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09
4'10/59
Minutes for
To:
My 1(:, 19(n
Members of the Board
From: Office of the Secretary
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
With respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard to
the minutes, it will be appreciated if you will advise
the Secretary's Office. Otherwise, please initial below.
If you were present at the meeting, your initials will
indicate approval of the minutes. If you were not present,
Your initials will indicate only that you have seen the
minutes.
Chm. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
I
Minutes of the Board of Governors of the Federal Reserve System
On Monday, May 16,
1960.
PRESENT:
Mr.
Mr.
Dia%
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Szymczak
Robertson
Shepardson
King
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Sherman, Secretary
Thomas, Adviser to the Board
Young, Adviser to the Board
Molony, Assistant to the Board
Fauver, Assistant to the Board
Noyes, Director, Division of Research
and Statistics
Farrell, Director, Division of Bank
Operations
Koch, Adviser, Division of Research
and Statistics
Daniels, Assistant Director, Division
of Bank Operations
Landry, Assistant to the Secretary
Keir, Chief, Government Finance Section,
Division of Research and Statistics
Report on money market developments.
Messrs. Thomas and Keir
'
lePorted on recent developments in the money market and near-term
bellk reserve projections.
Messrs. Koch and Keir then withdrew from the meeting.
Discount rates.
The establishment without change by the Federal
Reeerve Banks of Cleveland, Richmond, Atlanta, Chicago, St. Louis,
141118413 City, and Dallas on May 12, 1960, of the rates on discounts and
6.4118-11ces in their existing schedules was approved unanimously) with the
111/4erstanding that appropriate advice would be sent to those Banks.
• rd.r
5/16/60
-2Items circulated to the Board.
The following items, which
had been circulated to the Board and copies of which are attached to
these
minutes under the respective item numbers indicated, were
2221'21
/211 unanimously:
Item No.
Letter to the Gary Trust and Savings Bank, Gary,
Indiana, approving the establishment of a branch
at 650 South Lake Street.
1
tter to the Union Rank and Trust Company, Grand
4.aPids, Michigan, approving an extension of time
y',(:) establish a branch in Grand Rapids Township,
Aent
County.
2
Ltetter to the Warren Bank, Warren, Michigan, approving
he establishment of a branch at 27248 Van Dyke Avenue.
Tietter to
Bank of America National Trust and Savings
ess°ciation, San Francisco, California, approving the
tablishment of a branch on the Island of Moen, Truk
T ?11, United States Trust Territory of the Pacific
-61-ands.
3
4
4
LettQr to
the Union Bank, Los Angeles, California
aPProving
the establishment of a branch in Orange.
5
Letter t
,
ArkarIsas- The First National Bank of DeWitt, DeWitt,
approving its application for fiduciary
PWers.
Letter
Oklaliorat,7 The First National Bank of Vinita, Vinita,
approving its application for fiduciary
Dwers.
tetter
to
Chairman Robertson of the Senate Banking and
exjencY Committee reporting on S. 3472, which would
theend
Dch,.puntil June 30, 1962, the authority contained in
'''ense Production Act of 1950, as amended.
7
5/16/60
-3Item No.
Telegram to the Federal Reserve Bank of Atlanta
aUthorizing it to obtain bids for the proposed
t10-floor addition to the Atlanta (head office)
Parking garage.
9
Latter to the Federal Reserve Bank of New York
40ting the action of its Board of Directors
ePproving continuation of its program for advanced
education of personnel.
10
Letter to the Federal Reserve Bank of Cleveland
epProving continuation of the payment of salary to
ell employee of the Pittsburgh Branch at a rate in
excess of the maximum of the grade to which his
Position is allocated.
11
Messrs. Thomas and Daniels then withdrew and Messrs. Hackley,
elleral Counsel, Hexter, Assistant General Counsel, and Nelson, Assistant
1/1-rector, Division of Examinations, and Miss Hart, Assistant Counsel,
entered the room.
Order and Statement in the case of Otto Bremer Company (Items 12
Q1.11.1. There had been distributed a memorandum dated May
9, 1960,
*ft the Legal Division regarding a request of Otto Bremer Company,
8t1 Paul, Minnesota, on November 20,
1959, for a determination under
Beetthn 4(c)(6) of the Bank Holding Company Act that the activities
or
a proposed subsidiary, Foster County Agency, Inc., were of a kind
that vould make inapplicable the provisions of section 4(a)(2) of the
Act, prohibiting the retention by a bank holding company of any voting
sheres of a nonbanking organization.
The memorandum noted that Otto
5/16/60
Bremer Company proposed to acquire 390 of the 1,000 total shares of
Poster County Agency, Inc., and that the agency would then conduct
various insurance activities now carried on by the insurance department
Of the Foster County State Bank, a banking subsidiary of whose stock
Qtto Bremer Company controls
39 per cent. It was further noted that a
hearing was held on February
8, 1960, at the offices of the Federal
Reserve Bank of Minneapolis and that on April
7, 1960, the hearing examiner
filed his Report and Recommended Decision wherein he recommended that the
13°8-rd grant the request.
The time for filing exceptions to the hearing
examiner's Report expired on April 26, 1960, no exceptions having been
tiled thereto.
