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Minutes for
To:
Members of the Board
From:
Office of the Secretary
June llt 1962
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
With respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard to
the minutes, it will be appreciated if you will advise
the Secretary's Office. Otherwise, please initial
below. If you were present at the meeting, your
initials will indicate approval of the minutes. If
YOU were not present, your initials will indicate
only that you have seen the minutes.
Chm. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
Minutes of the Board of Governors of the Federal Reserve System
On Monday, June 11, 1962.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Sherman, Secretary
Kenyon, Assistant Secretary
Molony, Assistant to the Board
Fauver, Assistant to the Board
Cardon, Legislative Counsel
Hackley, General Counsel
Farrell, Director, Division of Bank
Operations
Solomon, Director, Division of
Examinations
Johnson, Director, Division of
Personnel Administration
Shay, Assistant General Counsel
Furth, Adviser, Division of International
Finance
Conkling, Assistant Director, Division
of Bank Operations
Daniels, Assistant Director, Division
of Bank Operations
Kiley, Assistant Director, Division of
Bank Operations
Goodman, Assistant Director, Division
of Examinations
Smith, Assistant Director, Division of
Examinations
Sprecher, Assistant Director, Division
of Personnel Administration
Young, Senior Attorney, Legal Division
McClintock, Supervisory Review Examiner,
Division of Examinations
Achor, Review Examiner, Division of
Examinations
Harris, Assistant Review Examiner, Division
of Examinations
c),
6/11/62
-2Chase Manhattan applications (Items 1 and 2).
distributed to the Board, under date of June
There had been
8, 1962, a memorandum from
the Division of Examinations relating to (1) an application of The
Chase Manhattan Bank, New York, New York, for permission to increase
it8 investment in Chase Manhattan Overseas Corporation, an "agreement"
corporation, and for the latter to increase its investment in The
Chase Manhattan Bank (South Africa) Ltd.; and (2) an application of
Chase Manhattan Bank and Chase Manhattan Overseas Corporation for
Permission to organize an Edge Act corporation to be known as Chase
Manhattan Overseas Banking Corporation.
Following explanatory comments by Mr. Goodman, unanimous
royal was given to the letters to The Chase Manhattan Bank and to
Ccunsel for that bank and Chase Manhattan Overseas Corporation of
Ilhich copies are attached as Items 1 and 2, respectively.
Messrs. Goodman and Furth then withdrew.
Application of Wilmington Trust Company.
There had been
distributed, under date of May 29, 1962, a memorandum from the Division
°t Examinations recommending approval of the application of Wilmington
Nst Company, Wilmington, Delaware, for permission to purchase the
48sets and assume the liabilities of Townsend Trust Company, Townsend,
tielaware, to continue the selling bank as a branch of the resulting
15841.
) and to make an additional investment in bank premises.
6/11/62
Following comments by Mr. Solomon based substantially on the
memorandum that had been distributed, the merger application was
-91P.E2ye24 unanimously, along with the requested additional investment
in bank premises, with the understanding that the Legal Division would
d•rett an order and statement for the Board's consideration.
Mr. Harris then withdrew.
Application of United California Bank.
There had been
distributed, under date of May 31, 1962, a memorandum from the Division
Of Examinations with further regard to the application of United
California Fulnk, Los Angeles, California, for permission to merge with
The First National Bank of Vista, Vista, California.
This memorandum
related particularly to the oral presentation heard by the Board on
MaY 25, 1962.
In the view of the Division, no information had been
althmitted at the oral presentation such as to justify a change in the
Vision's original recommendation, which was that the application be
denied. (Prior to the oral presentation, the application had been
given preliminary consideration at the meeting of the Board on May 7,
1962, at which time the members of the Board indicated that they would
be Inclined to concur in the adverse staff recommendation.)
In discussion of the matter, Governor Shepardson said that upon
ttIrther study he found it difficult to reconcile the adverse staff
ree°mmendation in this case with the favorable staff recommendation
respect to the application of United California Bank to merge with
6/11/62
-4-
The First National Bank of La Verne, La Verne, California. (The La Verne
ePPlication was denied by the Board.)
As he read the file, including
the transcript of the oral presentation, there appeared clearly to be
no question of competition between United California and the bank in
Vista, which according to the oral presentation was situated in an
expanding and changing area where there was need for an increased
lending limit.
