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I
Minutes for
To:
Members of the Board
From:
Office of the Secretary
June 13, 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.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Sheparison
Gov. King
Gov. Mitchell
Minutes of the Board of Governors of the Federal Reserve
SYstem on Wednesday, June 13, 1962.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
King
Sherman, Secretary
Kenyon, Assistant Secretary
Molony, Assistant to the Board
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Farrell, Director, Division of Bank
Operations
Mr. Solomon, Director, Division of
Examinations
Mr. Hexter, Assistant General Counsel
Mr. Conkling, Assistant Director, Division
of Bank Operations
Mr. Spencer, General Assistant, Office
of the Secretary
Mr. Young, Senior Attorney, Legal Division
Mr. Hill, Attorney, Legal Division
Mr. McClintock, Supervisory Review Examiner,
Division of Examinations
Mr. Troup, Supervisory Review Examiner,
Division of Examinations
Mr. White, Review Examiner, Division
of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Discount rates.
The establishment without change by the
?sderal Reserve Bank of Boston on June 11, 1962, and by the Federal
Reserve Bank of Kansas City on June 12, 1962, of the rates on discounts
44a advances in their existing schedules was approved unanimously, with
the understanding that appropriate advice would be sent to those Banks.
6/13/62
-2Circulated item. The following item, which had been circulated
to the members of the Board and a copy of which is attached to these
minutes as Item No. 1, was approved unanimously;
Letter to Federation Bank & Trust Company,
New York, New York, approving the establishment of a branch at 1871 Nostrand Avenue,
Brooklyn.
Application of Southern Bank and Trust Company (Items 2 and 3).
Pursuant to the decision at the meeting on June 5, 1962, distribution
haa been made under date of June 8 of a proposed order and statement
l'eflecting the Board's approval of the application of Southern Bank
and Trust Company, Richmond, Virginia, to merge with Citizens Bank of
Chesterfield, Bon Air, Virginia.
The transaction contemplated the
establishment by the applicant bank of a branch at the head office site
Of Citizens
Bank.
There being no objection to minor editorial changes suggested
by
Mr. Hexter, the issuance of the order and statement was authorized
elabject to such changes being mule.
Copies of the order and statement,
48 issued, are attached hereto as Items 2 and 3.
Ap0.ication of Peoples Bank and Trust Company. There had been
distributed a memorandum from the Division of Examinations dated June 5,
19621 recommending favorably on an application by The Peoples Bank and
T/'114t Company, Grand Haven, Michigan, for consent to its proposed consolidation with The Spring Lake State Bank, Spring Lake, Michigan, and to the
establ
-ishment of a branch at the present location of the latter bank.
6/13/62
_3At the Board's request, Mr. McClintock reviewed the circumstances
of the case, his comments being based substantially on the information
set forth in
the memorandum of June
5.
Mr. McClintock having concluded his remarks, Mr. Solomon
expressed the view that the case presented rather an unusual situation.
The
Comptroller of the Currency's report on competitive factors had
been adverse, and the Department of Justice also had reported unfavorably.
However, the competitive situation seemed more complex than it might
appear at first.
When the situation was fully analyzed, it appeared
that little competition would be eliminated by the proposed transaction;
in fact, the transaction probably would have the effect of stepping
uP the tempo
of competition in the Grand Haven-Spring Lake area, where
the largest bank would face stronger competition.
Also, there were
larger institutions a few miles away in Muskegon.
Governor Mills said he concurred with the reasoning that
had been expressed by Mr. Solomon and Mr. McClintock.
f banking services would be eliminated.
One local source
Looking, however, at the
ge°graPhioal area and the banks that would be relatively close to the
Grand Haven area, the sources of banking services would be many, with
''ininlum amount of inconvenience to those seeking such services.
Governor Robertson expressed the view that the two banks should
11(It he Permitted to merge.
In his opinion, the only competitive area
reallY involved was the immediate area, and it was unwise to bring into
if1"i tr'
6/13/62
-4-
the picture the Muskegon banks, which were 12 miles away. It appeared
to him that
there was real competition between the merging banks) as
evidenced
by the data presented by the Division of Examinations. Therefore, it was necessary to determine what benefits could be gained
through the
proposed transaction that would offset the elimination of
competition.
While trust services would be made available in Spring
Lake) such services already were available in Grand Haven, a short
distance away.
Further, the manage nent of the Spring Lake bank was
satisfactory the condition of the bank was good, and its future prospects seemed good.
