The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
The attached minutes of the meeting of the
Board of Governors of the Federal Reserve System on
March 2, 1960, 'which you have previously initialed,
have been amended at the request of Governor Mills to
revise his remarks beginning on page
6.
If you approve these minutes as amended, please
initial belay.
Chairman Martin
Governor Szymczak
FR 609
Rev. 10/59
Minutes for
To:
March 2, 1960.
Members of the Board
From: Office of the Secretary
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.
Chm. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Minutes of the Board of Governors of the Federal Reserve System
on Wednesday, March 2, 1960.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
King
Sherman, Secretary
Hackley, General Counsel
Solomon, Director, Division of Examinations
Hexter, Assistant General Counsel
O'Connell, Assistant General Counsel
Conkling, Assistant Director, Division
of Bank Operations
Mr. Hostrup, Assistant Director, Division
of Examinations
Mr. Landry, Assistant to the Secretary
Mr. Farrell, Assistant Counsel, Legal Division
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Discount rates.
The establishment without change by the Federal
Reserve Bank of Atlanta on February 29, 1960, of the rates on discounts
and advances in its existing schedule
was approved unanimously, with the
understanding that appropriate advice would be sent to that Bank.
Item circulated to the Board.
The following item, which had
been circulated to the Board and a copy of which is attached to these
minutes as Item No. 1, was approved unanimously:
Letter to the Federal Reserve Bank of Kansas City waiving
assessment of a penalty incurred by the Goodland State
Bank, Goodland, Kansas, because of a deficiency in its
required reserves.
Mr. Conkling withdrew from the meeting at this point.
3/2/60
-2Applicability of Regulation T to a "reorganization" (Item No. 2).
There had been distributed a memorandum dated March 1, 1960, from Mr.
Hexter relating to a question that had arisen under Regulation T, Credit
by Brokers, Dealers, and Members of National Securities Exchanges, in
connection with the plan of International Harvester Company, a New Jersey
corporation, to acquire control of Solar Aircraft Company, a California
corporation.
Mr. Hexter stated that International Harvester was currently
offering to stockholders of Solar one share of Harvester stock in exchange
for 2-1/4 shares of Solar stock, the offer being conditioned upon at
least 80 per cent of all outstanding Solar stock being exchanged.
The
purpose of this condition was to make the exchange transaction a tax-free
"reorganization" under sections 354 and 368 of the Internal Revenue Code
of 1954.
A substantial amount (perhaps 10 per cent) of outstanding Solar
stock was said to be held in undermargined brokerage accounts.
If the
Board were to rule that the proposed exchange of stock constituted a
"withdrawal of . . . registered securities" under section 220.3(b)(2)
of Regulation T and was not exempted from that section by some other
provision of the Regulation, the exchange could be effected only if
additionAl cash or collateral were placed in any undermargined brokerage
accounts.
It was also understood that many of the customers with Solar
stock in their undermargined accounts were not in a position to furnish
such additional collateral or cash; and if such persons were unable to
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accept the exchange offer, less than 80 per cent of outstanding Solar
stock might be deposited, thereby preventing consummation of the plan.
Mr. Hexter said that Solar took the position that the proposed
exchange was a "reorganization" and therefore was exempted from Regulation T by virtue of section 220.6(e), which provides that "a creditor
may, without regard to the other provisions of this part, effect for a
customer the exchange of any registered or exempted security in a general
account for the purpose of participating in a reorganization or recapitalization in which the security is involved
"
There was no doubt,
he said, that "reorganization" included a merger, consolidation, or similar
arrangement under which stock of one corporation was exchanged for stock
of another corporation by operation of law, pursuant to corporate action
rather than by individual choice.
It was the recommendation of the
Legal Division that the Board interpret the term "reorganization" in this
section 220.6(e) of Regulation T as including the Harvester-Solar plan
since, broadly speaking, the objective of this exchange plan was the same
as that of a merger--namely, to bring the operations and assets of Solar
at least mainly under the ownership and control of Harvester.
The
underlying purpose of the "reorganization" exception in Regulation T
was presumably to enable an undermargined customer, without depositing
additional cash or collateral, to participate in a fundamental change in
the status of a particular company.
The proposed interpretation would
not provide a loophole that undermargined customers could utilize at
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will to avoid the application of the retention requirements to their
accounts, and it was also persuasive that the term "reorganization" is
defined in the Internal Revenue Code to include transactions such as the
Solar-Harvester plan.
There being no objection, unanimous approval was given to the
recommendation of the Legal Division, with the understanding that a letter
would be sent to Counsel for Solar Aircraft in the form attached as
Item No. 2.
Messrs. Molony and Fauver, Assistants to the Board, entered the
room at this point and Mr. Farrell withdrew.
Application of First Wisconsin Bankshares Corporation to acquire
shares of Mayfair National Bank
(Items 3 and 4).
There had been dis-
tributed a memorandum from the Legal Division dated March 1, 1960,
attaching for the Board's consideration a proposed Order and Statement
that would approve the application of First Wisconsin Bankshares Corporation, (formerly Wisconsin Bankshares Corporation), Milwaukee, Wisconsin,
to acquire 2,950 of the 3,000 voting shares to be issued by Mayfair
National Bank, Wauwatosa, Wisconsin, a proposed new bank.
ng
Mr. Hackley said that in accordance with the understandi
incorporated
reached at the meeting on Monday, February 29, the Statement
a change from the Tentative Statement issued on November 30, 1959, that
was intended to clarify the portion of the earlier statement which had
been construed in some quarters as an invitation to submit competing
applications.