The Vista bank was owned largely by members of one
rarailY, and the senior officer--a man about 80 years old--wished to
retire from the banking business.
Further, while the record was not
qftific, it might be presumed that the principal owner's son and
clatIghter were not anxious to continue the operation of the bank.
Comments in response by Mr. Solomon were to the effect that a
t.*r of judgment admittedly was involved in appraising the La Verne
and Vista cases.
While judgments could differ, it had appeared to the
/31-vision of Examinations that a stronger case of need for the services
or a larger bank could be made in the La Verne case than in the Vista
ea,se.
Governor Shepardson then referred to testimony at the oral
esentation claiming to show enlarged needs in the Vista area for
'
14
rarm credit and for credit incident to the expansion of industrial
Etetivities.
If this was the situation, he found it difficult to
clevelOP justifiable reasons for denying a proposed merger that would
hello to meet those needs.
6AI/62
Following comments by Mr. Solomon to the effect that neither of
the banks concerned appeared to be aggressively interested in farm
loans, Governor Robertson noted that there was already located in Vista
a. branch
of a large California bank which apparently had found it
difficult to compete with the local institution, thus tending to
indicate that there was not such a substantial need for a larger
lending limit as might have been inferred from statements made at the
°1'al presentation.
After further discussion of the operations of the branch of the
lazge bank already located in Vista, Governor Shepardson turned to the
Inanagement situation of the Vista bank and suggested that a distinction
Could, be drawn between the problem of such a bank in obtaining
elceeutive talent and the situation where a newly-formed bank was
ill:volved.
At a bank such as First National of Vista, the problem
seemed to him more difficult because the bank was closely held by a
411114 group and the opportunity was not present to share in the
Wnersliip of the business.
The Chairman then called upon the members of the Board,
beginning with Governor Mills, who stated that he would continue to
re,
4./ for reasons he had cited at the Board meeting on May 7, that the
E9galcat1on should be rejected.
He also expressed the view that in
e04s1dering merger applications there was a tendency to place too much
elnPhasis on lending capacity.
A major responsibility of a bank was to
6/11/62
-6-
act as a safe depository of funds for the community, and the Vista bank
aPPeared to be performing that function well.
It apparently could
continue to do so, and without depriving the area of the range of
credit services that might be sought by potential borrowers.
Governor Robertson concurred in the views expressed by
Governor Mills and in the reasons cited by the Division of Examinations
support of its adverse recommendation.
He added that in his view
the staff must in every case make its recommendation not in the light
c)r views that the staff may have held on previous cases but in the
light of decisions that had been made by the Board.
Governor Shepardson stated that he would favor approval of the
al3P1ication for the reasons he had expressed earlier during this
Governor Balderston expressed himself as inclined toward
disapproval.
Chairman Martin indicated that he agreed with Governor Shepardson.
Re Igas not convinced that the Vista bank should be forced to stay in
business against the desire of its owners merely for sake of maintaining
4 Unit bank.
He did not feel that this was the right way to approach
the
question.
Question was raised whether any advantage would be seen in
(leferring a final decision on the matter until additional members of
the Board could be present, but it was decided to proceed according to
2122
-7the votes of the members present at this meeting.
Accordingly, the
aPPlication was denied, Governors Mills, Robertson, and Balderston
voting to deny and Chairman Martin anti Governor Shepardson voting to
aPProve.
It was understood that the Legal Division would draft for
the Board's consideration an order and statements reflecting the
action taken by the Board.
Messrs. McClintock and Achor then withdrew from the meeting.
Proposal to establish a branch in Milwaukee.
Pursuant to the
Understanding at the meeting on June 1, 1962, the Board had agreed to
meet tomorrow with Congressman Reuss and a Milwaukee delegation, at the
Congressman's request, to hear views in support of the establishment
cle a branch of the Federal Reserve Bank of Chicago in Milwaukee.
In
PreParation for that meeting, there had been distributed a memorandum
trot°. Mr. Farrell dated June 7, 1962, summarizing information contained
in the study filed by the Chicago Reserve Bank under date of March 1954
concerning decentralization in the Seventh Reserve District.
The
Memorandum also referred to a report dated April 6, 1955, from
e°Iternor Balderston and former Governor Szymczak that related mainly
'
to the question whether the Chicago Reserve Bank should establish a
hlAnch at Des Moines, Iowa, but recognized the relationship of that
issue to a larger question of policy having to do with whether the
411mber of Reserve Bank branches should be increased.
