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Minutes for :Tilly ,31., 1;5i To: Members of the Board From: Office of the Secretary Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. A Chm. Martin Gov. Szymczak Gov. Vardaman Gov. Mills / • Gov. Robertson Gov. Balderston Gov. Shepardson x 2116 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Wednesday, July 31, 1957. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Balderston, Vice Chairman Vardaman Mills Shepardson Mr. Carpenter, Secretary Mr. Fauver, Assistant Secretary Mr. Masters, Director, Division of Examinations Mr. Solomon, Assistant General Counsel Mr. Hostrup, Assistant Director, Division of Examinations Items circulated to the Board. The following items, which 1°44 been circulated to the members of the Board and copies of which are attached to these minutes under the respective item numbers indi- cated, were approved unanimously: Item No. lirter to the Federal Reserve Bank of approving the extension of 1°rk etirement dates for two of its employees. utter to the Federal Reserve Bank of New lZk, interposing no objection to the art; l o ements made for Mr. Francis H. Schott l'articipate in a mission in Chile for e Chilean Government. tette ti r to the Federal Reserve Bank of en : 4ta approving the extension of retiredate for an employee. tette 1,0e_ r to the Federal Reserve Bank of New 41 .0 . 4 aPproving the request of First Trust rz Deposit Company, Syracuse, New York, " ad ditional investments in bank premises. tt 1 2 3 L. 7/31/57 -2Item No. Letter to the Federal Reserve Bank of At.lanta regarding the request for a flnal tax certification by Hillsboro Enterprises, Inc., Nashville, Tennessee. 5 Letter to The Clovis National Bank, Clovis, , 11?w.Mexico, approving the application for -411/13-ted fiduciary powers. (For transmittal thrclugh the Federal Reserve Bank of Dallas) 6 Letter to the Comptroller of the Currency recommending approval of an application to c)rganize a national bank in Newport, Tennessee. 7 Information requested by the Federal Bureau of Investigation Items 8 and 9). The Board then discussed a request dated July 18, 1957) of the Federal Bureau of Investigation for access to examination I'ePorts in connection with action by the United States Attorney in Florida, against the Industrial National Bank of Miami, Florida, alld the North Shore Bank of Miami Beach, Florida. A proposed reply had been circulated to the members of the Board prior to the meeting. Mr. Masters reported receiving a call from the United States Att°rneY's office on July 30 in which it was indicated that arrangeIllent8 had been made with the Comptroller of the Currency and with the Feder _ al Deposit Insurance Corporation to make their examination l'el3c)rts available in Miami, Florida, and that question had been raised Ilhether the System likewise could make its reports available in MIRMis, he D -vederal Reserve Bank of Atlanta had advised that there was no e)calllining group in the Florida area at the moment and no way that this eltlest could be met without some difficulty and at substantial cost. 2118 7/31/57 -3A basic question at issue was whether information from the examination reports, other than under subpoena, should be made available to other Governmental agencies which might lead to indict01' conviction. Governor Mills expressed the view, which was also shared by Governor Vardaman, that this question should be decided 14 favor of preserving the confidentiality of examination reports, except in response to subpoena, but it was pointed out that the Board °n 41111 91 1957, had decided to make the information available voluntarilY as a measure of cooperation among Government agencies. Governor Vardaman stated that, in the light of the previous decision, the only question now before the Board related to making the examination reports available either in Atlanta or Miami. It " 11 his view that the System should use whatever means appropriate to tflake the material available in Miami at the convenience of the Ullited States Attorney. Governor Shepardson asked whether it would be possible for the representative of either the Comptroller of the Currency or the ?ederea Deposit Insurance Corporation to carry the System's exami- 44t10a reports to Miami inasmuch as the System regularly made available itif°rniation copies of such examinations to the Federal supervisory Ileridies, Mr. Masters indicated that such a procedure would go well be, Jvad the agreement existing among the supervisory agencies that slIch reports were furnished for internal official use only. He said that he would be extremely reluctant to see this agreement breached. 