The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
6/61
Minutes for
To:
Members of the Board
From:
Office of the Secretary
June 16, 1961
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. Shepardson
Gov. King
Minutes of the Board of Governors of the Federal Reserve System
on Friday, June 16, 1961.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Mills
Robertson
Shepardson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
M2aay_11.9.41h2t
The Board met in the Board Room at 10:00 a.m.
Sherman, Secretary
Kenyon, Assistant Secretary
Thomas, Adviser to the Board
Young, Adviser to the Board and Director,
Division of International Finance
Molony, Assistant to the Board
Fauver, Assistant to the Board
Noyes, Director, Division of Research
and Statistics
Holland, Adviser, Division of Research
and Statistics
Koch, Adviser, Division of Research and
Statistics
Landry, Assistant to the Secretary
Petersen, Special Assistant, Office of
the Secretary
Eckert, Chief, Banking Section, Division
of Research and Statistics
Yager, Economist, Government Finance Section,
Division of Research and Statistics
review.
Mr. Yager reported on recent developments in
the money market, following which Mr. Thomas described developments with
l'eeloect to bank reserves, the money supply, and related matters.
Mr. Eckert
thll distributed charts relating to the liquidity position of the banking
sYstem and
commented on that subject.
from
Messrs. Young, Holland, Koch, Petersen, and Yager then withdrew
the meeting
and the following entered the room:
Mr. Farrell, Director, Division of Bank
Operations
Mr. Solomon, Director, Division of Examinations
6/16/61
-2Mr. Hexter, Assistant General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Daniels, Assistant Director, Division
of Bank Operations
Mr. Benner, Assistant Director, Division
of Examinations
Miss Hart, Assistant Counsel
Mr. Troup, Supervisory Review Examiner,
Division of Examinations
Mr. Achor, Review Examiner, Division of
Examinations
Discount rates.
The establishment without change by the Federal
Reserve Banks of New York, Philadelphia, and San Francisco on June 15,
1961) of the rates on discounts and advances in their existing schedules
as az:21rl
unanimously, with the understanding that appropriate advice
lloald be sent to those Banks.
Items circulated to the Board.
beeII
The following items, which had
circulated to the Board and copies of which are attached to these
inutes under the respective item numbers indicated, were approved
una
nimously:
Item No.
tiett
to The Cleveland Trust Company, Cleveland,
a .r) aPProving an extension of time to establish
vl'anch at 14481 Cedar Road.
1
tetter to
all Federal Reserve Agents requesting
tab
.(lulations showing the dates on which certain
ral Reserve notes were issued to the Reserve
by the Federal Reserve Agents. (With copies
°Ie Presidents of all Federal Reserve Banks.)
2
letter 4.
uo the Comptroller of the Currency regarding
the
Pl'oPosed Federal Reserve note printing order for
f18o81 year 1962.
3
T
6/16/61
-3Messrs. Farrell and Daniels withdrew from the meeting at this point.
vest of Justice Department.
Consideration had been given at the
meeting on June 13, 1961, to a memorandum from Mr. Noyes dated June 9, 1961,
concerning a request of the Department of Justice for a list of the 1,900
baliks which submitted reports in the 1955 business loan survey or, as an
alternative, an indication as to which of the 43 banks listed in its letter
submitted reports in that survey.
Following discussion of the matter, it
.
understood that the staff would draft a reply to the Justice Department
P'llrsuant to this understanding, there had been distributed under date of
june 15) 1961, a draft of reply to the Department setting forth the names
eT the 22
strongly
reporting banks from among the 43 listed in its letter, but
Urging) for reasons stated, that in communicating with banks in the course of
it8 investigations the Department avoid reference, directly or indirectly, to
liecleral Reserve surveys or statistical reports.
In response to a question from Mr. Noyes as to whether the letter, as
cil'afted, reflected the consensus of the Board regarding an appropriate reply
t0 the request from the Department of Justice, Governor Robertson said that
it re
flected his views.
gested a
However, for the purpose of added emphasis, he sug-
rearrangement of the contents of the letter.
his views,
Governor Shepardson stated that the letter did not reflect
--ee he believed this was a situation in which the Board could justifiably
ci
to supply the information requested.
IsePly he
would have in mind.
He then suggested the type of
6/16/61
Governor Mills concurred in the point of view expressed by Governor
Ehepardson.
Therefore, following further discussion, it was understood that
alternative drafts of reply to the Department of Justice would be prepared
for consideration by the Board, it being contemplated that a reply, when
aPproved by the Board, would be held for discussion with Assistant Attorney
Genera Loevinger if he Should be able to accept an invitation to meet with
the members of the Board in the near future.
Messrs. Thomas, Molony, Noyes, O'Connell, and Eckert then withdrew
from the meeting.
Suestions under Reoulations T and U (Item No.III:. Distribution had
been made of a memorandum from the Legal Division dated June 15, 1961, relating
to the general question of the status under Regulation T, Credit by Brokers,
De —
a4L-B, and Members of National Securities Exchanges, and Regulation U, Loans
by
-9°4-m5 for the Purpose of Purchasing or Carrying Registered Stocks, of
4°48 to pay life insurance premiums, with collateral consisting of mutual
tand shares.