3/2/60
-5A number of clarifying changes were then suggested and agreed
upon with a view to improving this portion of the Statement.
During this
discussion, Governor Robertson expressed a view that some of the difficulties encountered by the Board in this particular case would not have
occurred had the tentative decision of the Board been its final decision.
Unanimous approval was then given to the Order approving the
application of First Wisconsin Bankshares Corporation for prior approval
of acquisition of voting shares of Mayfair National Bank, and to the
accompanying Statement, together with a press release to be issued at
4 p.m. EST, March 2, 1960. Copies of the Order and Statement are attached
as Items 3 and 4, respectively.
Proposed Amendment to Regulation Y (Item No. 5).
Pursuant to
the understanding reached at the Board meeting on Monday, February 29,
1960, there had been redistributed copies of a Legal Division memorandum
dated September 28, 1959, relating to the Board's tentative decision
procedure regarding applications under the Bank Holding Company Act, along
with an excerpt from the minutes of the meeting of the Board on October 8,
1959, at which this memorandum had been considered.
Chairman Martin recalled that during discussion of the tentative
decision procedure at the meeting of October 8, 1959, attention had been
directed particularly to an alternative procedure recommended by the
Legal Division under which the issuance of tentative decisions would be
discontinued and the receipt of all applications under the Bank Holding
Company Act would be promptly announced in the Federal Register stating
3/2/6o
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the names of the applicant and the bank or banks involved, indicating
the general nature of the proposed transaction, and allowing 30 days
for the submission of comments.
The announcement, under the proposed
procedure, also would state that the application, except such portions
thereof as the Board may determine to withhold from disclosure, would be
available for public inspection if a written request for such inspection
was granted by the Board.
The Chairman suggested that the Board begin
this discussion of alternative procedures by considering the pros and
cons of that proposal.
He made it clear, however, that this was not
intended to preclude discussion of other alternatives contained in the
memorandum.
Governor Mills said he would continue the tentative decision
procedure or go to a procedure of making the initial decision of the Board
its final decision, thus completing the Board's action on the application
and permitting an appeal to the courts if there was disagreement with
that decision.
grounds.
He would dispute the Legal Division's proposal on two
First, the Board is dealing in a competitive area in these
applications and he believed that competition should allow the bank
holding company to have the initiative and foresight to advance its considerations with the administrative agency without being obliged to Ramit
competitors into the picture to interpose objections and possibly to seek
to have a subsequent application take precedence over the initiative
thus shown by the applicant.
He believed this was necessary in order to
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be completely equitable with the holding companies under the kind of
system we operate in.
By opening the application of a holding company
to inspection, which would be tantamount to inviting objections to the
application, would in a sense derogate from the Board's responsibility
for independently judging the application and thus would disparage the
self esteem that the Board should properly have.
The Board should arrive
at a reasoned judgment on such applications fairly and equitably and let
that judgment be disputed in the courts as far as the applicant was
concerned.
This would recognize that objectors to the application would
not have the same opportunity.
Governor Mills said his second reason for
disputing the proposal of the Legal Division was that by making public
applications the Board would in a sense be indicating sympathy with proposed legislation now before the Congress that would require the Board,
the Federal Deposit Insurance Corporation, and the Comptroller of the
Currency to make public applications by banks to establish branches.
Up
to the present time the Board has felt that that area of decision fell
within the domain of the Board and should not be exposed to a public
hearing.
For the same reason, Governor Mills said that if the Board moved
to public hearings on branch applications it would be treading on the edge
of a controlled economy and would be detracting from the ability of a
bank to enjoy
the initiative and foresight to which it was entitled and
which it should be permitted to pursue in confidence.
Therefore, unless
and until the Board wished to change its position on secrecy for handling
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of branch applications, he felt that it would be wrong considering the
Board's dual responsibility to member banks and to bank holding companies
to publish in the Federal Register the receipt of applications by holding
companies.
In reply to a question by Chairman Martin, Mr. Hackley said the
Legal Division believed that bank holding companies would object to
publication of notice of receipt of applications under the Bank Holding
Company Act.
Furthermore, the Board had stated to Transamerica Corpo-
ration in 1956 that receipt of applications would be treated by the Board
as "unpublished information" under its Rules of Organization and Procedure.
As he saw it, the applicant would be placed at a disadvantage by such
publication, and he gave as an example the bidding up by competing
interests of the price of stock of a bank proposed to be acquired.
If
it was the feeling of the Board that publication would be desirable, he
suggested that a proposed amendment to Regulation Y, Bank Holding
Companies, be published in the Federal Register in order to solicit
comments.
Mr. Hackley also observed that if notice were published of every
application, there would be cases in which an interested party would not
be in a position to make intelligent comment without examining the
application itself.
This consideration had dictated the formulation of
the alternative in the Legal Division's memorandum of September 28
Pursuant to which an application would be made available for public
3/2/60
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inspection upon written request, with the Board reserving the right to
withhold such portions of the application as it might determine should
not be disclosed..
Mr. Hackley noted that another alternative set forth in the
Legal Division's memorandum called for abandoning the present tentative
decision procedure and, except in cases where a public hearing was
required by the Bank Holding Company Act, treating applications under
that Act in the same manner as any other applications; for example,
applications for branches of State member banks.
There would be a dis-
advantage for the Board under such a procedure, however, since the Board
might be in a vulnerable position in the event of judicial review of its
decision which was more likely to occur in connection with holding
company applications than with branch applications.
