of such instances, the
the
to
report
.eves that it would serve no useful purpose to make a
delays
the
,,,lted States Attorney for his determination as to whether
-40unted to misdemeanors under the Act."
N
0
for your Bank,
In a memorandum from Mr. Dunne, General Counsel
tra-the Board
1961,
lea7Tutted by you with a letter dated November 17,
ee, also
,
Tenness
Memphis
a jned that Commercial and Industrial Bank of
which
in
loans",
felaineshares subsidiary, had been treating as "new
, the total
outset"
the
"at
ate
particip
°w' subsidiary banks might
ato
being
advanced to
funds were
tile ullt of a loan renewal where additional
the borrower
where
s
same borrower as part of the renewal, and renewal
nt
but differe
collateral was
405 the amount of the loan remained the same
reastituted for the original collateral securing the loan. The Board
rIewelled the conclusion that, in such cases, obviously only the amount of any
could be considered to be a "new" loan,
and funds which were advanced
ao advised your Bank in a letter of December 20, 1962.
The instances mentioned in the attachment to your letter of
4Pril ,
the series of violations
rem, 13, 1963, fall into the same category as
,,,rted in 1960, since about forty participations seem to have been
64'G
Mr. 0. 0. Wyrick
-3-
arranged after periods ranging up to twenty days following the
°r1ginati0n of the loans. Although Bancshares has made known its
readiness to "see that all objectionable participations are returned
co the originating bank", considering the obvious negligence attending the
Past participation procedures of Bancshares' subsidiary banks, more
844t_ 1ngent measures are indicated than the mere return by the banks of
'le "objectionable participations".
It is apparent that the basic cause of the violations noted
Bancshares participation procedures stems from either or both a
lailure to set forth succinctly and clearly procedural details that
;$3uld assure compliance with the law, or assuming that such have been
°rImulated and promulgated, a failure on the part of Bancshares to
ii)otlice effectively the actions of its banks' employes. Accordingly,
is suggested that Bancshares be requested to submit for your review
ctirld comment all outstanding instructions and directions regarding steps
4° be taken by its banks in arranging participations at the outset. These
.tructions could then be reviewed by the Bank's staff with a view to
1 rI-ls
)
'
thlliging them into harmony with the spirit, as well as the letter, of
e Board's interpretations. In this regard, Bancshares should be
squired to make known the steps it now takes, or intends to take, to
7
_sure that the outstanding instructions regarding participations are made
1!_l°1411 to and fully understood by the personnel of its subsidiary banks.
'tt_I addition, Bancshares should identify the steps it proposes to take
° assure compliance with these instructions.
ill
f
As to the manner in which Bancshares' banks hereafter
Under4.
Lake participations at the outset, you are requested to advise
'eShares
of
that in view of its previous history of continued violation
inadthe provisions of section 6 of the Act, all of which have been
at the time of, or following,
the. known to Bancshares' management
de lt occurrences, should future actions by Bancshares evidence
4 iberate disregard of the provisions of section 6 as interpreted
he Board, the Board would feel obliged to refer such actions to
the
vii United States Department of Justice as being, prima facie,
4u1 violations of the Act.
Your. communication of the substance of this letter to
%:Ishares will be appreciated. The Board's staff will render whatever
Copies of
till stance in this matter you may consider appropriate.
Insurance
443 letter have been sent to the Federal Deposit
Corporation.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
@FedFRASER