Although it was contended that there was need for
increasing the loan limit, it was also stated that the Spring Lake area
/4as almost
exclusively residential, with little industry or industrial
emPloYment.
lending
In those circumstances, the demand for loans beyond the
limit of the Spring Lake bank would appear negligible.
In short,
there seemed to be no benefits sufficient to offset the elimination of
competition.
Accordingly, he would not favor the proposed transaction,
whicu
u would take out of the picture an institution with total resources
Of close to $6
million.
Governor Shepardson stated that he concurred with the recommendation of the
Division of Examinations.
In that connection, he noted that
1/hile the growth of the Spring Lake bank over the past ten years was
said to have been satisfactory, it had experienced little deposit growth
since 1958.
Admittedly, there would be elimination of some amount of
21.37
6/13/62
-5-
competition, but that factor did not seem too significant to him when
CoMpared with the increased services that would be rendered.
Chairman Martin and Governors Balderston and King also having
indicated that they would concur in the recommendation of the Division
Of Examinations, the application was approved, Governor Robertson
dissenting.
It was understood that the Legal Division would prepare
drafts of an order and supporting statement for the Board's consideration,
and that a dissenting statement also would be prepared.
Messrs. Troup and Hill then withdrew.
Application of Union Trust Company of Maryland.
There had
been distributed a memorandum from the Division of Examinations dated
jilhe 8, 1962, recommending favorably on an application by Union Trust
Company of Maryland, Baltimore, Maryland, to merge with Farmers and
Merchants' Bank, Salisbury, Maryland, and incident thereto, to operate
bl'anches at the locations of the offices of the latter bank.
Mr. Solomon reviewed the facts of the case, basing his remarks
Gubstantially upon the information in the memorandum of June 8. During
the course of comments, he made reference to the reports on competitive
factors submitted to the Board, pointing out that although the report
the Federal Deposit Insurance Corporation had not been unfavorable,
the Department of Justice and the Comptroller of the Currency had
expressed the view that the proposed merger probably would have adverse
c°mPetitive effects on the remaining independent bank in Salisbury and
6/13/62
-6-
the amall banks in the surrounding area. In that connection, the
Comptroller had stated in his report that use of the merger technique
"by the applicant and other banks" in Maryland to gain entry to certain
areas or to obtain growth "might well lead" to an unbalanced banking
structure and to a competitive situation in Maryland which would not be
consonant with the public interest.
However, the Salisbury National Bank
had specifically stated to Federal Reserve personnel that it did not
expect to be affected adversely by the proposed merger.
Also, the Comp-
t oiler's expression of opinion was in contrast with his favorable
decision in the matter of the merger of The Easton National Bank of
MarYland, Easton, into Maryland National Bank, Baltimore, which previously
had established branches in the Easton area.
Also, Maryland National
was the largest bank in the State; it was twice the size of Union Trust.
During the ensuing discussion, Governor Mills expressed the
view that the present case was a close one.
However, when considered
in the light of Mr. Solomon's analysis, he would agree with the recommendation for approval.
The focus of the problem should be the Salisbury
Ilational Bank, and that was a bank of such size that it should be able
to
compete locally with two large branch banking institutions.
In fact,
Sa
lisbury National might prosper due to local friendships and confidence
14 its facilities.
Insofar as the smaller banks in the general area were
e°4cerned, they were located in minor communities.
Being small community
banks, they would not enter effectively into the broader competitive
Picture and they should not be adversely affected.
At).
41(
6/13/62
Governor Robertson stated that he would vote for disapproval of
the application.
While he agreed with what had been said about the
inconsistency of the Comptroller's views on this case and his decision
°I1 the Easton application, he felt the Board would find itself in the
same position if it approved the proposed Salisbury merger.
In the
Easton case, the Board had stated in its report to the Comptroller that
the merging banks did not appear to be competitors to any important
clegree and that the proposed transaction would eliminate little competition
between them; but that the merger would remove the only bank in the Easton
area
in a position to afford substantial competition to Maryland National;
and that the "proposed purchase of assets and assumption of liabilities
reflects the continuance of a trend in Maryland toward concentration of
ballking resources in a few large banks."
With respect to the application now before the Board, Governor
Robertson
said that there was obviously no significant competition between
the banks involved in the proposed transaction.
In his view, however,
Ills was merely an attempt by Union Trust to enter into a new area, at
it8
°wn instigation, by paying a healthy premium to the shareholders of
FarElers and Merchants' Bank, a premium that it could afford to pay to
(et into this area.
The application, of course, must be viewed from
the standpoint of the public interest.
