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609
10/59
Minutes for
To:
March 23, 1961
Members of the Board
Prom: Office of the Secretary
Attached is a copy of the minutes of the
°ara of Governors of the Federal Reserve System on
the
above date.
It is not proposed to include a statement
vith
- respect to any of the entries in this set of
es in the record of policy actions required to
maintained pursuant to section 10 of the Federal
tleserve Act.
Should you have any question with regard to
the
minutes
) it will be appreciated if you will advise
the 0_
If oecretary's Office. Otherwise, please initial below.
ib,,You were present at the meeting, your initials will
Zlicate approval of the minutes. If you were not present,
f:
.4-1r initials will indicate only that you have seen the
'Inutee.
Chin. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
037
Minutes of the Board of Governors of the Federal Reserve System
cltiThursday, March 23, 1961.
PRESENT:
Mt.
Mt.
Mt.
Mt.
Mt.
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
Kenyon, Assistant Secretary
Young, Adviser to the Board
Molony, Assistant to the Board
Fauver, Assistant to the Board
Hackley, General Counsel
Noyes, Director, Division of Research and
Statistics
Mr. Solomon, Director, Division of Examinations
Mr. Johnson, Director, Division of Personnel
Administration
Mr. Connell, Controller
Mr. Hexter, Assistant General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Rudy, Special Assistant, Legal Division
Mr. Furth, Adviser, Division of International
Finance
Mr. Hostrup, Assistant Director, Division of
Examinations
Mr. Goodman, Assistant Director, Division of
Examinations
Mr. Leavitt, Assistant Director, Division of
Examinations
Mr. Landry, Assistant to the Secretary
Mr. Young, Assistant Counsel
Miss Hart, Assistant Counsel
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Item distributed to the Board.
bee4 a.
Istributed
The following item, which had
to the Board and a copy of which is attached to these
t4141-ztes
- as Item No. 1, was approved unanimously:
3/23/63.
-2Letter to Bank of America, New York City, granting
consent to it and to Banca d'America e d'Italia to
take certain steps in connection with the organization of United Overseas Bank and United Overseas
Corporation, Geneva, Switzerland.
Messrs. Thomas, Adviser to the Board, and Wood, Senior Economist,
Divisi°11 of Research and Statistics, entered the meeting at this point,
€tad Messrs. Furth and Goodman withdrew.
Report on proposed Housing and Community Development Act of
1961 (Item No. 2).
Distribution had been made of a draft of report
t0 the Bureau of the Budget on the proposed Housing and Community
evelopment Act of 1961.
In discussing the draft, Mr. Noyes noted that the Treasury
intena
ed to include in its report on the proposed bill a comment on a
11..c)vision that the Treasury regarded as significant, having to do with
ItlYrtierxt of
claims against the Federal Housing Administration in cash
irlzost
that
cases rather than by use of debentures.
A draft of comment
might be included in the Board's report on the bill was distributed.
With further reference to the draft bill, Mr. Noyes noted that
41 est all
- of the various programs mentioned therein had been the subject
rritical reports by the Board at times in the past.
He assumed,
licrt.rever. that
the Board would not want to submit a report containing
detailed
comment on a large number of the specific provisions of the
hill'
As to the general scope of the proposed legislation, it might be
4111 that it called for enlarging the scope and liberalizing the terms
3/23/61
or
-3-
r14ancing of a large number of existing programs of Governmental
as.sistance in the housing field.
The suggestion was made that it might be appropriate for the
BOardi
s report on the bill to conclude with a general Observation along
the lines
of the comment by Mr. Noyes, with a statement to the effect
that the
Board questioned the de irability of moving in that direction,
ell(' there
was general agreement with this suggestion.
Several other
sileastions for changes in the draft also were agreed upon, and it was
Illiderstood that there would be included in the report some comment of
the kirid Proposed with regard to the point that had been discussed by
the
staff with the Treasury.
It was then agreed unanimously that the draft report would be
ellded to
the extent indicated at this meeting, and that the report
yokaa be
transmitted to the Budget Bureau in a form reflecting such
ehallges,
A copy of the letter sent pursuant to this action is attached
Els
Messrs. Wood and Young (Assistant Counsel) then withdrew from
thelzeeting.
APPlication by Northwest Bancorporation re The First National
Pipestone (Items 3 and 4). There had been distributed under
'clate 0
r February
14, 1961, two memoranda from the Division of Examinations
reRardi
4 objections of applicant to the Board's tentative decision of
4Dteirib
el' 15, 1960, to deny the application by Northwest Bancorporation,
3/23/61
-4Minnesota, to acquire shares of The First National Bank of
PipeQ+
"
°11e, Pipestone, Minnesota.
One memorandum summarized the Division's
°Pillions with
respect to such objections, as follows:
In view of the additional information submitted and the
redesignation of the secondary fringe area, the service
area of the banks in Luverne, Minnesota, does not overlap the secondary fringe area of The First National Bank
of Pipestone, and any such implications should be omitted
from the Board's final statement.
2.
Savings and loan associations are not, for purposes of the
Bank Holding Company Act, institutions in the "banking
field".
3. The
Board in its tentative decision did not impliedly
assume that there was no competition between bank holding
companies.
4.
Northwest's other objection ("that the ownership of a
competing bank or banks in the area to be served, whether
the ownership be by another bank holding company or
independently owned, is immaterial") would appear to
involve primarily a legal matter.
In general it was the view of the Division that the additional
irito
rItiation submitted by the applicant should not affect the Board's
81011 reflected in the tentative statement.
The other memorandum of the Division of Examinations reviewed
the h.
lst°rY of the case to date and discussed in some detail the
ob i
uecti
°-- Of applicant to the Board's tentative statement. Reference
las .'Lls° Made in the memorandum to the fact that one other objection
rect,i
d with respect to the Board's tentative decision; namely, a
letter a
ated October 25, 1960, from Mr. Howard R. Alton, Jr., of
I O4
3/23/61
-5-
Pipestone, Minnesota, stating that the banking needs of the company with
hieh he was
affiliated, as well as other businesses of size in the area,
1.7°416- be better served if The First National Bank of Pipestone were a
Partof the Northwest
group.
In a memorandum from the Legal Division dated February 21, 1961,
- also had been distributed to the Board, the view was expressed that
the
'
-- 11d.avits and arguments submitted by Northwest Bancorporation
Preseni.
'
- eu- no material facts or arguments not previously considered by
the,
'°ard. Accordingly, it was recommended that the Board issue an order
(1440
Pr°v1ng the application. A draft of such an order was submitted
lqth the
memorandum, along with a draft of accompanying statement. In
1311-rig the proposed statement, the Board's tentative statement had
been l'eViSed to incorporate such changes as seemed necessary or desirable
14 View or the additional information and arguments filed by the applicant.
At the request of the Board, Mr. Solomon reviewed briefly the
hi8t°11Y Of the case.
With respect to the objections raised by the
aPPlicatit following
the issuance of the tentative decision, he said that
z'llallarY it was the view of the Division of Examinations that the
irit°1111ati°11 presented by the applicant did not substantially alter the
tEl.t8 that were before the Board when it originally considered the
144:gication.
Hostrup then commented in somewhat more detail on certain
c)t th,.
ou
Jections that had been raised by the applicant.
With respect
3/23/61
-6-
t° the definition of the secondary service area of the Pipestone bank,
he felt that a good case had been made by the applicant that there was
14 fact no significant competition between the bank proposed to be
e'2(111ired and the applicant's subsidiary bank in Luverne. With respect
to 4.1,
'"e inference that apparently had been drawn by the applicant from
the tentative statement to the effect that in the Board's view subsidiary
barike,
'
of First Bank Stock Corporation do not compete vigorously with
those
°f Northwest Bancorporation, he commented that the point in the
lye
statement actually had to do with the adverse effect of the
Pr°13c)seci- acquisition on the competitive position of the small independent
bank'
in the area concerned. Thus, a substantial part of the presentation
Of /10
rthwest tended only to belabor its erroneous interpretation of the
le'nelapt,
Of the tentative statement.
With regard to the letter received
4 PiPestone resident objecting to the tentative decision, Mr.
liostru
P expressed the view that it aided little to the consideration of
the
.
case
by
Mr. Rudy commented from a legal standpoint on the arguments made
rthwest following issuance of the tentative decision.
The first
e'qfklrge
lit) he noted, constituted an effort to persuade the Board to
ree,_
er its previous position that in a case of this kind the
1-10n afforded by savings and loan associations should not be
twteni
lit() account. From a legal standpoint, he felt that nothing had
been r
41sed by Northwest in this regard that would encourage the staff
V2V61
-7-
t° suggest that the Board change its position. Therefore, the staff
'
17°124 not recommend that competition from savings and loan associations
be
taken into account in reviewing the competitive situation in the
bltriking field in cases under the Bank Holding Company Act.
As to the
seeclid main point, relating to competition between holding company
13821k5
) Mr- Rudy noted that Northwest had supplied considerable material
arla had caused a survey
to be made.
In preparing the draft of final
stEttement, the staff had added language recognizing the existence of
c°111Petition between holding company banks but pointing out that the
lic/lding Company Act was not limited to the preservation of competition between
holding company systems. A third principal point urged
bY' 17°Ithwest was that the existence of another large holding company in
the 4• rea was not pertinent to consideration of the proposed expansion of
17(31t111‘7eat t s system of banks, and on this point the proposed statement of
the B• oard would include a comment to the effect that in considering any
6.13111.1cetion it was believed necessary to look at the over-all situation.
Mr- Rudy also noted that Northwest had requested that a hearing
be hei
cl If the Board decided to turn down the application.
However,
the s• taff did not feel that Northwest had made a case for the holding
Or
a hearia.
Mr- Hackley expressed the view that the most important argument
ttlacie
'Y Northwest was that under the law the Board was not entitled,
QOns.
lclering the application of one holding company, to take into
3/23/61
-8-
account the
existence of another holding company in the same area.
14as a debatable question and went to the heart of the case.
This
In the
draftf
0- statement, the staff had attempted to indicate that in certain
cirettistances) such as those involved in this case, the existence of
841crther holding company in the area in considerable strength was a
e°11sideration relevant to the competitive effect of the expansion of the
612.1-Qatit holding company.
However, this did not mean that in cases
liere there was
another holding company in existence in the area concerned,
there
14°1-11d be a conclusive presumption against the applicant company.
Governor Mills said he believed that the position taken by the
Bokra.
1/1 its tentative decision was correct and that the additional
lon submitted by the applicant had not been of such character
tts n
t- justify changing the tentative decision. Therefore, he felt that
the
e'PPlication should be denied. He agreed with the recommendation of
8taft that the request for a hearing not be granted.
Governors Robertson and Shepardson indicated that they agreed
with the
Position expressed by Governor Mills.
Governor King recalled that when the matter was originally before
,
oa
rd. he had expressed the view that the application should be
EIDProve,,
'. He had felt that there was a real question about taking an
triat
would deprive a community of the considerable improvement
111 bank.
141 4.0
lag facilities, physical and otherwise, that would be afforded
"tone if Northwest acquired the local independent bank.
In a
3/23/61
-9Particularly, he thought that such facilities could be used
t°84115ntagel and he did not like to see the community lose them.
,
,
Obvio
ub-LYin his thinking he had put considerable weight on the factor
Qrnseds and convenience of the community involved.
To arrive at the
130sition that the application should be denied, it would seem necessary
to
"
°cesd more on the basis that the banking services available in the
e°46521144tY were in reasonable balance at the present time due to the
elcisteace
of one holding company subsidiary bank and one independent bank.
Rovev,
vr, he could not folly accept the idea that the two holding companies
licrt compete with each other as effectively as an independent bank
4441e holding
company subsidiary bank. Possibly this was true, but he
ce'rlsiclered it a debatable point.
Nevertheless, after considering all
cIthe asPects of the case as they had now been presented to the Board,
he
hal decided to vote to deny the application despite the favorable
cott
.
'44.gerati0n8 that he had mentioned.
Governor Szymczak indicated that he would vote for denial.
In response to a request from Governor Balderston for further
ectrtillellt on the
contention of Northwest that the existence of a second
1.
101
.di
4g caluPanY in the area concerned should not be considered, Mr.
Y said that this point had troubled the staff of the Legal
Divisi
04 and that he would hesitate to predict whether the courts would
4 the Board's position.
tlorthlre
St
If this case should go to court, he felt
could make a rather convincing argument that the Board was
3/23/61
-10-
elltatled to consider only the competitive effects of the proposed
On the other hand, he thought sound arguments could be
lade) as indicated by the draft of statement, that in some cases,
1411.114cu1ar1y where the applicant proposed to take over the largest bank
area where another holding company also was operating and where
the
vere a number of small independent banks in existence, the proposed
8'11148ition might have a potentially adverse effect on competition.
It
8"11Led likely to him that the courts would decide that this was a matter
or
ement and that the Board would be sustained.
After further discussion, Governor Balderston and Chairman Martin
steteA
- that they would vote to deny the application.
Unanimous approval was then given to issuance of an Order and
/14 01bm
744415ring Statement denying the application of Northwest Bancorporation,
-P011.8, Minnesota, to acquire shares of The First National Bank of
itest
Pipestone, Minnesota.
Copies of the Order and Statement are
attac
/led hereto as
Items 3 and 4.
Permanent assigpment of hearing examiner (Item No. 51
:
_ There
had be
en
distributed under dates of March 8 and March 221 1961,
l'141PectivelY, memoranda from the Legal Division and from the Division
o
1'8°411e1 Administration-Office of the Controller concerning the
:
14.1
"14)4 of assigning a hearing examiner permanently to the Board's
etatr.
I0,
3/23/61
The Legal Division's memorandum, which bore as attachments drafts
'(I't(1) a letter to the Civil Service Commission and (2) a description
(Ira Proposed hearing examiner position at the Board, noted that pursuant
to
the Board's direction (on March 25, 1959) the question had been
8.41clied of the advisability, need, and justification for the Board's
t'ecitleating the Civil Service Commission to undertake a position survey
14c)king to the possibility of the Board's appointment on a permanent
be4is of one or more hearing examiners certified as eligible by the
Cc3nralissi°n•
The study was based upon a review of the Board's hearing
11°1‘4°e41. between June 1956 and present date, inquiry as to the presence
hearing examiners on the staffs of other agencies, and the manner in
vhich
the various agencies carry such hearing examiners within their
°rge.n.
lzations.
ot
the
Discussion of this subject had been held with the staff
Civil Service Commission, and an estimate had been made of the
S
requirements for hearing examiner services in the future.
With respect to the review of the Board's hearing workload,
the m
em°randum pointed out that since 1956 the Board had utilized the
airo
es of seven hearing examiners who had conducted 20 hearings. The
13
had expended for reimbursement of hearing examiner salaries
Pre0t4.-'LltiatelY
$58,000 between June 1956 and December 31, 1960.
Regarding
the
13ractices of other regulatory or quasi-regulatory bodies within the
Pe(ier
government with respect to the permanent assignment of hearing
.)cttmin,
ers, the memorandum noted that 21 such agencies had permanently
3/23/61
-12-
assi,
'bued to their organizations hearing examiners designated and classified
bY theCivil Service Commission.
A practice prevalent in certain of the
aelicies was that of assigning to staff hearing examiners, pursuant to
"1°11 11 of the Administrative procedure Act, duties other than those
l'elated to hearings and "not inconsistent with their duties and
l'esP°t1sibilities as examiners."
In this connection, the acting director
• of
of a unit
the Department of Justice which was concerned with effecting
rvvem
—ents in administrative procedures within the executive departments
44a A,
-16enoies of the government had stated that there was no question in
Ills /Ili"d as to the propriety of an agency such as the Board assigning
to arly
hearing examiner on its staff work other than that directly
rted.
to hearings which was not inconsistent with the hearing examiner's
chztie
s. The view had been expressed by this party that it was preferable
tor az
agencY to have hearing examiners assigned to it, even though such
Ilers might not be fully occupied on hearing duties, rather than to
vw examiners from other agencies. The work product of examiners
1.11(1).e
rieneed in the activities of a particular agency had been found
to be
generally inferior to that of examiners with permanent assignments.
The Legal Division's memorandum also referred to a meeting held
by 141,..
Connell with representatives of the Civil Service Commission,
O
1/hich
occasion Mr. O'Connell presented a summary statement of the
hearing workload since June 1956, identified the approximate
total.
ralliaper of hours of examiner's time required in several cases
10
3/23/61
-13Considered, described the nature of the Board's regulatory
furletions involving possible administrative proceedings, and identified
the 4.
kTpe of recommended decision usually rendered by hearing examiners
detailed
to the Board. It was the unanimous opinion of those present
at t
_
conference that in the event one or more hearing examiners were
4131xli1ted by the Board there should be established a "division", "office",
or us
ection" of hearing examiners, this division, office, or section to
°Perate i
ndependently of the General Counsel and the Legal Division and
t"e responsible directly to the Board of Governors, with the mode of
eontac+
,with the Board following that established for other divisions
or
or Ices
of the Board. A representative of the Commission had said
he aiA
-'" not anticipate any problem in effecting the transfer from another
Etgerle
Y of a specified examiner provided (1) his salary level coincided
Vith
-at, set by the Commission for the vacancy to be filled, and (2)
Drior
consent to the transfer was obtained from the agency in which
the e
calilirier was currently serving. The conference concluded with the
lInders+
-"anding that any action in this matter would originate at the
tokria
that the Commission would act promptly on any request made
bY the ,
1
Joard for a job analysis.
With respect to the question of the future need for hearing
s
services at the Board, the memorandum of the Legal Division
Itted
,,Liat there was some validity in the presumption that the bulk
oT (let
erlm
inations under section 4(c)(6) of the Bank Holding Company Act
3/23/61
-14-
had aiready been made in view of the approach of the statutory terminal
dat' Of May 9, 1961, beyond which the Board may not extend the time
vithin .
which holding companies may retain nonbanking interests. However,
it Seem
reasonable to assume that some requests for determinations
uha
er this section of the Bank Holding Company Act would arise subsequent
tQ
ay 1961.
It was also noted that there was no evidence that the
er of applications filed under section 3 of the Act would be fewer
°11 the
average than in the period 1956-1960.
At the request of the Chairman, Mr. Hackley commented on the
Illeinc)randum of the Legal Division, noting in his remarks that the Board's
dete,„,
--iu.nation of
this matter might have to turn on the necessitites of
the situation.
This conclusion stemmed from the impression gained both
fr°111 the respective agencies from which examiners had been borrowed
ak/fl'om the Civil Service Commission that they would not look favorably
111304
arrangement
whereby the Board would continue indefinitely to
borro—
w hearing
examiners for its hearing assignments. In his comments
141% If
ackleY also referred to the Legal Division's recognition that
eertai
aaministrative problems would be involved in the appointment
--41-ng examiner to the Board's staff. However, it was the
ulvisio
4's view that in the long run the permanent employment of a hearing
exe.rain.e
bY the Board could expedite both the holding of hearings and
the
the
liendering of reports, and therefore might be more economical than
1)1'esent arrangement.
Mr. Hackley concluded his comments with the
1 115
V23/61
-15-
that the Legal Division did not wish to be understood as advocating
the Permanent assignment of a hearing examiner.
Its survey, and
eellellisions drawn therefrom, resulted from the Board's suggestion that
the matter be
studied.
Mr. O'Connell then reviewed in some detail the results of the
tegaa
ulvision's investigation into the matter, his comments being based
"seritiallY on the memorandum that haL3 been distributed.
In the course
(If hie remarks, he also referred to some extent to the aspects of the
131.%()b1em
that had been pointed up in the memorandum from the Personnel
and the Office of the Controller.
Mt. O'Connell concluded with
the st
atement that although no position was being urged by the Legal
n418LO, he
felt that in all the circumstances the Board might be well
e4111-18ed to consider at least requesting the Civil Service Commission to
illeae a survey of the situation.
There followed questions by members of the Board, to which Mr.
Cop
-ortneli. responded, regarding the procedures that would be envisaged
if the Board
decided to take action along the lines that had been
BLID.
I•gested.,
Mr • Johnson then commented on the material presented in the
J
in+
-' memorandum from the Personnel Division and the Controller's Office,
-11deating that the intent had been essentially to highlight the
6k4Illinietrative problems involved in connection with the permanent
Ellintmeat of a hearing examiner to the Board's staff.
eLls° commented briefly to the same effect.
Mr. Connell
3/23/61
-16The members of the Board then expressed their views, beginning
it4Governor Mills, who said it seemed to him that as a matter of
1)ractical necessity the Board probably should retain its own hearing
e441insr under present conditions.
cl°11bt.
the
As to the future, he had some
However, he felt that the Board had benefited from having had
Services of a number of hearing examiners who had had no other
c°411eetion with the
$0ard
aId its staff
he
°Ilia- anticipate
toara,
s staff might
Board's work.
In a sense, this had resulted in the
being exposed to differing judgments.
Conversely,
that a hearing examiner permanently appointed to the
develop certain philosophies that would reflect a
1rie
reasoning followed by the Board in reaching decisions.
That
°°-or the examiner's judgment and deprive the Board of the
'endent outlook that should be expected of a hearing examiner.
Governor Robertson said it was his present view that over the
run the Board probably would be faced with exactly the problem
cltlitleci. by the Legal Division.
However, as he saw it, the Board had
4°4"d for two hearing examiners, and if it employed one such examiner
might still be occasions where the need for borrowing the services
e'ti examiner
would arise.
)30,111
On the other hand, it appeared that the
14oul4 have much less than a full-time need for the services of
eve,
one ,,
1,
earing examiner as far as the conduct of hearings was concerned.
eJ-reumstances, although the Board might be forced in the longer
to
ciPPoint a hearing examiner to its staff, his present inclination
V23/61
-17-
v°1114 be to hold off as long as possible and attempt to continue to
bor.—
"Ivi hearing examiners as needed as long as that course was available.
hearings not required by statute, he suggested utilizing the services
01
h„_,
-c-ulng officers to the extent possible.
Governor Shepardson said he thought the administrative problems
that had been brought out by the staff were rather serious.
He also
felt that there was something to the point that had been mentioned
l'egaIling the likelihood that a permanent hearing examiner sooner or
14ter would come to share some of the philosophy of the Board.
In a
Y this might be considered desirable, but to the extent that it
Ire
'
'
1‘mied the hearing examiner's approach the quality of objectivity
1.181
1401114 be
diminished. In any event, however, it appeared to be the
reeling of the Legal Division that the Board was about at the end of
the line as far as the borrowing of hearing examiners was concerned.
the question was whether the Board should wait until it was
to take some action or whether the Board should take the
-"
re. On balance, although he would prefer to continue the
Droc
euure that the Board had been following, he was inclined to feel
that th
-e Point was so close at hand when a decision would be necessary
that it
Would be preferable to take the initiative and ask the Civil
Serlri
ee Commission to conduct a survey. If the Commission should find
that
the Board had need for an examiner on its staff, apparently there
be no other course to follow.
If the Commission found otherwise,
3/23/61
ttlEtt /43uld presumably mean that the Board could continue to borrow
"eminers without encountering the resistance currently reported.
Governor King said that basically his position was the some as
that
expressed by Governor Robertson.
Also, he thought that, as
G°velll°r Mills had suggested, perhaps there was much to be said for
1411111-tg different hearing examiners in different cases.
As to the
reAcrted resistance to the continued borrowing of examiners, he was
ncteertain whether that was actually more than casual comment.
his preference would be to continue to borrow from other
4e/1cl-es as long as possible.
In this connection, he was somewhat
concerned from the standpoint that in the past the hearings ordered by
the B
°arid would not have required the services of an examiner on a
tone basis.
Aside from the fact that apparently there might be
lelii°13's when a hearing examiner would have little to do, the Board under
altch
circumstances might be more disposed to order hearings.
Governor Szymczak stated that he agreed with the position
eXPrsa
8", by
Governors Mills and Shepardson, and that he would favor
eqUesti
-ag a survey by the Civil Service Commission.
In reply to one of several questions raised by Governor
8
stcm, Mr. Hackley commented that the hearings ordered by the
4re princippily fact-finding in nature and that the principal
he,
Of the hearing examiner is to conduct the hearing.. While the
z
.-xaminer makes a recommended decision, that recommendation is
3/23/61
-19-
11°-t binding upon the Board.
In such circumstances, while there was
exblattedlY a great deal to be said for getting a fresh approach by
borr
ng different examiners, there would also be an advantage in
45
'
available a hearing examiner who would have sufficient familiarity
ithbanking to be able to conduct a hearing without extensive advance
Plie
paration.
Governor Balderston then expressed the view that it might work
t'3 the advantage of the Board in resolving the matter if the Board were
to t&./ e the initiative rather than wait until its hand was forced.
illccinglY, he agreed with the position that it would be advisable, on
balance) to request the Civil Service Commission to make a survey of
the
situation.
Chairman Martin concurred in this point of view.
Granting the
Etc141141strative difficulties involved, he felt that the Board might just
"ell face up to the problems and see what could be done.
Accordingly,
e 11°111d favor asking the Civil Service Commission to make a survey.
On the basis of the views that had been expressed, it was then
ec
Ileed.
to request the Civil Service Commission to make a survey of the
the appointment of a hearing examiner to the Board's staff,
401rev..,
'44)1's Robertson aml King dissenting from this decision for the
they
had stated.
In this connection Governor Robertson suggested that the wording
or
4.%
4.40Posed letter to the Civil Service Commission be amended
3/23/61
-20-
8° as not to convey the impression that the Board had formed an opinion
that a
hearing examiner was needed.
There was agreement with this
slIggestion, and it was understood that appropriate changes would be
Illacle in the letter for this purpose, along with certain technical
hellges that might be deemed advisable.
A copy of the letter sent to the Civil Service Commission
13111‘suant to the foregoing action is attached as Item No. 5.
Messrs. Thomas and Young (Adviser to the Board) withdrew from
the meet.118
during the foregoing discussion and Messrs. Noyes, Johnson,
C°1111e11) Rudy, and Hostrup withdrew at its conclusion.
Report on competitive factors (Allentown and Egypt
Pennsylvania).
bistribution had been made under date of March 20, 1961, of a draft of
rePort to the
1411(aved
Comptroller of the Currency on the competitive factors
in a proposed consolidation of Egypt Schnecksville Bank, Egypt,
Pe4118Ylvania, and The Merchants National Bank of Allentown, Allentown,
PelllasYlvania.
Following discussion, the report was approved unanimously for
-411
-scion to the Comptroller of the Currency in a form containing the
wing conclusion:
sub EgYpt Schnecksville Bank, which would be absorbed by the
stantially larger Merchants National Bank in this proposed
c4ansaction, has demonstrated its capability as an able small
IIIIPetitor. While competition is at present not great between
ihe two institutions it could be expected to become rather keen
the area in which Egypt Schnecksville has recently received
07rmlasion to establish a branch, since Merchants National
uJected to the branch and acknowledged the likelihood of loss
J
3/23/61
-21-
important business to Egypt Schnecksville as a competitor.
The strong competitive capability of Egypt Schnecksville,
which has been successfully met by other small banks in the
area, would suggest that the injection of the larger
absorbing
bank into the existing and proposed offices of
EgYpt Schnecksville probably would not have a substantial
adverse effect on those smaller banks. However, the proposed
transaction would eliminate a small bank that would soon
Provide increased competition for the larger absorbing bank.
The meeting then adjourned.
Secretary's Note: Governor Shepardson today
approved on behalf of the Board the following
items:
the a
Memoranda from appropriate individuals concerned recommending
the ,PP°intment of the following persons to the Board's staff, effective
uates of entrance upon duty:
Stephen G. Fuerth as Legal Assistant in the Legal
Division, with basic annual salary at the rate
of ,c6,435.
Daisy E. O'Connor as Charwoman in the Division of
Administrative Services, with basic annual salary
at the rate of 45313_85.
6 alla
Letters to the Federal Reserve Bank of Boston (attached Items
approving the appointment of J. Lewis Taylor and Lucien S.
Ilner, Jr., as assistant examiners.
to the Federal Reserve Bank of Richmond (attached Items
4216. aoLetters
aPProving the designation of John W. Grubbs, Jr., and Richard H.
as sPecial assistant examiners.
Secret
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 1
3/23/61
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 23, 1961
Pank of
41 BroadAmerica,
New York Street,
15, New
York.
Gen
tlemen:
1961 , Reference is made to the Board's letter of February 16,
4.3
ranting consent to:
(1) Bank of America to contribute one-third of organizational
capital expense of United Overseas Bank (1 UOB"), Geneva,
Switzerland, and to receive capital shares of corresponding value, amounting to Swiss Francs 166,666 (approximately US;38,750 equivalent);
(2)
Banca d'America e d'Italia ("BAI"), Milan, Italy, to
purchase 10 percent of outstanding shares each of -Banque Africaine Internationale, Brussels, Belgium;
Societe Congolaise de Banque, Leopoldville, Republic
of the Congo; and
Banque du Ruanda-Urundi, Usumbura, Ruanda-Urundi
for approximately US135,000; and
(3) Bank of
America and BAI to exchange shares of stock of the
three banks for shares of UOB after its organization, and
to hold such shares.
13arkin ,,Your letter of March 16, 1961, states that the Swiss Federal
holcil L'emmission will not allow a banking corporation to act also as
I1
,
r1 company as there has been no precedent in Switzerland for
, eh a
arrangement. It is understood that the Swiss banking author-.
Cave suggested that a separate holding company and a separate
e established to accomplish your original purpose.
be
It is also understood that the proposed holding company will
riarn.,4,
'
441 Gen
united Overseas Corporation ("UOC"), that it will be located
ltrecava3 Switzerland, and that the directors will be the same as the
:111 b-rs of BOB. It is further understood that the capital of UOC
'
0 hol,?1 34j-ss Francs 500,000, and that the sole function of UOC will be
'
the stock of the four banks above named.
I
aank of America., New York
Of
-2-
On
the basis of the information furnished in your letters
march 16 and
March 20, 1961, and the above understandings, the
...0ard of
Governors grants its consent to
(1) Bank of America to contribute one-third of organizational
capital expense of UOB and to receive capital shares of
corresponding value, amounting to Swiss Francs 166,666
(approximately US$38,750 equivalent);
(2) BAI to
purchase 10 percent of outstanding shares each of
01.1.111.1111
Banque Africaine Internationale, Brussels, Belgium;
Societe Congolaise de Banque, Leopoldville,
Republic of the Congo; and
Banque du Ruanda-Urundi, Usumbura, Ruanda-Urundi
for approximately 1%135,000; and
(3) Bank of
America and BAI to exchange shares of stock of
the four banks named for shares of UOC after its organization and to hold such shares.
The 13,
.3A/ sidl s consent is granted upon condition that Bank of America and
4!3pr::141 dispose of their holdings of stock of UOB and UOC, as promptly
ellgap-06icab1e, in the event that UOB or UOC should at any time (1)
issuing, underwriting, selling or distributing securities in
illg p;:-"ed States; (2) engage in the general business of buying or selltal
'
'n1
s .8J wares, merchandise, or commodities in the United States or
t°t)-1; anY business in the United States except such as is incidental
atioll-'r international or foreign business; or (3) conduct their opera manner which, in the judgment of the Board of Governors of
'ecler eral Reserve System, is inconsistent with Section 25(a) of the
Reserve Act or regulations thereunder.
be appree.Upon
completion of the organization of UOB and UOC, it 1/111
tthe
lated if you will furnish the Board of Governors (1) copies
("ticles of association and by-laws, (2) balance sheets, and (3)
°fficers and directors. Please advise the Board of Governors,
:
i the Federal Reserve Bank of New York, when UOB and UOC are
shed and opened for business.
eataq
Very truly yours,
(signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
NC(1,
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 2
3/23/61
ADDRESS OFFICIAL CORRESPONDENCV
TO THE BOARD
March 230 1961
11. Rommel,
roi? Assistant
kre,‘ LegislativeDirector
Reference,
i?ixecuulof the
Budget,
lia8h4_61ve Office
of the President,
441gtorl 25, D.
C.
Dear,
'Ir. Rommel:
the 10
This is in reply to your request for a report on a draft of
-r°P"ed "Housing and Community Development Act of 1961."
4h0 „ear
1,
Concerning,. Title I which would amend FRO s operations
experiment
to make
c,eriod 44axis on low-priced houses generally available for an
a
41 ationa.
31 and make available low-interest loans financed by the Federal
&tte47Mortgage Association for "middle-income" housing, the Board has
add to what it has said on earlier occasions about the desir,
t1 the" of keeping real estate financing in touch with market conditions.
t4ritv
ease of an insured mortgage, the difference between a 40-year
e8 i", and a 30-year maturity, from the point of view of the soundness
-1-1,,vestor's portfolio, is probably small. The longer maturity martsecr,
°11,i
ld probably be subject to somewhat wider price fluctuation in
'tered-rl'arY market however. At the same time, no evidence has been
Agrehas that
the effect on consumer's willingness to undertake house
:
111411 rees
ri will be large or of long duration. In view of the relatively
ction in monthly payments resulting from such a change, and the
tili,b8tant
- V,
6ere
increase in interest cost over the life of the mortgage,
-t1c1 the r
i eal question as to whether many prospective purchasers would
r term attractive.
D4cictitiori ISimilarly, a decision of the Federal Government to subsidize an
ilo°,
1/111atin
4„
4' 4500 million worth of housing for a specified portion of the
iiilzevel,--3.",yould be no departure from post-war policies. The Board doubts,
qihoj riuuat the financing technique proposed will increase the long-run
(3- that private financing will be induced to enter this field.
tap,
ttThe Board r
regards Title II as a worth-while recognition of the
gat th
It-ode f,--e existing supply of housing must, even in reasonably long
'
11rnish the vast bulk of housing accommodations. The proposed
. 11.
Rommel
-2-
Prerir
eivri .
would appear to be well worth a
trial to see whether market
of ea.T18 cannot be shifted from
new, suburban building to conservation
10/144
'etin structures and neighborhoods.
It is questionable, however,
er the
loans to finance this programshould be eligible for
"r the FNMA
purchase
special assistance program.
As noted above, the Board
additio
questions whether authorization of
secti na
l.1 funds for the FNMA
Special Assistance functions, as proposed in
estajil 433 is any longer the appropriate way to
handle financing of real
the ts: °Aerations
that the Federal Government decides to undertake. At
or e.slinA,e, FNMA was rechartered, the special assistance device was
thought
tried
°P120rtunity to demonstrate to private
investors
that
certain
unco
-nancing techniques were workable. Very
few
such
obligations,
latieil'ed by FNMA, have
been sold and it is recognized in this legisat the
The
obligations generated would be held to maturity by FNMA.
istrrt?stion raised here
is whether it would not be cleaner fiscal admin,11,?chani
1
.
lart to handle special
assistance financing through the appropriation
`ktree.t4'841 rather than
by increasing further the authority of FNMA to draw
-1-Y on the
Treasury,
wSomewhat similar considerations are relevant to
section 1.1.021
-t?.11,1d- authorize the Secretary of
the
Treasury
to
purchase
an addirri-Ni,'''')million of
preferred stock in ma. in order that the Association!s
*h‘r P1\11VICe
i Power
under its Secondary Market Operation might be
increased,
v rttelfe to operate as a
j
secondary market, it must be able to roll its
oim
° °ver• If it is to be hindered
in turning over its portfolio,
'rations ought also to be
financed through the budget.
to
zxcbe uvek
ri third aspect of the
financial arrangements proposed that ought
thvery serious thought
is the manner of paying insurance claims.
kata?Pt
4 de, Hol,e • case of the home improvement program under Title I of the
pre;,,,uenture
-singAct,
m
payment of claims against FHA has traditionally been
tht,"'artis
i he proposed bill would pay claims under most of the new
40;°Aertit.,-.4 Cash. The Board recognizes that
cash payments would simplify
klve at
Problems of the insuring agency and make the affected loans
o aritacc, c.E0
. -110. to lenders. It
would, however, remove the very important
1.
tile 1,1 61". the use of debentures,
IN
namely, that the investor assumes some
8k
rence which
,
would result from his bad judgment. Furthermore, the
tOAtion etwoen insured
and guaranteed mortgages and direct Government
-' a/ready slender, would be further
reduced, thus complicating
it tasks that
confront
debt
management.
the
Con,
sr,
irabilit
er
y nir Titles V - VII, the Board raises no question about
0 the ends sought. It suggests, however, that the role
jecier
°r th al Government in the achievement of these ends be reexamined.
'
44414' e activities
covered in these titles were initiated on the
1c3r1 that
some modest assistance by the Federal Governme4t in
the
tit
lir. W. H. Rommel
-3-
firs+
nr v Instance would help to demonstrate the economic soundness
of the
•e-0°
,,4
7
s ams and that priva
te financing or local sponsorship would be forth'
ye llg as a result. To extend and expand these programs from
year to
tel7 constitutes a change in this basic philo
sophy, and in the long-run,
de to pre-empt these as areas of Federal responsibi
lity.
The approach involved in these Titles would vastly increase
Federal
responsibility in these areas. The Board is concerned about the
,a;Vasing
domination
thi real estate devel by the Federal Government of the housing industry
opment generally, and feels that it is important at
juncture to assess the full range of real estate, housi
ng, and coms-(Vy
development problems now facing the American people, to budget
derrti°11 of these problems over time, and to explore alternative
ways of
lik"ing the costs. Piecemeal amend
ment of relatively new statutes seems
to produce unsatisfactory results.
theseThe Board is disturbed that the general direc
tion of legislation
pro01,
fields appears to be steadily to enlarge the scope of existi
ng
lit:Zi a-me and successively adopt new liberalization of financing terms with
4-e thought
for the problems these pose for stable growth.
14
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary
I Or
Item No. 3
3/23/61
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
the :latter of the Application of
1\1(11TKAIEST BANCORPORATION
Prior approval of acquisition of
13c',,
t,_111g shares of The First National
..
;'
of Fipestone„ Pipestone,
'
nnesota
ORDER DENYING APPLICATION
UNDER BANK HOLDING COMPANY ACT
There having cone before the Board of Governors pursuant
to „.
-cti°n 3(a)(2) of the Bank Hclding Company Act of 1956
(12 us
,
1842) and section 4(a)(2) of the Board's Regulation Y
(12 cpn
.„
222.4(a)(2))„ an application on behalf of Northwest
vrPoration for the Board's prior approval of the acquisition
Ot 80
Per cent or more of the 1,500 outstanding voting shares of
The Fi
rSt
National Bank of Pipestone, Pipestone, Minnesota; a
Notic
e of Tentative Decision referring to a Tentative Statement
Oh aa.
la application having been published in the Federal Register
oh se
Ptember 22, 1960 (25 Federal Register 9129); the said Notice
havin
Provided interested persons an opportunity, before issuance
°r the n
,Jcard's final order, to file objections or comments upon the
:64
—2—
facts stated and tile reasons Lac:1i cated in the Tentative Statement;
and the time for
filing such objections and cements having expired
and all
objections and colviments, includini: those filed by the
41)2-icant, havinc, been carefully considered;
IT IS iliBY CRDMED, for the reasons set forth in the
Bcarcl i s Statement of this date, that the said application be and
helieb:‘,' is denied.
Dated at Washington, D. C., this 23rd day of IJarch 1961.
By order of the Board. of Governors.
Voting for this action: Chairman liartin, and
Governors Balderston, Szymczak, Iills, 7„obertson,
Shepardson, and Ling.
(a-ned) Merritt Sherman
iicrritt 7l1er1l3n,
Secretary.
C
BOARD OF GOVERNORS
OF THE
Item No. 4
3/23/61
FEDERAL RESERVE SYSTEM
APPLICATION
BY NORTHWEST BANCORPORATION, MINNEAPOLIS, MINNESOTA,
FOR PRIOR APPROVAL OF ACQUISITION OF VOTING SHARES OF
THE FIRST NATIONAL BANK OF PIPESTONE, PIPESTONE, MINNESOTA
STATEMENT
Northwest Bancorporation, Minneapolis, Minnesota
ON0
rthwest"), a bank holding company, has applied,* pursuant to
14)1.1 3(a)(2) of the Bank Holding Company Act of 1956 ("the Act")1
the
card's prior approval of acquisition of 80 per cent or
riore
ilarlk
c)f the 1,500 outstanding voting shares of The First National
of p
ipestone, Pipestono, Minnesota ("Bank").
Views and recommendations of the Comptroller of the
Clarr
As required by section 3(h) of the Act, the Board gave
11(3tieM
the Comptroller of the Currency of the receipt of this
aPP1ie
ati°11. The Comptroller recommended that the application be
DI:Toved.
Statutory factors
ilcjar'd t
- Section 3(c) of the Act requires the
take into consideration the following five factors:
(1) the -f
inancial history and condition of the holding company and
Thi
,m'ate 4a.1210lication was filed prior
to July 1, 1960, the effective
•
V%I.ridi 'he amendment to section 4(e) of the Board's Regulation Y
',1111 a,;:14.g
-1 for the publication of notice of receipt of applications
to section 3 of the Act in lieu of the issuance of tentative
-ns and tentative statements by the Board.
-2bank
concerned; (2) their prospects; (3) the character of their
inanagement; (4) the convenience needs and welfare of the communities
)
and area
concerned; and (5) whether or not the effect of the acquisiwould be to expand the size or extent of the bank holding company
"em involved beyond limits consistent with adequate and sound
bank;
411g, the public interest, and the preservation of competition
in
the field
of banking.
The first four factors y - The town of Pipestone, with
Po
PUlation of about 5,700, is located in southwestern Minnesota
in
-well-diversified farming area. There are two banks in
?iPestone,
The First National Bank of Pipestone, the subject of
th14 aPPlication, with deposits of about .Y7.5 million, and the
PiPestone
latter
National Bank, with deposits of about :
":)3.2 million.
The
bank is a subsidiary of First Bank Stock Corporation, which
al80 is a
bank holding company.
With respect to the first three statutory factors, it
4131al,s
that, as to both Northwest and Bank, their financial
histor
Y and condition are satisfactory, their prospects are good,
and v"il,
eir managements are competent. In connection with their
15r°sPect8 and managements, the Board has considered (1) that the
tWo sen,_ r
4-0 officers of Bank, because of their age, are contemplating
r"irexent or a less active role in Bank's management; and (2) that
the laqest single stockholder of Bank, who may eventually become the
nlai°114Y stockholder, is a nonresident who is not engaged in the
_3_
banking business, and that this fact might affect the continuance
"ank in its present status.
However, these facts, in the Board's
"Ion, are not sufficient to impair the future prospects of Bank
Or t° suggest that it will not continue to be competently managed.
With respect to the effect of the proposed acquisition
UPon the
convenience, needs
and welfare of the area concerned
it
aPPears that Bank has
consistently been a leading bank in the area
411d has adequately met its customers' banking needs.
Northwest has
indicated that it is committed to the construction of a more
niccletli bank building and
to other physical improvements if its
acqUisition of
Bank is approved; and it is recognized that Northwest's
4equisition of control might result in some expansion of Bank's
41'1Iices and facilities.
However, these facts do not, in the
13(>41'clts judgment, provide strong ground in themselves for approval
qthe application, since Bank already is adequately contributing
t°14a*rd fulfilling the needs of its community for banking services.
The fifth factor. - As in nearly all cases arising under
the
Holding Company Act, the most difficult determination
l'el
es to whether the particular acquisition would expand the
11°1-ding
company's system "beyond limits consistent with adequate
41.4 sound
banking, the public interest, and the preservation of
°111Petition
in the field of banking." This is a determination
that cannot be made
in accordance with any formula but must be
1)43ed Po
Consideration of all the relevant facts in each case.
consideration
111 "is ease, the
most relevant facts are the following.
Northwest controls 77 banks in Minnesota, Iowa, Montana
Nebraska, North Dakota, South Dakota, and Wisconsin. Within
Minnesota, Northwest controls 47 banks with aggregate deposits of
°fel" a billion.
These banks account for 7.2 per cent of total
c°111merci3l banking offices in the State and about 26 per cent of
total
deposits of commercial banks.
In appraising the effect of the proposed acquisition upon
banjo,
competition, the Board has taken into consideration Northwest's
rel:besentations as to the areas in which Bank's business originates.
As„.
444-11cated by a map submitted with the application, Bank's
PrimAy.
area”, from which it obtains about 73.2 per cent of its
eP°8its of individuals, partnerships, and corporations ("IPC
oltsu), comprises the town of Pipestone and an area within
a rad.
1US of
7 miles from Pipestone; and Bank's "secondary area",
froim ,
wnloh it obtains the remainder of such deposits, consists
o th
e area beyond the primary area but within a radius of
a°111e,,,
'uat less than 25 miles from Pipestone.
However, additional
vrmation subsequently submitted by Northwest asserted that
the
p4
4estone County - Rock County line, which runs east-to-west
thrall
gh the town of Jasper, is a natural southern boundary of
aarati
3 secondary
area even though it has a few customers beyond
that 1.
-111e. On this basis, Bank's secondary area would consist
Or the
area beyond the primary area but within a radius of
at less than 25 miles from Pipestone to the west, north
41.4 eas+
-- and approximately 12 miles to the south.
Northwest does not presently control any bank in Bank's
11-111a-ry and secondarir service areas.
Northwest's nearest banking
aubsidi
-arY is the Rock County Bank in the town of Luverne
(Popu
lation about 4,200), approximately 25 miles south of Pipestone
:14°113 miles beyond the south:.rn limit of Bank's sr'condary area as
above d
escribed.
A survey of customers of Bank and of the Rock
C°111-ItY Bank, submitted by Northwest, indicates that there is
PracticallY no overlapping of the service areas of the two banks
all'ithat
competition
between them is negligible.
It is necessary, however, in the light of the fifth
statu+
"°17 factor, to consider not only the extent to which
Northle
acquisition of Bank would immediately lessen competi'
jilt also how it may affect the future competitive position
1111 growth
of other banks in the areas involved.
If Bank were to be acquired by Northwest, the holding
1P411Y* would control one of the two banks in Pipestone and
aPII'c)xj.rriately 72 per cent of the IPC deposits held by those
batiks
' Within the primary and secondary areas of Bank, as
:
rei°1131Y described, there are 11 banks - 9 in Minnesota and
ri
South Dakota.
Bank is the largest of these banks. Its
acIlllsition by Northwest would cause Northwest to control approx11441Y 35 per
cent of the aggregate IPC deposits held by the 9
tie8ota
banks
in those areas and nearly 28 per cent of such
deDosits held
by all 11 of the banks in those areas.
-6In this connection, Northwest has urged that, in
cl"ermining the proportion of deposits that would be controlled
by
it if the acquisition were approved, consideration should be
gilien to the deposits held by a large savings and loan association
illPiPestone.
1
t8
However, for the reasons stated by the Board in
Statement regarding the application by First Bank Stock
Cc3rP°1"ation to acquire stock of Eastern Heights State Bank
(1960 BULLETIN 486, 492), it is the Board's opinion that, for
P1413oses of the Bank Holding Company Act, "competition in the
field of banking" does not encompass whatever competition may
be v..
4-Lorded by savings and loan associations.
The full effect of the proposed acquisition upon the
13111)110 interest and preservation of competition cannot, in the
Board!S
opinion,be fairly determined without taking into account
the
-Lact that the other bank in Pipestone is a subsidiary of
?irst A
-ank Stock Corporation, a bank holding company which controls
86
bari
abckt
In 5 States, 49 of which, with aggregate deposits of
0„
OG, are in Minnesota.
-,'-v
'c050,C
As indicated in the Board's Statement (1959 BULLETIN 134)
regard;
-ng the application of Firstamerica Corporation to acquire
ock
Eltof California Bank, the Board does not regard the Holding
411Pa V
CCnu Act
%pile
as
as meaning that the mere size or extent of an .
ant holding company's system should itself be regarded
" adverse consideration.
Furthermore, the existence of a
—7..
subsidiary bank of another holding company in the area in which
an applicant holding company proposes to acquire a bank does not,
t course, compel an adverse decision.
The law requires the
c)ard to consider whether a particular acquisition would expand
the 81.2e or extent of "the bank holding company system involved"
bey
end limits consistent with the public interest and preservation
t competition.
However, the strength of another holding company
In the area concerned may, in circumstances like those in the
Present case, be directly relevant to the question whether the
PrePosed particular acquisition by the applicant holding company
1113/44 expand its system in a manner that would adversely affect
ipotential banking ccmpetition in that area.
The Board has recognized the adverse effect upon the
Pllblic interest and preservation of competition that may follow
trom
'
control of a large proportion of the banking resources of
e°rnmunity by relatively large bank holding companies. When
North
Ilest sought to acquire a proposed new bank in Rochester,
-sc'ta, the Board noted that two of the three existing banks
in
Rochester were subsidiaries of Northwest and First Bank Stock
C°rPoration, and that, if Northwest should establish a fourth
bkIlk
111 aochester, three of the four banks would be subsidiaries
c)t these holding companies, and Northwest, controlling two of
thoae our,
"presumably would be in a strong position to increase
Its relative proportion of the banking business of the community."
(1958
BULLETIN 11)
(,4::"„)
—8—
In the present case, the two holding companies would
e°ntrol not only all of the deposits of banks in the town of
PiPestone but
also over 38 per cent of the aggregate IPC deposits
Of
all banks in Bank's primary and secondary areas.
This fact
es greater significance because the bank proposed to be
acclud-red by Northwest is the largest bank in these areas.
Alt
h°11gh the town of Luverne is 13 rules be:rond the limits of Bankls
8ecndarY area, it is also significant that of the two banks in
1411rerne one is a subsidiary of Northwest and the other is a
silhidiary of First Bank Stock Corporation.
Moreover, as indicative
Of the strength of the two holding companies in the general area,
it MaY be noted that, while there are 40 Minnesota banks within
a
4(11118 of 50 miles of Pipestone, only 1)4. of these have deposits
q More
than ,?3 million. Of these larger banks, the two holding
e°MPanies now control 9 and, if the proposed acquisition were
eonsuliimated, they would control 10 of the 14 larger banks in
the
general area.
It is recognized that there would remain within
8anly
s Primary and secondary areas a number of alternative
°Ilrees of
banking services, including banks not controlled by
a
holding
than. the
company.
Howevcr, all of these banks are smaller
bank proposed to be acquired by Northwest.
In these
ell'e/IMStances, it is the Board's judgment that Northwest's
4eg'Llisition of the larest bank in the areas involved would
halre an
adverse effect upon the general competitive situation.
What has been said here should not be construed, as
applicant
by
appears to construe it, as meaning that banks controlled
°Ile holding company do not actively compete with banks controlled
by another holding company operating in the same area.
To the extent
that suchcompetition between banks in different holding company
'
I °111:)s exists and may be intensified, this is not, of course, ineon
eistent with the preservation of banking competition as contemplated
'137 the Act.
But the fifth statutory factor is not limited to the
ID?eservation of competition between holding company banks; it requires
the B
°ard to consider the whole field of banking competition, includ-
tL
possible adverse effect of the expansion of bank holding
e°111PanY groups upon the competitive position of the banks, in the
°ea concerned that are not controlled by holding companies.
Nor should any statements here made be construed as
'11€:esting that the expansion of a bank holding company in an
al'ea in which another holding company operates would be regarded
1).Y the
Board in all cases as having an equally adverse effect upon
111.1king competition.
As previously indicated, the Board's decision
rillIst depend upon all the facts of each case.
ea8e involving Northwest
Thus, in an earlier
(1959 BULLETIN 147), the Board approved an
4111cation to acquire a bank in Eveleth, Minnesota, despite the
that it caused Northwest and First Bank Stock Corporation to
NArol three
of the five banks in the vicinity, since that adverse
clIrrIstance, in the Board's opinion, was outweighed by considerations
1
-10favorable to the proposed acquisition.
By contrast, in the present
ease it appears to the Board that the benefits that may result from
the Proposed acquisition are not sufficient to offset its adverse
eJ
ot, upon the public interest and preservation of competition.
Conclusion. - It was the Board's tentative decision,
"'ice of which was duly published in the Federal Register on
September 22, 1960 (25 FR 9129) that approval of the proposed
aeggisition would not be consistent with the public interest or
the Purposes of the Bank Holding Company Act and that the applican should be denied. As contemplated by that notice, affidavits
441 arguments were submitted by Northwest and other comments were
el*QIIitted.
All such affidavits, arguments and comments have been
eallefully considered by the Board and, to the extent necessary,
collsideration thereof has been reflected in this Statement.
Viewing the relevant facts in the light of the general
ktp°ses of the Act and the factors enumerated in section 3(c),
It
is the judgment of the Board that the proposed acquisition
1()11-1d not be consistent with the statutory objectives and the
interest and that the application should be denied.
'
‘141
ch 23, 1961.
The
1,
i
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 5
3/23/61
ADDRESS orriciAL CORRESPONDENCE
TO THE BOARD
ciltattitki
March 30, 1961
1.1,11ited States Civil Service Commission,
.471.1-1"eau of Inspection and Classification Audits,
"ashington 253 D. C.
Attention
Mr. David Wolman
Gentlemen.
The Board of Governors has under consideration the
cilleation of establishing within the Board's offices a hearing
ae cl-trierls position, in order to make available to the Board on
heverrlanent basis the services of a person qualified to perform
A al:ing examiner duties consonant with the requirements of the
witl.:it
, listrative Procedure Act, and other duties not inconsistent
" his duties and responsibilities as an examiner.
Years . On the basis of the Board's experience in the past several
duct it appears that the major portion of hearings to be conwill arise under provisions of the Bank Holding Company Act
oj
(12-1-p61 in particular sections 3(a) (12 USG 18142) and it(e)(6)
sec+',SC 1843). An additional source of statutory hearings is subTho"'°r1 9 of section 9 of the Federal Reserve Act (12 USC 327).
t113 jtosubtls-iteanceof the pertinent statutory provisions and information
nature and conduct of hearings thereunder is set forth
enclosed Position Description.
.The Beard's action in considering the need for the permaIlent a
ssiMinent to its staff of a hearing examiner stems, in part.,
*or,,
to 14:'he fact that since June of 1956 the Board has had occasion
a.rie;`'.1`lize the services of 7 hearing examiners borrowed from other
voiv.
-ie'
jes for the purpose of conducting a total of 20 hearings in'
1-1Er nearly 60 separate determinations.
type
'Mille it is difficult to estimate accurately the number or
cleterc)f hearings that the Board either will be required or shall
a les'ne to conduct, there is no reason to expect that there will be
selling in the number of applications for the Board's prior
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
United States Civil Service Commission
.
f
-2-
apn,.
k-oval pursuant to section 3(a) of the Bank Holding Company Act,
nalthough it is possible that there may be a lessening in the
0?lber of requests for determinations pursuant to section 4(0(6)
at Act. No accurate estimate can be made as to the number of
trnistrative hearings, if any, that may be required incident to
pe! ard's continuing supervisory responsibilities under the
+1, Bokkeral Reserve
Act. However, it is the judgment of the Board
at, the
general hearing workload that has necessitated the borrowof hearing examiners in the past will likely continue.
i
For the foregoing reasons, it is requested that
ktntice
ti,
Commission initiate appropriate action towards a
ex'n as to the need for assigning to the Board's staff a
A aTiner qualified in the manner set forth in section 11
4n1strative Procedure
Act.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
L
'Ielosure
the Civil
determinahearing
of the
e
BOARD OF GOVERNORS
OF THE ,
FEDERAL RESERVE SYSTEM
Item No.
6
3/23/61
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONOENCE
TO THE BOARD
March 24, 1961
Mr, B. F. Groot, Vice President,
Federal Reserve Bank of Boston,
Boston 6, Massachusetts.
Dear Mr. Groot:
In accordance with the request contained in your
letter of March 10, 1961, the Board approves the appointment of J. Lewis Taylor as an assistant examiner for the
Federal Reserve Bank of Boston.
Please advise us of the
effective date of the appointment.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
1-mil
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 7
3/23/61
ADDRESS orriciAL CORRESPONOENCE
TO THE BOAR°
March 24, 1961
Mr. B. F. Grcot, Vice President,
Federal Reserve Bank of Boston,
Boston 6, Massachusetts.
Dear Mr. Groot:
In accordance with the request contained in
Your letter of March 8, 1961, the Board approves the
appointment of Lucien- S. Thalheimer, Jr. as an assistant
examiner for the Federal Reserve Bank of Boston. Please
advise us of the effective date of the appointment.
Very truly yours,
(Signed) Elizabeth I,. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No.
8
3/23/61
ADDRESS OFFICIAL C OR R ESPON DE NCE
TO THE BOARD
March 24, 1961
Mr. John L. Nosker, Vice President,
Federal Reserve Bank of Richmond,
Richmond 13, Virginia.
Dear Mr. Nosker:
In accordance with the request contained in
Your letter of March 16, 1961, the Board approves the
designation of John W. Grubbs, Jr. as a special aseistant examiner for the Federal Reserve Bank of Richmond for the purpose of participating in examinations
Of State
member banks only.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS
Item No. 9
3/23/61
OFFICIAL
CORRESPONDENCE
TO THE BOARD
March 24, 1961
Mr. John C. Horigan,
Chief Examiner,
Federal Reserve Bank of Richmond,
Richmond 13, Virginia.
Dear Mr. Horigan:
In accordance with the request contained in
Your letter of March 17, 1961, the Board approves the
designation of Richard H. Jones as a special assistant
examiner for the Federal Reserve Bank of Richmond for
the purpose of participating in examinations of State
member banks only. The authorization heretofore given
Your Bank to designate Mr. Jones as a special assistant
examiner is hereby canceled.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER