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9
Minutes for
To:
Members of the Board
From:
Office of the Secretary
June 20, 1963
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
Gov. Mitchell
Minutes of the Board of Governors of the Federal Reserve
System on Thursday, June 20, 1963.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Shepardson
Mitchell
Sherman, Secretary
Kenyon, Assistant Secretary
Fauver, Assistant to the Board
Farrell, Director, Division of Bank
Operations
Mr. Solomon, Director, Division of
Examinations
Mr. Johnson, Director, Division of
Personnel Administration
Mr. Hexter, Assistant General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Daniels, Assistant Director, Division
of Bank Operations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mrs. Semia, Technical Assistant, Office
of the Secretary
Mr. Bakke, Senior Attorney, Legal Division
Mr. McClintock, Supervisory Review Examiner,
Division of Examinations
Mr.
Mr.
Mr.
Mr.
Circulated or distributed items.
The following items, copies
Of which are attached to these minutes under the respective item numbers
indicated, were approved unanimously:
Item No.
Letter to The Chase Manhattan Bank, New York,
"
4
York, approving the establishment of a
iLltited purpose branch at 74-25 Grand Avenue,
Maspeth, Queens County.
1
6/20/63
-2Item No.
Letter to Rhode Island Hospital Trust Company,
Providence, Rhode Island, approving the
establishment of a branch in Middletown.
2
Letter to The Forest Hill State Bank, Forest
Hill) Maryland, approving the establishment
Of a branch in Jarrettsville.
3
Letter to The Bank of Hartsville, Hartsville,
South Carolina, approving the establishment
Of a branch at West Carolina Avenue and
Cedar Lane.
14
Letter to United California Bank, Los Angeles,
California, approving the establishment of a
branch at Harbor Boulevard and Broadway, Anaheim,
branch operations now conducted at 203 East
Lincoln Avenue to be discontinued simultaneously
vith the establishment of the new branch.
5
Letter to County Trust Company, Tenafly, New
Jersey, approving an extension of time to
establish a branch at 2 West Clinton Avenue.
6
Letter to The Merchants and Planters Bank,
7
Camden, Arkansas, approving an investment in
bank premises.
Letter to Security National Bank of San Antonio,
San Antonio, Texas, granting its request for
Permission to maintain reduced reserves.
8
Letter to the Federal Reserve Bank of Kansas City
aPProving the appointment of Frank J. Martincik
48 Federal Reserve Agent's Representative at the
Omaha Branch.
9
Letter to Senator James 0. Eastland, Chairman of
10
the Committee on the Judiciary, reporting on
S. 1664, a bill "To provide for continuous
ituprovement of the administrative procedure of
Federal agencies by creating an Administrative
Conference of the United States, and for other
Purposes."
6/20/63
-3Item No.
Letter to the Chairman of the Conference of
Presidents requesting a review of procedures
of the Federal Reserve Banks in providing coin
services to the public.
11
Letter to the Federal Reserve Bank of San
Francisco approving the payment of salary to
William M. Burke as Senior Economist, and to
Gault W. Lynn as Director of Research at
rates fixed by the Bank's Board of Directors.
12
Mr. Bakke then withdrew from the meeting.
Report on competitive factors (Baltimore-Aberdeen, Maryland).
There had been distributed a draft of report to the Federal Deposit
Iasurance Corporation on the competitive factors involved in the
proposed merger of The First National Bank of Aberdeen, Aberdeen,
Maryland, into The Equitable Trust Company, Baltimore, Maryland.
After discussion, the report was approved unanimously for
transmission to the Federal Deposit Insurance Corporation.
The con-
clusion of the report read as follows:
There is little if any existing competition between
The Equitable Trust Company and The First National Bank
of Aberdeen. However, with the recent opening of a
branch of First National only 13 miles by a primary
highway from an office of Equitable Trust, it would
appear that potential for some competition does exist
between them.
Consummation of the proposed merger would not
Significantly alter Equitable Trust's competitive position in the areas it now serves nor alter its position
relative to other large banks in the State; however,
it would represent an extension of its trade area and
might adversely affect the remaining banks in Harford
County as they would be exposed to the direct competitive
6/20/63
capabilities of a much larger bank. Also, this proposal
would represent the entry of the first out-of-county
bank into Harford County and further concentrate banking
resources in Maryland.
Report on competitive factors (Hartford-New London,
Connecticut).
There had been distributed a draft of report to the
Federal Deposit Insurance Corporation on the competitive factors
involved in the proposed merger of The Union Bank and Trust Company
°f New London, New London, Connecticut, an uninsured bank, into
The Connecticut Bank and Trust Company, Hartford, Connecticut, a
State member bank.
After a discussion during which several changes in the
conclusion of the report were agreed upon, the report was approved
4nanimously for transmission to the Federal Deposit Insurance
Corporation.
The conclusion of the report, as approved, read as
falows:
The Connecticut Bank and Trust Company and The Union
Bank and Trust Company of New London are not competitive
to a significant extent. The proposed merger would
introduce into New London a second large bank to offer
competition to the largest bank in the State, Hartford
National Bank and Trust Company, which has an office
there already. In New London operation of banks by
the State's two largest banks might result in a keener
competitive situation with possible adverse competitive
effects on the remaining small bank in the area; however, that bank now competes with the State's largest
bank and competitive effects should not be severely
adverse.
Application for membership (Item No. 13).
the Board discussed, but deferred action
On June 11, 1963,
n,the application of Yellowstone
Bank, Absarokee, Montana, Absarokee, Montana, for membership in the
6/20/63
-5-
Federal Reserve System.