It was contended by the appli-
°alit that the merger would provide better service, but he could not see
that the merger would provide better facilities to the Salisbury area.
9
6/13/62
-8-
Farmers and Merchants' Bank was an institution with resources of over
$17 million, and it was admittedly taking care of the needs of the
People of that area.
It did not appear to need a larger loan limit;
there was no evidence that it had to sell loan participations.
°Perated a trust department.
It
If the application was approved, the
Board would be saying, in effect, that it was permitting the merger
01' the
two banks because the resulting bank could provide better service,
1)14 in his opinion that statement was not supportable.
In the case
involving Easton and Maryland National, the Board had expressed a view
to the Comptroller that the merger would add to the trend in Maryland
tcngard domination by a few large banks, and the current proposal should
be viewed similarly.
The only basis he could see for approval would
be the action of another Government agency in the Easton case, and that
Was not a good argument.
There followed a brief discussion of the terms of the merger
Merchants'
44-reement, under which shareholders' equity in Farmers and
1241/111( equ5ling about $1,322,000 would be exchanged for shares in the
l'sulting bank having an adjusted value of $1,786,000.
Each share of
the Salisbury bank worth $66.10 (prior to adjustments per the merger
8.1reellient) would be exchanged for 1-1/2 shares of stock in the continuing
be'llk worth (book value)
$89.32. The total premium of $464,000 equaled
2°9 Per cent of the deposits of the Salisbury bank as of December 29,
1961) and was equal to 2.9 times net current operating earnings of the
b44k
in 1961.
40
6/13/62
-9Governor Shepardson said that he concurred with the recommenda-
tion of the Division of Examinations. While he recognized that the
Proposed merger was part of the program of extension of large banks
14 the State of Maryland, in this case the area was one of both present
aad Potential vigorous growth, industrial and otherwise. Further, the
small banks in the surrounding area were located in minor communities
ar
apparently would be little affected by the proposed transaction.
ComPetition between the larger banks, it seemed to him, was primarily
in tile meeting of larger credit needs; the type of service the moiler
banks could render reached to a clientele that the competition of the
large banks did not affect particularly. To him, the possibility of
increased competition for the large branch bank operating in the
84liaburY community would be sufficiently favorable to justify approval
4cItl/ithstanding the further expansion of large-scale banking that was
involved.
Governor King said that he would vote for approval of the
aPPlication„ after which Governor Balderston and Chairman Martin also
cated that they would favor approval. Governor Balderston, prior
to axPressing this view, commented that he found the case most troublesome.
(1
/
41 balance, he felt that the arguments of the Division of Examinations
Persuasive.
However, he was concerned as to how the banking structure
Of the State of Maryland might develop. Chairman Martin indicated that
Ile regarded the case as a close one.
4,
6/13/62
-10Accordingly, the application was approved, Governor Robertson
dissenting. It was understood the Legal Division would draft an order
and
supporting
statement for the Board's consideration, and that a
dissenting statement also would be prepared.
Messrs. Young and White withdrew from the meeting at this
Point and Mr. Noyes, Director, Division of Research and Statistics,
entered the room.
Chain banking survey (Item No.
4).
At the meeting on June
8,
1962, there was discussion concerning a draft of proposed reply to a
letter received from Mr. C. W. Robinson, President of The First National
1344k of Sayreville, Sayreville, New Jersey. Mr. Robinson's letter
1%eferred to the current survey of direct and indirect controls of banks
and.
inquired as to (1) "the law under which we are required to submit
the information" requested by the Board's letter of May 25, and (2)
the protection that is provided the bank against legal action by any
shal'eholder who might resent a release of confidential information."
14 the light of suggestions mAtie at the June
8 meeting,
it was under-
Stood that a
revised draft of letter to Mr. Robinson would be prepared
t°r the Board's consideration. There had now been distributed, under
(late of June 12, a revised draft and an alternative revised draft.
Mr. Cardon, in response to a question from the Chairman,
exi3reesed a preference for the alternative revised draft because it had
tleeMed to him that the other draft implied, at least, that the Board was
6/13/62
-11-
involved in this survey only because of Congressman Patman's request
end that the Board was not much interested in this type of information.
As he interpreted the previous discussions of the survey, the Board
Ifta interested in the collection of information in this area, although
Perhaps feeling that it should not be gathered in precisely the manner
requested by Congressman Patman.
If so, he supposed the Board might
feel that the door should be left open to obtain such information,
either in cooperation with Congressman Patman or as a Federal Reserve
Project, in the latter event probably by the use of somewhat different
techniques and with appropriate safeguards as to maintaining the
c°nfidentiality of the information received. The alternative revised
dzaft seemed to him to take care of those points.
