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Minutes for
To:
Members of the Board
From:
Office of the Secretary
May 21, 1965.
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. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Minutes of the Board of Governors of the Federal Reserve System
on Friday, May 21, 1965.
PRESENT:
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Robertson
Daane
Maisel
Sherman, Secretary
Kenyon, Assistant Secretary
Broida, Assistant Secretary
Noyes, Adviser to the Board
Molony, Assistant to the Board
Spencer, General Assistant, Office of the
Secretary
Mr. Morgan, Staff Assistant, Board Members' Offices
Mr. Furth, Consultant
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Messrs. Brill, Holland, Koch, Partee, Williams,
Axilrod, Ettin, Gramley, and Keir of the
Division of Research and Statistics
Messrs. Hersey, Katz, Sammons, Reynolds, and Baker
of the Division of International Finance
Mr. Geng, Manager, Securities Department, Federal
Reserve Bank of New York
Economic and money market review.
Mr. Williams reviewed recent
trends in various sectors of the domestic economy.
Messrs. Ettin and
lrod then summarized banking and money market developments, relating
Portions of their remarks to (1) distributed tables affording perspective
on the money market and bank reserve utilization and (2) charts showing
movements in the level of time and savings deposits in relation to various
Other financial factors since 1953.
4
Mr. Baker concluded the review with
report on foreign exchange market developments and related matters.
Mr. Geng, Mr. Furth, and all members of the Board's staff who
had
been present except Messrs. Sherman, Kenyon, Molony, Sammons, and
Spencer then withdrew from the meeting and the following entered the room:
5/21/65
-2Mr. Hackley, General Counsel
Mr. Solomon, Director, Division of Examinations
Mr. Shay, Assistant General Counsel
Mr. Leavitt, Assistant Director, Division of Examinations
Miss Hart and Mr. Young, Senior Attorneys, Legal Division
Mr. Egertson, Supervisory Review Examiner, Division of
Examinations
Mr. Poundstone, Review Examiner, Division of Examinations
Discount rates.
The establishment without change by the Federal
Reserve Banks of New York, Philadelphia, Chicago, and San Francisco on
MaY 20, 1965, of the rates on discounts and advances in their existing
schedules was approved unanimously, with the understanding that appropriate
advice would be sent to those Banks.
Distributed items.
The following items, copies of which are
a ttached to these minutes under the respective item numbers indicated, were
..T..EL227
.111 unanimously:
Item No.
Letter to United California Bank, Los Angeles, California,
aPProving the establishment of a branch at 609 South Grand
Avenue in connection with the acquisition of assets and
mortgage servicing contracts of Insurance Funds Mortgage
Company.
1
!..etter to Chase Manhattan Overseas Banking Corporation,
New York, New York, granting consent to purchase shares
°f a nominee corporation to be organized under the laws
°f Singapore, Malaysia.
2
Report on competitive factors (Albany-Schenectady, New York).
Unanimous approval was given to the transmittal of a report to the Comptroller of the Currency on the competitive factors involved in the proposed
5/21/65
-3-
merger of The Citizens' Trust Company of Schenectady, N. Y., Schenectady,
New York, into National Commercial Bank and Trust Company, Albany, New
York.
The conclusion read as follows:
The proposed merger of The Citizens' Trust Company of
Schenectady into National Commercial Bank and Trust Company,
Albany, would eliminate the competition existing between the
two banks, and would further strengthen the dominant position
of National Comutercial Bank and Trust Company in the AlbanySchenectady area. The effect of the proposal on competition
would be adverse.
Proposed amendment of National Housing Act (Item No. 3).
There
had been distributed a memorandum from the Legal Division dated May 19,
1965, with regard to a request from the Bureau of the Budget for the
Board's views on a revised draft of bill submitted by the Federal Home
Loan Bank Board "to amend section 408 of the National Housing Act, as
amended, to provide for the regulation of savings and loan holding companies and subsidiary companies."
The memorandum noted that the Board had reported to the Budget
Bureau on an earlier draft of the same bill, indicating in a letter of
August 17, 1964, that while certain aspects of the draft might merit further study, the Board favored enactment of the proposed legislation.
Since
the present bill, which would provide for regulation of existing holding
e°mPanies of savings and loan associations and continue a "freeze" first
imposed in 1959, differed only in minor respects from the earlier proposal,
it was recommended that a letter phrased in generally favorable terms be
sent in response to the Budget Bureau's request.
tqas
attached to the memorandum.
A draft of such a letter
5/21/65
-4Following summarization by Miss Hart of the information presented
in the May 19 memorandum, approval was given to the transmittal of the
letter, Governor Maisel abstaining.
A copy of the letter is attached as
Item No. 3.
Application of Bank of Wood County Company (Items 4 and 5).
Pursuant to the decision at the meeting on May 17, 1965, there had been
d istributed drafts of an order and a statement reflecting the Board's
aPproval of the application of The Bank of Wood County Company, Bowling
Green, Ohio, to merge with The First National Bank of North Baltimore,
North Baltimore, Ohio.
The issuance of the order and statement was authorized.
Copies
of the documents, as issued, are attached as Items 4 and 5.
The meeting then adjourned.
Secretary's Note: Acting in the absence of
Governor Shepardson, Governor Robertson today
approved on behalf of the Board memoranda
recommending the following actions relating
to the Board's staff:
William S. Davis as Economist, Division of Research and Statistics,
"a temporary basis from about June 15 to September 15, 1965, with basic
annual salary at the rate of $9,830.
Bernard Shull as Senior Economist, Division of Research and
Sta tistics, with basic annual salary at the rate of $18,740, effective
the date of entrance upon duty.
0,
Patricia Louise Fike as Operator (Tabulating Equipment), Division
el, Data Processing, with basic annual salary at the rate of $4,480,
tfeetive the date of entrance upon duty.
5/21/65
-5-
Salary increaseffective May 23, 1965
Lynda Fein, Clerk-Typist, Division of Research and Statistics, from
$3,680 to $4,005 per annum.
William N. Huff, Economist, Division of Research and Statistics,
from $7,465 to $7,710 per annum.
from
Mary Janice Krummack, Economist, Division of Research and Statistics
$8,650 to $8,945 per annum.
Kathryn E. Ridgway, Statistical Clerk, Division of Research and
S tatistics, from $5,530 to $5,680 per annum.
Dorothy M. Vereb, Statistical Clerk, Division of Bank Operations,
from $4,630 to $4,780 per annum.
Frank P. Herigstad, Assistant Federal Reserve Examiner, Division of
4aminations, from $6,250 to $6,450 per annum.
Allen E. Simmons, Mail Clerk, Division of Administrative Services,
from $3,680 to $3,805 per annum.
Charlie H. Ward, Laborer, Division of Administrative Services, from
$4,420 to $4,514 per annum, with a change in title to Lead Laborer.
Robert M. Steinberg, Economist, Division of Data Processing, from
$10,960 to $11,315 per annum.
t, Dorothy L. Saunders, from the position of Assistant Supervisor to
tne position of Supervisor, Stenographic Section, Office of the SecrearY, with no change in basic annual salary at the rate of $6,245,
effective
May 23, 1965.
Virginia M. Spivey, from the position of Secretary to the position
;1 Assistant Supervisor, Stenographic Section, Office of the Secretary,
m th no change in basic annual salary at the rate of $5,330, effective
aY 23, 1965.
Secretary
BOARD OF GOVERNORS
Item No. 1
5/21/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORFICSPONDIENCC
TO THC BOARD
May 21, 1965
Board of Directors,
United California Bank,
Los Angeles, California.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by United California Bank,
Los Angeles, California, of a branch at 609 South Grand
Avenue, Los Angeles, California, in connection with the.
acquisition of assets and mortgage servicing contracts of
Insurance Funds Mortgage Company, 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 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.)
BOARD OF GOVERNORS
OF THE
Item No. 2
5/21/65
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 21, 1965.
Chase Manhattan Overseas Banking Corporation,
1 Chase Manhattan Plaza,
New York 5, New York.
Gentlemen:
In accordance with the request and on the basis of the
information furnished in your letter of May 7, 1965, transmitted
through the Federal Reserve Bank of New York, the Board of Governors
grants its consent to the purchase by your Corporation of all the
Shares of a nominee corporation to be organized under the laws of
Singapore, Malaysia, at a cost of approximately US$326.
It is understood that the nominee corporation is to be
organized and maintained solely for the purpose of acting as nominee
for the registration of securities acquired or held by the Singapore
branch of The Chase Manhattan Bank for the account of its customers;
that all shares of the nominee corporation are to be owned by your
Corporation, except such shares as may be held by individuals in
Order to meet Singapore legal requirements as to number of shareholders and as to qualifying shares for directors, and all such
Shares would be held in trust for or assigned to your Corporation
under appropriate instruments of transfer; and that it is anticipated that the authorized capital of the nominee corporation would
not exceed Malaysian $1,000 (equivalent to approximately US$326) and
that the paid-in capital would not exceed Malaysian $100 (equivalent
to approximately US$33.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 3
5/21/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 21, 1965.
Mr. Phillip S. Hughes, Assistant Director for
Legislative Reference,
Bureau of the Budget,
20503
Washington, D C.
Dear Mr. Hughes:
This is in response to your communication of May 14, 1965,
requesting the Board's views on a fresh draft of a bill prepared by the
Federal Home Loan Bank Board ("FHLBB") "to amend section 408 of the
National Housing Act, as amended, to provide for the regulation of
savings and loan holding companies and subsidiary companies."
In its letter of August 17, 1964, the Board reported to the
Bureau of the Budget on an earlier draft of the same bill that, while
certain aspects of the draft might merit further study, "the Board in
general favors enactment of legislation to provide for supervision and
regulation of existing holding companies of savings and loan companies
and believes the proposed legislation would be helpful in continuing to
11
Preserve the local community character of savings and loan associations.
Since the present draft differs only in minor respects from the earlier
"e, most of the Board's comments, including this conclusion, would
"ntinue to apply to the bill before it.
Two additional comments may be pertinent. As the Board
l nderstands the scheme of the proposed legislation, an organization which
!
18 a holding company under such a statute would be forbidden to acquire
m°re than five per cent of the shares in any company, unless that company
restricted its business activities to those permitted a "subsidiary" under
subsection 2(c). However, a company would not actually be a "subsidiary",
Inder subsection 2(a)(2)(B) unless at least one of four tests were met,
‘1) 25 per cent of its shares were controlled, (2) the election or
!ppointment of a majority of its directors or trustees were controlled,
zk3i) the controlling person or company was a general partner in the subor (4) the controlling person or company had contributed more
411 25 per cent of the capital of the subsidiary.
Unless a company is a subsidiary, so defined, of a holding
,.—PanY, certain activities, such as "upstream lending" are not forbidden
and the FHLBB has no authority, under subsection (d)(6) to approve
Corn
Mr. Phillip S. Hughes
-2-
or disapprove certain types of agreement between the company and a
controlled savings and loan association, although these agreements are
of a kind which the FHLBB clearly considers might be detrimental to such
an association. Since a holding company could have effective control of
another company without meeting any of the four tests specified, there
appears to be a danger that some of the abuses against which the draft
13111 is directed might occur without violating the statute.
An additional test of control, "exercises a controlling
influence over the management or policies of such other company", which
would have afforded an instrument for meeting this problem, appeared in
the draft bill submitted to the Board last year, but has been dropped
from the present bill. It appears to the Board that some language of
this kind might helpfully be reinserted in the new draft.
A second, relatively minor comment relates to a possible
1,1TIbiguity in subsection (4)(1)(A) of the draft bill, which forbids a
.°1ding company "To acquire the control of an insured or uninsured
Institution or to retain the control of such institution". While it is
nderstood that this language is designed only to forbid a holding company
retain control of an institution that has been acquired in violation of
e subsection, the words could be read, literally, to require all holding
L'°mPanies to divest control of all institutions, whenever acquired. To
ret this difficulty, the words "acquired in violation of this subsection"
ght be inserted after "control of such institution".
In summary, the Board continues to be of the view expressed
uin its letter of August 20, 1959, to the Chairman of the Committee on
inking and Currency of the Senate, that having "endorsed proposals that
07d to the enactment in 1956 of legislation to regulate holding companies
re commercial banks" it would in principle "favor similar legislation with
jusPect to holding companies of savings and loan associations if in the
judgment of Congress such companies have developed to such an extent as to
stifY regulation."
V
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Item No. 4
5/21/65
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS
or
THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
1
In the Matter of the Application of
TRE BANK OF WOOD COUNTY COMPANY
for approval of
merger with
The First National Bank of North Baltimore'
ORDER APPROVING MERGER OF BANKS
There has come before the Board of Governors, pursuant to the
Dank Merger Act of 1960 (12 U.S.C. 1828(c))
, an application by The
13411k of Wood County Company, Bowling Green, Ohio, a State member bank
Of the Federal
Reserve System, for the Board's prior approval of the
raerger of that bank and The First National Bank of North Baltimore,
Notth Baltimor
e, Ohio, under the charter and title of The Bank of
Wood County Company. As an incident to the merger, the sole office
Of
'"e First National Bank of North Baltimore would become a branch of
the tesulting bank. Notice of the proposed merger, in form approved
by
the Board, has been publishe pursuant
d
to said Act.
Upon consideration of all relevant material in the light of
the factors set forth
in said Act, including reports furnished by the
Com,—
"-roller of the Currency, the Federal Deposit Insurance Corporation,
-2and the Attorney General on the competitive factors involved in
the proposed merger,
IT IS HEREBY ORDERED, for the reasons set forth in the
Board's Statement of this date, that said application be and hereby
iS approved, provided that said merger shall not be consummated
(a) within seven calendar days after the date of this Order or
(1)) later than three months after said date.
Dated at Washington, D. C., this 21st day of May, 1965.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Robertson, and Maisel.
Absent and not voting:
Mitchell, and Deane.
Governors Shepardson,
iznec)
Mezr tt Sherman
Merritt Sherman,
Secretary.
Item No. 5
5/21/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION OF THE BANK OF WOOD COUNTY COMPANY
FOR APPROVAL OF MERGER WITH
THE FIRST NATIONAL BANK OF NORTH BALTIMORE
STATEMENT
The Bank of Wood County Company, Bowling Green, Ohio ("Bank
oWood County"), with total deposits of $23.4 million, has applied,
illirsuant to the Bank Merger Act of 1960 (12 U.S.C. 1828(c)), for the
4ardl
Prior approval of the merger of that bank and The First
1144°11a1 Bank of North Baltimore, North Baltimore, Ohio ("First
latL°nal"), which has total deposits of $4.5 millicn.lj The banks
14(411d
merge under the charter and title of Bank of Wood County, which
ie•a State member bank of the Federal Reserve System.
As an incident
to t• he merger, the sole office of First National would become a branch
13
° ar• lk of Wood County, increasing the number of its offices from three
to fo
Under the law, the Board is required to consider, as to each
() t• he bank's involved, (1) its financial history and condition, (2) the
441114eY of its capital structure, (3) its future earnings prospects,
(4° the gerral character of its management, (5) whether its corporate
are consistent with the purposes of 12 U.S.C., Ch. 16 (the
° it figures are as of December 31, 1964.
""..Ar^-i
-2-
Federal Deposit Insurance Act), (6) the convenience and needs of the
"nZunity to be served, and (7) the effect of the transaction on
%Petition (including any tendency toward monopoly).
The Board may
tIcIt approve the transaction unless, after considering all of these
fact°", it finds the transaction to be in the public interest.
Banking factors. - The financial histories of Bank of Wood
C°t111tY and First National are satisfactory and each bank has a sound
asset condition.
Each bank also has a satisfactory earnings record
favorable future earnings prospects.
Management of both banks
is satisfactory. First National's capital position is adequate.
Cons
uzmation of the transaction would bring needed improvement in
the
caPital position of Bank of Wood County, and the resulting bank
'"Lad
have capable management, a sound asset condition, and good
fqtire
earnings prospects.
There is no indication that the corporate powers of the banks
'Or would
be, inconsistent with the purposes of 12 U.S.C., Ch. 16.
Convenience and needs of the communities. - Bowling Green,
°hi°, with
a 1960 population of about 14,000, is the seat of Wood
C(1411tY and is located in the northwestern section of the State,
4111)tcl imately 20 miles south of downtown Toledo, 27 miles northwest
o
and 26 miles north of Findlay, the closest sizable cities.
ec°n°mY of Bowling Green is supported by both diversified industry
ti(1
e%riculture.
North Baltimore, with a 1960 population of about 3,000, is
1°cated
111 the south-central portion of Wood County, 14 miles south of
-3-
4141ing Green, 12 miles north of Findlay, and 13 miles west of Fostoria.
Its economy is supported primarily by agriculture.
Grain farming and livestock feeding are the basic agricultural
acti:vities in Wood County.
The expansion of these activities in recent
Years is
evidenced by a marked increase in the size of farms as well as
the
number of livestock of individual feeders. These operations require
not.
ha
credit than can be supplied by small rural banks.
First National
not been able to accommodate several of its customers in recent
Years
(Including 10 farm customers) due to the bank's low lending limit.
'erger would result in a bank with greater resources which could
'lett
"serve the banking needs and convenience of Wood County, partictiler
lY in the North Baltimore area.
Competition. - The service area'—
of Bank of Wood County
dOes
"0t overlap that of First National and there appears to be only
sitilt competition between the two banks, due in part to the fact that
41311k with deposits of about $12 million is located midway between
D
ualtimore and Bowling Green.
The service area of the resulting bank would be a largely
1 l'ea extending from Toledo, with a population of over 318,000,
4ckth „
-eProximately to Findlay, with a population of 30,000. The
ing bank through its office in North Baltimore would compete more
411
lY and effectively with two Findlay banks and two Fostoria banks,
which have deposits ranging from $12 to $41 million.
It is not
that the proposed merger would adversely affect the present
0 it
:
rea from which a bank obtains 75 per cent or more of its
of individuals, partnerships, and corporations.
719
-4-
e°111Petitors of Bank of Wood County or a small bank in North Baltimore
presently competes with First National.
-
Numerous alternate sources
te banking services would remain available in Wood County.
Summary. - No significant competition would be eliminated by
the
Proposed merger, while banking competition in the North Baltimore
alc'ea should be stimulated without any adverse effect on other banks.
Ilank customers in the North Baltimore area would have ready access to
a ilank with sufficient resources to supply much of the credit required
by an
expanding agricultural economy.
Accordingly, the Board finds that the proposed merger would
be
4
'`14.
1.14Y 21
the public interest.
1965.
@FedFRASER