Although the Federal Reserve Bank of Minneapolis
recommended approval of the application, the Division of Examinations
recommended denial, for reasons set out in a distributed memorandum dated
June 4, 1963, and elaborated upon by Mr. Leavitt at the June 11 meeting
of the Board.
There had now been distributed a memorandum dated June 19,
1963, from the Division of Examinations presenting statistical comparisons
of the number of banking offices in communities and counties similar
to the town of Absarokee and Stillwater County, Montana, in population
and other characteristics.
In discussion at today's meeting, Mr. Solomon referred to the
fact that at the time of the previous discussion it had been uncertain
Whether or not President Deming of the Minneapolis Reserve Bank, who was
then on vacation, had participated in the development of the Reserve
Bank's recommendation.
Mr. Solomon had since talked with Mr. Deming,
and had learned that the latter recommended approval of the application.
Mr. Deming pointed out that the competing national bank in Absarokee
was a member, and it seemed to him that it would be somewhat discriminatory
to exclude the second bank from membership.
He understood that Mr.
Harris (principal organizer of Yellowstone Bank) and Mr. Towe (principal
°rganizer of the nationP1 bank) were both essentially conservative
bankers; and both were sufficiently affluent to contribute funds to bolster
their respective banks if necessary.
Mr. Deming also expressed the
view that for the Federal Reserve to choose between the two banks by
denying the Yellowstone Bank's application would be undesirable.
In
-6-
6/20/63
summary, Mr. Deming's position seemed to be that even if the application
as no more than marginal, it would be best to approve it and let
competition determine the outcome.
Mr. Solomon remarked that some slight weight for approval
might be found in the fact that Yellowstone Bank was already in operation
rather than seeking to organize.
After commenting on the statistics
that had been compiled and distributed, he stated that the Division would
Still be inclined, on balance, to recommend disapproval, although
recognizing approval would not be unsupportable.
Governor Mills stated that be would approve, although the
aPPlication admittedly was marginal.
The organizers of the two banks
eaCh operated other banks, and each had substantial means to protect the
banks in Absarokee.
In fact, they would be under great compulsion to
Protect the new banks identified with their names; if either bank should
get into difficulty, its principal owner could hardly afford to let it
default, thus throwing a serious shadow on his other banks.
If it
were founn eventually that the two banks could not survive competitively,
it seemed logical to suppose that at some point an agreement might be
reached under which one bank would absorb the other.
Although Governor
Mills was not happy with the situation, he thought approval was justified.
Governor Shepardson expressed concurrence with Governor Mills'
reasoning, adding that Stillwater County, though not heavily populated,
/laa an area characterized by large ranches with banking needs.
He had
been told that Mr. Harris was one of the strong agricultural credit leaders
19C.
6/20/63
-7-
in the Montana area, had a large following among the ranchers, and
had done much to develop agricultural programs.
This suggested that
Mr. Harris would continue to draw banking business from the ranchers
around Absarokee regardless of the existence of the other bank in
the town.
Governor Mitchell stated that he would approve.
He thought
this was a situation in which Mr. Deming's judgment ought to carry
considerable weight.
Governor Balderston said that he would approve.
The risk to
the depositors would appear to be negligible, for the reasons Governor
Mills had outlined.
Chairman Martin having indicated that he also would approve,
the membership application of Yellowstone Bank was approved unanimously.
A copy of the letter sent to the bank reflecting this decision is
attached as Item No. 13.
Mercantile Trust Company (Item No. 14).
At its meeting on
JUne 11, 1963, the Board gave preliminary consideration to a question
(If the legality of certain proposed transactions involving Mercantile
Trust Company, a State member bank of St. Louis, Missouri.
The bank
Proposed that its wholly-owned subsidiary (Mississippi Valley Company)
Irould absorb another corporation (Mercantile Mortgage Company) the
assets of which included the capital stock of four corporations that
qParently operated as insurance agencies.
It was also proposed that
Mississippi Valley Company purchase from the individual who controlled
-8-
6/20/63
Mercantile Mortgage Company three additional corporations, including
a life insurance company, an acceptance corporation, and a loan company.
The member bank planned to make a "capital contribution" of
to Mississippi Valley Company.
$4 million
The Legal Division having found serious
legal questions, the St. Louis Reserve Bank was so informed and was
asked to request the member bank not to consummate the transactions
uatil the Board had had an opportunity to study the matter adequately
to determine whether or not the transactions would violate Federal law
Or conditions of System membership applicable to the member bank.
Mercantile Trust Company subsequently revised its plan to provide for
4 contribution of
$4,000,000 to the surplus rather than the capital
c3f Mississippi Valley Company.
There had been distributed a draft of letter to Mercantile
Trust Company that would take the position that a contribution by
the bank to either the capital or the surplus of its wholly-owned
subsidiary would violate the provision of section 5136, Revised
Statutes, prohibiting purchase of corporate stock by member banks;
that the proposed purchase by Mississippi Valley Company of the
8toek of the several corporations that were now subsidiaries of
Mercantile Mortgage Company likewise would violate section 5136; and
that the operation of the offices of Mercantile Mortgage Company where
real estate loans were made, in Missouri and in other States, would
violate section
9 of the Federal Reserve Act and section 5155 of the
Revised Statutes, which in effect forbid a member State bank (a) to
6/20/63
-9-
operate branches outside the State in which its main office is located
or (b) to operate branches within that State except to the extent
expressly authorized by the law of the State and with the approval of the
Board. (For the purpose of those provisions of Federal law, the term
"branch" is defined to include any additional office or branch place
of business "at which deposits are received, or checks paid, or money
lent".) The reasoning on which these conclusions were based was set
out in the draft letter.
