The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
16
Minutes for
To:
PrOM:
July 13, 1962
Members of the Board
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
!Iinutes in the record of policy actions required to
De 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
el°Ve Secretary's Office. Otherwise, please initial
14. If you were present at the meeting, your
i
44iti8.l6 will indicate approval of the minutes. If
You were not present, your initials will indicate
041Y that you have seen the minutes.
Chm. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
4141,4:1(
of
Minutes of a meeting of the available members of the Board
Go
vernors of the Federal Reserve System which was held in the Board Room
4t 10:00 a.m. on Friday, July 13, 1962.
PRESENT:
Mr. Balderston, Vice Chairman
Mr. Robertson
Mr. Shepardson
Mr. Sherman, Secretary
Mr. Fauver, Assistant to the Board
Mr. Koch, Adviser, Division of Research
and Statistics
Mr. Brill, Associate Adviser, Division
of Research and Statistics
Mr. Firth, Adviser, Division of International
Finance
Mr. Landry, Assistant to the Secretary
Mr. Eckert, Chief, Banking Section, Division
of Research and Statistics
Mr. Keir, Senior Economist, Government Finance
Section, Division of Research and Statistics
Money market review.
Mr. Keir commented on recent developments
in the money market, referring in the course of his remarks to certain
ell4rts distributed beforehand.
Mr. Eckert then discussed the situation
Ifith respect to bank reserves, credit, and the money supply.
, and
Following this presentation Messrs. Koch, Brill, Eckert
ICeir vithdrew and the following entered the room:
Mr. Hexter, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Goodman, Assistant Director, Division
of Examinations
Mr. Leavitt, Assistant Director, Division
of Examinations
on
Mr. Poundstone, Review Examiner, Divisi
ations
Examin
of
The following actions were taken subject to ratification at
the next meeting of the Board when a quorum was present.
7/13/62
-2Secretary's Note:
on July 17, 1962.
Discount rates.
The actions were ratified
The establishment without change by the Federal
Reserve Banks of New Yo k, Cleveland, Richmond, Atlanta, St. Louis,
1411111eaPo1is, and Dallas on July 12, 1962, of the rates on discounts and
a4veaces in their existing schedules was approved unanimously, with the
tulder'standing that appropriate advice would be sent to those Banks.
Items circulated to the Board.
The following items, which had
been circulated to the Board and copies of which are attached to these
rairathes under the respective item numbers indicated, were approved
11118-rdmously:
Item No.
elktter to
0
Deposit Guaranty Bank & Trust
tls11Vany, Jackson, Mississippi, approving (1)
"e establishment of a branch near the intersection
S. Highway 80 and Ellis Avenue, and (2)
vestment in bank premises.
t
etter to First National Bank of Eau Gallie,
1 .?„11ie, Florida, approving its application
r411.
° •LJAg.uciary powers.
o
lkt
er
4-6.0 United California Bank, Los Angeles,
1
2
3
enf?rnia, approving an extension of time to
c;,--.u.Lish a branch in the West Los Angeles Fashion
-liter at Olympic Boulevard and Purdue Avenue.
P_222Et!_on competitive factors (Coshocton, Ohio, and Smithfield,
N0rt
the
" Ca lina- Copies had been distributed of draft reports to
Cr.4_
-lvt.roller of the Currency and the Federal Deposit Insurance Corporation,
rf4
-8Pecf.
"lvelY, on the competitive factors involved in a proposed purchase
7/13/62
-3-
°t assets and assumption of liabilities of The Farmers and Merchants
Bank Company, Warsaw, Ohio, by Coshocton National Bank, Coshocton, Ohio,
and 1U a proposed merger of Lincoln National Bank of Lincolnton,
41X:canton, North Carolina, into First-Citizens Bank & Trust Company,
allithfield,
North Carolina.
Following discussion, during which certain changes were suggested
alld agreed upon as to the wording of the reports, they were approved
tOrtransmission to the Comptroller and the Federal Deposit Insurance
C°rPoration in forms containing the following conclusions, respectively:
P.21119cton, Ohio
.
The proposed purchase of assets and assumption of
liabilities of The Farmers and Merchants Bank Company, Warsaw,
Ohio, by Coshocton National Bank, Coshocton, Ohio, would
eliminate the moderate amount of competition between these
ty0 institutions and would reduce the number of banks in
Coshocton County from three to two.
amithfield4 North Carolina
There would appear to be only nominal competition
existing between these two banks. The merger does represent
the continuance of a trend in North Carolina toward
concentration of banking resources.
