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Minutes for
To:
January 13, 1960.
Members of the Board
From: Office of the Secretary
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
Fliflutes in the record of policy actions required to
De maintained pursuant to section 10 of the Federal
Reserve Act.
have any question with regard to
Should you
the
,
minutes, it will be appreciated if you will advise
ele
Secretary's Office. Otherwise, please initial below.
tt You were present at the meeting, your initials will
JIldicate approval of the minutes. If you were not present,
Y°ur initials will indicate only that you have seen the
minutes.
Chm. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
ii
Minutes of the Board of Governors of the Federal Reserve System
on
Wednesday, January 13, 1960.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
King
Mr. Sherman, Secretary
Mr. Hackley, General Counsel
Mr. Farrell, Director, Division of Bank
Operations
Mr. Solomon, Director, Division of Examinations
Mr. Johnson, Director, Division of Personnel
Administration
Mr. Hexter, Assistant General Counsel
Mr. Chase, Assistant General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Kiley, Assistant Director, Division of
Bank Operations
Mr. Nelson, Assistant Director, Division of
Examinations
Mr. Smith, Assistant Director, Division of
Examinations
Mr. Sprecher, Assistant Director, Division of
Personnel Administration
Mr. Landry, Assistant to the Secretary
Discount rates.
The establishment without change by the Federal
Rese—
"re Bank of Boston on January 11, 1960, of the rates on discounts
II" advances in its existing schedule was approved unanimously, with the
141derstanding that appropriate advice would be sent to that Bank.
Items circulated to the Board.
The following items, which had
eiretaated to the
members of the Board and copies of which are attached
"minutes under the respective item numbers indicated, were
t° the
-.1).a1111Tal
unanimously:
S
1/13/60
-2Item No.
II:letter to the Comptroller of the Currency recom,nding approval of the application of The Beach
Dank
Jacksonville Beach, Florida, to convert
J'Ilto a national
banking association.
1
Letter to the
Comptroller of the Currency recomending favorably with respect to an application
-0 organize
a national bank in Aurora, Illinois.
Lette
r to the Federal Deposit Insurance Corporation
gard4-4_ j-ng the application of the Farmers Bank, Clay,
,
RI'uckY, for continuation of deposit insurance after
"4.Lndrava1 from membership in the Federal Reserve
BYstem.
2
T
i;
Letter
t0 th Riverside Trust Company, Riverside,
,
Net
" Jersey
,,
J approving an investment in bank premises.
th er
Lett
to the Federal Reserve Bank of Chicago approving
PaYment of salaries to certain nonclerical personnel
specified annual rates.
The First State Bank
3
4
5
Abilene, Texas--investment in bank
There had been distributed a memorandum from the Division
or
xand-nations dated January 6, 1960, attaching a draft letter to
The pi
rstState Bank, Abilene, Texas, granting permission to invest
ti
Premises an amount in excess of the capital stock of the Bank
"Provided for by Section 24A of the Federal Reserve Act.
Governor Mills observed that the analysis in the memorandum was
thor04
and included the reservations which the Division of Examinations
vith
"
h
- respect to the proposed investment in bank premises by The First
State
'nk, although the conclusion of its memorandum was that on balance
1/13/60
-3-
it recommended approval of the application.
He said that his own sentiment
vas that
approval would constitute a violation of the canons of sound
banki
ng administration with respect to overinvestment in bank premises
aM that
consequently he believed the application should be rejected,
realiv _ g
1-11 that such action would probably cause The First State Bank
to tit
from membership in the System.
Governor Robertson agreed with the view expressed by Governor
Millay stating that the proposed investment in bank premises went much
Alrther than what he thought was contemplated under the statute as a
normal
yanking operation.
The fact that the asset condition of the
sank
vas not rated as top notch indicated that the large planned
itvp04
nt in real estate would be unwise.
Governor Shepardson said that he had similar reservations.
His
e
turned partly on whether the Board had any fairly definite standards
C/11 hot,
-" far a bank might be permitted to go in investing in real estate,
arid ip
so whether this program could be brought within those standards.
'
Chairman Martin then inquired whether it was the sentiment of
the 14_
s4"Jard that the Dallas Reserve Bank should be informed that the
Board
vas leaning
toward rejection of this application and that any
krthe,
4-niormation the Bank wished to add would be helpful at this
11°Itt,
14r. Solomon noted that, because of time limitations, the
rqi ete
file on this case had not been circulated to the Board.
-4said that the file disclosed that the Division of Examinations had
aireadY requested Vice President Pondrom of the Dallas Reserve Bank
t°1 additional information regarding the proposal, with the result
that the Bank had
sent an examiner to Abilene to make a detailed
illirveY of the situation.
Although the Division's original inclination
had been that
the application should not be approved, following receipt
°f the complete report of the examiner a further study of the proposal
had
caused the Division to conclude that it was feasible.
Mr. Solomon
"Plained that the reason the entire file had not been circulated was
that
vice President Pondrom had telephoned from rallas on January 11
to
cliaciose that the stockholders meeting of First State Bank was to
be h-,,
-Lot today, that the Bank was anxious to receive the Board's views
this 111°rning, and that in view of this fact it seemed desirable to
distribute to the Board the memorandum that had been prepared by the
tiv1.
si011 of Examinations, which memorandum contained fairly complete
illf°111lati°n in Summary form but did not include the detailed picture
e°117eYed by the complete file. Mr. Solomon called attention to the
tact that
half of the total cost of $1 million for the proposed new
bazitit
,
quarters would be financed by an insurance company loan secured
by a
'
et mortgage on the property, and there would be an arrangement
1111dsx' 14hich the Bank would repurchase the property subject to, but
Ilith°11t liability for, the mortgage.
The Bank proposed to sell
"cliti°nal capital
stock for about $470,000 and, counting the borrowed
1/13/60
-5-
capital, the investment in bank premises would constitute 71 per cent
Of
the total capital structure of the Bank.
Despite the dangers
in"lved in the Bank's going into the real estate business to the
extent
proposed, the investment seemed reasonable under the circum-
stances and, in
fact, was almost a necessity in order to provide badly
needed additional space required by the Bank for its operations.
Noting that the proposal of the applicant bank apparently would
still involve an absorption of its capital in excess of 50 per cent,
Gcnreill°r Mills suggested that it would be difficult to approve the
aP13lication in the light of the standards supervisory authorities had
d for new national banks or State chartered banks entering the
85retem.
Mr. Nelson replied that the Bank's capital would be $1,420,750
I'Liclifing sale of the additional stock for about $500,0001 and that the
money secured from the insurance company would be paid off by
Isenteas,
SO that in effect the ratio of the Bankts investment in the
4eNLDremises
to its own capital would be only 35 per cent and not
71 Per cenj. The issue of $500,000 additional capital, which would
be completed
only if this plan was approved, would mean that the
stoekhoide
rs were putting up the money the bank actually would be
illvesting in
the building.
Mr. Solomon commented that when the sale of $500,000 stock was
e°10Plet
edo the bank would have 91 per cent of the capital that was
1/13/60
-6-
indicated
as desirable under the Boardes form of analysis of bank
which put it in a fairly good position.
Messrs. Molony and Fauver, Assistants to the Board, entered
the room
during the foregoing discussion.
Following a comment from Governor Robertson that it would be
helpf41 for the
Board members to see the complete file on this case
bero__
reaching a decision, the Chairman suggested that this procedure
be
followed and that Mr. Solomon telephone the Dallas Reserve Bank to
inform it
that the Board had not been able to act on the application
today
4 He Would also inform the Dallas Bank of the sentiment at this
rneeting, inviting any
additional comments that the Reserve Bank might
Wishto offer.
This suggestion was approved unanimously.
Safekeeping of securities by the Reserve Banks (Item No. 6).
There
had been
distributed a memorandum dated December 30, 1959, from
Messrs.
HackleY, Solomon, and Farrell regarding modification of a
statem nt
e-- Of general policy proposed by the Conference of Presidents
march
23/ 1959, with respect to the safekeeping of securities by
the Pederal Reserve Banks. Attached to the memorandum was a draft of
etter to
ell Federal Reserve Banks prepared pursuant to the discussion
at
e Meeting of
the Board on May 200 1959.
Mr. Farrell indicated that there had been some differences of
01P01114011
1,
ve 14een the Division of Bank Operations and the Division of
1/13/60
-7Exam.
inations as to the content of the draft of letter for transmission
to the
Reserve Banks.
As he had indicated at the meeting on May 20,
1959) he believed that in rejecting the proposal made by the Presidentst
C°117Eseren
-oe on March 23, 1959, regarding safekeeping operations, it 'would
be
Preferable to issue a brief general statement on safekeeping practices
that 'would authorize such holdings when they would contribute to the
efficient and economical operations of the Reserve Banks or otherwise
*7°111-(3 he in the public interest and consistent with the purposes of the
SYstem.
1-ui5 would leave the matter largely to the judgment of the
individual Reserve Banks.
On the other hand, the Division of Examinations,
"had been indicated at the meeting last May, believed that a more
detail,
eki statement of the acceptable practices for safekeeping along
the
lines that the
Conference of Presidents had suggested would be
helpfU1 to
the examiners in attempting to determine whether the
Practices of the
Reserve Banks complied with the Boardts policy. In
diseu
88inE the matter with Mr. Hackley, the latter felt that a letter
al°4 the lines of the draft proposed would be substantially in accordance
Jith the
conclusions that the Board reached last May.
Mr. Solomon said that as he recalled the discussion in May of
1959,
the Board felt that it would be appropriate to have a general
st"ement
e3c8.171Ples
such as Mr. Farrell suggested and to accompany it with some
of
acceptable safekeeping practices under that general policy
etatement.
If no examples were given
the Board's examiners -would find
1/13/60
-8-
it difficult to determine whether specific practices were in keeping
Ilith the expressed intent of the Board and would have to accept almost
anY view Of a Reserve Bank as to what was in the public interest.
His
feeling was that the draft of letter submitted with the memorandum of
December
30, 1959, would be satisfactory from the standpoint of the
vi
sion of Examinations, and that it would also be consistent with
earl ier
- instructions of the Board and recommendations of the Presidents'
Conference.
14hetner
In response to a question from Governor Robertson as to
Federal Reserve Banks should hold any securities in safekeeping
for
member banks or the public, Mr. Solomon said that he had not studied
thi8 question in detail since he had not understood that the Board
contemplated elimination of all safekeeping, which had been practiced
it/ greater or
less degree by the Federal Reserve Banks over a period
Of nianY Years.
There could no doubt be persuasive arguments for
recluetng the
amount of safekeeping.
There ensued considerable discussion of the extent to which
Pedera,
-I. Reserve Banks in the past had held securities in safekeeping
ri3r rne
mber banks
and for others, of what might constitute holdings in
the ft,
111°lie interest", and of the desirability of indicating to the
8ank8 the +
- ,;,Ypes of safekeeping that might be appropriate.
Retu-Ming to
the question of the letter to be sent to the Federal
ReSe
rveBan, 8
4 regarding the policy to be followed, Chairman Martin
0
ented that
the subject of safekeeping seemed to go around in circles
125
1/13/60
and that
this discussion illustrated why it had been so difficult for
the
system to resolve the question over the years. If only a general
statement were issued to the Reserve Banks leaving them free to engage
In
safekeeping whenever they felt it to be in the public interest, that
vould end
the idea of a limitation by the Board on the extent of such
services.
Perhaps this was Where the Board wanted to come out, but on
the other
hand, he thought there was something to the position that
there
should be some guides for the Reserve Banks and for the help of
the
examiners.
Governor Robertson said that his view was that, in the absence
Qtbet+-cr reasons than he had heard for specific statements of what
cc/Uld bp
held in safekeeping, the whole problem should be turned back
to the
Reserve Banks with the understanding that they would make their
oun
rqles.
Governor Mills questioned whether that would be the most desirable
aPProa-l_.
'
n Essentially, the Reserve Banks had been following a "good
neighbor pOli — ft
cy on safekeeping for many years, and in his opinion it
nfld gone
too far. The proposed letter would freeze the practices
'Where
they are and
not suggest additions. Governor Mills felt that
it
louUld be
t
desirable to contract what the System is doing rather than
expand, but
there was a situation that had grown up over the years
1411ell made
it difficult to bring about a contraction. In his judgment,
the
Board had
an area of responsibility from the budgetary standpoint
1/13/60
-10-
since the
costs of the safekeeping operation were substantial.
This
must be
looked upon essentially as a free service to member banks.
The proposed
letter would freeze the situation that now existed, and he
would not
wish to send a letter which opened the way for those Reserve
Banks who wished to
do so to extend this area of free services to member
balaka.
The
Mer. Farrell said that he endorsed the comments of Governor Mills.
end ncY among the Reserve Bank Presidents, he said, was to leave
the
tatter to the judgment of each Reserve Bank, which would have been
substantially the result of the proposed statement submitted by the
C°11ferenca Of
Presidents. Over the years, the Board had gone along
with an_
J suggestions from the Reserve Banks, which had resulted in the
Collet
i°n of outstanding letters on this subject in the Federal Reserve
40se-Leat Service,
While the proposed letter might put some restraint
Oh
iVrther expansion
sion of safekeeping services, he doubted that it would
be very
effective.
Chairman Martin said that it seemed to him the draft letter
*4111' Provide a guide as to what might be done without trying to spell
°t1t in Specific
detail rules that might be embarrassing to the Board
Or
Cause
em
barrassment to the Reserve Banks. He noted that the draft
etter
contained a
statement as to what would be appropriate general
to
and then
provided various illustrations that would be helpful
the
Reserve Banks as well as to the Boardts examiners in judging
1/13/60
-11-
ether given practices fell within the general policy.
As Governor
Mills had indicated,
it was difficult for the System to go backward on
a thing
such as this, and safekeeping practices had been afforded by
the
Reserve Banks in greater or less degree for many years.
Governor Robertson commented that he had no objection to the
garters'
statement of policy contained in the proposed draft letter.
Re did have
difficulArin justifying some of the types of safekeeping
for
'which illustrations were given, especially since so far as he knew
this
wue not expressly provided for in the Federal Reserve Act.
Mr. Farrell noted that the basic authority for the safekeeping
°Peration vas one
aspect of the problem that had been raised before the
13realdentst
Conference but that only one of the Presidents took the
11°Biti°n that the Banks should not engage in that activity because of
cichlbtta legal
authority.
Mr. Hackley commented that there was nothing in the Federal
Ileller." Act that specifically authorized safekeeping by the Reserve
tat a 1.‘
k- °Ito in his opinion, this function could be supported as a
legitimate service, consistent with the purposes of the System, both
t° member banks
and to a limited extent where a third party had an
,
ln the securities.
14r. Smith stated that the letter represented an attempt to
iit
Elatekeeping services and not to provide a basis for expanding
thati.
Prom the standpoint of the exeminer, it vould be preferable to
1/13/60
-12-
have this
type of letter, and it also would provide the Reserve Banks
themselves with a more definite guide on which they could fall back
in
rejecting requests for safekeeping services that might be received
frcma member
banks and public officials.
Governor Robertson stated that the latter point was one reason
%41Y he doubted the advisability of the Board's sending out illustrations
that vould enable the Reserve Banks to reject safekeeping requests on
the gr°11nd6 that the Board's rules would not permit them to give the
Service.
Chairman Martin stated that this got into the public relations
area
'that the Reserve Banks had a good many problems in this area
vithout adding
to their difficulties, and that in his judgment it would
he
Preferable in this particular case to have some general guide lines
that the
Banks might refer to in reaching decisions on safekeeping
requests.
During a further discussion of this matter, Mr. Hexter pointed
°Ilt that the
draft of letter, after stating a general policy, essentially
relDresented a statement of existing outstanding instructions of the Board,
rnerely
brought together into a single document. He doubted that any
Reserve
Bank could undertake any safekeeping activity within the terms
0r the Proposed
letter that could not be undertaken at the present time
acec
"
ance with various outstanding instructions of the Board.
13°ard
'Of course,
had the alternatives of giving the Reserve Banks
The
1/13/60
-13-
Unlimited authority in the safekeeping field, or of having a complete
re-assessment of the entire safekeeping function.
The approach taken
in the draft letter was intended to implement what the Board tentatively
decided last May and to indicate by specific illustrations that if a
Particular
safekeeping operation fell within any of those listed, it
14a8 a pe
rmissible activity.
Governor Shepardson said that he believed the Board had in
accepting an existing situation.
draft
for
letter accomplished this.
these
In his opinion the proposed
Regardless of whether the rationale
safekeeping services was entirely satisfactory, the System
had a p
r
actical situation.
i\lrnished
In his opinion, the proposed letter
good statement that would give to the Reserve Banks
l'eaa°nable guides. He believed that the Board could well accept this
letter
and authorize it to be sent on to the Federal Reserve Banks.
G overnor King stated that he concurred in this view, and
Goverhor Szym
czak said that the Reserve Banks had long been following
sarekeep
ing practices such as those described and he would favor
qlProval of
the letter.
Chairman Martin commented that the letter should be looked upon
8.8
a
a,
c set
the Board
guide under the general statement of policy rather than
of rules.
Unless there was objection, he suggested that
approve the letter.
13
1/13/60
No further comments being heard, unanimous approval was given
to a
letter to the Federal Reserve Banks regarding safekeeping activi-
ties in the
form of the attached Item No.
6.
Messrs. Farrell, Kiley, and Smith then withdrew from the
meeting.
Application under Bank Holding Company Act of Farmers and
Machn-4
---al_Trust Company
Childress,Texas (Items7
8 and 9). In a
Illemorand—
um dated January 8, 1960, and distributed to the Board before
this m
eeting, Mr. OtConnell referred to the fact that on November 30,
'the Board issued a notice of tentative decision and a tentative
1959
StateMent
announcing that it proposed to approve the application of
Parlera and Mechanics Trust Company, a bank holding company of Childress,
TeXas, filed
pursuant to Section 3(a) of the Bank Holding Company Act,
for Prior
approval of the acquisition of 5 per cent of the outstanding
11°tina,
auares of the First National Bank, Paducah, Texas. Two of the
members
°f the Board had dissented from the tentative decision. Mr.
Otconn
ellts memorandum indicated that the Board had received comments
°11 and o'hi
-v ections to the proposed approval from Mr. J. M. Faulkner,
Co
mmissioner of Texas, and from Congressman Wright Patman of
41 "Pies of which were distributed to the Board. With respect
t th
-e8e objections, the memorandum stated that in the opinion of the
LeRa1
ivisthm, they either had been dealt with sufficiently in the
np
e --,
the statement that accompanied the tentative decision, or
131
1/13/60
-15-
there had
been added comments in the draft statement now submitted to
the
Board that adequately reflected consideration of the objections
re
ceived.
Mr. O'Connell commented on the nature of the objections
receiv_ A
and the manner in which they had been covered in the draft
or statement
now submitted to the Board.
He then outlined three
P°481.12.e alternative courses of action: (a)
The Board could affirm
the tentative
decision and adopt the draft of statement now attached,
44 action
the
*which would reflect the judgment of the Legal Division that
objections received from Mr. Faulkner and Congressman Patman were
84fricientlY answered in the statement or were sufficiently nonmeritoriou.„
° as not to invalidate the tentative decision. (b) The Board
c°11141 defer action and afford the applicant an opportunity to file
aciditi°nal comments--a course that seemed unnecessary, particularly
It the Board
were prepared to approve the application, since the
aPplicant had had
an opportunity to see the objections -which had been
1/14de Public
by the objectors. (c) The Board could reconsider the
D°81ti°4 taken in the tentative decision of November 30, and if there
44 been
a change in that position, the Board might wish to request
Division to rewrite the draft of statement regarding the case.
the
Mr. O'Connell went on to say that if the first of these alterstateke
were taken
by the Board it might wish to approve the draft of
nt now before it, the draft Order approving the application,
1/13/60
and a statement for the press, all for release later today.
In that
event, and
"u If any member or members of the Board wished to dissent
fr°m such
decision, as had two members in the case of the tentative
cleeisi°11, a dissenting statement also would be issued.
In response to a question from Chairman Martin, Mr. OtConnell
Stated that in his judgment it was not necessary for the Board to send
the aPPlicant copies of the objection filed, either as a legal matter
Or as a
public relations move.
Mr. Hackley commented that this case differed from a case
receh+1
'
- 4'Y considered by the Board in which Wisconsin Bankshares Corporation of
Milwaukee, Wisconsin, applied for permission to acquire the
shares Of a
bank in the Mayfair Shopping Center, Wauwatosa, Wisconsin.
In that
case the Board issued a tentative decision indicating approval
c)r the
application, after which objections were received by the Board
and th°13e objections were the basis for a request by the Board to the
Pede,
Reserve Bank of Chicago for a re-examination of the application.
that casP,
however, the objections went to the merits of the case,
141 reas in
the case now before the Board the objections were to the
Boardta
Procedure and there was nothing additional to be gotten from
either the
Reserve Bank or the applicant.
Board
Co,
Governor Robertson commented that assuming the majority of the
14°uld approve the application of Farmers and Mechanics Trust
/ nothi-ng would be gained by sending the matter back to the
1/13/60
-17-
aPPlicant since any additional comments by the applicant would be by
1471Y °f trying to support approval of the request.
Governor King inquired as to the basis for an objection by
C°11
reasman Patman that the Board had failed to notify the State
Banking Commissioner of Texas of the application filed by Farmers and
Mechanics Trust Company and to await receipt of his views before reaching
anY decision
regarding the case.
Mr. O'Connell stated that Congressman Patman was incorrect in
his basic statement for the reason that the applicant is not a bank
and the bank
sought to be acquired is a national bank.
There is no
statuto_
17 requirement for notification of a State Banking Commissioner
84Ch
case.
Under the statute, the only requirement for notifi-
cation in
this instance was to the Comptroller of the Currency: who
11114 been
notified.
Chairman Martin said that the real question appeared to be
Illether any member of the Board had changed the position he had taken
%then the t
entative decision on this application was reached last
November, at
which time all members of the Board except Governors
Yrliczak and Robertson indicated that they would approve the application.
There being
in position, Governor
an
indication of a change
approvalnoi
Mills
moved th:
of the draft of statement submitted by the
Lep
sion with its memorandum of January
8, 1960,
the issuance
°ran °rder of
approval of the acquisition in the form of the draft
1:VI
1/13/60
8111aMitted
y
that
and the release of a press statement in accordance with
suggested by the Legal Division.
There followed a discussion of Governor Millst motion during
vhich
Governor Shepardson said that he understood that the Board was
definitely trying to establish a philosophy in administering the Bank
Rolding Company
Act that these applications were to be approved in the
absence
Of countervailing factors. In other words, the Board would not
atteyn„t
to show
any need for an acquisition; in fact, it denied the
existence
of need, and it would base its decision on a lack of adverse
effect on
competition or other factors to cause approval to be withheld.
Mr. O'Connell said that the Boardts philosophy on the basis of
ita previous decisions under the Bank Holding Company Act gave attention
t° the s
tatutory wording that the acquisition be consistent" with
'various
factors.
If a finding by the Board indicated that the acquisition
17°111d be "consistent" with adequate and sound banking, preservation of
c°1413etiti°n: and with the public interest, the inference under the
statilt.
k.
'would be that the Board may (not "must") give its approval.
In
the case
before the Board, Mr. OtConnell said, the finding was that
th e
no "need" and there was no favorable finding on the grounds
"
14
or aerving the public.
ea." fitting
1741" ant
as closely as possible the statutory language that would
approval.
It vas Mr. O'Connell's opinion that this was a
1/13/60
-19Mr. Hackley stated that the Legal Division assumed it to be the
Philosophy of the majority of the Board at the present time that the
84:4111 is required under the law to consider certain factors. The law
does
not say that if
the Board finds adversely under any of these factors
it
Mu+ „
uasapprove, nor does it say that the Board must approve if it
rinds
favorably.
1?ellt
It is a matter of judgment for the Board.
Mr. Hackley
to say that the Legal Division believes that, if the Board finds
that any significant loss of competition -would be likely to result from
seqUisition, then in order to warrant approval, there must be a
finding of a
contribution to the public interest or some other counter7ai11ng factor that would outweigh the lessening of competition. In
the
Present
instance, the issue seemed to come down to a matter of
illdgMent as
to whether the lessening of competition would be sufficient
to c
'
ffset the
other factors which were either favorable or neutral.
14 'reaching the
tentative decision in November, it was Mr. Hackley's
1"'erstanding that the majority of the Board believed that there was
hot
shown such
a lessening of competition as to warrant disapproval of
th
e al3Plicat1on of
Farmers and Mechanics Trust Company.
Governor King said that in his opinion there was an area of
corvetition that
the Board did not discuss very often. This was the
84%es Of
relative freedom of people in business and banking to pursue
their
busiess under as much freedom as possible. To him, this repre4e4ted an
area of public interest. On the one side were the people
1/13/60
-20-
14110 aoUght to borrow from the banks, while on the other side were those
engaged in banking.
It was difficult to be certain in weighing these as
to 'where
the public interest would be best served.
In Governor Kingts
Judgnient, the precedent set by a decision on the application now before
the Board
vas the important consideration rather than this specific
Be
In reaching
his decision in this close case, he would give weight
to
this area of
public interest, the relative freedom of those in business
and
banking to pursue their business, as well as to the public interest
that vas
represented by the borrower.
Governor Balderston said that Mr. Hackley had stated the philo"Phical d
ifferences among the members of the Board.
This was the question
ilrlderlYing
of the votes of Board members on these holding company
cases.
To put it another way, could the Board approve an application if
, the Public
was not injured? Or, should the Board not approve an applieat1
°11 if the public was not injured, and take a position that it would
aPproval only if the public was to receive a positive benefit?
Chairman Martin stated that at this time he would call for a
on
Governor Mills' motion.
Governor
th
e
hie
Robertson indicated that he would still wish to dissent
is was also
aPPlication, and Governor Szymczak indicated that this
position.
Thereupon, Governor Mills' motion was put by the Chair and
IlkProvAA
G overnors Szymczak and Robertson dissenting.
1/13/60
-21Governor Robertson suggested that the Board might wish to hear
draft of a dissenting statement that he and Governor Szymczak proposed
to -Sue,
and he then read the proposed statement.
Chairman Martin stated that in carrying out the action taken by
the Board it
would be understood that the Order, the Statement, and the
Press release on
the application, as well as the Dissenting Statement
Of Gc)vernors Szymczak and Robertson, would be issued promptly, preferably
for
release at 4 O'clock this afternoon.
Secretary's Note: Pursuant to this action the
Order, Statements, and press announcement were
released at 4:00 p.m. on January 13, 1960, and
copies were sent to the applicant and other
interested parties. Copies of the Order, Statement, and the Dissenting Statement of Governors
Szymczak and Robertson are attached to these
minutes as Items 7, 8, and 9, respectively.
Messrs. Johnson, Director, and Sprecher, Assistant Director,
Diviai°n of Personnel Administration, entered the room during the
f(Ireaing discussion, and at this point, all of the members of the
staff
excepting Messrs. Sherman, Johnson, Chase, and Sprecher withfrom the
meeting.
At th
Retirement allowance for Reserve Bank officers
(Items 10 and 11).
e meeting on November 18, 1959, the Board gave approval to a plan
/thich short Service Presidents of the Federal Reserve Banks could
be Rr
anted a minimum retirement allowance of 40 per cent of their final
if they
completing 10 years' service, the difference
retired after
bet„,
" --r1 the
amount payable under the Retirement System of the Federal
1/13/60
-22-
Reserve Banks
and the 40 per cent of final salary to be paid directly
by
the Federal Reserve
Bank concerned to the individual. The Board's
villingness to approve such an arrangement was indicated informally
to
ell Reserve
Bank Chairmen at the time of the meeting of the Conference
Of
Chairmen with the Board on December 4, 1959, and in letters from the
Boston and
Chicago Reserve Banks, both dated December 30, 1959, the
Board vas
advised that the directors of those Banks wished to enter
into c
ontracts with Presidents Erickson and Allen, respectively, under
*Itch such
a guarantee would be undertaken. In the case of President
Erickson, this
represented a revision of the contract already in effect,
°riginally entered
into on December 12, 1950, and amended February 24,
1958;
the case of President Allen the contract would be in the form
in
submitted with the
Chicago Bank's letter of December 30, 1959, and would
l'ePresent an
initial undertaking between the Chicago Reserve Bank and
151
'
e8ident Allen.
In a memorandum dated January 6, 1960, the Division of Personnel
fli"ration stated that the proposed contracts between the Boston
"
a Chien,
Banks and Presidents Erickson and Allen had been reviewed
by that
Division as well
as by the Legal Division and appeared to be
in a to
'I'm that
would carry out the arrangements with those Presidents,
al°4 th
e lines approved by the Board on November 18, 1959, for Mr.
should he be employed by the Federal Reserve Bank of Cleveland.
1/13/60
-23Governor Balderston noted that on November 18, 1959, the Board
aPproved a retirement arrangement for Mr. Hickman and also his employment
as a Vice President of the Federal Reserve Bank of Cleveland.
He then
irlquIred whether a contract covering the retirement provisions between
the Cleveland Reserve Bank and Mr. Hickman had been submitted for the
B°1/rdt8 approl, to which Mr. Sprecher responded that Mr. Hickman had
riot
14"
Yet actually become an employee of the Cleveland Bank but that it
expected that a contract designed to carry out an arrangement such
as the Board
approved on November 18 would be submitted shortly for
the Boardts
approval.
Governor Balderston then stated that the two contracts now
iperc/re the Board for approval were typical of the type of contract
that
the Board might expect to receive from the New York, Atlanta,
andel
eveland Banks. He inquired whether, if the Board saw fit to
aPPrcYve the contracts submitted by the Boston and Chicago Banks, it
would
'
w4 .6h now to give advance approval to contracts that might come
in tr°ra other Federal Reserve Banks covering similar arrangements
14th p,
.esidents for short-term service.
Governor Mills said that, as he understood the situation, the
tYpe
of retirement allowances indicated by the two contracts before
the
Board for Reserve Bank Presidents who had not filled a complete
ter4
service in the Federal Reserve System had been given provi-
81411a1 aPproval by the Board) and Governor Balderston now vas asking
1/13/60
Whether that provisional approval should be made a blanket approval
that would cover all cases if and when they might come in.
Governor
Mille said that in his judgment, a matter of this importance should
be
considered by the Board and receive its approval on each separate
°ccasion.
He went on to say that he had expressed reservations about
the adoption of such an arrangement at the meeting on November 18 and
that the more he thought of it the less enthusiasm he had for the
whole plan.
Chairman Martin noted that the requests before the Board today
liere for
approval only of the letters to the Boston and Chicago Banks
re".rding the proposed contracts submitted by those Banks.
there
Unless
w.b objection) he suggested that these be approved.
Governor Robertson said that he would not vote against accepting
these two contracts but that his approval was given only because the
Iklard. had adopted this program for other short-service Presidents in
the Pederal Reserve Banks.
14114
Under the circumstances, he saw no purpose
continuing to vote against the implementation of similar arrange-
ets for the Presidents of the Boston and Chicago Banks.
Thereupon, the letters to the Boston and Chicago Federal Reserve
were approved unanimously in the form attached to these minutes as
and 11) with the understanding that the contracts referred to
the
letters would be executed by the Secretary on behalf of the Board
Szhi c
°Pies transmitted to the respective Federal Reserve Banks and to
the i„
-4-"Ilividuals concerned.
141
1/13/60
-25Mr. Chase withdrew from the meeting at this point.
Security matter.
Governor Shepardson referred to a security
investigation of a Board employee several years ago which had been
accepted with the understanding that the employee would not be placed
in a sensitive position.
Subsequently, the Board authorized full
Sec
uritY clearance for the employee.
In view of this later action,
G°vernor Shepardson said it was assumed that the restriction as to
assignment of the employee to a sensitive position also was removed.
There was unanimous concurrence that Governor Shepardson had
°°rrectly stated the Board's intention.
Thereupon the meeting adjourned.
Secretary's Note: On January 12, 1960, Governor
Shepardson approved on behalf of the Board a letter
to the Federal Reserve Bank of Chicago (attached
Item No. 12) approving the designation of Arthur J.
Frigaard as special assistant examiner.
112
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item NO. 1
1113160
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 131 1960.
Comptroller of the Currency,
areasury Department,
"ashington 25, D. C.
T
Attention Mr. W. M. Taylor,
Deputy Comptroller of the Currency.
Dear Mi. Comptroller:
Reference is made to a letter from your office dated
BeaDec. u
-11hler 14, 1959, enclosing copies of an application of The
ta,r Dank, Jacksonville Beach, Florida, to convert into a
asu4onal banking association and requesting a recommendation
to whether or not the application should be approved.
This bank has been a member of the Federal Reserve
1 3:stem since May 17, 1948, and, in view of the Reserve Bank's
,
8
;"°141edge of the institution and the latest report of examination
e. °I March 27, 1959, a field investigation of the application
,w3
vtat not regarded as necessary. Current information is favorable
ca .1,1 respect to the financial history of the bank, adequacy of
ofP'tal structure, future earnings prospects, general character
toarnanagement, and services to the community. Accordingly, the
of Governors recommends approval of the application of
Th
The
coach Bank to convert into a national banking association.
The Board's Division of Examinations will be glad to
'
offi s any aspects of this case with representatives of your
-ce if you so desire.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 2
1/13/60
WASHINGTON 25. D. C.
ADDRESS orriciAL CORRESPONDENCE
TO THE BOARD
January 13, 1960.
Comptroller of the Currency,
Treasury Department,
Washington 25, D. C.
Attention Mr. W. M. Taylor,
Deputy Comptroller of the Currency.
Dear Mr. Comptroller:
Reference is made to a letter from your office dated
tober 2) 1959, enclosing copies of an application to organize
.".national bank at Aurora,Illinois, and requesting a recommenda61011 as to whether or not the application should be approved.
Information contained in a report of investigation of
application made by an examiner for the Federal Reserve Bank
!LL. Chicago discloses generally favorable findings with respect
to
•the factors usually considered in connection with such proposals
nth the exception of the unfavorable background and past record
'I one of the proposed directors. It is assumed that this matter
11'111 be resolved to your satisfaction and accordingly the Board
0
4 Governors recommends approval of the application.
the
The Board's Division of Examinations will be glad to
-ss any aspects of this case with representatives of your
°ffice if you so desire.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No.
3
1/13/60
ACORES!! OFFICIAL 00191RICISPONOCNCIC
TO THIE II OAR
January 13, 1960.
The Honorable Jesse P. Wolcott,
Chairman,
Federal Deposit Insurance Corporation,
Washington 251 D. C.
Deer Mr. %Wolcott;
reference is made to your letter of December 31,
19co
--) concerning the application of Farmers Bank, Clay,
after with'Cent
,
A uckY, for continuance of deposit insurance
System.
eserve
'algal from membership in the Federal
No corrective programs that the Board of Governors
ieves should be incorporated as conditions to the conk,
I2eldsp
agreed
ce of deposit insurance have been urged upon or
t
DY the bank.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 4
1/13/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS
orriciAL
CORRESPONDENCE
TO THE BOARD
January 13, 1960.
Board of Directors,
Riverside
Trust Company,
Riverside,
New Jersey.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Philadelphia, the Board of Governors
Of the Federal Reserve System approves, under the provisions
?f Section 24A of the Federal Reserve Act, an additional
if nvestment of $211,000 in bank premises by Riverside Trust
, /14"
°111PaPY, Riverside, New Jersey, for the purchase of land and
. orletruction of temporary and permanent quarters for the
Levittown Branch, Levittown, New Jersey.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
ill
BOARD OF GOVERNORS
OF THE
Item No. 5
FEDERAL RESERVE SYSTEM
1/13/60
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO TFIE HOARD
,:4141111
444****
January 131 1960.
lAr. H. J. Newman, Vice President,
Federal Reserve Bank of Chicago,
Chicago 90, Illinois.
Dear Mr. Newman:
The Board of Governors approves the payment of
salaries by the Federal Reserve Bank of Chicago to the Bank's
Bngineers and Firemen at annual rates of $61697.60 and $,907.20,
lesPectively, effective January 4, 1960, in accordance with the
'
l'squest contained in your letter of December 301 1959.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
14'
BOARD OF GOVERNORS
S-1722
OF THE
FEDERAL RE:SERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 6
1/13/60
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 13, 1960.
tear sir:
This refers to the statement of general policy for the 61ede
IZReserve
Banks with regard to the safekeeping of securities and
1.959.ed Practices adopted by the Conference of Presidents on March 235
The Board has accepted this statement, with certain modification
-s) as set forth below:
It is appropriate for the Federal Reserve Banks to hold
securities in safekeeping when such holdings contribute to the
efficient and economical operations of the Reserve Banks, or are
otherwise in the public interest and are consistent with the
03e5
of the Federal Reserve System. The following are
i. P
13
of types of holdings that would or would not be
ii)propriate
appropriate
under this policy.
1,
Securities owned by a member bank located outside of
a Federal Reserve city, or located in a Federal Reserve city but outside of the central financial district thereof, may be accepted for safekeeping
Without restriction,
2, Securities issued by the Ti. S. Government or its
agencies and owned by a member bank located in the
central financial district of a Federal Reserve
city may be accepted for safekeeping or held in
"collateral account" (even if not actually pledged
as collateral for borrowings or deposits) if such
custody contributes to the efficient and economical
operations of the Reserve Banks.