Under the terms of
the Bank Holding Company Act, the Board is required to publish its
Order in the Federal Register, but this is not the case so far as its
decisions regarding branch bank applications are concerned.
Governor Robertson said he perceived no distinction in principle
between the application of a bank holding company under the Bank Holding
Company Act and the application, for example, of a broadcasting company
to acquire an additional station.
He agreed with the recommendation
of the Legal Division that the tentative decision procedure should be
abandoned and that the Board should adopt a procedure of publishing
3/2/60
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notice of the receipt of all holding company applications and allow
30 days for the filing of comments, with a provision that on written
request the application would be available for public inspection, except
for such portions as the Board might determine to withhold from disclosure
in the public interest.
It was his guess that the Board, after a period
of experimentation, would decide to provide for inspection without
written request.
In agreeing with the recommendation of the Legal
Division, he realized that this represented a reversal of his views when
the tentative decision procedure was adopted.
In reply to a question from Governor Shepardson as to the points
of information that would be necessary for an interested party to obtain
by inspecting an application under the Bank Holding Company Act, Mr.
Hackley said that usually it might be sufficient to have knowledge that
a particular holding company had applied for prior approval to acquire
a particular bank in a particular location.
However, there might be
cases in which a third party would like to know such things as the type
of business the bank involved intended to engage in and the nature of the
competitive situation.
Mr. Solomon agreed with the views expressed by Mr. Hackley.
He
added that in a good many cases a potential objector to an application
might be able to get along without actually examining the application,
but in other ccses counsel for an interested party would be under a
severe handicap if he did not have an opportunity to examine into what
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he was objecting to and thus was forced to make his comments more or
less in the dark.
It was Mr. Solomon's view that in the event of judicial
review a court would take the same position.
Governor Shepardson said that he found himself between two points
of view.
On the one hand, since banking institutions require a public
charter and are subject to public supervision, public notice of applications would seem to be indicated.
In addition, technological developments
in banking make it more difficult to resist the continuing movement toward
consolidations into larger units in this part of the economy.
On the
other hand, he found it difficult to support disclosure of applications
under the Bank Holding Company Act until disclosure of applications for
bank branches was required, since the considerations seemed to him to be
essentially the same.
Personally, he felt the sound procedure ultimately
would be to publish notice of applications for acquisitions under the
Bank Holding Company Act and for establishment of branches.
This
reasoning suggested the possibility of adopting an alternative to which
Mr. Hackley had referred in the memorandum of September 28 that the
tentative decision procedure be abandoned and that holding company applications be treated like any other applications, except where a public
hearing was required by the Bank Holding Company Act or was ordered by
the Board.
The adoption of that alternative procedure would place a
burden on the staff in attempting to make a complete analysis of each
situation without having the advantage of the viewpoint of possible
3/2/60
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objectors.
If this was considered a serious obstacle, he would lean
toward retaining the tentative decision procedure until legislation, if
enacted, clarified the situation so far as branch bank applications were
concerned.
Governor King said that his views were much the same as those
expressed by Governor Shepardson.
If the Board were to decide that the
advantages of disclosure of holding company applications would outweigh
the disadvantages pointed out by Governor Mills--and for his part,
Governor King said he would weight those disadvantages very considerably-he believed that a decision to publish notice of branch applications
should be reached at the same time.
He would not object to the Board
reaching a decision on the latter point at this time, but that might seem
to be pre-empting the right of Congress to legislate on the matter of
requiring public notice of branch applications.
Until such a decision
was reached, however, he felt it would be better to continue the present
procedure regarding applications under the Bank Holding Company Act.
Mr. Hackley commented, in response to a question from Governor
Robertson, that there were bills in the Congress at present that would
require public hearings on all applications for the establishment of
branches by banks and there was also a bill that would take away all
authority for the Board to pass on the establishment of branches by
State member banks.
His understanding was that these bills were not
receiving active consideration at this time.
In any event, Mr. Hackley
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pointed out, despite the similarities between holding company acquisitions
and the establishment of branches, there was a significant distinction
in the Board's position from the legal standpoint in passing upon applications under the Bank Holding Company Act of 1956 and in passing upon
branch applications under existing legislation.
Governor Szymczak stated that he would favor adoption of part of
the procedure recommended in the Legal Division's memorandum, in that he
would abandon the tentative decision procedure and would publish notice
of the receipt of applications from holding companies.
However, he would
not include in such notices any statement indicating that the application
would be available for inspection but would meet that problem in any
individual case when it arose.
Governor Balderston said he found difficulty in reaching a
decision on this question but that he came out about where Governor
Szymczak did.
He believed the tentative decision procedure had worked
well except in the case of Wisconsin Bankshares application to acquire
stock of Mayfair National Bank, when it had worked badly.
He could see
the merits of the argument presented by the Legal Division, however,
even though he would be content to continue what the Board was now doing.
Mr. Hackley said that, the tentative decision procedure having
been followed for 1-1/2 years, it had become well known to the bank holding
companies.
The procedure does provide some opportunity for the expression
of objections.
If the Board should decide to abandon this procedure and
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announce that it would give notice of the receipt of applications, such
action would no doubt cause questions as to reasons for the change and
might even give rise to action in Congress to require public hearings
on all bank holding company applications.
The bank holding companies
could be expected to object to the procedure recommended by the Legal
Division and, if the Board were to adopt it over their objections, they
might not furnish as full information in the future as they have in the
past.
It might be that they would be deterred from filing applications.
If the Board should decide to adopt the recommendation of the Legal
Division, Mr. Hackley felt it would be desirable to amend Regulation Y
to make clear that any objector to an application must furnish a copy of
his objection directly to the applicant at the same time it was sent to
the Board, in order that the applicant would be aware of the nature of
any objection being filed with the Board.
Governor Balderston said that when the proposal was considered
last October, a view was expressed, with which he concurred, that the
Board had had good experience with the tentative decision procedure.
Should the Board now decide to change this procedure, he was concerned
as to what explanation would be made to justify a change from a procedure
that had worked fairly well and which had become known to holding
companies and their lawyers.
He did not believe the Board had been
wrong in following this procedure, and he found difficulty in convincing
himself that it needed to be changed and why.
3/2/60
-15Chairman Martin commented that this was the same point that
the Board arrived at when it discussed the question last October.
He
had studied the September 28 memorandum of the Legal Division again
last night and had noted the statement near its end that "bank holding
companies and the public have become accustomed to the 'tentative decision'
procedure."
Mr. Molony noted that the banking group would hardly have been
expected to take issue with the procedure that had been followed.
He
questioned, however, whether the public was well informed about this
procedure.
If the public knew of it and thought secret applications
favored the banks involved, he wondered what explanation would be made
by the Board.
Specifically, he inquired what response would be given
by the Board as to why it did not give notice of the receipt of holding
company applications, if such a question were to be directed to the
Board by a member of the Congress, or what reply would the Board make
if he were to ask to see an application that had been filed.
Mr. Molony
doubted that the answer suggested by Governor Mills' comments--that, in
effect, to furnish such information would do mischief--would be convincing
in a matter where an agency of the Congress was handling public business.
He would think that the Board would wish to publish notice of the receipt
of applications unless it had a persuasive answer to questions such as
he posed.
3/2/60
-16Mr. O'Connell said that he believed he could provide a legal
answer to the questions Mr. Molony posed, and he commented in some detail
as to how he would base a reply.
He came out, however, with a statement
that in his judgment notice of the receipt of an application under the
Act, with reasonable availability of data in the application to a
potential objector, would be desirable.
Chairman Martin said that he still had not changed his view that
the Board had operated quite satisfactorily under the tentative decision
procedure.
If, however, it wished to experiment with a different procedure,
he did not think it should feel frozen into the present one, and he would
not object to trying the one proposed by the Legal Division.
Governor Shepardson stated that on principle he favored public
notice of applications and full disclosure of the contents to interested
parties, although he was still concerned about the difference in handling
of applications under the Bank Holding Company Act and applications for
bank branches.
He was also disturbed by the fact that at present no
notice was required of receipt of applications for approval of bank
mergers.
Mr. Hackley reviewed the origin of the tentative decision
procedure in 1958 and the suggestion then that it might be observed in
operation for a year or so, after which the Legal Division might have a
further recommendation, which was now before the Board.
Ideally, from
a legal point of view, a hearing would be desirable on every application
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filed under the Bank Holding Company Act.
In practice, that seemed
unnecessary, and the suggested procedure was one designed to provide
full opportunity for the Board to hear not only from the applicant but
also from potential objectors.
In response to a question from Governor Balderston, Mr. O'Connell
said he favored giving public notice of receipt of applications under
the Bank Holding Company Act and making the contents of each application
available to an interested party.
In this manner, any party opposing
the application would have had an opportunity to see the record upon
which the Board had relied in reaching its decision.
In his judgment,
this would be a better procedure from the legal standpoint than that
represented by the tentative decision procedure.
Chairman Martin then inquired whether the Board wished to
experiment with the Legal Division's recommendation.
Governor King said that he could not agree with the argument
for revealing an application under the Bank Holding Company Act without
doing the same on a branch application.
If the Board made a decision
to change the present procedure, he hoped that applications under the
Bank Holding Company Act would not be revealed in full.
He would not
object to making public the fact that an application had been received
to acquire stock of a particular bank in a particular location, provided
a similar procedure was followed with respect to branch bank applications.
3/2/60
-18Governor Robertson said he disagreed with the judgment that
there would be objections from the holding companies to disclosure that
their applications had been filed.
As to branch applications, the Board
did not act on those until after the state authorities had acted and in
some states the fact that a branch application had been filed became
known.
In any event, he could see no real basis for having holding
company applications depend on what was done on branch applications.
Mr. Hexter noted that the Board's position with respect to
branch bank applications differed somewhat from that involving applications
under the Bank Holding Company Act.
In the former case, the Board was
one of three supervisory agencies before which such applications came,
whereas in the latter instance its jurisdiction was exclusive.
Mr. O'Connell added that the basic legislation in each case
differs.
The sections of the Federal Reserve Act under which the Board
considers branch bank applications contain no reference to holding
hearings, while the Board has discretionary power in connection
with
applications under the Bank Holding Company Act where a hearing is not
required by law.
Chairman Martin then asked Mr. O'Connell to confirm whether he
favored, on legal grounds, a change in the procedure to publish notice
of applications under the Bank Holding Company Act and to make available
the applications, with some restrictions as indicated, upon written
requests, and Mr. O'Connell replied in the affirmative.
3/2/60
-39.
Governor Shepardson noted a suggestion that there might be a
segregation of information in the application, with one section containing
data of a type that would not be disclosed.
Mr. Hexter said that this would be possible, but as a practical
matter it would be difficult to know in advance just how to define information to be made public and that which would be unsuitable for disclosure.
His judgment was that it would be preferable, at least at the outset, to
make the application available on written request, subject to withholding
of any information not suitable for disclosure.
Such information, he
felt, would be a relatively insignificant portion of any application and
in most cases the question probably would not arise at all.
Governor Shepardson said that, in the light of the whole discussion, he still was bothered about treating holding company applications
differently from those for branches.
However, he would be willing to
approve the proposal of the Legal Division.
Chairman Martin said that this would be an experiment.
The
matter of privacy of information was a difficult one, he felt, and there
was a difference between banks and airline routes or television channels.
The only reason he had been able to find for treating the banking matters
with greater privacy was that it was possible to start a run on a bank.
A run on even a small bank and its failure would be a matter of public
interest that could have an impact different from anything that could
result from public concern over an airline or a broadcaster.
3/2/60
-20Governor Mills said that, if the Board was about to adopt the
proposal of the Legal Division for giving notice of applications under
the Bank Holding Company Act, he wished to make his dissent a matter of
record.
He also suggested, as an aside, an examination of a new book
by Friedrich A. Hayek, "The Constitution of Liberty."
Governor King said that he too would record a dissent from the
proposed action.
He had not been able to convince himself that this was
a desirable move and under the circumstances he preferred to make no
change in the present procedure.
Mr. Hackley stated that he gathered the Board was about to
approve the Legal Division's recommendation, including the proposal to
make applications available on written request, subject to withholding
portions from disclosure, and with the further understanding that any
person who filed with the Board an objection to an application must at
the same time send a copy of his objection to the applicant.
Chairman Martin indicated that this was the proposal on which
he was polling the members of the Board.
Thereupon, approval was given to the proposed amendment to
Regulation Y
Bank Holding Companies, that would supersede the tentative
decision procedure and provide for publishing notice of receipt of all
holding company applications, stating the names of the applicant and the
bank or banks involved, indicating the general nature of the proposed
transaction,quoting the five statutory factors, and allowing 30 days for
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submission of comments, with a statement that the application, except
such portions thereof as the Board may determine to withhold from
disclosure, mould be available for public inspection if a written request
for such inspection is granted by the Board.
In approving the proposed
amendment, it was understood that it would provide that any objector to
the application must send to the applicant a copy of the objection at
the same time that it was filed with the Board.
Governors Mills and
King dissented from this action.
It was also agreed that an appropriate notice of proposed rule
making in the form attached to these minutes as Item No. 5 would be
submitted for publication in the Federal Register, with a request that
comments be submitted to the Board or a Federal Reserve Bank not later
than April 15, 1960, and that letters would be sent to the Federal Reserve
Banks, all registered bank holding companies, and other interested persons
informing them of the proposed amendment.
All of the members of the staff except Messrs. Sherman, Molony,
and Fauver then withdrew from the meeting.
Memorandum regarding Directors' Day.
Before this meeting, there
had been distributed a memorandum from Mr. Fauver regarding the Directors'
Day Program held on February 17 and 18, 1960.
There was a brief dis-
cussion of the memorandum and of modifications that might be desirable
in arrangements for a subsequent meeting of this type.
83f,)
3/2/60
-22Presentation of computer developments.
Governor Shepardson
inquired whether the Board would wish to have a presentation of developments in the use of the Board's computer, such presentation to be in
charge of Mr. Schwartz, Chief Analyst, Statistical Operations Planning,
Division of Research and Statistics, and to take not over one hour.
It
was agreed that such a presentation should be arranged for during the
next few weeks.
Appointment of Mr. George Rudy.
Governor Shepardson referred to
discussions with President Irons of the Dallas Reserve Bank regarding the
temporary assignment to the Board of George F. Rudy, General Counsel and
Assistant Secretary of that Bank,for a period of one year from about
April 1, 1960 to March 31, 1961.
He stated that Mr. Irons was agreeable
to the arrangement and that Mr. Rudy had indicated he would like to
accept the assignment.
Governor Shepardson indicated he would recommend
the Board's approval of the arrangement under which Mr. Rudy would
continue as a regular employee of the Dallas Bank and continue to receive
his salary directly from that Bank; and he outlined the basis on which
it was contemplated that Mr. Rudy would be reimbursed for transportation
and other costs.
Unanimous approval was then given to this arrangement.
A copy
of the letter to President Irons pursuant to this action is attached
Item No.
6.
The meeting then adjourned.
3/2/60
-23Secretary's Notes: On February 3, 1960, the
Board approved a revision of the Loss Sharing
Agreement of the Federal Reserve Banks with the
understanding that the revision would become
effective when a duly executed counterpart original
had been received from each Reserve Bank. Such
counterpart originals having been received, the
Federal Reserve Banks were notified yesterday that
the revised Agreement became effective March 1, 1960.
Pursuant to the recommendations contained in memoranda from appropriate individuals concerned,
Governor Shepardson approved on March 1, 1960, on
behalf of the Board, the following actions affecting
the Board's staff:
Advance of sick leave
M. Callie Wickline, Nurse, Division of Personnel Administration, an
additional advance of sick leave through March 31, 1960.
Acceptance of resignation
Thomas G. Cook, Guard, Division of Administrative Services, effective
March 5, 1960.
On March 1, 1960, Governor Shepardson noted on
behalf of the Board the death of Marie Butler Leven,
Chief, Economic Editing,Division of Research and
Statistics, on February 21, 1960.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 1
3/2/60
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 2, 1960
Mr. John T. Boysen,
Vice President and Cashier,
Federal Reserve Bank of Kansas City,
Kansas City 6, Missouri.
Dear Mr. Boysen:
This refers to your letter of February 1, regarding
a penalty
of $58.52 incurred by the Goodl
and State Bank, Goodland, Kansas, on a
deficiency in its required reserves
for the biweekly computation period
ended January 27.
It is noted that the deficiency was attributab
le to the fact
that the bank, which
is under new management, had been operating under a
misunderstanding as to the proper method
of handling its reserve account;
because of this misunderst
anding it was deficient in reserves in six
Periods since October 15,
1959, penalties for three of which your Bank
was able to waive
under provisions of the Board's instructions, and
assessments were made on the other
s; and that the meAber bank is cooperating in correcting its
practice, although too late to prevent the
deficiency in the period ended Janua
ry 27.
In the circumstances, and in view of your recommendation, the
Board authorizes your
Bank to waive assessment of the penalty of $58.52
for the period
ended January 27.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 2
3/2/60
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 2, 1960
AIR MAIL
Herbert F. Sturdy, Esq.,
Gibson, Dunn & Crutcher,
634 South Spring Street,
Los Angeles 14, California.
Dear Mr. Sturdy:
This is in reply to your letter of February 23, relating
to the plan for acquisition by International Harvester Company of
at least 80 per cent of the outstanding stock of Solar Aircraft
Company.
On the basis of the information contained in your letter
and enclosures, it is the opinion of the Board of Governors that
the plan described constitutes a "reorganization" within the
meaning of that term as used in section 220.6(e) of Federal
Reserve Regulation T. Consequently, a creditor may, without
regard to the other provisions of Regulation T, effect for a
customer the exchange of Solar stock for Harvester stock pursuant
to the terms of the exchange offer.
Very truly yours,
\ \'
Merritt Sherman,
Secretary.
M43
UNITED STATES OF AMERICA
Item No. 3
3/2/60
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
FIRST WISCONSIN BANKSHARES CORPORATION
(formerly Wisconsin Bankshares Corporation)
for prior approval of acquisition of
voting shares of Mayfair National Bank,
Wauwatosa, Wisconsin
----------------------ORDER APPROVING APPLICATION UNDER
BANK HOLDING COMPANY ACT
There having come before the Board of Governors, pursuant
to section 3(a)(2) of the Bank Holding Company Act of 1956 (12 USC 18)43)
and section 4(a)(2) of the Board's Regulat
ion Y (12 CFR 222.)4(a)(2)),
an application on behalf
of First Wisconsin Bankshares Corporation
(formerly Wisconsin Bankshares Corporation), whose principal office
is in Milwaukee, Wiscons
in, for the Board's prior approval of the
acquisition of 2,950 of the 3,000 voting shares of a proposed bank,
the Mayfair National Bank, Wauwato
sa, Wisconsin; a Notice of Tentative
Decision referring to a Tentative Statement on said applications
having been published in the Federal Register on December
5, 1959
(2)4 F.R. 9801); said Notice
having provided interested persons
844
-2-
an opportunity, before issuance of the Board's Order, to file
objections to and comments upon the facts stated and the reasons
indicated in the Tentative Statement; and the time for filing such
objections and comments having expired, and comments and objections
having been duly considered;
IT IS HEREBY ORDERED, for the reasons set forth in the
Board's Statement of this date, that said application be and hereby
is granted, and the acquisition by First Wisconsin Bankshares
Corporation of 2,950 voting shares of the proposed bank, the Mayfair
National Bank, Wauwatosa, Wisconsin, is hereby approved, provided
that such acquisition is completed within three months from the date
hereof.
Dated at Washington, D. C., this 2nd day of March, 1960.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and Governors
Balderston Szymczak, Mills, Robertson, Shepardson,
and King.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
S45
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
4
3/2/60
APPLICATION BY FIRST WISCONSIN BANKSHARES CORPORATION OF
MILWAUKEE, WISCONSIN, FOR PRIOR APPROVAL OF ACQUISITION
OF VOTING SHARES OF MAYFAIR NATIONAL BANK
STATEMENT
First Wisconsin Bankshares Corporation (formerly Wisconsin
Bankshares Corporation), Milwaukee, Wisconsin ("Bankshares"), a bank
holding company, has applied, pursuant to section 3(a)(2) of the Bank
Holding Company Act of 1956 ("the Act"), for the Board's prior approval
of Bankshares' acquisition of
2,950 of the 3,000 voting shares to be
issued by Mayfair National Bank of Wauwatosa, Wauwatosa, Wisconsin
("Mayfair"), a proposed new bank.
Views and recommendations of the Comptroller of the
Currency. - Since Mayfair would be a national bank, notice of the
application was given, as required by section 3(b) of the Act, to
the United States Comptroller
of the Currency.
In his reply, the
Comptroller commented on the application from the point of view of
each of the factors enumerated
in section 3(c) of the Act (see
following paragraph) and recommended that the Board approve the
application.
Statutory factors. - Section 3(c) of the Act requires the
Board to take into consideration the following five factors: (1) the
financial history and condition
of the holding company and bank
-2concerned; (2) their prospects; (3) the character of their management;
(4) the convenience, needs, and welfare of the communities and the
area concerned; and (5) whether or not the effect of the acquisition
would be to expand the size or extent of the bank holding company
system involved beyond limits consistent with adequate and sound
banking, the public interest, and the preservation of competition
in the field of banking.
Discussion. - Bankshares is a bank holding company, as
defined in section 2(a)(1) of the Act. It owns a large majority of
the stock of six commercial banks in Wisconsin, with aggregate
deposits in the neighborhood of V380 million at the end of 1958.
BY
far the largest of these subsidiary banks is the First Wisconsin
National Bank of Milwaukee, the largest bank in Wisconsin, with
deposits in excess of $700 million.
In Milwaukee County (in which
Milwaukee and Wauwatosa are situated) Bankshares' banks maintain
fourteen offices, thirteen being offices of First Wisconsin National
Bank. The remaining banks in the group, located in Eau Claire,
Fond du Lac, Madison, and Oshkosh, compete only to a negligible extent,
if at all, in the Milwaukee
area.
Mayfair National Bank is to be located in the Mayfair
Shopping Center, a large new center in the community of Wauwatosa,
which is chiefly a residential suburb of Milwaukee, located to the
west of that city and extending to the western boundary of Milwaukee
County. The primary service area of the bank would include part
-3of Wauwatosa and would extend into Waukesha County to the west and
slightly into the residential portion of Milwaukee to the east.
The
population of this area has more than doubled within the past decade,
and is estimated to exceed
6o,000 at present. There are no banking
offices in the primary service area, but there are two banks in the
business section of Wauwatosa, a little more than two miles from the
proposed site of Mayfair.
The financial history, condition, prospects, and management
of the holding company are satisfactory.
The prospects and proposed
management of Mayfair also are satisfactory; since the bank has not
yet been established, financial history
and condition are not relevant
factors with respect to it.
First Wisconsin National Bank, Bankshares' principal subsidiary, is unquestionably the dominant banking institution in the
major urban area centered about the city of Milwaukee.
the small Southgate National Bank (Bankshares
that area), it has almost
Together with
other subsidiary in
33 per cent of the banking offices and over
43 per cent of the deposits
held by all banks in Milwaukee County.
In these circumstances, any expansi
on in the size or extent of the
holding company system - even the relatively small expansion that
would result from the establishment of Mayfair - necessarily raises
the question whether the acquisition would
be "consistent with .
the public interest and the preservation
of competition in the field
of banking", which is one
of the factors enumerated in section 3(c)
of the Act.
S
However, the decisive factor in this situation, in the
Board's judgment, relates to "the convenience, needs, and welfare of
the communities and the area concerned." As previously indicated,
the area that would be served by Mayfair has been growing in population at a rapid rate, and further growth must be anticipated. Despite the increase in population of the area by tens of thousands,
as well as the substantial increase in business activity in the
area, no additional banking offices have been established in
Wauwatosa since 1920.
The numerous business interests in the large
Mayfair Shopping Center and elsewhere in the area, as well as the
residents of the area and others who would be drawn to the shopping
center, are entitled to the very considerable convenience that
mould result from the establishment of the proposed bank.
In view of the continuing growth of the area involved, it
does not appear to the Board that the establishment of the proposed
new bank mould have a materially adverse effect
on the soundness
or prospects of the two existin
g banks in Wauwatosa.
These are
substantial institutions with total deposits in excess of $16 million
in one case and $28 million in
the other (including the deposits of
a branch situated about
2-1/2 miles from the proposed site of
Mayfair). It also seems quite clear that no other bank could be
materially affected by the establishment of Mayfair, although some
business that currently goes to offices within a four-mile radius
of the site of the new bank inevitably would be drawn to Mayfair,
which would be more conveniently situated for some present customers
of existing banks.
The situation regarding this application is similar, in
many respects, to that involved in the application by Bankshares to
establish a new bank in the Southgate Shopping Center, which was
approved by the Board on October 9, 1957 (1958 Fed. Res. Bulletin 10).
As pointed out in a later decision, in that case
"...the Board granted its approval for a large holding
company to establish a new bank in a shopping center
because, considering all the relevant circumstances,
including the population and prospects of the area
concerned and the existing banking facilities, the
probable service to the area was deemed by the Board
to outweigh adverse considerations with respect to
the fifth factor." (Statement re First Eastern Heights
State Bank of Saint Paul, 1958 Fed. Res. Bulletin 1063.)
In the present case, also, it seems clear that the convenience, needs,
and welfare of the area concerned would be served by establishment
of the new bank to a degree that outweighs the adverse consideration
that the proposed acquisition will increase, in small measure, the
extent to which banking offices and bank deposits in Milwaukee County
will be concentrated in the Bankshares holding company group.
In connection with Notice of the Tentative Decision in
this matter, the Board observed that, in view of Bankshares'
dominant position in Milwaukee and its vicinity, the public
interest might be better served if banking facilities could be
850
-6furnished to the area around the Mayfair Shopping Center by an
Institution that would not be a part of that holding company group,
but that, although the shopping center had been planned for many
years and had been in operation for some time, it did not appear
that any other groups or individuals had evinced interest in
establishing banking facilities in the neighborhood.
Apparently
misconstruing this observation as an invitation to encourage pot(mtial
competitors even at this late date, another bank holding company and
a group of individuals each expressed interest in establishing a bank
in or near the Mayfair Shopping Center.
considered these representations.
The Board has carefully
In view of the circumstances,
however, it is believed that to deny Bankshares' application because
of these recent indications of interest would tend to discourage
initiative in providing needed banking facilities.
The Board has
concluded that such an outcome would not be in the public interest.
Conclusion. - Viewing the relevant facts in the light of
the general purposes of the Act and the factors enumerated in
section 3(c), and after due consideration
or comments received, it
is the judgment of the
Board that the proposed acquisition would be
consistent with the statutory objectives and the public interest and
that the application should be approved.
March 2, 1960
It is so ordered.
FEDIMAL RESERVE SYSTEM
Item No. 5
3/2/60
12 CFR Part 222
[Reg. i]
BANK HOLDING COMPANIES
Notice of Proposed Rule Making
The Board is considering amending Part 222 (Reg. Y) so as to
Provide for the publication in the Federal Register of notice of receipt
of all applications under
§ 222.4.
The purpose of this amendment is to afford interested persons
Lull opportunity to submit to the Board comments and views with respect
to applications
filed by bank holding companies pursuant to § 222.4 and
to facilitate
prompt consideration thereof by the Board in the light of
any such comments or
views.
The proposed amendments would change paragraphs (d) and (e) of
222.4 to read as follows:
(d) Submission of applications.
Application for approval by
the Board of any transaction requiring such approval under paragraph (a) of this section shall be filed with the Federal Reserve
Bank. Five copies of such application shall be filed except where,
Pursuant to the provisions of paragraph (e) of this section, copies
of the application are required to be transmitted to both the
Comptroller of the Currency and the appropriate State supervisory
authority, in which circumstances six copies of the application
shall be filed. Any such application shall be filed not less than
-260 days before the date on which it is proposed that the
3/
transaction requiring approval be consummated.— Upon timely
request and upon a satisfactory showing as to the need therefor,
the Board in its discretion may accept an application although
submitted within such period of 60 days. A separate application
shall be filed with respect to each bank the voting shares or
assets of which are sought to be acquired by an existing bank
holding company or nonbanking subsidiary thereof.
(101 Procedure on applications. (1) A Federal Reserve Bank
receiving an application under this section will retain two copies
thereof and will forward all other copies to the Board. If either
the applicant or the bank the voting shares or assets of which are
to be acquired is a national bank or a District bank, the Board
Will transmit a copy of the application to the Comptroller of the
Currency. If either the applicant or the bank the voting shares
or assets of which are sought to be acquired is a State bank, the
Board vill transmit a copy of the application to the appropriate
supervisory authority of the State in which such bank is located.
(2) Following the receipt of any application under this section, the Board will publish in the Federal Register a notice of
such receipt, stating the names and addresses of the applicant
37-17"1517.--67s7s it may not be possible fo'r the Board to act upon
an application within such period of 60 days and this requirement
should not be regarded as suggesting that the Board will act upon
al applications within that period of time, although every effort
Will be made to expedite such action.
and the bank or banks involved, indicating the general nature
of the proposed transaction, and allowing 30 days for the submission of written comments or views by interested persons.
Any such comments or views may be submitted directly to the
Board or to the Meral Reserve Bank for transmission to the
Board. Persons submitting comments or views shall furnish a
copy thereof to the applicant and shall advise the Board directly
OX through the
Federal Reserve Bank in writing of such transmission to the applicant. Al]. applications filed will be available
at the offices of the Board or of the Federal Reserve Bank for
inspection by any person to whom permission for such inspection
is granted by the Board. Itritten requests for such permission
shall be submitted to the Board, either directly or through the
Federal Reserve Bank, and shall clearly state the person's interest in the matter and the reasons for which the request for
inspection is made. Notwithstanding a showing of good cause for
inspection, the Board may decline to permit inspection of any
part of the application with respect to which disclosure would
not, in the Board's judgment, be in accordance with the public
interest.
This notice is published pursuant to section 4 of the Administrative Procedure Act and section 2 of the Rules of Procedure of the
Board of Governors of the Federal Reserve System (12 CFR 262.2). AuthoritY to amend this Part is contained in Sec. 5(b) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1844(0).
To aid in the consideration of the foregoing matters the
Board will be glad to receive from interested persons any relevant
data, views, or
arguments* Although such material may be sent
directly to the
Board, it is preferable that it be sent to.the
Federal Reserve Bank of the appropriate district for transmission
to the Board. Al].
such material should be submitted in writing to
be received not later than April
150 1960
BOARD OF GOVERNORS OF THE FEDERAL RESERVE
STEM
(Signed) 11erritt Sherman
Merritt Sherman
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 6
3/2/60
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 2, 1960
Hr. Watrous H. Irons, President,
Federal Reserve Bank of Dallas,
Dallas 2, Texas.
Dear Mi. Irons:
This is to confirm the informal arrangement made with you
by Governor Shepard
son regarding the assignment to the Board of Mr.
George F. Rudy.
The Board would appreciate the temporary assignment to its
Offices in Washington of Mr. Rudy for a period of one year from
about April 1, 1960, to March 31, 1961. As
you suggested, Mr. Rudy
will continue as a regular employe
e of the Federal Reserve Bank of
Dallas and will receive his salary directly
from you.
The Board will pay for the movement of his household goods
and personal effects
from Dallas to the residence established in the
Washington, D. C., area. When Mr. Rudy has decided on the carrier
which will move his household furnishings, please
let us know and we
will send him the necessa
ry Government bill of ading in order that
the shipment may
be made without transportation tax.
Also, the Board will pay transportation expenses for himself and family. This will be
on the basis of 100. per mile, plus
actual additional necessary travel expense
.
Recognizing that Mr. Rudy's living expenses in Washington
will be somewhat higher than Dallas, the Board will
also pay him a
per diem allowance during
this temporary assignment, the amount of
which can be mutually decided upon at a later date.
The Board is appreciative of your willingness to make Mr.
111:
1dYi5 services available, and hopes that the above arrangements
Will be satisfactory to
you.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
@FedFRASER