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Minutes for To: Members of the Board From: Office of the Secretary May 11, 1966 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. Robertson Gov. Shepardson Gov. Mitchell Gov. Daane Gov. Maisel Gov. Brimmer I 1').1)`7' Minutes of the Board of Governors of the Federal Reserve System on Wednesday, May 11, 1966. The Board met in the Board Room at 9:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Martin, Chairman Robertson, Vice Chairman Shepardson Mitchell Sherman, Secretary Kenyon, Assistant Secretary Molony, Assistant to the Board Cardon, Legislative Counsel Fauver, Assistant to the Board Hackley, General Counsel Brill, Director, Division of Research and Statistics Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. Hexter, Associate General Counsel Mr. O'Connell, Assistant General Counsel Mr. Partee, Associate Director, Division of Research and Statistics Mr. Gramley, Associate Adviser, Division of Research and Statistics Mr. Sammons, Associate Director, Division of International Finance Miss Wolcott, Technical Assistant, Office of the Secretary Messrs. Sanders and Smith of the Legal Division Messrs. Burton, Egertson, Maguire, and Poundstone of the Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. Mr. Approved items. The following items were approved unanimously after consideration of background information that had been made available to the Board. Copies are attached under the respective numbers indicated. Item No. Letter to Wells Fargo Bank, San Francisco, California, approving the establishment of a branch in Redding. 1658 -2- 5/11/66 Item No. Letter to Kanawha Banking and Trust Company, Charleston, West Virginia, approving the establishment of an in-town branch. 2 Letter to First National City Bank, New York, New York, approving the establishment of branches in St. Thomas and St. Croix, Virgin Islands. 3 Letter to Almeda State Bank, Houston, Texas, approving an investment in bank premises. 4 Telegram to the Federal Reserve Agent at Cleveland authorizing the issuance to BancOhio Corporation, Columbus, Ohio, of a general voting permit covering its stock of The First National Bank of Jackson, Jackson, Ohio. 5 Letter to the Federal Reserve Bank of Dallas regarding expansion of Blue Cross-Blue Shield coverage. 6 Report on competitive factors. A report to the Federal Deposit Insurance Corporation on the competitive factors involved in the proPosed merger of Matinecock Safe Deposit Company, Locust Valley, New York, into Matinecock Bank, also of Locust Valley, was approved unanimously for transmittal to the Corporation. The conclusion read as follows: The proposed merger of Matinecock Bank, Locust Valley, New York, and Matinecock Safe Deposit Company, Locust Valley, New York, would have no effect on competition. Application of Associated Bancorporation (Items 7-9). There had been distributed a memorandum from the Legal Division dated May 10, 1966, regarding the application by Associated Bancorporation, Milwaukee, 16:-!1 -3- 5/11/66 Wisconsin, for approval of action to become a bank holding company. The memorandum detailed certain information regarding one of the proposed subsidiary banks that had come to the attention of the staff subsequent to the public hearing on the application in November 1965, and on the basis of this information the Legal Division recommended that the Board direct the Hearing Examiner to defer indefinitely the filing of his report and recommended decision. A proposed order implementing this recommendation was attached to the memorandum. Also attached were drafts of letters to the Hearing Examiner and to counsel for the applicant. In commenting on the distributed material, Mr. O'Connell brought out that the most recent report of examination conducted by the Federal Deposit Insurance Corporation of Milwaukee Western Bank, one of the banks to be acquired by the proposed holding company, indicated that the condition of the bank had deteriorated substantially. Examinations of both Milwaukee Western Bank and Menomonee Falls Bank, the other bank to be acquired by the proposed holding company, were scheduled for this month. If the examinations should confirm the suspected substantial deterioration in the former bank and, possibly, a lesser deterioration in the latter, the Legal Division would recommend to the Board that it reopen the hearing for the receipt of testimony and documentary evidence, such further hearing sessions to be closed to the public. The proposed order to the Hearing Examiner now under discussion would not identify the f;Grt 5/11/66 -4- basis for postponement of the filing of a report and recommended decision, but the letter to counsel for the applicant would. It was possible that in the circumstances the applicant might want to withdraw its application. Following discussion of the distributed material and of the Points brought out by Mr. O'Connell's oral presentation, the issuance of the order was authorized and the letters to the Hearing Examiner and to counsel for the applicant were approved unanimously. order and letters are attached as Items 7-9. Copies