Attachments to
the memorandum presented certain historical and current data that it
6/u/62
-8-
as thought might be of interest to the Board.
There had also been
distributed copies of a file memorandum prepared by President Scanlon
of the Chicago Reserve Bank under date of June 5, 1962, regarding
telephone calls that he had received from certain Milwaukee bankers
leollowing a meeting of the Milwaukee Clearing House on that day.
In discussion of the matter, Mr. Cardon noted that Congressman
Reuss had raised the question whether a reporter from the Milwaukee
101/Ma3. might be admitted to the meeting tomorrow.
'
The question presented by Congressman Reuss was discussed at
some length in the light of whether the meeting should be changed to
the form of a "public hearing," with some effort made to notify other
rePresentatives of the press.
Against this possibility, it was noted
that parties who might be opposed to the establishment of a branch in
Milwaukee would have no opportunity to present themselves and offer
s•rguments.
Further, parties from other sections of the country who
ht be generally interested in the subject of Federal Reserve Bank
hl'anches would be deprived of ample notice.
Accordingly, at the conclusion of the discussion it was agreed
that the meeting should be held in the Board Room on the basis
°Ilginally contemplated, with the understanding, however, that
e°4gressman Reuss would be advised that there would be no objection
to his arranging to bring with him the reporter from the Milwaukee
j°11-rilal if he so desired.
It was also understood that a stenographic
tl'anscript of the meeting would be prepared.
-9Messrs. Molony, Fauver, Cardon, Shay, Conkling, Daniels, and
loluag then withdrew.
Reports of examination (Cleveland and Minneapolis).
There had
been circulated to the members of the Board reports on the examinations
Blade by the Board's examining staff of the Federal Reserve Banks of
Cleveland
and Minneapolis as of January 3 and March 2, 1962, respectively.
At the request of the Board, Mr. Smith commented on the
respective examinations, and it was agreed that there were no matters
aPPearing to warrant action on the part of the Board at this time.
Messrs. Farrell, Johnson, Kiley, Smith, and Sprecher then
"uirew.
Examination reports of nations.] banks.
By letter dated April 30,
1962) the Comptroller of the Currency advised of a new schedule of
increased charges for providing copies of reports of examination of
Ilati°11a1 and District of Columbia banks to Federal Reserve Banks.
The
letter indicated that the new schedule would become effective June 1,
962) but the Comptroller subsequently agreed with Chairman Martin to
cleter the effective date until July 1, 1962.
By letter dated May 11,
1962, the Board requested the views of the Reserve Banks, and a summary
or the comments received from the Banks was contained in a memorandum
*(1101 the Division of Examinations dated May 28, 1962, which had been
distributed.
21 2,r,
6/11/62
-10At the Board's request, Mr. Solomon discussed the Reserve Bank
views, which he summarized as being generally to the effect that, although
the proposed increased charges for copies of examination reports were
regarded as unreasonable, the Reserve Banks found such reports useful
and felt there might be little alternative to paying the stated charges.
As to a suggestion that the reports might be borrowed from the Comptroller and reproduced by the Reserve Banks, Mr. Solomon expressed doubt
that such a procedure would be agreeable to the Comptroller.
Mr.
Solomon also noted that some of the Banks had mentioned the possibility
Of pUrchasing only one examination report each year.
However, other
Reserve Banks had not mentioned this possibility, and their views therefore were not known.
For this and other reasons, he felt that something
night be said for discussion of the matter by the Board with the Reserve
'
8ank Presidents.
There being concurrence with this view, it was agreed that the
matter should be discussed with the Reserve Bank Presidents at the time
f the next
meeting of the Presidents' Conference, scheduled to be held
June 18-19, 1962.
The members of the staff then withdrew and the Board went into
eXecutive session.
Services of Professor McGill.
Following the meeting, the
etarY was informed that during the executive session the Board
'
2ecl
thorized Governor Balderston to arrange for a contract for the services
Or Professor Dan McGill of the University of Pennsylvania for the purpose
21
6/11/62
-11-
of reviewing certain aspects of the Retirement System of the Federal
Reserve Banks, such contract to provide for payment to Professor McGill
at the rate of $200 per day plus necessary expenses incurred by him,
including but not limited to roundtrip transportation from Tennessee to
Washington, D. C., it being understood that the contract would cover
such services as Professor McGill might be called upon to perform
between now and the end of the current calendar year.