Noting that the hearing examiner had concluded that
ala the activities of the proposed subsidiary would fall within the terms
°t the exemptions afforded by section 4(c)(6), the memorandum stated that
the Legal Division agreed with this conclusion and believed it to be in
"cord with the statutory purposes of that provision as well as with
1)l'evi°ua decisions of the Board.
the
Accordingly, it was recommended that
Board authorize the issuance of an Order and Statement along the lines
of
drafts that were attached to the memorandum.
There being no indication of disagreement with the conclusion and
rec°1nmendation of the Legal Division, an Order and Statement in the form
r attached Items 12 and 13 were unanimously approved.
Letter to the Philadelphia National Bank, Philadelphia, Pennsylvania
(Items 14 and
15).
There had been circulated a draft letter to the
5/16/60
-5-
Philadelphia National Bank, Philadelphia, Pennsylvania, that would
advise of Board approval of the articles of association and the
°Manization certificate of Philadelphia International Investment
Corporation.
The letter also would transmit a permit authorizing the
corporation to proceed with steps incidental and preliminary to its
°rganization.
Mr. Solomon said that it should be noted that Board approval
Of the articles and organization certificate of Philadelphia International Investment Corporation would constitute a definitive step
8
tnee
it meant that the Board, for all practical purposes, would be
/Nrov
ape
ing the Investment Corporationts charter.
However, in his
estimation there was nothing unusual in the application.
Mr. Goodman concurred, saying that the application was entirely
in
order.
The Board then unanimously approved the letter to the Philadelphia
ilstional Bank, Philadelphia, Pennsylvania, advising of approval of the
"idles of association and the organization certificate of Philadelphia
ljlternational Investment Corporation and transmitting a permit authorthe corporation to proceed with steps incidental and preliminary
to j
‘'"6 organization.
Copies of the letter and the permit are attached
as Items 14 and 15.
Messrs. Noyes and Goodman then withdrew from the meeting.
5/16/60
Letter to the Comptroller of the Currency.
There had been
circulated a memorandum dated April 29, 1960, from the Division of
Examinations recommending favorably with respect to an application
to
organize a national bank at Miami, Florida, along with a draft
Of letter to the Comptroller of the Currency containing this recommendation.
It was noted in the memorandum that the Atlanta Reserve
134nk had recommended unfavorably on the application.
Asked by the Chairman to comment, Mr. Nelson said that the
13r°Posed national bank would be located about four miles southwest of
the center of Miami, that the population of the area to be served
inclu.ded about 200,000 persons, and that the proposed bank expected
to have $9 million in deposits at the end of the third year of operatio„
Both future earnings prospects and general character of management
14re considered to be satisfactory.
The only question related to the
convenience and needs of the community to be served, which apparently
lIckld be served by the proposed bank, since the nearest competing bank
11" two miles distant.
The ratio of population per banking office in
the Miami metropolitan area was about 18,000 to one compared to about
to one in the State of Florida and 9,800 to one in metropolitan
Etrea6 in the United States in 1958.
Mr. Nelson went on to say that
(111*IcIllgh the investigation of the proposed bank did not develop many
plIcts
indicating pronounced need for additional banking facilities in
the area, it did show that a satisfactory volume of business could be
5/16/60
-7-
developed within a reasonable period.
Thus, even though a number of
letters had been received from bankers in Dade County during recent
weeks opposing the granting of new bank charters, the Division of
Examinations recommended that this application be acted on favorably.
Governor Shepardson referred to a letter from a director of
the Bank of South Miami dated March 181 1960, stating opposition to
helf bank charters in Dade County, in part because of a decline in the
eiposits of certain of the commercial banks in the County in the past
rel'i months.
He said that when he was in Jacksonville a few weeks ago,
he had heard comment at the Jacksonville Branch of the Federal Reserve
Benk of Atlanta to the effect that the Miami area might be becoming
°Nrar-banked.
In addition, a real estate agent to whom he had talked
had referred to a rising number of vacancies in the area.
Consequently,
he (Governor Shepardson) had requested Mr. Nelson to look into the
gileetion whether there had been a decline in bank volume in the Miami
al'ala during 1959.
However, the data secured by Mr. Nelson from the
°mita Reserve Bank on this point did not reveal such a trend.
He
believed the recommendation of the Division of Examinations was correct
ill the light of the great disparity in the ratio of population to bank
cIffices in Dade County compared to the rest of the country.
Chairman Martin observed that hotels in the Miami-Miami Beach
ea 'ere experiencing difficulty and had a high vacancy rate.
'
El
this
However,
hardly constituted a real basis for turning down the application
5/16/60
-8-
before the Board, in view of the other information available regarding
the Proposed bank.
It appearing that the Board was disposed to recommend approval
the application, it was understood that the Division of Examinations,
according to the customary procedure, would communicate with the
A tlanta Reserve Bank to inform it of this fact and to give the Bank an
°PPortunity to furnish any further details concerning the application
it might desire.
Telegram to all Reserve Banks regarding report of "unregulated
2
:2t
&
I.,ere
(Item No. 16).
There had been distributed a memorandum dated
l'
aY 13, 1960, from Miss Hart recommending that the New York Reserve
be given discretion to grant extensions up to 90 days on three
allPlications for extensions of time in which to file Form F. R. 728
114der section 221.3(j) of Regulation U, Loans by Banks for the Purpose
Or Purchasing
or Carrying Registered Stocks, pertaining to loans by
811-ca11ed "unregulated lenders."
A draft letter to this effect was
attached to the memorandum.
Miss Hart commented that the Legal Division was in accord with
aUggastion that all of the Reserve Banks be given the same discretion
to grant extensions of time within which to file Form F. R. 728 as was
15r1)P°sed in the draft letter to the New York Reserve Bank.
It was con-
"tilliolated that each Reserve Bank would then be in a position to grant
reciliests with a reasonable showing of need.
5/16/60
-9There being no objection, unanimous approval was given to
the recommendation of the Legal Division, with the understanding
that all Reserve Banks would be informed by telegram of the Board's
action, and with the additional understanding that no further public
notice of extensions of time be given pursuant to this action.
A
eqVY of the telegram is attached as Item No. 16.
Bank merger bill.
Noting that the Bank Merger Bill (S. 1062)
had been signed by the President on May 13, 1960, Governor Robertson
stated that the Board would be affected by its provisions immediately.
In the first place, it probably would be necessary for the Board to
public notice of applications for mergers now pending.
He said
that this was also the view of the Federal Deposit Insurance Corporation
LII(1 the Comptroller of the Currency regarding applications pending in
Their offices.
Secondly, there was the question whether under the
statUte each of the Federal bank supervisory agencies should seek each
c)therts views solely with respect to the competitive aspects of proposed
niellgers•
It was his view that this would be the correct procedure and
that the Board's request for comments from the Justice Department
84111d also be restricted solely to this aspect.
Mr. Hackley concurred in this view.
He also said that he hoped
be able
to submit a memorandum shortly to the Board regarding the
legislative history of the law, with special reference to standards that
5/16/60
-10-
should be considered by the Board in passing on mergers.
He went
0/1 to say that one requirement of the law was that a form of Notice
Of intent to merge be prescribed by each bank supervisory agency to
be used by banks submitting applications to it.
Mr. Solomon remarked that some work had already been done by
the staff on the preparation of such a form of Notice, which could be
illsesented rather promptly to the Board for its consideration.
In
the same connection, he noted that it would be necessary to prepare
E4 aPplication form for use by banks that planned to merge and that
draft of such application form had already been sent to the Reserve
13411Its for comment.
The latter had been requested to use this blank
"
14 11 a definitive form could be prepared.
He then referred to a
Procedural question that would have to be worked out by the three
BUPa rvisory agencies, namely, how much of each application to merge
Ileeded to be submitted to the other two supervisory agencies and the
41stice Department by the agency to which the application was originally
"
de. He agreed with Governor Robertson and Mr. Hackley that as a
lflaatter of principle only that portion of each application relating to
Corn
,
—wetitive factors needed to be submitted. However, there was the
ractu
al question of separating references to this factor from the
1
108e Y related aspect of convenience and need. In response to a
cIlleation from Governor Robertson, Mr. Solomon said that the Notice
Of
flt to merge to be published by member and nonmember insured
5/16/E
-11-
banks would involve preparation of a new form by the Board
and the
Pederal Deposit Insurance Corporation, whereas the Comptroller's
Office
.w)
uld need only to revise slightly the form it
currently requires for
notice by national banks intending to merge.
At this point Mr. Hexter and Miss Hart withdrew from the meeting.
Annual review by Price Waterhouse & Co. of examination procedures
and techniques.
Governor Shepardson referred to the meeting of April 201
1960) at which consideration had been given to a memoran
dum dated March 28,
1960, from the Division of Examinations regarding the report of Price
Wa
terhouse & Co. dated December 18, 1959, covering the fires 1959
st44 of techniques and procedures used by the Board's examining staff
conducting examina
tions of Federal Reserve Banks. He recalled that
the
Board then authorized expenditure of an amount not to exceed
$7,500
for +1,
-"ve purpose of retaining representatives of an accounting firm to
Etcc°111158nY represen
tatives of the Division of Examinations in making
°n-the-ePot surveys of audits conducted by auditing departments of the
Reserve Banks,
and deferred action on the question whether the review
°It exa
mination procedures and techniques that had been made annually
bY1311blie accounting firms for the past several years should be continu
ed.
111 his Judgment, it would be desirable to continue
the yearly reviews of
eXetti
nation procedures and techniques. Should the Board agree, he would
recom.,
-muend that
it authorize continuation of the annual reviews.
There was unanimous agreement with this suggestion.
5/16/60
-12-
The meeting then adjourned.
Secretary's Notes: On May 12 and 13, 1960,
Governor Shepardson approved on behalf of
the Board the following items:
Memoranda from appropriate individuals concerned recommending
the following actions affecting the Board's staff:
OnMa
12212222122
f
Esther P. Locke, Secretary, Division of Research and Statistics,
„/I1411 $4,790 to $4,940 per annum, effective the date she assumes the
"ev position to which she has been transferred.
Albert C. Bain from $4,940 to $5,090 per annum, with a change in
le from Telegraph Operator to Senior Operator (Tabulation Equipment),
Div
ision of Administrative Services, effective May 15, 1960.
04 ma
.112?-1,),11-11ent
1,e
Carolyn Ruth Cullipher as Clerk-Stenographer in the Division of
$3r!onnel Administration, with basic annual salary at the rate of
'r 55, effective the date she assumes her duties.
-'44:12:_11191122fes
effective May 15, 1960
t1jeElsi-e q. Davis, from $4,325 to $4,490 per annum, with change in
from Statistical Clerk to Statistical Assistant, Division of Research
anA
Qt
atistics.
Of
Gerald F. Millea, Chief, Division Administration Section, Division
-arch and Statistics, from $9,290 to $9,890 per annum.
Resp.
from ..:2,172thY Projector, Economist, Division of Research and Statistics,
4°,0)010 to $9,890 per annum.
5/16/60
-13-
Permissi
on to work additional period
—__:110.2112re beginning maternity leave
,
Midge C. Boteler, Clerk-Stenographer, Division of Personnel Adminlstration, to
work through June 10, 1960, before beginning maternity leave.
Letter to the Federal Reserve Bank of Cleveland (attached Item
.
112.1_11) approving the designation of Donald Ashcraft as special assista
nt
e
xemliner.
Governor Shepardson today approved on behalf
of the Board the following items:
Memorandum dated May 11, 1960, from Mr. Masters, Associate
14).&.ector,
Division of Examinations, recommending that reimbursement in
(
7 amount of $128 be made to Ralph C.
Maurer, Review- Examiner, Division
„„4aminations, for certain expenses incurred by him during March 1960
;Ler assumin
g duties as a member of the Board's staff and prior to
blish
ing a residence in the Washington area.
Letter to the Federal Reserve Bank of New York (attached Item
approving the appointment of seven persons as examiners.
BOARD OF GOVERNORS
1
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 1
V16/60
ADDRESS aFriciat. CORRESPONOENCE
TO THE BOARD
May 16, 1960
Board of
Directors,
Gary Trust
and Savings Bank,
G3474 Indiana.
Gentlemen
:
Pursuant to your request submitted through the Federal
„"e Bank of Chicago, the Board of Governors of the Federal
R,ser
System approves the establishment of a branch at 650 South
!le Street,
IIICIaaxTrust and Savings Bank, provided
Gary,
.!,4 branch
is
,.months
from the date of this
established
441-4ca
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 2
5/16/60
ADDRESS OFFICIAL CORRESPONDENCE
TO TNE 130ARD
May 16, 1960
Board of Directors,
Union Bank and Trust Company,
Grand Rapids, Michigan.
Gentlemen:
Pursuant to your request submitted through
the Federal Reserve Bank of Chicago, the Board of
Governors of the Federal Reserve System extends the
time within which Union Bank and Trust Company may
establish a branch at the southwest corner of Plainfield Avenue, N.E. and Four Mile Road, N.E., Grand
Rapids Township, Kent County, Michigan, to
September 15, 1960, under the authorization contained in the Board's letter dated December 10, 1959.
Very truly yours,
gned) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
'
1 '
4
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, O. C.
Item No. 3
5/16/60
AooRces orriciAL
CORRESPONOCNCE
TO THE EIOARO
May 161 1960
Board of Directors,
Warren Bank,
Warren, Michigan.
Gentlemen;
Pursuant to your request submitted through
the Federal Reserve Bank of Chicago, the Board of
Governors of the Federal Reserve System approves the
establishment of a branch at 27248 Van Dyke Avenue,
Warren, Michigan, by Warren Bank, Warren, Michigan,
provided the branch is established within nine months
from the date of this letter.
Very truly yours,
(Signed) Kenneth A- Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
4001r**4
104(1%41;
4o
OF THE
FEDERAL RESERVE SYSTEM
4440itikk
J)
Item No. 4
5/16/60
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 16, 1960
13ank of America National Trust
and Savings Association,
San Francisco 20, California.
Gentlemen:
The Board of Governors of the Federal Reserve System
thorizes Bank of America National Trust and Savings Association,
2,11 Francisco, California, pursuant to the provisions of Section 25
the Federal Reserve Act, to establish a branch on the Island
l
c3f,140en, Truk Atoll, United States Trust Territory of the Pacific
slands, and to operate and maintain such branch subject to the
Pro
ons of such Section.
r
Unless the branch is actually established and opened
for I..
shluusiness on or before May I, 1961, all rights granted hereby
be deemed to have been abandoned and the authority hereby
64'anted will automatically terminate on that date.
Please advise the Board of Governors, in writing,
thr
h the Federal Reserve Bank of San Francisco, when the branch
°ug
cro
10cad for business, furnishing information as to the exact
cation of the branch.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
e
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS
Item No.
orrictAL
CORRESPONDENCE
TO THE SOAR°
May 16, 1960
Board of Directors,
Union Bank,
Los Angeles, California.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of San Francisco, the Board of
Governors of the Federal Reserve System approves the
establishment of a branch in the vicinity of the intersection of Main and Bronson Streets, Orange, California,
by Union Bank, provided the branch is established within
One year from the date of this letter.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
5
5/16/60
,r
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 6
5/16/60
WASHINGTON 25, D. C.
ADONIESS orriciAL COAFtESPONOENCE
TO THE BOAR()
May 16, 1960
Board of Directors,
The First National Bank
of DeWitt,
DeWitt, Arkansas'
Gentlemen:
The Board of Governors of the Federal Reserve
System has given consideration to your application for
fiduciary powers and grants The First National Bank of
DeWitt authority to act, when not in contravention of
State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates,
assignee, receiver, committee of estates of lunatics,
or in any other fiduciary capacity in which State banks,
trust companies, or other corporations which come into
competition with national banks are permitted to act
under the laws of the State of Arkansas. The exercise
of such rights shall be subject to the provisions of
Section 11(k) of the Federal Reserve Act and Regulation F
of the Board of Governors of the Federal Reserve System.
