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9/61
Minutes for
To:
Members of the Board
From:
Office Of the Secretary
January 17, 1963
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.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
140
Minutes of the Board of
°II Thursday, January 17, 1963.
Governors of the Federal Reserve System
The Board met in the Board Room at
10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mx.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Mitchell
Sherman, Secretary
Kenyon, Assistant Secretary
Mblony, Assistant to the Board
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Hackley, General Counsel
Solomon, Director, Division of
Examinations
Mr. Shay, Assistant General Counsel
Mr. Goodman, Assistant Director,
Division of Examinations
Mr. Leavitt, Assistant Director,
Division of Examinations
Miss Hart, Senior Attorney, Legal
Division
Mr. Potter, Senior Attorney, Legal
Division
Mr. Doyle, Attorney, Legal Division
Mx. Reynolds, Chief, Special Studies
and Operations Section, Division
of International Finance
Mr. Hunter, Supervisory Review Examiner,
Division of Examinations
Mr. Poundstone, Review Examiner, Division
of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Circulated items.
The following items, copies of which are
'
ettached to these minutes under the respective item numbers indicated,
ere 2pproved unanimously:
1/17/63
-2Item No.
Letter to City Trust Company, Bridgeport, Connecticut,
813Proving the establishment of a branch in the vicinity
or Connecticut Avenue, Stratford Avenue, and Florence
Street.
1
Letter to The Cleveland Trust Company, Cleveland, Ohio,
aPProving the establishment of a branch at 27327 Wolf
11°a0a, Bay Village.
2
Application of Lock Haven Trust Company (Items
3 and 4). There
had been
distributed drafts of an order and statement reflecting the
aecision reached by the Board on January 10, 1963, approving the
aPPlication of Lock Haven Trust Company, Lock Haven, Pennsylvania, for
l/ermission to merge with The Mill Hall State Bank, Mill Hall, Pennsylvania.
After discussion, the issuance of the order and statement was
Copies of the documents, as issued, are attached as Items
3 exici
respectively.
Application of Hackensack Trust Company.
aistributed
There had been
memoranda from the Division of Examinations and the Legal
ivIsion, together with other pertinent papers, relative to the application
Or
to
Or
The
Hackensack Trust Company, Hackensack, New Jersey, for permission
merge with Bank of Bogota, Bogota, New Jersey.
the Division of Examinations was favorable.
The recommendation
The Legal Division's
e mMents were restricted to a consideration of protests from two persons
re
arding alleged unfairness in the merger proposal.
The persons con-
cerned asked to be heard in the event that the Board should order a
4.4.1404,
1/17/63
-3-
Public proceeding on the application.
For reasons stated, it was the
Legal Division's opinion that the protests did not support the request
for a public proceeding; further, that it would not be necessary to
advise the protesting parties in the event no such proceeding was held.
At the request of the Board, Mr. Leavitt summarized the application,
his comments being based on the memorandum from the Division of Examinations,
foil
4-I-awing which Miss Hart and Mr. Shay outlined the question discussed in
the
memorandum from the Legal Division.
There was no indication of dissent
from the position taken by the Legal Division.
There followed an exchange between Governor Mitchell and Mr.
Leavitt relating to the conclusion of the Division of Examinations
that the Bank of Bogota was not a strong competitor.
Mr. Leavitt
indicated that this opinion, concurred in by the Federal Reserve Bank
°I New York, reflected principally the fact that Bank of Bogota had
ah°wn a rate of growth much less than that of other banks in the area.
governor Mitchell then turned to benefits claimed to flow from the merger,
krticularly the broader banking services to be provided in Bogota by
the continuing institution, and inquired whether such services were not
already available from other banks in the vicinity.
Mr. Leavitt replied
t° the effect that such a situation would almost always be true where
baxIks in the New York-Northern New Jersey metropolitan area were concerned.
11°I,Tever, Hackensack Trust would make available to customers of Bank of
I3°gota certain services that the latter bank was not now making available.
1/17/63
As
to the asserted benefit of a larger loan limit, he acknowledged
that numerous alternative sources of credit were available to persons
in
need of larger credits, but added that the increased loan limit of
Hackensack Trust should enable it to compete more effectively with
larger nearby institutions.
