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Minutes for To: March 22, 1961 Members of the Board Prom: 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 minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, please initial below. tf You were present at the meeting, your initials will : . -4dicate approval of the minutes. If you were not present, JoUr initials will indicate only that you have seen the minutes. the Chin. Martin Gov. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Minutes of the Board of Governors of the Federal Reserve System orl Wednesday, March 22, 1961. 10:00 PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson King Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. bec4 The Board met in the Board Room at Sherman, Secretary Kenyon, Assistant Secretary Thomas, Adviser to the Board Young, Adviser to the Board Shay, Legislative Counsel Molony, Assistant to the Board Fauver, Assistant to the Board Hackley, General Counsel Noyes, Director, Division of Research and Statistics Solomon, Director, Division of Examinations Hexter, Assistant General Counsel Leavitt, Assistant Director, Division of Examinations Young, Assistant Counsel Wood, Senior Economist, Division of Research and Statistics Items circulated to the Board. n4 "reUlated The following items, which had to the members of the Board and copies of which are attach ed to these minutes under the respective item numbers indicated, roved unanimously: Item No. tette_ Nip4 to The First Pennsylvania Banking:g nc.InTrust P , tabj ea hiladelphia, Pennsylvania, approving the Llat "ehtent of a branch at 401 West Chester Pike, erch, Haverford Township. tette r to The York Bank and Trust Company, York, :. 41rAllth TIla, approving the establishment of a N41“0,1986 Carlisle Road, Shiloh, West ester Township. • 1 2 '1021 3/22/61 -2Disclosure of information relating to bank mergers (Items 3 9412-1-4). There had been distributed to the Board copies of a memorandum fr°14 Mr. Hackley dated March 21, 1961, with further reference to rNuests for the disclosure of certain information having a relationship to antitrust suits brought by the Department of Justice in connection th Proposed bank mergers in Philadelphia, Pennsylvania, and Lexington, iCenttlekY. Mr. Hackley's memorandum advised that pursuant to the underaLatIrl ' Ing at the Board meeting on Friday, March 17, he had informed the Qrri°e of the Comptroller of the Currency and the Federal Deposit nsilr ahce Corporation that in the absence of objection on the part of thos e agencies the Board was prepared (1) to make available to counsel r°r the banks involved in the Philadelphia merger a copy of the Board's • reP°rt °n competitive factors to the Comptroller of the Currency, and (2) to authorize the Department of Justice to offer in evidence, and to take alrailable to defense counsel, copies of the Board's reports on c)111Pet't,,• -ve factors in the Philadelphia and Lexington cases. Mr. Hackley quentlY was advised that neither the Comptroller's Office nor the Pecier 41 Deposit Insurance Corporation would object to the actions Drop °sed to be taken by the Board, although it was the Comptroller's think& hg that reports made by the banking agencies to each other on ()ItiPet t• 1 -ire factors should not generally be made public. the Submitted with rnell-L°randum were drafts of letters proposed to be sent to counsel 3/22/61 14°1 'The Philadelphia National Bank and to the Department of Justice. In discussion of the matter, certain suggestions were made with l'"Pect to the wording of the proposed letters. Textual changes l'eflecting these suggestions having been agreed upon, the letters were then P....P.,Ttploal for transmittal, Governor Robertson dissenting. Copies Or tile letters, as sent, are attached as Items 3 and 4. Governor Robertson dissented because, as he had stated at the Illeeting on March 17, he did not believe that the Board should make the rePort on competitive factors available to counsel for the Philadelphia banks c oncerned or that it should voluntarily permit such reports to be Off ered in evidence by the Department of Justice. In his opinion, the only, esult would be to place one agency of the Government against Ittl°the -r. He felt that the wiser course would be to reply to the %hint °et Department in terms that the Board was not willing to permit the Use of the reports in the manner contemplated except upon order from the court. However, he agreed that the letters to the Justice Department 41It° counsel for The Philadelphia National Bank were in accord with the 1"11 ' itY view expressed at the March 17 meeting of the Board. In the memorandum that had been distributed, Mr. Hackley also st ed that he had advised representatives of the Comptroller of the "eY and the Federal Deposit Insurance Corporation that the Board Ivo 11°t be in favor of releasing to outside parties intra-agency staff 3/22/61 —4— temoranda relating to bank mergers. He was informed that the Cl3qtroller's Office was preparing a statement of the reasons for which then ' A)naptroller approved the Philadelphia merger in the form in which 811ell st atement eventually would be published in the Comptroller's annual l'eP01't to Congress, and that this statement would be made available upon request ln • the Philadelphia case. M. Hackley further reported in his memorandum that pursuant to the , ' 41eTstanding at the March 17 meeting copies of the latest reports C)r "v ndition of the State member banks in Lexington, Kentucky, had been 314t t0 the Department of Justice. However, a representative of the DePartite -h.. informed Mr. Hackley yesterday that the Department was sending to .0 , "8 Board a letter, as yet not received, which would request earnings arid ,44 . m-°/1.dend reports, trust examiners' reports, and examination reports "the 'Jenks concerned. that it As to the earnings and dividend reports, the memorandum indicated had been ascertained from the staff of the Comptroller's Office a4tid the D Federal Deposit Insurance Corporation that no objection would be 4141to Permitting the Justice Department to have access to such reports. wa 8 stated also to be the view of the Board's staff. 110 view to the contrary being expressed by members of the Board, 'Was barks 2214.ktLIPI522.d. that earnings and dividend reports of the State member e°110erned would be made available to the Department of Justice if the arit iciPated letter from the Department should be received. 3/22/61 As to reports of examination, Mr. Hackley's memorandum stated thaw rePresentatives of the Comptroller of the Currency and the Federal Dep0si T -Lnsurance Corporation had indicated that their respective icies would refuse to make available to the Justice Department the reports concerning the banks involved. In support of this position, they r eferred to the following statement made by Senator lbright on the floor of the Senate before the Bank Merger Act was passed: * while cooperation is, of course, expected between the banking agencies and the Justice Department, it 1 not intended that this provision (requiring Justice to 2 ...Deporton competitive factors) should give the Justice ijartment free entry to the files of the banking agencies. an is not intended that the Justice Department would have toY °ccasion to examine the banking agencies' files relating the banking factors under consideration, and in particular, is expected that the banking agencies will continue to :ve the bank examiners' reports the same confidential treatment which the Department of Justice gives to FBI rePorts ,, the j.rcumstances Mr. Hackley's recommendation was that the Board take a Position against affording access to examination reports of the state member banks concerned in the mergers. Governor Mills stated that he agreed with this recommendation 41ci that u he wished to state again the sentiments he had expressed on o ccasions with respect to maintenance of the confidentiality c't cl°c4Ments of this kind. He commented that a bank examination (/riztitutes _ n 3olverley andaco:::::::al of a bank's position and a judgment as to the of the bank. Of It is a document that has come out , a relationshi very much akin to that existing between lawyer and 3/22/61 —6— client) and the contents of an examination report, unless that document 811°1114 be subpoenaed, should be held in sacred confidence. sidered He con- this to be especially true in a situation where the Justice Dehn 'ent was appearing in an adversary capacity, and in connection With litigation unrelated to the examination function. Later in the meeting Governor Mills commented further in this ream, referring specifically to a recent court decision which upheld the /3 lireau of the Census in its refusal to release to the Federal Trade Cotazis 81°n, for use in connection with a proceeding by the Commission 4144nst e certain party, information supplied by that party to the krea U. He also referred to an instance in which the Board had in "feet rejected a request from the Justice Department for statistics turIlishaa to the Board on a confidential basis by an automobile finance e°tPany. Governor Robertson stated that he could not concur in the slIggeation that the examination reports in question be withheld from the Department of Justice. He regarded the statement by Senator klb right, urged in support of such a position by the other banking 4e ncies, as irrelevant to the situation. To take such a position, he stI ggeeted, would run counter to the history of relationships between the (111Stiee Department and the bank supervisory agencies over a long period or time. The Justice Department, he brought out, is the chief law enforcement agency of the Government, and the Board is an agency of the I( 3/22/61 a°vernment. The Board must have due concern for the protection of c°r1fidential documents, but it should not prevent the chief law "reement agency of the Government from obtaining leads to informatio . „," The Board should not voluntarily permit the introduction of %caw, w-ulatlon reports in evidence in connection with proceedings brought by the n -epartment, but thus far experience had shown that the 1)ePartnlent used such reports only for the purpose of obtaining leadso Theref, ' re, upon request, he would favor making the reports in question "ailable to the Department for that purpose irrespective of the position taken by the other bank supervisory agencies. Governor Shepardson indicated that he was inclined to agree with Goirell„ u°r Robertson. While he thought there was a basis for objecting to the use of examination reports in evidence, he did not see how the Board )11341 derlY to the Justice Department the opportunity to inspect such reporte i -n order to obtain leads. Governor King inquired concerning past practice, and Mr. Hackley rePlie d that from time to time, in connection with criminal proceedings, the 80 ard had permitted inspection of examination reports by the bepart Illent of Justice, including United States Attorneys, for the ilt410OSe Of obtaining leads. Mr. Solomon confirmed this statement and "ded th -at in one case where the Department of Justice had under eotsici eration an antitrust proceeding in a bank merger case in the PlAtab Ilrgh area the Board had instructed the staff to permit a ' 3/22/61 —8— rsPresentative of the Department to have access to bank examination files on the Boardfq premises. In reply to a question concerning whether a distinction could be drawn for this purpose between criminal and civil actions, Ilackley said that this might be a distinction without a difference. illb4nk merger cases, he noted, the Justice Department was carrying out its resAonsibility for enforcement of the antitrust laws. In further discussion, Mr. Hackley pointed out that the Boards 114.1 -s e Of Organization provide that the Board may make available to %tain other agencies of the Government copies of reports of examination 4nd oth• sr information for use where necessary in the performance of the °racial duties of such agencies. Governor King then referred to the language of the statement by 4nator F ulbright on the floor of the Senate, as quoted in Mr. Hackleyfs ril"1°1-aricl1114, and indicated that he found it difficult to believe that this statement did not cover rather conclusively the situation with esPect to the use of examination reports in connection with bank 14erger cases. Accordingly, he wished to associate himself with the Pc)sition taken by Governor Mills. Governor Balderston said it was distasteful to him to have bank %Iihation reports used in the manner contemplated, but that he thought this was inherent in the setup. Chairman Martin referred to a question that had been raised the pertinence of information in the examination reports to " 311'22/61 —9— alltitrUSt proceeding. He expressed agreement with the view that essent134y the examination report probably was not a pertinent cis3cint. He went on to suggest, however, that the problem seemed to e°111e back to the question of broad public relations. Generally speaking, it 144s his philosophy that in protecting the confidentiality of information theD -oard ought to be sure it was acting on a basis that would be understood bY the tc Public and that it would not look as though the Board was just trying ,m ysterious in its operations. On some matters, he noted, it was dltficult to make a distinction. It was, therefore, the view of the majority of the Board, from thich Go vernors Mills and King dissented, that, in the event the anticipated lette r should be received from the Justice Department, the position of the Bc d should be that it would permit representatives of the Department to ha ess to examination reports of the banks in question for the purpose °t obt ning leads but not for use in evidence. This being the majority view, Mr. Hackley inquired whether, if sileh request should be received, it would not be desirable to communicate 1444 the Office of theComptroller of the Currency and with the Federal 1)eP°sit I nsurance Corporation prior to taking any action on the request of theJustice De partment. lias The reply given by the Chairman, from which no dissent was heard, that this should be done before any reply was made to the Justice 4q)artment. Then, if the other banking agencies wished to make any l'ePresentations to the Board, they should be permitted to do so. 3/22/61 -10A final matter covered in the memorandum from Mr. Hackley related:to advice he had recieved from the Justice Department that e°12118e1 for the banks involved in the proposed Philadelphia merger 1/14/Ined. to serve upon the Department on Monday, March 27, a proposed csrdel‘ and motion which would request the court to direct the Department to Pr°cluce for inspection and copying (1) the reports on competitive tact Ors made to the Comptroller of the Currency by the Board and the Pecie„ 'al Deposit Insurance Corporation, and (2) the report prepared by then ‘domptroller containing the findings upon which his approval of the tilerger was based. The motion, a draft of which had been furnished to tirr. 1114,0_, —"r, stated that the defendants had asked the Attorney General, then oMPtroller, the Board, and the Corporation to make such reports ' le but that none of such reports had yet been received from any sUch persons. Mr. Hackley proposed to advise the Department of Justice by teieva °Ile (1) that the Board had furnished a copy of its report on e°121Petitive factors to counsel for the Philadelphia banks, and (2) that the I°a*rd would urge that every effort be made to avoid production of qatt Memoranda prepared in the Comptroller's Office other than a latatstien+ --' of reasons for the Comptroller's approval of a merger in the to a rtfl such statement would be published in his annual report to conaresse 30 disagreement being indicated, it was understood that eY would advise the Department of Justice in such manner. t 3/22/61 —11— Messrs. Shay, Hackley, Solomon, Hexter, Leavitt, and Wood then wit hdrew. There ensued a discussion of a matter related to the current Tree. ' 1117 advance refunding operation, concerning which a memorandum has been Placed in the files of the Federal Open Market Committee, following '4114n the Board went into executive session. The Secretary later was informed that during the executive session the 00ard took the following actions: To succeed Arthur W. Marget, who had resigned effective March 26, 1961, Ole Board appointed Ralph A. Young as Director of the Division of Inter national Finance effective March 27, 1961, with the understanding that it_ rs Young also would continue in the position of Adviser to the tiOarcl e Mr. Young was authorized to accompany Chairman Martin on a trip to tur °Pe which would include attendance at a meeting of the Economic r011 cctitnittee of the Organization for Economic Cooperation and pMent Boarci, Di scheduled to be held in Paris, France, in mid—April 1961. After consideration of a file that had been circulated to the 94P-Pr.°111 was given to a letter to the Federal Reserve Bank of Yorte interposing no objection to plans approved by the Board of ector s for foreign travel by members of the staff of the Bank during 1961. 4 °cloy of the letter is attached as Item No. 5. The meeting then adjourned. 10. 3/22/61 —12— Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: xarchMemorandum from the Division of Administrative Services dated Caret 29 9, 1 61, recommending the appointment of Mary W. Cooley as la Helper (part—time), with basic annual salary at the rate of 1,69 " 71 ') effective the date of entrance upon duty. MarchMernorandum from the Division of Administrative Services dated 1961, recommending acceptance of the resignation of Myrtle Clerk—Typist in that Division, effective at the close of ness April 21, 1961. Ilare,Memorandum from the Division of Personnel Administration dated be 22 -.-961, recommending that the salary rate for Substitute Nurses creased from $18 per day to $20 per day, effective March 22, 1961. BOARD OF GOVERNORS 00444* , eOW ; 44 OF THE " 5rrr " FEDERAL RESERVE SYSTEM 04 4 41 : 44 0 WASHINGTON 25. D. C. Item No. 1 3/22/61 ADDRESS orrtclAt. CORFIEEPONDENCE TO THE HOARD tAt taw*" March 22, 1961 Board of Directors, The First Pennsylvania Banking and Trust Company, Philadelphia, Pennsylvania. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Philadelphia, the Board of Governors approves the establishment of a branch at 401 West Chester Pike, Llanerch, Haverford Township, . 3elaware County, Pennsylvania, by The First Pennsylvania ,„ : 81111ng and Trust Company, Philadelphia, Pennsylvania. "lis approval is given provided the branch is established Within one year from the date of this letter. 1 Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 2 3/22/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD March 22, 1961 Board of Directors, The York Bank and Trust Company, York, Pennsylvania. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Philadelphia, the Board Of Governors of the Federal Reserve System approves -the establiciament of a branch at 1906 Carlisle Road, Sh Tp,iloh Wee"'": Manchester Township, York County, .i'nnsylvonia, by The York Bank and Trust Company, c)rk, Pennsylvania. This approval is given 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. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 3 3/22/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD March 22, 1961 Arthur Littleton, ilit: t 4a4, Lewis & Bockius, 111-,V Pidelity-Fhiladelphia Trust Building, 1a —. 14/1Phia 9, Pennsylvania. rie r Mr. Littleton: This refers to your letter of March 7, 1961, to rederic Solomon, Director of the Board's Division of 0118, requesting a copy of the report submitted by the Oa to Governors to the Comptroller of the Currency, pursuant 1111,' 011 4-ic Law 86-463 with respect to the competitive factors arid J - ed in the proposed merger of The Philadelphia National Bank e„ca -e Girard Trust Corn Exchange Bank. A copy of that report is sta.:3rd. It should be noted that,, pursuant to the terms of the this report related only to the competitive factors involved v4 req - ° Sd merger and not to other factors which the Comptroller 8 red by the statute to consider. 1 For your information, the Board has indicated to the N)art that +tient of Justice, in response to an inquiry from the Department, ot th:ie Board has no objection to the Department's offering a copy Proce:,,bove-mentioned report in evidence in the pending antitrust ' 4.411g or to its being made available by the Department to 8°1 for the banks involved. Very truly yours, , , Merritt Sherma4 Secretary. Zr:closiire • e BOARD OF GOVERNORS .044144t*„ . 44' f‘O 4 a ae 4:440;40 14 OF THE is It ft 4 * FEDERAL RESERVE SYSTEM 4. a o Item No. 4 3/22/61 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD it4tfilOnt°4' 444**** March 22, 1961 Lee Loevinger, Assistant Attorney General, Antitrust Division, Department of Justice, washington 25, D. C. DOar,Mr, Loevinger: 1141,, 1 This is in response to Mr. Kirkpatrick's letter of in e" 8, 1961, to Chairman Martin, requesting permission to offer repevidence and to make available to defense counsel copies of the t(1) ca 4t:Intmitted by the Board of Governors to the Comptroller of 3r, pursuant to. Public Law 86-463, with respect to the rVetitive effect of (1) the proposed merger of The Philadelphia l Bank and the Girard Trust Corn Exchange Bank, Philadelphia, Peril alaci?-1-vapia, and (2) the proposed merger of the First National Bank Illet Company and the Security Trust Company, Lexington, Kentucky. The Board has no objection to the Department's offering such rePort • cotals ln evidence and to their being made available to defense Jiastiel- in the antitrust proceedings instituted by the Department of u_ Atc?:with respect to these proposed mergers. The Board hopes in -Ln connection with any such use, it will be made clear that, the cc)rdance with Public Law 86-463, these reports related only to rili-e-;°7=ve factors involved in the merger proposals and not to N.;unalder. which the Comptroller was required by the statute to In response to a request by counsel for The Philadelphia Z"L. Bank and Girard Trust Corn Exchange Bank,,the. Board has Cut,resued, to them a copy of its report to the. Comptroller of the Pt tb rleY on the competitive factors involved in the proposed merger -°se banks. Very truly yours, 1, 'L Merritt S emm Secret.ar •-• • ,q94ft04 BOARD OF GOVERNORS OF THE Item No. 5 FEDERAL RESERVE SYSTEM 3/22/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE 00ARD March 221 1961 Mr. Alfred Hayes, President, Federal Reserve Bank of New York, 33 Liberty Street, lieW York 45, New York. 1)ear Mr. Hayes: Your letter of February 20, 1961, regarding fore-gn 4 travel plans of officers and members of the i;"aff of your Bank during the current year has been rourlv. 6 U to the attention of the Board of Governors. e Board has no objection to the plans approved by Your Directors. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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