Mr. Farrell recalled that the Board had originally told CongressM44 Patman that it did not feel the purposes to be served by this survey
17°111d justify the expense involved. The Division of Bank Operations,
he noted, had entertained reservations from the outset. The survey
having been decided upon, it had been hoped, of course, that some use1'41 information would be obtained.
After examining some of the forms
that had been returned, however, he felt--and he thought he spoke for
the Division—that the information reported would not be useful for
11c)ard Purposes.
He agreed with Mr. Cardon that the Board should be
erested in information in this area.
However, as he had said, he
(lid not believe that the information available from the current survey
6/13/62
-12-
would be useful data as far as the Board was concerned.
In his opinion,
certain language in the alternative revised draft tended to imply, when
read in the context of the entire letter, that the Board regarded the
eurveY as a step in the right direction, and he doubted whether the
Board would do well to place itself in that position.
In further discussion, Governor Robertson noted that, as
Mr. Farrell suggested, the Board at first advised Congressman Patman
to the effect that it did not think sufficient benefit would be achieved
to warrant the Federal Reserve in making the survey on its own. However) the Board also said to Mr. Patman that it would make the survey
if the survey was thought by the House Select Committee on Small Business to be of sufficient value.
In his reply, Congressman Patman stated
that the Committee regarded the survey as being of such value as to
hetifY making it.
In subsequent discussions, Governor Robertson added,
the sentiment of the Board seemed to become more favorable; the question
we's raised whether the survey should not go further than had been contemPlated.
His own view, Governor Robertson said, was that the Board
h°111d have more information in the area to which the survey related.
If arlYthing could be obtained from the current survey, that would be
The results might indicate the scope of a further survey that
Should be
made by the Board.
Chairman Martin commented to the effect that at the present stage
°I' the matt,
q- the Board must give consideration to the subject from
2
6/13/62
-13-
Congressman Patman's point of view.
The Board had agreed to undertake
the survey at Mr. Patman's request.
Having so agreed, the Board would
not want to act in a manner that might suggest bad faith.
It should
do the best it could and make a bona fide effort.
The discussion that ensued centered principally on whether, as
in the
alternative revised draft, to cite the provisions of section 11(a)
°f the Federal Reserve Act under which reports could be required by the
13°4r01 from member banks, while at the same time advising that the current
silrveY was not mandatory and instes0 was being made by the Board upon
reqUest from Congressman Patman as Chairman of the Small Business Committee'a committee that had the subpoena power.
Those favoring caution
as far as the citing of section 11(a) was concerned noted, among other
things, that in the case of this survey the Board would not be able to
131'°vide the assurance of confidentiality of information that would
rciirlarilY attach to reports required under that section.
Others pointed
t, however, that omission of any reference to section 11(a) might lead
4 reMer of the Board's letter to conclude that the Board had no authority
to require reports of member banks.
After various comments with regard to this problem had been
1841e/ Mr. Rexter suggested possible language in substitution for language
conta.
ined in the pertinent portion of the alternative revised draft.
His
allggested language was intended to make it clearer, while retaining a
l'eference to sction 11(a), that the current survey was not being made
On a
mandatory
basis under that section.
6/13/62
There appearing to be general agreement that Mr. Hexter's
vrsion would be acceptable, it was understood that the change would
be made and
that the letter to Mr. Robinson would be in the form
attached as Item No.
4.
(Governor Mills' preference would have been for
the other revised draft distributed prior to this meeting, He indicated
that,
although he would agree to the alternative revised draft, with
Mt% Hexter's suggested substitution, if that was the sentiment of the
8°4rd, he had reservations about the inclusion of any reference to
section 11(a) of the Federal Reserve Act.) It was also understood
that copies of the letter to Mr. Robinson would be sent to the Federal
Reserve Banks for their information in view of questions being received
1)Y the Banks in connection with the survey.
In reply to a question with regard to survey forms returned
by
sme banks with the express understanding that the information would
be held in confidence by the Federal Reserve, an assurance that the
13(411'd could not provide, Mr. Sherman stated that no such reports had
as Yet been returned to the member banks concerned.
However, he had
Itriderstood from the discussion at the meeting on May 31, 19620 that
17a8 the Board's view that when completed questionnaires were submitted
11"tl4 Such a proviso, an obligation existed, in the prevailing circumsi
es, to return them to the member bank.
No different view was indicated by the Board.
21 4
6/13/62
-15Report on H. R. 11654 (Item No. 5).
Mr. Sherman reported that
a telephone call had been received by Mr. Cardon on June 12, 1962,
from Counsel for the House Committee on Banking and Currency requesting
the Board's views on H. R. 11654, a bill "To amend section 14(b) of
the Federal Reserve Act, as amended, to extend for two years the authority
O1
Federal Reserve Banks to purchase United States obligations directly
from the Treasury."
In that connection, a draft of letter to the
C°111mittee had been prepared that would indicate the Board favored
the proposed legislation.
There being no objection, the letter was approved unanimously.
eoPY is attached as Item No.
5.
The meeting then adjourned.
Secretary's Notes: On June 12, 1962,
Governor Shepardson approved on behalf
of the Board the following items:
N
Letter to the Federal Reserve Bank of Philadelphia (attached Item
4.6) approving the appointment of George S. Siekielski, Jr., as
:
Q.ssistant examiner.
Letter to the Federal Reserve Bank of Chicago (attached Item No. 7)
"
41),
Proving
the appointment of James A. Piskos as assistant examiner.
Memoranda from appropriate individuals concerned recommending the
Owing actions relating to the Board's staff:
roll
Ntaide activity
tarik Permission granted Myra E. Beck, Statistical Clerk, Division of
c_ Operations, to engage in part-time work for the Washington
u-Lculating and Inventory Service.
211.
6/13/62
.ta212
.
ce of resignation
Audrey A. Taylor, Records Clerk, Office of the Secretary, effective
at the close of business June 11, 1962.
Governor Shepardson today approved on
behalf of the Board the following items:
Letter to the Federal Reserve Bank of Boston (attached Item No.
aPproving the appointment of Walter Orrin Farrell as examiner.
8)
r
Letter to the Federal Reserve Bank of New York (attached Item No. 9)
vegarding arrangements for obtaining the services of John B. Harrison,
i:xaminer,
to work in the Board's Division of Examinations for an
dPProximate period of two months.
f
Memoranda from appropriate individuals concerned recommending the
°Ilowing actions relating to the Board's staff:
b . Jane C. Turner as Minutes Clerk, Office of the Secretary, with
l'It810 annual salary at the rate of $4,0401 effective the date of
_4
rance upon duty.
Charles F. Frost as Guard, Division of Administrative Services,
:1th basic annual salary at the rate of $3,500, effective the date of
ntrance upon duty.
Acceptance of resignations
Sandra K. Anderson, Statistical Clerk, Division of Research and
Stat.
Istics, effective at the close of business June 23, 1962.
D. Rogers, Messenger, Division of Administrative Services,
,
erfe Edward
etive at the close of business June 15, 1962.
.LELnew position
"-...- .12.11211212.11
New position of Statistical Clerk or Statistical Assistant in the
bi • .
vlsion of Examinations.
Secre
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 1
ADDRESS OFFICIAL CORRESPON9ENCE
TO THE HOARD
June 13, 1962
Board of Directors,
Federation Bank & Trust Company,
New York, New York.
Gentlemen:
The Board of Governors of the Federal Reserve
Syatem approves the establishment of a branch by Federation
Bank & Trust Company, New York, New York, at 1871 Nostrand
Avenue, Brooklyn, New York, New York, provided the branch
iS established within six months from the date of this
letter.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
6/13/62
UNITED ST.2,TES 07 A:IERIC!1,
BEFORE TH-E BOAaD O
Item NO. 2
6/13/62
GOV:UORS 07 THE FEDERAL RESERVE SfSTEfl
ITASHINGTON, D. C.
the Matter
of the Application of
S°13111ERIT BANK AND TRIM' ca ANY
1
1
i
cioval
of merger with
Itlzens Dank of Chesterfield
1
1
•••
oRrITt
A7TROVIEG ifEaGER OF BANKS
There has come before the Board of Governors, pursuant to the
41111"lerger Act of 1960 (12 U.S.C. 1828(0), an aoplication by Southern
84r)ic
and Trust Company, Richmond, Virginia, a member bank of the Federal
Ileaer
Te
SYstem, for the Board's prior approval of the merger of Citizens
0.0
Chesterfield, Chesterfield County, 3on Air, Virginia, with and
irlto
'011thern Bank an(' Trust Company, under the charter and title of
the
Itter, the office of Citizens Bank of Chesterfield to be operated
ranch of Southern 3ank and Trust Company.
Pursuant to said Act, notice of the proposed merger, in form
al?Provf) ,
°Y the 7303rd of Governors, has been published and reports on
the co
111Petitive factors involved in the proposed transaction have been
receiv
eci from the Comptroller of the Currency, the Federal 'Deposit
41ee Corporation, and the Department of Justice and have been
%484,
'cLered by the Board.
21L51.
IT IS ORDERED, for the reasons set forth in the Board's
Statement of this date, that said application be and hereby is
413151‘°ved) provided that said merger shall not be consummated (a)
11114T to June 29, 1962, or (b) later than three months after said
date.
Dated at Washington, D. C., this 13th day of June, 1962.
By
order of the Board of Governors.
Voting for this action: Chairman Martin, and Governors
Balderston, Mills, Robertson, and Shepardson.
Absent and not voting: Governors King and Mitchell.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Item No. 3
BOARD OF GOVERNORS
6/13/62
OF THE
FEDERAL RESERVE SYSTEH
APPLICATION BY SOUTHERN BANK AND TRUST COMPANY
FOR APPROVAL OF AERGER liaTH CITIZENS BANK OF CHESTERFIELD
STATENENT
Southern Bank and Trust Company, Richmond, Virginia
NI
_
(48°Uthern!!1
to the
pursuant
with deposits of about $41 million, has applied,
Bank Merger Act of 1960 (12 U.S.C. 1828(c)), for the Boardts
141.°r aPproval of the merger of that bank and Citizens Bank of
cheste •
-rfleld, Bon Air, Virginia ("Citizens"), as yet not open for
busin
ess. Under the Agreement of Merger the banks would merge under
the oharter and
application
title of Southern, and the Agreement and
ccIltemPlate that the office of Citizens would become a branch of
S°Ithern
(pursuant to amendments to the statutes of Virginia enacted
operated
effective June 29, 1962), increasing from 3 to 4 the offices
I that bank.
Under the Act, the Board is required to consider (1) the
411ancial history and condition of each of the banks involved, (2)
the
adequacy of its capital structure, (3) its future earnings
Prosn
whether
ects, (4) the general character of its management, (5)
'
ita
Federal
(41:)°rate powers are consistent with the purposes of the
eP°8it I
and
nsurance Act (12 U.S.C., Ch. 16), (6) the convenience
Ileeds
°I' the communities to be served, and (7) the effect of the
tra
nsaction on competition (including any tendency toward monopoly).
The Board
may not approve the transaction unless, after considering
ala these
factors, it finds the transaction to be in the public interest.
Banking factors. - The financial history and condition of
3ellth
ern are satisfactory. The bank's capital structure is adequate,
its future
earnings prospects are favorable, and its management is
com
petent. These attributes would also characterize the resulting
bark
'which would be under Southern's management.
Citizens has not yet opened for business, as previously noted.
The
bank was organized in 1958 as an affiliate of Southern. The two
1)11k8 have the same president) a majority of the board of directors of
Citizens are
also directors of Southern, and a majority of the shares
or each
bank is held by common owners. Citizens was organized with the
elceetation of its merger with, and operation as a branch by, Southern
at the
end of five years of actual operations by Citizens as a unit bank
14 acc01"clance with State law which, however, was recently amended,
effective June 29,
1962, so as to eliminate the necessity for this waitPeriod in. the circumstances of the present case.
Operation of
eltizens as a branch of Southern, rather than as an affiliated bank,
effect economies in staff and equipment.
No inconsistency with the purposes of 12 U.S.C., Ch. 16 is
eated.
Convwlience and needs of the communities. - Richmond
(P°P111P.tion around 220,000) is the capital of Virginia and serves an
eZterisive trade area havinz a diversified economy.
Bon Air (popula-
ti°11 about
6,000), an unincorporated community in Chesterfield County)
Virgirlla, which is contiolous to Richmond, lies about 10 miles west
ordoLztown Richmond and less than
5
miles from the Richmond city
Bon Air is located in one of the largest and most rapidly
e3cParlding sections of the Richmond metropolitan area, the credit needs
(3r which
are increasing proportionately.
Approval of the proposed transaction would have virtually no
efl ot nn
the convenience and needs of the city of Richmond. However,
if th
Proposal were to be consummated, there would be available in
kri A.
lr--in which there is now no operating banking office--the office
°f a bank
With a loan limit of about $5670000, rather than an office
or
smaller bank which, if now open for business, would have a
lo„
"Admit of around
S3,000.
1/otaa
.g.2122_tition. - If Citizens were to open for business, there
be little likelihood of any competition between that bank and
Sckth
e-- .Ln view of the close relationships between the two, as
`
'
-1'lbed above.
Southern ranks fifth in size among eight commercial banks
111 Riehm
°Ild, and this would not be changed by consummation of the
Pr°1°°8a1. Each of the four larger banks is more than twice the size of
8°14hem. The
proposed transaction would have no effect of consequence
Or
e Present competitive situation in Richmond.
The closest banking offices to Citizens are two branches of
The Ban,
'C
of Virginia, Richmond, with IPC (indjvidua]s, partnerships, and
c°11)(3rati0n-%
3
') deposits of around $113 million, which are 3 miles and 8
Ma
p
e- 'mom Citizens. These branches, and a branch of The First and MerCharts
Rational Bank, Richmond (IPC deposits of about $198 million), lo-
4:teci nine miles from Citizens, reportedly derive considerable business
Nm ton Air.
Consummation of the proposed merger would not adversely
anY banks serving the area.
Summary and conclusion. - The proposed transaction would unite
141° banks, one of which is not yet open for business, affiliated through
(3111111°11c4nershipnagement and between which no significant competi1404
would be
expected. The only effect of consequence on banking
'Petit.
might be to provide more effective competition with the other
oanic4
441g ins
titutions now serving Bon Air. The need and convenience of
that
tiorl *ea would be more adequately and efficiently served by consummaOf the
proposal.
Accordingly, the Board finds that the proposed transaction
14°14-cl be in
the public interest.
41N 13) 1962.
Item No.
BOARD OF GOVERNORS
440**,4.4
44L4
444
OF THE
CA *
Oft
• tr
4
6/13/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
44.
ADDRESS OFFICIAL CORRESPONDENCE
,
0
4V0,
TO THE BOARD
June 13, 1962
Mr, C. W. Robinson, President,
The First
National Bank of Sayreville,
. Sa
yreville, New Jersey.
Dear Mr.
Robinson:
This is in reply to your letter of May 28, 1962, regarding
the n
Lioard's letter of May 25 to your Bank with respect to information
141 be used by the Select Committee on Small Business of the House of
ePresentatives in a study of direct and indirect controls of banks.
inquire as to "the law under which we are required to submit the
'
ahtormation"
as well as "the protection that is provided the bank
opinst legal action by any shareholder who might resent a release
confidential information."
Although section 11(a) of the Federal Reserve Act authorizes
,_the Board "to require such statements and reports as it may
de
necessary," the Board's request in this instance was not made
suant to that statutory authority. As mentioned in the Board's
of y 25 letter, this specific survey was undertaken at the request
mThe Honorable Wright Patman as Chairman of the Small Business
th mittee. Representative Patmam expressed to the Board the view
°tat a
survey of chain banking would be meaningful and that collection
justhe data asked for would be of such value to the Committee as to
histifY the necessary expenditure of time and money. In keeping with
systrequest, the Board asked each member.bank of the Federal Reserve
to em to furnish the desired information. It may also be helpful
li.,
e Y°11 to know that the Small Business Committee of the House of
thr_ resentatives has the authority to issue subpoenas and "to require
13!
ea
ttendance of such witnesses and the production of such books,
rs, and documents, and to take such testimony, as it deems
eessary o u
Z
While this particular survey was made at Mr. Patmanis
the Board is of the opinion that more information than is
av ailable
regarding control of banks is needed.
''1
Mr. C. W. Robinson
-2-
The Board is not in a position to comment on the status
°f Your Bank in the event of legal action by a shareholder on account
of disclosure
of the amount of his holdings of stock of the Bank.
eresumably, such legal action would be governed by applicable
statutes
and legal principles of the State having jurisdiction of
the
litigation, and possibly also by provisions of Federal law
relating to national
banks.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
2
04,,Oft
e 404014.c'c%
Item NO. 5
BOARD OF GOVERNORS
6/13/62
OF THE
,d21,
A*
FEDERAL RESERVE SYSTEM
WASHINC3TON
OFFICE OF THE CHAIRMAN
June 13, 1962.
The Honorable Brent Spence,
Chair/Ian,
.970n1rnittee on Banking and Currency,
House of Representatives,
Washington 25, D. C.
Dear Mr. Chairman:
This is in response to a request by telephone on June 12
!!clm Robert R. Poston, 'Counsel of your Committee, for the views of
ps Board on H. R. 11654, a bill "To amend section 14(b) of the
authorl
ildsral
Reserve Act, as amended, to extend for two years the
ns
obligatio
':1 !i5r of Federal Reserve banks to purchase United States
inrectly from the Treasury."
The use of this authority by the Federal Reserve enables
the T
reasury to avoid creating unnecessary financial strains that
:Tad otherwise occur if it ,had to draw heavily on its accounts
dates.
T PeeiallY during periods immediately preceding tax payment
prompt
by
ren1Porary Treasury borrowing at such times, followed
oePayment from the proceeds of tax payments, provides a smooth
abrupt money market fluctuations
erating mechanism, without the
cleat
would otherwise occur. The authority could also be useful in
aling with situations resulting from a national emergency. Since
1. 42, when the authority was granted, it has been used sparingly, and
detail in the
!1_.8e is reported, as required by law, each year in
Bo
currently
appear
also
use
its
of
results
i,'11°8 Annual Report. The
weekly statements issued by the Federal Reserve and in daily statete issued by the Treasury. The Board favors the proposed legislation.
tt
Sincerely yours,
21 ;
r (4
Item No.
BOARD OF GOVERNORS
6
6/13/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
mat°
4 i1a***
June 13, 1962
Mr. Joseph R. Campbell, Vice President,
Federal Reserve Bank of Philadelphia,
Philadelphia 1, Pennsylvania.
Dear Mr. Campbell:
In accordance with the request contained in your
letter of June 11, 1962, the Board approves the appointment
Of George S. Siekielski, Jr.
/ as an assistant examiner for
the Federal Reserve Bank of Philadelphia. Please advise as
to the effective date of the appointment.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
21 6()
Item No.
BOARD OF GOVERNORS
7
6/13/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
(}4.0
ORzt
ADDRESS OFFICIAL CORRESPONDENCE
4
ms0tV
404o4*
'
%.4%
TO THE BOARD
June 131 1962
CONFIDENTIAL (FR)
Mr. Leland Ross, Vice' President,
Federal Reserve Bank of Chicago,
Chicago 90, Illinois.
Dear Mr, Ross:
In accordance with the request contained in your
letter of June 11, 1962, the Board approves the appointment
Of James A. Piskos as an assistant examiner for the Federal
Reserve Bank of Chicago. Please advise the effective date
of the appointment.
It is noted that Mr. Piskos is indebted to The
Indiana National Bank of Indianapolis, Indianapolis, Indiana.
Accordingly, the Board's approval of Mr. Piskos' appointment
given with the understanding that he will not participate
in any examination of that bank until his indebtedness has
been liquidated.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
21C
Item No.
BOARD OF GOVERNORS
8
6/13/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 15, 1962
Mr. Benjamin F. Groot, Vice President,
Federal Reserve Bank of Boston,
Boston 6, Massachusetts.
Dear Mr. Groot:
In accordance with the request contained in your
letter of June 11, 1962, the Board approves the appointment
Of Walter Orrin Farrell, at present an assistant examiner,
as an examiner for the Federal Reserve Bank of Boston.
Please advise the effective date of the appointment.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
*44 19°I1
,
BOARD OF GOVERNORS
ototto4.4
4,
OF THE
a
,o
v&, A*
FEDERAL RESERVE SYSTEM
A*
.A. *
'..,
a:.
tIt'tt:IL ram. ,,,
004,g01,-
WASHINGTON 25, D. C.
0
04
Item No. 9
6/13/62
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 130 1962
1
r. Alfred Hayes, President, ,
Federal
Reserve Bank of New York,
4ew York 45, New York.
Bear Mr. Hayes:
In accordance with the tentative arrangements made with Vice
Prec'A
"ent
4
,
Crosse by the Board's Division of Lamination, it is under°d that your Bank will make available, for a period of approximately
months or from June 18 to August 17, the services of Mr. John B.
1011glson, a Bank 'Examiner for the Federal Reserve Bank of New York.
ba"e in Washington, Mr. Harrison will be assigned to the foreign
:
II lid-rig section of the Board's Division of Examinations, but it is also
become generally familiar with
tluiPed he will have an opportunity to
work of the Division as a whole and to visit other divisions of
the
des./843a rd. While on assignment in Washington, Mr. Harrison will be
lgnated as a Federal Reserve Examiner.
It is understood that the Federal Reserve Bank of New York
absorb all of Mr. Harrison's salary and subsistence expenses, and
wqboard will reimburse him for transportation expenses in connection
the Board's
tran triPs to and from New York each week in accordance with
vel regulations.
Bank
The Board of Governors appreciates the cooperation of your
making the services of Mr. Harrison available during this
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER