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1969 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Thursday, November 20, 1952. The Board met the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Vardamm Mills Robertson Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Vest, General Counsel Bethea, Director, Division of Administrative Services Mr. Allen, Director, Division of Personnel Administration Mr. Solomon, Assistant General Counsel Mr. Mr. Mr. Mr. Mr. Governor Vardaman reported that in accordance with the understand"an executive session of the Board he had discussed informally with the.. " attorney General a letter addressed to the Board on September 22, 1952, ' Rolmes Baldridge, Assistant Attorney General, concerning funds a14°1111ting to approximately $3.8 million held on deposit in the registry or e United States Court for the Northern District of Ohio, Eastern Divi- e1 °11) Pending disposition of two civil actions. The letter stated that it Vas A "sired to transfer these funds to the Federal Reserve Bank of CleveTor safekeeping and investment and reinvestment thereof in Treasury ' bill 8 as the parties might from time to time direct, subject to final Bition of the actions and final order of the Court disposing of the t1,11,4 8' It also stated that the Department of Justice believed it to be bettel' that this money be deposited with the Federal Reserve Bank than that 11/20/52 -2-- it be deposited in a commercial bank or banks. Governor Vardaman said that the Attorney General advised him Yesterday that he had issued instructions to his staff that funds of his character should be deposited with commercial banks unless the 8'1'''ter was brought to his attention and he took it up with the Board. Gclvernor Vardaman said that the recent request apparently had resulted lirc° a disagreement among the lawyers involved, who favored various c°111nlerc ial banks and, in the circumstances, joined with the Court in Ngesting that the funds be deposited with the Federal Reserve Bank. also stated that as far as the Department of Justice was concerned, the Particular case referred to in the letter of September 22, 1952, e " he considered closed. At this point Governor Evans joined the meeting. Before this meeting there had been sent to the members of the d. a memorandum dated November 12, 1952, from Governor Mills stating that in accordance with the request of the Board at the meeting on '1114 29) 1952, he had considered with members of the staff the applicabilitl, - of the Federal Employees' Compensation Act to the Board's employees that, for reasons stated, it was his recommendation that the question 'r the applicability of the statute to the Board's organization be not l'ateed at this time. The memorandum also recommended that the Board Eigre e (1) that in the event of serious injury or death of an employee 1971 11/20/52 -3- line of duty the Board would take whatever steps might be necessary t° assist the employee or his dependents in presenting the matter to the hresu of Employees' Compensation of the Department of Labor for the purlee of ascertaining their rights under the law, and (2) that as long as the Federal statute was held not to be applicable to the Board the present iniattrartee policy with the Liberty Mutual Insurance Company be continued. There was a general discussion of the problem presented in the tetorandum but no conclusions were reached and it was understood that the matter would be considered again at a subsequent meeting of the Board. Governor Robertson referred to the discussion at the meeting of the Board on October 29, 1952, regarding bank holding company legislation allito the understanding at that time that no steps should be taken pend41g further consideration of the position which the Board should take with reePect to such legislation. He stated that he felt he should advise the 4111'esentatives of the Independent Bankers Association and American Bankers 1418°ciation and the holding company official with whom he conferred earlier %Iht hey had not received copies of the bank holding company bill which he b4c1 14dicated to them that he would prepare as a "target" bill, and he ilreesnted a letter which he proposed to send to them for that purpose. Following a discussion, it was understood that there would be no °I)Jection to Governor Robertson's sending the letters. Secretary's Note: Pursuant to the above, the following letter was sent by Governor 11/20/52 -4Robertson to Mr. James S. Peters, President of the Independent Bankers Association, Manchester, Georgia, on November 21, 1952, along with similar letters to Mr. J. 0. Brott, General Counsel of the American Bankers Association, Washington, D. C., and Mr. J. Cameron Thompson, President of Northwest Bancorporation, Minneapolis, Minnesota: "Last summer when I met with you and other representatives of the Independent Bankers Association and representatives of ..he American Bankers Association concerning proposals for bank nolding company legislation, I agreed to try to draft a proPosed bill which would put into statutory language the princiPles expressed in Chairman Martin's letter to Congressman SPence and my testimony before the House Banking and Currency Committee last June. It was contemplated that that draft could be used as a target to facilitate the formulation of your own vieve with respect to the most desirable form of legislative action in this field. "A draft of such bill has been completed. However, it is the feeling of the Board of Governors, in which I concur, that a copy thereof were to be sent to you and to the representa147es of the American Bankers Association, in accordance with °le understanding at the time of the conference aforementioned, the draft would in all likelihood be considered by some people 1 8 an attempt on the part of the Board of Governors to decide 1 'he form of proposed legislation. "You know, I am sure, that this would be an erroneous positin „-n, since the Board of Governors is firmly of the opinion that 'ne origination and enactment of legislation in this field is ci°1elY within the province of Congress. In arriving at its s 2c18i0n, Congress will want the benefit of the considered judg7ent of interested persons and agencies, especially to the exthat there are conflicting points of view. The Federal leeerve does not wish to be placed in the position of trying ,dc) unduly influence anyone to adopt its point of view, for it °elieves that the greatest value is to be derived by Congress fl'orn forthright expressions of different points of view. "Consequently, although we are always willing to consult llith you or other representatives of the Independent Bankers I 1_973 11/20/52 Association, or with any representatives of the American Bankers Association or any other interested persons for the Purpose of developing our views and furnishing inforElation which might facilitate the formulation of your own Views, we do not now contemplate submitting to you a draft of our views in bill form. It is probable that if the Banking and Currency Committee of either the House ?I the Senate deems it appropriate to consider legisla'ion of this type during the next session of Congress, It Will propose a bill of its own which can be used for targe4. uPurposes just as well as one which we might propose." Before this meeting there had been sent to the members of the 11" copies of a memorandum dated October 6, 1952, from Mr. Crosse, Assistut Vice President of the Federal Reserve Bank of New York, prePared in response to the Board's letter of August 18, 1952, to Mr. Sproul, ll'esicient of the New York Bank, requesting a survey of the banks controlled 14arine Midland Corporation, a holding company affiliate, to assist the B c3ard in determining what action it should take with respect to any tiLlikrA applications having to do with branches, mergers, and voting involving Marine Midland Corporation or banks controlled by the Corp° , `11"4-°n. hg The approach of the study was from the viewpoint of en- to establish administrative guides as to the extent that ex- 1)8.4131-On might be permitted without raising the question of a tendency t°1jEtza monopoly. Governor Robertson stated that Mr. Bayard F. Pope, Chairman of the, toard of Marine Midland Corporation, had requested an appointment 11/20/52 —6— With him this afternoon, that although no applications had been received by the Board, it was understood that applications for the establishment or tvo additional branches by State member banks in the Marine Midland €r°111) had reached the Federal Reserve Bank of New York and at least three other branch applications which would require Board approval were e°11temPlated, and that Mr. Pope presumably desired to discuss this situati°4, Governor Robertson inquired what position he should take in his e°4versation with Mr. Pope, that is, whether he should say to him that the ,, mard the would not look with favor upon any applications involving expansion by the group or whether he should say that any appli- eatiOael if submitted, would be considered by the Board in the light of the acts involved, including any tendency toward undue concentration in the control of banking facilities in the areas concerned. Governor Robertson said that he did not consider the study by the Nay °rk Bank as helpful as it might have been since it reviewed the e°111Petiti ---ve Position of Marine Midland group banks according to New York State banking districts and counties, whereas he felt that the extent of 4 /101A ``ing company's operations should be judged by looking at the areas Ithere the banks and branches were located or proposed to be located. In tilAtt connection he reviewed the banking situation in the communities where It II" understood Marine Midland group banks were contemplating the establish- tent °- additional branches, three of which would be de novo branches and two :1975 ,1120/52 -7- f which would involve the take-over of existing banks. Governor Robert- 8°4 went on to say that he had also reviewed the memorandum submitted to Governor Evans under date of December 13, 1951, by Mr. Hedge, General NIrmel of the Federal Reserve Bank of Chicago, and Mr. Shay, Assistant C°111:teel of the Board, concerning the status of Marine Midland Corporation tilIcler section 7 of the Clayton Act. He thought the statement in that randum to the effect that in 18 western-central counties of the State Ille Of NeV York banks in the Marine Midland group had 34 per cent of the celleroial bank deposits was not a fair test as the memorandum tended to el'eate the impression that the counties in question were contiguous where48 in a ctuality they were not. It was Governor Robertson's opinion that the Board should consider 843NY ePPlications which might be received from Marine Midland group banks Etccording to the standards used in considering any application for a new behlp -4 or branch, including the needs of the community for banking facilities ) and that, if these factors seemed favorable and in addition it did laot appear that any undue concentration of banking resources in the area 14 the hands of Marine Midland group banks would result, the Board would be ju stified in acting favorably upon the applications. He also felt that p °Pe should be informed that the Board would want to look closely into 8.1ky 4 Urther expansion in the area around Buffalo, New York. During the course of Governor Robertson's comments, Mr. Chase, 4884 tant Solicitor, entered the room. 11/20/52 -8- At the request of Chairman Martin, Mr. Vest made a statement in hich he said that it was difficult to comment on the legal aspects of the eituation without having a specific application before the Board. Ile brought out that the Board has the power to pass on applications by State member banks for the establishment of branches and since no particular criteria for passing on such applications were set forth in the It seemed reasonable to assume that the Board would consider many "the things that it would consider in connection with applications for lertibersi,4 '4-LP in the System and applications for voting permits, including the competitive situation in the area, as well as the philosophy and )11°Y of the antitrust laws. He thought the Board would be justified 111 de— "Ylng applications in cases where there was evidence of an undue c°110sttration of banking resources in any given section of the country '4111°1 it might want to take into account. He also thought that, if the toe.„ 11 should turn down an application on the grounds that there was an ' 1%le concentration of banking resources in the area, the question might 418e vhether. the Board should look into the question whether section "the 7 Clayton Act had been violated or whether there was a tendency t°'441scl monopoly. Mr. Vest pointed out that the Board was under no legal c°131Pfl Ulsion to follow such an examination of the circumstances by Institut- 8. Proceeding, but he felt that it might find itself in an inconsistent ItIltl°n, depending on the facts, if it did not do so. He concluded by 11N/72 —9- essing the view that there would seem to be merit in the Board's " 814aiting the decision of the courts in the Clayton Act proceeding against america Corporation before instituting any other proceeding. Mr. Chase agreed generally with the views expressed by Mr. Vest 414 also with Governor Robertson's point of view that even if the Clayton Act /fere not in existence, the Board would want to deny an application 71141"Pre it believed that the granting of such application would tend to 13I'cuce an undue concentration of banking resources in a particular area. Governor Evans said that while he would not want to pass on the 40.1 -L Problem involved, he would like the record to show that, in his " °Nlii°11, the Board should defer action on any further applications for 1)14111chea by banks controlled by Marine Midland Corporation until the proe4(114g. against Transamerica Corporation had been decided by the courts bee Use he thought that the decision might furnish a yardstick which could be 13P1ied more effectively than anything available to the Board at the 11:118ellt time. Governor Evens; recalled that in December 1971, when the 114zA aPProved the issuance of a general voting permit to Marine Midland et*, v3ration covering its stock in The National Chatauqua County Bank of hte Bt(Ilin, Jamestown, New York, he advised Mr. Pope, with the Board's Nrti Beton, of the reasons why he voted against the issuance of that ' t, and Mr. Pope therefore was fully aware of his position. 1978 4/20/52 -10- Governor Szymczak stated that his position was similar to that ex-Pressed by Governor Robertson, while Governor Nills stated that where transaction involving the take-over of an existing bank and the establishOf a branch was legally permissible and there were no other adverse f(tet re, it seemed to him that it would be questionable whether the Board sh°111d Prevent the transaction even though each successive approval might ng the day closer when there would be a tendency toward monopoly. As he ut derstood the law and the type of supervisory responsibility vested ill the Board, Governor Mills did not see how the Beard would be justified t4Ste-nding between the buyer and the seller. Governor Vardaman doubted whether it would be advisable for the to delay action on applications submitted to it until such time as a el3tLI't decision had been rendered in the Transamerica proceeding, it being his View that each application should be acted upon according to its merits vith (art regard to the position taken by the Board in the Transamerica case. Re 41 8° felt that the Board should give careful consideration to the attiOf the State banking authorities with regard to any particular appliti°4 for the establishment of a branch. Chairman Martin commented that in the case of an application for the _ Ei tablishment of a branch in an area where there were no banking rEellitiEs, the position that the Board should take would seem to be fairly 11/20/52 ve11 indicated. -11He also suggested that Governor Robertson might say to Mr* Pope that any future applications by banks in the Marine Midland group %I°111c1 be scrutinized very carefully by the Board. Following further discussion, it was understood that Governor Rober tson would talk with Mr. Pope in the light of the views expressed at this meeting. Governor Evans called attention to a memorandum dated November 11, 1952) from the President to the heads of executive departments and agencies lihich stated that a limited air raid drill in the Federally-occupied buildtrig. in the Metropolitan area of Washington had been scheduled for the ' eEllilY Part of December and directed that each department and agency 1.r.ticipate in the drill. Governor Evans said that the drill was scheduled for December 120 1952 'during regular working hours, and that the Board's staff was going Ileacl 'with plans for participation in the drill. Reference was made to the suggestion of the Federal Advisory 0c1414cil at its meeting with the Board on November 18, 1952, that the ()Etlq ' s 418 study of the impact of the excess profits tax on commercial banks be, 'arried forward through the year 1952. It was agreed unanimously that the study should be carried forward along the lines suggested by Mr. Horbett, 1980 11/20/52 -12Assistant Director of the Division of Bank Operations, at the meeting of the Board on November 17, 1952, with the understanding that this proposed procedure would be subject to such revisions as seemed appropriate after further study by the Division of Bank Operations and discussions with the other Federal bank supervisory agencies. At this point all of the members of the staff except Messrs. enter, Sherman, and Kenyon withdrew from the meeting and the r°1°14ing additional actions were taken by the Board: Minutes of actions taken by the Board of Governors of the Federal Re8erve System on November 19, 1952, were approved unanimously. Letter to Mr. Leach, Chairman, Conference of Presidents of the Reserve Banks, reading as follows: "The Board suggests that there be included in the ,genda for the next Presidents' Conference, scheduled to ce held early in December, the question of borrowings bY member banks from the Federal Reserve Banks under circumstances which indicate that one of the purposes ) c f the borrowings, even though not the principal one, Illight be that of increasing 'borrowed capital' for the Purpose of lessening or avoiding excess profits taxes. AS You know, this subject was discussed at the February arid September Conferences. "In its letter of April 19, 1945 (S-843, F.R.L.S. j, ir5129), the Board suggested that, because of the possibility that some member banks might borrow for the purPose of reducing excess profits taxes, any unusual apPlication for discount facilities be reviewed to determine whether the application was consistent with the Proper needs of the bank for replenishing reserves. 19S1 11/20/72 -13- "Reinstitution of the excess profits tax in 1950 and the big increase in borrowings suggest that there is greater need than ever for close scrutiny of discount applications. Substantial borrowings that result from tax considerations could cause serious interference with Federal Reserve monetary and credit policies. "At the forthcoming Conference, the Presidents might discuss how their respective Banks attempt to determine, when considering a given discount application, whether the member bank's borrowings appear to be substantially influenced by a desire to lessen or avoid excess profits taxes, or whether for any other reason it is making an undue use of Federal Reserve credit. The discussion might suggest standards to be followed and kinds of information useful for such detersuch as continuity of and increase in a member bank's borrowings; relationship of its Federal Reserve borrowings to its required reserves and capital account in recent months or over the past year; extent of other borrowings; and changes in the bank's deposits, loans, and investments associated with occasions for borrowing." Approved unanimously. Letter to The Wolfeboro National Bank, Wolfeboro, New Hampshire, 1'4141118 as follows: "The Board of Governors of the Federal Reserve System has given consideration to your supplemental application for fiduciary payers, and grants you authority to act, when not in contravention of State or local law, as executor, assignee, and receiver. The exercise of these powers, in addition to those heretofore granted to act as trustee and registrar of stocks and bonds, shall be subject to the provisions of the Federal Reserve Act and the regulations of the Board of Governors of the Federal Reserve System. "This letter will be your authority to exercise the fiduciary powers granted by the Board pending the preparation of a formal certificate covering such authorization, Which will be forwarded to you in due course." 1982 /52 Approved unanimously, for transmittal through the Federal Reserve Bank of Boston.
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