.62plication of Dauphin Deposit Trust Company (Items
sec
4-6). In
rxlance with the understanding at the meeting on July 12, 1962,
thel'e had been distributed copies of a revised draft of statement
Bettilag forth reasons for the Board's denial on July
3, 1962, of the
4r1)14cation of Dauphin Deposit Trust Company, Harrisburg, Pennsylvania,
to ,_
"rge
Ic
with The First National Bank of Mount Holly Springs, Mount Holly
1 /1l'e.8., Pennsylvania.
7/13/62
Mr. Shay described the various changes that had been made
Lathe draft along the lines of suggestions made by Governor
Mitchell,
who, Mr. Shay said, had expressed agreement therewith.
The Board members present then individually commented on and
sugeftted modification of the revised draft, with particular
raeterence to the basis that wuld thereby be provided for support
°I‘ tha Board's position in the event judicial review of the
(leeision was sought by applicant. Following this discussion,
the is
ance of the order and statement was authorized. Copies
t the order, statement, and dissenting statement by Governor
Mills are attached hereto as Items 4,
11P2E.q.en bankinz and financial
5, and 6, respectively.
erations (Item No. 7).
?4411Lant to the understanding at the meeting on July 11, 1962,
thel'e had been distributed copies of a proposed reply to the
Seel'etarY of the Treasury regarding a draft of bill that would
111
1 sections 25 and 25(a) of the Federal Reserve Act and
Lae°
rPorate the substance of those sections in a new "Foreign
1344111
4 Operations Act," the principal effect of which would
be t
- substitute the Comptroller of the Currency for the Board
°I' Governors throughout. The draft letter would note that, in
the b
sence of reasons for the adoption of the proposal more
°111.13elling than those advanced in a proposed letter to the
27f),
7/13/62
-5-
President of the Senate from the Secretary of the Treasury that
transmit the draft bill, the Board would not be disposed
to favor the introduction or enactment of legislation of this
kind.
In a discussion of the draft letter various suggestions
Change were made, including a proposal that there be reference
therein to the relationship between monetary policy and the subject
°r the draft bill.
Following this discussion, it was understood
that a revised draft would be prepared that, if agreeable to the
Chair an, could be delivered by him in person to the Secretary of
the TIleasury, with the further understanding that, if he deemed
it a
ppropriate, the Chairman might on that occasion mention the
ationship of the proposed legislation to monetary policy.
Secretary's Note: The original letter,
a copy of which is attached as Item No.
7, was delivered by Chairman Martin to
Secretary Dillon on July 18, 1962. A
copy of the letter was delivered by
messenger to Comptroller of the Currency
Saxon with a personal note from Chairman
Martin.
Application of State Bank of Salem (Items 8 and 9).
At +I__
'Lie meeting on July 11, 1962, unanimous approval had been given
t° an application by The State Bank of Salem, Salem, Indiana, to
4egilire the assets and assume the liabilities of State Bank of
7/13/62
-6Hardinsburg, Indiana, with the understanding that drafts
an order and statement would be prepared for consideration by the
4)a-11(1. Pursuant to that understanding, copies had been distributed
(32 drafts of such an order and statement.
After a discussion the issuance of the order and statement
vas
Copies are attached as Items
8 and 9, respectively.
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 increases in the
basic annual salaries of the following
persons on the Board's staff, effective
July 22, 1962:
kl!k!L.2:12A-:qI12
Division
Basic annual salary
To
From
Research and Statistics
4°.
se C.
Research Assistant (Data Process14) Cassedy,
j°8"I'llle L. Jessup, Statistical Clerk-Typist
$6,930
$7,095
4,460
4,565
4,040
4,145
410140
4,145
7,820
8,080
Bank Operations
1)Ettt1
ela Leonard, Statistical Clerk
Examinations
Ce"r01. Judith Sullivan, Stenographer
Personnel Administration
ellattles W. Wood, Personnel Assistant
141wahliff;
7/13/62
ki:.t2:11.1crease l effective July 22, 1962 (continued)
Name
titijtie
Division
Basic annual salary
To
From
Administrative Services
Cha'aes P. Brown, Operator, Mimeograph
Ofl
Dortch, Operator, Xerox-Mimeograph
ies T. Jones, Messenger
waiter Jordan, Jr., Cafeteria Laborer
$4,056
4,285
3,185
3,185
$4,264
4,514
3,290
3,290
Item No. 1
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
7-13-62
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 13, 1962
Board of Directors,
Deposit Guaranty Bank & Trust Company,
Jackson, Mississippi.
Gentlemen:
The Board of Governors of the Federal Reserve
,Ystem approves the establishment by Deposit Guaranty
4dank & Trust Company, Jackson, Mississippi, of a branch
near the intersection of U. 8: Highway 60 and Ellis
Avenue, Jackson, Mississippi, provided the branch is established within 12 months from the date of this letter.
The Board of Governors also approves an additional
investment of 24,000 in bank premises for purposes of
constructing a building in which the above branch will be
located and for other bank premises costs incidental thereto.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
•
Item No. 2
7/13/62
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 13, 1962
Bo.ard
of Directors,
FIrst Nut1on.A1 lUnk of Lau Gallie,
1411 Gallie, ilorida.
Ge
ntlemen:
The Board of Governors of the Federal Reserve System has
consideration to your application for fiduciary powers and
First National Bank of Eau Gallie authority to act, when not
?ontravention of State or local law, as trustee, executor,
atImlnistrator, reg±strar of stocks and bonds, guardian of estates,
:ignee, receiver, committee of estates of lunatics, or in any
otrr fiduciary capacity in which State banks, trust companies, or
a_uer corporations which come into competition with national banks
e;e Permitted to act under the laws of the State of Florida. The
el'cise of such rights shall be subject to the provisions of
Be
octio4 11(k) of the Federal Reerve Act and Regulation F of the
41'd of Governors of the Federal Reserve System.
tiven
A formal certificate indicating the fiduciary powers
thekt,
your bank is now authorized to exercise will be forwarded
14 (We
course.
Very truly youn3,
(Signed) Elizabeth L. Carmichael
Elizabeth L. earmichLiel l
Assistant Secretary.
2V,1
Item No. 3
BOARD OF GOVERNORS
OF THE
7/13/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 13, 1962
Board of Directors,
United California Bank,
Los Angeles, California.
Gentlemen:
The Board of Governors of the Federal Reserve
SYstem extends to February 4, 1963, the time within
Ilhich the United California Bank may establish a branch
in the West Los Angeles Fashion Center at Olympic
Boulevard and Purdue Avenue, Los Angeles, California.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Item No. 4
UNITED STATES OF ALIERICA
7/13/62
BEFORE THE BOARD OF GOVERIIORS OF THE FEDERAL RESERVE SY3TEN
WASHINGTON, D. C.
the
liatter of the Application of
4 IN DEPOSIT TRUST COJPANY
for
111,
3PProval of merger with
First National Bank of
°I.111t, Holly
Springs
•••
ORDER DENYING APPLICATION FOR APPROVAL OF MERGER OF BANKS
There has come before the Board of Governors, pursuant to
the
Merger Act of 1960 (12 U.S.C. 1828(c)), an application by
1)41.1)hi
Dc2Posit Trust Company, Harrisburg, Pennsylvania, a member
bark
'
ct the Federal Reserve System, for the Board'
the
prior approval of
terr,„
-7 of The First National Bank of Mount Holly Springs, Nount
S
Prings, Pennsylvania, with and into Dauphin Deposit Trust Company,
Charter and title of the latter.
L'g
Notice of the proposed
'in form approved by the Board, was published pursuant to said
Upon consideration of all relevant materials in the light
t the
th
4 tors set forth in said Act, including reports furnished by
mPtrollcT of the Currency, the Federal Deposit Insurance Corporation,
491F-AV
-2-
arid the Department of Justice on the competitive factors involved in
th2 Proposed
merger,
IT IS HEREBY ORDERED, for the reasons set forth in the
11°3`rdtS Statement of this date, that the said application be and
herebY is
denied,
Dated at Washington, D. C., this 13th day of July, 1962.
By order of the Board of Governors.
Voting for this action: Vice Chairman Balderston, and
Governors Robertson, Shepardson, and Mitchell.
Voting against this action:
Absent and not voting:
Governor Mills.
Chairman Tlartin and Governor Kinga
(Signed) Merritt Sherman
Nerritt Sherman,
Secretary.
0
BOARD OF GOVERNORS
OF THE
Item No. 5
7/13/62
FEDERAL RESERVE SYSTE
AP.PLICATION BY DAUPHITI DEI;OSIT TRUST CalPANY
FOR APPROVAL OF iERGER WITH
THE FIRST i:ATIOOAL 3AN:c. OF HOUNT HOLLY SPRINGS
STATEMENT
Dauphin Deposit Trust Company, Harrisburg, Pennsylvania,
ph
Deposit") with dery)sits of approxi.datJly $108.5 million,
has
aPPlied, pursuant to the Bank lerger Act of 1960 (12 U.S.C..:1828(c)),
11G Boars prior approval of the merger of that bank and The First
Bank of ,iount Holly Springs, Nount Holly Springs, Pennsylvania
("Firot l
ationa1"): with deposits of approximately $3.4 million. Under
th
T .
v°Int Plan of 11,,rger, the banks would merge under the charter and
title
of Dauphin Deposit, and the Plan and application contemplate that
the of
lice of First National would become a branch of Dauphin Deposit,
acing from 10 to 11 the offices operated by that bank.
44a .
Under the Act, the Board is required to consider (1) the
history and condition of each of the banks involved, (2) the
acY of its capital structure, (3) its future earnings prospects,
(4) t#11
te gerv'ral character of its management, (5) whether its corporate
Nkra
are consistent with the purposes of 12 U.S.C., Ch. 16 (Federal
posit
t°
Insurance Act), (6) th.--) convenience and needs of the community
served, and (7) the effect of the transaction on competition
-2(14C111A •
lng
"
any tendency toward monopoly). The Board may not approve
the transaction unless, after considering all these factors, it finds
the transaction to be in the public interest.
For convenience, the first five of these factors may be
c°1181derod together as "banking factors".
The two remaining factors
Nasidered
separately.
Banking factors.
. - The financial history and condition and
Pit
al structure of both banks are satisfactory. The management of
44bank is competent. Dauphin Depositls earnings are good and its
earnings prospects are favorable.
The burden of one contention in support of the application is
that c
Qnsummation of the transaction would provide a basis for improved
gs Prospects relative to what such prospects might be for First
Iatmorie4- as an independent unit bank. The Board is not satisfied on
the
basi
'
s of the record, however, that the future earnings prospects of
Pil
'
ettin#4
-.-Lonal are other than favorable, especially in view of the
batik t8
tiota
g°0c1 earnings and growth records, and the favorable considera-
'PI"iously noted, relative to other banking factors.
are or
There is no evidence that the powers of the banks involved
would be inconsistent with the purposes of 12 U.S.C., Ch. 16.
Sprill
communities. - Mount Holly
Convenience and needs of the
-___
..........--........
83 Population about 1,900, is located in Cumberland County 23 miles
cAlth/lest
of Harrisburg, the seat of Dauphin County, and 6 miles south of
mvariisi
'
e the seat of Cumberland County. Mount Holly Springs serves a
-3trade area of about 32,000 persons.
The area is experiencing some
"
1 11 of industry and economic conditions are favorable.
First National
la the only commercial bank in the community. The bank obtains almost
80 p
er cent or about 2,700 of its 3,330 deposit accounts from within a
t:krs-mile radius of Mount Holly Springs, and has a primary service
8.7ea with a population approaching 71500.
Dauphin Deposit makes its
8er'vicee available in the Mount Holly Springs area through an office
10cated at
Carlisle. Offices of two other banks larger than First
Ratio„
-4- also are located at Carlisle and a branch of another larger
1)4111- ,
located at Boiling Springs, a town five miles northeast of Mount
11(111-Y SPrings.
In support of the application, it is contended that the
orrtire
Ilience and needs of the area served by First National would be
bett„
served by the increased resources and loan limit and the expanded
terv4
'Lees which would be available through the Mount Holly Springs
ottic
e of the resulting bank. There would be made available to customers
Qr
-.4r8t
National an increase in loan limit from about $32,000 to over
$1,000
)000) and the services of a trust department and a foreign
cleDartinent
There is a lack of substantial evidence of a need for the
broaa
er services and greater resources of a larger bank in Mount Holly
4t111,,
From the record it may be concluded that only in fairly iso4vted 4
411Stanoes
1111111
11*8e
entS of
has First National found it necessary to participate the
its borrowers with larger lending institutions or has other-
found the
services rendered by it too limited for its customers' needs.
—Li—
Morer„,.
over, the increased services and facilities that would be made avail-
able b
Y the resulting bank are already provided in nearby Carlisle by
411)14:1
4 Deposit and another bank of comparable size.
The record does
44811%1 that the banking needs of the Mount Holly Springs area are
tria,4_
'"_
clately served or that such needs cannot be met satisfactorily by
r t
National.
Competition. - The area of chief concern as to possible
cakPetii.t•
-lite effects of the proposal is the Carlisle - Mount Holly Springs
ate .
In Cumberland County. It is contended) in effect, that consumma%4
°I' the proposal should further stimulate competition in that area
bet
en Dauphin Deposit and The Harrisburg National Bank and Trust
Corripan
and provide more effective competition to the Boiling Springs
anch
c)f The Cumberland County National Bank and Trust Company, New
berland.
There is substantial competition, however, between First
and Dauphin Deposit's Carlisle office, both of which serve
asen .
tla:1-13r the same types of customers in much the same manner. The
area
betw
We
Carlisle and Mount Holly Springs is served by both of
the e bank;
--ng offices, each of rhich obtains a substantial portion of
bi
lness from the area. Almost 30 per cent of the total amount of IPC
ita
\144vidu_,
d'Isy partnerships and corporations) deposits of Dauphin Deposit's
41,11.81
e °ffice and slightly more than 41 par cent of its total number of
cle1)°sit accounts originate in the surrounding area outside the confines of
isle, This area includes that lying between Carlisle 2nd Mount
11°113r Springs and portions of the area of trade from which First
11`1q0nal obtains about 56 Per cent on the total volume or its IPC
cle
its and about 58 per cent of its total number of such deposit
ace°11nts.
Consummation of the transaction would eliminate this com-
Petition between 2irst National and the branch of Dauphin Deposit
4t'
Carlisle.
The record is persuasive that First National would con-
as a sound, Yell-managed institution, competitive with the
'
neab
banking offices at Boiling Springs and Carlisle
The service area of Dauphin Deposit is described in the
4PPlication as comprising the whole of Dauphin and Cumberland Counties.
lethAproposed merger should be consummated Dauphin Deposit, one of
the thI'oe
largest banks serving the area, would have over 27 per cent
the
total IPC deposits and 19 per cent of the total offices of all
'relal banks in the two-county area. Dauphin Deposit's primary
%.v.4
'ce area seems limited to the southern section of Dauphin County
atici the4
— eastern section of Cumberland County.
On this basis, consumkatioh
- of the pr000sed merger would result in Dauphin Deposit having
30 per cent
of the total TPC deposits and over 24 per cent of
the t
°tal Offices of all col:mercial banks in the smaller area.
Oorls
I-lin/nation of the transaction would add to the concentration of
barkt_
'flg resources and facilities inlle three largest banks serving
the
area,
Dauphin Deposit, The National Bank and Trust Company of
C4trAl
?ennsylvania
York, and The Harrisburg National Bank and Trust
opip„
would hold 65.3 per cent of the IPC deposits and 53.5 per cent
gi.fices of all cdnmercial banks in the smaller area mentioned.
-6Summary and conclusion. - Consummation of the proposed
irger would eliminate the substantial competition existing between
First National and Dauphin De'Dosit and result in further concentrating
the banking resources and facilities in Dauphin and Cumberland Counties.
There is insufficient evidence to indicate that the banking
ileeds of Mount Holly Springs require a local office of a larger bank.
Broader banking services, for which there appears to be little demand,
are already available with reasonable convenience to the Mount Holly
SPrings area through Dauphin Deposit's office in nearby Carlisle, and
two offices of another large bank.
Any benefits that might accrue to the public as a result of
al
val of the merger would fall short of offsetting the diminution of
e°111Petition and the elimination of one of the five banks serving the
Carlisle - Mount Holly Springs area.
Accordingly, the Board is unable to find that the proposed
merger would be in the public interest.
jtilY 13, 1962.
9,
Item No. 6
7/13/62
DISSENTING STATEHLNT OF GOVERNOR MILLS
The geographical, financial and competitive conditions
al3Prta'
InIng to this merger applicaton are such as to emphasize the
noe,1
"-Lc:A' treating the seven factors required to be considered by the
Bot›
. A
under the Bank Merger Act as inseparable parts of a broad, overa]a,
Olido to decisions in cases arising under that statute. Analyzed
Cr
this vieupoint, there is an absence of compelling arguments as to
1111Y tlle
public interest would not be served by consummation of a transon r
epresenting, as this one does, the freely-expressed wishes of
the
varties thereto.
Harrisburg is located about 25 miles north of York. These
*tie
8) respectively, lie at the northern and southern ends of a cohe84"-vc trade area that extends westward from each city on an arc ter14111ati
-ng in the other. Roughly, Mount Holly Springs lies to the west of
-Sburg and
York, about the center of the arc. Harrisburg and York
talp
- Principal commercial and financial centers serving the entire
4
ea.
3
are
which includes several smaller communities whose banking needs
*11 both by unit banks and by branches of the large Harrisburg and
'4ork
ecftercial banking institutions. An evident tendency for the
13rianel,
--Lt.-=.1nr7 institutions to leapfrog each other in their endeavors
to
extend
their facilities throughout the area, by absorbing smaller
Qotta
eial banks via merger transactions suggests that a concentration
414 control over commercial banking resources of the area could be
led through this process at some point that would be adverse to the
Dreierir
ation of competition in the field of banking.