2119 7/31/57 Following the discussion it was agreed that the proposed reply should be modified to indicate that the records would be made available in the United States Attorney's office in rather than at Miarni the offices of the Federal Reserve Bank of Atlanta. With this modi- fication, the reply was approved with an appropriate change to authorize making the reports of examination available in Miami. Secretary's Note: Following the meeting, Mr. Masters conferred by telephone with officials of the Federal Reserve Bank of Atlanta informing them of the Board's view that an appropriate official of that Bank should make the applicable reports available in the United States Attorney's office in Nialati. The approved revised letters to the Federal Bureau of Investigation and to the Federal Reserve Bank of Atlanta are attached as Items 8 and 9. Worthen Bank & Trust Company, Little Rock, Arkansas (Item The 10),. Board then considered a memorandum from the Division of Examinations dated July „pl eu 1957, which had been distributed prior to the meeting, l*elating to the establishment of a teller's window near the intersection Or 'eSu 56th Street and Scott Hamilton Drive, approximately two miles 804th of the corporate boundaries of Little Rock, Arkansas. This was the Matter referred to at the Board meeting on July 29 when Chairman Mart. ali referred to a call he had received from Senator McClellan. SubsequA a similar inquiry regarding the status of this matter had bee 4 made by Senator FuIbright. „ Aci 7/31/57 Mr. Masters reviewed briefly the status regarding the application which had been filed on May 2, 1957, including the fact that the Union National Bank of Little Rock had filed a similar application O1 April 18, 1957, which had been approved by the Comptroller of the C urrency on July 5- The teller's windows of both banks were to be located in a rapidly growing area south of the corporate boundaries c)f Little Rock, and it appeared that while the immediate needs of the the community might not justify the existence of several such windows, Prospects for further growth and the relatively low cost of in- stallation overbalanced any possible objection. The Board's examiner concurred in the recommendation of the l'eaeral Reserve Bank of St. Louis that the request for permission to es tablish the teller's window be approved provided the branch was est ablished within six months from the date of approval. 1111aninl°11sly agreed that the application be approved. It was The attached letter to Worthen Bank & Trust Company,attached hereto as Item No. 10, 1.418 -12221:2X. S. 01 unanimously for transmittal through the Federal Reserve Bahlp St. Louis and at the same time it was understood that the Legislative Counsel, Mr. Cherry, would inform the offices Of bcth Senators McClellan and Fuibright of the Board's action. .12Tp1ication for general voting permit, First Bank Stock oration— Minneapolis Minnesota (Item 11). The Board then C) 7/31/57 -6- eMsidered a memorandum from the Division of Examinations dated j1 Y 25, 1957, which had been distributed prior to the meeting, relEtting to the application of the First Bank Stock Corporation Minneapolis, Minnesota, for a general voting permit covering the stock it owned and controlled of Southside National Bank of 111880u1a, Missoula, Montana. The capital stock of this subsidiary had been acquired by the Corporation prior to the enactment of the Bank Holding Company Act, and the bank opened for business on ADril 8, 1957. The memorandum stated that the Federal Reserve Bank he4 recommended that the voting permit be issued, and it was also the Division's recommendation that a general voting permit be issued 811°Ject to the condition that prior to its issuance the applicant sh°111d execute the standard general voting permit agreement. After consideration of the financial condition of the 844111-cant, the general character of its management, and the probable effect of the granting of such permit upon the affairs of the sUbslain bank, the Board unanimously agreed to issue the permit, sencling a wire to the Federal Reserve Bank of Minneapolis which at hereto as Item No. 11. Acquisition of shares of Continental Gin Company by Trust .,ZIPIT221...2I_Georgia (Item No. 12 . The discussion then turned to a raellicirandum from Mr. Hexter dated July 25, 1957, which had been 2122 7/31/57 -7- distributed prior to the meeting. This memorandum outlined a proposed 8111LEftent for acquisition of shares of Continental Gin Company by the Trust Company of Georgia and Trust Company of Georgia Associates, 111° sought to exercise their stockholders' rights to purchase one 841clitional share of Continental for each share presently held. gliestion was whether this arrangement violated section The 4(a) of the 13alik Holding Company Act which forbids a bank holding company to acquire direct or indirect ownership or control of any voting shares of any company which is not a bank." The memorandum stated that the company alleged in effect that acIllirsing additional shares in an amount that is just sufficient to r4ailltain a holding company's percentage ownership of the outstanding stock of another corporation is merely the continuance of existing InershiP rather than acquisition of additional ownership and therefore 18 exempted from the prohibition of section 4(a) by the provisions or section 4(c)(4), which permits the retention of "shares lawfully 4cgilired and awned prior to the enactment of this Act by a bank which Is bank holding company, or by any of its wholly-owned subsidiaries." Mr. Ilexter's memorandum took the position that the ownership of shares Of co rPorate stock was not only "a fixed percentage of ownership of the 141, "Ole" as the holding companies intimated; it was also an owner- shit °J- a certain aggregate interest in a corporation, measurable by doll, -'rs invested, present market value, or otherwise. The memorandum 7/31/57 -8- Pointed out that instead of directly exercising their rights to acquire additional shares of Continental, the holding companies 'lad developed a plan under which the rights would be exercised by trustees, who would borrow the money from a wholly-owned subsidiary :Of Associates. The holding companies' plan had been presented in a letter to the Atlanta Federal Reserve Bank dated June 7, 1957. That letter did not request action but in the circumstances Mr. Hexter recom'landed that the Board inform the holding companies concerned, through the Atlanta Reserve Bank, that in the Board's opinion the arrangement '4°111d constitute a violation of section 4(a) of the Bank Holding Comn -wanY Act. A proposed reply was attached to his memorandum. Governor Shepardson questioned whether the exercise of stock ri ghts in relation to issuance of additional shares of stock was in 114Y l'ay comparable to the issuance of such shares through a stock 'dend. If it were, he wondered whether the maintenance of a pro- 1)°rticnate share of ownership could be distinguished from the acquin --4 of additional shares without a larger proportion or degree of control. Mr. Solomon expressed the view that under the provisions of aeeti°n 4(c)(4) it might be possible to distinguish between the acquiion of flew shares under a straight stock dividend and the acquisition of flew n shares which involved the investment of additional money 14 connection with their purchase, as in the present case. He conceded 7/31/57 -9- that it was true in both cases that the original owner of the shares 14ould have the same proportionate degree of ownership of the company as a whole. He pointed out, however, that the provisions of the Relaing Company Act conferred upon these two holding companies a exemption from one of the basic provisions of the statute, anla that it was a general rule of statutory interpretation that exto remedial statutes should be narrowly construed. Governor Mills also mentioned the specific exemption, pointing (Alt that it conferred upon these companies the right to hold certain 1)14°11 " ties which they otherwise would have been required to dispose of "under the general provisions of the Act. Following the discussion, the letter to the Federal Reserve 41* Of Atlanta, attached hereto as Item No. 12, was unanimously 11212est for determination under Bank Holding Company Act Transamerica oration. Governor Vardaman raised a question about the progress °II a. final decision with regard to the retention by Transamerica °11ation of the stock of Occidental Life Insurance Company on C°11 ' 'which the Board held a hearing on July 9, 1957. It was pointed cllt that at the Board meeting on July 11, 1957, it was understood that 'Sinee this was a case of first instance, the Legal Division Woula PrePare an opinion setting forth the reasoning for the Board's decis4 'On which would be released at the time the Board's order VAS 7/31/57 -10- 1)liblished in the Federal Register. It had been expected at that time that it would take approximately one month to prepare such 811 °Pinion. Governor Vardaman expressed the hope that every effort liotad be made to release the Board's decision as soon as possible. Thereupon the meeting adjourned. Secretary's Notes: Pursuant to the recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson approved on behalf of the Board on July 30, 1957, the following actions regarding the Board's staff: intment se,21eanor S. Caroglanian as Clerk, Division of Administrative th;viees, with basic annual salary at the rate of $3,1751 effective date she assumes her duties. tat5hirley Virginia Register from the position of Clerk-Stenographer Division of Personnel Administration to the position of ClerkIn in the Legal Division, with no change in her basic salary or P3070 per annum effective August 1 1957. Ac stik,ace of resignation Of E. Aikens, Assistant Federal Reserve Examiner, Division tions, effective August 2, 1957. Acting on behalf of the Board, Governor Shepardson today authorized Mr. Fauver, Assistant Secretary, to decline the invitation he had received from Mr. Robert M. Joline to speak before a combined meeting of Federal and State-chartered savings and loan associations in the greater Philadelphia area on September 24, 1957, for the reason that local meetings of that type are usually handled by the Federal Reserve Bank of the District. 7/31/57 -11On July 121 19571 the Board approved a letter to the Internal Revenue Service inquiring whether there would be any objection on the part of the Service to the proposed deletion of a specified footnote to section 10(c) of Regulation F. This approval was with the understanding that the letter would be sent after the subject had been discussed with the Office of the Comptroller of the Currency. Such discussions having been held, the letter was sent on July 311 19571 over the signature of the Secretary of the Board. Governor Shepardsonpacting on behalf of the Board, approved on July 301 19571 a visit by the students from the Center for Latin American Monetary Studies to the Board's offices the week of September 16-20. This approval was on the basis of a memorandum submitted by Mr. Fauver, dated July 29, 19571 and a request from Mr. Marquez, Director of the Center) to the Chairman dated July 9. It was understood that the approval included the absorption by the Board of incidental costs for translating facilities, a luncheon for the group on September 161 and other incidental costs. 2127. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 7/31/57 WASHINGTON 25, O. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 31, 1957 Mr. Walter H. Rozell, Jr., Assistant Vice President, Federal Reserve Bank of New York, New York 45, New York. Dear Mr, Rozell: In view of the circumstances outlined in your 1?tter of July 19, 1957, to the Board concerning the exten42,..°n of retirement dates for two of your employees, the Board vl Governors approves the retention in service and the o: f salary to the following persons through the dates c ertd PiTia Extended Through Name Throckmorton, Clair A. Simons, Robert November 25, 1957 November 30, 1957 It is understood that if the benefits from the Proposed changes in the Retirement System become effective 0 1:)r°T. to either of these dates, these extensions will extend n-LY to such prior date. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 2128 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 2 7/31/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 31, 1957 M. Thomas O. Waage, Secretary, Federal Reserve Bank of New York, 33 Liberty Street, New York 45, New York. Dear Mr. Viaage3 This letter is in response to your letter .71,1 e 19 concerning the extension of leave of absence ' °r Mr. Francis H. Schott to participate in a mission, ?.rganized by and Saks, to study the economic and ancial situation in Chile for the Chilean Government. Of It is understood that Mr. Schott's leave of absence pay has been extended to February 28, 1958 ?tthe same terms and conditions as the initial leave and u t this action was taken in response to a request from Ilein and Saks. The Board of Governors interposes no objection to the ih arrangements with respect to Mr. Schott described your letter. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 2129 BOARD OF GOVERNORS OF THE Item No. 3 FEDERAL RESERVE SYSTEM 7/31/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 31, 1957 Mr. Malcolm Bryan, President, Federal Reserve Bank of Atlanta, Atlanta 31 Georgia. Dear Mr. Bryan: In view of the circumstances outlined in your letter of July 17, 1957, concerning the extension of retirement date for your employee Olive Parker, the Board of Governors approves the her retention in service and payment of salary to through August 31, 1957. It is understood that if the benefits from the proposed changes in the Retirement System do not become effective on September 1, 1957, this approval will extend until such later date in 1957 as the changes become effective. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. .Say4oaoos ‘ao4uadaro .11 .s aequadan .11 .s (pau2Ts) g sanoS 4ina4 Sa0/1 . .STSuTpaoopr Nuuct aq4 ci.s.r.4pv osroTa •sosodand onocre atm. JOJ ()pew eq o4 ao opru slueu4s9 -UT TruoTI4PPw 0141 saAoaddr pus po44puqns eArq no uoIlvw 4 a°J1rfrog ou 9144 O. uoT4raopTsuop uoAT2 esti saouaoAop Jo pa . saroS OATJ JO ancg 4,x0u oqq. 2uT11np op= oq o4 poqoodxo OJEt 96e9C98 04 2uTlunowv soan4Tpuodxo aoq4o pur gL56T c6 sum Jo ge uoT4ruTmrxo ot.T4 0, ; aoTad pozTTelTdro oaom uoTum soan4Tpuodxo Jo tioeTTT sQpnT esooTJJo go maq uTrlaao pur ooTJJ0 uTvw (05Lt pc.1003-fc SuTTopouloa pur 2uT4raouaa Jo osodand o74 aoJ 000 -ul 4un0are spu o.4ou 4unowr ur uT sasTwoad Nuect UT s4ulawlsoAuT Truovvrp -pr Jo 4olr OhJOSOU Traopej caul Jo viz uoTI.00s aapun TeAold , lsaI, pue 1.snjj -dr JOJ g XJ01, MON g OSTIOVISS gICTIVda100 Jo 1.sonboa ou4 uoT4upuowwo3oa oTqraoArJ ulTm2uT4iqui4 ; ; 1 anoS op= sT opuoaaJou OCTal:4. fl.TgodQa 12.56T gc STnr Jo :uttioqd •ajg 10.2 maN '511 )1aox. he g y[aox maN Jo Numa OAJOSOU Tyjepza '4uopTsoad ooTA r uvroud sy %Ix L6T '-Er kuir °MVOS 3H1 01 ***4' 04N44 .* 30N3ON04:183db00 1V131_140 SS3,4000, 0 .4 •D •0 'GZ NOIDNIHSVM L5/TE/L ii 'oN 4 4 0,, 1A131SAS 3AH393ei 1Ve:13C11d 3H1 JO o SHONLI3A09 d0 CILIVO8 hti 41 %40501.P 410;oso" BOARD OF GOVERNORS OF THE tAA FEDERAL RESERVE SYSTEM Item No. 5 7/31/57 WASHINGTON 25, D. C. ADDRESS ,444 tLatto''' OFFICIAL CORRESPONDENCE TO THE BOARD July 31, 1957 ! r• J.,E. Denmark., Vice President, A.„ral Reserve Bank of Atlanta, --,,anta 3, Georgia. Dear Mr. Denmark: This is in reply to your letter of July 18, enclosing a copy "a 1etter of July 17 from Mr. J. Marshall Ewing relating to Hillsboro '"Prises, Inc., Nashville, Tennessee. request fMr. Ewing emphasizes that his letter of June 28 constituted a jatipr a i or a final tax certification, and appears to be under the Boar ! is-on that this was not understood by the Board. However, the stsrl ' ' a.8 letter to you dated July 11 explicitly stated the Board's undercsrtilirilg that Mr. Eming's June 28 letter was a request for a final tax to mr -cation. The Board does not have a copy of your letter of July 15 htm.2wing, but in the circumstances it would seem advisable to inform for ;7Pli0it1y that the Board regards his letter of June 28 as a request J 1 1 tax certification. As stated in the Board's letter of arld 0,4-3 there are complex general questions involved in this matter, tinnl'rlsequently there may be some delay in the issuance of the requested if "' cert-ication with respect to Hillsboro Enterprises, Inc. tortir. There are several other matters that you may wish to clarify Was fo ,Ewing. His letter of July 17 states that the request submitted Ileven-- certification in accordance with section 1101(e) of the Internal C°de, and he quotes both paragraphs of that subsection. In this ) however, paragraph (1) of section 1101(e) is entirely inapplicable arasiru%afcl,a final certification could be issued only pursuant to k2) thereof. !Ettio i21r. Ewing also states that, under section 1101(e), final "certifictil-r.fr?quired before the expiration of the period permitted under -the 10;:ke.) of the Bank Holding Company Act of 1956.” The reference to or 19:5-11J-cd permitted under section 4(a) of the Bank Holding Company Act 118 atat in paragraph (1) of section 1101(e), and that paragraph, above, nectL: a°0 ve, does not apply in this case. In any event, the periods uhepe;r4 in both paragraph (1) and paragraph (2) of section 1101(e) are 414-, slcd8 within which the corporation must take the required action contrary to E . Mr. g's understanding--are not periods in which final 213 J. E. Denmark 2!rtif1cat1on must be ""enue Code does not certification must be such certification as -2- made by the Board of Governors. The Internal specify any period within which the final issued, although the Board will, of course, issue expeditiously as possible. ?.spearsMr. Ewing's letter also states that "final certification to be necessary before the company could take advantage of the sf provisions provided for nontaxable distribution under the rrrnal Revenue Code." This does not seem to be correct. Section maVb)(1)(B) requires the prior certification (which has already been bu,e with respect to Hillsboro) to be issued "before the distribution", pa , l there is no similar requirement with respect to final certification. to obtain a final certification might eventually cause deficiens to be assessed against stockholders with respect to a prior year, a final certification is not prerequisite to a tax-free distribution. V r Finally, Mr. Ewing states that "No ruling would be issued by the Internal Revenue Service with respect to the transaction until such (final) certification is provided." It is suggested that Mr. Ewing be informed that this is not the case, a .tcl_that the Internal Revenue Service has already issued a ruling, in !se entirely similar to that of Hillsboro, before a final certifica' 41 had been issued by the Board of Governors. mr. tw It will be appreciated if you will transmit this information to issu„ing, together with assurances that a final certification will be with respect to Hillsboro as soon as practicable. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 6 7/31/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 31, 1957 Board of Directors, The Clovis National Bank, Clovis, New Mexico. G entlemen: The Board of Governors of the Federal Reserve Sy ole-em has given consideration to your application for uciary powers and grants you authority to act, when rult in contravention of State or local law, as executor and administrator, the exercise of such rights to be subJect to the provisions of the Federal Reserve Act and the regulations of the Board of Governors of the Federal Reserve System. A formal certificate indicating the fiduciary lers which The Clovis National Bank is now authorized exercise will be forwarded to you in due course. r Very truly yours, (Signed) S R. Carpenter S. R. Carpenter, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 7 7/31/57 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 31, 1957 Comptroller of the Currency, Treasury Department, Washington 25, D. Co Attention Mr. W. M. Taylor, Deputy Comptroller of the Currency. near Mr. Comptroller: Reference is made to a letter from your office dated A4 Ma 2, 19570 enclosing copies of an application to organize 4 national bank in Newport, Tennessee, and requesting a rec°Imendation as to whether or not the application should be a pproved. A report of investigation of the application made by Lexaminer for the Federal Reserve Bank of Atlanta indicates : 1 14t a capital structure of $300,000 would be provided for the fhk instead of $250,000 shown in the application. This report 'Ilscloses satisfactory findings with respect to the factors the81Y considered in connection with such proposals, except that :l identity and qualifications of the proposed executive officer 70 not available. The Board of Governors recommends approval h, the application provided arrangements are made for executive -a'hsgement satisfactory to your office. Zf The Board's Division of Examinations will be glad to disc uss any aspects of this case with representatives of your e if you so desire. Very truly yours, igned) S. R. Carpenter S. R. Carpenter, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 8 7/31/57 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD' July 31, 1957 Xe L. L. Laughlin, LaPecial Agent in Charge, Washington Field Office, Federal Bureau of Investigation, Wa shington 25, D. C. Dear Mi. Laughlin: This is in response to your letter of July 180 19570 sting that certain information be made available regardthe Industrial National Bank, Miami, Florida, and North e un Miami Beach, Florida, for use by the United States torney, Miami, Florida, in connection with the presentation n' 4 a case before a Federal Grand Jury. It is understood, as 0ber , . es,04. of a conversation had since receipt of your letter th"e?11 the United States Attorney, James L. Guilmartin, and i. e .plrector of the Board's Division of Examinations, that it a qesired to have the necessary documents made available in r.er,ue ?!lor With respect to the Industrial National Bank of Florida, it is suggested that request for information 0,,n1d be addressed to the Office of the Comptroller of the J since that office has primary responsibility for '11Pervision of national banks. Mi sh_ toda ,4 With respect to the North Shore Bank, the Board has pede4 uransmitted a letter, copy of which is enclosed, to the av_ral Reserve Bank of Atlanta, authorizing that Bank to make ti llable to the United States Attorney, or to his representarel5L1nformation contained in the questionnaires or examination You enumerated that relates to "alleged violations" that are mentioned, but not described, in your letter. Rese,_ You will note that the authorization to the Federal doea " e Bank of Atlanta is given with the understanding that it the not include any information in the confidential sections of examination reports, that the information made available aOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM L. L. Laughlin -2- ! ill be used for the exclusive consideration of the United 9tates Attorney's office for the sole purpose of developing ?ads in connection with the alleged violations, and that Ittle United States Attorney will not use the information for !L. Y further purpose such as evidence in any proceeding and 1 make no reference to the source of the /7 inf)7mation. Very li1 youi ra,;y ( Sec triclosur,e 2136 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 9 7/31/57 WASHINGTON 25. D. C. ADDRESS cirriciAL CORRESPONDENCE TO THE BOARD July 31, 1957 14r. Malcolm Bryan, President, Federal Reserve Bank of Atlanta, Atlanta 3, Georgia, Dear Mr. Bryan: julyThere is enclosed a copy of a letter to the Board dated 18, 1957, from Mr. L. L. Laughlin, Special Agent *11 Charge, Washington Field Office, Federal Bureau of InvestiAlso enclosed is a copy of the Board's reply of this ! T te. Mr. Laughlin requests certain information concerning rclustrial National Bank, Miami, Florida and the North Shore st1114.c, Miami Beach, Florida which may be used by the United ti, 8"-iss Attorney at Miami in preparation of a case involving "ese two banks for presentation before a Federal Grand Jury. The Board is suggesting to Mr. Laughlin that the request for information regarding the Industrial National Bank houlu be addressed to the Office of the Comptroller of the Shore Bank, you are eneY. With respect to the North authorized mi to make available to the United States Attorney, tiarni, Florida, or to his authorized representative, informadeon re3 ating to "alleged violations" mentioned, but not ,,uscribed, in Mr. Laughlin's letter, that is contained in the gbeetionnaires and reports of examination relating to North store Bank enumerated in Mr. Laughlin's letter. It is underde:c.)d that the United States Attorney, James L. Guilmartin, the necessary documents to be made available in Miami. The Board sees no objection to this, providing, of course, th joard ofa the documents at all times are retained in the possession au,n official of the Federal Reserv.i Bank of Atlanta. This ' errization is given with the understanding that it does not in anY information in the confidential sections of the exa be mination reports and that the information made available will Attused for the exclusive consideration of the United States °rneY's office for the sole purpose of developing leads in SOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 2138 Mr. Malcolm Bryan, President —2- with the alleged violations mentioned. Also, the united States Attorney should understand that he is not to Ilse the information for any further purpose, such as evidence, in any proceeding and is to make no reference to the source of the information. A copy of this letter has been enclosed with the 80ard t8 reply of this date to Mr. Laughlin. Very t a Pe Secreta Ile.1081.1res Cc; Mr. L. L. Laughlin, Special Agent in Charge, Washington Field Office, Federal Bureau of Investigation, Washington 25, D. C. Cc; Mr. R. C. Masters — Exam. a 213 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 10 7/31/57 WASHINGTON 25. D. C. AC/DRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 31, 1957 Board of Directors, Worthen Bank et Trust Company, Little Rock, Arkansas. Gentlemen:. Pursuant to your request submitted through the Fed eral Reserve Bank of St. Louis, the Board of Governors °12 . the Federal Reserve System approves the establishment Qvli. a branch by the Worthen Bank & Trust Company in the R einitY of the intersection of vest 65th Street and Scott itathilton Drive approximately two miles south of the corporate r, nt, t3 of Little Rock, provided the branch is established wit a "In six months from the date of this letter and the ti) 1PrOval given by the State authorities is effective as of e date the branch is established. Very truly yours, (Signed) S. R. CarDent.ir S. R. Carpenter, Secretary. i 7P TELEGRAM Item No. 11 LEASED WIRE SERVICE 7/31/57 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON July 31, PERati 1957 mINNEApouB Ic4B JE A. First Bank Stock Corporation, Minneapolis, Minnesota B. S outhside National Bank of Missoula, Missoula, Montana C. 104_ CriOr to the issuance of permit, authorized herein, applicant shall execute and deliver to you in duplicate an agreement in form accompanying Board's letter 5-964 (F.R.L.S. #7190). (Signed) S. R. Carpenter CARPENTER 1Z3JE - The Board authorizes the issuance of a general voting permit, under the provisions of section 51114 of the Revised Statutes of the United States, to the holding company affiliate named below after the letter "A", entitling such organization to vote the stock which it owns or controls of the bank(s) named below after the letter "B" at all meetings of shareholders of such bank(s), subject to the condition(s) stated below after the letter "139. The period Within which a permit may be issued pursuant to this authorization is limited to thirty days from the date of this telegram unless an extension of time is granted by the Board. Please proceed in accordance with the instructions contained in the Board's letter of March 10, 1947, (S-964). 4. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 12 7/31/57 WASHINGTON 25. D. C. 34 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD 0440*- July 31, 1957 ,IL4,1% Malcolm Bryan, President, l'ederal Reserve Bank of Atlanta, 104 Marietta Street, Atlanta )', Georgia. Dear Mr. Bryan: This is with reference to a letter addressed to you by Mr. j Georp,Ihn A. Sibley, Chairman of the Board of the Trust Company of the ;6 ..11/ dated June 7, Although Mr. Sibley's letter did not request and ttliews of your Bank or of the Board, it involved legal questions er()fore, in the absence of Mr. Patterson, your General Counsel, Y°11 tr ansmitted it to the Board. As you will recall, Mr. Sibley's letter referred to a proPosed Geup, .arrangement for the exercise of rights held by Trust Company of sha;gla and Trust Company of Georgia Associates to purchase additional holth. e8 °f common stock of Continental Gin Company, in INhich those two resio;Ilf companies already owned 6,346 shares and 10,114 shares, woui:c' ie iYelY. The holding companies contended that such purchases they n°L violate section 4(a) of the Bank Holding Company Act because all-Z.11_1,4 simply maintain, and would not increase, the percentage of holdi-'8-Landing common stock of Continental Gin Company owned by the gc companies. In addition, the companies proposed to have the rightn theins-lexercised by trustees rather than by the holding companies wolacieres, although the ultimate beneficial interest in the shares ue in the holding companies. °Pinion t After consideration of this matter, the Board is of the etitIlt hat the carrying out of the proposed arrangement would con : compane a violation of the portion of section 4(a) of the Bank Holding sINIIirY Act that provides that "no bank holding company shall . . of ve direct or indirect ownership or control of any voting shares 1101 c2mPanY which is not a bank". There is nothing in the Bank espe 'cmPany Act that grants an exception from this prohibition with hold,,eu to a cquisitions of stock for the purpose of maintaining a PlIrthe °(2 .!uParkY's proportionate interest in the corporation involved. -1 wie Board is unable to agree that the applicability of 2142 Mr. Malcolm Bryan -2- section 4(a) can be avoided by having shares in nonbank corporations 5,1arcalased by trustees for the benefit of bank holding companies, _Bother than by the bank holding companies themselves. Enclosed for ur information is a copy of a memorandum discussing these questions 44 more detail. 1 It will be appreciated if you will transmit the substance of this letter to the two bank holding companies involved. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. Enclosure
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