of the There was agreement with a further recommendation by Mr. O'Connell that the order be made part of the hearing record, but that it not be published in the Federal Register. Compounding of interest. There had been distributed a memoran- dum from the Legal Division dated May 6, 1966, relating to a proposed amendment to Regulation Q, Payment of Interest on Deposits, which would Permit member banks, subject to certain conditions, to pay interest on d eposits at the maximum permissible rate compounded on any basis that the member bank might wish to adopt. The memorandum reported reserva- tions expressed by the Federal Deposit Insurance Corporation in response to the request for that Corporation's views, pursuant to the procedure agreed upon at the Board meeting on March 30, 1966. The views of the Comptroller of the Currency also had been requested, but it was now understood from the Comptroller's staff that no response would be forthcoming. 5/11/66 -5Governor Robertson suggested that further consideration of the proposal be deferred until a luncheon meeting could be arranged with Chairman Randall and Mr. Sherrill of the Federal Deposit Insurance Corporation, and it was understood that this course of action would be followed. Question was raised whether it might also be appropriate to discuss with Messrs. Randall and Sherrill the status of the Board's revised notice of proposed rule making that would bring within the definition of "deposit" promissory notes and other forms of member bank indebtedness, with certain exceptions. It was indicated that a memoran- dum from the Legal Division summarizing comments received on the revised Proposal would be available shortly. Accordingly, it was understood that discussion of the subject would be contemplated at the Board meeting next Monday, after which it could better be determined whether a review of the matter with Messrs. Randall and Sherrill would appear Profitable. The meeting then adjourned. Secretary's Note: On May 10, 1966, Governor Shepardson approved on behalf of the Board a letter to the Federal Reserve Bank of San Francisco (copy attached as Item No. 10) approving the appointment of Danila Mitrovich and Robert L. Ruby as examiners. 1662 BOARD OF GOVERNORS Item No. 1 5/11/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 11, 1966 Board of Directors, Wells Fargo Bank, San Francisco, California. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by Wells Fargo Bank, San Francisco, California, of a branch in the vicinity of the intersection of Interstate Highway #5 and Cypress Avenue, Redding, Shasta County, California, provided the branch is established within six months from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension Of the period allowed to establish a branch; and that if an extension should be requested, the procedure prescribed in the Board's letter of November 9, 1962 (S-1846), should be followed.) Item No. 2 5/11/66 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 AODRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 11, 1966 Board of Directors, Kanawha Banking and Trust Company, Charleston, West Virginia. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by Kanawha Banking and Trust Company, Charleston, West Virginia, of a branch at the southwest corner of Virginia, East, and Summers Streets, Charleston, West Virginia, provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter of November. 9, 1962 (S-1846), should be followed.) IGG4 BOARD OF GOVERNORS Item No. 3 5/11/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS orriciAL CORRESPONDENCE TO THE BOARD May 11, 1966. First National City Bank, 399 Park Avenue, New York, New York. 10022 Gentlemen: The Board of Governors of the Federal Reserve System grants its permission to First National City Bank, New York, New York, pursuant to the provisions of Section 25 of the Federal Reserve Act, to establish two branches in the Virgin Islands, one to be located on the island of St. Thomas, and one on the island of St. Croix, and to operate and maintain such branches subject to the provisions of Section 25 and of Regulation M. Unless the branches are actually established and opened for business on or before May 1, 1967, all rights granted hereby shall be deemed to have been abandoned and the authority hereby granted will automatically terminate on that date. Please inform the Board of Governors, through the Federal Reserve Bank of New York, when the branches are opened for business, furnishing information as to the exact location of each branch. The Board should also be promptly informed of any future change in location of the branch on St. Thomas and the branch on St. Croix. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed to establish the branches; and that if an extension should be requested, the procedure prescribed in the Board's letter of November 9, 1962 (S-1846), should be followed.) 1;65 Item No. 4 5/11/66 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADONE•111 OFTICIAL. CORMPONOENCIE TO THC !CARO May 11, 1966 Board of Directors, Almeda State Bank, Houston, Texas. Gentlemen: The Board of Governors of the Federal Reserve System approves, under the provisions of Section 24A of the Federal Reserve Act, a direct and indirect investment in bank premises not to exceed $800,000 by Almeda State Bank, Houston, Texas, for the purchase of land and construction of new banking quarters. It is understood that the $800,000 represents $400,000 to be furnished by the bank and $400,000 to be borrowed by Almeda Corporation from a source other than the subject bank. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. TELEGRAM LEASED Item No. 5 5/11/66 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON WIRE SERVICE May 11, 1966 BALL - CLEVELAND KEBJE A. BancOhio Corporation, Columbus, Ohio. B. The First National Bank of Jackson, Jackson, Ohio. C. Prior to issuance of permit authorized herein, Applicant shall execute and deliver to you, in duplicate, an agreement in form accompanying Board's letter 8-964 (F.R.L.S. #7190). BAKKE (Signed) Karl E. Bakke Definition of KEBJE The Board authorizes the issuance of a general voting permit, under the provisions of section 5144 of the Revised Statutes of the United States, to the holding company affiliate named below after the letter "Au, entitling such organization to vote the stook which it owns or controls of the bank(s) named below after the letter 930 at all meetings of shareholders of such bank(s), subject to the condition(e) stated below after the letter 0C". The period within which a permit may be issued Pursuant to this authorization is limited to thirty days from the date of this telegram unless an extension of time is granted by the Board. Please proceed in accordance with the instruc— tions contained in the Board's letter of March 10, 1947, (5964). Item No. 6 5/11/66 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 11, 1966 AIR MAIL Mr. Watrous H. Irons, President, Federal Reserve Bank of Dallas, Dallas, Texas. 75222 Dear Mr. Irons: Reference is made to your letter of May 3, 1966, advising that the Personnel Committee of the Board of Directors has authorized expanded Blue Cross-Blue Shield coverage for active and retired employees of the Head Office and branches, effective July 1, 1966. The Board of Governors approves the program of increased benefits under the new contract and the absorption of two-thirds of the premium cost in connection therewith, subject to the approval of your Board of Directors. Very truly yours, (Signed) Marritt Sherman Merritt Sherman, Secretary. 1668 UNITED STATES OF AMERICA Item No. 7 5/11/66 BEFORE THE BOARD CF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. In the Matter of the Anplication of ASSOCIATED BANCORPORATION, U Llwaukee, Wisconsin, DOCKET NO. BHC-74 Pursuant to Section 3 of the Bank Holding Company Act of 1956. ORDER The application of Associated Bancorporation for ap?roval of the formation of a bank holding company, nursuant to section 3(a)(1) °f the Bank Holding Company Act of 1956, was the subject of a public hearing held on November 9 and 10, 1965, before Hearing Examiner David London, at the Federal Reserve Bank of Chicago. On December 20, 1965, Pursuant to Section 263.4 of the Board's Rules of Practice for Pc rmal Hearings (12 CFR Part 263), the Hearing Examiner filed the tra nscript of hearing record with the Secretary of the Board. Sub- conclusions seluerltlY, Aoplicant filed proposed findings of fact and Of law with supporting brief. Pursuant to Section 263.6 of the Board's ilules of Practice, filing by the Hearing Examiner of his report and ecommended decision would follow the filing of Applicant's proposed fiadings, conclusions, and brief. 1669 the On the basis of information obtained by the Board in finds that Performance of its bank supervisory functions, the Board the filing by the Hearing Examiner of his report and recommended decision should be stayed pending consideration by the Board of the renecessity for receipt by the Hearing Examiner of further evidence lating to one or more of the issues involved in this proceeding. Accordingly, it is ordered that the filing of the Hearing Examiner's report and recommended decision in this proceeding be stayed until further order of the Board. Dated at Washington, D. C., this 11th day of May, 1966. By order of the Board of Governors. (Signed) Merritt Sherman Merritt Sherman, Secretary. 1670 Item No. 8 5/11/66 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 11, 1966. REGISTERED RETURN RECEIPT REQUESTED Mr. David London, Hearing Examiner, National Labor Relations Board, 1717 Pennsylvania Avenue, N. W., Washington, D. C. 20570 Re: Associated In the Matter of the Application of Bancorporation - Docket No. BHC-74 Dear Mr. London: ation which is now Reference is made to the above applic ended decision. recomm and before you for preparation of a report presently studying is Board In connection with this application, the ity that suggests author isory data in its possession as a bank superv the subject applion g hearin the possible need for a reopening of the g a determination Pendin ce. cation for the production of further eviden that you stay ing direct order in this respect, the Board has issued an r order furthe until on decisi the filing of your report and recommended ed. enclos of the Board. The Board's order is and its counsel by We have this date advised Applicant riate advance notice Approp registered mail of the Board's action. any proposed reing regard Will be given to you and the Applicant appropriate ered consid opening of the hearing or of other action by the Board. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosure Item No. 9 5/11/66 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 11, 1966. AIR MAIL - REGISTERED RETURN RECEIPT REQUESTED Roy G. LaBudde, Esq., Michael, Best & Friedrich, 626 East Wisconsin Avenue, Milwaukee, Wisconsin, 53201 Re: In the Matter of the Application of Associated Bancorporation - Docket No. BHC-74 Dear Mr. LaBudde: As you know, the above application relating to the Proposed acquisition by Applicant of the voting stock of Milwaukee Western Bank, Milwaukee, and Menomonee Falls Bank, Menomonee Falls, both in Wisconsin, is now before Hearing Examiner David London for his report and recommended decision. Subsequent to your filing of Applicant's proposed findings of fact, conclusions of law, and brief, the Board has had occasion to review the November 15, 1965 report of examination of the Milwaukee Western Bank prepared by examiners of the Federal Deposit Insurance Corporation's Seventh District Office, and the bank's report of condition as of April 5, 1966, submitted to the Corporation. In general, the examination and condition reports mentioned reflect, in the Board's judgment, conditions within Milwaukee Western Bank significantly different in certain critical areas than reflected in the May 4, 1964 report of examination prepared by the Corporation. Among other matters noted in the November 15, 1965 report of examination were the substantial increases in loan classifications and large concentrations of credit that have occurred apparently since the May 4, 1964 report of examination. In addition, as reflected in the bank's April 5, 1966 report of condition, the bank's loan-to-deposit ratio has increased over that of November 1965, reflecting an increase in total loans and a net decrease in deposits. The foregoing references to certain aspects of Milwaukee Western Bank's operations have, in the Board's opinion, a direct bearing on one or more of the statutory factors with respect to BOARD RESERVE SYSTEM OF GOVERNORS OF THE FEDERAL Roy C. LaBudde, Esq. )-'2 1 r' -2- which evidence was adduced during the hearing on Associated that Bancorporation's application. Similarly, the Board believes Menomonee and Bank the current examinations of Milwaukee Western Falls Bank, which the Board is advised were commenced on May 9, 1966, will bear upon the aforementioned factors. Pursuant to Section 263.2(j) of the Board's Rules of te Practice for Formal Hearings (12 CFR Part 263), upon appropria entry to prior time notice, the Board may reopen any hearing at any of its order disposing of any matter, for the purpose, among others, of calling for further evidence upon any issue. To the end that the Board will be able to determine whether there is reasonable cause to reopen the hearing record on Applicant's proposal for the purpose of receiving further evidence, the Board has directed its staff, November 15, including Board counsel, to review, among other data, the 15, December the Bank, 1965 report of examination of Milwaukee Western reports the and 1965 report of examination of Menomonee Falls Bank, of examination of both banks that will be prepared following the these current examinations of these banks. Pending completion of examinations and the reports thereon, and the Board's decision as to the need for reopening the hearing record on the application in Docket No. BHC-74, the Board has issued an order directing the ed Rearing Examiner to stay the filing of his report and recommend is order Board's The Board. the of order decision until further enclosed. Also enclosed is a copy of a letter of this date under which the Board's order was sent to Hearing Examiner London and a "PY of the Board's letter to Applicant with its stated enclosures. any Should you or representatives of Associated Bancorporation have you letter, questions regarding either the enclosed order or this may wish to communicate with Mr. Thomas J. O'Connell, Board counsel, in this regard. record in The enclosed order will be entered as part of the Register. this proceeding, but will not be published in the Federal Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosures 1 1 6'0/.' Item No. 10 5/11/66 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 11, 1966 Mr. H. E. Hemmings, First Vice President, Federal Reserve Bank of San Francisco, San Francisco, California. 94120 Dear Mr. Hemmings: In accordance with the request contained in your letter of May 4, 1966, the Board approves the appointments of Danila Mitrovich and Robert L. Ruby, at present assistant examiners, as examiners for the Federal Reserve Bank of San Francisco, effective July 1, 1966. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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