3. Securities, other than those issued by the U, S.
Government or its agencies, owned by a member bank
located in the central financial district of a Federal Reserve city may be held only if required as
collateral for borrowings or deposits,
-2-
4
S-1722
Securities in which third parties have an interest
should not be accepted from member banks for safekeeping except (1) securities pledged as collateral
by member banks to secure deposits of public funds,
(2) securities pledged with a public official to
qualify member banks to exercise trust powers, (3)
securities pledged as collateral to secure deposits
of trust funds in their commercial banking departments, (4) securities pledged pursuant to Treasury
Department instructions and Federal court orders,
and (5) securities which for other reasons within
the framework of the general policy a Reserve Bank
may deem desirable to accept for safekeeping,
5. In order that nonmember banks may not indirectly obare available to
tain the safekeeping privileges
member banks, the amount of securities held for a nonmember bank as collateral for its Treasury Tax and
Loan Account should have a reasonable relationship to
the actual balance in that account over a period of
time
6,
Securities issued by the U, S. Government, owned by
States or political subdivisions thereof, may be accepted for safekeeping where such service appears
desirable; but, in order not to overload the vault
facilities of the Reserve Banks, there should be no
general invitation to States or political subdivisions
to deposit securities for safekeeping
This letter supersedes the Board's letters on
June 6, 1934 (X-7907 FFLLS. #3061)
June 18, 1947 (5-981, F,R,L,Sr #3061,1)
April 2, 1943 (S-631, F,R.L.S, #3061,2)
May 2, 1951 (S-1321, F.R,L,S, #3061,3)
April 4, 1955 (S-1562-a, PeR.L.S. #3061.3)
September 29, 1939 (S-186-a, F.R.LcS #3067)
Very truly yours,
,)
an,
Merritt
Secretlavy.
To
14 PRESIDENTS OF ALL FEDERAL RESEhVE BANKS
149
UNITED STATES OF AYERICA
Item No.
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTE14
7
03/60
WASHINGTON, D. C.
-----------------the Matter of the Application of
PARIERS AND MECHANICS TRUST COMPANY
C
hildress, Texas
for prior
approval of acquisition of
7c)ting shares of The First National Bank,
Paducah, Texas
•••
••••
ORDER APPROVING APPLICATION UNDER
BANK HOLDING COITANY ACT
There having come before the Board of Governors pursuant
to section
3(a)(2) of the Bank Holding Company Act of 1956 (12 U.S.C.
1843) and section 4(a)(2) of the Board's Regulation Y (12 CFR 222.4
(11)(2)), application on behalf of the Farmers and Mechanics Trust
coillPaaY, Childress, Texas, for the Board's prior approval of the
ecquisition of
5 per cent (150 shares) of the outstanding voting shares
q The
First National Bank, Paducah, Texas; a Notice of Tentative
beeit,
-Q1011 referring to a Tentative Statement on said application having
been Published in the Federal Register on December
5, 1959 (21.i F.P. 9801);
wotice having provided interested persons an opportunity, before
Issue
nee of the Board's final order, to file objections to or comments
4°11 the
statements of fact and conclusions reached in the Tentative
State
having
'116; and the time for filing such objectons and comments
ed and comments received having been duly considered;
'
1.50
IT IS HEREBY ORDERED, for the reasons set forth in the
Iklardi e Statement of this date, that the said application by Farmers
and Mechanics Trust Company for approval of the acquisition of
5 Per
cent of the outstanding voting shares of The First National
ilank, Paducah, Texas) be and hereby is granted and approved, provided
that such
acquisition is completed within three months from the date
h
ereof,
Dated at Washington, D. C., this 13th day of January, 1960.
By order of the Board of Governors.
Voting for this action: Chairman Martin, Vice Chairman
Balderston and Governors Mills, Shepardson and King.
Voting against this action: Governors Szymczak and Robertson.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF
THE
Item No. 8
1/13/60
FEDEIZAL RESERVE SYSTEM
AP2LICATI(N BY FAR:IERS AND MECHANICS TRUST COMPANY,
CHILDRESS, TEXAS, FOR PRIOR APPROVAL OF ACQUISITION OF
VOTING SHARES OF THE FIRST NATIONAL BANK, PADUCAH, TEXAS
STATEMENT
Farmers and Mechanics Trust Company ("Farmers"), a bank
holm
---ng
company, has applied, pursuant to section 3(a)(2) of the Bank
11°141ing Company Act of 1956 ("the Act"), for the Board's prior approval
°f its acquisition of 5 per cent (150 shares) of the outstanding voting
shares of
The First National Bank, Paducah, Texas ("National").
Views and recommendations of supervisory authorities. - Section 3(b) of the Act requires the Board, upon receipt of an application
for approval under section 3, to "give notice to the Comptroller of
the currency, if
the applicant company or any bank the voting shares
114' assets of which are sought to be acquired is a national banking
"a°ciation or a District bank, or to the appropriate supervisory
authority of the interested State, if the applicant company or any bank
the v°tiN shares or assets of which are sought to be acquired is a
State bank . • • • Farmers, the applicant company, is not a bank. The
betik
.) the voting
shares of which are sought to be acquired, is a national
tank.
Pursuant to the requirements of the Act, notice of the receipt of
this
application was given to the Comptroller of the Currency, and the
e°111PtrrIll
----Ler recommended that the application be approved.
-2Statutory factors. - Section 3(c) of the Act requires the
'ard to take into consideration the following five factors: (1)
Bc
the financial history and condition of the company and the banks
concerned; (2) their prospects; (3) the character of their manageTnent; (4) the convenience, needs, and welfare of the communities
the
and area
concerned; and (5) whether or not the effect of
acquisition would be to expand the size or extent of the bank
holding company system involved beyond limits consistent with adequate and sound banking, the public interest, and the preservation
°f competition in the field of banking.
banks:
Discussion. — Farmers presently has two subsidiary
°Ile, with deposits of about :,!2.3 million, in the town of Childress
in Childress County, Texas, and the other, with deposits of about
cr2 7
'
million, in the town of Hollis in Harmon County, Oklahoma.
alcn County is northeast of, and partly contiguous to, Childress
'
lial
County. National, the bank in which Farmers seeks to acquire stock,
is
located in Paducah in Cottle County, Texas, which is just south
°f Childress County.
National is the only banking office in Cottle
CoulltY, and holds deposits of about al. million.
At present, Farmers owns 5 per cent of National's stock.
The
Proposed acquisition of 150 additional shares of stock would cause
National
's to own 10 per cent of National's outstanding stock.
FallT1°I
1Tould not
become a "subsidiary" of the holding company within the
Illeaning of the Act, since subsidiary status is based upon ownership
cf 25 Per
cent or more of the voting shares of a bank.
-3—
Insofar as the first three statutory factors are concerned,
it appears that the financial history and condition of Farmers and
National are satisfactory and that their prospects and the character
f their management are good. As to the fourth factor, Farmers asserts
that
4".1._
3
increased stock ownership of National would enable it to use
its greater influence in the management of the bank to expand the bank's
loan o
perations to accommodate worthy farmers, ranchers, and businessmen
in the Paducah area.. However, there is no evidence that National has
tOt
bean serving its area adequately or that demand for loans by qual-
ie
borrowers has not been satisfied. In the Board's opinion, the
Propo se
d stock acquisition would not substantially contribute to,
alth°Ugh it would not be inconsistent with, the "convenience, needs,
"welfare of the communities and the area concerned".
Turning to the fifth statutory factor, there is no suggestion
that
the proposed expansion of the size or extent of the holding company
sYstem •
Involved would be inconsistent with adequate and sound banking.
c .
The ,
-uclal question is whether such epension would be consistent with
the
'lie interest and the preservation of competition in the field of
batkine.
The area concerned is sparsely populated and the towns are
l'iativelY
Paducah accounts for a large part of the population
Of
Cottle County. The nearest town with banking facilities is Childress,
31 miles
to the north, which has two banks. One is a subsidiary of
Parmers,
as previously mentioned, the other is about twice the size of
Pazin
era' bank and is not controlled by a holding company. There are four
batk
8 located in three other towns in adjoining counties, located from
32 to
4.. miles distant from Paducah.
•53
-4To the extent that the proposed transaction mizht result in
a diminution of banking competition, it would) in the Board's opinion,
be
limited to the area between and around Paducah and Childress in
uhich there are three banks, one being Farmerst subsidiary in Childress.
Assuming that the acquisition by Farmers of additional stock of National
wOuld tend to draw further within its influence a second of the three
banks in
this area, it might diminish, to some degree, the availability
to r
esidents of the area of alternative sources of banking services
Under separate and independent control. However, one of the remaining
alternative sources would be the second bank in Childress) the largest
bank in the area; and, as previously indicated, there are four other
banks in towns which, in view of geographic and population factors,
may be
regarded as only a relatively short distance from the ChildressPaducah area.
After consideration of the foregoing facts in the light of the
Purpoe,..
"s (If the Act and the factors contained in section 3(c) thereof,
it uas the
Board is tentative Oecision, notice of which was duly published
Th
the Federal Ilegister, that approval of this application would be conthe statutory objectives and the public interest.
As per-
Qtted
-Y that notice, certain objections and comments were submitted
to +1,
""a Board; and all of such objections and comments have been carefully
e°11sidered.
One of the objections received and considered by the Board
114'gss th
-at the acquisition by Farmers of additfonal voting shares of
Nat5.0
nal cannot lawfully be approved by the Board because the acquisition
Propos
sd by Farmers would be ultra vires, that is, beyond the powers
conferred on Farmers as contained in its charter granted by the State
Of Texas. In the Board's opinion this objection cannot be sustained.
e of the
In connection with bills that preceded the passag
Bank Holding Comnany Act of 19561 Congress considered various proposals that would have precluded approval by the Board of any
acquisition in conflict with applicable State law. Congress rejected
pertinent, of
11 such
proposals, with the single e:-.ception, not here
the provision contained in section 3(d) of the Act that prohibits
usly
4PProval of acquisitions across State lines. The Board has previo
taken the position that no provision of the Bank Holding Company Act
ates to preclude the Board from approving a particular transaction
merelY because it appears to be in contravention of a State statute.
(In the matter of the Applications of First New York Corporation, et al.,
44 Federal Reserve Bulletin 902, 905 (1958)) This position is here
ion in
l'eaffirmed; and the same principle must be applied to a provis
aPPlicant's cornorate charter. This does not mean, of course,
that
a particular transaction need not meet the requirements of any
aspects of
8tatute, Federal or State, that might be applicable to any
Such tr
however, to
ansaction. It is not the province of the Board,
(tete1111ine
law or exceed
whether such a transaction would violate State
the charter powers of a State corporation; such questions are uithdn
the
and judicial
of the appropriate State administrative
author i t
this case urges
Another objection received by the Board in
that
Texas contrac°fllmon control of two or more banks in the State of
that State's prohibition against branch banking and, as a
-6—
co
nsequence, contravenes the provisions of the Bank Holding Company
Act. In the Board's view, this objection is clearly answered by the
legislative history of that Act.
Chief among the proposals considered by Congress for limiting
ardls discretionary authority under the Act was that contained
80
in a bill passed by the House of Representatives which would have prothe
hibited approval of any acquisition of stock of a bank in any State
excOpt "within geographic limitations that would apply to the establishment of
branches of banks under the statute law of such State", unless
the acquisition was affirmatively authorized by the law of the State.
This Proposal, however, was rejected by the Senate, and the bill finally
enacted into law contained no provision that would require the Board to
consider the existence or not of branch banking legislation within a
Particular State in passing upon an application that would result in
hcadin
g company expansion within that State. At the time of passage of
the
Act
Congress was apparently aware of the existence of legislation
in several States that prohibited branch banking.
Congress was pre-
aware of the fact also that in the National Bank Act it had
Pecifically taken into consideration the existence of State branch
bante•
—1-11g laws in authorizing the Comptroller of the Currency to approve
estabi
ishment or operabion of a branch by a national bank only if
State 1
'
aws specifically and affirmatively authorized State banks to have
br
ldaa
anches. No mandatory reference to State branch banking provisions
ncluded in the Bank Holding Company Act. Thus, notwithstanding
Propos
als made on the floor of the Congress regarding the relation of
State
branch banking
laws to holding company expansion, the existence
a
in
Particular State of a prohibition against branch banking cannot be
157
weighed as an adverse consideration by the Board in exercising its
3udgment on a holding company's application to acquire stock of a
bank in that State.
It appearing that the proposed acquisition would be consistent
Ilith the
statutory objectives and the public interest, it is the judg-Illett of
the Board that the application should be approved. It is so
ordered.
Jarru
.
13) 1960.
Item No. 9
Dissenting Statement of Governors Szymczak and Robertson
01••••••••••••••••••••11
1/13/60
OOMMIMP..•• ././../.••••••••••••
lessen
The proposed acquisition in this case would tend to
banking competition.
At present, persons residing in the area between
and around Paducah and Childress have three conveniently available
Choices of banking services:
The First National Bank of Paducah and the
tuo banks in Childress, one of which is a subsidiary of the holding comPanY• The Holding Company already owns
5
per cent of the stock of the
Paducah bank. Its acquisition of an additional
5
per cent mill admittedly
and purposefully increase its influence in the affairs of that bank and
to that extent will likely result in a diminution of competition between
the
Paducah bank and the holding companyts subsidiary bank in Childress.
competition,
Against this adverse factor of probable lessening of
there are no offsetting favorable considerations. It is apparent that
he
Paducah bank is adequately meeting loan demands in its community.
There -4 s no positive indication that the proposed stock acquisition would
to
in anY Way tend to improve banking services or otherwise contribute
the pub
,
11c interest.
The facts that the holding company and the bank involved in
this ease are relatively small and that the area concerned is now sparsely
P°Pulated (although it may not always be so), do not warrant a departure
frora
he general principles that would be applied in a case involving
larr,
ber institutions and more heavily populated areas, when considered
ill the light of the factors stated in section 3(c) of the Bank Holding
C°r11PanY Act. In our judgment, the application should be denied.
1113/60
BOARD OF GOVERNORS
440,4,400,4
I.005 C01,*0
OF THE
Item No. 10
1/13/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS orrIctAL. CORRESPONDENCE
TO THE SOARD
ka,4 kitt,
44**6
Confidential (FR)
Mr. Robert C. Sprague,
Chmaltan,
F,ederaI Reserve Bank of Boston,
aoston 6)
Massachusetts.
Dear Mr.
Sprague:
December 30, 1959,
to chair This refers to your letter of
vote of your Board of
the
of
Dire , man Martin enclosing a copy
bee ebors and three copies of the revised contract dated
Federal Reserve Bank
of rer 28, 1959, entered into between the
a minimum retirefor
providing
and President Erickson
rrlent°sat"
cert :llowance for President Erickson after his retirement under
aln conditions.
entered
The Board of Governors approves the contract as
into
and
1959,
b
the
otween the Bank and Mr. Erickson on December 28,
signature
of the Board of Governors has affixed his
thecretarY
e Place indicated in the Agreement.
has
In accordance with your letter, one executed copy
been
are
copies
ret—retained for the Board's files and the other two
,uTted herewith.
Very truly yours,
ShorUlaU
Merritt Sherman,
Secretary.
trle
CONTRACT
For and in consideration of the mutual promises of each, this AgTeemen
18 entered
into between Joseph A. Erickson and the Federal Reserve Bank of
80ston, Boston,
Massachusetts.
Subject to all of the applicable provisions of law, Joseph A. Erickson
4greept to
serve as an officer of the said Federal Reserve Bank as long as such
11811.0
-e shall be mutually agreeable to the parties hereto.
For and on account of such service, said Federal Reserve Bank shall
154Y 84i4 Joseph A.
Erickson as follows:
(1)
Said Federal Reserve Bank shall pay to said Joseph A. Erickson
a salary at the rate of $35,000 per annum during the period
ending December 31, 1960 and thereafter during his service as
an officer and prior to his retirement his salary shall be as
determined from time to time in accordance with applicable
provisions of law;
(a)
If, having attained the age of 65, said Joseph A. Erickson
shall retire with not less than 10 years of service creditable
under the Retirement System of the Federal Reserve Banks, and
if he is President of said. Federal Reserve Bank at the time of
his retirement, said Federal Reserve Bank shall pay to said
Joseph A. Erickson after such retirement and during the remainder
of his lifetime an amount per annum which, together with his
regular retirement allowance under the Retirement System of the
Federal Reserve Banks (without regard to optional benefits or
conversion, or additional voluntary contributions), will aggregate
a sum equal to 40 per cent of the annual salary being paid to
him at the time of his retirement; and
(3)
If/ without having attained the age of 65, said Joseph A. Erickson
Shall retire with not less than 10 years of service creditable
under the Retirement System of the Federal Reserve Banks, and
if he is President of said Federal Reserve Bank at the time of
his retirement, the aggregate sum equal to
4o per cent of salary
referred to in the preceding paragraph (2) shall be reduced by
the application of the then current table of pension reduction
factors of the Bank Plan of the Retirement System of the Federal
Reserve Banks, and the portion of the aggregate that is payable
by said Federal Reserve Bank shall be the difference between the
dollar amount represented by such lesser percentage of salary
and the regular retirement allowance payablezt the attained age
by said Retirement System.
This Agreement does not obligate the said Joseph A. Erickson to remain
a.e an
°fficer
of the said Federal Reserve Bank, and does not constitute an
Agreement bY the said Federal Reserve Bank or the Board of Governors of the
Pecieral Reserve System that he will continue in such capacity; it does not
el)ligate the said Federal Reserve Bank to appoint, reappoint, or continue him
42 Etil Officer, nor does it obligate the Board of Governors of the Federal
11"els\re System to approve his appointment or reappointment or his compensation.
revisea
The existing agreement between the parties dated December 12, 1950 as
by suPplement dated February 24, 1958 is hereby further amended to make
the term
s thereof
consistent with the terms hereof.
Witness our hands and seals this
. —
day of
December
1959.
/
FEDERAL RESERVE BANK OF BOSTON
By
Secretary
r (
Chairman of Board of Directors
162
ed
al Reserve System and in witness thereof, the seal of the said Board is
ched and its Secretary has affixed his signature.
(Signed)
13, 1960
Date
Merritt Shermen
Secretary
163
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 11
1/13/60
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE HOARD
January 13, 1960.
Confidential (FR)
irlr. Bert R.
Prall,
"'Airman,
i'ederal Reserve Bank of Chicago,
Chicago 90, Illinois.
tear lir.
Pralls
This refers to your letter of December 30, 1959, to
and 1,"or Balderston enclosing a resolution of your Board of Directors
Ballk cll! copies of an Agreement dated December 30, 1959, between your
allowance
tOX ,-nu President Allen providing for a minimum retirement
'resident Allen after his retirement under certain conditions.
GOVe,s-
The
Governors approves the Agreement as entered
be 1A4oen Board of
Seore4
the Bank and Mr. Allen on December 30, 1959, and the
the ,;arY of the Board of Governors has affixed his signature in
t'aos indicated in the Agreement.
In accordance with your letter, two executed copies have
beev,' reta'
rotkizned lnod for the Board's files and the other two copies are
herewith.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
41ci
0Sure
AGREEMENT
For and in consideration of the mutual promises of each,
this Agreement is entered into between CARL E. ALLEN and the
FEDERAL RESERVE BANK OF CHICAGO, Chicago, Illinois.
Subject to all of the applicable provisions of law, CARL E.
ALLEN agrees to serve as an officer of the said FEDERAL RESERVE
BANK
as long as such service shall be mutually agreeable to the
parties hereto.
For and on account of such service, said
BANK shall
pay said CARL E. ALL
FEDERAL RESERVE
as follows:
(1) Said FEDERAL RESERVE BANK shall pay to said
CARL E. ALLEN a salary at the rate of $50,000
Per annum during the period ending December
31, 1960, and thereafter during his service as
an officer and prior to his retirement his
salary shall be as determined from time to time
in accordance with applicable provisions of law;
(2) If, having attained the age of 65, said CARL E.
ALLEN shall retire with not less than 10 years of
service creditable under the Retirement System of the
Federal Reserve Banks, and if he is President of said
FEDERAL RESERVE BANK at the time of his retirement,
said FEDERAL RESERVE BANK shall pay to said CARL E.
ALLEN after such retirement and during the remainder
-2-
of his lifetime an amount per annum in eval monthly
installments which, together with his regular retirement
allowance under the Retirement System of the Federal
Reserve Banks (without regard to optional benefits
or conversion, or additional voluntary contributions),
will aggregate a sum equal to 40 per cent of the
annual salary being paid to him at the time of his
retirement; and
(3)
If, without having attained the age of 651 said CARL E.
ALLEN shall retire with not less than 10 years of service
creditable under the Retirement System of the Federal
Reserve Banks, and if he is President of said FEDERAL
RESERVE BANK at the time of his retirement, the aggregate
sum equal to 40 per cent of salary referred to in the preceding paragraph (2) shall be reduced by the application
of the then current table of pension reduction factors
of the Bank Plan of the Retirement System of the Federal
Reserve Banks, and the portion of the aggregate that is
Payable by said FEDERAL RESERVE BANK shall be the difference
between the dollar amount represented by such lesser
Percentage of salary and the regular retirement allowance
Payable at the attained age by said Retirement System.
This Agreement does not obligate the said CARL E. ALLEN to remain
166
,1114
an officer of the said FEDERAL RESERVE BANK, and does not con-
stitute an Agreement by the said FEDERAL RESERVE BANK or the Board
Of
Governors of the Federal Reserve System that he will continue
in such capacity;
it does not Obligate the said FEDERAL RESERVE BANK
to appoint, reappoint, or continue him as an officer, nor does it
obligate
the Board of Governors of the Federal Reserve System to
4PProve his appointment or reappointment or his compensation.
Witness our hands and seals this
30th
day of December, 1959..
(1 2
FEDERAL RESERVE BANK OF OHICAGO
BY
Attest:
/
(f_
Chairman of Board of Directors
The a•bove Agreement has been approved by the Board of Governors
he
ederal Reserve System and in witness thereof, the seal of
said Board is
attached and its Secretary has affixed his signature.
(Signed) Merritt Sheiian
Secretary
167
BOARD OF GOVERNORS
OF THE
Item NO. 12
1/13/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS
orriciAL
CORRESPONDENCE
TO THE •OAR0
January 12, 1960.
Mr. W. R. Diercks, Vice President,
Federal Reserve Bank of Chicago,
Chicago 90, Illinois.
Dear Mr. Diercks:
In accordance with the request contained
in your letter of January 6, 1960, the Board approves the designation of Arthur J. Frigaard as a
Special assistant examiner for the Federal Reserve
Bank of Chicago.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER