The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
At the request of Governor Mills, the attached
minutes of the meeting of the Board of Governors of
the Federal Reserve System on May 27, 1963, which
you have previously initialed, have been amended
beginning at the top of page
7 to provide a more
complete statement of his position regarding the
proposed deposit insurance bill.
If you approve these minutes as amended, please
initial below.
Chairman Martin
Minutes for
To:
Members of the Board
From:
Office of the Secretary
Yay 27, 1963
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.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
Minutes of the Board of Governors of the Federal Reserve
SYstem on Monday, May 27, 1963.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
King
Mitchell
Mr. Sherman, Secretary
Mr. Young, Adviser to the Board and Director,
Division of International Finance
Mr. Fauver, Assistant to the Board
Mt. Landry, Assistant to the Secretary
Mr. Spencer, General Assistant, Office of the
Secretary
Messrs. Noyes, Koch, Garfield, Williams, Dembitz,
Solomon, Broida, Gehman, Partee, Trueblood,
and Wernick of the Division of Research and
Statistics
Messrs. Furth, Hersey, Sammons, Katz, Gemmill,
Irvine, Klein, and Swerling of the Division
of International Finance
Messrs. Macdonald and Knap, Banking Department,
Bank for International Settlements
Economic review.
The Division of International Finance presented
a review of international financial developments, at the conclusion of
vhich Mr. Furth reported on the annual International Monetary Fund-United
States consultation meetings held recently.
Following Mr. Furth's report,
the Division of Research and Statistics reviewed domestic economic and
financial developments.
After discussion based upon these reports, Messrs. Macdonald and
KnaP and all members of the Board's staff withdrew except Messrs. Sherman,
1.°11ng, Fauver, Noyes, and Spencer, and the following entered the room:
-2-
5/27/63
Cardon, Legislative Counsel
Hackley, General Counsel
Farrell, Director, Division of Bank Operations
Solomon, Director, Division of Examinations
Johnson, Director, Division of Personnel
Administration
Mr. Hexter, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Daniels, Assistant Director, Division of Bank
Operations
Mr. Leavitt, Assistant Director, Division of
Examinations
Miss Hart, Senior Attorney, Legal Division
Mr. Young, Senior Attorney, Legal Division
Mr.
Mr.
Mr.
Mr.
Mr.
Circulated or distributed items.
The following items, copies of
Which are attached to these minutes under the respective item numbers
indicated, were approved unanimously:
Item No.
Telegram to the Federal Reserve Bank of Chicago
(1) interposing no objection to the Bank's
advertising for bids for plumbing renovations
in the old section of the Chicago head office
building, and (2) authorizing an expenditure of
about $260,000, the estimated cost of the renovation project.
1
Letter to Hillside National Bank of Dallas, Dallas,
Texas, granting its request for permission to
Maintain reduced reserves.
2
Letter to the Budget Bureau recommending approval
H. R. 5389, an enrolled bill "To repeal certain
legislation relating to the purchase of silver, and
for other purposes."
3
Letter to the Federal Reserve Bank of Kansas City
aPProving the payment of salaries to certain officers
at the head office and Omaha Branch at rates fixed
by the Bank's Board of Directors.
4
With respect to Item No.
4, Mr. Johnson pointed out that John N.
Reserve Bank, would be
Blair) Assistant Cashier at the Kansas City
-3-
5/27/63
assuming additional responsibilities as officer immediately in charge
of the check and noncash collection functions without change in title
or salary group classification.
While such a determination was the
Primary responsibility of the Board of Directors of the Bank, at the
Other Reserve Banks the officer in charge of check collection activities
had a title above the Assistant Cashier level and was classified in a
higher salary group.
Following discussion, it was understood that no reference to
this situation would be made in the letter to the Kansas City Bank,
but that Governor Mitchell would discuss the matter with President Clay
while the latter was in Washington for tomorrow's meeting of the Federal
Open Market Committee.
Secretary's Note: Governor Mitchell subsequently discussed the matter with President
Clay.
Application of Sussex County Trust Company.
