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Minutes for May 14, 1958 To: , ' Members of the Boar From: Office of the Secretary Attached is a copy of the minutes of the of the Federal Reserve System on Governors of Board the above date. It is not proposed to include a statement with respect to any of the entries in this set of minLtes 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, if you were present at the meeting, please initial in column A, below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. A Chm. Martin Gov. Szymczak Oov. Vardaman 1/ Gov. Mills Gov. Robertson Gov. Balderston 4 Gov. Shepardson 24ad 1/ In accordance with Governor Shepardson's memorandum of March 8, 1957, these minutes are not being sent to Governor Vardaman for initial. 1483 Minutes of the Board of Governors of the Federal Reserve System on Wednesday, May 14, 1958. PRESENT: Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Szymczak Mills Robertson Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Kenyon, Assistant Secretary Masters, Director, Division of Examinations Molony, Special Assistant to the Board Shay, Legislative Counsel Solomon, Assistant General Counsel O'Connell, Assistant General Counsel Items circulated to the Board. The following items, which had been circulated to the members of the Board and copies of which are 4ttaohed to these minutes under the respective item numbers indicated, were a proved unanimously: Item No. 1 1,etter to The Pickerington Bank, Pickerington, Ohio, ving the requirement of six months' notice of ZI:chdrawal from membership in the Federal Reserve ?stem. (For transmittal through the Federal Reserve 44k of Cleveland) 1 lirter to the Federal Reserve Bank of Richmond regarding The eligibility of Mr. James P. Casbarian, a director of ale Bank of Maryland, Seat Pleasant, Maryland, to serve m 8° as a director of a proposed new bank in Silver Spring, Let et-.r to Northwest Bancorporation, Minneapolis, suggesting that an opinion be sought from the Comptroller of the relleY as to the eligibility of shares of Downtown Auto ",-L for investment by a national bank. (For transmittal tl'rc)ugh the Federal Reserve Bank of Minneapolis) 3 5/14/58 -2Item No. Letter to Wellington State Bank, Wellington, Texas, granting consent, under the provisions of Section 18(c) of the Federal Deposit Insurance Act, for that bank to Purchase the assets and assume the liabilities of First National Bank, Wellington, Texas. (For transmittal through the Federal Reserve Bank of Dallas) 4 Letter to the Bank of Belmont Shore, Long Beach, California, denying its request for an extension of time within which to establish a branch at Seal Beach, California. (For transmittal through the Federal Reserve Bank of San Francisco) 1/ 5 Letter to the Comptroller of the Currency recommending "Proval of an application to organize a national bank ;t11 Silver Spring, Maryland. (With a copy to the Federal tleserve Bank of Richmond) 6 recommending 7 er of the Currency to the Comptroller tt Le ,I,PProval of the application of The Farmers State Bank of 1-and, Worland, Wyoming, to convert into a national ' 131°1 ' tanking association. (With a copy to the Federal Reserve ..Jank of Kansas City) Request of Congressman Celler for certain correspondence (Item In a letter dated May 12, 1958, copies of which had been distributed to the members of the Board, Congressman Celler, Chairman of the House Committee on the Judiciary, referred to the applications of the First New York Corporation, The First National City Bank of New York, and International Banking Corporation under the Bank Holding Company Act, Since the recommendation of the Federal Reserve Bank of San Francisco had been to hold the matter in abeyance rather than to deny the request for extension of time, the letter was aPproved with the understanding that before it was sent the Secretary would get in touch with the President of the Reserve Bank to determine whether the Bank wished to express any further views. President Mangels subsequently informed the Secretary that he approved the proposed method of handling the matter, and therefore the letter was sent. 1485 5/14/58 -3- cm which oral argument was to be held on May 21, 1958, and asked to be furnished copies of the correspondence between the Board and the Depart"tent of Justice dealing with the Justice Department's investigation of the competitive aspects of the proposal to form a bank holding company. This letter had been written to the Board following telephone conversations between Mr. O'Connell and Mr. Herbert Maletz, Chief Counsel for the Antitrust Subcommittee of the House Judiciary Committee. At the request of the Board, Mr. O'Connell summarized his corwersations with Mr. Maletz, in which the latter initially requested information as to what steps had been taken to place in the hearing record the results of investigation by the Department of Justice regarding certain competitive aspects of the applications. Mr. O'Connell said he told Mr. Maletz that such material had not been placed in the record, for the Department of Justice had declined to come into the hearing as a Ilitness and had shown the Board's Counsel neither the introductory material ' to its investigative file nor its conclusions. Mr. Maletz had stated thet he would be in touch with the Department of Justice to ascertain Ilhat the Department intended to do to cause its opinions to be reflected 14 the record and then inquired whether in the meantime the Board would rlIrnish copies of its correspondence with the Justice Department, which ce4aed Mr. O'Connell to suggest that a letter be sent to the Board in (31(Ier that it might consider the request. ' 1486 5/14/58 -4Mr. O'Connell then stated reasons which might be given for and against complying with the request. The reasons against compliance included the fact that in considering the applications in the light of the hearing record the 80ard was acting under mandate of the statute as an independent adjudicatory body and should not lay itself open to any suggestion of urging or tampering while the matter was still pending before it. In this connection, it might be assumed that Mr. Celler would use material taken from the correspondence in his statement at the time of the oral argument, which would raise a question whether, if the correspondence /gere supplied, the parties to the proceeding should not be notified alad perhaps have the correspondence made available to them also, so that they could prepare any rebuttal they might wish to present. l'Inthermore, compliance with the request might establish a precedent for 81milar demands by others in future cases. In concluding, Mr. O'Connell brought out that the possibility that the correspondence might be subject to subpoena should be given 8cIlle consideration. Mr. Solomon stated that there was nothing in the requested correspondence which would reflect any discredit upon the Board. Rowever, after considering the question along other lines, particularly 14 terms of its broad aspects, it was the view of the legal staff that It 'would be preferable not to release the desired material. 1487 5/14/58 _5... Comments by the members of the Board revealed that they were unanimously in agreement with the position of the Legal Division, Particularly since it appeared that it would be more logical for Congressman Celler to request the information from the Department of Justice than from the Board. Although Mr. Mbletz had informed Mr. °'Connell that a source in the Department of Justice had orally authorized making the information available, it was the view of the Board that any such authorization should be received in writing over a4 aPpropriate signature. While agreeing with the view that the request should not be e°111Plied with, Governor Szymczak suggested that it might be desirable fOr Vice Chairman Balderston to meet with Congressman Celler in order to exPlain the Board's position. The other members of the Board con- curred in this suggestion, with the understanding that Governor Balderston would take with him an appropriate letter to complete the reeord. Mr. O'Connell then distributed a draft of letter which might be used for the purpose. Certain suggestions were made for changes ln the draft, following which unanimous approval was given to a letter to Congressman Celler in the form attached as Item NO. 8, with the Illirlerstanding that a copy would be sent to the Department of Justice. 0,1 5/14/58 -6While the letter in the form in which it was approved did not inake reference to the oral authorization from the Department of Justice for release of the correspondence, it was understood that Governor Balderston would make reference to that situation in his meeting with Congressman Celler if it seemed appropriate to do so. It was further u nderstood that Governor Balderston would make it clear in his conversation with Mr. Celler that after a decision on the First New York C°rPoration matter had been rendered, the Board would not be reluctant to furnish from its files copies of the correspondence with the Justice ePartment, if appropriate authorization was received from that Department. The meeting then adjourned. Secretary's Notes: On May 13, 1958, Governor Shepardson approved on behalf of the Board a letter to the Federal Reserve Bank of Philadelphia approving the appointment of William W. Deemer as assistant examiner. A copy of the letter is attached as Item No. 9. Pursuant to recommendations contained in memoranda from appropriate individuals, Governor Shepardson also approved on behalf of the Board on May 13, 1958, increases in the basic annual salaries of the following persons on the Board's staff in the amounts indicated, effective May 18, 1958: 1489 5/14/58 -7- .1.1/22_end title Basic annual salary From To Division Pearl S. Thompson, Records Clerk Office of the Secretary $3,585 $3,670 Edward R. Fry, Economist Research and Statistics 5,980 6,390 Kathryn E. Ridgway, Statistical Clerk Research and Statistics 3 840 3,925 3,805 3,940 4,66o 14.,795 1,758 800 Marcia G. Patz, International Finance S ecretary C. A. Examinations Zimmerman, Assistant Federal Reserve Examiner Rosemarie H. Personne Smith, Clerk (half-time basis) Aaministration Vera Dulin, Cashier C ateteria Administrative Se es 3,385 31470 Nina L. Nercey, Cafeteria Helper Administrative Services 2,600 2,675 J4,12.114 14 'Pope, utlard Administrative Services 3,300 385 4111h dr '111 ' Se retary 149( BOARD OF GOVERNORS OF THE '41) FEDERAL RESERVE SYSTEM Item No. 1 5/14/9 WASHINGTON 25, D. C. ADDRESS OFFICIAL cORRESPONDENCE TO THE BOARD Hay -1)1 1 1958 Board of Directors, The Pickerington Bank, Pickerington, Ohio. Gentlemen: The Federal Reserve Bank of Cleveland has forwarded to the Board of Governors letters of April 18 and 22, 1958, together 1,,,ith the accompanying resolution signifying your intention to withdraw from membership in the Federal Reserve System and requesting *waiver of the six months' notice of such withdrawal. In accordance with your request, the Board of Governors 11141 VeS the requirement of six months' notice of withdrawal. Upon , 6 ,11rrender to the Federal Reserve Bank of Cleveland of the Federal 1,rserve Bank stock issued to your institution, such stock will be a.,nceled and appropriate refund will be made thereon. Under the 12I°v1sions of section 10(c) of the Board's Regulation H as amended effective September 1, 1952, your institution may accomplish termi, atlon of its membership at any time within eight months from the qate the notice of intention to withdraw from membership was given. It is requested that the certificate of membership be ' I eturned to the Federal Reserve Bank of Cleveland. Attention is invited to the fact that if your bank is s"-t-rous of continuing deposit insurance after withdrawal from .i,Tml.pership in the Federal Reserve System, it will be necessary at application be made to the Federal Deposit Insurance Corpora-. Very truly yours, (Signed) 3. R. Carpenter S. R. Carpenter, Secretary. 1491 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 2 5/14/58 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 14, 1958 Mr. Aubrey N. Heflin, Vice President and General Counsel, Federal Reserve Bank of Richmond, Richmond 13, Virginia. Dear Mr. Heflin: Careful consideration has been given to your letter of April 201 1958, and enclosures, relating to the question whether James P. Casbarian, a director and president of The Bank of rYland, Seat Pleasant, Maryland, a nonmember bank, could serve a director of a proposed new national bank in Silver Spring, ,1`11 qand, in view of the provisions of section 8 of the Clayton The specific provision involved is paragraph 5 of section 8, which provides that a director or an officer of a member bank may serve as a director or an officer of another bank not situated in he same town as the member bank, or in any city, town, or village contiguous or adjacent thereto". It appears from the information submitted that Silver Spri„ of „-ug and Seat Pleasant are both "contiguous" to the District parts both 021Umbia and readily accessible to it, being, in fact, ' dt the Washington Metropolitan Area. However, it appears that the stance between Silver Spring and Seat Pleasant is 12-1/2 or 13 -1-esby road; that one possible route would be to go through the end ar'strict except for a short stretch in Silver Spring at one route, possible in Seat Pleasant at the other; that another T:',°11g the northeast boundary of the District, would go through other incorporated communities; that one of the most direct that, i2tes would pass 24 traffic lights and 7 stop signs; and unlikely seems it ZILITiew of the size and location of the banks, tt there would be any competition be:meen them. ' -v g Mrs Heflin -2- Under the circumstances, it appears that Silver Spring and Seat Pleasant are not "contiguol,s" to each other, because their boundaries do not touch, and it Likewise appears that they are not "adjacent" to each other, because they are not "in such close proximity [or] so readily accessible to each other as to be in practical effect a single city, town or village". In your letter you refer to the situation existing between St. Louis and Normandy, Missouri, in 1953. However, it . pPeared that Normandy was a suburb of St. Louis, readily accessto St. Louis by a six-lane thoroughfare, the distance being 1.6 miles. There were intervening suburbs, but this was °.°11,Ght not to affect the result, in view of footnote 8 in gulation L, which refers to "a suburb of a city separated from , + at city only by an intervening suburb" as being "contiguous" the city within the meaning of section 8. .VY Z Although questions of this kind are seldom free from doub+u, it • would appear that sectiorc8 of the Clayton Act would Prevent Mr. Casbarian from serving the proposed national bank. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 1493 BOARD OF GOVERNORS OF THE ,,,,i . I 4, w -0tl, FEDERAL RESERVE SYSTEM .4 * WASHINGTON 25. D. C. P Item No. 3 5/14/58 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD i Ntf,t1s,AV l : ''',4 May 14, 1958 14r. H. Raymond Horn, Senior Vice President, Northwest Bancorporation, Ilinneapolis 2, Minnesota. Dear Mr. Horn: This refers to your letter of April 25, 1958, which, 1 111°4 other things, requested a ruling by the Board that 1 crthwest Bancorporation's indirect ownership of shares of rwntown Auto Park, Minneapolis, Minnesota, is exempt from the divestment requirements of the Bank Holding Company Act. It is understood that 750 voting shares of Downtown Auto Park are owned by the Northwestern Bank Building Company, iholly-owned subsidiary of the Northwestern National Bank of neapolis which itself is a subsidiary of Northwest Bancorpob tion. It is further understood that 185 voting shares of wcwntown Auto Park are owned by the Midland National Bank of 4 llnaapoli3, also a subsidiary of Northwest Bancorporation. 4'' V As you know, section 4(c)(4) of the Bank Holding C°1111" ea4Y Act exempts from the prohibitions of section 4 "shares are of the kinds and amounts eligible for investment by tIllonal banking associations under the provisions of secto°11 5136 of the Revised Statutes". In this connection the i,,ard has expressed the opinion that shares held or acquired eL,! accordance with section 24A of the Federal Reserve Act are CIA from the prohibitions of section 4 of the Bank Holding of secti PanY Act by virtue of the above-quoted provisions " Park are Accordingly, if the shares of Downtown Auto nt by investme for eligible Kind and amount which would be control or p ownershi indirect or ational bank under the law, the from th_such shares by a bank holding company would be exempt ler Comptrol the Since Act. the Prohibitions of section 14 of Of BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. H. Raymond Horn. of the Currency has primary jurisdiction with respect to determining whether a given Livestment by a national bank is permis!lble under the law, it would seem appropriate for Northwest 13ancorporation to request an opinirn from the Comptroller as to the eligibility of shares in Downtown Auto Park for investment bY a national bank. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 149 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No, L. 5/14/58 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 14, 1958 'Board of Directors, Wellington State Bank, Wellington, Texas. Gentlemen : The Board of Governors of the Federal Reserve at'em hereby gives its written consent, under the proof Section 18(c) of the Federal Deposit Insurance 'for Jellington State Bank, dellington, Texas, to iale.hase the assets and assume the liabilities of First °videdlonal Bank, Wellington, Texas. This consent is given 144 r a. the purchase of assets and assumption of liabilities are effected substantially in accordance with the terms of the sales contract dated April 19, 1958; b. that fixed assets and securities acquired from the First National Bank are not placed on the books of the 1:ellington State Bank at amounts in excess of the depreciated value for income tax purposes and the current market value, respectively; C. the transaction is concluded within six months from the date of this letter, and d. that formal approval of the State authorities is obtained. Very truly yours, (Signed) S R. Carpenter s. a. Carpenter, Secretary. EMARD CIF GOVERNDR5 T}-IV FEDERAL RESERVE SYSTEM Item No. 5 5/14/58 WASIIINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE: TO THE BOARD May 14, 1958 board of 1)414k of Directors, Belmont Shore, g Reach, California. Gentlel„n2 Reference is made to the request contained in a letter datedI kt, larch 21, 1958, to the Federal Reserve Bank of San Francisco, e_ an extension of time in which the Bank of Belmont Shore may aZblish a branch in the vicinity of the intersection of Main Street Pacific Coast Highway, Seal Beach, California. On April 3, 1957, the establishment of the above branch trias en,_;i101?roved by the Board of Governors, provided the branch was exrollshed within six months, and this time was subsequently it ended to April 3, 1958. At the time of approval of this branch, acrIgs understood that in order to comply with a requirement preed by the Superintendent of Banks of the State of California, 42;ai funds of the bank would be increased by not less than vv, through sale of additional common stock. %Ia411 , Subsequent to the extension of time granted by the Board, Jrregularities on the part of officials of the institution vere }lore 41.sclosed which have resulted in certain changes in management. .°'„Ifers it does not appear that definite arrangements for establishto e ullel branch have progressed sufficiently that it is yet possible bilt:!inlate with some accuracy when the branch could be opened for ' In view of the problems confronting the bank, the Board or eet‘:ioN:ernors does not feel justified in extending the time to : al plish this branch. However, when these matters are resolved, to ener another examination of the bank, the Board would be willing at t2sider a branch application in the light of conditions existing uat time. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 5/14/58 WASHINGTON 25, D. C. :d* 4, Item No. 6 ADDRESS OFFICIAL CORRESPONDENCE liAlt TO THE BOARD - t'''•' ''' °I'x'2 4 ,,ig, mstt , l May 14, 1958 Comptroller of the Currency, TreasurY Department, W ashington 25, D. C. Attention Mr. W. M. Taylor, Deputy Comptroller of the Currency. 1°ear Mr. Comptroller: Reference is made to a letter from your office dated January 30, i138 1, enclosing copies of an application to organize a national bank at 9 not er Spring, Maryland, and requesting a recommendation as to whether or the application should be approved. Information report of investigation of the ap- contained in a Plioati die..., on made by an examiner for the Federal Reserve Bank of Richmond sho ' .4°Bes that a capital structure of $7500000, instead of $500,000 as am_1411 in the application, would be provided for the bank and this revised t of capital is regarded as adequate. While there appears to be no lack time of banking facilities and services in the community at the present attr, it is reported that the proposed bank under good management could !.ct sufficient business to function profitably. In this connection, the RoweJ-nformation with respect to the proposed management is favorable. ons of the proposed directors, Mr. Conroy, would not be eligible aerv ' provisions of the Clayton Act and the Board's Regulation L to bis4,the proposed bank as well as a bank which he is serving in the c_t of Columbia. The Board of Governors is of the opinion that fairo„.1, Aaole consideration should be given the application. e4V* aspectTheBoard's Division of Examinations will be glad to discuss s of this case with representatives of your office if you so desire. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. BOARD OF GOVERNORS OF THE Item No. 7 FEDERAL RESERVE SYSTEM 5/14/5B WASHINGTON 25, D. C. ADDRESS" OFFICIAL COPUESPONCENCE TO INC BOARD May 14, 1958 Comptroller of the Currency, Treasury Department, W ashington 25, D. C. Attention Mr. W. M. Taylor, Deputy Comptroller of the Currency. 'Dear Mr. Comptroller: Reference is made to a letter from your office dated Mar b eu 5, 1958, enclosing copies of an application of The Farmers fate Bank of Worland, Worland, Wyoming, to convert into a nabanking association and requesting a recommendation as 1:10na1 60 whether or not the application should be approved. This bank has been a member of the Federal Reserve em since March 27, 1933, and, in view of the Reserve Bank's Stern kho t, wledge of the institution and the latest report of examinaalon as of September 11, 1957, a field investigation of the 1,13Plication was not regarded as necessary. Information in the p!c°rds of the Board of Governors and that supplied by the 47dsral Reserve Bank of Kansas City is favorable with respect u the financial history of the bank, adequacy of capital struc: 6 e, future earnings prospects, general character of management, recl services to the community. Accordingly, the Board of Governors oreommends approval of the application of The Farmers State Bank Worland to convert into a national banking association. Z discuss The Board's Division of Examinations will be glad to any aspects of this case with representatives of your CO if you so desire. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. I'9,3. BOARD OF GOVERNORS Item lo. 8 5/14/58 OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE VICE CHAIRMAN av,O,V May 141 1958. Tr,he Ho norable Emanuel Cellar, Chairman, trrnittee on the Judiciary, iflof Representatives, agton 25, D. C. r Z °ear Chairman Celler: This will aclnowledge receipt of your letter of May 12/ 1958 1114 requesting, in connection with the applications of the 11%7 York Corporation, The First National City Bank of New Cora„ and International Banking Corporation under the Bank Holding %1„l'anY i Act of 1956, that you be furnished with a copy of the (ItlePondence between the Board and the Department of Justice a. lng with the Department's investigation of the competitive ets of the transaction proposed under these applications. Pursuant to section 3 of the Bank Holding Company Act, this toa.1,1 or ' nothas been delegated the responsibility of determining whether t° 1Pprove any acquisition or merger or consolidation under 4c.6°11 3, taking into consideration the factors enumerated in that illap; , °11° In performing this function the Board's independence of alle-7,nz and action is considered essential. At the same time, fair 1114"equate notice and disclosure to all parties to a proceeding tc41,, the Act, as well as disclosure to the public to an extent vatible with the rights of the parties, has been maintained. thq d. Consistent with this policy, the Board is of the opinion sclosure or transmission of materials connected with the 4/3c)ve..1 tecol:entioned proceeding and not a part of the public hearing :'while this matter is still pending before the Board, would %rlzti lt,EN-;111-te an improper action on the Board's part. This conclusion 0m the Board's view of its adjudicatory function and its 4qa pbility to assure a fair hearing for all parties. Further, zt:,4131:?eision reflects the Board's concern that such action might others during the course of ktur ' e ah a precedent for a demand by hearings. BOARD OF GOVERN RS OF THE PEOERAL RESERVE SYSTEM anuel Geller For these reasons the Board feels that it mould be „ ProPriate at this time to furnish a copy of the above-mentioned ,ges Its pondence between the Board and the Department of Justice. qii : 11,the Board has rendered a decision in this matter, if you should desire this correspondence, the Board, with the written consent e Department of Justice, mould be glad to furnish you with a 444 Of all correspondence of the nature you requested. Sincerely yours, (Signed) C. Canby Balderston C. Canby Balderston, Vice Chairman. 1501 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item Noo 9 5/14/58 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD Nay 13, 1958 E. C. Hill, Vice President, rederal Reserve Bank of Philadelphia, Phi ladelphia 1, Pennsylvania. Dear Mr. Hill: In accordance with the request contained in Ya:our letter of May 9, 1958, the Board approves the 4PPo1ntment of William W. Deemer as an assistant exfor the Federal Reserve Bank of Philadelphia. e43e advise as to the date upon which the appoint' ent is made effective. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary.
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