Travel by Mr. Hersey.
The Secretary was informed later by
Governor Shepardson that during the executive session the Board
authorized Arthur Hersey, Adviser, Division of International Finance,
to travel to Paris, France, to attend, as a consultant to members of
the US. delegation, the meeting of Working Party 3 of the Economic
P°1icY Committee of the Organization for Economic Cooperation and
bevel
-...opment to be held July 17-18, 1962.
Mr. Hersey was also authorized
to Pay brief visits to the central banks in England, Germany, and the
Netherlands following the Paris meeting, the duration of his entire
trip
to be approximately from July 15 to August 1, 1962.
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 the
dates indicated:
Yves Maroni, Economist, Division of International Finance“rom
$12,730 to $13,250 per annum, effective July 8, 1962.
2127
6 1/62
-12-
Karen Marie Dittal Stenographer, Division of Examinations,
$3,970 to $4,145 per annum, effective June 24) 1962.
Secretaq
914
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item NO. 1
6/11/62
ADDRESS OFFICIAL CORRESPONDENCE
TO THE HOARD
June 11, 1962
The Chase Manhattan Bank,
One Chase Manhattan Plaza,
New York 15, New York.
Gentlemen:
In accordance with your request and on the basis of the
information furnished in your letter of May 17, 1962, as amended by
Your letter of June 5, 1962, transmitted through the Federal Reserve
Bank of New York, the Board of Governors grants permission to The
Chase Manhattan Bank, New York, New York, pursuant to the provisions
°f Sections 9 and 25 of the Federal Reserve Act, to increase from
$15,950,000 to $16,745,000 the amount it may invest in Chase Manhattan
Overseas Corporation ("CMOC") or Chase Manhattan Overseas Banking
Corporation ("CMOBC"), which is being organized to acquire the assets and assume the liabilities of CMOC.
The Board of Governors also grants permission for CMOC,
°r CMOBC, as the case may be, to increase its investment in The
Chase Manhattan Bank (South Africa) Ltd., Johannesburg, Republic
°f South Africa ("South African Bank") to an amount not to exceed
US$21545,000; provided that CMOC, or.CMOBC as the case may be, shall
not carry on its books the shares of the South African Bank at a
net.amount in excess of the book capital accounts of the South
rican Bank, after giving effect to the elimination of all known
losses.
In your letter of June 5, 1962, you have submitted one
executed copy each of Forms F.R. 150, 151, and 152 for the organiza111°n of a corporation under Section 25(a) of the Federal Reserve
,
ct to be known as "Chase Manhattan Overseas Banking Corporation"
tor the purpose of engaging in international or foreign banking..
321 a letter of this date, Nr. Roy C. Haberkern, Jr. has been inZormed that the Board of Governors has approved the Articles of
soeiation and the Organization Certificate of CMOBC and has been
furnished a preliminary permit authorizing CMOBC to exercise such
?fe the powers conferred by Section 25(a) of the Federal Reserve Act
a8 are incidental and preliminary to its organization.
21
The Chase Manhattan Bank
-2-
The Board's approval of the Articles of Association and
the O
the prerganization Certificate of CMOBC and the issuance of
furnished
on
informati
of
basis
the
]..iminary permit have been made on
Y0ur letter of June 5, 1962, and the representations therein.
1
tn brief, it is understood that CMOBC, through a corporate reorgan114?ation which will involve no recognition of taxable gains or losses,
1_ 11 acquire all of the assets of CMOC in exchange solely for the
:
11,ock of
CMOBC and the assumption of the liabilities of CMOC; that
,;(3C will then be liquidated; and that the shares of CMOBC will be
vls tributed in liquidation to The Chase Manhattan Bank, the sole
sh
areholder of CHOC.
In letters dated January 5, 1959, October 5, 1959,
Dec
emuer 16, 1960, March 15, 1961, February 14, 1962, May 2, 1962,
„
Ziu in this letter, the Board has granted permission for The Chase
g:anhattan Bank to make various investments in cmoc and for CMOC to
(
uTlke investments in The Chase Manhattan Bank (South Africa) Ltd.,
South African Bank"), Johannesburg, Republic of South Africa, and
: Chase Manhattan Trust Corporatipn Limited ("Nassau"), Nassau,
TI,ne
Itov,hamas; and directly, or indirectly through intermediary corporaD1. , in Banco Hipotecario Lar Brasileiro, S. A. ("Banco Lar"),
-°n6
de Janeiro, Brazil, and Banco Mercantil y Agricola ("Banco
r ercantil"), Caracas, Venezuela.
'
In accordance with your request, the Board of Governors
grants consent for CMOC to acquire, hold, and distribute the stock
‘CIMBC in the transaction described in your letter of June 5,
°F.,
1
1,2`,)2. The Board also grants permission for CMOBC to acquire and
the stock of South African Bank, Nassau) and Banco Lar now
company
o!ld by CMOC (directly or indirectly through a subsidiary
y, the
indirectl
or
directly
corqoanies) and to purchase and hold,
c'ock of Banco Mbrcantil which CMOC is now authorized to acquire
all
1
Since tm. CMOBC may be organized prior to the time that
authorized invesents are made by The Chase Manhattan Bank in CMOC
Banco
ynd by CMOC in South African Bank, Nassau, Banco Lar, and
,Lercantil, the authorizations contained in the letters referred to
the above paragraph shall be deemed to authorize The Chase
rlar_thattan Bank to make investments in CMOBC or CMOC to the same
"tent that such investments were authorized to be made in CMOC,
rd that CMOBC or CMOC, as the case may be, shall be deemed to be
has
to make investments to the same extent that cnoc
been
ueen authorized.
relates to
Section 211.10(a) of Regulation K, which
"L•
iabilities of one borrower." provides, in part:
The Chase Manhattan Bank
". . .For the purposes of this paragraph, the cost
to a Corporation of any stock owned by it shall, unless otherwise specified by the Board of Governors
in a particular case, be treated as if it were a
liability of the issuer of the stock for money borrowed. . ."
Subject to continuing observation and review, the Board suspends,
Until further notice, the provisions of the above quoted portion
of Section 211.10(a) so far as they relate"to the stock investment
by CMOBC, directly or indirectly, in South African Bank, Banco Lar,
and Banco Mercantil. So long as the activities of Brasilar Adlninistracao e Participacoes Ltda. ("Brasilar") are limited solely
to holding the stock of Banco Lar as authorized herein, any loans
uy
CMOBC to Brasilar will be considered as stock investment by
CMOBC in Banco Lar.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
21
BOARD OF GOVERNORS
OF THE
Item No. 2
6/11/62
FEDERAL RESERVE. SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 11, 1962
Mr. Roy C. Haberkern, Jr.,
Milbank, Tweed, Hope & Hadley,
One Chase Manhattan Plaza,
New York 15, New York.,
Dear Mr. Haberkern:
The Board of Governors has approved the Organization
Certificate, dated June 5, 1962, and the Articles of Association
as amended by the incorporators' letter of June 7, 1962, of
Chase Manhattan Overseas Banking Corporation, and there is
enclosed a preliminary permit authorizing that Corporation to
exercise such of the powers conferred by Section 25(a) of the
Federal Reserve Act as are incidental and preliminary to its
organization. The Corporation may not exercise any of the other
Powers conferred by Section 25(a) until it has received a final
Permit from the Board authorizing it generally to commence business. The steps which must be taken prior to issuance of a
final permit are enumerated in Section 211.3(c) of the Board's
Regulation K.
Vary truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
Enclosure.
Mo.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
June 112 1962
Preliminary Permit
IT IS HEPP,RY CERTIFIED that the Board of Governors
of the Federal Reserve System, pursuant to authority vested
in it by Section 25(a) of the Federal Reserve Act, as amended,
haS this day approved the Organization Certificate, dated June 5,
1962, and the Articles of Association as amended by the incorAN OVERSEAS
Porators' letter of June 7, 1962, of CHASE MANHATT
Governors, and
BANKING CORPORATION duly 'filed with said Board of
zed
that CHAsE MANHATTAN OVERSEAS BANKING CORPORATION is authori
to exercise such of the powers conferred upon it by said
to its organization
Section 25(a) as are incidental and preliminary
the Federal
Pending the issuance by the Board of Governors of
e business in
Reserve System of a final permit generally to commenc
Governors of the
4000rdance with the provisions of the Board of
Federal Reserve System issued pursuant thereto.
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
By (Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
(SEAL)
@FedFRASER