There had been
distributed under date of May 23, 1963, drafts of a proposed order and
suPporting statement reflecting approval by majority vote on May 16 of
the application by Sussex County Trust Company, Franklin, New Jersey,
to merge with The Farmers National Bank of Sussex, Sussex, New Jersey.
(The title of the resulting bank would be The Bank of Sussex County.)
Governor Mitchell described changes in the statement that he
felt would be helpful, indicating that he considered it difficult, from
the statement as drafted, to rationalize the Board's position on this
case as compared with its denial of certain other applications.
5/27/63
Accordingly it was understood that the statement would be redrafted
With these suggestions in mind and that the revised draft would be brought
back to the Board for consideration.
Mr. Young (Adviser to the Board) withdrew from the meeting at this
Point.
Application of Chemical Bank New York Trust Company.
There had
been distributed under date of May 24, 1963, drafts of a proposed order
and supporting statement reflecting approval by majority vote on May 22
Of the application by Chemical Bank New York Trust Company, New York,
New York, to acquire the assets and assume the deposit liabilities of
Bank of Rockville Centre Trust Company, Rockville Centre, New York.
After a discussion of the proposed statement, the staff was
requested to prepare a revised draft based upon certain changes that
had been suggested by members of the Board.
It was understood that the
Board would meet today at 2:30 p.m. to consider the revised draft.
Messrs. Shay, Leavitt, and Young (Legal) and Miss Hart then withdrew from the meeting.
Deposit insurance bill (Item No. 5).
At the meeting on May 23,
1963, Mr. Hackley reported receipt of a request from the Bureau of the
Budget for the Board's views within twenty-four hours with respect to
a revised draft of bill to increase deposit insurance coverage and for
Other purposes. (A preliminary draft of bill on this subject had been
considered at the meetings on May 15 and 16, 1963, in response to a request
from the Budget Bureau for the Board's views.) Following discussion
5/27/63
-5-
on May 23, it had been understood that the Budget Bureau would be
informed that the Board did not wish to express any final views with
respect to the revised draft bill, within the period of time indicated,
because of insufficient opportunity to study its various provisions.
There had now been distributed a memorandum from Mr. Hackley
dated May 24, 1963, in which it was noted that in its letter to the
Budget Bureau of May 16, 1963, the Board took the position that the
Preliminary draft bill would be acceptable in principle only if modified
to include provisions extending reserve requirements against both time
and demand deposits to all commercial banks and also provisions for
revising the existing structure of reserve requirements.
With respect
to the revised draft, it was pointed out that--like the previous draft-it included provisions increasing deposit and share account insurance
coverage from $10,000 to $15,000; placed the authority of the Board of
Governors and the Federal Deposit Insurance Corporation to regulate
deposit interest rates on a "standby" basis, with added provisions for
flexibility, and vested similar authority over dividend rates on share
accounts in the Federal Home Loan Bank Board; made conflict-of-interest
Provisions of a criminal nature now applicable to insured banks also applicable to members of the Home Loan Bank System; and made certain existing
non-criminal conflict-of-interest provisions now applicable only to member
banks (including those relating to loans to affiliates, loans to executive
°fficers, and interlocking directorates with securities companies) applicable also to nonmember insured banks.
The principal substantive differences between the revised draft
and the draft bill previously considered were that the revised draft
5/27/63
-6-
omitted provisions (1) making reserve requirements against time and
savings deposits applicable to nonmember insured banks, (2) affording
nonmember insured banks access to discounts by Federal Reserve Banks,
and (3) requiring the maintenance of a cash reserve by members of the
Home Loan Bank System.
The "liquidity" provisions of the previous draft
bill would be retained in somewhat different form; the earlier draft
would have authorized the Board to prescribe such liquidity requirements
for all insured banks, but the revised draft would vest such authority
in the Comptroller of the Currency, the Board, and the Federal Deposit
Insurance Corporation with respect to the classes of banks under their
respective supervision.
The "liquidity" provisions of the bill were
directed at the soundness of insured institutions and were not intended
as monetary policy provisions.
