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832 Minutes of actions taken by the Board of Governors of the Federal the Reserve System on Monday, June 26, 1950. The Board met in Board Room at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Szymczak Draper Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Vest, General Counsel Millard, Director, Division of Examinations Mr. Chase, Assistant Solicitor Mr. Mr. Mr. Mr. Mr. Mr. Mr. At the request of the Board members, Mr. Morrill reviewed devel0Pments during the past few days relative to the action taken °11 behalf of the Board by its Solicitor, Mr. Townsend, in petition14 the in United States Circuit Court of Appeals for the Ninth Circuit ka Francisco, California, to enjoin Bank of America National Trust and Savings Association, San Francisco, California, from Eleguil'ing the assets of some 21 banks controlled by Transamerica ec)IT°Itti°n. Mr. Morrill stated that the Court issued a temporary l'estrainin8 order on June 23, following which Bank of America filed a motion to vacate the order; that this motion was heard by the Court 04 June 24 with extensive arguments on both sides, and that Mr. TNtsend had been accompanied in court by Mr. O'Keefe, attorney who is assisting the Solicitor in connection with the Transamerica 833 6/26/jo Proceedings -2and Mr. OtKane, Assistant General Counsel of the Federal Reserve Bank of San Francisco. thee Mr. Morrill stated further that the judges of the Circuit Court who heard the argument on the motion halided down an order oil Saturday, June 24, 1950, enjoining Bank of America from taking over the assets of the banks in question until after by final determination by the Board of the proceeding instituted it under the Clayton Act. Shortly after the order was released MI'. Morrill said, headli nes appeared in West Coast newspapers to the effect that President Giannini, of Bank of America, had been advised by his counsel that the court order was invalid and that he had the l'ight under authority granted by the Comptroller of the Currency and the State banking authorities to proceed to acquire the assets of the bankv - and open them as branch es on June 26; and that statements to his effect had also been broadc ast over the radio. Mr. Morrill made the further statement that, in these circe, an Mr. Townsend suggested to him that the Board authorize him to take such action as might be appropriate in the circumstances t0 bl 'ing the apparent disregard of the restra ining order to the attention of the court. To carry out that suggestion the following tele ram to Mr. Townsend was approved by the available members of the Board this morning and was sent to Mr. Townsend: In v "Referring telephone conversations with Morrill. iew of informaticn with respect to possible plan of 13ank of America to go forward with acquisition of 1 834 6/26/ ) 0 -3- assets of 21 banks controlled by Transamerica and to open the offices as branches, Board of Governors has authorized and directed you to cause the facts With respect to this matter to be brought formally to the attention of the United States Circuit Court Of Appeals and to take such other action in this connection as may be necessary and appropriate in the circumstances. " The wire was approved unanimously, and its sending was unanimously ratified and confirmed. Mr. Morrill then stated that he had inquired of Mr. Townsend hether someone from the Board's offices should advise Mr. Bergson, Of the Attorney General's office, and the Attorney General of recent developments in the proceedings, to which Mr. Townsend res,, vc)nded that he had written a letter to Mr. Bergson informing hir4 what had taken place and that a copy of that letter and its enel°sures had also been sent to the Board. Mr. Townsend also asked, Mr. Morrill said, that a request be made of the Comptroller of the Currency that, in view of the of the court in issuing the restraining order, he notify Bank r-ca that it should not take any action to open any branches 80 long as the order of the court was outstanding. Upon learning this d evelopment yesterday, Mr. Szymczak suggested that the request °D the Comptroll er of the Currency be in writing. In response to this suggestion the following letter was prepared yesterday evening €111(1 with the informal approval of the available members of the Board 835 6/26/J0 It- Was sent to Mr. Delano at his home by messenger last night: "As you perhaps know, the Board of Governors on Friday, June 23, 1950, through its Solicitor, filed in the Circuit Court of Appeals for the Ninth Circui t in San Francisco, California, a petition to enjoin Bank of America, National Trust & Savings Association, San Francisco, California, from acquiring the assets Of some 21 banks controlled by Transamerica Corporation which have been the subject of recent correspondence between the Board of Governors and your office. The Court granted a temporary restraining order and yesterday) following a hearing on a motion filed on behalf of Bank of America, National Trust & Savings Association, to vacate the order, the Court by unanimous action denied the motion and issued an injunction to restrain Bank of America from acquiring the assets of the banks in question until after final determination by the Board Of Governors of the proceeding instituted by it under the Clayton Act. "The Board has been informed today that newspapers and radio in San Francisco have been carrying stateme nts to the effect that Bank of America intends to disregard he order of the Court and open the offices of the 21 °anks tomorrow morning as branches of Bank of America under permits issued by your office. "In the circumstances, the Board of Governors requests that you notify Bank of America, National Trust Savings Association, immediately that, in view of the , 3-nformation which you have received from the Board of rvernors with respect to the unanimous action of the uourt, the national bank should not take any action to ?pen the branches referred to as long as the order of cne Circuit Court of Appeal remain s s in effect. "This letter is being sent to you at your home torlight by special messenger so that you may have the request of the Board in time to communicate with the Ilational bank before the opening of the bankin office s g in question tomorrow morning." Mr. Szymczak stated that on Saturday, June 24, Mr. Townsend l'ecillested that we undertake to ascertain the manner in which the assets Of the twenty-one banks would be acquired and that he (Mr. 6/26/50 -2SzYmczak) suggested that Mx. Chase get the information by telephone 'Ofl 1111 Deputy Comptroller of the Currency Robertson. He also said that after the conversation with Mx. Robertson, Mr. Chase sent the followWire to Mr. Townsend, the wordin g of which was approved by Mr. Robertson over the telephone. "Deputy Comptroller of the Currency J. L. Robertson advised me this morning that he understood the take over of the banks which Bank of America propos es to convert into branches on June 26 pursuant to Comptroller's Permits, is to be accomplished by a sale of assets and assumption of liabilities. He said there was no federal control over such a sale and assumption, and that therefore his office had not approv ed it and had no power to aPProvs it or disapprove it. He said the proposed take over did not involv e a consolidation or merger, and that the liquid ation of the banks would follow the sale of their assets." Mr. Szymczak made the further statement that on Sunday night the letter referred to above was being prepared, Mr. Robertson called 04 the telephone to say that the Office of the Comptroller he 'd received a request from counsel of Bank of America for something to offset statements which the bank's counsel alleged Mr. Townsend 414cle dullng the hearing on Saturday on the motion to vacate the tsm,, 4'rarY `' restraining order to the effect that in granting the 1)ellaits to Open the branches in question the Comptroller of the Currency had not taken the public interest into consideration and that the Board did not know until a few days ago that the permits to establish the anche-s in question were to be granted by the Comptroller of the ctIrre licY• Mr. Szymczak went on to say that Mr. Robertson said that S17 t 6/26/50 the -6- statements were not true because the Comptroller of the Currency hul considered the public interest and the Board had known for a long time that the permits were to be issued. Mr. Szymczak added that he reviewed for Mr. Robertson's information the reasons why the Board felt the branch permits would not be issued and told him that he 14°111d trY to ascertain what Mr. Townsend had said on the two matters referred to above. At his request, he said, after the letter to the C°MPtroller of the Currency was sent on Sunday evening, Mr. Carpenter Celled Mr. Robertson and gave him the substance of the letter, to 14hich Mr. Robertson replied that the Comptroller of the Currency had 40 au thority to withdraw the permits which had been issued or to tell the Barlk of America not to go ahead with the establishment of the branches. At this point the letter referred to above was approved unanimously and its sending was unanimously ratified and confirmed. During the ensuing discussion, Mr. Morrill was called from the r°0m and upon his return stated that he had just talked with Mr. Tovas . -nd by telephone and that the latter stated that the story had Come over the radio that Bank of America was going to open the braac, this morning, that in these circumstances he was giving , Caret '4- co nsideration to the steps that he should take to bring the —mstances to the attention of the court, and that there was 13°88ibility that the court might ask him to serve as an officer of S38 6/26/50 -7-- the court to institute a citation for criminal contempt. In that connection, Mr. Morrill said, Mr. Townsend pointed out that the fine 113118-117 imposed for civil contempt probably would not be a deterrent t° Bank of America as the fine would simply be charged as a business e lpenee, that the action of the bank was such as to invite punitive action which would mean more than a fine, and that if the bank were Cited for criminal contempt it would be a case between the United Stat es and the bank with which the Board would have no official Connection. At this point, Mr. Evans joined the meeting. Mr. Morrill said he informed Mr. Townsend of Mr. Robertson's telePhone call to Mr. Szymczak in connection with the two statements allezmAu. by counsel for Bank of America to have been made by Mr. send at the hearing on Saturday, and that Mr. Townsend made the 1111qualif1ed reply that he did not make the statements, that neither in the papers filed in the court nor in his statement at the hearing had he mentioned the relation of the Comptroller to the proceeding 1111ti1 the subject was raised by the attorneys for the other side, azd that in discussing the statement of counsel for Bank of America that the Board knew for some time that the branches were to be granted he replied that even if that were true it would have no legal effect on the proceeding for the reason that had the Board been guilty of neglect it could not have estopped the court from 839 6/26/50 -8- Protecting its jurisdiction. Mr. Townsend stated to the court, Mr. Morrill said, that the Board knew the applic ations were pending and 14 that connection presented correspondence between the Board and the C°41Ptroller of the Currency on that subject, after which he said that the Board had every reason to assume, on the basis of information *Lich could be supplied if the court should think it important, that the branches were not going to be granted. Consideration was then given by the Board to the questions (1) whether the new developments on the case should be brought to the attenti on of the Attorney General and (2) what should be said to the Comptroller of the Currency with respect to the two statements alleged by counsel for Bank of America to have been made by Mr. T°14leend at the hearing on Saturd ay. In connection with the second point, consid eration was given t° the de sirability of the Chairman calling the Comptroller of the ClIrrencY by teleph one. It was suggested, however, that it would be 1)lieterable first to ask Mr. Townsend to suggest the nature of the reply the should be made. This suggestion was unanimously agreed to. . Mn, McCabe then asked that a letter be prepared to the Attor,. --Y General enclosing a copy of the letter from Mr. Townsend sent t, v't.. Bergson and briefly reciting the developments as the R(.10 6/26/50 -913(19.rd understands them since the letter from Mr. Townsend to Mr. Bergson was written. It was agreed unanimously that such a letter should be sent to the Attorney General by messenger as soon as it could be prepared. The letter sent in response to this action was as follows: "For your information, I enclose a copy of a letter dated June 24, 19)0, and its enclosures, which J. Leonard Townsend, the Board's Solicitor, addressed to the Honorable Herbert Bergson, Assistant Attorney General, regarding the Petition which the Board of Governors filed in the United States Court of Appeals for the Ninth Circuit in aid of the jurisdiction of that Court against Transamerica C°rPoration and Bank of .unerica National Trust and Savings As sociation. "Supplementing the information contained in the letter, Mr. Townsend advised us by telephone that late ! II the day of June 24, after the or9.1 argument referred 60 in the last paragraph of the letter, the three judges ' 1 110 heard the original ex parte argument handed down a lnanimous decision dismissing the motion to dissolve temporary restraining order and granting a permanent injunction restraining Bank of America National Trust rld Savings Association from acquiring the assets or flking business of the banks listed in the petition. have not received a copy of the Court's decision or or the injunction, and cannot give you their exact n"guage. However, we will furnish you with copies soon as we receive them. "Subsequently, Mr. Townsend advised us that on Sunday, June -), newspapers and radio in San Francisco were carryitlig statements to the effect that Bank of America intended _ c) disregard the Order of the Court and open the offices !Its branches of Bank of America under permits issued by the torn uo ptroller of the Currency. The Board addressed a letter the Comptroller of the Currency dated June 2) advisink, tiL1111 accordingly. A copy of that letter is enclosed. At time of dictating this letter we have no information (1 t0 any later developments." I t 8/711, 6/26/50 -10Chairman McCabe stated that he called Chairman Spence of the House Banking and Currency Committee this morning to say that the Budget Bureau would send to him for the information of his ColiZittee, a copy of the letter which the Director of the Budget sent to the Chairman of the Federal Deposit Insurance Corporation on Febru- arY 1°, 1930, stating that bill S. 2822, to amend the Federal Deposit illslarance Act, would be in accordance with the President's program 0/11Y if it were revised to restore the existing language of the Federal Reserve Act with respect to examinations of State member banks bY the Federal Deposit Insurance Corporation only- with the written c°)Isent of the Board of Governors. Chairman McCabe withdrew from the meeting at this point. The Secretary stated that, at the Chairman's request and in ace°rdance with the action taken at the meeting on June 23) 1950, he ce*lied Mr. Staats, Assistant Director of the Bureau of the Budget, /41° stat A , --e that in response to the Board's request he would send to Chat,— ' 14an Spence the letter to the Chairman of the Federal Deposit CO Corporation referred to above and that he thought the Board 11°111d be entirely justified in taking such action, including talking tc) Chairman Spence and otherwise, as it felt was necessary to see to it that the views of the President as stated in the letter to the ederal Deposit Insurance Corporation were carried out. Mr. Carpenter mnde the further statement that, at the Chairs request, he talked further with Mr. Staats about getting 842 6/26/50 -11- 8. s tatement that the Administrative Services Act and the Reorganizati011 Act No. 18 were not applicable to the Board, and that Mr. Staats did not see why it would not be possible to get a statement from the General Services Administration to the effect that the Reorganization Act was not applicable to the Board. He also said, Mr. Carpenter stated, that he had not been aware of the fact that the express 411th°ritY of the President contained in the Administrative Services Act to exempt agencies from the Act would expire on June 30, 1950, and that he would look into that point and call back on Monday, jtule 26. Mr. Carpenter stated that he told Mr. Staats that in the circu mstances the Board would like very much to have a letter from the President along the lines suggested in Chairman McCabe's letter to Mr. Staats on June 1, 1950. In a further discussion, the members present expressed the °131410/1 that Chairma McCabe should n say to Chairman Spence that if lItYthing were brought out in the executive session of his Committee, Which it Was understood was to be held on June 27, 19)0, for the lAirpose or considering certain features of the bill to amend the the the to Deposit Insurance Act, in which the Board has an interest, ard would like to be given the same opportunity to discuss il'etters with the Committee in executive session as was given the re presentatives of the Federal Deposit Insurance Corporation. Thereupon the meeting recessed and reconvened at 2:30 p.m., IS43 - 6/26/50 -12- there there being present Messrs. McCabe, Szymczak, Draper, members of the Board, and Messrs. C-rpenter, Thurston, Riefler, Thomas, Vest, Young, Solomon, Hackley, Fauver, and Schmidt of the Board's staff. The draft of statement to be made by Chairman McCabe before the Senate Banking and Currency Committee tomorrow on pending legislation to provide aid to small business was discussed paragraph by paragraph and numerous revisions were made with the understanding that the revised statement would be presented by Chairman McCabe at the hearing as a statement made on behalf of the Board of Governors. During the discussion there was delivered to the Chairman a leter as just received from the Comptroller of the Currency, reading follows: "Attached hereto is a copy of a telegram today sent to Mr. L. M. Giannini, President, Bank of America National Trust and Savings :ssociation, San Francisco, California, the contents of which are self-explanatory." The wire enclosed with the letter was in the following form: "In connection with the injunction issued against Your bank on June 24, your counsel has requested advice for Presentation to court regarding the allegation that although this office granted certain branch permits to Your bank it did not consider the public interest in17°1ved in the related acquisition of assets and assumption Of l iabilities of banks being replaced by the branches. .1311 are advised that whenever a national bank applies 10r authority to establish a branch the approval or disapproval of the comptroller is based on a study and in4estigation of all relevant factors, one of the most important of which is the effect on the public interest Of each aspect of the transction. This case is no 844 6/26/50 -13exception. The branch applications here involved Were predicated upon the proposed take-over by Bank. of America of the business of other specified banks and that factor was fully considered in determining that approval of the applications and the granting Of the permits were in the public interest. Your counsel further inquired as to assertion that the Board Of Governors of the liederal Reserve System first learned of the proposed branching on June 13. You are advised that the Chairman of that Board was kept generally informed of the status of the branch applications and was notified at least as early as April 11, 1950 of the intention to grant the Branch Permits in connection with a contemplated increase of your Bank's capital. A copy of this wire is being sent to the Chairman of the Board of Governors of the Federal Reserve System." It was agreed unanimously that the wire should be sent to Mr. Townsend over the leased wire with the request that he telephone any comments including the nature of the reply, if any, which he felt should be made. At this point all of the members of the staff with the eXce/,+ ' °n of Mr. Carpenter withdrew, and the action stated with reslPe t c-' 0 each of the matters hereinafter referred to was taken by the Board: Memorand, dated June 21, 19)0, from Messrs. Young and Noyes 'Director and Assistant Director of the Division of Research and Statistics, respectively, recommending an increase in the basic salary of Miss Katherine M. Radicevic, a clerk in that Division, fron r„ Yc))30 to $2,61)0 per annum, effective July 9, 1950. Approved unanimously. 6/26ho Letter to Mr. Lunding, Federal Reserve Agent of the Federal Reserve Bank of Chicago, reading as follows: "In accordance with the request contained in Mr. Meyer's letter of June 22, 19)0, the Board of Governors approves, effective July 3, 19)0, the Payment of salary to Mr. Charles J. Scanlon, Alternate Assistant Federal Reserve Agent, Federal Reserve Bank of Chicago, at the rate of $7,)00 per annum." Approved unanimously. Letter to Mr. DeMoss, Vice President of the Federal Reserve Bank of Dallas, reading as follows: "In view of the request contained in your letter of June 19, 19)0, addressed to Mr. Millard, the Board extends to July 3, 19)0, the time within which the First State Bank of Bellaire, Bellaire, Texas, may accomplish membership." Approved unanimously. Letter to Mr. Stetzelberger, Vice President of the Federal Res. Bank of Cleveland, reading as follows: "Reference is made to your letter of June 21, 9 ,20/ submitting a certified copy of a resolution adopted by the Board of Directors of The Miami uePosit Bank, Yellow Springs, Ohio, signifying its in tention to withdraw from membership in the Federal System and requesting waiver of the six m onths, notice which may be required. —onths, view of your favorable recommendation the Board. ard of Of Governors waives the usual requirement of slx months' notice, as requested. Accordingly, upon l isurrender of the Federal Reserve Bank stock issued to ! h Miami Deposit Bank, Yellow Springs, Ohio, the Federal Reserve Bank is authorized to cancel such ock and make appropriate refund thereon. "Please advise the Board of Governors when cancellation is effective and refund is made. The 846 6/26/) 0 -1)- "Certificate of Membership issued to the bank should also be obtained, if possible, and forwarded to the Board. The State Banking authorities should be advised of the bank's proposed withdrawal from membership and when it has been effected." Approved unanimously. Letter to Mr. Floyd W. Larson, National Secretary, American Institute of Benking, 12 East 36 Street, New York 16, New York, reacling as follows: "This refers to your letter of May 2) and to subsequent communications regarding the number of bank officers and employees by counties. we are doing the card punch work for National banks and for Federal Reserve banks and branches, as of December 31, 1949; the State member data are already on cards. These will be furnished to the Federal Deposit Insurance Corporation where the combination will be made with its data. The completed sheets that it will furnish you will show for each State a five column listing: the first !caumn will be the name of the county; the second, the number of bank officers; the third, the number Of bank employees; and the fourth and fifth columns will show the number of bank officers and employees .11 towns with a population of over 10,000 according the 1940 census. As explained to you when you were here, the coding of individual towns has not been completed; thus in any county having towns with a population of over 10,000, for example Alameda, California, the figures in the fourth and lfth columns will be the totals for all such towns rather than a separate listing of each. "It is expected that the completed sheets will be forwarded to you early in July. "You understand, of course, that our statistics on number of officers and employees of branch-operating ,tate member banks, like the corresponding statistics National banks and insured nonmember banks, are from consolidated reports, and, consequently, rePre sent the personnel of the head office and all of 847 6/26/50 -16- "its branches, including branches located outside of head office cities and head office counties. It is my understanding that you plan to obtain supplementary data from banks located in places with a population of 10,000 or more, which were operating one or more branches outside their respective head office cities. We furnished you a list of such banks as of June 1939, Which you used in connection with the tabulation of bank personnel that you made as of that date. If you Wish, we will be glad to prepare and furnish you a corresponding list as of December 31, 1949, covering all such branch operating banks, member and nonmember." Approved vnanimously. Memorandum dated June 20, 1950, from Mr. Young, Director °r the Division of Research and Statistics, recommending that the Board authorize negotiations with the Survey Research Center of the 1/4iversity of Michigan for a sixth nationwide Survey of Consumer l'inances to be conducted in January and February 191 at an estimated cost or $114.0,250, plus a contingency reserve of $10,000 to cover a4Y excess expenditures over the above cost estimate. The memorandum alia° recommended that contracts be concluded with the Survey Research eellter Pursuant to the above recommendation. Approved nrifInimously. Memorandum dated June 20, 1950, from Mr. Gardner L. Boothe, II, Assietan+ --- Director of the Division of Administrative Services, recoramel,44 that an assessment of two hundred and twenty-five thousandths or °Ile Per cent (.00225) of the total paid-in capital and surplus (secti°ne 7 and 13b) of the Federal Reserve Banks as of June 30, 1950, 848 6/26/50 -17- be levied against the Federal Reserve Banks for the general expenses Or the Board of Governors for the period July 1 to December 31, 19)0, and that the Banks be instructed to pay in the assessment in two eq1Aal instalments on July 3, 1950, and September 1, 1950. The following resolution levying an assessment in accordance with the above recommendation was adopted by unanimous vote: "WHEREAS, Section 10 of the Federal Reserve Act, as amended, provides among other things, that the Board of Governors of the Federal Reserve System shall have power to levy semi-annually upon the Federal Reserve Banks, in Proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses and the salaries of its members and employees for the half year succeeding the levying of such assessment, together with any deficit carried forward from the preceding half year, and "WHEREAS, it appears from a consideration of the estimated expenses of the Board of Governors of the ederal Reserve System that for the six months' period eginning July 1, 1950, it is necessary that a fund eqUal to two hundred and twenty-five thousandths of one Per cent (.0022)) of the total paid-in capital stock and ,s,urPlus (Section 7 and Section 13b) of the Federal Reserve ' anks be created for such purposes, exclusive of the cost °r Printing, issuing and redeeming Federal Reserve notes; GoImp:NOW, THEREFORE, BE IT RESOLVED BY TRE BOARD CI' ---Li4ORS OF THE FEDERAL RESERVE SYSTEM, THAT: (1) There is hereby levied upon the several Federal Reserve Banks an assessment in an amount equal to two 11111clred and twenty-five thousandths of one per cent ( ,7.0022j) of the total paid-in capital and surplus (Section I and Section 13b) of each such Bank at the close of business June 30, 19)0. (2) Such assessment, rounded to the nearest hundred dollars, shall be paid by each Federal Reserve Bank in equal installments, the first on July 3, 19)0, and he second on September 1, 1950. (3) Every Federal Reserve Bank except the Federal Reserve sank zank of Richmond shall pay such assessment by t 6/26/50 -16- "transferring the amount thereof on the dates as above provided through the Interdistrict Settlement Fund to the Federal Reserve Bank of Richmond for credit to the account of the Board of Governors of the Federal Reserve System on the books of that Bank, with telegraphic advice to Richmond of the purpose and amount of the credit, and the Federal Reserve Ilank of Richmond shall pay its assessment by crediting the amount thereof on its books to the Board of Governors of the Federal Reserve System on the dates as above provided."
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