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Minutes for January 144 1957
To:
Members of the Board
From:
Office of the Secretary
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
With respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard
to the minutes, it will be appreciated if you will
advise the Secretary's Office. Otherwise, if you
were present at the meeting, please initial in column A below to indicate that you approve the minutes.
If you were not present, please initial in column B
below to indicate that you have seen the minutes.
A
Glam. Martin
Gov. Szymczak
1/ Gov. Vardama
n
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
1/ The
attached
set of minutes was sent to Governor Vardaman's office in
ilZrdance with the procedu
re approved at the meeting of the Board on
2
3%
, t=,
t,. (The set was returned by Governor Vardaman's office
see Mr. Kenyon's memorandum of February 12, 1957)
l'1,7-L hereafter
Governor Vardaman would not initial any minutes of meet808 of the
Board at which he was not present. Therefore, with Governor
va2ardson's approval,
these minutes are being filed without Governor
a/ran'0
initial.
Minutes of actions taken by the Board of Governors of the
Federal Reserve System
on Monday, January 140 1957.
The Board met in
the Board
Room at 10:00 a.m.
PRESENT:
Mr. Martin, Chairman
Mr. Balderston, Vice Chairman
Mr. Mills
Mr. Robertson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Carpenter, Secretary
Sherman, Assistant Secretary
Kenyon, Assistant Secretary
Fauver, Assistant Secretary
Thomas, Economic Adviser to the Board
Vest, General Counsel
Young, Director, Division of Research and
Statistics
Hostrup, Assistant Director, Division of
Examinations
Hackley, Associate General Counsel
Hexter, Assistant General Counsel
Thompson, Supervisory Review Examiner,
Division of Examinations
Messrs. Mane, General Counsel, Einzig, Assistant
Vice President, and Galvin, Chief Examiner,
Federal Reserve Bank of San Francisco.
In a letter dated January 12, 1956, the Board requested the Federal R
eserve Bank of San Francisco to undertake to obtain information with
respect to(11
\-.L; the nature and extent of banking competition in the relevant
area before
the acquisition by Arizona Bancorporation of stock of The Bank
Of Dou
gla8, Douglas,
Arizona, and other banks, and before the acquisition
of
/1414 of Southern
Arizona Bank and Trust Company, of Tucson, by TransaMericm
ck Co
rporation; and (2) the effect of those acquisitions upon competi-
tion
in the
area generally as well as upon competition among the enumerated
beziks.
With its
letter of November 23) 1956, the San Francisco Reserve
-2-,
Bank transmitted copies of a two-volume study of the sane date entitled
"Investigation of
Banking in Arizona".
The first part of the study
consisted of an
over-all picture of the State of Arizona, a discussion
Of credit
facilities available in that State, and a discussion of the
sources of credit
available to particular types of borrowers.
The second
section consisted of a
study of individual areas in the State, including
the
sources of borrowed funds for the residents of each area, while the
third section
drew conclusions as to the availability of alternative
sources of
credit in different localities, the competitive situation
between
--- yanks, and the specific changes in bank competition which had
c'colarred as a
result of the acquisitions referred to in the Board's
latter. The fourth section presented the legal aspects of the foregoing
inatarial. At the meeting of the Board on December 14, 1956, it was agreed
that it would be helpful to have representatives of the Reserve Bank meet
Ifith the Board
to summarize and highlight the conclusions drawn from the
and Messrs. °Wane, Einzig, and Galvin were present at this meetfor that
purpose.
Mr. Galvin reviewed the existing banking facilities in Arizona
aticl 14r. Einzig outlined the areas where the respective banks were found
to halrPeen in competition. Mr. 0:Kane's remarks were addressed principall-4 to the
legal conclusions which had been drawn from the study in
the
light of the
Clayton Att.
79
1/14/57
-3Following a discussion of various questions raised by members
of the Board
with respect to different phases of the situation in Arizona,
as described
in the study, reference was made by Governor Robertson to
reports of an understanding between the Valley National Bank of Phoenix
Etild
General Motors Acceptance Corporation to the effect that consumer
financing terms would not be changed by either organization independently.
Mr. Mane stated that without more information than was now
available concerning
the reported arrangement, a definite opinion on the
legal aspects could
not be drawn.
In response to a further question by Governor Robertson as to
vhether a report on the matter should be sent to the Department of Justice,
Mr* °tKane expressed
the view that perhaps a report should be made for
what
ever action
the Justice Department might want to take.
When Mr. Einzig commented that such a transmittal might reduce
the v4„
'
41-ingness of General Motors Acceptance Corporation to make information available
to the Board in the future, Mr. OtKane suggested that
IperhaPa the broad responsibilities of the Board were such as to override
that con
sideration. Mr. Einzig added the explanatory comment that inforZation
1-11 the San Francisco study regarding the operations of General
Motors
Acceptance Corporation was taken from information received by the
1/(3ard,
Presumably on a confidential basis.
Chairman Martin said that the Board was very much impressed by
the qualitY and scope of the study and that, although the study presented
questi"s 'which the Board
would have to consider further, the work done
bY thp n
Ileserve Bank was useful and constructive.
1/14/57
-4Messrs. (Mane, Einzig, and Galvin then withdrew from the meet-
ing along
With Messrs. Fauver, Thomas, Hostrup, Hexter, and Thompson;
and
Messrs. Johnson, Controller and Director, Division of Personnel
Administration, Horbett, Associate Director, Division of Bank Operations,
Noyes, Adviser,
Dtvision of Research and Statistics, and Sprecher,
Assistant Director,
Division of Personnel Administration, entered the
room.
The Board then gave
consideration to a memorandum from the Division of
Personnel Administration dated January 10, 1957, regarding a
reqpes by
t
the Federal Reserve Bank of Kansas City for approval of
uPllard a
djustments in the employees' salary structures at the head office
and
branches, effective January 1,
1957. The memorandum brought out that
the Percentage
increases in the top grades of the structure originally
submitted had been
reduced by the Reserve Bank following discussion of
qUestions raised
by the Board's staff. The staff had felt that the
ProPosed grades
were too high in relation to those of the other Reserve
Iiallks to be
realistic and pointed out to the Kansas City Bank that the
"ructure 'would
have the effect of necessitating adjustments in the
"ricers* Al
s--i-arY structure, the lowest grades of which are based on the
t4/q/ 0 the
nonofficial structure line. The memorandum recommended that
the
modified proposal,
'which would place the Kansas City Bank's struc-
tare
third highest
in the System, be approved.
S-I:
1/14/57
-5Following comments by Mr. Johnson on the original proposal and
the modifications
approved by the Bank's directors as a result of discussions between the Board's staff and the Reserve Bank, Mr. Johnson
vent on to say that the Division of Personnel Administration had received this
morning certain information concerning a survey made by the
National Industrial Conference Board of positions in the Kansas City
area which
appeared to show, in all nine cases where somewhat comparable
Positions were involved, salary levels lover than those indicated by the
Reserve Bankts
survey.
He thought that it would be difficult to raise
question with the Reserve Bank concerning the adequacy of its wage
sUrvey,
but on the other hand he questioned whether any survey in Kansas
City could
justify a salary structure, particularly in the higher grades,
4bc)ve anY other Reserve Bank structure, a result which would have fol'Wed from
adoption of the original proposal. In this connection, he
Ps:Anted out
that because of difficulty in locating comparable positions
ill the
higher
grades, the determinations of the ranges for those grades
are made
Principally by extending the salary lines applicable to pod.tione in
the lower grades. While he thought that the revised proposal
of the' Xansae City Bank would not be greatly out of line with the structures of
the other Banks and could be approved, he felt at the sane time
tilkt the
Board should continue to look carefully at the Kansas City
Bank,s wage
surveys.
In a discussion of various aspects of the matter, including the
--8-4b11) between Reserve Bank official and nonofficial salary
-6structures,
Governor Balderston commented that the sample of jobs in-
cluded in the Kansas City Bank's survey was relatively small.
Accord-
ing to the Reserve
Bank, a sample survey of other companies had been
made which
indicated that inclusion of such companies in the Bank's wage
811217eY would not have changed the results substantially.
Nevertheless,
he felt that
if the Board approved the current proposal, the Kansas City
k should be
encouraged to enlarge its sample in the future.
Governor Balderston also expressed concern that the projections
made for
the higher grades in a Reserve Bank's salary structure might
41 some cases
lead to unsound results.
Inasmuch, however, as a sub-
etanttal amount of time had elapsed since the original Kansas City proP°8a1 vas submitted, and since the Reserve Bank management had been cooperative in
revising the proposal so that the salary structure would be more
in line vith those of
other Reserve Banks, it was his opinion that the
Propos
ed revised
structure could be approved by the Board.
Thereupon, unanimous approval
was given to a letter to Mr. Leedy,
President of the Federal Reserve
Bank of Kansas City, in the following form:
In accordance with your letters of November 29, 1956,
Jarinn— 8,
and January 10, 1957, the Board of Governors ap12'°Ire8 the following minimum and maximum salaries for the
-?apective grades at the Head Office and Denver, Oklahoma
ltY, and Omaha Branches, effective January 1, 1957:
Head Office and Denver Branch
Grade
Minimum Salary
Maximum Salary
$ 2100
2220
$ 2700
3000
1
1/14/57
Grade
3
4
5
6
7
8
9
lo
11
12
13
14
15
16
Minimum Salary
Maximum Salary
$ 2460
2700
3060
3420
3840
4260
4740
5340
5940
6540
7320
8160
9120
10140
$ 33oo
3660
4140
4620
5160
5760
6420
7200
7980
8820
9840
10980
12240
13680
Oklahoma City Branch
1
2
3
4
5
6
8
9
10
11
12
13
14
15
16
2100
2160
2340
2580
2880
3180
3540
3960
414.14.0
4980
5520
6180
6900
7680
8580
9540
2640
2880
3120
3480
3840
4260
11.740
5340
6000
6720
7440
8280
9240
10320
11520
12840
Omaha Branch
1
2
3
4
5
6
2100
2160
2340
2640
2940
3300
3660
2640
2880
3120
3540
3960
4440
14.920
1/
114./57
-8Grade
Minimum Salary
8
9
10
11
4o8o
14.560
5100
5700
6360
7140
7980
8880
12
13
14
15
16
9960
Maximum Salary
$ 5520
6180
6900
7680
8580
9600
10740
12000
13440
The Board understands that these adjustments in structure will not
result in salary expenditures in such an amount
as to exceed the funds provided for in the Reserve Bank's
1957 budget,
emplZtele
es,
Board approves the payment of salaries to the
other than officers, within the limits specified
for the grades
in which the positions of the respective
emPloyees are classified. It is understood that all emPloyess whose salaries are below the minimum of their grades
as a result
of the structure increase will be brought within
,,e appropriate range as soon as practicable and not later
Aprii 1,
1957.
Messrs. Johnson and Sprecher then withdrew from the meeting.
Reference was made to a memorandum from Mr. Horbett dated J8n118-rY 1A
-') 1957, concerning a request from the Federal Reserve Bank of
iCansas CitY for a Board ruling on the question whether member banks in
Kansas
City) Kansas, could obtain termination of their reserve city stat48 ber°re the end of the next three-year review period if they now voted
to
continue it
for the three-year period beginning March 1, 1957. It
aPPeared that
the two reserve city banks in Kansas City, Kansas, would
beLflg
1957,
o give up the reserve city designation, effective March 1,
except that the laws of
the State of Kansas do not permit the
-9deposit
Of active State funds in a bank located in a nonreserve city.
It also
appeared that efforts were being made to obtain legislation at
the current session of the State Legislature to change this requirement.
The m
emorandum, copies of which had been sent to the members of the
ard, brought out that a somewhat similar question was raised by the
Kansas City Bank in 1954 on behalf of member banks in St. Joseph, Missouri,
at
which time the Board concluded that it would not be warranted in approvbag the
request.
Mr. Horbett expressed the opinion that if the Board wished to
change the
be to
Position taken in 1954 the best course of action probably would
make a change in the existing formula covering the designation of
l'eserve cities.
age
various
He pointed out that the making of exceptions might encour-
kinds of requests from banks in reserve cities.
Following a discussion of
the matter, unanimous approval was
given to a telegram to Mr. Leedy,
President of the Federal Reserve
Bank of Kansas City, reading as
follows:
Referring Mr. Woolley's January 10 telegram, Board does
believe it -would be warranted in approving under the
dxiTting formula a request for termination of reserve city
tesIgnation of
Kansas City, Kansas, other than at established
Ziennial review dates, and that it would be inadvisable to
;74end and publish a new formula to permit such a procedure.
2u, vill recall
that Board took same position in Febru4ry
544.1 on a request from member banks in St. Joseph, Missouri.
:ot
1
ranallm
There had also been circulated to the members of the Board a memo-
"r
Mr. Horbett, dated December 28, 1956, relating to a recommendatton b
Y the Federal
Reserve Bank of Cleveland that the Board deny the
86
1/14/57
-10-
request of Western Pennsylvania National Bank, McKeesport, Pennsylvania,
f°r Permission to maintain the reserve requirements applicable to banks
located in
nonreserve cities instead of those applicable to reserve
city
banks.
Pursuant to the provisions of Regulation D, Reserves of
Member Banks,
the subject bank became a reserve city bank on December
1) 1956,
8.
when it established a branch in Pittsburgh at the location of
bank which
it absorbed. The Reserve Bank had also recommended the
liailrer of certain penalties incurred by the subject bank because of reserve
account deficiencies early in December 1956. Mr. Horbett's memoandum expressed concurrence in both recommendatIons but called attention t° actions taken by the Board in the past in somewhat similar situati°n8 Idlich might have a bearing on the Board's decision.
In discussing the matter, Mr. Horbett reported that the area
'where
the branch is located might be redeveloped in
the next year or two
and th-4the branch therefore might be moved. He pointed out that if a
chan—
'
'
11. in location was
made, the member bank could of course ask for a
Of the
matter by the Board in the light of the changed
stances.
circum-
Following the discussion,
unanimous approval was given to a
letter to Mr. Stetzelberger, Vice
President, Federal Reserve Bank of
Cleveland, reading as follows:
to
This refers to your letter of December 14 with regard
the application of the Western Pennsylvania National Bank,
1/14/57
-11-
McKeesport, Pennsylvania, for permission to maintain
the reserve requirements applicable to banks located
in nonreserve cities, instead of those applicable to
reserve city
banks to which the bank became subject early
in December when it established a branch in Pittsburgh.
The Board has given careful consideration to the
Pertinent facts contained in the letter sent by Mr.
Cancelliere,
president of the subject bank, to Chairman
Martin under date of December 1, and to those contained
in Your letter of December 14 and accompanying exhibits.
It has also
had a review made of Board actions in the
past °n applications for reduction in reserve requirements in similar circumstances.
The Board concurs in your view that the Pittsburgh
branch of the Western Pennsylvania National Bank is not
located in an outlying district of the city of Pittsburgh, and
that there is considerable question whether
;toile type of
business which will be transacied in Pitts. urgh by
the Western Pennsylvania National Bank will be
Phioal of that transacted by banks located in outlying
cetistricts
of reserve cities that have permission to
_arrY reduced reserves. Accordingly, and pursuant to
.nur recommendation, the Board denies the subject bank's
a
pplication.
of „Also pursuant to
the recommendations in your letters
eember 14 and January 2, the Board authorizes your
to waive the penalties totaling $932.01 incurred by
the
subject bank early in December.
Please advise the member bank of the Board's actions.
Messrs. Sherman and Horbett then withdrew from the meeting and
Mr, v
ASSIStant
Counsel, Legal Division, entered the room.
Under date of January 2, 1957, Senator Sparkman, Chairman of the
Subcommittee on
Housing of the Senate Banking and Currency Committee,
li.rote to
the Board
requesting its views cn the question of appropriate
interest rates
for Federally underwritten mortgages. With a memorandum
dated
January 10,
1957, from Mr. Young, Director of the Division of
1/14/57
-12-
Research and Statistics, there had been sent to the Board copies of
8- proposed reply.
This reply would suggest leaving the rate of interest
On
individual mortgages to the discretion of the Commissioner of the
Federal Housing Administration or the Administrator of the Veterans
kiministration at the time the mortgage was submitted for insurance or
guarantY.
It was suggested that this would insure needed rate flexi-
bility by area
and that individual mortgages should bear a rate of interest which was
fair and reasonable, considering the general state of
mortgage and
capital markets, the location of the property mortgaged,
aaad other
Specific factors relating to each individual transaction.
At the conclusion of the discussion of the draft, it was understood that the letter would be redrafted on the basis of comments
made at this meeting and that the
matter then would be considered
further by the Board.
Reference then was made to a memorandum dated January 8, 1957,
from mr
• Young, Director, Division of Research and Statistics, recommending that
the Board authorize entering into a contract with the Bu-
'
l eau of the
Census, at a cost of $25,000, to continue the arrangement
fc'r
obtaining information on charge account and instalment receivables
held by retail
dealers in connection with th Bureau's annual survey of
retail
trade.
The memorandum stated that the budget of the Census
kreau for
the fiscal year 1958
s
reported
to
include a request for
1/14/57
-13-
funds to collect
credit data in connection with the 1957 survey, to be
conducted early next year.
If the budget should be approved, the memo-
randum pointed out, it would not be necessary for the Board to defray
thC cost
of collecting the retail receivables data next year and probablY in
subsequent years.
Following a statement by
Mr. Young, the recommendation
contained in his memorandum was
approved unanimously.
Under date of January 9, 1957, the Bureau of the Budget requested
the Board's views with respect to a draft bill vhich would authorize a
Year program of Federal assistance to States and communities to
enable them
LO
increase public elementary and secondary school construc-
tion.
n draft
of proposed reply was submitted to the Board with a memorandum from mr.
Young, Assistant Counsel, dated January 10 which stated
that +.1,
draft bill represented a revision of an earlier draft on which
the Board
reported to the Budget Bureau by letter dated January 5, 1956.
The January 19r6
7 reply did not comment with respect to the main provii°118 of the bill
but raised a question as to the exemption of State oblitticme issued to finance school construction from the restrictions of
Sectioll 5136 of the
Revised Statutes of the United States.
This exemption
II" not c
ontained in the current draft bill.
/181ted
Hackley stated that last Friday, January 11, the Budget Bureau
bY telephone
whether it might have at least an informal response
from
- tee
Board today.
Following a brief discussion,
unanimous approval was given to a
-14letter to Mr. Roger W. Jones, Assistant Director for Legislative Reference, Bureau of the Budget, reading
as follows:
This is in response to your communication of January
9/ 1957, in which you request the views of the Board with
respect to a draft bill, "To authorize a four-year program
Of Federal
Assistance to States and communities to enable
Inem to increase public elementary and secondary school
co
nstruction."
The draft bill would authorize the Federal Government
to purchase obligations issued by local educational agencies
to finance
school construction where such obligations canotherwise be marketed upon reasonable terms; provide for
Federal grants to States to finance urgently needed school
facilities; provide support by the Federal Government, with
th
Participation of the States, of obligations issued by
tate
school-financing agencies established to finance construction
of school facilities; and provide for Federal
.T.ants to the States to assist them in meeting their adminisrative
expenses in the development and initiation of State
Pro
grams_ designed to promote efficiency in, told to increase,
public school
construction.
The provisions of the draft bill do not fall directly
thin the scope of the Federal Reserve System's monetary
na supervisory responsibilities, and the Board has no
comment to offer with respect to them.
r
Mr. Carpenter
stated that the President had signed a bill to
excus_
(31.rernment workers on January 21, 1957, in observance of InaugUration Day.
Thereupon, it was agreed
unanimously to excuse on that
date all employees of the Board
except those required to be present by the nature of their duties.
The
meeting then recessed and reconvened at 2:30 P.m. with the
Bate m
embers of the
Board present along with Messrs. Carpenter, Kenyon,
Ve8t,
-("'ruP, Hexter, and Thompson of the staff.
1/14/57
-15In accordance with arrangements made by Governor Robertson
Pursuant to the understanding at the meeting on January 11, 1957) the
follovin
g persons also were present to state reasons in support of the
aPPlication of Marine Midland Corporation to acquire the voting shares
°D The Lake
Shore National Bank of Dunkirk, Dunkirk) New York:
Bayard
Pe P°Ps) Chairman of the Executive Committee of Marine Midland Corporation; Baldwin Maull, President of the Corporation; E. C. Gruen, Financial
13fricer of the
Corporation; Charles Teschner, Chairman of the Board of
Chaute-uqua National Bank of Jamestown, Jamestown, New
R,
Beebe) President of The Lake Shore National Bank.
and Harvey
Under the proposal
the Lake Shore bank would be merged with the Jamestown institution, which
°Uld establish a
branch at the location of the Lake Shore Bank in Dunkirk.
Mr. Beebe began the discussion by covering local aspects of the
Matter. u.
He said that he had started negotiations with Marine Midland
l'el'esentattves in June of last year, that the results of the negotiations
satisfactory
on both sides, that a formal application was submitted
In A
ugust, and
that additional information subsequently was furnished by
him and
Marine
Midland
t tiv s in a discussion with members of
the B.
Oardts staff
in November and later in a letter that he sent to the
liOarA
‘' He also
stated that personally he would not be anxi.ous to see a
he
arilig ordered on the
matter because he felt that the reasons might be
tieut,
"rst°9d in a small community like Dunkirk) with repercussions detritlental to
the bank, In addition, he felt that just about all of the information
pertinent
to the case had been furnished.
94.
1/14/57
-16Mr. Beebe went on to say that news of the proposal was pub-
lished in a
banking publication in December, following which various
Taestions were raised in the community and
representatives of Manufacturers and Traders Trust Company of
Buffalo, New York, indicated to
him that that
institution would be desirous of acquiring the Lake Shore
Bank and
establishing a branch in Dunkirk, where it has one branch alraadY in operation.
He did not know whether Manufacturers and Traders
vtuld have
in mind discontinuing its present branch, situated in a
iess
desirable location than the Lake Shore Bank, or whether it would
operate both
offices. He pointed out, however, that in any event
Manufacturers and Traders would have a considerably larger banking
opereti0
11 than the remaining independent
bank in Dunkirk. Mr. Beebe indicated
that
at first
he felt Manufacturers and Traders would not be in a position
to lake an offer
because supervisory approval vas not likely to be forth.Coming
However, he
had since been informed by representatives of the
BUrfaiv,
ii
mmoic that the
matter had been taken up informally with persons
the office of
the State Superintendent of Banks and that this might
distin
-guishable from certain applications recently denied because of
the
Pr
esence of the
local independent bank and the fact that Manufacturers
be
vas al-Lady represented
in Dunkirk.
beli
Turning to the local competitive situation, Mr.
Beebe said he did
eve that
Dunkirk would be as well served from the competitive
tEtridyto
*
Int 'with
aPt
only two banking offices.
He felt that Manufacturers was
tO
44ke an attractive offer for the Lake Shore Bank,
but he said that
-17it vould
be difficult to enter into such an arrangement because of the
competitive history between the Lake Shore Bank and the Manufacturers
branch.
On the other hand, there had been a long history of friendly
relations between his bank and the Marine
Midland bank in Buffalo.
Another deterr
ent, he said, was that stock of Marine Midland Corporation,
1,ich
forvshares of the Lake Shore Bank would be exchanged, has a dennitelY ascerta
inable market value while stock of Manufacturers and
'Traders is not
so widely traded. For these and other reasons, he did
4" feel that an offer
by Manufacturers and Traders would be so well
re
e--''" RY the Lake Shore Bank's officers, directors, and stockholders.
Pr°rn the point of view
of bank personnel, he thought that the advantages
the direction
of accepting the Marine Midland offer.
In further comments, Mr. Beebe review
ed the number and size of
ccnnmereial
banks and savings and loan associations which, along with a
branch
°f a personal loan company, operate in the Dunkirk-Fredonia area.
It Irea "4u,
8 opinion that the independent banks in those cities would not
be
aaged if the Lake Shore Bank became a branch of the Chautauqua
National Bank.
Teschner then discussed the location, size, branches, and
hist*
17 of the
Chautauqua National Bank. In telling of the types of
busiale
88 handled, he
expressed the view that the wider range of services
that e
ices
°Uld be offered by a branch in Dunkirk, as compar
ed with the servYailable through
the Lake Shore Bank, would be helpful to the
1/14/57
-18-
c°41nlunitY. He felt that the operation also would be more profitable
ss a branch bank and
that in general the consolidation would be benefieial to the whole
area. Employees of Lake Shore, he said, would be
i4
a position to
receive all of the benefits available to employees of
a Marine Midland bank.
Mr. Teschner then reviewed various occasions
cr r a period of years when his bank had extended loans or other assist"
ance to
commercial businesses in the Jamestown area in such a way as to
contribute to the area's business development.
In several of these cases)
he 8tated, the loan requests had been turned down by competing independent balls.
143. Maull summarized steps taken thus far by Marine Midland
ration in an effort to obtain supervisory approval of the current
el)Plication and stated reasons why a decision at the earliest time possible 'would be
appreciated.
It was only because Lake Shore desired an
exchange of shares, he said, that the transaction cane within the purview
or the
Bank Holding
Company Act. He expressed the view that the implieati°118 of this particular transaction bore only a remote relationship,
1ra 4,
r
to the
objectives of the Act. Mr. Maull then discussed the status
Of mart
that
ne Midland Corporation in relation to its controlled banks) stating
PrinciPally it acts to assure good management and directors, to supDlY ca,4
"tal funds when needed, and to supply those services that can be
Dem
rmed best
on a "pool" basis. Following a description of such services
hA
- said that through
the establishment of regional banks with
95
1/14/57
-19-
branches, the number of banking institutions in the group had been
redrted from 133 to 13
over the years and that this development in
New York State was
not confined to the Marine Midland group.
More im-
Portant than
the size of the banks, he asserted, were the characteristics
"
4 location. Mr.
Maull then vent on to state reasons why he considered
4
regional bank setup more beneficial to the business development of
the various
areas than the operation of smaller unit banks. On the
question of
competition, he thought that wherever there was strong competition between
rival banking organizations the public would be well
served, and
that there was such competition in all areas where Marine
Midland banks
operate, including competition from other types of financial ins
titutions and from metropolitan banks located in New York City
and
elsewhere. In fact, he said, the competition and the credit needs
Of the
areas were such as to indicate that perhaps the regional banks
should be
larger.
Mr• Pope said that Marine Midland had tried to look at this case
vithin the
framework of the standards set forth in the Bank Holding Corn13a113
'Act: that
it could see nothing in the situation in Dunkirk, in
Chautauqua
tate
Of
County) in the Ninth New York Banking District, or in the
New. York which would constitute good reason for denial of the
411P11cation, and that
the considerable degree of existing competition
'4111c1
continue. After referring to the efforts of Marine Midland to
1/14/57
14°1*
-20-
closely with the Board in the past, he mentioned the current
competition for savings accounts as an example of the keen nature of
competitive rivalry.
He also spoke of the extent to which Marine Midland
had auPPlied capital
funds over the years to the banks in its group.
As
t° local autonomy, he said that in most cases Marine has no
direct repl'eaentative on the board of directors of the group bank, and that the
directors of each
institution "run the bank". As to concentration, he
said that
Marine's coverage in no case approached undue concentration
it relation
to the number of the banking offices in the particular area.
Re
IN.,.
4-2.eved
that a Marine Midland bank office in Dunkirk could serve
better than
the local bank the welfare of the people who do business in
the area) and he added
that Marine had never "gone in the back door" to
acquire a
bank.
Governor Robertson inquired of Mr. Pope where, if he were in the
130ardea
Place, he would draw the line beyond which bank acquisitions
by
holding comp__
eu07 group should not be permitted.
the
14r, Pope responded that he would draw the line at a point where
acquisition vould be damaging to competition and said that he did
not think the
Marine Midland acquisitions previously approved by the Board
had
disrupted
competition. Mr. Pope also said that he did not believe any
1111I could
be laid down
which would be applicable in all parts of the
Q°141.trY, that
there must be consideration of the territory involved and
844 aPPlication
of common sense, and that the question could not be
'altered in
dogmatic terms through fixing percentages.
144/57
-21In reply to a question by Governor Balderston regarding Marine
Midland concentrati
on in Niagara County, Mr. Maull said that the concentration in the county was heavy, that this was an older location for
Marine Midland, and that he thought Marine must have served the area
sat
isfactorily or others would have come into the territory.
Chairman Martin then inquired of Mr. Beebe as to his intentions
if supervisory
approval of a sale of the Lake Shore Bank to Marine Midland
or
„.
--"Alacturers and Traders could not be obtained.
Mr. Beebe replied that it was his intention to retire from the
bankiav
"business, that his principal associates in the bank were older
men, that
other top management was not available within the bank, and
that he
'would have to cast around for some other solution. He also said
th" the bank's stock, formerly owned by an estate, had been placed largely
in the
hands of persons that he had interested in the bank, that most of
the earnings had been retained for addition to capital funds, and that the
dividend rate
therefore had been low. In substance, he felt that the
atockho
ld
er
st
oc
interests
of their k
by exchange
best be served
would st
for
Stock of Marine
Midland Corporation.
Chairman Martin concluded the meeting by stating that the Board
endeavor
to reach a decision as soon as possible.
The meeting
then adjourned.
Secretary's Note: The Board having been
informed that Dr. Philip G. Davidson
1/14/57
-22would accept appointment, if tendered,
as a director of the Louisville Branch,
Federal Reserve Bank of St. Louis, the
following telegram was sent to Dr.
Davidson today pursuant to the Board's
action on January 10, 1957:
Board of Governors has appointed you director of
L°uisville Branch of Federal Reserve Bank of St. Louis
for remainder of term expiring December 31, 1957. Your
acceptance by collect telegram would be appreciated.
It is understood that you are not director of any
altndo not hold public or political office. Should
eZ1
bT 11
change in these respects during your tenure
Please inform Chairman St. Louis
Bank.
We should like to know how you wish your name and
be shown in Board's announcement and pubP1=1:5t.°
@FedFRASER