With respect to the Budget Bureau's request for the views of the
Board on the revised draft, three possible alternatives were suggested
for
consideration in making a reply:
1. The Board could oppose the revised draft of bill
on the same ground as before; that is, solely because it
did not contain provisions extending reserve requirements
to all banks and revising the structure of reserve requirements.
2. The Board could interpose no objection in principle
to the revised draft, reserving the right to comment later
on detailed provisions of the bill.
3. The Board could indicate that the revised draft
would be acceptable in principle if the provisions relating
to liquidity requirements for insured banks were omitted.
5/27/63
-7In discussion, Governor Mills stated that he had not been so
concerned in many years about any measure that had been proposed for the
Board's consideration.
He was strongly of the view that the Board should
give no support to it.
It was hastily improvised legislation, and he was
sure that no one could trace through all of its ramifications.
It would,
he felt, be strongly resisted on the part of savings and loan associations
and on the part of conmercial banks.
While the liquidity provisions would
be applicable to both, it could be said that they were proposed for
banks
as a gesture to please the savings and loans.
They could be used as an
alternative instrument of monetary policy if the authorities so elected.
In a way this would be desirable in some respects, but this involved a
very difficult subject.
Allowing supervisory authorities to prescribe
such liquidity requirements could lead to a great deal of criticism.
Further, he objected strongly to the provisions of the proposed legislation
that would place authority over maximum permissible rates of interest on
time and savings deposits on a standby basis.
Present
4
The experience with the
per cent maximum was revealed by reading the earnings figures
Of member banks of the Federal Reserve System for 1962.
In the eyes of
aanY people, the higher permissive rate had produced a great deal of harm
rather than proving useful.
In sum, for the Board to give official
approval to a measure such as this proposal, with only brief consideration
'its various provisions, would not seem to Governor Mills to show an
(4
exercise of good judgment.
1
5/27/63
110-41441C)
rl
-8-
There followed a general review of the provisions of the revised
draft bill, and of the response that might be made to the Budget Bureau.
At the conclusion of this discussion, it was agreed that the Budget
Bureau should be advised that the revised draft bill would be acceptable
in principle to the Board only if it were modified to omit provisions
relating to liquidity requirements for insured banks.
Governor Mills
dissented, for reasons indicated by his comments, from the decision to
advise the Budget Bureau in such manner.
A copy of the letter sent to
the Bureau of the Budget is attached as Item No.
5.
Request for examination reports (Item No. 6). In a letter dated
14aY 10, 1963, Congressman Patman, Chairman of the Committee on Banking
and Currency of the House of Representatives, requested for review by
the staff of the Committee copies of the reports of examination of
certain Federal Reserve Banks for the years 1960, 1961, and 1962.
In
accordance with this request, copies of the reports covering examinations
Of
the New York, Richmond, Chicago, and San Francisco Banks were sent
to Chairman Patman on May 14.
A request now had been received for the reports of examination
of the other eight Federal Reserve Banks for the years indicated, and
Lt was understood that such reports would be furnished, with a transalittal letter in the form attached as Item No.
6.
The meeting then recessed and reconvened at 2:30 p.m. with the
t°110wing in attendance:
-9-
5/27/63
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
King
Mitchell
Sherman, Secretary
Fauver, Assistant to the Board
Hackley, General Counsel
Solomon, Director, Division of
Examinations
Mr. Shay, Assistant General Counsel
Mr. Leavitt, Assistant Director, Division
of Examinations
Mr. Spencer, General Assistant, Office of
the Secretary
Miss Hart, Senior Attorney, Legal Division
Mr. Young, Senior Attorney, Legal Division
Mr.
Mr.
Mr.
Mr.
.A52plication of Chemical Bank New York Trust Company (Items
6111.21.
.L.
7, 8,
Pursuant to the understanding at this morning's session, there
had been distributed a revised draft of statement in connection with
the application by Chemical Bank New York Trust Company, New York, New
York, to acquire the assets and assume the deposit liabilities of Bank
or Rockville Centre Trust Company, Rockville Centre, New York.
After discussion of the revised draft, certain changes of an
editorial nature were agreed upon.
With the understanding that these
changes would be made, the issuance of the order and statement was
authorized.
to this authorCopies of the documents issued pursuant
ization are attached as Items
7 and 8; a copy of Governor Robertson's
dissenting statement is attached as Item No.
Mercantile Trust Company.
9.
Mr. Solomon reported a telephone call
from Mr. Shuford, President of the Federal Reserve Bank of St. Louis,
$
5/27/63
-10-
111 which Mr. Shuford stated that in a visit to the Reserve Bank, representatives of Mercantile Trust Company, St. Louis, Missouri, had indicated
that the member bank planned to acquire through its wholly-awned subsidiary
(Mississippi Valley Company) a corporation engaged in the origination and
servicing of mortgages, Mercantile Mortgage Company, the operations of
Which apparently extended into several States.
While the representatives
Of Mercantile Trust had taken the position that they were merely advising
the Reserve Bank as a matter of information, the Reserve Bank had cautioned
against the proposed transaction being consummated until the matter could
be given further consideration by the System in view of legal questions
that might be involved.
Following discussion, it was understood that Mr. Solomon would
get in touch with Mr. Shuford and request that the Board be furnished
With additional information.
Report on competitive factors (Crewe, Virginia).
There had been
distributed a draft of report to the Federal Deposit Insurance Corporation
on the competitive factors involved in the proposed merger of The National
laank of Crewe, Crewe, Virginia, with Bank of Crewe, Crewe, Virginia.
The report, in which the conclusion read as follows, was approved
for transmittal to the Corporation:
The proposed merger of The National Bank of Crewe, Crewe,
Virginia, with Bank of Crewe, Crewe, Virginia, would eliminate
one of the two banks in Crewe; however, there are two alternative
sources of credit in a community 10 miles distant. While this
Proposal would eliminate the substantial amount of competition
existing between two banks headquartered in a small town whose
economy appears to be declining, the Board does not believe
that the over-all effect on competition would be adverse to
the public interest.
risirayr—
(
5/27/63
11-
The meeting then adjourned.
Secretary's Note: Governor Balderston, acting
in the absence of Governor Shepardson, today
approved on behalf of the Board the recommendation contained in a memorandum from the Division
of Research and Statistics that the Board's
action of May 3, 1963, accepting the resignation
of Bette L. Robinson, Statistical Clerk in that
Division, effective at the close of business
May 31, 1963, be rescinded.
Secret
GRAM
TELE
WIRE SERVICE
• LEASED
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
May 27, 1963
Scanlon - Chicago
Board will interpose no objection to your Bank's
advertising for bids for the plumbing renovations in
the old section of the Chicago head office building,
as described in your letter of May 1, 1963, and
authorizes an expenditure of about $260,000 for the
renovation project.
(Signed) Merritt Sherman
SHERMAN
0.04,0"1
I 1
BOARD OF GOVERNORS
OF THE
Item No. 2
5/27/63
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 271 1963
Board of Directors,
Hillside National Bank of Dallas,
Dallas, Texas.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Dallas, the Board of Governors,
acting u4der the provisions of Section 19 of the Federal
Reserve Act, grants permission to the Hillside National
Bank of Dallas to maintain the same reserves against deposits as are required to be maintained by nonreserve city
banks, effective as of the date it opens for business.
Your attention is called to the fact that such
Permission is subject to revocation by the Board of Governors.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
4
Item No.
BOARD OF GOVERNORS
3
5/27/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
tt,j1
.A.,
.‘,...
‘t....„
`* r),,
'.;.
i.
OFFICE OF THE CHAIRMAN
.., 0
,1ci'•
May 271 1963
Mr. Phillip S. Hughes,
Assistant Director for
Legislative Reference,
Bureau of the Budget,
Washington 25, D. C.
Attention Mrs. Garziglia.
Dear Mr. Hughes:
In response to your communication of May 24, 1963, the Board
recommends that the President approve the enrolled bill, H.R. 5389,
"To repeal certain legislation relating to the purchase of silver, and
for other purposes."
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
BOARD OF GOVERNORS
Item No.
OF THE
4
5/27/63
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONOENCE
TO THE BOARD
May 27, 1963
cONFIDENTIAL (FR)
Mr. Homer A. Scott,
Chairman of the Board,
Federal Reserve Bank of
Kansas City,
Kansas City 6, Missouri.
•
Dear Mr. Scott:
The Board of Governors approves the payment of salaries,
at the rates indicated, to the following officers of the Federal
Reserve Bank of Kansas City, for the period beginning with the
effective date shown below through December 31, 1963.
Annual
Salary
Title
Effective
Date
Omaha Branch
George C. Rankin
Walter L. Pleiss
Carl C. Tollander
Dan S. Spencer
Vice President
Cashier
Assistant Cashier
Assistant Cashier
1
1
1
1
$17,000
12,500
10,000
10,000
July
July
June
July
$12,000
June 1
Head Office
John N. Blair
Assistant Cashier
The salary rates approved are those fixed by your Board
of Directors as reported in your letter of May 9, 1963.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
,
BOARD OF GOVERNORS
Item No.
5
5/27/63
nr THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 27, 1963
14r. Phillip S. Hughes,
Assistant Director for
Legislative Reference,
Bureau of the Budget,
Washington 25, D. C.
Dear Mr. Hughes:
This refers to Legislative Referral Memorandum dated
1111Y 22, 1963, requesting the Board's views regarding a revised draft
of a bill "To provide for an increase in the maximum amount of insurance coverage for bank deposits and savings and loan accounts,
to protect further the safety and liquidity of.insured institutions,
t° strengthen safeguards against conflicts of interest, and for
Other purposes".
provisions of section 6 of the
The Board believes that the
ents for insured banks
requirem
y
liquidit
r evised draft relating to
serious
to
questions and create
rise
are unnecessary and would give
undesirable confusion. Accordingly, the revised draft bill would be
acceptable in principle to the Board only if modified to omit the
the Board would, of course,
Provisions of section 6. In any event,
upon the detailed
//lsh to reserve the right to consider and comment
be introduced in Congress.
Provisions of any such bill that may
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.'
BOARD OF GOVERNORS
Item No. 6
OF TH1
5/27/63
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
May 27, 1963.
he Honorable Wright Patman, Chairman,
natittee on Banking and Currency,
iruse of Representatives,
48hingt0n 25, D. C.
be
Mr. Chairman:
In accordance with the request in your letter of May 10, 1963
4411
Subsequent
ot
oral communications, the reports covering examinations
ste the Federal Reserve Banks of Boston, Philadelphia, Cleveland, Atlanta,
the years 1960, 1961,
„ Louis, Minneapolis, Kansas City, and Dallas in
4
Corresponding
reports for the
11 1962 are being transmitted herewith.
();
and
Chicago,
San Francisco)
Richmond,
"four Reserve Banks (New York,
'e sent to you on May 14.
As on previous similar occasions, these reports of examination
. being sent with the understanding that they will be made available
11e
their staffs. It will be
413 CCInfidenCe Only to members of Congress and
to the Board's office
returned
4814.eciated if you will have the reports
soon as they have served your purpose.
1
Sincerely yours,
(Signed) Wm, MCC. Martin, Jr.
Wm. McC. Martin, Jr.
flclosures
Item No.
7
5/27/63
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
CHEMICAL BANK NEW YORK TRUST COMPANY
f°r approval of acquisition of assets
of Bank of Rockville Centre Trust
Company
ORDER APPROVING ACQUISITION OF BANK'S ASSETS
to
There has come before the Board of Governors, pursuant
the Bank Merger Act of 1960 (12 U.S.C. 1828(c)), an application by
York, New York, a member
Chemical Bank New York Trust Company, New
bank of the Federal Reserve System, for the Board's prior approval
of its acquisition of the assets and assumption of the deposit liabilities of Bank of Rockville Centre Trust Company, Rockville Centre, Nassau
and, as an incident thereto, Chemical Bank
County, Long Island, New York,
New York Trust Company has applied, under section 9 of the Federal Reserve
establishment by that bank of
Act) for the Board's prior approval of the
branches at the three present locations of Bank of Rockville Centre Trust
Company,
and assumption of
Notice of the proposed acquisition of assets
of Governors, has been
deposit liabilities, in form approved by the Board
Published pursuant to said Bank Merger Act.
-2-
Upon consideration of all relevant material in the light of
the factors set forth in said Act, including reports furnished by the
on,
Comptroller of the Currency, the Federal Deposit Insurance Corporati
and the Department of Justice on the competitive factors involved in
the proposed transaction,
forth in the
IT IS HEREBY ORDERED, for the reasons set
ons be and hereby
Board's Statement of this date, that said applicati
are approved, provided that said acquisition of assets and assumption
Of deposit liabilities and establishment of branches shall not be condate of this Order,
summated (a) within seven calendar days after the
date.
Or (b) later than three months after said
of May, 1963.
Dated at Washington, D. C., this 27th day
By order of the Board of Governors.
and
Voting for this action: Chairman Martin,
n,
King, and Mitchell.
Governors Balderston, Mills, Shepardso
Voting against this action:
Governor Robertson.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(sEAL)
Item No.
BOARD OF GOVERNORS
5/27/63
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY CHEMICAL BANK NEW YORK TRUST COMPANY
FOR APPROVAL OF ACQUISITION OF ASSETS OF
BANK OF ROCKVILLE CENTRE TRUST COMPANY
STATEMENT
Chemical Bank New York Trust Company, New York, New York
("Chemical"), with deposits of $4,253 million,* has applied, pursuant
to the Bank Merger Act of 1960 (12 U.S.C. 1828(c)), for the Board's
Prior approval of its acquisition of the assets and assumption of the
deposit liabilities of Bank of Rockville Centre Trust Company,
Rockville Centre, Nassau County, Long Island, New York ("Rockville
Bank"), with deposits of $39.8 million.
Incident to such applica-
tion, Chemical has also applied, under section 9 of the Federal
of
Reserve Act, for the Board's prior approval of the establishment
branches at the three locations of the offices of Rockville Bank,
increasing the number of Chemical's presently operating domestic
°ffices from 112 to 115, and of its approved offices in Nassau County
(two offices are now operating and a third will be opened in
Great Neck in the near future) from three to six.
Under the law, the Board is required to consider, as to
each of the banks involved, (1) its financial history and condition,
(2) the adequacy of its capital structure, (3) its future earnings
* Deposit figures are as of December 28, 1962.
8
-2-
Prospects, (4) the general character o: its management, (5) whether
its corporate powers are consistent with the purposes of 12 U.S.C.,
Ch. 16 (the Federal Deposit Insurance Act), (6) the convenience and
needs of the community to be served, and (7) the effect of the transaction on competition (including any tendency toward monopoly).
The
Board may not approve the transaction unless, after considering all
these factors, it finds the transaction to be in the public interest.
Banking factors. - Both Chemical and Rockville Bank have
satisfactory financial histories.
The financial condition of Rockville
Bank is sound, and its capital structure is adequate.
The net earn-
ings of Rockville Bank for 1962 showed a significant decline.
In fact,
the bank's earnings were somewhat below the average for banks of
comparable size in the Second Federal Reserve District.
Management of
Rockville Bank has followed a conservative policy, refraining from expanding into new branch locations, which would have required the sale
of additional capital stock, and has concentrated the bank's lending
vithin limited fields.
Chemical is the fifth largest bank in the United States and the
fourth largest in New York City.
Its financial condition is sound, its
structure adequate, and its
earnings prospects favorable, its capital
management competent.
Consummation of the proposed acquisition would
n°t cause any unfavorable change in respect to any of these factors.
-3-
There is no indication that the corporate powers of the banks
are, or would be, inconsistent with 12 U.S.C., Ch. 16.
Convenience and needs of the communities. - The effect of
the proposed acquisition on the convenience and needs of New York City
1411 not be significant.
e
The rather fully-developed village of Rockvill Centre,
located
about
in the town of Hempstead in southern Nassau County
a
live miles east of Queens and twenty miles east of Manhattan, had
Population of over 26,000 in 1960, reflecting an increase of less than
twenty per cent during the previous ten years.
4 "bedroom
The village is primarily
local residents are drawn
suburb" of New York City, and many
fl'ora the executive level.
The commercial section of the village is
comprised principally of specialty and service shops.
About three years
ately 36 acres
48°) however, an urban renewal program covering approxim
in the western end of the village was begun.
This development will
by
"naist principally of middle income apartment houses to be erected
ted by a
Ptivate interests, and one low rent project to be construc
Public housing authority.
Rockville Bank operates a
In addition to its main office,
branch at the southern edge of Oceanside, about two miles south, and
4
of Rockville
branch in North Malverne, about three miles north
Centre.
are also primarily resiThe areas served by these branches
shops similar to those found
dential, with local shopping centers and
in Rockville Centre.
9'
L.''1 ,
I
-4-
The Rockville Bauk has coacentrated its lending in real
estate mortgages and consumer credit, especially automobile loans,
rather than in commercial and other types of credit.
The bank does
not make any home mortgage loans in excess of the lesser of $25,000 or
of
7° Per cent of appraised value, even though in the northern area
Rockville Centre the prices of homes range from $40,000 to $60,000.
for which there
W°r does the bank make several types of consumer loans
is a demand in the Rockville Centre area.
These and similar services
ate available in Rockville Centre from the two offices of Franklin National
other banks, large
Bank* located there, and in nearby areas, from numerous
and small, including branches of large New York City banks.
Approval of
the acquisition will, howe7er, provide an alternative source in Rockville
Centre of a broader range of banking services.
in Nassau County,
Competition. - Chemical operates two branches
°Ile at Massapequa, 12 miles east of Rockville Centre, and the other,
about three miles
1/hich was opened on May 6, 1962, at West Hempstead,
fr(Im Rockville Centre's North Halverne office.
The latter is Chemical's
competitive in Rockville
°IllY office which can be considered directly
Eank's service area, although it is expected that competition between
the two banks would be nominal.
Chemical has been authorized to open a
miles north of Rockville
third office in Nassau County at Great Neck, 9
d that it would
4nk's North Malverne office, but it is not anticipate
*
Until June 10, 1960, Franklin National Bank's head office was
one of its principal
bocated in Franklin Square, where it now has
t'anches,
-5-
draw business from the service area of that branch of Rockville Bank.
A number of persons commuting to work from Rockville Centre to New
York City bank in the city and some of these have accounts with
Chemical.
Rockville Bank draws 77 per cent of its deposits from an
area including the communities of Rockville Centre, Oceanside, Franklin Square, and West Hempstead, and 81.5 per cent of its deposits
from a wider area which includes four additional communities, Lynbrook,
Lakeview, Malverne, and Island Park.
Both offices of the small Ocean-
side National Bank are located less than two miles south of Rockville
Centre.
It competes with Rockville Bank.
The Community Bank, Lynbrook,
also a small bank operating two offices, is located about one mile
west of Rockville Centre.
However, its principal competition comes
from two branches of the large Meadow Brook National Bank and not
from Rockville Bank.
The rest of the fifteen commercial banking of-
fices located in the four-community area (and of the twenty-one in the
eight-community area) represent branches of larger Long Island or New
York City banks.
Franklin National Bank and Meadow Brook National Bank
together have eight offices and hold a relatively high per cent of
the total deposits of the commercial banking offices in the fourcommunity area.
The substitution of a large New York City bank for
Rockville Bank can be expected to intensify competition in the general
-6-
area.
The two remaining independent local banks, Community Bank of
LYtbrook and Oceanside National Bank, will be exposed to a keener
competitive climate.
The effect of the proposed acquisition on competition in
kw York City is negligible.
However, some effect should be expected
c4 the movement among the larger city banks to acquire outlets in
Nassau County, which began with passage of the New York Omnibus
1344king Act in 1960.
The desire of these banks to serve a wider economic
area has been evident.
The banks first tried to achieve this objective
ill Part by applications for de novo branches.
However, what is regarded
48 a "fully-banked" situation in parts of Long Island and the "homeprotection" afforded by the New York banking law have imposed
limitations on this route.
In 1961, Chemical sought to merge
with Long Island Trust
ColliPany, Garden City, New York, the third largest bank on Long Island
Ilith deposits of $140 million and 14 offices.
In marked contrast to
that situation, the present case involves a bank with deposits of less
th44 $40 million and only three offices.
In rejecting Chemical's 1961
4PPlication the Board's Statement (1962 Federal Reserve Bulletin 548)
Pcinted out that future merger applications were "not foreclosed".
"Cr, the Board said that "approval of future merger applications
4/r
well be required" by positive factors discussed therein. Those
-7-
factors are persuasive in this case. Furthermore, in that Statement
the Board indicated that consummation of the proposal would cause "a
substantial altering of the banking structure in the area" and "would
bring sudden adverse competitive effects".
Such consequences could
not reasonably be anticipated in connection with the present proposal.
of the
Summarv and conclusion. - The effect of approval
tly
Proposed transaction on local competition will not be significan
ions indicate
adverse, and the Board concludes that broad considerat
approval.
would
Accordingly, the Board finds that the proposed merger
be in the public interest.
May 27, 1963.
791
Item No. 5
5/27/63
ON
DISSENTING STATEMENT OF GOVERNOR ROBERTS
the majority's
I am troubled by the assumption implicit in
banks must expand into
decision in this case that New York City
Long Island, even at the expense of an adequately varied banking
assumption that size
structure, and equally concerned by the twin
itself brings better banking services to the public.
this is necessarily true.
I do not think
Bankers in small banks are frequently more
the community than are
responsive to the needs of their neighbors in
ns are
the branch managers of large banks whose significant decisio
with
made under the eye of distant superiors not primarily concerned
the welfare of the particular community.
needs of
Neither the banking factors nor the convenience and
the community - as disclosed by the record before the Board - support
approval of the application.
Rockville Bank has had a satisfactory
record of performance, and admittedly would continue to serve the
community well as an independent bank.
There are already large banks
provided
in the area which can provide any needed services not already
by local banks.
branch
Indeed, Chemical has recently established a
less than three miles away.
On the other hand, as the Department of
tion is far from negligible,
Justice rightly pointed out, existing competi
and the potential competition (due to Chemical's new branch) which will
be eliminated by the merger could be substantial.
y
The Board here departs - without reason - from the salutar
Company
Principle laid down in its decision in the Long Island Trust
case (1962 Federal Reserve Bulletin 548) that "competition throughout
-2-I Pis+
c)
all the ranges of banking size and services is in the public interest
toward ". . . pre• • ." and that the Board's efforts should be directed
size, each offering
serving a variety of banking alternatives of varying
its own advantages to the public".
That case involved an application by
offices; the present
Chemical to merge a $141 million bank with fourteen
case concerns a request by the same applicant for permission to acquire
4
as does the
$40 million bank with three offices. I am unable to find,
majority, that the difference in scale is a difference in kind.
If
in
denial was required in the former case, then it is equally required
independent middlethe present one, since approval eliminates the only
sized bank in the eight-town area in which Rockville now competes.
offered the shareholders
By any test, the premium Chemical has
Of Rockville is a large one, and indicates an urgent desire to acquire
these banking sites.
On the basis of the December 31, 1962 market value
of the Chemical stock being exchanged for that of the Rockville Bank, the
Premium is greater than the total capital funds of Rockville, by 9.4 per
cent of its deposits, and is 11.3 times its average annual net earnings
for the last five years. I do not blame Chemical for offering the premium,
or the shareholders of Rockville Bank for accepting it.
But if the Board
Permits bank acquisitions, involving such premiums, which have nothing
more than this one does to recommend them, then the continuing trend
toward concentration of banking power in large banks able to pay a price
that cannot be resisted will result in the early demise of all independent
banks in Nassau County - indeed, all independent banks throughout the country
that are so located as to attract the covetous eye of expansion-minded
in
stitutions.
For these reasons, I would deny the application.
14e37 27, 1963.
@FedFRASER