Mr. Leavitt admitted that Bank of Bogota,
according to the record, was drawing a certain amount of deposits from
the Hackensack area, in competition not only with Hackensack Trust but
with other banks.
Governor Mitchell expressed the view that there was
much in the record to show that Bank of Bogota was in fact a rather
strong competitor, even though its growth record was not impressive.
Mr. Leavitt agreed that the bank was a competitor, but maintained that
its lack of growth indicated it was not as strong a competitor as other
banks in the area.
The members of the Board then expressed their views on the application, beginning with Governor Mills, who concurred in the favorable
l'ecommendation of the Division of Examinations.
It seemed to him that
ever so often the Board should refresh its thinking on its administrative
l'esPonsfbilities under the law.
It should not allow a preoccupation
with the competitive factor to overbalance other factors that, according
t° the statute, also must be taken into consideration.
the la
As stated in
and as Mr. Hackley had brought out from time to time, the
13°ard was required to reach a balanced judgment.
In this particular
eI)
Plication, both banks were operating in a highly populated area, where
44
1/17/63
-5-
there were a variety of banking and other credit facilities, especially
Ilhen it was noted that the lending activities of both banks were concentrated to a considerable extent in the field of real estate credit.
Turning to the phase of the competitive situation having to do
th smaller banks that would remain in competition with large branch
banking
institutions if a proposed merger were effected, Governor Mills
8ata he felt that at times he detected an overly paternalistic attitude
toward the smaller banks.
Many banks, he noted, are small because they
d° not exert themselves.
Undue concern with this element of a situation
could do an injustice to banks that had sound reason to merge; by
Preventing them from merging the Board might in effect hold an umbrella
Over banks that possibly did not deserve consideration in the form of
Protection from additional competition.
Governor Robertson indicated that he would deny the application.
Ile considered this a close case, but for only one reason, namely, that
the merger would improve somewhat the capital position of Hackensack
Trust company.
This bank had been undercapitalized for a long time,
e'lla prominent in its management was an individual who had been adamant
th respect to capital and had rebuffed the Federal Reserve over the
Y'ears in this respect.
If the merger were consummated, that would result
In a slight improvement in Hackensack's capital position which would
be to the good.
However, the application involved two banks located
°IllY about a mile apart, and interbank competition admittedly would be
eliMinated.
In offset, it was alleged that the merger would solve a
1/17/63
-6-
'management sucession problem at Bank of Bogota and that the increased
lending limit of Hackensack would enable it to compete more effectively
with larger banks in the general area. In Governor Robertson's opinion,
these alleged benefits were not sufficient to warrant approval.
Bank
Of Bogota was a good small bank in a residential community, adequate
to meet the needs of the community.
The alleged difficulty in finding
a mto succeed the 60-year old president hardly impressed him as a
illstifiable basis for approval of the merger.
Some banks, he noted, do
11°t grow rapidly simply because they are not always pushing.
Yet Bank
Of Bogota appeared to be serving the public, as evidenced by its 55 per
cent loan-deposit ratio.
Its earnings were average, and it had been
48signed a I-A-S/1 rating.
One of the reasons that the bank had not
as fast as others might be its location; the location had been
good in the past but now was not.
However, the bank could move on its
°1411 initative if that seemed desirable.
In substance, he could see no
significant public benefit that would be derived from the transaction.
WhillHackensack Trust would be able to make slightly larger loans, the
13e0p1e in need of large loans were able to get them at present from a
/lide variety of credit sources.
Neither did the fact that Hackensack
TrlAst was a very aggressive organization--while Bank of Bogota was not-seem to him to constitute a reason for approving the merger.
In his
illdgment, the fact that existing competition between the two banks
/.04.141. be eliminated was not offset by favorable factors.
1/17/63
-7-
Governor Shepardson agreed that some existing competition would
be eliminated as a result of the merger.
It seemed to him, however,
that a vital point was the extent of remaining facilities in the area.
The amount of competition that would be eliminated did not seem so
significant when there were numerous other sources of credit, so that
Potential borrowers would in no sense be severely restricted in their
Choice of banking accommodation.
In summary he agreed with the analysis
131' the Division of Examinations and would approve the merger.
Governor Mitchell said it seemed to him that if one looked at
the competitive aspect, he must look at the markets the banks were serving.
In brief, the banks were serving depositors and borrowers.
As to
borrowers, they would have ample recourse to alternative sources of
service.
As to depositors
he supposed that convenience was a rather
IMPortant factor, and it would appear that merging Bank of Bogota into
Rackensack Trust Company was going to eliminate some competitive advantages
to depositors.
He did not feel strongly about the case.
However, he
it difficult to approve the application on the grounds that had
been set forth as a basis for approval.
Largely on that account,
he
lklad vote to disapprove.
Governor Balderston expressed the view that the case was not an
easY one.
However, his approach was similar to that of Governor Shepardson.
The alternative sources of banking facilities in the area were numerous,
s° it seemed to him that the elimination of interbank competition in
1/17/63
-8-
this case was not so significant as in many cases that had come before
the Board. The so-called banking factors did not afford arguments for
aPproval that to him were too convincing, but on balance he would accept
the recommendation of the Division of Examinations.
Chairman Martin stated that he also would accept the Division
recommendation.
He did not regard this as an open-and-shut case.
How-
ever) it seemed to him that the Board ought to be careful about turning
'()Isrn people who were endeavoring to better their situation and had shown
enough initiative and energy to come in with a program that was within
the Purview of reason.
He noted that there was a great deal of discussion
et Present about growth at the national level, and growth at the local
'
level was necessary to complete the picture.
He was fairly well acque.inted
vith the area concerned in this case, and he was inclined to think that
some significant public benefits might evolve from consummation of the
transaction.
Thereupon, the application of Hackensack Trust Company was
-84PZ2ITI.,
Governors Robertson and Mitchell dissenting, with the under-
that an order and statements reflecting the decision would be
13rePared for the Board's consideration.
Miss Hart then withdrew from the meeting.
Application of Ann Arbor Bank.
There had been distributed
Memoranda from the Division of Examinations and the Legal Division,
41()ng with other pertinent papers, relating to the application of Ann
48
1/17/63
-9-
Arbor Bank, Ann Arbor, Michigan, for permission to merge with The Dexter
Savings Bank, Dexter, Michigan.
The Division of Examinations recommended
favorably.
At the request of the Board, Mr. Leavitt summarized the application,
his remarks being based essentially on the information contained in the
Illemorandum from the Division of Examinations.
In his comments, Mr.
I4av1tt indicated that the Division had been influenced, among other
things, by the favorable decision of the Banking Commissioner of Michigan,
which had been rendered after consideration over a period of time.
The members of the Board then expressed their views, beginning
Irith Governor Mills, who concurred in the Division recommendation, while
e'l l'eeing with the Division that this was a close case.
His judgment in
the matter was influenced by the fact that Dexter was in effect a part
c)f the suburban area of Ann Arbor.
The trend of business in Dexter was
toward Ann Arbor and, as he recalled, Dexter had become principally a
residential community.
As he saw it, therefore, approval of the merger
//°111d not represent much more than approval of a branch in a general
nietropolitan area.
rl'Om. An
-w.
vi.
If Dexter had been located at a greater distance
Arbor, he might have been inclined toward an adverse point of
However, he looked at Ann Arbor and Dexter as a single general
c°MMunity.
There were other sources of banking services in the area,
so approval of the merger would not vest in Ann Arbor Bank such a dominant
1/17/63
-10-
control over banking resources as to be contrary to the spirit of the
bank merger statute or adverse to community interests.
Governor Robertson stated that he would approve.
It appeared
to him that there was little competition between the two banks seeking
t° merge; it was mostly potential competition that would be eliminated.
110
him, the overriding consideration was the management situation at
the Dexter bank.
The former president and two directors had died.
Thlls, active management was being provided by a director (from a nonbanking business) who had cone into the bank temporarily, plus help
from the Ann Arbor Bank itself.
Also, the Dexter bank was a fairly
lay earner, and it was a small bank in a suburban community of Ann Arbor.
In his judgment, these factors outweighed the diminution of competition
that would result from the merger.
Governor Shepardson stated that he would approve on the basis
of the staff recommendation.
Governor Mitchell indicated that he disliked to see the increased
e°ncentration of banking resources in the Ann Arbor area that would result
rl'°M the proposed merger.
While there might be no significant competition
lh Ann Arbor between the two banks seeking to merge, it appeared to him
that in Dexter there must be quite a bit of actual or potential competition
between them.
In his opinion, Ann Arbor was large enough to support more
than two banks, in which connection he noted that the Comptroller of the
rency had recently granted a charter to a third bank.
'
eill
rae.tter,
As a practical
however, it seemed to him that it was futile to try to keep people
1/17/63
-11-
1n business if they did not want to stay in business.
The owners of
the Dexter bank apparently did not want to stay in the banking business,
and on that ground he would approve the proposed merger.
Governor Balderston and Chairman Martin also indicated that they
would approve.
Thereupon, the application of Ann Arbor Bank was approved
Unanimously, with the understanding that drafts of an order and supporting
statement would be prepared for the Board's consideration.
Messrs. Potter and Hunter then withdrew from the meeting.
Powers of foreign branches of national banks; revision of
Pursuant to the discussion by the Board at its meeting
°II December 12, 1962, and subsequent discussion between members of the
stetr and Governor Mitchell, there had been distributed copies of a
Inemorandum from Messrs. Shay and Doyle dated January 16, 1963, submitting
4 revised draft of proposed Board regulation concerning powers for foreign
bx'anches of national banks.
The proposed regulation was intended to
1311131ement Public Law 87-588, approved August 15, 1962, which amended
section 25 of the Federal Reserve Act to authorize the Board by regulation
to permit foreign branches of national banks to exercise powers enabling
theM to compete on more equal terms in the countries in which they were
located.
The January 16 memorandum summarized the principal respects
111 Ighich the revised draft of proposed regulation differed from the
aft previously submitted with a memorandum from Messrs. Shay and Doyle
'
Cil
clated December 7, 1962.
P
1/17/63
-12-
With a memorandum from Mr. Goodman dated January 4, 1963, there
had also been distributed, in accordance with the understanding at the
Board meeting on December 20, 1962, a proposed draft revision of Regu14t1°n K, Corporations Doing Foreign Banking or Other Foreign Financing
Under the Federal Reserve Act.
The Draft revision of Regulation K
undertook to translate into regulatory form the principles suggested
to the Board in a memorandum from Governor Mitchell dated December 18,
1962. Also submitted with Mr. Goodman's memorandum was an edited copy
°r Regulation K showing deletions, additions, and inserts, to conform
to the proposed draft revision.
In introductory comments, Governor Mitchell noted that the
1)roPosed regulation concerning additional powers for foreign branches
or
national banks and the proposed revision of Regulation K were somerelated, since a number of the issues raised in the one connection
/lere raised also in the other.
He pointed out that there was some
'
l eason to push ahead as rapidly as possible with the issuance of a
IsegUlation on foreign branches of national banks, which would be known
48 Regulation M, and he added that the revised version of Regulation
14 1.7as roughly consistent with the proposals being made relating to the
'
l ellision of Regulation K.
t° be considered together.
In a sense, therefore, the two matters ought
As a starting point, and in order to provide
13el'sPective, he suggested that the Board might want to have Mr. Goodman
cliclass the proposed revision of Regulation K in terms of the broader
152
1/17/63
-13-
issues involved, following which there could be expressions of opinion
by
members of the Board.
Consideration could then be given to the
araft of regulation relating to foreign branches of national banks.
There being agreement with this suggested procedure, Mr. Goodman
reviewed several items involved in the proposed revision of Regulation K
to which he felt that particular attention should be drawn.
These
included the proposed statement of national purpose of Edge corporations,
°Perations of such corporations within the United States, acceptance
transactions, the establishment of branches by Edge corporations, equity
investments by those corporations, and the possible elimination of the
distinction between banking and financing corporations.
At the conclusion of Mr. Goodman's presentation, Governor Mills
Made a statement in which he said that he was impressed by the amount
°I' work that had gone into the proposed revision of Regulation K.
He
tenaed to favor eliminating the separation between banking and financing
corporations.
However, he felt that the regulation should be in such
11°1111 as to prevent an Edge corporation engaged in the banking business
'ara engaging also in the underwriting of securities, and he was not
tl
sUre that this separation was effectively required in the present draft.
It Edge corporations were allowed to combine banking and investment
a etivities, that would be going in an opposite direction from the
'
kisition that the Board had heretofore taken with respect to the
separation of such functions in domestic banking.
1/17/63
Governor Mills also said that he was somewhat disturbed about
the fact that the interest aroused by the proposed changes in Regulation
IC Was likely to be almost entirely on the part of institutions that
were going rapidly into foreign banking and financing activities.
Accordingly, the Board probably would not obtain the benefit of careful
Study by those who might see faults in the proposed revision of Regulation
that were not discernible to the Board.
As to the proposed statement of the national purpose of Edge
eorPorations, Governor Mills questioned whether Congressional intent
illstified as liberal an interpretation of the law as that contained
in the proposed statement of purpose.
Governor Mills also raised the question whether advantage could
11(3t be taken of the regulation to engage, in effect,in interstate branch
banking, thus contravening existing statutes.
He realized that the
language of the regulation was meant to be restrictive, but he was not
sure whether it accomplished the purpose effectively.
The foregoing, Governor Mills said, were general observations.
Re feared that the Board did not really know what it was getting into,
411C1 he was not sure how to find out.
The only people who were likely
t° submit views upon the publication of a proposed revised Regulation K
Were the
people anxious to get into Regulation K activities.
Chairman Martin said that he thought the Board members were
liar with his general views.
In brief, he concurred with the
A
1/17/63
-15-
Position expressed by Governor Mitchell in the latter's memorandum of
December 18, 1962.
In his (the Chairman's) opinion, Regulation K should
be made useful or it should be scrapped and new legislation requested.
He did not pretend to know what the intent of Congress may have been
at the time the Edge Act was passed; this lack of clear indication of
intent had led to problems over the years.
In any event, however, it
did not seem to him that Regulation K was serving too useful a purpose
in the form in which it now stood. To a large extent it tended to deal
lrith minutia, with the result that the administration of the regulation
'
/.748 always getting bogged down in detail.
After some discussion concerning what may have been the intent
(3f the Congress in passing the Edge Act, Governor Mitchell commented
that the intent of the revised draft of regulation was to push as much
l'esPonsibility as possible onto the Edge corporations themselves.
It
seemed to him quite clear that the Congress, when it passed the Edge
Act) was unable to resolve its problems and therefore turned them over
t° an agency--the Federal Reserve Board.
The Act itself did not provide
very clear indication of over-all intent.
It had been urged by
8°Ille People, he noted, that the Edge corporations be permitted to become
International financial organizations, almost without national identity,
but he doubted whether that was what the Congress had intended.
Instead,
he thought it was probably the intent of the Congress that the Edge
com.,
-vorations be international arms of American institutions.
This was
ttt
1/17/63
-16-
what the draft revision of Regulation K was attempting to say.
He
Itras not sure how best to translate this philosophy into an acceptable
r gulation, but the endeavor was to free Edge corporations and the Board
as far as practicable from an intolerable amount of regulatory minutia.
Chairman Martin then made certain further comments in which he
expressed the view that the over-all purpose should be to promote the
4°reign banking facilities of the United States.
United States had lagged in this area.
He believed the
It might be debated whether
or not Regulation K was one of the principal reasons, but for some
reason the United States had fallen behind.
Perhaps the best approach
l ould be for the Board to say that it had no clear idea of what the
0°11gre58 intended and that it would like the Congress to develop
leeislation that would be helpful in permitting better foreign banking
services
than at present.
Regulation K had been in existence for many
ears, but no really important institutions had yet been developed;
there had been little progress in this area.
Thus, it was possible
that the Congress might say to the Board, if it sought legislation,
that the Board
had not actually had too much experience in this area.
11-cher, the writing of appropriate legislation would not be an easy
'
a sk.
To repeat, his general approach was that a good job in the area
foreign financing was not being done.
the
Many things had fallen to
lot of the Export-Import Bank and international agencies because
4111( rican banks had felt that they could not get around the regulations
)T)
1/17/63
-17-
to undertake those activities.
This was the general framework within
which he felt that the Board should consider a revision of Regulation K.
There ensued a discussion with respect to the feasibility of
Ifriting into Regulation K certain general standards under which Edge
corporations might undertake transactions without coming to the Board
for prior approval.
An alternative, it was pointed out, would be to
give the Edge corporations almost complete freedom in their transactions,
alld this approach also raised questions.
At the conclusion of this discussion, Chairman Martin suggested
that the Board turn to the revised draft of Regulation M, and he then
Qa3-led upon Mr. Shay for oamment.
In response, Mx. Shay reviewed the principal differences between
the draft now before the Board and the draft considered earlier by the
8°.ard•
One of the areas to which he referred was the provision of a
s reamlined procedure under which national banks would be permitted
t° establish branches in foreign countries.
Another provision related
to the "further" powers that foreign branches might be permitted to
ez
ercise.
Governor Mitchell commented that he had been persuaded to the
11°int of view embodied in the revised draft regulation, which would
111(licate to national banks what their foreign branches could do, in
certain specific respects, and would allow the national banks to come
to the Board with requests for further powers if deemed necessary.
1/17/63
-18-
There followed a general discussion relating to the provisions
°f the revised draft regulation with regard to the procedures under
vhich national banks would be allowed to establish branches in foreign
countries, and a number of questions in this connection were asked and
d
ebated.
As to the general approach of the revised draft regulation,
Governor Mills indicated that he agreed with the Legal Division that
the administration of the law called for a regulation that would be specific in some respects.
He had some question whether the regulation,
as now drafted, was specific enough.
The core of the problem seemed to
Ile in the fact that foreign branches of national banks would be vested
141-th greater authority than their parent banks and could undertake transthat would be ultra vires for the parent banks.
This raised a
question,
for example, as to whether the regulation should not be more
ePen ,
in respect to the issuance of guaranties.
As another example,
do
zestic banks may not establish branches without obtaining permission
from
the appropriate regulatory authorities.
In the circumstances, the
el'4nting of permission to national banks to establish foreign branches
hout the prior permission of the Board seemed to provide a broad area
fl •
".'lscretion.
In this connection, he foresaw the possibility of embarrass-
rIleilt if in any case the Board objected within the specified period of 30 days
4fter an
application was filed.
'flieht
Upon filing such an application, the bank
have given notice to various parties, including notice to the
1/17/63
-19-
authorities of the foreign country involved.
As to the extent to which
foreign branches would be empowered to engage in the underwriting,
selling, and distributing of securities, he felt that the regulation
shcAlld clearly and specifically define the limits within which such
a
ctivities must be confined.
In the discussion that ensued, Mr. Shay indicated that as a
Matter of technical drafting the provisions of the revised draft of
regUlation could easily be tightened up to such extent as the Board
might desire, including a tightening in the areas to which Governor
Mills had referred.
Governor Robertson then made a series of comments and suggesti°ns with regard to particular provisions of the revised draft regulati°n, his suggestions being generally in the direction of tightening,
Or at least being careful to assure that the provisions of the regulation
/ere sufficiently specific.
His comments had to do with the provisions
Qr the draft regulation relating to the establishment of foreign branches
bY national banks, the power to issue guaranties, and the underwriting,
Sale, and distribution of securities.
His comments also touched upon
the Provisions relating to the making of loans on the security of gold.
the other direction, he suggested that consideration be given to
13errattt1ng loans to bank officers to take care of their housing needs,
am. that there be restored to the regulation some provision allowing
r°reign branches to acquire and hold certain securities where that was
Ilec=essary in order to do business in a particular country.
U,"
1/17/63
-20-
At the conclusion of further discussion, Chairman Martin
slIggested that the staff prepare another draft of proposed branch
regulation in the light of the comments made at this meeting, and
Lt was
understood that such a draft would be prepared for consideration
by the
Board.
In connection with the study of Regulation K, Governor
Robertson suggested that it would be helpful if the Division of International Finance would consider the matter from the point of view of
the effect on the U. S. balance of payments, and it was understood
that
a memorandum would be prepared.
The meeting then adjourned.
Secretary's Note: Pursuant to recommendations contained in memoranda from
appropriate individuals concerned,
Governor Shepardson today approved on
behalf of the Board the following
actions relating to the Board's staff:
ointment
v.
Ruth H. Smith as Operator, Key Punch, Division of Data Processing,
Alth basic annual salary at the rate of $4,135, effective the date of
'
Iltrance upon duty.
inease
t. Pearl G. Farrington, Statistical Assistant, Division of Interna1°nal Finance from $5,685 to $6,055 per annum, effective January 20,
1963.
' t.
Secrtary
k, •
C.
BOARD OF GOVERNORS
Item No. 1
1/17/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 17, 1963
Board of Directors,
s tiY Trust Company,
i
.
'''cidgeport, Connecticut.
Gettlemen
:
The Board of Governors of the Federal Reserve System
l'3: 21 roves the establishment of a branch by City Trust Compaly,
cAeglgePort, Connecticut, in the vicinity of the intersection of
r1neoticut Avenue, Stratford Avenue and Florence Street, Bridge-.
p;
2t,
et Fairfield County, Connecticut, provided the branch is
ablished within one year from the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
0711e letter to the Reserve Bank stated that the Board also had
(
/Proved a six-month extension of the period allowed to establish
2
branch; and that if an extension should be requested, the
.rooedure prescribed in the Board's letter of November 9, 1962
kS-1846), should be followed.)
161
BOARD OF GOVERNORS
Item No. 2
1/17/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 17, 1963
Board of Directors,
The Cleveland Trust Company,
Cleveland, Ohio.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment of a branch (drive-in
and walk-up facility) by The Cleveland Trust Company at
?7327 Wolf Road, Bay Village, Ohio, provided the branch
ls established within six months from the date of this
letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
(The letter to the Reserve Bank stated that the Board also had
approved a six-month extension of the period allowed to establish
the branch; and that if an extension should be requested, the
Procedure prescribed in the Board's letter of November 9, 1962
(S-1846), should be followed.)
'62
Item No. 3
1/17/63
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
the Matter of the Application of
LoCK HAVEN TRUST COMPANY
tor
rn, approval of merger with
he Mill
Hall State Bank
U.
ORDER APPROVING MERGER OF BANKS
There has come before the Board of Governors, pursuant to
the Bil Merger Act of 1960 (12 U.S.C. 1828(c)), an application by
Loeb.
4' Haven Trust Company, Lock Haven, Pennsylvania, a member bank of
the
Federal Reserve System, for the Board's prior approval of the
lirger of that bank and The Mill Hall State Bank, Mill Hall, Pennsylvania,
1111der the charter and title of the former. As an incident to the merger,
the„
-°-1-e office of The Mill Hall State Bank would be operated as a branch
or L 1,
Qe- Haven Trust Company.
Notice of the proposed merger, in form ap-
Act.
1111 by the Board, has been published pursuant to said
of
Upon consideration of all relevant material in the light
the
eorni
,Lactors set forth in said Act, including reports furnished by the
on,
troller of the Currency, the Federal Deposit Insurance Corporati
"
4 th-e Department of Justice on the competitive factors involved in the
Pr
°P(Ised merger,
3
IT IS HER3BY ORDERED, for the reasons set forth in the
Boodr 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 17th day of January, 1963.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Mills, Robertson, and Shepardson.
Absent and not voting:
Governors King and Mitchell.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(44)
164
Item No. 4
1/17/63
BOARD OF GOVERI,TORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY LOCK HAVEN TRUST COMPANY
FOR APPROVAL OF MERGER WITH
THE MILL HALL STATE BANK
STATEMENT
Lock Haven Trust Company, Lock Haven, Pennsylvania ("Lock
11411 Trust"), with deposits of $13.8 million,* has applied, pursuant
to the Bank
Merger Act of 1960 (12 U.S.C. 1828(c)), for the Board's
P11°31* approval of the merger of that bank and The Mill Hall State Bank,
1 Hall,
lion.*
Pennsylvania ("Mill Hall Bank"), with deposits of $3.4 mil-
The banks would merge under the charter and title of Lock Haven
Nat, which is a State-chartered member of the Federal Reserve System.
Aaall incident to the merger, the sole office of Mill Hall Bank would
bee°Im3 a branch of the resulting bank, increasing the number of its
°ftices from one 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
adert
''4acY of its capital structure, (3) its future earnings prospects,
corporate
general character of its management, (5) whether its
11°Ilet's are consistent with the purposes of 12 U.S.C., Ch. 16 (the Federal
.kte
aaPosit
Trust and
figures are as of July 9, 1962, for Lock Haven
°f April 16, 1962, for Mill Hall Bank.
365
-2-
1:438it
Insurance Act), (6) the convenience and needs of the community
t0 he served, and (7) the effect of the transaction on competition (including any tendency toward monopoly).
The Board may not approve the
ttatsaction unless, after considering all these factors, it finds the
tt'allsaction to be in the public interest,'
Banking factors. - Lock Haven Trust has owned over 50 per cent
ritths stock of Mill Hall Bank continuously since 1927, when stock control
vast.
lrst acquired as a measure to restore confidence in the latter bank.
tle
'me person is president of both banks which also have two common
dire
'
ers. These persons have been dominant in the satisfactory manage14141t of both banks and they will continue to be influential in the
6ement of the resulting bank. Each bank has a sound financial concati„
satisfactory earnings
3 an adequate capital structure, and both have
These attributes would also characterize the resulting bank
1)t°8Pects•
h) together with its customers, would be expected to benefit from the
44111,4
'
-4-1-flcation in management and related efficiencies implicit in the
.
)1‘c)Posa.i
No inconsistencies with the purposes of 12 U.S.C., Ch. 16 are
1114eated.
Convenience and needs of the communities. - Lock Haven (1960
11°Dulati0n 13,000) is the seat of Clinton County (1960 population 38,000)
erltral Pennsylvania, and is primarily an industrial community which
le tile
chief trading center in the County. Lock Haven Trust's service
4Ne, r,
the geographical area from which the bank derives 75 per cent
ore of its deposits, both demand and time, of individuals, partnerships,
441 corporations, referred to as "IPC" deposits) has a population of at
least 22,000.
Mill Hall (1960 population 1,700) is principally a residential
c°111ruzity 3 miles southwest of Lock Haven. The service area of Mill Hall
'lank has a population of over 7,000, and the bank's total area of service
ettends to Lock Haven.
Virtually all of the service area of Mill Hall
411k is within the service area of Lock Haven Trust.
Consummation of the transaction would have its main effect on
the convenience and needs of Mill Hall. The ownership and management
ties
between Lock Haven Trust and Mill Hall Bank long have been well-
"u publicly, and Mill Hall Bank has frequently referred its customers
to
LueK Haven Trust for banking accommodations which the smaller bank
e°414 not supply.
Nevertheless, operation of Mill Hall Bank as a branch
q Look Haven Trust would make the facilities of the trust and installment
4°11 departments and the higher lending limit of the latter institution
tric'r conveniently available to bank customers in Mill Hall and vicinity.
Mor
eover, the consequent simplification in administration and related
beh-"Ilts, referred to previously, would tend to inure to the customers
"he resulting bank and the communities involved.
Competition. - Mill Hall Bank is the only banking office in
Mill
Hall. Look Haven has one bank in addition to Lock Haven Trust, which
the larger of the two institutions.
Consummation of the transaction
414 increase Lock Haven Trust's share of the total IPC deposits of cm,
Triel'eial banks in its service area from around 40 per cent to 50 per cent,
—4—
arldits share of total loans of commercial banks in the area from about
44
Per cent to 54 per cent. The other Lock Haven bank has about 33 per
cent and 28 per cent of the total of such deposits and loans, respectively.
Two
smaller banks are located in Avis and Beech Creek which lie, respect'L'elY, about 9 miles northeast and about 10 miles southwest of Lock Haven.
While consummation of the transaction would increase Lock Haven
411att s
dominant position in its service area, it does not otherwise appear
that
there would be any significant effect on competition.
As indicated
ear]..
er, Lock Haven Trust has awned more than 50 per cent of the stock of
11111 Hall Dank for
over 35 Years/ and the same persons are dominant in the
1444agement of the two banks, the policies of which have been much the same.
The
controlling stock interest on which this durable relationship between
the ,,
'
10 banks has been based would seem much less likely to terminate than
ght
reasonably be expected if the stock were owned by common individual
°1111,er
'e
ation
In view of these circumstances and those noted previously, effectu-
Of the transaction would unite two banks which have been operating
-eParate units, for the most part, in name only.
Summary and conclusion. - The proposal would unite two banks which
al%
ready under common ownership and management, and between which little
n
4) true competition exists. The merger would eliminate administrative
--k-Lon and tend to increase efficiency with probable benefits from inNar,
'ed availability of expanded banking services. Otherwise it is expected
that th
-ere would be little or no change with respect to banking in the Lock
Rav
eri
4ill Hall area as a result of this transaction.
Accordingly, the Board finds that the proposed transaction would
be
i4
the public interest.
441114rY 17, 1963.
@FedFRASER