At the Board's request, Messrs. Hexter and Solomon reported
on a conference they had had with President Shuford of the St. Louis
Reserve Bank, Mr. K. R. Cravens, Chairman of the Board of Mercantile
Trust Company, and Mr. Robert Neill, Counsel for Mercantile Trust. The
rileeting had been devoted largely to discussion of legal questions, Mr.
Neill presenting at some length his reasons for believing Mercantile
Trust's program would not violate any condition of membership or Federal
Or State statute, and the System representatives presenting the possible
reasons for a contrary conclusion.
Upon being asked if it would not be
Possible to modify the program to remove the features to which there
might be legal objection, Mr. Cravens had replied that that would not
be Possible before the consummation date, June 21, 1963.
The contract
did not
approval
provide that the transactions would be dependent upon
by the
Board; moreover, there was a substantial penalty clause.
All of
the auditing and other preparation had been done on the assumption that
the transactions would be closed tomorrow, and failure to carry out that
6/20/63
-10-
intention would cause a great deal of difficulty and confusion.
In
substance, it was contended that it would be necessary to go through
with the plan and then try to resolve any questions.
Shortly after the
visitors had left, Mr. Neill returned, saying that in response to a
telephone inquiry he and Mr. Cravens had learned that loans were not
actually made at the field offices of Mercantile Mortgage Company but
at its head office.
Mr. Neill was of the view that it could be reasoned
that money was not lent at the field offices and consequently those
°ffices would not come within the definition of "branch."
Governor Mills asked if, in view of the Board's taking the
Position that the proposed transactions would violate Federal law,
Mercantile Trust might not be relieved of any possible damages if it
failed to perform under its contract.
Mr. Hexter replied that that
Point had been discussed with Messrs. Cravens and Neill, the latter
contending, on the basis of a court decision that he cited, that the
bank would not be relieved of contractual liability.
Mr. Hexter noted that the draft letter did not touch upon
the question whether the proposed transactions would constitute a
change in the character of Mercantile Trust's business which, under its
conditions of membership, would require the Board's approval.
Considering
the strength of Mercantile Trust, it seemed probable that the Board would
approve even if it should be determined that a change in the nature of
business was involved.
Also, the bank had given assurances that the
Proposed increase in its investments in affiliates would not exceed the
Of el
6/20/63
-11-
limitations prescribed in section 23A of the Federal Reserve Act.
The
letter therefore was confined to the questions relating to purchase
of corporate stock and operation of branches and, as to the first
question, followed the position the Board had taken previously, notably
in the matter of Bankers Trust Company, New York, New York, earlier
this year, to the effect that an acquisition of bank stock by a whollyowned subsidiary was tantamount to such an acquisition by the parent
bank, and, consequently, would be a violation of law.
As for Mercantile
Trust's contention that a contribution to surplus rather than capital
/Me unobjectionable, the Board's Legal Division had explored that
question twenty-five years ago, arriving at the conclusion that a
contribution to surplus would violate the statute.
As for the question
Of operating branches, if mortgage loans were in effect made through the
offices of Mercantile Mortgage Company, Mercantile Trust would be
indirectly operating branches at those offices.
If a member bank,
through a subsidiary, could establish offices anywhere it wished, it
could easily circumvent the Federal law regarding branches.
There ensued a discussion of the range of out-of-head-office
activities of banks, and positions the Board had taken in the past
in regard to such functions. It was mentioned that the Office of
the Comptroller of the Currency for many years had held that, if
dePosits were received at the business establishment of a director of
a national bank, that establishment constituted a branch.
6/20/63
-12General concurrence having been expressed with the position
taken in the draft letter, the discussion turned to courses of action
open to the Board in the situation that appeared to be developing,
namelY, that Mercantile Trust would proceed with its program despite
being informed that the Board regarded the transactions as involving
violations of law.
The sanctions that the Board could apply included
exPulsion from membership or, if the objectionable features of the plan were
continued, removal of officers or directors of the member bank.
It
was noted that the member bank might counter by withdrawing from
Membership or by seeking to convert to a national bank charter.
Probably a stronger possibility was that Mercantile Trust, having
e°nsummated the transactions, would attempt to meet the Board's
objections through some device such as transferring the stock of its
subsidiary to trustees for the benefit of its shareholders.
Inquiry was made as to the feasibility of turning the matter
Over to the Department of Justice for prosecution, but it was pointed
out that administration of the provisions of the law relating to
exPuision from membership and removal of officers and directors was
vested in the Board.
The possibility of enjoining Mercantile Trust
from consummating the proposed transactions was also mentioned, but
the legal staff cited several reasons why it appeared questionable
whether an injunction could be obtained.
After further discussion, the letter to Mercantile Trust
e°mPanY was approved unanimously.
A copy is attached as Item No. 14.
6/20/63
-13-
text
It was understood that, in addition to sending the letter, its
would be telephoned to the St. Louis Reserve Bank for transmittal to
Mercantile Trust Company today.
Mr. Daniels then withdrew from the meeting.
Deposits of trustees in bankruptcy.
There had been distributed
s memorandum dated June 14, 1963, from the Legal Division in connection
with two questions raised by the Federal Reserve Bank of San Francisco
regarding deposits of trustees in bankruptcy as "savings deposits"
under Regulation Q, Payment of Interest on Deposits.
The first question
s
as whether a recent amendment to the Bankruptcy Act authorizing trustee
in bankruptcy to deposit funds in interest-bearing savings deposits
affected the Board's authority under section 19 of the Federal Reserve
Act to define "savings deposits" in member banks, and, as provided in
Regulation Q, to limit such deposits to individuals and certain types
c/f non-profit organizations.
The second question asked under what
circumstances a deposit of a trustee in bankruptcy might qualify for
4 "savings deposit" under Regulation Q.
As to the first question, the Legal Division concluded that
the recent amendment to the Bankruptcy Act in no way affected the
80ard'8 authority under section 19 or the definition of a "savings
Posit" contained in Regulation Q.
As to the second question, one of the requirements of the
definition of a "savings deposit" is that it must consist of funds
6/20/63
that are either (1) "deposited to the credit of one or more individuals, or of a corporation, association, or other organization operated
Prtnarily for religious, philanthropic, charitable, educational,
fraternal, or other similar purposes and not operated for profit,"
or (2) "in which the entire beneficial interest is held by one or
more individuals or by such a corporation, association, or other
organization."
Three different possibilities were suggested by the Legal
Division as to the test that should be applied in determining whether
a deposit by a trustee in bankruptcy might be considered a savings
deposit under that definition.
First, it might be argued that, since
84ch a trustee is an "individual," a literal reading of the first part
of the definition would permit a deposit by him to be classified as a
a4vings deposit.
Second, the question might be made dependent upon
the nature of the bankrupt, on the theory that the trustee stands in
the position of the bankrupt.
Under this approach, if the bankrupt
an individual, deposits by the trustee could be classified as
savings deposits, but if the bankrupt was a business corporation, such
dePosits would not qualify as savings deposits.
The third alternative
‘'7(3111c1 be to hold that, since a trustee in bankruptcy holds the bankassets for the benefit of creditors, a deposit by a trustee might
as a savings deposit only if the creditors would themselves
gflalify for savings deposits.
After discussing the merits and dis-
advantages of the three alternatives, the Legal Division recommended the
6/20/63
-15-
third, even though it was obvious that under it the deposits of trustees
in bankruptcy could seldom be considered savings deposits.
A draft
of letter to the Federal Reserve Bank of San Francisco reflecting this
recommendation was attached.
It was suggested that the proposed letter
be submitted to the Federal Deposit Insurance Corporation for an
expression of its views, which could be done through informal consultation
by the Legal Division with the legal staff of the Corporation; and that,
if the Corporation concurred in the proposed position, the interpretation
be sent to all Federal Reserve Banks and published in the Federal Register
and Federal Reserve Bulletin.
A preliminary discussion disclosed divergent opinions among the
Members of the Board.
One member (Governor Mills) concurred in the
reasoning and recommendation of the Legal Division.
Another member
(Governor Mitchell) expressed the view, for reasons stated, that the
ProPosed interpretation was unnecessarily severe.
He suggested amending
Regulation Q so that trustees in bankruptcy, and perhaps others such as
liquidating agents and receivers, would be entitled to have savings
deposits.
Governor Balderston indicated initially an inclination toward
the alternative of making the question dependent on the nature of the
bankrupt.
Later, however, he expressed himself favorably toward the
approach suggested by Governor Mitchell, as did Governor Shepardson.
Question was raised whether any such amendment should be considered
/fithin the context of the over-all study of Regulation Q recently
'
decided on by the Board, but Governor Mitchell noted that the specific
6/20/63
-16-
question concerning trustees in bankruptcy seemed to require rather
Prompt attention.
At the conclusion of the discussion it was understood that
the Legal Division would draft a possible amendment to Regulation Q,
along the lines suggested by Governor Mitchell, for the Board's
consideration in connection with the question of the eligibility of
trustees in bankruptcy to hold savings deposits.
It was also understood
that the staff would obtain the views of the Federal Deposit Insurance
Corporation.
The meeting then adjourned.
Secretary's Notes: The requirements contemplated by the Board's action on May 29, 1963,
in approving the issuance of a preliminary
permit to Marine Midland International Corporation, New York, New York, having been
completed, a letter was sent today to that
corporation transmitting a final permit to
commence business.
Governor Shepardson today approved on behalf
of the Board a memorandum dated June 19, 1963,
from Mr. Daniels, Assistant Director, Division
of Bank Operations, recommending that Dorothy
Werner of that Division be designated as alternate witness in connection with the mutilation
of facsimile signature plates used by officers
of the Federal Reserve Banks in signing checks
drawn by the Banks as fiscal agents of the
United States, and that John Baird, currently
serving as alternate, be designated as principal
witness.
Secretary
()f)
2
Item No. 1
6/20/63
BOARD OF f3OVERNORS
OF
THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. O. C.
SPONDENCE
ADDRESS OFFICIAL CORRE
TO THE BOARD
June 20, 1963
Board of Directors,
The Chase Manhattan Bank,
New York, New York.
Gentlemen:
Reserve
The Board of Governors of the Federal
74-25
at
ch
bran
a
of
t
System approves the establishmen
ted
limi
the
for
,
York
Grand Avenue, Maspeth, Queens, New
ng
essi
proc
coin
a
of
ns
purpose of conducting operatio
deposits and the paycenter including the receipt of
coin, by The Chase
in
ment of withdrawals, primarily
is established within
ch
bran
Manhattan Bank, provided the
er.
this
lett
six months from the date of
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Bank stated that the Board
(The letter to the Reserve
n of the period
also had approved a six-month extensio
if an extension
that
ch;
and
bran
the
allowed to establish
cribed in the
should be requested, the procedure pres
, should be
846)
(S-1
1962
9,
mber
Nove
Board's letter of
followed.)
4 -f
t.
BOARD OF GOVERNORS
Item No. 2
6/20/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, 13. C.
ApoRtes orrialm-
CORRESPONDENCE
TO THE VICIARD
June 201 1963
Board of Directors,
Rhode Island Hospital Trust Company,
Providence, Rhode Island.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment of a
branch by Rhode Island hospital frust Company,
Providence, Rhode Island, in a. new shopping
center on West Main Road, Middletown, Rhode
Island provided the branch is established within
six months from the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carwich),
A5sistaht Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension of the
Period allowed to establish the branch; and that if an
extension should be requested, the procedure prescribed
in the Board's letter of November 9, 1962 (s..1846),
should be followed.)
200S
Item No.
BOARD OF GOVERNORS
3
063
6/2
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 20, 1963
Board of Directors,
The Forest Hill State Bank,
Forest Hill, Maryland.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment of a
branch by The Forest Hill State Bank on State
Route 165 near the junction with State Route 23
in Jarrettsville, Maryland, provided the branch
is established within six months from the date
of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
(The letter to the Reserve Bank stated that the Board
also had approved a six-month extension of the period
allowed to establish the branch; and that if an extension
should be requested, the procedure prescribed in the
Board's letter of November 9, 1962 (s-1846), should be
followed.)
BOARD OF GOVERNORS
Item No.
OF THE
FEDERAL RESERVE SYSTEM
4
6/20/63
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 20, 1963
Board of Directors,
The Bank of Hartsville,
Hartsville, .South Carolina.
Gentlemen:
,The "Doard of Governors of the Federal
Reserve ystem approves the establishment by The
Bank of Hartsville, Hartsville, .louth Carolina,
of a br,nch at the northeast corner of West
Carolina Avenue and Cedar Lane, iLartsville, south
Carolina, provided the crunch i6 esLablished within
one year from tilt: ci,Jte of thi,t, leLter.
Very Lrui
(Signed) Elizabeth L. Carmichael
,gaizabeth L. Carmichael,
Assistant .Acretary.
(The letter to the Reserve Bank stated that the Board
also had approved a six-month extension of the period
allowed to establish the branch; and that if an
extension should be requested, the procedure prescribed
in the Board's letter of November 9, 1962 (S-1846),
should be followed.)
BOARD OF GOVERNORS
Item No. 5
OF THE
6/20/63
.FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CO4REOP1NOENCE
TO THE BOAND
June 20, 1963
Board of Directors,
United California Bank,
Los Angeles, California.
Gentlemen:
The Board of Governors of the Federal Reirve
System approves the establishment of a branch by
United California Bank at the northeast corner of aarbor
Boulevard and Broadway, Anaheim, California, provided
the branch is established within one year from the date
of this letter, and provided further that branch operations now conducted at 203 East Lincoln Avenue, Anaheim,
California, are discontinued simultaneously with the
establishment of the above branch.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
(The letter to the Reserve Bank stated that the Board
also had approved a six-month extension of the period
allowed to establish the branch; and that if an extension
should be requested, the procedure prescribed in the
Board's letter of November 9, 1962 (S-1846), should be
followed.)
q...)()
Item No. 6
6/20/63
BOARD ,OF 'GOVERNORS
OF THE
''cL9°f COI;* •
•
,FEDERAL RESERVE SYSTEM
.11
WASHINGTON 25. D. C.
W.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
)
L.
LIES°L•
•
•• •
June 20, 1963
Board of Directors,
County Trust Company,
Tenafly, New Jersey.
gentlemen:
The Board of Governors of the Federal Reserve System
extends to December 30, 1963, the time within which County Trust
,°mPany may establish a branch at 2 West Clinton Avenue, Tenafly,
loergen County, New Jersey.
F
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Item No.
BOARD OF GOVERNORS
7
6/20/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 20, 1963
Board of Directors,
The Merchants and Planters Bank,
Camden, Arkansas.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves, under the provisions
of Section 24A of the Federal Reserve Act, an
investment in bank premises in an amount not
exceeding $400,000 by The Merchants and Planters
Bank, Camden, Arkansas, for the purpose of purchasing land and constructing a new building.
It is understood that the necessary
land has already been purchased at a cost of
$94,000.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
Item No.
OF THE
FEDERAL RESERVE SYSTEM
8
6/20/63
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPOND
TO THE BOARD
June 20, 1963
Board of Directors,
Security National Bank of San Antonio,
San Antonio, Texas.
Gentlemen:
gh the
Pursuant to your request submitted throu
nors,
Gover
of
Board
the
s,
Federal Reserve Bank of Dalla
al
Feder
the
of
19
on
Secti
of
sions
acting under the provi
nal
Natio
ity
Secur
the
to
ssion
Reserve Act, grants permi
the same reserves against
Bank of San Antdnio to maintain
ained by nonreserve
deposits as are required to be maint
opens for busines.
city banks, effective ao of the date it
that such
Your attention lo called to the fact
of Governors.
Board
the
by
tion
mvoca
permission is subject to
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
2014
Item No. 9
6/20/63
BOARD OF GOVERNORS
. OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 28, D. C.
ADONCIIII OIIIGIAL OurinceriamoaNca
TO THE BOARD
June 20, 1963
Mr. Romer A. Scott,
Pederal Reserve Agent,
Federal. Reserve Bank
,of Kansas City,
4aneas City 6, Missouri.
1384r Mr. Scott:
As requested in Mr. Mathews' letter of June 7, 1963, the Board of
GOve
rnors.approves the appointment of Mr. Frank J. Martincik as Federal Reserve
Agentia Representative at the Omaha Branch to succeed Mr. Carl C.
Tollander.
This approval is given with the understanding that Mr. Martincik will
be solely responsible to the Federal Reserve Agent and the Board of Governors for
th
bie Proper performance of his duties, except that, during the absence or disabit;tY of the Federal Reserve Agent or a vacancy,in that office, his responsi"
- -tY will be to the Assistant Federal Reserve Agent and the Board of Governors.
When not engaged in the performance of his duties as Federal Reserve
Age *
n u's Representative, Mr. Martincik may, with the approval of the Federal
.keae
rve Agent and the Vice President in charge of the Omaha Branch, perform such
11!rk for the Branch as will not be inconsistent with the duties as Federal
er-e Agent's Representative.
10
It will be appreciated if Mr. Martincik is fully informed of the im-.
Porta
Res nee of his responsibilities as a member of the staff of the Federal
er-ve Agent and the need for maintenance of independence from the operations
"-L the Bank in the discharge of these responsibilities.
Please have Mr. Martincik execute the usual Oath of Office which
,A then be forwarded to the Board of Governors along with notification of
effective date of his appointment.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
4
BOARD OF GOVERNORS
OF THE
Item No. 10
6/20/63
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
June 201 1963
The Honorable James O. Eastland,
Chairman,
Committee on the Judiciary,
United States Senate,
Washington 23, D. C.
Dear Mr. Chairman:
This is in reply to your request of June 10, 1963, for a
t of
report on S. 1664, a bill "To provide for continuous improvemen
an
the administrative procedure of Federal agencies by creating
Administrative Conference of the United States, and for other
Purposes."
The Board has reviewed the bill in question and agrees in
Principle with the objectives sought to be accomplished.
However, two features of the bill are, in the view of the
Board, objectionable.
First, the provision that the membership of the Administrative
well
Conference shall be preponderantly Federal personnel could very
bill;
the
of
4(b)(6)
section
in
tend to defeat the objective declared
priof
viewpoints
the
of
tion
namely, to assure "adequate representa
the
is
It
".
experience
diverse
of
n
vate citizens and the utilizatio
1961-1962,
of
Conference
tive
Administra
Board's understanding that the
created by Executive Order 10934, consisted of approximately equal
representation between Government and non-Government personnel. It
is believed that serious consideration should be given to a similar
structure for the permanent Administrative Conference. Completely
apart from the fact that a greater degree of balance and objectivity
would probably flow from such a division of representation, public
be enacceptance of and confidence in the Conference would no doubt
"Governof
appearance
l
hanced were it not to have even the superficia
ment domination".
The second objectionable feature of the bill is the provision
that in addition to appointees from the Federal agencies, the heads of
the agencies shall also be members of the Conference. It is not believed
that such individuals could realistically be expected to find the time,
)
The Honorable James 0. Eastland
-2-
regardless of the degree of their interest, to devote continuing and
thoughtful attention to the affairs of the Conference, and that their
statutory authority to designate alternates would be invoked with
'regularity. This would tend to defeat the purpose of having the
agency heads as members in the first place. It is believed that the
interests of the agencies could adequately be represented by the appointees provided for in section 4(b)(4) of the bill, and that in the interests of keeping the membership of the Conference to a manageable number,
the agency heads should be omitted as members. It may be noted in
Passing that this suggestion, if adopted, would make a major contributlon toward the accomplishment of the suggestion made above regarding
the balance between Government and non-Government members.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm, McC, Martin, Jr.
4
Item No. 11
6/20/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 20, 1963.
Watrous H. Irons, Chairman,
Conference of Presidents,
Pederal Reserve Bank of Dallas,
Station K,
Dallas 2, Texas.
pear Mr. Irons:
Presidents of the
With its letter of May 17, 1963, to the
s from its answers
Ped eral
Reserve Banks, the Board enclosed excerpt
, and asked to be
at° inquiries about coin from Congressmen and others
e Banks
d'"vised whether the practices followed by the various Reserv
lffered substantially from the statements in the excerpts.
a feeling on the part
The replies to this letter indicated
each Bank that its practices did not differ in any substantial
r,
clsegree from the statements that the Board had been making. Howeve
ations
convers
141.11:0P1emental information submitted with the replies and
that considerable variation
,Irh officials of various Banks indicate
;M-sts in the treatment of the public at the Reserve Banks. For
up to
sli!ample, one Bank advised that it would supply to individuals
nicof
each
k ° in silver dollars, two rolls of cents, and one roll
if
d
supplie
els, dimes, quarters, and halves, and that new coin is
s
payment
er
e-count
liailable. Another Bank indicated that its over-th
still
At
ted coin.
aere confined to the extent possible to circula
,nother Bank, it appears that little or no currency and coin service
48 made available throygh a window open to the public.
Of
Z
the release by the
The existing coin shortages, coupled with
dollars with premium values, have
141111 of increasing numbers of silver
g procedures of
1.
d in focusing more attention on the coin handlin
Pulte
nt areas
differe
ne Reserve Banks. Variations in these procedures in
tic
numisma
!t the country are being brought to the attention of
complaints.
Pub lications and are resulting in an increasing number of
2018
To: Mr.
Irons
-2-
Under these circumstances, the Board would appreciate your
arranging to have the Conference of Presidents undertake a review of
the matter to determine the extent of the variations in the services
afforded by the Reserve Banks to the public and to assist, as far as
ticable, in the elimination of inconsistencies in these services.
It will be helpful if this review can be completed in time to permit
consideration at the next meeting of the Conference.
l!rac
Very truly yours,
(Signed) Merritt She
Merritt Sherman,
Secretary.
201 fl
Item No. 12
6/20/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 20, 1963
CONFIDENTIAL (FR)
M. Eliot J. Swan, President,
Federal Reserve Bank of
San Francisco,.
San Francisco 20, California.
Dear Mr. Swan:
s the payment of salary
The Board of Governors approve
to Mr. William M. Burke as Senior Economist of the Federal Reserve
effective
Bank of San Francisco at the rate of $16,500 per annum,
through
1
July
about
or
11Pon his employment by the Bank on
December 31, 1963.
payment of
The Board of Governors also approves the
at the rate
h
Researc
r
of
Directo
salary to Mr. Gault W. Lynn as
r 31, 1963.
Decembe
1
through
July
period
of Slc;,000 per annum for the
by your Board
The salary rates approved are those fixed
Of Directors as reported in your letter of June 6, 1963.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
1(1
Item No. 13
6/20/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 21, 1963
Board
of Directors,
4144owstone Bank, Absarokee, Montana,
Absarokee, Montana.
Gerltlemen:
The Board of Governors
aPPlio •
tor ation of Yellowstone Bank,
ber StOck in the Federal Reserve
"conditions hereinafter set
1.
of the Federal Reserve System approves the
Absarokee, Montana, Absarokee, Montana,
Bank of Minneapolis, subject to the numforth.
Such bank at all times shall conduct its business and
exercise its powers with due regard to the safety of
its depositors, and, except with the permission of the
Board of Governors of the Federal Reserve System, such
bank shall not cause or permit any change to be made in
the general character of its business or in the scope of
the corporate powers exercised by it at the time of admission to membership.
2.
The net capital and surplus funds of such bank shall be
adequate in relation to the character and condition of
its assets and to its deposit liabilities and other
corporate responsibilities.
3.
At the time of admission to membership, such bank shall
have paid-in and unimpaired capital stock of not less
than $50,000, and other capital funds of not less than
20 per cent of capital stock.
In connection with the foregoing conditions of membership, particular
korilb:'-on is called to the provisions of the Board's Regulation H, regarding
espe:f8hiP of State banking institutions in the Federal Reserve System, with
reference to Section 208.7 thereof. A copy of the regulation is enweed
ktte,,,
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
owstone Bank, Absarokee, Montana
-2-
If at any time a change in or amendment to the bank's charter is
made
,
) the bank should advise the Federal Reserve Bank, furnishing copies of
'
aaldocuments involved, in order that it may be determined whether such
8,,ge affects in any way the bank's status as a member of the Federal Reserve
W
Acceptance of the conditions of membership contained in this letter
sh°111d
oexti be evidenced by a resolution adopted by the board of directors and a
Bank:Jed copy of such resolution should be transmitted. to the Federal Reserve
ainout Arrangements will thereupon be made to accept payment for an appropriate
of Federpl Reserve Bank stock, to accept the deposit of the required
eto !ve balance, and to issue the appropriate amount of Federal Reserve Bank
cA to the
bank.
The time within which admission to membership in the Federal Reserve
8Ystem
the 0 in the manner described may be accomplished is limited to 30 days from
ext,,,ate of this letter, unless the bank applies to the Board and obtains an
h -",,
sion of time. Nhen the Board is advised that all of the requirements
stom,ueen
ave
complied with and that the appropriate amount of Federal Reserve Bank
',has been issued to the bank, the Board will forward to the bank a formal
icate of membership in the Federal Reserve System.
thThe Board of Governors sincerely hopes that you will find membership
The 6 System beneficial and your relations with the Reserve Bank pleasant.
trig °fficers of the Federal Reserve Bank will be glad to assist you in establishvitilY°11r relationships with the Federal Reserve System and at any time to discuss
koat rePresentatives of your bank means for making the services of the System
Useful to you.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
trlelostire.
Item No. 14
6/20/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 20, 1963
AIR MAIL - REGISTERED
RETURN RECEIPT REQUESTED
Mr. K. R. Cravens,
Chairman of the Board,
Mercantile Trust Company,
721 Locust Street,
St, Louis 1, Missouri.
Dear Mr. Cravens:
This refers to three legal questions presented by proposed
ransactions through which Mississippi Valley Company, a subsidiary
of
Mercantile Trust Company, would acquire the assets and business
1":ercantile Mortgage Company and the stock of certain other corporaTrust
ci°ns, as described in a letter of June 12, 1963, to Mercantile
Neill.
&
Douglas
Mitchell,
°InPany from Thompson,
Purchases of corporate stock. Two of the questions arise
nr.Ider section 9 of the Federal Reserve Act (12 U.S.C. 335) and sec.1-ori 5136 of the Revised Statutes (12 U.S.C. 24), which in effect
torbid "the purchase by [a member State bank] for its own account of
any shares of stock of any corporation", except as "permitted by law".
this
(a) The Board has re-examined its interpretations of
12
June
the
tatutory provision in the light of the discussion in
!
letter of your Bank's Counsel. The view was there expressed that
section 23A of the Federal Reserve Act (12 U.S.C. 371c) permits a
Tember bank to purchape the stock of affiliates "within the limits
'herein prescribed if the corporate power with respect thereto
eXisted under state law". However, it must be borne in mind that
of
:!ction 23A is a statute that limits and regulates a wide field
s
affiliate
their
unancial relationships involving member banks and
U.S.C.
12
1933,
of
Act
f all categories (see section 2 of the Banking
s, and
21a), including extensions of credit, investments in securitie
23A,
Section
s.
clvances collateralized by securities of affiliate
th erefore, is a restrictive statute and cannot be regarded as a grant
°f authority to purchase corporate stocks up to the limits prescribed,
Particularly in view of the specific provision on purchases of
$31100rate stock that was enacted as a part of the same statute
183, 185).
Oanking Act of 1933, sections 13, 16; 48 Statutes at Large
3
r 13 4:1)
BOARD
SYSTEM
OF GOVERNORS OF THE FEDERAL RESERVE
Mr, K. R. Cravens
-2-
The Board reaffirms its position that the purchase by
Ilercantile Trust Company of additional shares of stock in Mississippi
Valley Company, its wholly-owned subsidiary, would contravene the
s tatutory prohibition. Under the present plan, however, Mississippi
alley Company would not issue any additional shares of stock; its
Outstanding stock would continue to be in the amount of $25,000, and
Mercantile Trust Company would increase the capital structure of its
subsidiary by contributing $4,000,000 to its surplus, and it is conended by your Counsel that this fact makes the statutory prohibition
lnaPplicable. The question, therefore, is whether that circumstance-that the $4,000,000 is to be paid into the subsidiary's surplus account
rather than into its capital account--removes the transaction from the
Purview of the above-quoted provision of R. S. 5136.
l
As you know, in the interpretation of statutes the principa
respect
With
.
purpose
ive
legislat
the
ei bjective is the effectuation of
t
i° corporations whose stock is held by a number of stockholders, the
,
"language of this statute ("the purchase...of any shares of stock")
to
e
be
effectiv
would
fully
ly
ordinari
even if literally construed,
tion
,arrY out the Congressional intent in this regard, since a contribu
c
.
the
to
redound
bank
would
member
a
by
IL0 the surplus of the corporation
)
ely)
exclusiv
tor
the
(not
contribu
y
generall
enefit of the shareholders
and therefore would be economically impractical. However, where the
bank,
c°rPoration in question is a wholly-owned subsidiary of the member
for
effect,
its
economic
and
al,
practic
a uch a contribution would be
t
is purpose, would be identical with the economic effect of a purchase
sr)z additional shares of the subsidiary.
as
Therefore, if the suggested distinction were regarded
•
d by
nullifie
be
n
could
y
provisio
statutor
the
ecisive, the purpose of
.1-11inor change in the form of the investment in the subsidiary corporacorporation
In other words, a member bank that owned a subsidiary
14041d be at liberty to increase its investment in the capital structure
°f that subsidiary, even though that action, viewed realistically,
w°uld accomplish prec,lisely what R. S. 5136 was intended to prevent.
d
of
Accordingly, the Board concludes that a contribution
wholly$4 nn
by Mercantile Trust Company to the surplus of its
fled subsidiary would violate section 9 of the Federal Reserve Act
.
and section 5136 of the Revised Statutes.
ippi Valley
(b) Among the assets to be purchased by Mississ
of corporations.
-(Pany in these transactions are the stocks of a number
ns of law
provisio
'is the position of the Board that the above-cited
tn,
Co
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr, K. R. Cravens
-3-
Prohibit purchase of corporate stock by subsidiaries
as well as by the member bank itself. Here also, it
contrary interpretation would permit the statutes to
the legislative purpose frustrated, by the device of
of the transaction without altering the substance at
are directed.
of a member bank
appears that a
be nullified, and
changing the form
which the statutes
Operation of branches. Mercantile Mortgage Company, the
corporation whose assets and business are to be acquired through the
Proposed series of transactions, maintains a number of offices, in
Missouri and in other States. It is contemplated that Mississippi
Valley Company, a wholly-owned subsidiary of Mercantile Trust Company,
would continue to operate these offices. The question arises whether
this would involve a violation of section 9 of the Federal Reserve Act
(12 U.S.C. 321) and section 5155 of the Revised Statutes (12 U.S.C. 36),
which in effect forbid a member State bank (a) to operate branches
Outside the State in which its main office is located or (b) to operate
!loranches within that State except to the extent expressly authorized
°Y the law of the State and with the approval of the Board of Governors.
For the purpose of these provisions of Federal law, the term
"branch" is defined to include (although it is not limited to) any
additional office or branch place of business "at which deposits are
received, or checks paid, or money lent". (R. S. 5155(f); 12 U.S.C. 36)
Por the basic reasons outlined in the foregoing discussion relating
to Purchases of corporate stock, it is the position of the Board that
any office of a wholly-owned subsidiary of a member bank at which loans
are made constitutes a "branch" of the member bank within the purview
°f these provisions of Federal law. This position appears to be
tequired in order to give to the laws in question their intended effect,
Since the contrary position would permit a bank to conduct operations,
regardless of Federal and State laws and without supervisory approval
°I. control, at any points it might choose both within and outside the
6tate in which it was located. It is hardly necessary to point out that
the statutes cited were enacted by Congress to prevent, rather than to
Permit, operations of a member bank's organization to be carried on at
°ffices other than it.7 main offices and legally authorized branches.
It is understood that the Missouri statute prohibiting the
establishment of a "branch trust company" refers only to the receiving
°f deposits and the paying of checks, and that the State Commissioner
°f Finance has held that the proposed transactions would not violate
;hat statute. With respect to offices of Mississippi Valley Company
Throated within the City of St. Louis, clause (1) of subsection (c) of
such offices
'S. 5155 (12 U.S.C. 36) would govern the question whether
4
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. K. R. Cravens
igq#
-4-
(regarded as branches of Mercantile Trust Company) could be established
and operated, with Federal supervisory approval. In the case of such
°ffices located elsewhere in Missouri, clause (2) of subsection (c)
vould govern.
It is understood that Mercantile Trust Company is giving
c0ns1deration to the possibility of restricting the operations con.
:ducted at what are presently offices of Mercantile Mortgage Company.
If those operations were so restricted that none of the offices would
constitute a "branch" of Mercantile Trust Company as defined in
S. 5155(f), no question would arise under the Federal branch bank.,11g laws. Of course, the question whether such offices would constitute
branches" as defined by that provision of Federal law would depend
uP°11 the actual operations performed.
To summarize the foregoing discussion, it is the position
°f the Board that the plan in this case, as presented in the letter
Of Your Counsel and other documents submitted to the Board, would
result in violations of section 9 of the Federal Reserve Act and see5136 and 5155 of the United States Revised Statutes (12 U.S.C.
321, 335, 24, and 36).
Very truly yours,
1 ‘.\
Merritt $herman,
Secretary.
C
@FedFRASER