A formal certificate indicating the fiduciary
Powers that your bank is now authorized to exercise will
be forwarded in due course.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
i 1
,
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
5/16/60
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 16, 1960
Board of Directors,
The First National Bank
of Vinita,
Vinita, Oklahoma.
Gentlemen:
The Board of Governors of the Federal Reserve
SYstem has given consideration to your application for
fiduciary powers and grants The First National Bank of
Vinita authority to act, when not in contravention of
State or local law, as executor, administrator, guardian
of estates, and committee of estates of lunatics. The
exercise of such rights shall be subject to the provisions of Section 11(k) of the Federal Reserve Act and
Regulation F of the Board of Governors of the Federal
Reserve System.
A formal certificate indicating the fiduciary
Powers that your bank is now authorized to exercise will
be forwarded in due course.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Enclosure
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
Item No.
8
5/16/60
OFFICE OF THE CHAIRMAN
May 16, 1960
The Honorable A. Willis Robertson,
Chairman,
Committee on Banking and Currency,
United States Senate,
Washington 25, D. C.
Dear Mr. Chairman:
This is in response to your request of May 5, 1960
for a report on the bill, S. 3472, which would extend until
June 30, 1962, the authority contained in the Defense Production
Act of 1950, as amended.
The only provisions of the Defense Production Act
Of 1950 which relate directly to the responsibilities of the
B°ard are contained in Title III, relating to Governmentaranteed loans for Defense Production under the Boards Regution V. It is understood that the Office of Civil and Defense
Mobilization considers that this authority is useful particularly
10 the procuring agencies as a means of assisting their contractors
:
ln securing working capital and additional equipment needed for
Performance of defense contracts. The Board would, therefore,
liave no objection to an extension of this program for an additional
140 years as provided by the bill.
'
r
Sincerely yours,
(Signed) Wm. McC, Martin, Jr.
Wm. McC. Martin, Jr.
I';74
Item No. 9
TELEGRAM
LEASED WIRE SERVICE
5/16/60
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
May 16, 1960
Patterson - Atlanta
ileurlst April 20, 1960, Board authorizes your Bank to call
. tor bids for construction of proposed 2-floor addition to
Atlanta parking garage on basis of detailed plans and
specifications submitted.
(Signed) Merritt Sherman
SHEBMAN
BOARD OF GOVERNORS
OF THE
Item No. 10
5/16/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 16, 1960
Mr. William H. Braun, Jr.,
Secretary,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mr. Braun:
The Board has read with interest the memorandum enclosed with your letter of April 15 appraising the results of
the "Program for Advanced Education of Personnel" during the
two-year period ended recently.
It is observed that, on the basis of experience
during the past two years, the Bank considers the program
highly successful. The Board has noted the action by the
Board of Directors at its meeting on April 7, 1960, approving continuation of the program on a permanent basis and
extending the participation.
The Board will rely upon normal budget procedures
to keep informed of the cost and activity in the Advanced
Education
Program in the future.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 11
5/16/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO
THE BOARD
May 16, 1960
CONFIDENTIAL (FR
Mr. W. D. Fulton,
P
resident,
Federal
Reserve Bank of Cleveland,
C
leveland 1, Ohio.
Nar Mr. Fulton:
In view of the circumztances outlined in your letter
MaY 6$ 1960, the Board of Governors approves the continuation
the payment of salary to Mr. Munroe T. Smith, Senior Clerk,
',.?„eurities and Treasury Issues Divisions, Pittsburgh Branch, at
;r present rate of $6,682 per annum until such time as the maxannual salary range for Grade 10 applicable to the Pittsburgh
h is increased above the current $6,656 or Mr. Smith is trans"rred to a position classified in a higher grade.
!ranc
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
1 749
Item No. 12
5/16/60
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
UNITED STATES OF AMERICA
WASHINGTON, D. C.
1 In the Matter of the Request of
' OTTO BREMER COMPANY
DOCKET NO,
BHC-55
For Determination under Section 4(c)(6)
of the Bank Holding Company Act of 1956
with respect to Foster County Agency, Inc.'
ORDER
The Otto Bremer Company, St. Paul, Minnesota, a bank
holding company within the meaning of section 2(a) of the Bank
Holding Company Act of 1956 (12 USC 1 1843), has filed a request
fcT a determination by the Board of Governors of the Federal Reserve
SYstsm that a corporation to be formed, the Foster County Agency, Inc.,
and its activities
are of the kind described in section 4(c)(6) of the
Act and section 5(b) of the Board's Regulation Y (12 CFR 222.5(b))„
8° as to make it unnecessary for the prohibitions of section L of
the Act with respect to retention of shares in nonbanking organizati°ns to apply in order to carry out the purposes of the Act.