'14
However, bearing in mind the difference in the service
Potent,
l of a small bank as compared with the wider and more flexible
411,
5e of bankin7 services implicit in the operation of a branch banking
"14zat10n closely connected with the immediate trade area involved,
418111111°.tion of the transaction would be of benefit to the public in
the c
°111111unity of ifount Holly Springs by substituting the facilities
that
Would 11
-e available from the Dauphin Deposit Trust Company for those
tle'" Prov1
- ried
,
by The First National Dank of 'fount Holly Springs. The
1)reserice cf alternative sources of banking service in the nearby commuqty
Of Carlisle and other reasonably accessible communities, which inClude
hem
/7e11-established unit banks and branches of more distantly
'411tered commercial banks, indicates the"existance of a soundly
)111)
1 et'
lt— e grouping of banking facilities in and around Nount Holly
Viewed from a broad perspective that takes into account the
ti
ar1'isburt7 - York trade area and its complex of commercial banking
8, rather than focusing almost exclusivel?: and too narrowly on
COmh,
„uni+
0Y of liount Holly Springs, reveals no convincing arguments
the
.
interest would not be served by consummation of the proDosec'
illerger or any persuasive reasons that would justify interposing
the
p
itilICtY
of this Board to deny fulfillment of the express wishes
the b
anks whose property rights are at stake.
Accordingly, I would approve the application.
4111 13
'1962.
00,0
f;
C, 4)(0466y
BOARD OF GOVERNORS
Item No.
7
OF THE
7/13/62
FEDERAL
RESERVE SYSTEM
WASHINGTON
7440.0
,
.0, 0
1.);-att.:41 atstVY.11.I
OFFICE OF THE CHAIRMAN
July 18, 1962
The
Honorable C. Douglas Dillon,
S
ecretary of the Treasury,
Washington
25, D. C.
Dear Doug:
IDeThe Board of Governors has been advised that the Treasury
partment has under consideration a proposal for legislation relatng to foreign banking and financial operations. Through Mr. Knight,
?.eneral Counsel of the Treasury, the members of the Board have been
rurnished with copies of a draft of a proposed bill and draft of a
1/33 05ed letter to the President of the Senate transmitting the draft
m'll• Several comments regarding the draft of proposed letter are
241e in the enclosed memorandum, and the comments in this letter are
'41rected at the bill itself.
The draft bill, in effect, would transfer to the Comptroller
°I' the
authority now vested in the Board of Governors with
'28Pect to (1) approval of foreign branches of national banks, (2) the
irartering and regulation of certain corporations engaging in foreign
hning or financial operations, and (3) approval of investments by
onal banks and State member banks in certain domestically chartered
gn banking corporations.
In the absence of reasons for the adoption of this proposal
Zore co
mPelling
than those advanced in the proposed draft of letter to
th5
rresident of the Senate, the Board of Governors would not favor
13': introduction or enactment of legislation of this kind. The Board
ferlieves that adoption of such a proposal would undesirably divide
'
tl eral supervisory authority in the field of foreign banking opera44)118 that is now unified in a single agency.
At present, State member banks as well as national banks
obtain the Board's approval before establishing foreign branches
nvesting in the stock of State-chartered foreign banking corpora,
tic
Such State-chartered foreign banking corporations must enter
Res° agreements with the Board, pursuant to section 25 of the Federal
?rve Act, to restrict their operations in accordance with such
8-(L)iralitat10n5 and restrictions as the Board may prescribe. While the
I'd's approval is not required for either State member banks or
T11,8
The Honorable C. Douglas Dillon
-2-
national banks to invest in the stock of federally-chartered foreign
?anking or financial corporations, all such corporations are chartered and regulated by the Board, pursuant to section 25(a) of the
Federal Reserve Act.
If the draft bill were enacted, this authority would be
divided between the Comptroller of the Currency and the Board of
uovernors insofar as foreign branches are concerned, depending upon
Whether the bank involved is a national bank or a State member bank.
rlorsover, the proposal would require the approval of the Comptroller
rtif the Currency, rather than the Board, for member banks' invest°
2nts in State-chartered "agreement" corporations, despite the fact
that most
such corporations at present are controlled by State member
banks.
Apart from the general administrative disadvantages of such
isions of authority, this aspect of the proposal would have addii°nal shortcomings. As you know, an American bank that controls a
;
foreign
1
banking subsidiary can extend its foreign operations by estabi shing additional foreign branches either of the bank itself or of
:
,'s subsidiary. If the draft bill were enacted and a State member bank
?sired to establish such additional facilities, the approval of the
1,°ard of Governors would be required if the facilities were to be
""!anehes of the bank itself, whereas the approval of the Comptroller
the Currency would be required if the branches were to be estabetnsd by the subsidiary corporation. The undesirability of the
.44.stence of such alternative jurisdictions seems apparent.
The international activities of United States banks are of
the importance for the flow of funds between the United States and
Th4 rest of the world and thus for United States monetary policy.
of's Policy has increasingly been affected by the United States balance
ch international payments, in which capital movements, and especially
tranges in international bank lending and international money market
.424sactions, play a decisive role. Thus, the Board's concern with
Of ernational activities of United States banks, including the activities
foreign branches and of their foreign banking subsidiaries, is
Z.I:nlately related to the Board's primary function of taking
monetaryvu-LicY
actions.
grea
at
;T
that
thFor the reasons indicated, it is the judgment of the Board
is proposal should not be adopted.
Sincerely yours,
(Signed) Bill
Wm. McC. Martin, Jr.
a_pz.t.a_aLL2tter to the President of the Senate
1
2112..91LLii=silav
The draft letter fails to make any reference to the bill's
tilportant effect on State member banks. Further, in the third paragraph
the statement is made that a thorough and systematic examination program
for foreign branches of national banks is not possible because of "the
existing division of the chartering and examining functions." The
significance of this sentence is not clear to the Board, in view of the
statement in the same paragraph that "the chartering, regulation and
examination of national banks, including their domestic branches, rests
with the Comptroller of the Currency." But even if "chartering" in the
last sentence of the paragraph is understood as referring to branch
authorization, it is difficult to see why "thorough and systematic
examination" of foreign branches would be impeded by the fact that the
branch,
authorization is issued by the Board of Governors rather than by
the
Comptroller.
The fourth paragraph of the draft letter states that "many"
of the existing federally-chartered foreign banking or financial corpare wholly-owned subsidiaries of national banks. National
anks control ten of the twenty-four foreign banking and financial
COr
Porations now in operation or authorized to open for business. The
tame Paragraph of the draft letter states that national banks also
lvest in the stock of domestically chartered corporations that have
eln,
j'ered into agreements with the Board of Governors to restrict their
a'L
,ivities.
Actually, there are at present five such corporations,
but in only
one instance does a national bank own stock of such a
cor
poration.
For these reasons, it is believed that it would be misleading
to eri.
uate (as does the same paragraph of the draft letter) that "the
entire thrust of the regulation of foreign banking activities is thus
aimed at national banks or federally-chartered banking corporations,
which in other respects are under the Comptroller of the Currency".
The fourth paragraph also states that "an agreement with the
Board of
is required only when national banks invest in such
:Porations". In fact, however, State member banks may not invest in
the
stock of such a corporation unless the latter has entered into an
reement
with the Board of Governors in accordance with section 25 of
the
Federal Reserve Act.
Item No. 8
7/13/62
UNITED STATES OF ANTMOA
BE-20n THE BOZIRD OF GOVERNORS OF THE FEDERkl, RESERVE SYSTEM
WASHINGTON, D. C.
----------------
liatter of the Application of
THE
STATE BANK OF SA LEN
tor ,
sto:APProval of acquisition of assets of'
Bank of Hardinsburg
ORDER APPROVING ACQUT.SITION OF BANKTS ASSETS
There has come before the Board of Governors, pursuant to
the
Bank Merger ',ct of 1960 (12 U.S.C. 1828(c)), an application by
The
c'tatC flank of Salem; Salm, Indiana, a member bank of the Federal
11Q.sz,,r
\re System, for the Board's prior consent to its acquisition of
the
ssots and assumption of the liabilities of the State Bank of
11 1,Q.11
burg, Hardinsburg, Indiana, and, as an incident thereto,
111 s#
'' te Bank of Salem has applied, under section 9 of the Federal
11Qe()1,
ve Aot (12 U.S.C. 321), for the Board's prior approval of the
estabi,.
'culliont of a branch by that bank at the location of the State
!140,1
'LC.
azci
CI
nardinsburg. Notice of the proposed acquisition of assets
a2sumption or liabilitic
in form approved by the Board of
Ge\r,
'
rrle/"3 ha_0 been published.
Upon consideration of all relevant material in the light
Of the factors set forth in said Bank Merger i.ct, including reports
furtished by
the Comptroller of the Currency, the Federal Deposit
Insur
ance Corporation, and the Department of Justice on the competi—
'qv.
factors involved in the proposed transaction,
IT IS HEREBY ORDITED„ for the reasons set forth in the
tioarA l
ae
s Statement of this date, that said applications be and hereby
approved, provided that said acquisition of assets and assumption
q 13-abilities and establishment of said branch shall not be consummated
uuln seven calendar days following the date of this Order, or
(b)
ater than three months after said date.
Dated at Washington, D. C., this 13th day of July, 1962.
By order of the Board of Governors.
Voting for this action:
Unanimous, with all members present.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(8EAL)
Item No. 9
BOARD OF GOVERNORS
7/13/62
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION OF THE STATE BANK OF SALEM
FOR APPROVAL OF ACQUIsIT1ON OF THE ASSETS
OF STATE BANK OF HARDINSBURG
STATEMENT
The State Bank of Salem, Salem, Indiana ("Salem Bank"), a
b
allk of the Federal Reserve System, with deposits of approximillion, has applied, pursuant to the Bank Merger Act of
1 6 (1)
Oti
U.S.C. 1828(c)), for the Board's prior approval of its acquisi-
Of the assets and assumption of the liabilities of State Bank of
Rardi
nsburg, Hardinsburg, Indiana ("Hardinsburg Bank"), also a member
of the Federal Reserve System, with deposits of approximately
Ra
Each bank operates one office. As an incident to the
to e
tt l°141g, Salem Bank has applied, under section 9 of the Federal Reserve
(12 UeS.C. 321), for the Board's prior approval for the establishment
branch at the location of Hardinsburg Bank.
Under the Bank Merger Act, the Board is required to consider
(1)th
th
—01ancial history and condition of each of the banks involved)
earnings
a-2qua0y of its capital structure, (3) its future
11'° Pects,
L) the general character of its management, (5) whether
e°113cIsate powers are consistent with the purposes of 12 U.S.C.,
- (the Federal Deposit Insurance Act), (15) the convenience and
-2.effect of the
neecis of the community to be served and ( ) the
monopoly).
tlinsaction on competition (including any tendency toward
considering
The Board may not approve the transaction unless, after
public
all of these factors, it finds the transaction to be in the
interest
.
fiaancial condition,
Bankinr; factors. - The capital structure,
would be true of the
azcilaeclent of each bank are satisfactory, as
satisfactory, and
bar. The earnings of both banks are
COflt.
investment
acen°Irlies which are planned, together la':1:n a change in
transaction, indicate prospects
P°1icies following consummation of the
Of lcreased earnings at the proposed Hardinsburg office.
There is no
involved are or would
c+-lon that
india.
the powers exorcised by the banks
--
,
be i
"consistent with the purposes of 12 U.S.C., Ch. 16.
Salem, Indiana
Convenience and needs of the communities. -
(Popuiatio
County, is situated
about 4,600), the seat of Washington
38 m.
Iles northwest of Louisville, 'Ientucky.
trade
The economy of Salem's
dependent primarily
area (population approximately 10,000) is
111)°11 agriculture, although industry provides employment for about
Persons.
miles
Hardinsburg (population 220) is located 15
dependent
30/11Test of Salem in an area of Washington County- which is
On
Eeneral farming.
-3..
Hardinsburg Bank's service area would be primarily affected
1):Pthe proposed transaction. This bank now makes few installment loans,
Cl°e3 not make amortized real estate loans, does not accept savings deor furnish trust services, and has a loan limit of only $10,000.
1)°
C°11slimmation of the oroposed transaction would make available to cust°14ers of Hardinsburg Bank a larc;er loan limit and a more complete range
c)f banking services,
Competition. - Because the Salem Bank and the Hardinsburg Bank
are ,
L eP@rated by a distance of 18 miles and are not connected by a paved
there is little competition between them. The proposed transaction
ITow
4." not substantially affect competition in Salem. The only other bank
1.11411 is slightly smaller than Salem Bank. However, when this other
bark
acquires a small bank in Campbellsburg (located 10 miles northwest
sni
permission for which has been granted by the Federal Deposit
I'llsIlrance Corporation, it would be somewhat larger than the bank which
11(40,
result from the proposed transaction.
Competition in the Hardinsburg area would be stimulated by
the en
-nsummation of
the
proposed transaction because of the more complete
411e
c)f bw:iking services expected to be offered in that area by the con-
4n1litr,
"ank. With the exception of the one other bank in Salem, each of
the 13..
banks now located in the Salem and Hardinsburg trade areas would
be at
least 9 miles from either of the continuing bankrs offices, and
tote
1/1 1a-ti0n of the transaction would have no significant adverse effect
Of these small banks.
90.ssi 41:Y4'9
Summary and conclusionQ - The proposed acquisition would
-.Lliate little competition, since competition between the two banks
You is
nominal.
The proposal should not adversely affect any of
the ba
that compete in the service area of the resulting bank, and
certain sections of such service area competition would be stimulated.
king
factors support approval of the proposed transaction, and the
8burg area would benefit from the availability of a wider range
or
arlking services°
Accordingly, the Board finds the proposed transaction to be
111 the
public interest,
1962,
@FedFRASER