The memorandum referred to receipt of a letter dated May 24, 1961,
*°41 Mrs Martin Ginsburg of New York City, attorney for a corporation seeking
to register a stock issue with the Securities and Exchange Commission, who
aked that a question be determined with respect to affiliates of his client.
Ihe question posed by Mr. Ginsburg was similar to the one that had been under
6/1.6/61
_5_
stlAdY for some months by the Board's staff, namely, whether a loan by a
bank for the purpose of paying life insurance premiums was subject to
Regulation U, where the loan would be secured by shares in a mutual
investment
fund and the arrangements for the loan would be made as part
Of
4
"package" at the time the shares were purchased.
The circumstances
81-Irrounding Mr. Ginsburg's request were, briefly, that there were three
affiliates of his client; one would sell mutual fund shares, a second
1.1°1114 lend money on the security of those shares, and the third would sell
lire insurance.
Since the second affiliate would borrow from banks to
rinance the lending program, it would be an "unregulated lender" (subject
t° section 221.3(q) of Regulation U) and the bank loans would be regulated
loan
8
if the Board were to rule that the loans were in effect being made
11°1s the Purpose of buying the mutual fund shares as well as for the purpose
°r PaYing the insurance premium.
In these circumstances, and in view of related questions under section
11(ci) of the Securities Exchange Act of 1934, the Securities and Exchange
Co
had refused to permit the registration statement to become
l‘fective until such time as the status of the loans was resolved by the
184 a. and by the Commission.
In an effort to speed registration, Mr.
ulsg offered on behalf of his client an undertaking that, pending
unation of the underlying question, none of the affiliates would
lena
111"eY on collateral consisting of securities sold by any of the
6/16/61
-6-
affiliates during the preceding three months, and that no arrangement or
understanding as to the pledge of the securities for loans to pay life
insurance
premiums would be made or entered into at the time the shares
'were sold.
The Securities and Exchange Commission had agreed to accept
this undertaking as part of the registration statement, if this position
was acceptable to the Board.
It was the view of the Legal Division that
no question as to the applicability of Regulations T or U to the activities
of the corporations affiliated with Mr. Ginsburg's client would arise so
1°ng as the proposed undertaking was in effect.
Therefore, it was the
Division's recommendation that a letter be sent to Mr. Ginsburg in substantially the form of a draft reply attached to the memorandum.
The memoran-
dllm noted, however, that Mr. Ginsburg had requested that the Board continue
to consider the underlying question and that an interpretation be issued on
this point.
In discussion of the matter, Governor Mills inquired as to the
advisability of informing Mr. Ginsburg along the lines suggested when the
IlticierlYing question had not yet been resolved.
The decision on that question,
8.11c1 the related questions under section 11(d) of the Securities and Exchange
Act
Of
1934, would appear to have a significant bearing on the attractiveness
ef the securities proposed to be issued by Mr. Ginsburg's client.
If the
ndings
Isecurities were offered subject to the proposed undertaking, misundersta
Ilg.ht arise, with resultant complications if the Board should subsequently
Q°11eluae that the loans in question were subject to Regulations T and U.
6/16/61
-7Staff replies were to the effect that the Securities and Exchange
C°Inmission proposed to accept the registration statement under the condescribed, it being understood that the prospectus would include
4
clear statement that no "package" deals were to be entered into as long
as the proposed undertaking was in effect.
Thus, the only point on which
the Board needed to pass at the present time was whether the limited
transactions proposed to be entered into were subject to Regulations T
arici U, and it seemed rather clear that they would not be.
In substance,
then) although the problems referred to by Governor Mills were in the
Picture, the decision whether to permit the registration statement to
become effective was within the province of the Securities and Exchange
Cission.
As to the underlying question, that is, whether loans for
the Purpose of paying life insurance premiums would be subject to Regulation U where the loans were secured by shares in mutual investment
runcis and arrangements for the loans were made as part of a "package"
4t the time the shares were purchased, difficulty had been encountered in
(3htaining adequate information.
It was hoped that a suggested interpretation
be presented to the Board for consideration in the relatively near
ruture, but even so the variety of possible arrangements under which activities of this kind could be conducted might present a substantial problem.
Following further discussion, approval was given to the letter to Mr.
Ginsbur,.
a copy of which is attached as Item No. 4.
In this connection,
Govey,
'"°r Shepardson indicated that he shared the apprehensions expressed by
6/16/61
-8-
Governor Mills but saw no other answer to be given at this time.
Governor
Mills indicated that he did not wish to dissent from the sending of the letter.
RWever, he was not sanguine about the developments that might occur.
Miss Hart then withdrew from the meeting and Mr. Hooff, Assistant
General Counsel, entered the room.
iR22uest by Justice Department re examination reports of North Shore
Bank
Item No.
5
In connection with certain criminal prosecutions against
9fricers and directors of the North Shore Bank, Miami Beach, Florida, the
13°ard had permitted the examination reports of the bank for the past 15 years
t° be Placed in the custody of Thomas E. Lindsey, an examiner for the Federal
1130sit Insurance Corporation, for assistance to the United States Attorney
In Kt
ami in obtaining information for the prosecution of the case but not
f°1' 118e in evidence. The Board had been requested to make available both
the
9Pen and confidential sections of the examination reports, but it decided
available only the open sections.