A hearing having been held pursuant to section 4(c)(6) of
the Act and in accordance with sections 5(b) and 7(a) of the Board's
ileMaticm Y (12 CFR 222.5(b) and 222.7(a)); the Hearing Examiner
havi,
"g filed on April 7, 1960, his Report and Recommended Decision
`;'50
-2-
wherein he recommended that the request with respect to Foster County
Agency, Inc.
be approved; the time for filing with the Board excep-
tions and brief to the recommended decision of the Hearing Examiner
having expired without
any exceptions or brief having been filed;
the Board having given due consideration to all relevant
aspects of
the matter; and all such steps having been taken in accordance with
the Board's Rules of Practice
for Form Hearings (12 CFR 263):
IT IS HEREBY ORDERED, for the reasons set forth in the
accompanying Statement of the Board of this date, that Foster
C°11ntY Agency, Inc. and its activities are determined to be so
Closely related to the business of banking or of managing or controlling banks
as to be a proper incident thereto and as to make
it unnecessary for the prohibitions of section
4 of
the Bank
11°1ding Company Act of 1956 to apply in order to carry out the
PurP°8es of that Act, and, therefore, Applicant's request with
l'esPect to Foster County Agency, Inc.
shall be, and hereby is,
granted; provided that this determination shall be subject to
rev
ocation by the Board if the facts upon which it is based
sh°111d substantially change in such a manner as to make the
reas°hs for such determination no longer applicable.
A viwy r
k3A.
-3Dated at Washington, D. C. this 16th day of May, 1960.
By order of the Board of Governors.
Voting for this action: Chairman Martin and Governors
Szymczak, Robertson, Shepardson, and King.
Absent and not voting:
Governors Balderston and Mills.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
r:
A
Item No.1
5/16/60
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
UNITED STATES OF AMERICA
WASHINGTON, D. C.
In the Matter of the Request of
OTTO BREMER COMPANY
DOCKET NO.
BHC-55
For Determination Under Section 4(c)(6)
of the Bank Holding Company Act of 1956
With respect to Foster County Agency, Inc.'
STATEMENT
Background of the case. - On November 20,
1959, the Otto
Bremer Company (hereafter sometimes called the "Applicant"), a Minnesota corporation with its principal office and place of business
St. Paul, Minnesota, and a bank holding company as defined in
esetion 2(a) of the Bank Holding Company Act of 1956 (the "Act"),
filed with the Board of Governors of the Federal Reserve System
(the "Board") a request for a determination that a proposed nonbang
subsidiary and its activities, the Foster County Agency, Inc.
("Fc'etern), will be of such a nature as to be exempt from the prohibit.ons of
section 4(a) of the Act.
Section 4(a) of the Act makes it unlawful, subject to
cer'tain exceptions, for a bank holding company (1) to acquire direct
indirect ownership or control of voting shares of any company
that 18 not a bank, or (2) to retain direct or indirect ownership
r'
(,)•.)
or control of voting shares of any such.company after two years from the
date of enactment (May 9, 1956) of the Act. Foster is a nonbanking company
which the shareholders of Foster County State Bank ("Bank") propose to form,
and in which the Applicant proposes to acquire stock.
The Applicant's proposed acquisition of stock of Foster escapes
the prohibitions of the Act only if it falls within one of the exceptions
provided by the Act. Section 4(c)(6) of the Act excepts shares of a nonbanking company if two requirements are met: (1) if all the activities
of the company are of a financial, fiduciary, or insurance nature, and
(2) if the Board determines, on the basis of the record made at a hearing,
that all the activities of the company are so closely
related to the business of banking or of managing or controlling banks as to be a proper incident thereto and as to make it unnecessary
for the prohibitions of section
to apply
1/
in order to carry out the purposes of the Act.
Section 5(b) of
The relevant language of the Act is as follows:
, "Sec. 4(a) Except as otherwise provided in this Act, no bank
uolding company shall-0
, "(1) after the date of enactment of this Act acquire direct
11;ijindirect ownership or control of any voting shares of any company
lch is not a bank, or
"(2)after two years from the date of enactment of this Act
shar. retain direct or indirect ownership or control of any voting
es of any company which is not a bank or a bank holding company
*
*
*
*
*
"(o) The prohibitions of this section shall not apply-*
*
*
*
*
"(
6
)
to
shares
activities
company
of
the
all
any
,,.
of which are
of ..,
Iinancial„ fiduciary,
insurance
nature
and
which
or
the Board
due
notice and hearing, by order has determined to be so
tro
c-ioerlelY related to the business of banking or of managing or conit,
:
3.. ng banks as to be a proper incident thereto and as to make
01,47soessary for the prohibitions of this section to apply in
r t0 carry out the purposes of this Act. 0 0 •"
f414
nu
4
the Board's Regulation Y, issued pursuant to the Act, paraphrases the
provisions of the Act, but requires that the activities of a company
must be closely related to the business of banking or of managing or
controlling banks Has conducted by such bank holding company or its
banking subsidiaries."
As required by the statute, the Board, on January 18, 1960,
ordered that a hearing be held on the Applicant's request; and such a
hearing was held at Minneapolis, Minnesota, before a duly designated
Rearing Examiner on February 8, 1960.
Following the conclusion of
that hearing, the Applicant, on March 22, 19602 submitted proposed
findings of fact and conclusions of law. In his Report and Recommended
1)ecision, filed with the Board on April 7, 1960, the Hearing Examiner
l'e"mmended approval of the Applicant's request.
The salient relevant facts with respect to the insurance
bu8inesa to be carried on by Foster are set forth hereafter in this
Statement°
Additional facts with respect to its activities are con-
tained in the Hearing Examiner's Report and Recommended Decision
attached hereto; and, to the extent not inconsistent with this Stateillent) the findings of fact made by the Hearing Examiner are hereby
adopted.
In determining whether or not the pending request should
be
anted, the Board has considered solely the facts embraced in
the,
'ecord of the hearing held in this matter. In addition, however,
th
Board has considered arguments presented in the Applicant's proposed
-4findings of fact and conclusions of law, and the Hearing Examiner's
Report and Recommended Decision.
The Board's findings and conclusions
are hereafter set forth.
Factual summary. - The Foster County State Bank, located in
Carrington
North Dakota, is a State bank. It is proposed that the
stockholders
in Bank will form the new corporation, Foster, which will
have 1,000 shares of stock outstanding, and that they will receive
Shares in proportion to their stockholdings in Bank.
The Applicant
clIns 39 per cent of the stock of Bank, so that it would receive 390
Shares of stock in Foster.
Carrington has a population of approximately 2,500 people,
and there is no other bank in Carrington, although there are two
Other banks in the trade area of approximately 20 surrounding miles.
The
Bank has been in operation for approximately 65 years, and for
Over 50 years has owned and operated an insurance department on its
Premises.
Foster will confine itself to carrying on the same activities
now carried on by this department. The Hearing Examiner found that:
"The insurance business, as a department of the bank, is
actually intermingled with the business of the bank and
all profits resulting therefrom inure to the benefit of
the 1,
..,ank. The bank does not advertise the insurance
agency and does not actively solicit insurance business.
It
maintains the department of insurance for its own
convenience, the convenience of its bank customers, and
,
t_io make certain that collateral on loans are protected
!!'Y insurance when such is necessary. The purchase of
'nsurance is not made a condition for a borrower to
40.btain a loan, except where prudence requires the pro!'ection of property against hazards when such property
le the principal security for a loan, such as in the
icpaTe of automobile loans, and real estate loans where
411dings are the main value of the property offered
:e security. In such cases, the bank will accept inWritten by any other agent, not requiring that
lt be purchased from the bank."
The insurance department of Bank sells fire, automobile,
inland marine, public liability, bond, specific disease, travel
(baggage), plate glass, grain and hail insurance.
During the
period from January 1, 1958, through September 301 1959, 13.37 per
cent of total premiums received derived from insurance written on
collateral held by the bank.
1959, through December
During the period from October 1,
31, 1959, 25
received derived from this source.
per cent of total premiums
Testimony was introduced at
the hearing, and the Hearing Examiner made findings, tending to
Show that a substantial proportion of premiums received during
the former period derived from hail insurance, and that this inwas connected with bank loans to a considerable extent.
However, in the absence of more specific data, the Board makes
110 finding on this point.
During the entire period reviewed,
111°re than 99 per cent of the business of the insurance department
/las done with persons who were also customers of Bank.
All three
Of the Bank's officers are licensed insurance agents, and they
e°nduct the business of the department.
The Hearing Examiner also found that:
"It is a normal and accepted practice for State banks
in the State of North Dakota to offer insurance agency service in conjunction with their banking operation. Both of
the other banks which operate in the same area with Foster
County State Bank have bank-connected insurance agencies.
A recent survey made in the State of North Dakota indicates
that 84 per cent of the State banks therein have connected
insurance agencies, and in communities under 5,000 population, 88 per cent of the State banks and 94 per cent of
the national banks have connected insurance departments."
Preliminary requirement as to nature of activities. - Since
Oster will confine itself, as the insurance department of Bank has
-6done, to selling insurance, it is clear that the preliminary requirement for exemption under section 4(c)(6) of the Act will be met - that
all the activities of the company involved be of a "financial, fiduciary,
or instrance nature."
Relation to banking business. - The statute and the Board's
Regulation Y require that, after passing the preliminary test, the
company's activities must be determined by the Board to be "so closely
related, to the business of banking or
of managing or controlling banks,
as conducted by the Applicant and its banking subsidiaries, as to be a
Proper incident" to such business and as to make it unnecessary for
:the
prohibitions of section 4 of the Act to apply in order to carry
'out the
purposes of the Act. This determination is to be made on the
ib •
asls of all of the relevant facts and circumstances disclosed at a
hear4_
-Lug
held in the case.
The weight which the Board believes should be given these
factors and circumstances was discussed at length in its Statement
in the First
Bank Stock Corporation matter, 1959 Federal Reserve Bulletin 9171 930-933.
For the reasons there set forth, it is the Board's
, iudOient that the direct connection between the activities of Foster
and the
activities of Bank, when considered in the light of the physical,
Pesonnel, and particularly of the historical connection between the
to
is
sufficdently great as to be given strong weight, along with
°ther
pertinent factors, as suggesting the requisite close relationship
required by the statute.
The degree to which common customers make
114 of facilities offered by both is a cumulative factor entitled to
bee° sidered in this respect.
Area practice in North Dakota, under
t
_7which banks in these localities offer insurance services of the kind
Which has been provided by the insurance department of Bank and will
be provided by Foster, is a weighty factor, and in the opinion of the
Board, the enactment of the Bank Holding Company Act does not diminish
the weight to be accorded such area practice.
Closeness and propriety of relationship. - On the basis of
the record and particularly the facts heretofore stated, it is the
Board's view that the activities of Foster will bear a direct and
substantial
relationship to the business of Bank. For the reasons
set forth in the Board's Statement in the First Bank Stock
Corporation matter, cited above, the Board believes that the relation of
Poster's activities to the business of Applicant's subsidiary, the
oster County State Bank, will not be inconsistent with the purposes
of the Act.
Conclusion. - After carefully considering all the circum"ances - historical, physical, and personnel relationship, the extent
Of
direct connection between the proposed activities of Foster and the
activities of Bank, the degree to which common customers will be enjoyed
135
'both
and particularly the sanction given by long-established prac-
tice in North Dakota to the operation of bank-connected insurance agencies
the U.
Auoard has determined that the activities of Foster County Agency, Inc.
/1111 be so
closely related to the business of banking as conducted by the
Poster
County State Bank as to be a proper incident thereto and as to
Inake it
unnecessary for the prohibitions of section
in or,
,Aer to carry out the purposes of the Act.
4
of the Act to apply
-8Accordingly, for the reasons herein set forth, it is the
Board's judgment that the requested exemption with respect to Foster
County Agency, Inc. should be granted; and IT IS SO ORDERED.
As
indicated in the Board's Order, its approval of this
request is based solely on the facts disclosed by the record; and
if the facts should substantially change in the future in such manner
as to make
the reasons for the Board's conclusion no longer applicable,
the statutory exemption resulting from the Board's present determination would, of course, cease to obtain.
May 16,1.960
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. O. C.
Item No. 14
5/16/60
ADDRESS orriciAL CORRESPONDENCE
TO THE BOARD
May 16, 1960
Mr. Frederick C. Rieck,
Assistant Vice President,
The Philadelphia National Bank,
Philadelphia 1, Pennsylvania.
Dear Mr. Rieck:
The Board of Governors has approved the Articles
Association and the Organization Certificate, dated
Pril 20) 1960, of Philadelphia International Investment
,
"orporation, and there is enclosed a preliminary permit
authorizing that Corporation to exercise such of the powers
conferred by Section 25(a) of the Federal Reserve Act as
incidental and preliminary to its organization. The
poration may not exercise any of the other powers cont‘erred by
Section 25(a) until it has received a final permit
M the Board authorizing it generally to commence business.
:Lne steps which must be taken prior to issuance of a final
Permit are enumerated in Section 3(c) of the Board's Regulation K.
°
fir
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
flel°81.1re
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 15
5/16/60
WASHINGTON
May 16, 1960
Preliminary Permit
1T IS HEREBY CERTIFIED that the Board of Governors of
the
by
Federal Reserve System, pursuant to authority vested in it
Section 25(a) of the Federal Reserve Act, as amended, has this
4gW approved the Articles of Association and Organization Certificate, dated April 20, 1960, of PHILADELPHIA INTERNATIONAL
Ifte,TMENT CORPORATION duly filed with said Board of Governors,
and that PHILADELPHIA INTERNATIONAL INVESTMENT CORPORATION is
au
thorized to exercise such of the powers conferred upon it by
eaid Section
25(a) as are incidental and preliminary to its
°qanization pending the issuance by the Board of Governors of
the Federal Reserve System of a final permit generally to commence
1°48i-flea8 in accordance with the provisions of said Section 25(a)
and the
rules and regulations of the Board of Governors of the
eclel'al Reserve System issued pursuant thereto.
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
BY ( gned) Kenneth A. Kenyon
Assistant Secretary
TELEGRAM
LEASED WIRE SERVICE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
Item No. 16
5/16/60
May 16, 1960
IN'esidents, all Federal Reserve Banks
Board today authorized granting extensions of time for filing Form FR 728
under section 221.3(j) of Regulation U of up to 90 days from May 15,
1960, in the Federal Reserve Bank's discretion in cases where the facts
Your judgment warrant granting the extension. No further public
notice is deemed necessary.
(Signed) Merritt Sherman
SHERMAN
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No.
5/16160
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 13, 1960
Mr. G. T. Quast„ Chief Examiner,
Federal Reserve Bank of Cleveland,
Cleveland 10 Ohio,
Dear Mr. Quast:
In accordance with the request contained
in your letter of May 5, 1960, the Board approves
the designation of Donald Ashcraft as a special
assistant examiner for the Federal Reserve Bank of
Cleveland for the purpose of participating in examinations of member banks. The authorization heretofore given your Bank to designate Mr. Ashcraft as a
special assistant examiner on a restricted basis is
hereby canceled.
Appropriate notations have been made on
our records of the names to be deleted from the list
Of special assistant examiners.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 18
5/16/60
ADORES* OfFICIAL CORREIHOONOICNCE
TO THE SOAR°
May 161 1960
11r. Howard D. Crosse, Vice President,
Pederal Reserve Bank of New York,
New York 45, New York.
Dear Mr.
Crosse:
In accordance with the request contained in your
letter of May 9, 1960, the Board approves the appointment
;I' the following named employees as examiners for the
ederal Reserve Bank of New York, effective May 5, 1960:
David W. Bouton
John J. Cooney
John B. Harrison
A. John Maher
Richard J. Pfleging
Donald F. Rice
Harold J. Spony
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER