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Minutes for
To:
Members of the Board
From:
Office of the Secretary
March 1, 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 Friday, March 1, 1963.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Mitchell
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Mr. Young, Adviser to the Board and Director,
Division of International Finance
Mr. Molony, Assistant to the Board
Mr. Cardon, Legislative Counsel
Mr. Fauver, Assistant to the Board
Mr. Noyes, Director, Division of Research
and Statistics
Mr. Koch, Associate Director, Division of
Research and Statistics
Mr. Brill, Adviser, Division of Research
and Statistics
Mr. Holland, Adviser, Division of Research
and Statistics
Mr. Solomon, Associate Adviser, Division of
Research and Statistics
Mr. Furth, Adviser, Division of International
Finance
Mr. Hersey, Adviser, Division of International
Finance
Mr. Mattras, General Assistant, Office of the
Secretary
Editorial Specialist, Board Members'
Morgan,
Mr.
Offices
Mr. Eckert, Chief, Banking Section, Division of
Research and Statistics
Mr. Yager, Chief, Government Finance Section,
Division of Research and Statistics
Miss Dingle, Senior Economist, Division of
Research and Statistics
Mr. Bernard, Economist, Division of Research
and Statistics
Mr. Goldstein, Economist, Division of International
Finance
•
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3/1/63
Money market review.
There were distributed tables relating
to the current Treasury advance refunding; total official and System
market purchases of coupon issues in relation to dealer sales; monetary
developments during the four-week period ending February 27, 1963; and
short-term claims on "foreigners" of 37 large U. S. non-bank corporations
as of November 30, 1962.
Mr. Bernard reported on recent developments in the Government
securities market, with emphasis on the advance refunding by the Treasury.
Miss Dingle discussed changes in the money supply, bank reserves, and
other banking statistics, after which Mr. Goldstein commented on recent
foreign exchange market developments.
Mr. Young then reported on the meeting he had recently attended
of Working Party 3 of the Economic Policy Committee of the Organization
for Economic Cooperation and Development which was held in Paris, France.
It was understood that Mr. Young would make a similar report to the
forthcoming meeting of the Federal Open Market Committee.
All members of the staff except Messrs. Sherman, Kenyon, Fauver,
the
Noyes, Brill, and Mattras then withdrew and the following entered
room:
Mr. Hackley, General Counsel
Mr. Solomon, Director, Division of Examinations
Mr. Shay, Assistant General Counsel
Mr. Leavitt, Assistant Director, Division of Examinations
Miss Hart, Senior Attorney, Legal Division
Mr. Potter, Senior Attorney, Legal Division
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3/1/63
Discount rates.
The establishment without change by the
Federal Reserve Banks of New York, Cleveland, Richmond, St. Louis,
Chicago, Minneapolis, Kansas City, and Dallas on February 28, 1963,
of the rates on discounts and advances in their existing schedules
was approved unanimously, with the understanding that appropriate
advice would be sent to those Banks.
Items circulated or distributed to the Board.
The following
items, copies of which are attached to these minutes under the
respective item numbers indicated, were approved unanimously:
Item No.
Telegram to the Federal Reserve Agent at Richmond
authorizing the issuance to The First Virginia
Corporation, Arlington, Virginia, of a limited permit
to vote its stock of Richmond National Bank and Trust
Company, Richmond, Virginia.
1
Letter to The Marine Trust Company of Western New York,
Buffalo, New York, approving the establishment of a
branch at 238 Main Street.
2
Letter to Southern Arizona Bank and Trust Company, Tucson,
Arizona, approving the establishment of a branch in a
shopping center at 24th Street and Camelback Road, Phoenix.
3
Report on competitive factors (Norfolk-Charlottesville, Virginia).
There had been distributed a draft of report to the Comptroller of the
on
Currency on the competitive factors involved in the proposed consolidati
of National Bank of Commerce of Norfolk, Norfolk, Virginia, and Peoples
National Bank of Central Virginia, Charlottesville, Virginia.
3/1/63
In discussion of the matter, Messrs. Solomon and Leavitt brought
out that this was regarded by the Division of Examinations as a difficult
case on which to draw conclusions concerning the competitive effects.
The banks involved were widely separated and there appeared to be little
direct competition between them, but each was the dominant bank in its
area.
The Division, on further consideration, would suggest including
at the appropriate point in the body of the report, and also in the conclusion, language indicating that both banks represented alternative
sources of banking services for medium-size businesses that could be
accommodated beyond their local area but did not have access to national
credit markets.
If that were done, the last sentence of the conclusion--
which stated that the union of these two banks would have an adverse effect
on competition--might be dropped.
Governor Mills said that he thought the general conclusion, as
stated, was correct, but in his view the additional language proposed
to be included was rather farfetched.
The banks were widely separated,
and the information presented on other available banking facilities was
so convincing that it would seem to stretch the point if it were suggested
strongly, as an adverse consideration, that borrowers would be deprived
of an alternative source of banking services.
However, he would not
object to the last sentence in the conclusion, as drafted.
He suspected
that the two consolidating banks would try to fill the gap between their
present service areas.
3/1/63
-5As the discussion proceeded, Governor Mitchell suggested that
the conclusion be slanted toward advancing the opinion that the adverse
competitive effects of the proposed consolidation would be more potential
than immediate.
There were also certain other suggestions for minor
changes in the language of the conclusion.
Thereupon, Governor Mills'
reservations regarding the additional language proposed for insertion
by the Division of Examinations having been noted, the report was approved
for transmittal to the Comptroller in a form in which the conclusion
read as follows:
The nearest offices of National Bank of Commerce
of Norfolk and Peoples National Bank of Central Virginia
are 143 miles apart and are not directly competitive.
However, Commerce National attracts correspondent business
from a wide region and solicits accounts from large
national and regional corporations that operate in the
service areas of both banks, and both banks represent
alternative sources of banking services for medium size
businesses which can be accommodated beyond their local
area but which do not have access to national credit markets.
This proposed consolidation would unite the State's
third and seventh largest banks, which are now the
dominant banks in their respective areas, and the continuing bank would be the second largest bank in Virginia
with an increased geographic sphere of influence. Further,
the proposal represents the continuance of a trend towards
State-wide concentration of commercial banking resources
by way of mergers and bank holding company acquisitions.
The union of these two banks would in this sense have a
potentially adverse effect on competition.
Application of Union Trust Company of Maryland (Items 4-7).
Pursuant to the decision reached at the meeting on February 21, 1963,
Governors Robertson and Mitchell dissenting, there had been distributed
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3/1/63
a proposed order and statement reflecting the Board's approval
of the application of Union Trust Company of Maryland, Baltimore,
Maryland, to merge with Peoples Loan, Savings and Deposit Bank,
Cambridge, Maryland.
Dissenting statements of Governor Robertson
and Governor Mitchell also had been distributed.
The issuance of the order and statements was authorized.
Copies of the order, the majority statement, and the dissenting
statements of Governors Robertson and Mitchell are attached to these
minutes as Items 4 through
7.
Mr. Shay, Miss Hart, and Mr. Potter withdrew at this point and
the following entered the room: Mr. Molony, Assistant to the Board;
Mr. Dembitz, Associate Adviser, Division of Research and Statistics;
and Mr. Partee, Chief, Capital Markets Section, Division of Research
and Statistics.
Bank loans collateralized by stocks and bonds (Item No.
8).
There had been distributed a memorandum from the Division of Research
and Statistics dated February 27, 1963, submitting a preliminary draft
of staff report on a recent survey of member bank loans collateralized
by stocks and bonds.
The memorandum pointed out that the survey in question was conducted in 1962 partly at the request of the Securities and Exchange
Commission, which planned to use the information in connection with the
Commission's special study of the securities market.
It was understood
3/1/63
-7-
that the Commission expected to publish the statistical summary of the
survey as an appendix item to a report to Congress, possibly recommending
new legislation in the area of securities market credit.
Material obtained
in the survey would also provide the basis for an article in an early
issue of the Federal Reserve Bulletin.
The survey sought to develop information about the volume and
characteristics of loans subject to Regulation U, Loans by Banks for the
Purpose of Purchasing or Carrying Registered Stocks, and of security
loans exempt from the present Regulation because they were made to
carry unlisted stocks or convertible bonds or were for purposes other
than purchasing or carrying securities.
It was felt that information
of this nature would be useful in determining the System's position
with respect to any proposals to extend the scope of the Regulation.
The survey results, blown up to universe proportions,
indicated that there were $10.9 billion in loans secured wholly or
Partly by stocks and bonds as of September 26, 1962.
Seven-eighths
of the dollar volume of such loans was collateralized principally by
stock, but despite the predominance of stock collateral only about
$900 million of the $10.9 billion in loans appeared to be subject to
Regulation U.
Even among loans secured principally by listed stock
and mutual fund shares, only 11 per cent appeared to be subject to the
Regulation, the bulk being exempt as "non-purpose" loans.
;
3/1/63
-8In commenting on the matter, Mr. Noyes brought out that the
Board was committed to transmit a report of the results of the survey
to the Securities and Exchange Commission.
This raised the question
whether the Board would want to express any views in the letter of
transmittal.
Based on discussion between members of the Board's staff
and the staff of the Commission, it appeared that the latter might suggest
to the Commission that it recommend in its forthcoming report to the
Congress that the present statutory authority be expanded in two ways:
(1) to cover credit extended on unlisted securities, to a large extent,
as well as listed securities; and (2) to cover any loan collateralized
by securities falling within the broadened definition, with the Board
given authority to provide exemptions in its discretion. Therefore, if
the Board had reservations, it might want to express them in transmitting
the report on the survey to the Commission.
It developed from further discussion that the Board would favor,
as it had in the past, an expansion of statutory authority to regulate
stock market credit extended on unlisted as well as listed securities.
Accordingly, it was understood that comment would be made to such effect
in the letter transmitting to the Securities and Exchange Commission the
results of the recent Federal Reserve survey.
However, when it came to
the question of broadened statutory authority that would subject to the
margin regulations all loans collateralized by both listed and unlisted
securities, despite the purpose of such loans, it developed that the
'
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3/1/63
Board would like to consider the matter further.
Therefore, the staff
was requested to prepare a memorandum on this phase of the subject for
the Board's consideration.
A copy of the letter subsequently sent to the Securities and
Exchange Commission is attached as Item No.
8.
All members of the staff except Mr. Sherman then withdrew from
the meeting.
50th aaniversary of the Federal Reserve System.
Chairman Martin
referred to discussions that had taken place in connection with observation of the 50th anniversary of the Federal Reserve System, such as
the January 30 letter from, Mr. Shuford, Chairman of the Presidents'
Conference Committee on Bank and Public Relations, and the report of
a Subcommittee of the Presidents' Conference on the subject.
With
reference to the suggestion that there be a brief history prepared regarding
the Federal Reserve System, he had come to the conclusion that it would be
desirable to designate Mr. Molony of the Board's staff to work on the
assembling of material for such a history and preparing a draft of the
history that had been suggested for this purpose.
The Chairman noted
that this would provide a means for assembling of material for the entire
System and that it would not preclude the use of a consultant such as an
outside historian later on if that seemed desirable.
His thought was that
Mr. Molony should be freed from his other work for a period of six months
to proceed with this project.
He had discussed the matter with him, and
3/1/63
-10-
Mr. Molony had indicated that he would be willing to undertake the task
and could commence the work on approximately March 15.
During a discussion of Chairman Martin's proposal in which the
members of the Board indicated their approval of his suggestion, Governor
Shepardson inquired whether it would be desirable to inform the Federal
Reserve Banks of the designation of Mr. Molony for the preparation of the
over-all System history.
This would include an indication that whatever
the Reserve Banks did should not duplicate the work for the System as a
whole but should be related to observation of the anniversary of the
System as regards their individual Banks or districts.
Governor Robertson suggested that such a communication should
also invite the Reserve Banks to supply information to assist Mr. Molony
In the System project, and it was understood that a draft of a communication of the type suggested would be prepared.
United Security Account Plan (Item No. 9).
The Secretary re-
ferred to a memorandum from Mr. Hexter, Assistant General Counsel,
dated February 21, 1963, that had been circulated to the Board transmitting a copy of the letter sent under date of February
5,
1963,
over the signature of John MacArthur, Chairman of the Board, Citizens
Bank & Trust Company, Park Ridge, Illinois, to United Security Account
holders advising them that certain changes were being made in the plan.
Mr. Hexter's memorandum indicated that with these changes the plan
apparently would no longer conflict with the Board's Regulation Q,
3/1/63
-11-
Payment of Interest on Deposits, or with section 19 of the Federal Reserve
Act.
As indicated in Mr. Hexter's memorandum, a letter to all Federal
Reserve Banks had been prepared and would be transmitted to them with
a copy of Mr. MacArthur's letter of February
5, for the purpose of
informing the Reserve Banks of the action taken by the member bank.
A copy of the letter to the Reserve Banks is attached as Item No.
The meeting then adjourned.
Secretary's Note: Pursuant to
recommendations contained in
memoranda from appropriate individuals concerned, Governor
Shepardson today approved on
behalf of the Board the following
actions relating to the Board's
staff:
Appointment
Cornelia J. Motheral, to work in the Division of Research and
Statistics for a six-month period on a temporary contractual basis,
With compensation at the rate of $28 per day for each day worked for
the Board, effective the date of entrance upon duty.
Salary increase
Charles M. Wrenn, from $4,250 to $4,565 per annum, with a change
in title from Operator, Tabulating Equipment, to Digital Computer
Systems Operator, Division of Data Processing, effective March 3, 1963.
Outside activity
Thomas Bryant, Cafeteria Laborer, Division of Administrative
Services, to work part-time at a gasoline service station.
9.
Item No. 1
3/1/63
TELEGRAM
LEASED WIRE SERVICE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
March 1, 1963
HYDE -- RICHMOND
KECEA
A. The First VirginiaCorporation, Arlington, Virginia.
B. Richmond National Bank and Trust Company, Richmond, Virginia.
C. None.
D. At any time prior to June 1, 1963, to act upon proposals to
increase and change the par value of the capital stock of such
bank and to take all action necessary in connection therewith,
provided that all action taken shall be in accordance with plans
satisfactory to the Comptroller of the Currency.
(Signed) Elizabeth L. Carmichael
CARMICHAEL
Definition of KECEA:
The Board authorizes the issuance of a limited voting permit,
under the provisions of section 5144 of the Revised Statutes
of the United States, to the holding company affiliate named
below after the letter "A", entitling such organization to
vote the stock which it owns or controls of the bail named
below after the letter "B", subject to the condition(s) stated
below after the letter "C". The permit authorized hereunder
is limited to the period of time and the purposes stated after
the letter "D". Please proceed in accordance with the instructions contained in the Board's letter of March 10, 1947, (5-964).
BOARD OF GOVERNORS
Item No. 2
3/1/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 1, 1963
Board of Directors,
The Marine Trust Company of Western New York,
Buffalo, New York.
Gentlemen:
al Reserve
The Board of Governors of the Feder
operation of a
System approves the establishment and
County, New
branch at 238 Main Street, Buffalo, Erie
rn New York.
York, by The Marine Trust Company of Weste
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 3
3/1/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORREEPONDENCE
TO THE BOARD
March 1, 1963
Board of Directors,
Southern Arizona Bank and Trust Company,
Tucson, Arizona.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment by
Southern Arizona Bank and Trust Company, Tucson,
Arizona, of a branch office in a shopping center
at the intersection of 24th Street and Camelback
Road in Phoenix, Arizona, provided the branch is
established within one year 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.)
1. 4,4
Item No.
4
3/1/63
UNITED STATES OF AEERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDT3RAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
UNION TRUST COMPANY OF MARYLAND
for approval o2 merger with
Peoples Loan, Savings and Deposit Bank
------------------
ORDER APPROVING MERGER OF BANKS
There has come before the Board of Governors, pursuant to
the Bank Merger Act of 1960 (12 U.S.C. 1828(c)), an application by
Union Trust Company of Maryland, Baltimore, Maryland, for the Board's
prior approval of the merger of that bank and Peoples Loan, Savings and
Deposit Bank, Cambridge, Maryland, under the charter and title of the
former.
As an incident to the merger, the sole office of the latter
bank would be operated as a branch of the former bank.
Notice of the
proposed merger, in form approved by the Board, has been published
pursuant to said Act.
Upon consideration of all relevant material in the light of
the factors set forth in said Act, including reports furnished by the
Comptroller of the Currency, the Federal Deposit Insurance Corporation,
and the Department of Justice on the competitive factors involved in the
proposed merger,
IT IS HEREBY ORDERED, for the reasons set forth in the
Board's Statement of this date, that said application be and hereby
is approved
provided that said merger shall not be consummated
(a) within seven calendar days after the date of this Order or
(b) later than three months after said date.
Dated at Washington, D. C., this 1st day of March, 1963.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston and Shepardson.
Voting against this action:
Governors Robertson and Mitchell.
Absent and not voting: Governors Mills and King.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
"IC
Item No.
5
3/1/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY UNION TRUST COMPANY OF MARYLAND
FOR APPROVAL OF MERGER WITH
PEOPLES LOAN, SAVINGS AND DEPOSIT BANK
STATEMENT
Union Trust Company of Maryland, Baltimore, Maryland
("Union"), with deposits of $291.9 million,* has applied, pursuant
to tha Bank Merger Act of 1960 (12 U.S.C. 1828(c)), for the Board's
prior approval of the merger of that bank and Peoples Loan, Savings
and Deposit Bank, Cambridge, Maryland ("Peoples"), with deposits of
$9.9 million.* The banks would merge under the charter and title of
Union, which is a State-chartered member bank of the Federal Reserve
System. As an incident to the merger, the sole office of Peoples would
become a branch of Union, increasing the number of its offices from
38 to 39,
Under the law, the Board is required to consider, as to each
of the banks involved, (1) its financial history and condition, (2) the
adequacy of its capital structure, (3) its future earnings prospects,
(4) the general character of its management, (5) whether its corporate
Deposit figures are as of October 22, 1962, for Union, and as of
July 16, 1962, for Peoples.
-2-.
Powers are consistent with the purposes of 12 U.S.C., Ch. 16 (the
Federal Deposit Insurance Act), (6) the convenience and needs of the
community to be served, and (7) the effect of the transaction on
competition (including any tendency toward monopoly).
The Board may
not approve the transaction unless, after considering all these factors,
it finds the transaction to be in the public interest.
Banking factors. - The financial history of both Union and
Peoples is satisfactory, as is their present financial condition.
capital structure of each is adequate.
of Peoples are only fair at best.
The
The future earnings prospects
The future earnings prospects of
Union are favorable, and this would be true of the resulting bank.
management of each bank is satisfactory.
The
Although Peoples has not as
yet provided for management succession, this is not regarded as an
immediate problem.
Under the management of the resulting bank, it is
believed that all banking factors would be satisfactory.
There is no evidence that the corporate powers of the banks
are, or would be, inconsistent with 12 U.S.C., Ch. 16.
Convenience and needs of the communities. - All but
5
of
Union's 38 offices are in the city of Baltimore or within a range
of 20 miles of the city.
Baltimore, with a population of 939,000,
is a commercial and industrial center, a major seaport,andone of the
larger eastern insurance and financial centers.
Consummation of the
Inerger will not have any measurable effect on the convenience and needs
of the Baltimore community.
1. 4.4
-3Five of Unions branches are located on the Eastern Shore
Peninsula, two in the town of Salisbury and one each in Easton,
Hillsboro and Trappe.
Cambridge, the community which will principally
be affected, has a population of 12,000, and is the seat of Dorchester
County and the second largest city in the Eastern Shore section of
Maryland. Cambridge is situated in the center of a prosperous agricultural region, growing wheat, corn, soybeans and tomatoes. Food
Packing was formerly the dominant industry, resulting in a seasonal
employment pattern, but new industries entering the area have brought,
and are continuing to bring, year-round manufacturing to Cambridge and
its environs.
The Cambridge Harbor Project includes deepening of the
channel in the Choptank River and the constructing of a pier which will
make it possible for large seagoing freighters to load and unload at
Cambridge, encouraging and fostering the trend toward industrialization.
A bridge and tunnel now under construction will connect Norfolk, Virginia,
to the southern tip of the Eastern Shore Peninsula, and should
accelerate the development of the Eastern Shore area.
branch
Cambridge is now served by three local banks and by a
of the largest bank in Maryland, the Maryland National Bank, Baltimore.
None of the three local banks has a lending limit in excess of $60,500,
none operates a trust department, nor does any make available many of
the services needed in an expanding area.
Until the trend toward in-
dustrialization began, these local banks were adequate to serve the
banking needs of the community. Growth and development of the area,
Which seems well assured, means that there will be a significant degree
of need for those services which can be supplied only by large banks.
While a large bank now operates an office in Cambridge, growth would
be encouraged by permitting another to expand into the Cambridge area.
The existence of the Union Trust Company office at Trappe, 7 miles
away, is not a convenient alternative source of services for larger
customers, as it is not feasible to retain an adequate staff in Trappe,
Which has a population of only 350.
Accordingly, the proposed merger
would contribute, in the Board's judgment, to the convenience and needs
of the Cambridge
area.
Competition. - There does not appear to be a significant amount
of competition existing between Union and Peoples.
While Union has a
branch in Trappe, Cambridge and Trappe are separated by the Choptank
River, which divides the two trade areas.
The small amount of business of common customers of Union and
Peoples originates chiefly from firms having offices in Cambridge and
also in one of the Eastern Shore communities where Union Trust already
has an office. Neither bank obtains a significant amount of business
from the service area of the other.
At the present time Dorchester County is served by 7 offices
of
4
banks. Three of these banks are relatively small and are head-
quartered in Cambridge while the Maryland National Bank operates one
branch in Cambridge and a branch in two other communities in the County,
each
of
which is about 15 miles from Cambridge.
While Peoples holds the
largest percentage of county deposits, its position in the County is
not dominant. It is not anticipated that the other two well-established
local banks in Cambridge would be unable to maintain satisfactory growth
rates following effectuation of the proposal.
Summary and conclusion. - There is little competition existing
between the two banks involved in this merger, and consummation of the
transaction would not have adverse effect on the other banks operating
in Cambridge.
The earnings of Peoples have been only fair, at best, and
consummation of the transaction would establish a basis for improved
earnings.
Cambridge is experiencing industrial and commercial expansion,
and prospects for
growth of the community and surrounding area are regarded as good. This merger would aid this development through the exPansion of banking services in Cambridge and thus benefit the community
as a whole.
For these reasons, the Board finds that the proposed merger
would be in the public interest.
March 1, 1963.
Item No.
6
3/1/63
DISSENTING STATEMENT OF GOVERNOR ROBERTSON
In the Bank Merger Act of 1960, Congress charged the
Federal agencies which supervise banks not to approve any merger unless,
after considering all the factors set forth in the Act, the agency "finds
the transaction to be in the public interest".
The Senate and House
Committees on Banking and Currency believed that, in most cases, the
decision would be clear.
If it was not, if the balancing of the vari-
ous factors proved to be difficult, then, in the language of the one,
adopted by the other, full consideration was to be given to the basic
Purposes of the statute, which were "to promote a sound banking system,
in the interest of the government, borrowers, depositors, and the
Public; and to promote competition as an indispensable element in a
sound banking system".
(Emphasis supplied) (S. Rept. No. 196,
April 17, 1959, p. 23; H. Rept. No. 1416, March 23, 1960, p. 11)
Testing by this standard, I cannot justify the decision to
approve this merger.
None of the banking factors provides positive
weight for approval.
Both banks are in satisfactory condition.
prospects of both are favorable.
The
No real management problem exists.
It is said that the community involved - Cambridge, on the eastern
shore of Maryland - is a growing one, with new industry moving into
the area.
But I find no allegation in the record of unserved present
or future banking needs of any size - large or small.
in Maryland has a branch in Cambridge.
The biggest bank
(Parenthetically, the small
volume of that branch's business does not indicate that the credit
r--• 4.)
-•
-2needs of the area cannot be met by banks of smaller size, or that a
branch of a large outside bank will do more to stimulate and encourage
economic growth in this community than will a local independent bank.)
In addition, the applicant already has a branch just seven miles away.
Hence, if a need should develop for loans larger than could be accommodated by the independent local banks, larger credit facilities are
available, not only locally, but also seven miles distant.
Consequently,
the potential future growth of the area is no justification for the
elimination of a sound independent bank and the replacement of it,
through merger, by a branch of a large Baltimore institution.
Consideration of the effect of the merger on competition does
not, in my view, offset the grey neutrality of the banking factors.
There are presently three independent local banks in Cambridge.
Of
these, the largest is being absorbed by this proposed merger. Whatever
potential and actual competition exists between that bank and the existing branch of the applicant bank, seven miles away, will disappear.
Finding the banking factors neutral, and a reduction in actual
or potential competition which will result from the merger, with no
visible sign that the public interest will be promoted by this further
step toward concentration of banking power in the State of Maryland, it
seems to me that the Congressional mandate requires denial of the
application.
March 1, 1963
Item NO. 7
3/1/63
DISSENTING STATEMENT OF GOVERNOR MITCHELL
The evidence in the record of this case does not convince
me that this application should be approved.
The anticipated indus-
trialization in and around Cambridge should it occur may establish
the need for different and more banking facilities in the future than
exist at present, but there is no showing of a present need which
cannot be satisfied by the banks already there. The fact that Cambridge
now has a branch of the largest bank in Maryland, and that this branch
has not developed any startling rate of growth, indicates to me that
there is as yet no need for the kind of specialized services which a
large bank can offer.
Had the Board found it in the public interest to
Permit and accelerate the transformation of the Maryland banking system
into a State-wide system as rapidly as possible--had the evidence been
before the Board to support such a finding--then, on that basis, I could
have concurred in approving the application.
On the information before
the Board in this record, however, I am compelled to vote for disapproval.
March 1, 1963
Item No.
8
3/1/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
March 12, 1963.
Mr. William L. Cary,
Chairman,
Securities and Exchange Commission,
Washington 25, D. C.
Dear Mr. Chairman:
Enclosed are five copies of a report prepared by the
Board's staff on last fall's survey of member bank loans collateralized by stocks or bonds. In view of the statistical nature of the
survey, the report is confined to a description of the findings,
presented on the basis of various classifications of loans, security
collateral, and banking office characteristics. No conclusions are
drawn from the study, since the data are subject to differing interpretations.
It is apparent, however, that the volume of bank loans
collateralized by securities is large, and that a substantial proPortion of the credit reported as being to purchase or carry securities
is exempt from Regulation U by virtue of its identification with
unlisted stocks. In this connection, I would like to reaffirm the
Board's previously stated position as to the desirability of extending
its authority so that loans for purchasing and carrying at least the
more actively traded over-the-counter securities could be covered
under the Regulation. This would of course require a change in the
enabling legislation. Extension of regulatory authority along these
lines would be more feasible if reliable and authoritative price
quotations were available, since the lack of such a "standard" would
Pose a difficult administrative problem. .
Our research staff will be glad to discuss the survey and
its findings with your staff in any detail desired. Also, additional
copies of the report are readily available should you need them.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
Enclosures
Item No.
3/1/63
BOAND OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 6, 1963.
Dear Sir:
1963, that
Enclosed is a copy of a letter, dated February 5,
State bank,
member
a
Illinois,
Ridge,
Citizens Bank & Trust Company, Park
has sent to alL
Division.
customers of its United Security Account
February 1963,
The February 5 letter makes it clear that, after
a customer will no longer be permitted to repay his check-loans "by using
the Credit Instruction Form to transfer the money out of your savings
repay a
l
The letter tells the customer that "if you want to
account."
oan.we must ask you to do it with new deposits," and the use of the
Credit Instruction Form (the means by which the objectionable feature of
the plan was effectuated) "will be unnecessary with the new procedure
which begins next month."
Security Account
Although the formal objection to the United
Plan was that it violated section 217.1(e) of Regulation Q, the basic
fault was that the plan contravened, in effect, section 19 of the Federal
Reserve Act, which prohibits a meMber bank from paying interest on accounts
subject to check. With the discontinuance of the Credit Instruction Form
:nd the procedure by which the bank would, as a routine matter if so
from
equested by a mark on that Form, repay check-loans by transfers
Savings deposits, the objectionable feature of the plan seemingly has been
e
liminated.
Banks in view
This communication is being sent to the Reserve
of Citizens Bank's nationwide solicitation of United Security Accounts and
the numerous inquiries received by Reserve Banks regarding such accounts.
Very trulyrurs,
Merritt She man,
Secretary.
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
CITIZENS BANK & TRUST COMPANY
0
United Security Account
Division
Chicago 48, Illinois
February 5,
1963
Dear Friend:
A few years ago we brought a new idea to personal banking. We introduced
the United Security Account. It was designed to be a combination savings and
cheque-credit account. The savings portion of the account earned the maximum
interest permitted by the Federal Reserve Board.
The mechanics were clear. When we paid the cheques you wrote, we loaned
YOU the money. You were able to continue the loan or repay it by using the
Credit Instruction Form to transfer the money out of your savings account.
The idea was so revolutionary that a number of other banks questioned our
right to pay you any interest at all, because the Federal Reserve Act prohibits
Paying interest on Checking accounts. To avoid any misunderstanding, the
Federal Reserve Board has asked us to simplify our procedure so it cannot be
said that savings which earn interest are being used to pay cheques.
You will still earn the highest rate of interest. You will still be permitted to use your United Security Account Cheques. Any cheques you write will
be considered a loan as in the past. Even though you have ample funds in your
savings account, this indebtedness will appear on your statements as before.
However, beginning next month, if you want to repay a loan, we must ask you to
do it with new deposits.
Most all United Security Accountholders have been making deposits with
regularity. Any deposits - that is, any money you send in - will first be used
to repay any cheque-loans. If they are received by the 10th of the month, there
Will be no charge for cheque-loans made during the previous month. The balance
of your deposit will be credited to your savings account and earn interest.
In many ways this procedure will simplify the program. You will no longer
have to return Credit Instruction Forms. Your savings earnings will not be
disturbed by a series of withdrawals to pay your cheques. Of course you can
withdraw directly as with any other savings account.
I am confident you will like the new simplified procedure.
Very sincerely yours,
(Signed) John MacArthur
John MacArthur
Chairman of the Board
CITIZENS BANK & TRUST COMPANY
P.S. The credit Instruction Form on the enclosed statement can still be used
this month as in the past, but it will be unnecessary with the new procedure
which begins next month.
@FedFRASER