Under date of June
9, 1961, a letter was received from the Department
Justice requesting that the period for the retention of these examination
days
r.e13°Ists in the custody of Mr. Lindsey be extended for an additional 90
tr°14 June 18, 1961, and in the opinion of the Division of Examinations, as
eclpressed in a memorandum distributed to the Board under date of June 14,
1961
4-) the best course of action would be to grant the requested extension,
slIbieet to the same terms as the original loan.
A draft of letter to the
liktment of Justice was attached to the memorandum.
6/16/61
-9The memorandum also referred to an informal request by the justice
DePartment to discuss the contents of the confidential sections of the
l'ePorts in the Board's offices, the purpose being to help the prosecution
PrePare against the possibility of unanticipated assertions by the defendants
at the
time of the trial.
With respect to this request, it was the view of
the Division of Examinations that it would be undesirable as a matter of
P011eY to make the confidential sections of the reports available to, or
even discuss them with, the Department of Justice.
If the Board agreed with
this view, the Division proposed to advise the Justice Department accordingly
by t
elephone.
In commenting on the memorandum of the Division of Examinations, Mr.
Scl°140n noted that the Federal Reserve Bank of Atlanta concurred in the
P°81tion taken by the Division on the question of the confidential sections.
Following discussion, during which Governor Mills requested that the
l'ecOrd show that he continued to disassociate himself from the action taken in
takfh-
available the examination reports of North Shore Bank to the United
States Attorney, the letter to the Justice Department was approved, Governor
MIlls
abstaining. A copy of the letter is attached as Item No. 5. On the
l'equeat relating to the confidential sections of the reports, it was agreed
thEtt the Division of Examinations would advise the Justice Department informally
8414gthe lines suggested in Mr. Solomon's memorandum.
Mr. Benner withdrew from the meeting at this point and Mr. Molony reelltered the
room.
6/16/61
-10Application of Citizens Commercial & Savings Bank.
Application had
been made by Citizens Commercial & Savings Bank, Flint, Michigan, for consent
t0 the proposed consolidation of that institution with The Old Corunna State
Be.nk, Corunna, Michigan, and for permission to operate a branch at the present
orrice of Old Corunna.
In a memorandum dated June 6, 1961, copies of which
hacl been distributed to the Board, the Division of Examinations recommended
4Proval of the application, as had the Federal Reserve Bank of Chicago.
There had also been distributed a second memorandum from the Division of
'llainations, dated June 8, 1961, informing the Board of receipt of an
a'PPlication by Citizens Commercial to consolidate with Chesaning State
/a1111k, Chesaning, Michigan.
The June 8 memorandum noted that the Michigan
.te Banking Department had approved the consolidation of Citizens and Old
'
tzl
C01.1111118. but, so far as was known, had not yet acted on the other application.
138.8ed on past experience, the State Banking Department might not act for two
ol" three months or longer.
Therefore, it appeared that the Board had the
following alternatives:
1.
It could act upon the application to consolidate Citizens
Commercial & Savings Bank and The Old Corunna State Bank
at this time.
2.
It could defer action on the Citizens-Old Corunna case
until the memorandum on Citizens-Chesaning had been
prepared, at which time the Board could act upon the
Citizens-01d Corunna application or even on both in
the event the State Banking Department had approved the
consolidation of Citizens-Chesaning.
3.
The Board could defer action on both cases until the
State had acted on Citizens-Chesaning.
6/16/61
-11-
In the event the Board should decide to adopt either the second or the third
alternative, it was suggested that it would be advisable to inform Citizens
Commercial & Savings Bank of the circumstances.
On the question of procedure, it was the consensus, after consideration
°f this aspect of the matter, that the Citizens-Old Corunna case should be
c°nsidered without delay.
In reaching this consensus, the Board had before
it comments by Mr. Solomon to the effect that on the basis of preliminary
review of the Citizens-Chesaning application, an adverse decision on the
Cc3rull1a case might tend, in practical effect, to foreclose favorable consideration
of the Chesaning case.
According to Mr. Solomon, it appeared
t° the Division of Examinations, upon initial inspection, that the Chesaning
ePPlication might not present as strong a case for approval as the Corunna
043
Plication.
As to the merits of the instant case, Mr. Solomon commented that the
licant bank was one of two local banks headquartered in Flint, with
ciel3c3sit8 somewhat larger than the other institution.
braz„
the
There was also a
of Michigan National Bank, Lansing, Michigan, and competition among
uaree institutions was keen.
The two local banks each had a considerable
1111111ber of branches in Flint and the surrounding area, while Michigan National
1.41s limited under State law to the single branch in the Flint area.
The two
4ca.1 Flint banks had been expanding within a 20-mile radius of the city and
1?el'e now moving beyond that area into the 25-mile radius.
While it would be
6/16/61
-12under State law for banks in Pontiac, Saginaw, and Lansing to get
into this area to some extent, thus far they had not done so.
Also, because
Of the State law, the Flint banks could not go into the surrounding communities
in which banks were already in operation and establish branches; therefore,
their only recourse was to buy out the existing bank.
If deposits at banking
°rfices in the city of Flint were included, the banks in that city were, of
c°11-rse, dominant in terms of area deposits.
In terms of deposits at offices
°Iltside the city of Flint, the holdings of the two local banks were substantial, but not unduly large in relation to the total.
The report of the Department of Justice on competitive factors
ecPressed the view that a degree of competition existed between the applicant bank and the bank in Corunna, 21 miles away, but in the opinion of the
livision of Examinations there was not very much competition.
More appeared
to exist between the Corunna bank and the banks in nearby Owosso.
On the basis of the facts of the specific case, the Division of
cialinations recommended favorable action on the application, although
th some doubts because of the question as to how far the absorption by
the ?lint banks of the independent banks within a 25-mile radius should be
PerMitted to
go.
However, the two local banks were in strong competition
Illth each other and with the Flint branch of Michigan National, and ringing
the
area were a number of fairly large cities with banks of substantial size.
1-
6/16/61
-13Governor Mills expressed the view that the application could
reasonably be approved.
Mr. Solomon had explained the problems and diffi-
culties involved, but the recommendation the Division of Examinations had
reached, on
also had
balance, was the conclusion that he (Governor Mills)
reached.
the
Although consummation of the proposed merger would expand
size of the applicant bank, there were alternative sources of credit, many
Of them, throughout the area.
Also, it did not appear to him that the smaller
banks competing in the general area would be damaged by favorable action on
this particular application.
appliGovernor Robertson indicated that he would favor denying the
of the
cati°11. First, there was a history showing that in the past decade 11
19 hanks serving the area within a 20-mile radius of Flint, but excluding the
city, had been absorbed, ten by the two local banks in Flint.
Second, the
aPPlicant bank was proposing to pay a premium equivalent to approximately
three per cent of the total deposits of the Corunna bank (and seven per cent
the
motivating influence
Chesaning case), thus affording an indication of the
behind these proposals.
Third, there was a real concentration of area banking
Ises°urces in the two Flint banks, and the absorption of banks in the surroundunless a line was
14 area might well continue until they were all absorbed
drat—
"'Li at some place. To him, this appeared to be a good place to draw the
linft.
' Fourth, he could not find any benefits that would flow to the public
by v,
Ixtue of the proposed merger. There was no evidence that the bank in
p-e
6/16/61
-14-
Corunna was not serving the public satisfactorily; as a matter of fact,
the evidence was to the contrary.
institution.
The bank was a good earner and a sound
The merger would simply eliminate one currently available
source of banking services and substitute a branch of a bank that was
alrem%.,,Y available 21 miles away.
Governor Shepardson said he could agree with the Division of
)1Ininations as to the specific situation.
However, in light of the
rlsacillal encroachment of the two Flint banks in the area concerned, it
seemed
desirable at some place to find a dividing line, and this might
be the aPpropriate place.
The Corunna bank evidently was doing well, and
It Ifas fairly sizable in relation to the other banks in the area surrounding
?lint.
All things considered, even though he felt the Division of Exam!had made a good case as far as this particular application was
c°11cerned, he would align himself against approval of the application, on
the basis that in a gradual encroachment of this kind a dividing line must
be clrawn at some point.
In subsequent comments, Governor Shepardson said that in considering
the
question of drawing a line he had looked at the list of banks in the area.
"e of the very small banks had been involved, he might have felt that its
131‘°81Dects could not be too good and his conclusion might have been different.
ever, the
Corunna bank had $7-3/4 million of deposits and appeared to be
111 a Position to take care of itself.
9
6/16/61
-15Chairman Martin commented that he would be inclined to agree with
the State authorities and the Division of Examinations so far as the facts
(311 this specific case were concerned.
He was not sure whether it was the
Board!s responsibility to draw a dividing line.
However, if a line was to
be drawn, this might be as good a place as any, and on that basis he would
be inclined toward disapproval.
During additional discussion, Governor Mills inquired of Mr. Hexter
Ilhether the theory of drawing a line and setting a stopping point against
i'llrther expansion did not involve so vague a concept as to create difficulty
14 the event of judicial review.
Mr. Hexter replied in terms that in all
eases the Board must exercise a judgment.
The Board, he noted, was regarded
bY the Congress as expert in this particular field.
In his opinion, a Board
de i
-8-Lon to deny a merger would not be upset, even though the basis of the
deci,.
10n was that the further growth of the applicant bank would not be in
'
the
Public interest, if there was a virtual absence of affirmative factors
rctiloring the proposed merger.
With regard to the question of the public interest, Governor Mills
in
g4ired whether a proposed merger could not be regarded as in the public
interest
if the factors appeared neutral; in other words, where, as it
41°13ectred to him in this particular case, a proposed merger would not be
Q°11trctrY
to the public interest.
In reply, Mr. Hexter raised the question
1.41ether it was realistic to assume that in any case the scales would be
6/16/61
-16-
precisely balanced.
He expressed doubt whether an instance would arise
Where a Board judgment would be reversed by a reviewing court on the
'
61round that the pros and cons of the case appeared to be exactly in
balance.
It being indicated, then, that the members of the Board, except
Governor
underMills, were inclined to disapprove the application, it was-
that the Federal Reserve Bank of Chicago would be asked whether it
Wished to make any further comments or supply any additional information.
_4p1ication of United California Bank (Item No.
Inem°randa dated June
6). Copies of
6 and June 8, 1961, from the Division of Examinations
had been
distributed with respect to an application by United California
Barat
) Los Angeles, California, for permission to merge with Bank of Encino,
A
1J0.8
,Allgeles, California, and to operate branches at the present offices of
the latter.
Both the Division of Examinations and the Federal Reserve Bank
R,
Francisco recommended approval.
barik.
The reports of the other Federal
supervisory agencies on the competitive factors involved in the proposed
ker.66Qr were favorable, but the Department of Justice reported unfavorably.
The June
6 memorandum of the Division of Examinations was concerned
'
4Pecif.4
,
- -Lcally with the application by United California Bank to acquire the
8°.11k °f
Encino. The June 8 memorandum noted the pendency of two additional
111e1s8ers planned by United California Bank in the Los Angeles area, along with
a
r
ther proposed merger reported recently in the press.
ill
'
It was suggested,
6/16/61
-17-
however, that there did not appear to be any reason to defer action on the
United California-Bank of Encino merger application, since the other proposed mergers were with banks located outside the area served by Bank of
Eheino.
As stated in the June
6
memorandum of the Division, its favorable
recommendation on the application by United California Bank to merge with
Eank of Encino
was based upon several considerations.
First, in view of
the densely populated service areas involved and the substantial number of
c°113eting banking offices there located, the elimination of present and
Potenti„
d.a. competition between the two banks would not represent a tendency
t° e-lscl monopoly by the resulting bank.
Second, there would be no reduction
111 the number of banking offices available to the public.
Third, while an
ill%endent bank would be eliminated, Bank of Encino through its reluctance
to
,
''°v1de additional capital and its failure to establish additional offices
liasn°t fulfilling its responsibilities or adequately serving the needs of
the
--ea.
The resulting bank would provide the community and present and
11°tential customers of Bank of Encino with a stronger banking institution
c3ring a wider range of banking services, more capital, and larger
resourn
-es. Fourth, the proposed merger would intensify competition among
the 1
are banks in the areas now served by Bank of Encino, without apparent
actve
rse
effect upon the present banking situation.
In the course of his comments on the matter, Mr. Solomon observed
that
the applicant bank was the third largest in the Los Angeles area and
6/16/61
-18-
the fourth largest in the State of California.
At present there were
t/relve banks operating a total of 63 offices in the San Fernando Valley,
'here Bank of Encino was located (about 18 miles north of the downtown
L°s An
business district).
Thus, there was active competition, and
although the Department of Justice had expressed the view that the effect
/0111d. be adverse, it was difficult to see how there would be much detrimental
effect on area competition as a result of the merger.
Furthermore, certain
illItant banking factors were not taken into account by the Justice
43artment, since it was rendering a report solely on the competitive
fact
Ors involved. Among other things, Bank of Encino had shown a reluctance
to
Provide additional capital. It had failed to establish the Canoga Park
bralleh for which it made application, apparently because it was unwilling
to 811M1Y the required additional capital, and thus it was not keeping pace
with the
growth of other banks in the area or with the growth of the com1411'flitY.
On the other hand, United California Bank would make additional
ees available to the present and potential customers of Bank of Encino.
Governor Mills stated that he would accept the favorable recommendation
or
.
e Division
of Examinations in this case.
As he saw it, the competitive
ItIletion was quite similar to that presented in the Citizens Commercial-Old
COrurin
a application, just considered by the Board, for here again there was
the
question of drawing a line at some point. The applicant bank, he noted,
44 a
substantial number of branch applications outstanding, along with three
6/16/61
-19-
a
dditional merger proposals.
Accordingly, although he was willing to approve
the present application, he had grave reservations about further expansion by
the bank.
He hoped it might be possible for the three Federal banking agencies
t"'eachsome understanding that would informally freeze the positions of the
large California banks for a waiting period to see what might develop.
Governor Robertson stated that he would deny the application.
He
attached much weight to the fact that the concentration of banking resources
in the hands of a few large institutions was steadily increasing in the area
"q1cerned and in the State of California.
were
Future plans of these large banks
known; they had been publicly announced in terms of prospective mergers
ancl additional branches.
Also, he felt it was a mistake to put too much
eall3hasis on the capital situation of the Bank of Encino.
As of today,
this $17 million bank was not inadequately capitalized.
While the staff
Meill°ralaclum had directed some criticism toward the bank because it was
to provide additional capital in order to expand its branch
°I
stions, he did not feel that the Board could take a position on the
Q11-1'rent Proposal on the basis that the bank was unwilling to expand branchIt might be satisfied to operate in its present manner, and some
Pe°131e Prefer to deal with smaller banks. Further, the management of the
batik
has good. To summarize, there was no indication that this bank was
not rileeting the needs of the public, there was no indication of lack of
gc3c'd management, and there was no evidence that capital or earnings were
01k
fl Ir.:4
7 "N
6/16/61
-20-
inadequate.
4
In the circumstances, it appeared to him that this was merely
case of a large bank assuming the initiative in acquiring an independent
bank) in line with the general trend in California.
United California Bank,
he noted, was offering a premium equal to about 4 per cent of the total
delp°sits of Bank of Encino.
He could not find any favorable banking
factors to offset the factor of increased concentration, and he did not
see how the prevailing trend toward increased concentration could be
taPPed unless a line was drawn at some point.
He agreed with Governor
111115 that it would be desirable if all of the bank supervisory agencies
c°u1sa reach an understanding to wait for a while in order to appraise
developments in California.
Governor Shepardson commented that he could not see at the present
tize
anY tangible move in the direction of unified action to stop the
easing degree of concentration of banking resources in California in
the hands of a few large banks.
that
As to the United California Bank, he noted
it had evolved from an effort, which he had supported, to build stronger
c°11113atition for Bank of America National Trust and Savings Association, and
12131'°1ral of the present application would seem to be in line with that
effszyy.4.
a. stab 4.
On the one hand, he was concerned by the question of how to bring
the increasing concentration of banking resources in the State.
°I1 the other hand, there was the question of equalizing the competition
elli°11 the existing large banks.
All told, he had found the current
:
47
1:
6/16/61
-21-
aPPl1c5tion difficult to resolve.
If he could see some prospect of a
Moratorium on further expansion of the large banks through branches and
he would be inclined to favor denial of the application.
However,
he did not see such a moratorium in prospect at the moment, and therefore
he Would resolve his doubt on the side of approval.
Chairman Martin indicated that he also would favor approval.
- not se
in the present circumstances
He
how the Board could do anything
More than conduct a harassing operation.
Thereupon, the application of United California Bank for permission
o merge
with Bank of Encino and to operate branches at the present offices
Qr the latter was approved, Governor Robertson dissenting.
A copy of the
letter sent to United California Bank informing it of the Board's action is
4tta4lAad as Item No 6.
The meeting then adjourned.
Secretary's Note: Governor Shepardson today
approved on behalf of the Board the following
items:
the 24em0randa from the Division of Personnel Administration recommending
biltiqfPointment of the following persons as Clerk-Stenographers in that
dAtelei°n, With basic annual salary at the rate indicated, effective the
8 of entrance upon duty:
Karen Marie Ditta
Mary LaGrand Vance
Carol Ann Slocombe
Carol Judith Sullivan
$3,970
3,970
4.1040
41olto
6/16/61
-22-
Letter to the Federal Reserve Bank of Philadelphia confirming arrangelents with the Bank to make the services of James P. Giacobello, Examiner
!
ror the Bank, available to the Division of Examinations for a period of
"Proximately three months beginning June 26, 1961, with the understanding
Olat during his assignment in Washington, Mr. Giacobello *would be designated
s a Federal Reserve Examiner and that the Reserve Bank would absorb his
:
aLarY and travel expenses.
Memorandum from the Division of Personnel Administration recommending
at arrangements be made with Dr. Calvin D. Linton to conduct a 20-hour
11rse in effective writing as an activity of the Employee Training and
el
lvelopment Program beginning September 26, 1961, with compensation in the
°1111t of $500 to be paid at the completion of the course.
Secretary.
2f),r
BOARD OF GOVERNORS
OF THE.
Item No. 1
6/16/61
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
4
4
ADDRESS OFFICIAL CORRESPO
TO THE BOARD
June 16, 1961
Board of Directors,
The Cleveland Trust Company,
Cleveland, Ohio.
Gentlemen:
Pursuant to your request submitted through
the Federal Reserve Bank of Cleveland, the Board of
Governors has approved an extension until August 9,
1961, of the time within which The Cleveland Trust
Company may establish a branch at 14481 Cedar Road.
The establishment of this branch was authorized in a
letter dated July 8, 1960, to be located at 14539
Cedar Road. However, the correct address is noted
to be 14481 Cedar Road.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
NCE
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 2
6/16/61
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 16, 1961.
'ear sir:
Enclosed is a copy of a letter from the Department of Justice,
dated
mjune
$100 F
e 6, 1961, together with the list of serial numbers of $50 and
Reserve notes referred to in the letter.
The request of the Department of Justice relates to the same
case 4_
resile
'
ll connection with which the Internal Revenue Service recently
liotesst?d your Bank to furnish the serial numbers of all $50 and $100
- 13-Laced in circulation during the period 1940-1960.
The foregoing information was requested by the Department of
-n an "expedite" basis to be used in the Department's presentathis matter before a Federal Grand Jury whose meeting was then
suffier.lt. At that time, the Department's representatives did not have
termselent time available to appraise fully the extent of their need in
rort,?f trial of the criminal matter. In the course of its preparation
thAt
however, the Department has determined that it will be essential
-u be furnished the date of issuance of the particular notes.
sti
hce
,,ton
The letter from the Department of Justice requests the month
tricl Ye
-artinar
i in which the Federal Reserve Agent sent to his member banks the
eritati-4-ar Federal Reserve notes appearing on the enclosed list. Repre.t,hat i;."7.78 of the Department of Justice and Internal Revenue understand
-is impossible to supply the dates on which the notes were paid
-lre
4arlk
ulation, but that the date the notes were issued to the Reserve
.„
an ,
be suPplied unless the necessary records have been destroyed.
el
,
41„Q%rci
.,,-1-Y, it will be appreciated if a tabulation is sent to the Board
47“01firu„,--g
"
°P each note in the enclosed list the month and year, subsequent
jarm
4'
17 1, 1940, but prior to December 31, 1960, that the note was
llect-4
'tote of'o the
Federal Reserve Bank by the Federal Reserve Agent. When a
the Particular number could have been within the period specified
'
›
c i
- ciefl 1934 or 1950 Series note, both possible dates of issue should be
and, for Banks with branches, the tabulation should show at which
ce ;
j'alich,'"e note was issued. Separate tabulations for head office and
'Lzt. -8 rnaY be provided if that would be more practicable than a single
n
Con
rY
Please return the hand written list enclosed.
may be retained for your files.
The photographic
theAs requested in the third paragraph of the Department's letter,
',abulations submitted should be accompanied by a certification, bearit
z the
corporate seal, by the Federal Reserve Agent, Assistant Federal
ellsrre Agent, or Alternate Assistant Federal Reserve Agent as to the
n °dY and authenticity of the data from which the tabulations have been
-°R1Piled.
It will be appreciated if the information requested is submitted
bY the end
of this month.
to the
A copy of this letter, without the list of notes, is being sent
President of the Bank.
Very truly y
Merritt S
Secret
Zriei,Osures*
DERAL RESERVE AGENT WITH COPY TO THE
TS OF ALL FEDERAL RESERVE BANKS.
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
3
6/16/61
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 16, 1961
The Honorable,
The CoNptroller of the Currency,
Treasury Department,
',:la
shini7;ton 25, D. C.
It is respectfully cequested that you place an order vith
Lhe
Re,.L'ul.oau of Ensravins and Print:Inc for printirc 525,632,000 Federal
ervo notes (sinE,le units) of the 1950 Series durinc the fiscal
'
be8
3:1 onainc June 30, 1962, in the amounts and denalinations shown
.°14 for the various Federal neserve B-nhs:
Denomination
1303tOn
('' r
Y)
10
20
50
100
Hew York
Philadelphia
Dollar
Ayaount
8,20,00o1,400,000
205,200,000
72,000,000
3,600,000
7,200,000
144,000
43,200,000
432,000
20,520,000
5
10
20
50
loo
25,340,000
56,4110,00o
14,400,000
1,296,000
23,000
120,200,000
564,400,000
238,000,000
04-,800,000
23,300,000
5
15,490,000
15,120,000
5,040,000
364,000
, 233,000
77,400,000
151,200,000
100,300,000
43,2o0,000
23,300,000
14,040,000
04,840,000
16,560,000
720,000
233,000
70,200,000
248,400,000
331,200,000
36,000,000
23,300,000
10
20
50
100
Cleveland
Ii-uia,ber of
notes
5
lo
20
50
100
The Comptroller
Of the Currency
-2-
Number of
notes
Dollar
Amount
$5
10
20
50
100
12,600,000
20,800,000
16,200,000
576,000
432,000
$63,000,000
208,000,000
324,000,000
28,800,000
43,200,000
5
24,120,000
19,440,000
8,230,000
576,000
120,600,000
194,400,000
165,600,000
57,600,000
26,280,000
29,800,000
15,120,000
864,000
864,000
131,400,000
298,000,000
302,400,000
7,920,000
12,240,000
4,320,000
288,000
288,000
39,600,000
122,400,000
86,400,000
14,4a0,000
28,800,000
5,760,000
6,120,000
5,400,000
144,000
144,000
28,800,000
61,200,000
108,000,000
7,200,000
14,400,000
20,
50
100
10,80°,000
10,720,000
8,640,0m
144,000
144,000
54,000,000
107,200,000
172,800,000
7,200,000
14,400,000
5
10
1,800,00o
14,400,000
9,000,000
144,000,000
115,200,000
7,200,000
Denomination
Richmond
Atlanta
10
20
100
Chicago
5
10
20
50
100
St. Louis
5
10
20
50
100
Minneapolis
5
10
20
50
100
Kansas City
Dallas
5
10
20
50•
5,760,000
11414,000
43,200,000
86,400,000
The Comptroller
of the Currency
-3Denomination
Number of
notes
Dollar
Amount
San Francisco
$10
20
50
100
12,240,000
16,200,000
432,000
1,152,000
122,400,000
324,000,000
21,600,000
115,200,000
Totals
$5
10
20
50
100
152,920,000
242,680,00o
119,520,000
5,616,000
4,896 000
764,600,00o
2,426,800,00o
2,390,400,o00
280,800,000
469,600,000
525,632,000 $6,352,200,000
Respectfully,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASJAINGTON 25, D. C.
Item No. 4
6/16/61
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 16, 1961
1:r,
Martin D.
Weil, Gotshal Ginsburg,
&Manges,
60 Last
42nd Street,
New York 17, New
York.
Dear Mr.
Ginsburg:
This refers to your letter of May 24, 1961, requesting a
c!eermi
nation as to whether Regulations T or U would apply to certain
l'i,ensions of credit by Secured Financial
Corporation ("Secured"), a
4.n"sidiary of General Economics Corporation
("General"), which has
ailed: registration
statement with the Securities and Exchange
whi!,/1111
,
8sion, and to subsequent letters and telephone conversations
tals,?" You have had with members of
the Board's staff with a view to
"ng action which would expedite the
effective date of registration.
Briefly, your client, General, has three subsidieries.
The r4
rst of these, First Continental Planning, Inc. ("First"), is
a'
of'°ker-dealer "active in the over-the-counter market and in sales
ratTutnal funds securities". The second,
Financial Protection Corpothi:°21 ("Financial"), is a general life insurance
agent, and the
ple'clul Secured, is
in the business of making loans, against the
of pfe °I4 securities such as those sold by First, for
the purpose
premium payments on life insurance policies sold by
Liananancing
...,
poasiti It is understood that the Commission 'has
been studying the
of se e connection between the loan program
of Secured and the sale
Whichcurities by First, and has also expressed an
interest in a study
a 14,,,the Board's staff has been conducting in this general
area with
toar,747 to determining the applicability of certain
provisions
of the
'
4 8
Regulations T and U to similar ti'ansactions.
state
In order to expedite the effective date of the
registration
Seciarr,t, you have suggested that General make an
undertaking
that
,
leu will not accept the pledge of any
securities which have been
thre,'Y First (or any other affiliate of Secured) within
thin the preceding
and that no suggestion will be made or arrangement entered
4S 4
) at the time when any securities
are sold by any such affiliate,
ror ththe pledge of the securities, then or
later, to secure loans
'
4e purpose of
paying life insurance premiums.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. Martin D. Ginsburg
The Board has as yet taken no position on this subject.
However, it is clear that in any event, Regulations T and U would
not apply to loans for the purpose of paying life insurance premiums
unless there were a sufficiently close connection between the loans
and the purchase of securities. The Board believes that under the
conditions you' propose, there would not be such a close connection,
and accordingly, loans by Secured, for the purpose mentioned, would
not be subject to the regulation.
This opinion is based upon the facts set forth in your
recent letters, including that of June l, 1961, and any variation
rom those facts could of course alter the Board's conclusion. It
also understood that you have not withdrawn your request for the
!bard's opinion on the question originally presented, as to the
_Itallpact of Regulations T and U on the proposed activities of the
ree subsidiaries, and that if the Board should
conclude that loans
b5r Secured for the purpose:of paying premiums on life insurance sold
bY. Financial, with collateral consisting of securities sold by First,
.1.muld not be subject to the regulations, your client's subsidiaries
would resume and expand the activities
described in the request.
T
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
450"'"017:0.„
OF THE
•
FEDERAL RESERVE SYSTEM
;
*
Item No. 5
6/16/61
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
11,4LIati:
44t1.4,0
June 16, 1961
Herbert J. Miller, Jr.,
Asaistant Attorney General,
Criminal Division,
United States Department of Justice,
Nashington 250 D. C.
Attention:
Mr. Nathaniel E. Kossack,
Chief, Fraud Section.
Re: U. S. v. Baron deHirsch Meyer, et al
(HJM:NEK:fea 29-18-243)
Gentlemen:
This refers to your letter of June 9, 1961, in
Which You request the continued use of reports of ex4miTition of the North Shore Bank, Miami Beach, Florida, for
fUrther period of 90 days from June 18, 1961. The Board
agrees to this extension of time under the arrangements
evi0u5ly consummated that the reports are to remain in
,ne custody of Mr. Thomas E. Lindsey, Examiner, Federal
ueposit Insurance Corporation, and are not to be presented or taken to the court nor used in evidence in
411Y legal proceeding.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 6
6/16/61
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 16, 1961
Board of
Directors,
United California
Bank,
Los Angeles,
California.
Ge
ntlemen:
The Board of Governors of the Federal Reserve System, after
isideration of all the factors set forth in section 18(c) of the
theeral Deposit Insurance Act, and finding the transaction to be in
to 13A bl10 interest, hereby consents to the merger of Bank of Encino,
the .geles, California, with and into United California Bank, under
oh'
and title of the latter bank. The Board of Governors
aJ
tolcl approves
the operation of branches by the resulting bank at the
°wing locations, all within the City of Los Angeles:
Z
17031 Ventura Boulevard, Encino;
14708 Ventura Boulevard, Sherman Oaks;
17815 Chatsworth Street, Granada Hills; and
In the vicinity of the intersection of Roscoe
Boulevard and De Soto Avenue, Canoga Park
(approved but not yet established).
This approval is given provided (1) the proposed merger is
"feet
tiaii_ed within six months from the date of this letter and substan196:C4 in accordance with the Agreement of Merger, dated March 21,
are s
(2) shares
hares of stock acquired from dissenting shareholders
di4
-sPosed of within six months from the date of acquisition.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER