The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for January 18, 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.
Chm. Martin
Gov. Szymczak
If Gov.
Vardaman
Gov. Mills
Gov. Robertson
Gov. Balderston
V
)\\
x CvC-13
Gw. Shepardson
x0
4/0
9
11,e
— attathed
aceord
set of minutes was sent to Governor Vardainant s office in
anee
With
the procedure approved at the meeting of the Board on
Noireither
29,
1
955.
The set was returned by Governor Vardaman's office
'With
that bthe statement (see Mr. Kenyon's memorandum of February 12, 1957)
liz
laia4rteahertBeord
rGovernor Varda.man would not initial any minutes of meetat which he was not present. Therefore, with Governor
yard
:7
10
,s
n
'irdtia
s appri.
ova1, these minutes are being filed without Governor
125
Minutes of actions taken by the Board of Governors of the
Federal Reserve
Sy3tem on Friday, January 18, 1957.
the
The Board met in
Board Room at 9:30 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Carpenter, Secretary
Sherman, Assistant Secretary
Kenyon, Assistant Secretary
Vest, General Counsel
Sloan, Director, Division of Examinations
Hackley, Associate General Counsel
Hexter, Assistant General Counsel
O'Connell, Assistant General Counsel
Thompson, Supervisory Review Examiner, Division of Examinations
The following matters,
which had been circulated to the members
°I' the Board,
were presented for consideration and the action taken in
ecich instance was
as stated:
Letter to Mr. Mangels, President, Federal Reserve Bank of San
PrAh
--eisco, reading as
follows:
This refers to your letter of December 4 suggesting a
mo„-1. fication of the Board's instructions as set forth in its
:
0 t"ter of October 29, 1934 (FRLS 5865), regarding issuance
Fl
e Federal
Reserve notes. The instructions provide that no
Federalderal Reserve
notes should be issued at the branches by
all
Reserve Agents' Representatives except upon specific
Asth°ritY, in each case, of the Federal Reserve Agent or the
stsistant Federal Reserve Agent. You suggest that the inbv11:,!tic3ns be modified to provide for blanket authorization
Federal Reserve Agent for the issue by his repre, n'atives at the branches of Federal Reserve notes up to
;
P
eoercified limits calculated to accommodate the usual day-to'needs of the respective branches. The proposed procedure
1/18/57
-2-
contemplates that the calculation of required collateral
Pledged with the Federal Reserve Agent would include a
mandatory margin in the amount of the blanket authorizations.
The Board recognizes that the suggested change might
Pe:mit a somewhat more convenient procedure. The Board feels,
nowever, that in view of the specific requirements of the Federal Reserve Act with respect to the issuance of Federal Renotes and the pledge of collateral thereto, it would not
be
desirable to authorize the suggested modification.
Approved unanimously.
Brorla Letter to the Board of Directors, Norfolk County Trust Company,
Ina: Massachusetts, reading as follows:
The Board of Governors of the Federal Reserve System
c
Ek.PPr°ves the establishment of a branch by Norfolk County Trust
mT4PanY, Brookline, Massachusetts, at 693 High Street, Westwood,
;L 7,tesachusetts, as a successor to the branch now located at 938
gh Street, provided approval of the State authorities is obed and the branch is established within six months from
ue date O.
this letter.
Z
Approved unanimously, for
transmittal through the Federal
Reserve Bank of Boston.
_etter to the Board of Directors, Citizens Bank of Hattiesburg,
RattiesbL
g, Mississippi, reading as follows:
ReR Nrauant to your request submitted through the Federal
er:.?rve Bank of Atlanta, the Board of Governors of the Fedci
;
-1- Reserve System approves the establishment of a branch by
1a Bank of Hattiesburg, Mississippi, in the vicinity of
the in
tersection of 28th Avenue and Hardy Street in the city of
. eab
urg,provided formal approval of the appropriate State
:1:tnorities is obtained and the branch is established within
months from the date of this letter.
Approved unanimously, for
transmittal through the Federal
Reserve Bank of Atlanta.
1/18/57
St. Lo Letter to Mr. Kroner, Vice President, Federal Reserve Bank of
148, reading as follows:
Reference is made to your letter of January 4, 1957,
recommending that the Board approve, under the provisions
?f Section
24A of the Federal Reserve Act, an additional
_-_livestment of $5,000 in bank premises by the Webster Groves
Trust Company, Webster Groves, Missouri.
After considering all available information, the Board
°f Governors concurs in the Reserve Bankts recommendation and
approves this additional investment of $5,000 in banking
emises by Webster Groves Trust Company, Webster Groves,
,i8souri. It is assumed that the bank will continue a sat.LsfactorY program of depreciating fixed assets.
v
Approved unanimously.
Letter to Mr. McConnell, Vice President, Federal Reserve Bank of
-41 aP°1i8) reading as follows:
This is in further reference to your letter of December
fL 5°, and its enclosures, concerning whether a particular
n-"u of time certificate of deposit complies with Regulation
You related that a number of member banks in Michigan are
"Ing the form of certificate.
tol„ The
certificate, which evidences a deposit in a stated
Hand which is nonnegotiable, provides on its face that it
monthmable when returned properly endorsed, upon three (3)
th s written notice during the first thirty (30) months,
vie
jeafter
six (6) months written notice, in accordance
.d- the schedule of redemption values printed on the reverse
erahereof
Interest will be paid by check semi-annually at
upon
ai7
te of two and one-half (2-1/2) per cent per annum for
ba„
full months. This certificate may be redeemed by this
anYtime after thirty-six (36) months from date of issue
Up
(6) months written notice to the payee."
°11 the reverse side of the certificate there are printed
schedule of redemption values and also a schedule of api:imate investment yield. It appears that there would be no
3:
rlestm.„
Yield on such a certificate redeemed, pursuant to
131 written notice, less than 6 months from date of
-e. Otherwise, the approximate investment yield on the
the
pr
128
1/18/57
certificate
if redeemed pursuant to 3 months' written notice
during the
first 30 months, would range from 1 per cent to
2 per cent, while the approximate investment yield on the
certificate would be 2-1/2 per cent if it were not redeemed
until after 30 months pursuant to the necessary 6 months'
written notice. The result seems to be that, notwithstanding
anY previous semi-annual payments of interest at the 2-1/2
Per cent rate
on such a certificate, the investment yield
actual,
Y received in the event of redemption pursuant to the
3 months'
written notice provision reflects an adjustment to
a lower
rate of earnings on the deposit.
Considering the matter on the basis of the Supplement
it/Lthe regulation as it existed prior to January 1, 1957, the
rd is of the view that the certificate in question would
-47,:" conflict with the regulation, assuming, of course, that
'"e actual net investment yield in the event of redemption
Pursuant
VD 3 months' vritt-n notice during the first 30
months would
not exceed 2 13.r* cent. Under the Supplement
sn t'ne regulation which bucame effective January 1, 1957, the
view would apply to such a certificate revised to take
ra y antage of the presently effective maximum permissible
—p tes (pf interest, assuming that the actual net investment
e" in the
event of redemption pursuant to 3 months' writ11°tice during the first 30 months did not exceed 2-1/2
at
. cent, and the actual net investment yield on redemption
ex a later
time pursuant to 6 months' written notice did not
yi
:
p ed 3 er cent. On this basis, the rates of investment
would not appear to exceed the maximum permissible
rates
eires of interest applicable under the regulation in the
cumstances of the particular redemption privilege elected.
ar
Z
sembIThe Board believes that the situation not only bears rein it
: e to the one involved in the interpretation contained
•
taat letter S-1022 of May 13, 1948 (F.R.L.S. #6301.1), but
-e view expressed above is consistent with the principles
:1:sed in its
interpretations published at 1953 Federal
,e Bulletin 721 and 1956 Federal Reserve Bulletin 833
(p.R
*-"S. #6301.2).
/1:1
Approved unanimously.
Ilintzl
,ancLetter to The
Honorable H. E. Cook, Chairman, Federal Deposit
e Corporation,
reading as follows:
Re
C°11.e rA ference
-.riling the
is made to your letter of January 3, 1957)
application of The Wcshington Loan and Banking
1/18/57
-5-
Company, Washington, Georgia, for continuance of deposit
insurance after withdrawal from membership in the Federal
Reserve System.
Our last report of examination of the bank, as of
January 3, 1956, disclosed a satisfactory asset condition,
and the matters
subject to criticism related primarily to
the
Trent lack of regard for banking laws and regulatiOflS,
;Y the management and to certain weaknesses in the
nstitution's records,
systems, and controls. These
matters were brought to the attention of the directors
Of the bank and corrections were promised except with re!pect to the
practice of absorption of exchange for cusomers in
violation of the Board's Regulation Q and im,
Rroving the records, systems, and controls. The Board of
Governors does not believe that corrective programs with
1:espect to these matters need be incorporated as conditions
to the
continuance of deposit insurance.
Approved unanimously.
reaa,
Letter to the Comptroller of the Currency, Treasury Department,
Ing as
follows:
N
Reference is made to a letter from your office dated
trember 9, 1956, enclosing photostatic copies of an appliesc_on to
organize a national bank at Seven Corners, Fairfax
ZuntY, Virginia, and requesting a recommendation as to
wnether or not
the application should be approved.
an
A report
of investigation of the application, made by
„
e xaminer for the Federal Reserve Bank of Richmond, indiizes 'Ldt
the proposed capital structure of the bank would
aQeoPlate and that the proposed management possesses the
sZalities to supervise
the institution satisfactorily. On
:
'
117 other
hand, the prospective earnings of the institution
17 favorable. The immediate area surrounding the
t"
c
loe
bri-a:p7rn of the proposed bank is now being served by a
b1417
- c" of a State bank, and it is reported that an additional
api01-117h is to be established near the site selected by the
ffe;
-cant. In addition, there are eight other banking ofthin a radius of three miles. The investigation did
riot
rev
reveal anY evidence of need for additional banking faciltea"- After considering
the information available, the
°f Governors does not feel justified in recommending
'
1'°Iral of the
application at this time.
130
1/18/57
-6-
The Board's Division of Examinations will be glad
to discuss
any aspects of this case with representatives
of Your office if you so desire.
Approved unanimously, following a discussion of the characteristics of the territory which
would be served by the proposed
bank, the number of existing banking facilities in the area, and
the question of need for additional
banking facilities at the present
time.
There were presented telegrams to the Federal Reserve Banks
listed 1
be-ow approving the establishment without change on the dates indicated
of the rates of discount and purchase in their existing schedules:
Boston
New York
Philadelphia
January 14
January 17
January 17
Approved unanimously.
At this point Messrs. Thomas, Economic Adviser
to.the Board, and
42
8Pecial Assistant to the Board, entered the room.
14 accordance with the decisions reached at the meeting on January
15, 19
57/ there was
a further discussion at this meeting of the forthcoming
hee.1.4_
4
JJ16
etbarlit
Under the Bank
Holding Company Act pertaining to the formation of
holding
comParlY involving The First National City Bank of New York,
cotIr 13811k Farmers Trust Comp
also of New York City, and County Trust
14/411Y Of
'White Plains, New York.
111 a memorandum dated January 17, 1957, copies of which had been
4cht to the
members of the Board, Chairman Martin advised that he had
131
1/18/57
-7-
talked 'With Mr. Howard Sheperd) Chairman of the Board of First National
CitY Bank) who stated that he and his associates would be opposed to
P°8tIzionement of the hearing as in their eyes it would indicate interferce vith
established procedures by an outside body. However, they saw
hO ob
jection to indicating at the opening of the hearing that it would
be
continued until March 15 or April 1 in order to give Mr. Morris
SchaPiro and his group
(the Advisory Council to the Joint Legislative
C°1411ittee on the Revision of the Banking Law of the State of New York))
eltrePreeentatives of the New York State Legislature an opportunity to
Ptesent their
views or recommendations.
It vas
reported that according to the press two bills had been
illtt°thiced in the State Legislature) the first of which would limit to
eXiating State banking
districts until May 10 1957, the formation and
"114mion of
new bank holding companies and would also prohibit further
elq)ansion of
existing bank holding companies. The second bill would prohibit
til MaY
1, 19580 holding company acquisition of banks across regional
ballk
Or
Ga7ernor Robertson stated that he had received this morning a copy
the
first bill.
He then read the bill and commented on its provisions.
ti4 11118 hie un
derstanding that this proposal was more likely to be enacted
4'
44 the second
bill, a measure which reflected the recommendation of the
°IPerrior of
New York.
1/18/57
Governor Robertson also said that he had talked by telephone with
Schapiro to inform him that the Board would not make a decision regard:I-Ng the hearing until today, and that Mr. Schapiro said he would so
advise the
members of the Advisory Council. Governor Robertson vent on
to ea
Y that when he
vas in New York City yesterday he learned that the
could not be introduced in the State Legislature on Friday, which
accolanted for the introduction of both bills yesterday.
He said that
President Hayes and
Vice President Wiltse of the Federal Reserve Bank of
liellY°rk both were inclined to feel, although they had no definite statebal" fl'ols the parties, that the applicants in this matter would not want
to be NI+
in a
position of pushing the issue through in the face of proaPectiva
-egislation. As for themselves, a preference was expressed for
0Perltiot
g the
hearing on the scheduled date but giving an indication that
the 113ard li°uld not reach its decision until after the termination of the
rresze
Period
fixed by whatever bill might be enacted. It was anticipated,
Oovern
or R
obertson said, that a bill might be passed on Wednesday, Jan23.
*0 Vest said that the question of procedure with respect to the
Ile illg appeared to him to be a relatively close one. He rather hoped
that the
Board would not go ahead with the hearing and at the same time
rItEtle 4
c"MitMent to hold it open when it was not known what the legisilltilie
situation would be by the date of the hearing.
To make such a
ecnritilitnielit, he said, also might mean that the hearing would have to be
133
1/18/57
-9reopened for further
testimony.
He felt that the Board would be justified
in g°ing ahead as scheduled or, on the other hand, in postponing the hearing on the
grounds that the public interest was reflected in the State
legislation. Since
the Governor had recommended legislation and bills had
nov
been
introduced, it could be said that the situation vas somewhat
different from the
situation prevailing when the hearing was announced.
Mr. Hackley agreed with Mr. Vest that it would be better to defer
the heari
ng than to begin it and make some commitment to hold the hearing
0Pen. A
Postponement of the date of the hearing could be based on the recent dev
e-Lopments with respect to the legislative situation in New York
State
) and it
would afford time for the Legislature to consider legis-
lati
on i
n a more comprehensive manner. Mr. Hackley also called attention
to
h,
t-- Prc)visions of the Bank Holding Company Act which indicate that the
-ard sh
°uld consider the views of the State authorities, pointing out
that in
this
re
qUired by
case the views of the State Superintendent of Banks were not
law, but that the Board nevertheless decided to ask for them.
After Mr. Hexter expressed
the view that because of the probable
t
a bill in New York State within the next few days little would
ee4etm
lk
Qst bY Postponement of the hearing, Mr. O'Connell said that he also
be
-nclined to favor postponement of the hearing rather than to
t th
e hearing and leave the record open.
earl)1
g 18
tlala
1/it
He pointed out that if a
conducted and the record is left open, it is a public record
ne--es may desire to alter their original testimony.
He inquired
1/18/ 57
-10the fact that bills had now been introduced in any way
appeared
t° lualifY Mr. Schapiro's suggestion that freeze legislation might not
be
enacted if the hearing was
postponed.
In response to Mr. OTormellts question, Governor Robertson
said
it seenled Possible that the bills might be withdrawn if the Board
postDoted the
hearing until the end of the legislative session. He expressed
dL(Ibt, however, whether
such action by the Board would be advisable now
that
the bills had been
introduced.
In a further discussion, Mr. Molony commented on the public relati°48 aspects of
the situation and suggested that there might be some
flifficultY in explaining a postponement of the hearing merely in anticipatiort
Of the
fact that certain State legislation might be enacted. On the
other h
and, if a bill should be enacted, it would be quite easy to explain
aeti
(311 to Postpone. With reference to Mr. Molony's remarks the adConfluent was made that in the event of announcement of similar
heari
48 in the
future, opponents of the applications concerned might fol1°Ir the
Practice—
- of having bills introduced in the State Legislature in an
attetpt
‘0 influence
deferment of the hearings.
GOv
Robertson said that he agreed generally with the analysis
Of the
Legal D
n
ivisio.
Going one step further, he had some doubt whether
the laeltra
in
811°111d wait until next Wednesday to postpone the hearing
nched'
ea to be
gin the following day. He, therefore, suggested that the hear/ha be
13°"Pc'ned for a week or 10 days so that interested parties
would
1/18/57
-11have 4a.
141e information and would not make arrangements on the assumption
that
the hearing
would begin as scheduled. While he did not think it
should be
taken for granted that legislation would be passed, he thought
that the
lative
interested parties should be afforded more time while legis-
- vel.Opments were awaited, and that a postponement until the first
°t Pebru-arY
would give everyone .an opportunity to appraise the situation.
If tree
ze
legislation was enacted in the meantime, he assumed that the
heari,
t'g would be put
over until the end of the legislative session.
Governor
Should
Mills then stated reasons why he felt that the hearing
proceed as scheduled, the first of which was that he thought the
Be" s• h°111d- preserve its jurisdictional authority from influence either
n the siA _
of interested public authorities or the applicant. To pre• Oh
Jurisdictional authority, he believed that the hearing should
gO forvard on
schedule unless the applicant withdrew the application or
l's Wellted
postponement. The second point which he brought out was that
the pu
rpose
the hearing was to examine all facets of the problem so
that the
Board could then reach a mature judgment and make an equitable
ciscisioh.
The information presented at the hearing, he noted, would in-
lude not
only the reasoning of the applicant but adverse testimony, in11411 g that
of the New York banking authorities. If, however, the
14 11 r• k
State authorities should petition the hearing examiner for an
ent
e be
while presenting thei
decided on its merit
testimony, that petition should of
136
1/18/57
-12Governor Szymczak indicated that at the moment he would favor
gcling ahead,
despite the introduction of the bills, because of the re8Pon8tbilitie8 vested in the Board by the Congress and the fact that it
vas n
ot certain
whether any State legislation would be passed. On the
°tiler hand, he recognized that such a procedure might create ill feeling
York State and cause the State Legislature to take some
action
that
otherwise might be avoided.
Chairman Martin then asked a series of questions bearing upon the
etre
"°f State legislation on the provisions of the Bank Holding ComPallY Act.
tiat the
In response, Mr. Vest said that the Congress had
made it clear
Bank Holding Company Act was subject to restrictions
in the form
"state
legislation.
Therefore, if freeze legislation was passed in New
York
State, he felt that it would
be futile for the Board to hold hearings,
Darticiaarly
if the legislation effected a freeze until. May 1958, as conte 4-ated by
one of the two bills. He pointed out that a hearing at the
Present ttme
could not in such circumstances develop appropriate factors,
4111" it vonld concern a question on which
the Board could not grant
"rective aPproval until the
expiration date of the State legislation.
It vne his
°Pinion that pertinent provisions of the Bank Holding Company
Per4litted the
State of New York to take legislative action which would
errective to
prohibit the transactions contemplated by the current
4DPlications under
the Bank Holding Company Act.
1/18/57
-13In the light of Mr. Vest's interpretation of the law, the view
1414 expressed that
the enactment of freeze legislation in New York State
v°111d constitute a valid reason for deferment of the forthcoming hearing.
It vas pointed out,
however, that at this point the situation was some*tat
different because the Board could not be sure that legislation would
be enacted and, furthermore, did not know what provisions any such legislation„
""-ght contain. In this connection, it was brought out that the
cf testimony at the hearing would not commence until Monday, JanU/117 28,
after certain formalities had been disposed of on the preceding
111141111aY, and that
the State legislative situation might have become more
Ie8.-1'bY the
later date.
At
+1,4
--.48 point Governor Robertson left the room to talk by telephone
'with
President Hayes. After returning, he said that Mr. Hayes had disclUsed the
matter with other officers of the Reserve Bank and continued to
4114111t the possibility of holding the hearing open until after the end of
t4e
-egialative session so as to give the Legislature a better opportunity
t° deal
with the
problem. He said it vas Mr. Hayes' view that it would be
lzrtfortunate if the
freeze legislation were enacted and that the Board might
'be in a
position to prevent such action if it took a position in line
Mr. SchaPirols recommendation. Under this plan the hearing would be
"1"
januarY 24 and the Board would make a statement that it would
:
„
t
.
—kiremer a
decision until after the end of the legislative session.
138
1/18/57
-14-
Stich action, Mr. Hayes felt, might result in preventing the passage of
hasty and
ill-conceived legislation out of a spirit of antagonism.
Governor Balderston said it had been his view, in the light of
the i--vortance of the ultimate decision in relation to the New York State
batiking structure, that a decision on the applications should not be
l'eached by the Board until the State had had an opportunity to pass legis1ati0n a
ffecting the whole New York situation. It was his present feeling
thyt the
best move might be for the Board to postpone the hearing until
a later date,
either to the end of a 10-day period mentioned by Governor
Robert
eon or until
the end of the legislative session.
Governor Robertson agreed with this position and said that if the
ilesard favored a
temporary deferment he could get in touch with Mr. Schapiro
arid
cate that if
the bills were withdrawn the Board would either (1)
11°13t
oa the
hearing or (2) postpone a decision until after the end of the
le8i8lative session. He said that if the Board was not going to make a
"181°11 ibllowing the taking of testimony, it would seem inadvisable to
:
'
411d the hew __
J.Jag at this time. A postponement of the hearing could be
j4litified on the
basis that the State should have an opportunity to devise
€141Ldt lilies
pertaining to its own banking structure.
At the
conclusion of further discussion of various aspects of the
ratter
at
7
.airman
/
Martin raised a question whether the Board should decide
Iale what it
would be best to do by January 24. He said that
the inte
rpretation of the statute given by Mr. Vest, it seemed clear
Ai.39
1/18/57
-15-
that the Board
would have to terminate the proceeding automatically if
ote n,
the pending bills should be passed by the New York State LegislatIlres
be
111 the circumstances, he suggested that no decision on procedure
e at this
time and that the Board consider the matter again prior
to the s
cheduled date of the hearing in the light of further developments.
Governor Robertson said that he would be willing to go along with
the chairmao
-s suggestion although he would prefer somewhat to act at
thia time to postpone the hearing for a week or 10 days. He also said
that if the m—
wmrd decided to defer a decision with regard to the hearing,
he %tom
call Mr. Schapiro and tell him that the Board had concluded to
d°
--g to interfere with the desires or wishes of New York State, that
the 04
B -rd would,
therefore, plan to proceed with the hearing, but that
re. bill should be
passed by the State Legislature, the Board would conilider the
matter again.
G°vernor Mills suggested that Governor Robertson might also point
°Iat to
Mr. se
he
hepiro that his Advisory Council was free to appear at the
al‘t118 and offer such testimony as it might desire.
Agreement was expressed with
the suggested procedure and it was
also understood that Chairman Martin
would get in touch with Mr. Howard
Sheperd and advise him of the status
of the matter.
Also in connection with the
First National City Bank matter, unanimous approval was given to letters
as follows, drafts of which had been
14(,
1/18/57
-16distributed to the members of the
Board prior to this meeting:
Letter ,
Retrise_ ror the
signature of Chairman Martin to The Honorable Victor R.
J114
) A8sistant Attorney General, Antitrust Division, Department of
j
This will acknowledge receipt of your letter of
.anuarY 11, 1957, with regard to the forthcoming hearing
/
07°1ving the application of The First National City Bank
New York and
others to form a bank holding company.
lou advise
that it is your view that your responsibilities
in the
enforcement of the antitrust laws require the DePartment of Justice to investigate this matter fully in
ilidezTitto ascertain all the essential competitive facts
is your intention to institute an immediate
44
:
,ee
1 tigation. We note that the Department cannot say at
;"-is time that
it desires to submit testimony in the hearif possible, would like to reserve the right to
be'e a brief or other statement at a later date. We
will
br,verY glad to have you submit a statement or file a
80:ef et the appropriate
time if you should decide to do
to bell/ the meantime, the Board or its staff will be glad
neet10°f any assistance it can to the Department in con
With any aspects of this matter.
Letter
Email f°1" the
signature of Vice Chairman Balderston to The Honorable
Celler, House of Representat
ives
is in reply to your letter of January 9, 1957,
with Thi8
a
reference
to the hearing regarding the formation of
Beurnk holding
company involving The First National City
°f New York, City Bank Farmers Trust Company of New
8.11,4) and
County Trust Company of White Plains, New York,
ft enclosina a
copy of your statement on January 7, 1957
before the Joint Legislativ,
. Committee to Revise the Bankmellt1414* of New York. We are pleased that the arrange+, 8 o
utlined in our letter of January 7 with respect to
'
"e time
your testifying at the hearing are satiefact°rY.
Provi!ecti°n 11 of the Bank Holding Company Act of 1956
that
interpreted as
-eAuvina — nothing therein shall be
""Y action which may be in violation of existing
IL 1
1/18/57
-17la, nor is anythingtlerein to constitute a defense to
anY action or proceeding on account of any prohibited
antitrust action or conduct. Also, as you indicate,
Under the Celler-Kefauver amendment to section 7 of the
ulayton Act the test is whether the effect of the acmay be substantially to lessen competition or
tO tend
to create a monopoly in any section of the
country.
Section 3(c) of the Bank Holiing Company Act requires the Board, in passing upon each application by
4 hank holding company for approval of its acquisition
f bank
stock, to consider certain specific factors,
ii
whether or not the effect of the proposed acti
would be to expand the size or extent of the
hold
olding company system beyond limits consistent with
e Public interest and the preservation of competition
the field of banking. The concept involved in this
4actor i8 a
broad one, and in the Board's opinion adeats consideration of the facts in this regard necesiarilY involves consideration of the standards mentioned
n section 7
of the Clayton Act--that is, whether in
eg
i, line of commerce in any section of the country the
le
'
ect of such acquisition might be substantially to
ssen competition or to tend to create a monopoly.
?
r
In the circumstances, it has not been considered
neces
sarY to refer specifically in the order for hearc41
, uJ the
standards of the Clayton Act or to give spein
structions
to the hearing examiner on the subJect
Y°u may be assured that the Board in its considten;
"
of this matter will take into account all pertifactors, including whether the proposed transactions
involve a violation of section 7 of the Clayton
At
'
or other
statutes.
Messrs. Thomas, Molony, and O'Connell then withdrew from the meet-
°4 january 14, 1957, the Board met with representatives of Marine
Corporation
to discuss the Corporation's application to acquire
142
1/18/57
-18-
tae 7°.ting shares of The Lake Shore National Bank of Dunkirk, Dunkirk,
Nev York.
of the discussion had been sent to the members of
the Board
and further consideration was given to the matter at this time.
Chairman Martin pointed out that the application had been before
the
Board for several months and that, vhile there were elements which
tended to
Justify some delay, the Board perhaps should have reached a
Ilecisi°n on the matter somewhat more promptly. He vent on to say that if
the
Placation was denied and Manufacturers and Traders Trust Company of
„
uaen obtained approval to take over the Dunkirk bank, the situatU)'Javould be difficult to
explain. He also made the comment that he
*kbted
""ether a formal hearing mould add a great deal to the informati°11 slreadY available in this particular case.
In itself, he said, this
1111(43"ed acquisition was a very small transaction which would not seem to
Etlter later
iallY the position of Marine Midland Corporation. Turning to
the
bank
holding company bills pending before the New 'York State Legisattire tiu
were discussed earlier in this meeting, he said that they
allPear
ettnateze
to prohibit an acquisition of this kind and that in the cir-
es it might be advisable for the Board to postpone action on the
to tile Midland matter until further information was available with respect
those
bills.
be et
Governor Mills said it vas his feeling that the application should
Pl)twed• While he did not know exactly where the stopping point
811°1134 be In the expansion of Marine Midland, he felt that if there was
143
1/18/57
-19Justification for any additional bank acquisitions by the holding comlan,Y, this was
a case where there was an abundance of evidence in support
or
the
transaction.
The situation was discussed further in the light of the pending
State
egislation and Governor Robertson expressed the opinion that action
by the
Board
today might tend to antagonize the State Legislature, for
he
-"uerstood that the bills which had been introduced were designed to
Prohibit
further expansion by Marine Midland.
Therefore, he would re-
fl'airi from acting until after State legislation had been enacted.
G°7ernor Szymczak, who was not present at the meeting with the
Marine m4
4441and representatives, said he had reviewed the record and continued
to feel
that Marine Midland expansion must be stopped at some point.
the -,se
or each proposed acquisition some justification could be given
arid it
,
a- very difficult to knaw just when the proper stopping point had
been
reached.
this m
Governor Balderston said that while, as he had stated earlier in
eeting, he would not want to irritate the New York State Legislature
ProcomA4
With the First National City Bank matter, he felt there
Other
considerations which should be mentioned in the Marine Midland
t:te
deei
it
0,In the. first place, he asked whether the Board should make its
11
in
anticipation of legislation that might be enacted or whether
M°111'1 Proceed
on the basis of existing legislation. He also suggested
''"t it might not be
good strategy for the Board to make an issue of a
144
1/18/57
-20-
Proposed acquisition
which by its nature was such that the problem would
/lot be
understood by the public generally. Since the Congress apparently
had not
intended to pass legislation uhich would freeze holding companies,
eillea the
aoTlisition of the Lake Shore Bank would not result in crossing
Y°I'k State banking district lines and
would appear to increase rather
that to
diminish competition locally, and since the delay in Board action
P°861-1)1Y had
affected the parties involved adversely, he felt that perhaps
the Board should
make a favorable decision regardless of the fact that the
-Legislation might be adopted. In other words, he questioned whether
the Boar„48
decision should be different than it would have been were it
tot for
t
ahe
prospect that State legislation might be enacted.
Governor Szymczak then added to his previous statement by saying
that his
vievs on the matter were the same as they would have been if the
legislative
developments I.n respect to holding company legislation in New
Y°rk S4.
tate had
not entered the picture. He referred to the expansion of
the marine
Midland Group over a long period of time and to the concentrati°14
that had
been built up in various parts of the State, particularly
the
Buffalo area.
In view of these long-run developments, it was his
(41clusion that
the point had been reached where further expansion should
4" be
Permitted.
Additional discussion brought out that denial of the application
'&d not
preclude the Marine Midland Group from taking over the Lake
S11°re
National Bank
under certain arrangements outside the purview of the
145
1/18/57
-21Bank
Holding Company Act.
The question was asked whether there was
rea8on to believe
that Manufacturers and Traders Trust Company would
be able to
obtain approval to acquire the Dunkirk bank, and it was
8t"ed that no
definite information was available on that point.
Governor Shepardson said that basically he was inclined to agree
/qt4 the
that
Point of view expressed by Governor Szymczak.
He understood
-while the Bank
Holding Company Act was not intended to be freeze
legislation, its purpose was to restrain bank holding company expansion
tc the extent
That affirmative and convincing justification must be given
tO permit i
t
It was clear that a number of small acquisitions could
131'°dIlee results
not consistent with the legislation, and he did not feel
that
strong evidence
had been presented to indicate a need for Marine
to rnovv into the Dunkirk area.
On the other hand, to turn down
the
aPplieation might permit a less satisfactory situation to develop
thrcw.gh
"Taisition of the local bank by other interests, and in all the
Lrelllanstsnoes he
would be inclined to make an exception in this case.
At the
request of the Board, Mr. Hackley then reviewed the Board's
responsibilities Under the provisions of the Bank Holding Company Act in
relation to a matter
of this kind. He pointed out that in this case there
al5Pee'red to be no
:
°1\r
"c)rth'4est
compelling reason for the acquisition, which would inbank.
In a previous case, involving
o
rf
ata
in
on,
Board had raised certain questions even
t
e xishtei::
th°11gb the
e
limination of an existing bank was not involved and that appli4ttioll vas
now
being held in abeyance at the request of the
applicant.
("f
1/18/57
-22Governor Mills stated that although, on the merits of the case,
he
would
be inclined to approve the application, he felt that Governor
Robert
'
04
had proposed a sound basis for deferring action temporarily.
With r
egard to the points mentioned by Governor Balderston, Governor Mills
eeia that he
thought the logic expressed was correct but that as a practical
tter
no serious harm
would be done by deferring the decision for a week.
k8stIJIL-ing that no
legislation had been passed by that time, he would be
-Luta to
approve the application.
Chairman Martin then stated that in view of the divergence of
°Pinion
expressed at
this meeting and in view of the legislative situation
14 New York
State, he would suggest deferring action on the application for
tilrther cons
ideration in the light of developments.
There was unanimous agreement with
this suggestion.
At this
arid,
Point Messrs. Hexter and Thompson withdrew from the meeting
MessrsRiefler, Assistant to the Chairman, Solomon, Assistant General
Coluisea.,
NOYes) Adviser, Division of Research and Statistics, Cherry,
ive
l'arket
Counsel, and Brill, Chief, Business Finance and Capital
s Sion,
Division of Research anti Statistics, entered the room.
In ac
cordance with the decision at the meeting on January 14, 1957,
eorisideration was
given to a revised draft of letter to Senator Sparkman,
Lj
Of the
Subcommittee on Housing of the Senate Banking and Currency
eo
Nttee
) re
sponsive to his request for the Board's views on the question
or
411Dropriate policy
for interest rates for Federally underwritten mortgages.
147
V18/57
-23Governor Mills said that while the first part of the revised
draft stated in
general terms that in the matter of rate policy there was
"area of discretion that the Congress might wish to look into, the two
Succeedi-4 paragraphs seemed to him to indicate an opinion on the part •
ct the
Board that flexibility of rates through the exercise of administrati _
*v'c discretion
deserved favorable consideration by the Congress. He
dotlbtd
vhether the Board would want to express such an attitude when it
seemed a
PParent that the Congress was not prepared to delegate discretionE1',Y
authority in this field to any administering agency. According to
44 illformation,
the Congress was opposed to granting discretionary author'which might result in interest rates that at some time might be conaidercd inc
onsistent with the best interests of veterans and those who
Obtain benefits
from the insurance of mortgages by the Federal Housing
4
11114413tl
'
ati°n.
On the theoretical side, he remained of the opinion that
..egislation such
as envisaged by the proposal for a flexible formula based
tIle Yield of long-term Goverment securities would tend to solve the
1)r".1"1 by producing
a general uniformity throughout the United States. He
tlIclaght that
such a formula would fail to apply only in rather remote combe a
4nd that
in such communities adjustment to a realistic rate could
cconaplished by
discounting.
It was possible, he said, that those cases
11°41d be 8° rare
that they would not constitute a serious problem.
eNal G°7"tor Robertson said that his thoughts on the matter were gen41°11€ the same
lines and that he thought the draft of reply could
148
1/18/57
—24—
be
changed in certain
respects to meet satisfactorily the points mentioned 1,-4' Governor Mills. He then suggested the nature of the changes
l'hioh he
had in mind.
Following a discussion of the subject in the light of the
comments
Plade
Governors
Mills and Robertson, Chairman Martin suggested that
allother A,
% 4-sft of the proposed reply be distributed prior to further coneidsret4
.i.on of the
matter by the Board.
There was unanimous agreement with this suggestion.
Under date of January 9 1957, there
had been sent to the members
of the Board cop ee
i
of a memorandum from Mr. Young summarizing an attached
from the Business Finance and Capital Markets Section which reYleired
stock market
developments in 1956. This review indicated that basic
ee040
4ie factors
relating to the level of stock market margin requirements h.A
-" changed substantially since the requirements were last increased
bY the
Board,
in April 1955, and that maintenance of present margin reqqrement
levels
could not be supported on the same economic grounds that
tirlaeria
e
:
4
wiers
the 1955
action.
However, in view of the economic situation gen-
as de
scribed in the memorandum from Mr. Young, it was felt that
L/4ght still be
persuasive reasons for maintaining the present margin
quiretri
vhich 1 -fltal even though such reasons differed substantially from those
et
the Board to raise
the requirements to the present level.
Atter Mr. Brill had commented on recent stock market
developments,
tY111"ak said that, as Mr. Young's memorandum indicated, some
1/18/57
-25ztql:Mtent could be
made for reducing the margin requirements at this time.
11°Iiiever, in view
of the over-all economic situation he felt that such
8-ct1on vould
be confusing.
Accordingly, he suggested that the subject be
1311-toyer for
further consideration a few weeks hence.
In a further discussion, Chairman Martin expressed agreement with
G° ern°1
'SzYmczakts reasoning that no action should be taken at this time.
Igent on to
say that the matter was one which should be followed con-
titil1°1181Y by the
Board in the light of developments.
G°vertor Robertson concurred and made the suggestion that the
be
considered again by the Board whenever circumstances appeared
t° Ifrrant.
Thereupon, it was agreed
unanimously that no action to
Change the margin requirements
should be taken at this time
and that, as suggested, the subject would be brought up again
for discussion at such time as
seemed appropriate in the light
of developments.
Shay,
88rs. Solomon and Brill then withdrew from the meeting and Mr.
Bsistant General Counsel, entered the room.
14tniles.
It a letter
dated December 17
1056
, y the Federal Reserve Bank of
Pc)lis presented
on behalf of a member bank two specific questions
Q"eernin
g the aPPlication of Regulation Q, Payment of Interest on De114its.
tike
The first question involved whether a deposit that was clearly a
deP°81t aA
-n- not a savings deposit might be evidenced by a certificate
ISO
1/4/57
-26-
labeled "savings
certificate".
v°1114 be
The second question concerned whether it
permissible for a bank not to require written notice of with-
for savings deposits evidenced by a pass book while requiring such
Ilotioe
as to savings
deposits evidenced by a written receipt or agreement,
the ,.
of which was
permitted by the May 16, 1955, amendment to Regulation
• A draft of
reply had been circulated to the members of the Board
Ithich
c)131c1 state, with respect to the first question, that the Board con-
t1ll4ecl to feel
that it would not be justified in raising objection to the
Practi
a*ces As to the second question, the reply would state that it seemed
elear that
the bank could not permit withdrawals as to one class of dePc'eita
vithout exercising the option to require advance written notice
ithile at
the same time
exercising such option as to the other class of
cleP°Bita.
When the file was in circulation Governor Shepardson attached a
11114 in which he stated, with regard to the first question, that it
plieleading
114tes
to place emphasis on detailed provisions in time certif-
U44.1_
regard to maturity and at the same time to confuse the issue
14 P"mitting
use of a misleading label on the heading of the certificate.
, the circumstances, he suggested that the Board might wish to consider
cevere
14 the position taken on previous occasions.
te ja:he file
was then recirculated with a memorandum from Mr. Eackley
k
-1412117 7, 1957, in which he stated that if the Board wished to take
15441°11 different from that suggested in the proposed letter a further
151
1/18/57
-27-
lullendriftt to
Regulation Q would appear to be necessary which would say
that no deposit could
be classified as a time certificate of deposit if
41ras labeled or
designated as a savings certificate. The memorandum
Pointed out
that any such proposal would involve negotiations with the
Pederio
Deposit Insurance Corporation and publication of a proposed amendrile
"in the
Federal Register for comments.
Governor Shepardson said that he did not question the consistency
of the
bit
Proposed reply with the position taken by the Board in the past,
at At the
Board was interested, as appeared from recent discussions,
in dr
°Ing lines of
distinction between savings accounts and time deposits
it
Seemed in
consistent to raise questions on relatively minor points and
then 13e
rmit a
misleading label to be used on time certificates of deposit.
or time
Hackley then reviewed the use by banks during recent years
certificates with alternate maturities and increasing interest
re'tes. Some
banks, he said, appeared to feel that it would help competitiv
to label
these certificates as savings certificates and the Board
1341 ot object
to such labeling. However, following the May 1955 amendtent of
Regulation Q some banks proposed to use certificates with definite
1111111krities as
savings deposits. On this point the Board took an unfavorIke
view and
decided to propose a clarifying amendment to the regulation.
the
eat
ease nol referred to the Board, it could be argued that confusion
although it was merely the form of the certificate that
eeted
rather than the substance. If the Board 'wished to discourage
152
1/18/57
the
-28-
Practice, it would probably be necessary to negotiate with the
1°ederal Deposit Insurance Corporation and publish a proposed
amendment
t° Reguin44
Q in the Federal Register, and the question was whether
the
Board felt
strongly enough that the practice was unduly confusing and
should be
stopped.
Mr. Vest stated
that, while the Board could of course amend its
reguie.ti_ 2
un a problem of appropriate language would be involved. The
de:Posit in
- question could not be
classified as a savings deposit,
8° the 14
,
--Jard would almost be
put in a position of saying that it must be
elate
-sifted as a
demand deposit.
Governor Robertson inquired whether the matter could be handled
aliggesting to the Minneapolis Reserve Bank that it advise the interested
Parties that the practice raised a
serious question and might result
131 4/1
atendment to Regulation Q if continued.
In r
esponse, Mr. Shay said that the manner Of labeling
be ratha
-r w
idespread in several Federal Reserve districts, and
a(lcied
1404) a
tr
hat the
Federal Deposit Insurance Corporation had taken
ter d
iscussion with Board representatives, that it had
t° th.
- Practice.
seemed to
Mr. Hackley
the posino objection
the 114 ?°11°Iring further discussion, Governor Robertson suggested that
be referred
to the Presidents' Conference with a request that
eelN
eellssed at the forthcoming meeting of the Conference and
the joint
or
the P
residents and the Board.
This suggestion was
approved unanimously.
153
-29Secretary's Note: Pursuant to this
action, the following telegram was
sent today to Mr. Leedy, Chairman of
the Presidents' Conference:
tio, 211estion has been raised with the Board whether Regula,
and Regulation D should be amended to prohibit the
tabeling of a deposit as a "savings certificate" where the
Posit would not qualify for classification as a savings
,?Posit but would qualify for classification as a time cerLificate of deposit.
r
In the past, the Board has not objected to the labelin
g of time certificates of deposit as 'savings certificates".
'Xiever, as the
matter has been raised again and in view of
a e fact that the
Board has under consideration possible
rnlendments to Regulation Q and Regulation D to preclude the
f7Pres
e
ntation of savings deposits by certificates having
e;:xed maturities as described in Board's letter to all Fedr1 Rese ve Banks of December 21, 1956, Board will appreciat
:
a,: it if you will put the question stated above on the
'
nda for the forthcoming meeting of the Presidents' Conferfj,%!Lnd the joint meeting of the Prasidents with the Board
ulscussion in the light of the desirability of such a
pertice and the extent to which it is used in the different
eral Reserve
districts.
4
At this
°13erations,
Point Mr. Horbett, Associate Director, Division of Bank
entered the room.
Mr. Carpet.
reported receipt by the Board of a letter dated
4"1111t7 15) 1957 written by two Miami, Florida, member bankers on behalf
°r the eight miami
member banks regarding the reserve city designation of
th6t city.
The letter requested deferment of the effective date of the
41ligliation (mare,
n 1, 1957) for at least 90 days and an opportunity for
illsesentatives of
Plse4i1t
tanks involved to appear before the Board to
"certain unusualfactors with respect to the local situation
1118/57
Ithich might have a bearing on the Board's final determination in
tills
matter".
The view was expressed that the requests should be
granted,
but that
it vould be advisable for the Miami banks to submit pertinent
tion in writing
before their representatives met with the Board.
At the conclusion of a diucly:nion of the matter, it was understood that a draft of reply to the
letter would be prepared for consideration by the Board.
The
meeting then adjourned.
Secretary's Note: Governor Shepardson today
approved on behalf of the Board the following
items:
m
IIPpointmMe-oranda
from appropriate individuals concerned recommending
oh
the rent of the following persons to the Board's staff, effective as
esPective dates on which they assume their duties:
e
itle
Division
Basic annual salary
A
A
ft*
L°VeJOY,
;asistant
Federal
"ecrlfe
Examiner
114th
b
Examinations
$5,440
13s
Rughes, Jr.,
r'cqlnel
Technician
Personnel Administration
4,525
Letter to
Mr. Latham,
follows..First Vice President, Federal Reserve Bank
st°n, r
eading as
lett!ri accordance with the request contained in your
Itlent;-82f January 14, 1947, the Board approves the appoint
as .- Q1 Richard Oliver Fischer and Frank Michael Hillery
-ssi.4
-kent examiners for the Federal Reserve Bank of Boston.
155
1/18/57
-31Please advise as to the dates upon which the appointments are made
effective.
Letter to Mr. MacDonald, Chief Examiner, Federal Reserve Bank of
reading as follows:
In accordance with the request contained in your
e
lett
isgnatri:
January 15, 1957, the Board approves the desof the following employees of your bank as
_P,scial assistant
examiners for the Federal Reserve Bank
rulajoston for the purpose of participating in the exami14_ i°ns of Depositors Trust Company, Augusta, Maine, The
Z7rrill Trust
Company, Bangor, Maine, The Connecticut
k and Trust
Company, Hartford, Connecticut, and Rhode
and Hospital Trust Company, Providence, Rhode Island:
Z
Arthur J. Campatelli
Ralph B. Kimball
41,1
Sven H. Lundberg
Earl F. Smith
Letter
Mr. W •
Vice President, Federal Reserve Bank o4"
York, readiniltse,
to
g as follows:
n accordance with the request contained in your
Inen;
er of January 10, 1957, the Board approves the appointas'
s of Albert J. Bozio and Constantine C. Kontopirakis
yorraistant examiners for the Federal Reserve Bank of New
poi
Please advise as to the dates upon which the apn6ments are made
effective.
Chemiit is noted that Mr. Kontopirakis is indebted to the
$192-cal COM Exchange Bank, New York, in the amount of
the eayable at the rate of $16 per month. Accordingly,
Mr. ,°arcils approval is given with the understanding that
Of trnt°Pirakis will not participate in any examinations
ind— e L'nemical Corn Exchange Bank, New York, until his
t'ctedness
haN4 been liquidated or otherwise eliminated.
The B
2prinp.f
oard also approves the designation of William K.
Reser;,,%8 as a special assistant examiner for the Federal
zank of New
York.
@FedFRASER