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Minutes for
To:
Members of the Board
From:
Office of the Secretary
January 13, 1965.
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
Minutes of the Board of Governors of the Federal Reserve
System on Wednesday, January 13, 1965.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Balderston, Vice Chairman
Robertson
Shepardson
Mitchell
Daane
Sherman, Secretary
Kenyon, Assistant Secretary
Molony, Assistant to the Board
Fauver, Assistant to the Board
Hackley, General Counsel
Hexter, Assistant General Counsel
O'Connell, Assistant General Counsel
Shay, Assistant General Counsel
Hooff, Assistant General Counsel
Partee, Adviser, Division of Research
and Statistics
Mr. Conkling, Assistant Director, Division
of Bank Operations
Mr. Daniels, Assistant Director, Division
of Bank Operations
Mr. Leavitt, Assistant Director, Division
of Examinations
Miss Hart, Senior Attorney, Legal Division
Mr. Via, Senior Attorney, Legal Division
Mr. Sanders,Attorney, Legal Division
Mr. Keir, Chief, Capital Markets Section,
Division of Research and Statistics
Mrs. Ulrey, Economist, Division of Research
and Statistics
Mr. Egertson, Supervisory Review Examiner,
Division of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Circulated or distributed items.
The following items, copies
which are attached to these minutes under the respective item numbers
indicated, were approved unanimously:
1/13/65
-2Item No.
Letter to The Farmers and Merchants Bank
of Vandalia, Vandalia, Illinois, interposing
no objection to a recent investment in bank
premises.
1
Letter to Great Western National Bank, Portland,
Oregon, granting its request for permission to
maintain reduced reserves.
2
Memorandum from the Director of the Division of
Examinations dated January 11, 1965, recommending
that a conference of representatives of Bank
Examination Departments of the Federal Reserve
Banks be held in the Board's offices, probably
on March 29 and 30, 1965, and that a dinner be
Provided at a local hotel during the conference,
to be attended by the Reserve Bank representatives
and by a list of designated Board personnel to
be submitted for advance approval later.
3
Letter to Mr. Robert E. Gunn, Vice President,
United Funds, Incorporated, Kansas City, Missouri,
regarding registration of stock of Chase Manhattan
Bank, New York, New York, for trading on the
New York Stock Exchange.
In connection with Item No.
3, it was understood that the
list of Board personnel suggested for attendance at the dinner would
be submitted to Governor Shepardson, for approval on behalf of the
Board, and that attention would be given to placing appropriate restriction on the number of those invited.
The letter to Mr. Gunn (Item No.
4) was approved in a form
reflecting certain suggestions by the staff of the Securities and
Exchange Commission following discussion with such staff of the
draft that had been submitted to the Board for consideration.
-3-
1/13/65
Report on competitive factors (Elmira, New York).
A revision
approval
of the proposed conclusion having been agreed upon, unanimous
was given to the transmittal to the Federal Deposit Insurance Corporation
Of a report on the competitive factors involved in the proposed merger
Of The Elmira Savings Bank, Elmira, New York, with Mechanics Savings
Bank, also of Elmira.
In the form in which approved, the conclusion
read as follows:
The proposed merger of The Elmira Savings Bank and
Mechanics Savings Bank of Elmira would eliminate the
existing competition between the two banks, and the overall effect of the proposed merger on competition would
be adverse.
Application of Farmers' Loan and Trust Company (Items
5 and 6).
There had been distributed a proposed order and statement reflecting
approval by the Board on January 7, 1965, of the application of The
Farmers' Loan and Trust Company, Columbia City, Indiana, for permission
to merge with Mayer State Bank, South Whitley, Indiana.
Certain suggested changes in the statement having been agreed
Upon, the issuance of the order and statement was authorized.
Copies
Of the documents issued pursuant to this action are attached as Items
5
and 6.
Protest of Quincy Trust Company (Item No. 7).
As stated in a
clistributed memorandum from the Division of Examinations dated January 12,
1965, Quincy Trust Company, Quincy, Massachusetts, had requested a period
Of time to prepare a brief for submission to the Board protesting an
1/13/65
application by Norfolk County Trust Company, Brookline, Massachusetts,
to establish a branch in Randolph.
Pursuant to the recommendation in the memorandum, unanimous
aptEm.1 was given to a letter to Quincy Trust Company in the form
attached as Item No.
7,
allowing approximately a week for the bank
to submit its views in writing.
It was recalled that several years ago when the Board approved
an application of Quincy Trust Company to establish a branch in the
town of South Weymouth over the protest of a competing trust company,
there had been complications in which members of the Boston Reserve
Bank's Board of Directors became involved.
In the circumstances a
suggestion was made that copies of the Board's correspondence with
Quincy
Trust Company be sent to President Ellis in order that he
might have the current matter in mind and, if he saw fit, mention the
situation at the next meeting of the Reserve Bank's Board of Directors,
although not with the thought of seeking views or recommendations concerning the branch application.
Margin requirements for over-the-counter securities.
randum from the Legal Division dated January
8,
A memo-
1965, which had been
distributed, recommended for reasons stated that the Board include in
its Annual Report for 1964 a proposal for an amendment to section
7
of the Securities Exchange Act of 1934 that would authorize the Board
to extend margin privileges and margin regulation to securities traded
over the counter as it deemed appropriate.
-5-
1/13/65
The memorandum noted that section
7 authorizes the Board of
Governors to limit the credit that a broker or dealer may extend on
any security registered on a national securities exchange, that a
broker or dealer is not allowed to extend credit on securities not
so registered, and that the law authorizes the Board to limit the
credit extended by banks for the purpose of purchasing or carrying
any equity security registered on a national securities exchange.
As a result, if a person wished to buy stock traded over the counter
on credit and to use the stock so purchased as collateral, a bank
was subject to no legal limit on the amount of credit it could
extend, whereas a broker or dealer could not lawfully extend any
credit whatever.
The 1963 Report of Special Study of Securities
Markets by the Securities and Exchange Commission had recommended
that the Board be authorized to permit brokers and dealers to extend
credit on such over-the-counter securities or classes thereof as it
might from time to time designate, and to impose initial margin requirements on actively traded over-the-counter stocks and convertible bonds
Used as collateral for loans by banks.
The Commission anticipated
that Congressional hearings might be held in the near future on
recommendations contained in the Special Study, and the Commission's
Chairman had inquired informally as to the Board's position on legislation to authorize margin requirements for over-the-counter securities.
The memorandum pointed out why considerable study would be
necessary before suitable margin regulations with regard to over-thecounter securities could be formulated but observed that if Congress
1
-6-
1/13/65
was willing to grant general authority to the Board in this area it
was not necessary to defer a legislative recommendation until standards
had been developed for incorporation into the statute itself.
One
question was whether a legislative amendment should cover all overthe-counter securities or should extend the Board's authority only to
some limited class of over-the-counter securities, such as so-called
"OTC-registered" securities.
On balance, it was felt that there was
little reason to deprive the Board, by statutory limitation, of the
oPportunity to exercise general authority in the public interest,
with decisions on what types of securities and markets were appropriate
for "margin" controls to be dealt with by regulation.
After discussion unanimous agreement was indicated with the
recommendation of the Legal Division, it being understood that a bill
would be drafted in accordance with this indication and that a suitable
legislative recommendation and accompanying explanation would be included in the forthcoming Annual Report.
In this connection it was understood that the Board would give
further consideration at meetings beginning tomorrow to suggestions
for possible legislative recommendations that had been included in a
Memorandum from Mr. Hackley dated October 30, 1964, and discussed by
the Board on November 18, 1964.
Question raised by President Irons (Item No.
8). Governor
Shepardson reported that President Irons of the Federal Reserve Bank
122
-7-
1/13/65
of Dallas had discussed with him communications from the Inter-American
Development Bank inquiring whether a member of the Reserve Bank's
staff could be assigned to present a paper at a workshop on agricultural financing in Latin America to be held in Chile in March 1965.
It was understood that President Irons had in mind arranging for the
Reserve Bank's Director of Research, Mr. J. Z. Rowe, to present such
a paper.
No objection on the part of the Board was indicated, and a
copy of the letter subsequently sent to President Irons is attached
as Item No.
8.
The meeting then adjourned.
Secretary's Notes: Governor Shepardson approved
on behalf of the Board on January 12, 1965, memoranda recommending the following actions relating
to the Board's staff:
.§alary increase
Diane Salisbury, Stenographer, Division of International Finance,
from $4,005 to $4,48o per annum, effective January 17, 1965.
Stance of resignation
tive
Richard C. Leavitt, Teletype Operator, Division of Administra
1965.
8,
Services, effective at the close of business January
Governor Shepardson today approved on behalf of
the Board the following items:
Memorandum from the Division of Research and Statistics dated
January 11, 1965, recommending the reappointment of Winthrop Case as
31,
Consultant on a temporary contractual basis effective to December
com1965, to assist the Economic Editing Unit of that Division, with
and
expenses
tion
transporta
and
day
per
$55
of
rate
Pensation at the
s.
regulation
Per diem to be paid in accordance with the Board's travel
-8-
1/13/65
The memorandum stated that, for purposes of travel, Mr. Case's headquarters would be New York City, that he would receive a per diem of
$16 when in Washington, and that transportation expenses would be
limited to the necessary round trip from New York plus additional round
trips not to exceed one per month while on duty in Washington.
Memoranda recommending increases in the basic annual salaries of
the following persons on the Board's staff, effective January 17, 1965:
Division
Name and title
Basic annual salary
To
From
Office of the Secretary
Mary H. Wilson, Minutes Clerk
$ 4,630
$ 4,780
18,740
19,310
Research and Statistics
Robert M. Fisher, Senior Economist
International Finance
4,48o
14-,63o
Travis J. Johnson, Senior Federal Reserve Examiner 12,915
12,915
13,335
13,335
5,330
5,495
Cynthia Y. Young, Clerk
Examinations
Ralph C. Maurer, Review Examiner
Administrative Services
Lorraine T. Hirz, Secretary
i24
Item No. 1
1/13/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOAR°
January 13, 1965.
Board of Directors,
The Farmers and Merchants Bank
of Vandalia,
Vandalia, Illinois.
Gentlemen:
The Board of Governors of the Federal Reserve System
has received the request of your bank for approval of a recent
expenditure for bank premises. Section 24A of the Federal
Reserve Act requires a State member bank to obtain the approval
of the Board of Governors for an investment in bank premises
whichoodhen added to the carrying value of present investments
in such premises, will aggregate an amount in excess of the bank's
capital stock. Since the expenditure in this case has already
been made, the prior approval contemplated by the statute cannot
be given.
However, if a timely request had been made for the
it appears, on the basis of information before
approval,
requested
the Board, that such approval would have been granted. Accordingly,
the Board offers no objection to the expenditure of $36,750 for the
recently acquired property to be utilized for the construction of
drive-in and customer parking facilities.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 2
1/13/65
OF THE
FEDERAL RESERVE SYSTEM
'
WASHINGTON, O. C. 20551
•
ADORERS orrociAL CORRESPONDENCE
TO THE BOARD
January 13, 1965.
Board of Directors,
Great Western National Bank,
Portland, Oregon.
Gentlemen:
With reference to your request submitted through the
Federal Reserve Bank of San Francisco, the Board of Governors,
acting under the provisions of Section 19 of the Federal Reserve
Act, grants permission to the Great Western National Bank to maintain the same reserves against deposits as are required to be
maintained by nonreserve city banks, effective as of the date it
Opens for business.
iS
flour attention is called to the fact that such permission
Subject to revocation by the Board of Governors.
Very truly yours,
gned) Merritt Slier
Merritt Sherman,
Secretary.
Item No.
3
1/13/65
To:
Board of Governors
DATE:
PROM:
Frederic Solomon
SUBJECT: Conference of Representatives
of Bank Examination Departments of
Federal Reserve Banks
January 11, 1965.
Bank
For several years an annual Conference of Representatives of
'
a
Such
offices.
Qiinination Departments has been held in the Board's
Board
the
to
Cionference could be ;101d on March 29 and 30, 1965, if agreeable
• to the various representatives.
Bank
In previous years the Board has approved a dinner for Reserve
approves,
Board
rePresentatives and a list of designated Board personnel. If the
most
since
dinner would be held at the Shoreham Hotel probably on March 29,
Usually
Hotel.
the representatives of the Reserve Banks stay at the Shoreham
of
list
a
practice
tr• ut 60 to 70 persons attend the dinner. As has been the
advance
for
Board
108e invited to attend the dinner would be submitted to the
qPproval. This information will be presented at a latter date.
4
the
The annual Conference is of value to the Board's staff and also
Vari
and
views
of
exchange
ous Reserve Banks. It provides an opportunity for an
• discussion of pertinent bank supervisory problems.
would
It is recommended that the Board approve the Conference, which
attached
is
There
Iltobebly be held on the above dates, and the proposed dinner.
1 4draft of a letter to the Presidents informing them of the Conference. The
,
"Presidents in Charge of Examinations will also be informed and their
commendations for agenda topics solicited.
'
Atta
chment.
BOARD OF GOVERNORS
......
c)OF Coy •.
R ••
:o
..'1
...t
.1.
,v,
Item No.
OF THE
Tr'
•••• •
w
I-••
4
1/13/65
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
,..):
•k4LRE":**
January 13, 1965.
Mr. Robert E. Gunn,
Vice President,
United Funds, Incorporated,
Kansas City, Missouri.
Dear Mr. Gunn:
This is with reference to your telegram of September 23,
1964, urging that the Board of Governors not approve registration of
Chase Manhattan Bank stock for trading on the New York Stock Exchange
"unless it is made clear that trading in Chase Bank shares will be
exempt from the restrictions of Rule 394" of the Exchange.
Prior to January 1, 1965, when the Board's new Regulation F,
"Securities of Member State Banks", became effective, there was no
means by which the Bank could register its stock with the Board and the
Exchange, which is required by section 12 of the Securities Exchange
Act of 1934 to permit exchange trading.
Now that this Regulation is effective the
an application for registration of its stock on the
the Exchange certifies to the Board that such stock
listing and registration, section 12(d) of the 1934
the registration shall became effective thirty days
Bank may file
Exchange. When
is approved for
Act provides that
thereafter.
The Board of Governors interprets its new responsibilities
under the 1934 Act to relate to assuring fair and adequate public
disclosure of information with respect to securities of member State
hanks subject to that Act. The Board considers that the responsibility
to assure fair dealing in such securities is primarily a matter of
!
elf-regulation by exchanges. To the extent that Government regulation
.Ln this area might be necessary, the appropriate agency under the 1934
Act is the Securities and Exchange Commission.
Accordingly, if you have any recommendations with respect to
hS modification of Rule 394, you should address them to the Exchange
and to the SEC.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
128
Item No.
5
1/13/65
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTIM
WASHINGTON, D. C.
•
In the Matter of the Application of
THE FARMERS' LOAN AND TRUST COMPANY
or approval of merger with
0aYer State Bank
ORDER APPROVING MERGER OF BANKS
There has come before the Board of Governors, pursuant to the
Bank Merger Act of 1960 (12 U.S.C. 1828(c)), an application by The Farmers'
Loan and Trust Company, Columbia City, Indiana, a State member bank of the
l'edoral Reserve System, for the Board's prior approval of the merger of
that bank
and Mayer State Bank, South Whitley, Indiana, under the charter
and title of The Farmers
Loan and Trust Company.
As an incident to the
Merger, the sole office of Mayer State Bank would become a branch of The
'41Illers' Loan and Trust Company.
Notice of the proposed merger, in form
approved by
the Board, has been published pursuant to said Act.
Upon consideration of all relevant material in the light of the
actors
set forth in said Act, including reports furnished by the
Co
11°'rroller of the Currency, the Federal Deposit Insurance Corporation,
"4 the Denartment of Justice on the competitivQ factors involved in the
Pl'°Posed transaction,
129
-2-
IT IS HEREBY ORDERED, for the reasons set forth in the Board's
Statement of this date, that said application be and hereby is approved,
Provided that said merger shall not be consummated (a) within seven
calendar days after the date of this Order, or (b) later than three months
after said date.
Dated at Washington, D. C., this 13th day of January, 1965.
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.
1/13/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY THE FARMERS' LOAN AND TRUST COMPANY
FOR APPROVAL OF MERGER WITH
MAYER STATE BANK
STATEMENT
The Farmers' Loan and Trust Company, Columbia City, Indiana
•
In
Trust")
with total deposits of $7,299,000, has applied,
Pursuant to the Bank Merger Act of 1960 (12 U.S.C. 1828(c)), for the
Oa d' prior approval of the merger of that bank and Mayer State Bank,
South Whitley, Indiana ("Mayer Bank"), which has total deposits of
$2,668,000.1/
The banks would merge under the charter and name of
Farmers Trust, a State member bank of the Federal Reserve System. As
an
incident to the merger, the office of Mayer Bank would become a
branch
of Farmers Trust, increasing its number of approved offices to
two.
Under the law, the Board is required to consider, as to each
Of the
banks involved, (1) its financial history and condition, (2) the
adequacy of its capital structure, (3) its future earnings prospects,
(4) the general character of its management, (5) whether its corporate
I'Ners are consistent with the purposes of 12 U.S.C., Ch. 16 (the
Pederal Deposit Insurance Act), (6) the convenience and needs of the
13---13;;osit figures are as of July 29, 1964.
6
1_31
-2community to be served, and (7) the effect of the transaction on
competition (including any tendency toward monopoly).
The Board may
°°t approve the transaction unless, after considering all of these
factors, it finds the transaction to be in the public interest.
Banking factors. - The financial histories of Farmers Trust
and Mayer Bank are satisfactory, and each bank has a sound asset
condition and an adequate capital structure.
Each bank has a satis-
factory earnings record and favorable future earnings prospects.
management of Farmers Trust is capable.
The
The management of Mayer Bank,
although presently lacking somewhat in depth, is adequate.
In addition
to capable management, the resulting bank would have a sound asset con-
dition, an adequate capital structure, and good future earnings prospects.
There is no indication that the corporate powers of the banks
are, or
would be, inconsistent with the purposes of 12 U.S.C., Ch. 16.
Convenience and needs of the communities. - Farmers Trust and
ilaYer Bank are two of seven commercial banks serving Whitley County,
Indiana, which is situated in the northeastern portion of the State.
The
"untY is principally an agricultural and residential area, but industry
is gradually increasing in importance in the local economy.
The service
are 2/
a— of Farmers Trust consists of Columbia City and the surrounding area
Ili thin a radius of about 8 miles; the service area of Mayer Bank consists
cl South Whitley and the surrounding area within a radius of from 5 to 8
South Whitley is located approximately 10 miles southwest of
e area from which a bank obtains 75 per cent or more of its
'Posits of individuals, partnerships, and corporations.
myc
Columbia City, and the service areas of the two banks overlap slightly
in a sector where population density is relatively low.
Mayer Bank does not offer consumer installment loans, for
Which there is a need in its service area, and its lending limit is
inadequate to enable it to meet the demand in its area for commercial
and farm loans.
Farmers Trust provides consumer installment loans and
its lending limit, although quite small relative to the needs of the area
it serves, is 50 per cent higher than that of Mayer Bank.
The merger
would result in a bank with greater resources and a higher lending
limit, which could better serve the banking needs and convenience of
each of the communities now served by the two banks.
Competition. - The merger would eliminate the very small
amount of competition existing between Farmers Trust and Mayer Bank and
f°reclose the possible development of further competition between them.
4°17ever, banking customers in the service area of the resulting bank
Ileuld continue to have access to a number of reasonably convenient
lternative commercial banking offices.
Uhile the merger would result in
sc)me increase in the concentration of banking resources, such increase
11°uld not result in a bank so Large as to affect adversely the other five
c°mmorcial banks serving Whitley County.
Summary and conclusion. - The acquisition of Mayer Bank by
Pe.rine_ s
r Trust would not adversely affect banking competition.
The
r4eqer would result, moreover, in a bank better able to serve the banking
.133
-4needs and convenience of Whitley County and one capable, as well, of
contributing to the areas economic development.
Accordingly, the Board finds that the proposed transaction
lionld be in the public interest.
January 13, 1965.
134
Item No. 7
BOARD OF GOVERNORS
1/13/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 14, 1965.
Board of Directors,
Quincy Trust Company,
Quincy, Massachusetts.
Gentlemen:
This refers to your letter dated January 8, 1965,
Objecting to the proposed establishment by Norfolk County Trust
Company of a branch office in Randolph, Massachusetts. It is
understood that you have also requested additional time within
Which to supplement your objections through submission to the
Board of a written brief. You ask that the Board defer action
on the branch application pending receipt of such brief.
While the interests of the applicant and the public
require the Board to take prompt action on the application, the
Board wishes to have all available information before it upon
Which to base its decision. Accordingly, the Board will take into
consideration any additional views of your bank which are received
in writing at the Board's offices on or before the close of
business January 20, 1965. Any such written submission should be
Made directly to the Board and a copy thereof sent to the Federal
Reserve Bank of Boston.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
Item No.
OF THE
8
1/13/65
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS or-F.1mm. CORRESPONDENCE
TO THE BOARD
January 13, 1965.
Mr. Watrous H. Irons,
President,
Federal Reserve Bank of Dallas,
Dallas, Texas 75222.
Dear Mr. Irons:
Governor Shepardson has brought to the attention of
the Board the letters received by you from the Inter-American
Development Bank, inviting a member of the staff of the Federal
Reserve Bank of Dallas to present a paper at the Workshop on
Agricultural Financing in Latin America to be held in Vina del Mart
Chile, March 18-25, 1965.
It is understood that you have in mind arranging for
Mr, J. Z. Rowe, Director of Research, to present such a paper,
and the Board sees no objection to your proceeding in this manner.
Very truly yours,
g-77/1
cil-A )
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER