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609
Minutes for
To:
Members of the Board
From:
Office of the Secretary
November 22, 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
bel°w. 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
if? y••• •
\ •
Minutes of the Board of Governors of the Federal Reserve
System on Monday, November 22, 1965.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Balderston, Vice Chairman
Robertson
Shepardson
Mitchell
Daane 1/
Maisel
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Mr. Young, Senior Adviser to the Board and
Director, Division of International Finance
Mr. Holland, Adviser to the Board
Mr. Solomon, Adviser to the Board
Mr. Fauver, Assistant to the Board
Mr. Goodman, Assistant Director, Division
of Examinations
Miss Eaton, General Assistant, Office of the
Secretary
Mr. Morgan, Staff Assistant, Board Members'
Offices
Mr. Furth, Consultant
Messrs. Brill, Koch, Partee, Axilrod, Eckert,
Ettin, and Keir of the Division of
Research and Statistics
Messrs. Sammons, Hersey, Katz, Wood, Dahl, and
Gemmill of the Division of International
Finance
Mr. Galusha, President of the Federal Reserve
Bank of Minneapolis
Money market review.
Mr. Axilrod reported on recent develop-
Ments in the Government securities and corporate bond markets, Mr. Ettin
e0mmented on bank credit developments, and Mr. Gemmill reviewed foreign
echange market developments, along with interest rates on bank loans
w.
lthdrew from meeting following money market review.
11/22/65
-2-
to foreigners and the latest available information on the U.S. balance
of payments.
Tables affording perspectives on the money market, the
capital market, and bank reserve utilization were distributed.
Following discussion of the reports, Governor Daane, President
Calusha, and
all members of the staff except Messrs. Sherman, Kenyon,
and Fauver, and Miss Eaton withdrew and the following entered the
room
Hackley, General Counsel
Farrell, Director, Division of Bank Operations
Solomon, Director, Division of Examinations
Johnson, Director, Division of Personnel Administration
Schwartz, Director, Division of Data Processing
Leavitt, Assistant Director, Division of Examinations
Shay, Assistant General Counsel
Smith, Associate Adviser, Division of Research and
and Statistics
Miss Hart, Senior Attorney, Legal Division
Mr. Via, Senior Attorney, Legal Division
Messrs. Heyde and Shuter, Attorneys, Legal Division
Mr. Egertson, Supervisory Review Examiner, Division
of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Discount rates.
The establishment without change by the
ederal Reserve Bank of Kansas City on November 17, 1965, and by the
Pederal Reserve Banks of New York, Philadelphia, Chicago, and San
4anc15c0 on November 18, 1965, of the rates on discounts and advances
In their existing schedules was approved unanimously, with the undertanding that appropriate advice would be sent to those Banks.
Circulated or distributed items.
Of
The following items, copies
Ilhich are attached to these minutes under the respective item
nunibers indicated, were approved unanimously:
11/22/65
-3Item No.
Letter to Bankers Trust Company, New York, New York,
aPProving the establishment of a branch at 207 Varick
Street, Borough of Manhattan.
1
Letter to Nevada Bank of Commerce, Reno, Nevada,
aPProving the establishment of a branch in Carson City.
2
Letter to Wells Fargo Bank, San Francisco, California,
aPProving the establishment of a branch near Aptos,
Santa Cruz County.
3
Idetter to United California Bank, Los Angeles,
.allfornia, approving the establishment of a branch
11 the vicinity of Saratoga Avenue and Campbell
venue, San Jose.
4
Letter to the Federal Reserve Bank of Atlanta waiving
ae assessment of a penalty incurred by St. Bernard
a nk and Trust Company, Arabi, Louisiana, because of
d eficiency in its required reserves.
5
Letter to the Federal Reserve Bank of Minneapolis
APPr°ving the appointment of Raynold W. Anderson as
sslstant Federal Reserve Agent.
6
Lett
h er to the Federal Reserve Bank of Chicago approving
s-e Payment of salaries to the Bank's electricians at
t
Pecified rates.
7
1
r
1.1port on competitive factors (Richmond -Virginia Beach).
After
certain suggested changes in the distributed draft had been agreed upon
by a
majority of the Board, a report to the Comptroller of the Currency
°n the competitive factors involved in the proposed merger of Bank of
Vir
.
glnia Beach, Virginia Beach, Virginia, into First & Merchants National
bank, Richmond, Virginia, was approved for transmittal in a form in which
the
conclusion read as follows:
11/22/65
-4-
There is no significant competition between First &
Merchants National Bank, Richmond, and Bank of Virginia Beach.
The conversion of Virginia Beach Bank's 10 offices into branches
of the State's largest bank would enhance Merchants' position
by an increase in size but, more importantly, by an extension
Of its geographic coverage into the Norfolk-Portsmouth area.
Consummation of the merger would eliminate the only locally
headquartered bank in Virginia Beach.
The overall effect of the proposed transaction on
competition would not be significantly adverse.
Governor Robertson dissented from the sending of the report, it
being his view that the conclusion should say that the consummation of
he merger would eliminate the only locally headquartered bank in
Virginia Beach and would represent a continuation of a dangerous trend
t lard concentration of banking in Virginia, which was already proceeding
"
at an accelerated pace; and that the overall effect of the proposed
ttsusection on competition would be significantly adverse.
Report on competitive factors (Greenville, Ohio).
After dis-
cussion resulting in a view that the effect on competition should be
described as seriously adverse (rather than adverse), unanimous approval
Was
.
given to the transmittal to the Comptroller of the Currency of a
I'ePort on the competitive factors involved in the proposed merger of
The Peoples Savings Bank of Greenville, Ohio, into The Second National
411k of Greenville.
The conclusion read as follows:
While alternate banking facilities would remain for the
Greenville community, consummation of the proposed merger of
The Second National Bank of Greenville and The Peoples Savings
Rank of Greenville would eliminate a considerable amount of
competition, and thus the effect of the proposed transaction
on competition is seriously adverse.
11/22/65
-5Application of United California Bank; form of statement in
IlltIlaIl_ap_22L_L IELJ_LL,_ETi_121L.
There had been distributed a memo-
randum from the Legal Division submitting drafts of a proposed order,
statement, and dissenting statement by Governor Robertson concerning
the Board's approval on November 3, 1965, of the application of United
Ca
lifornia Bank, Los Angeles, California, to merge into itself Feather
River National Bank, Oroville, California.
In discussion, Messrs. Hackley and Shay directed attention to
the
format of the majority statement.
They suggested eliminating certain
Paragraphs containing comments on matters that were not material to the
Boardls
decision, thus pointing up the influential factors.
At the same
time, the introductory part of the statement would continue to list the
factors required by law to be considered in a case of this kind, and it
14 .1d indicate that the Board could not approve such a transaction unless,
"
after considering all those factors, it found the transaction to be in
the public interest.
The members of the Board expressed themselves favorably on the
suggested changes, and it was understood that the same rationale would
be
applied in preparing statements on merger cases in the future.
Governor Maisel then referred to the comments on competitive
fact°rs in the proposed statement in the United California Bank matter.
Re
Cited the numerous mergers of the subject bank and recalled that at
th„
November 3 meeting, when the current application was acted upon, he
410,
t>i
11/22/65
-6-
had Suggested the possibility of including a warning-type comment in the
Board's statement.
the
As he read the draft statement, it seemed to say that
,
ompetitive factors were favorable, whereas they were not favorable
given the merger record of United California Bank.
The merger was
a pproved only because of strong considerations under the banking factors.
Governor Mitchell suggested, in this regard, that the summary
and conclusion of the statement might be modified to set forth that
Feather River National Bank had not provided service to meet the needs
Of its
community adequately and that it had been unable to acquire
proposed
succession
to its temporary management; and that therefore the
merger had been found to be in the public interest despite the fact
that United California Bank was not a bank that should have to be
N3anding by acquiring offices in this fashion.
in the
After further suggestions had been made for changes
statement along such lines, the issuance of the order, statement, and
41ssenting statement was authorized.
Secretary's Note: The order and statements
were issued later in the day. However, in
light of subsequent questions by Governor
Maisel, certain further changes, with which
other members of the Board agreed, were
made in the majority statement. Copies
of the order, majority statement, and
dissenting statement, in the form in which
they were finally issued, are attached as
Items 8, 9, and 10, respectively.
cpimyr-"7, 17
CYt 6
11/22/65
-7-
Check collection system (Item No. 11).
There had been distrib-
uted a draft of letter to the Chairman of the Conference of Presidents
of the Federal Reserve Banks noting that the Presidents, at their meeton September 27, 1965, had considered proposals for improvement in
he Federal Reserve check collection system and had authorized a subtee
study that would give early consideration to the following
topics:
(1) the promotion and encouragement of all types of local or
regional
check clearing arrangements or facilities; (2) improvements
in
the means of transportation of checks; and (3) revision of payment
Pr ocedures by country banks, such as an automatic charge plan, in lieu
Of Present remittance practices.
The draft letter would indicate that while the Board had no
bjection to studies along such lines, it felt that the time had now
come for the System to develop a broader program to extend to member
banks
Cheek
the full potential of benefits that could be derived from automated
handling.
Such a program should include as initial steps:
(1) The
(leveloPment in the near future of a plan under which Federal Reserve
ilanks and branches would serve as clearing centers for all items fully
qualified for electronic handling. Hopefully, such a plan would eliminate
the
u lrect-sending and other sorting requirements now imposed upon member
banks using Federal Reserve check collection facilities.
Of
i4
the
(2) A survey
possibilities and problems that would need to be taken into account
the development of a plan under which (a) in the initial stage all cash
t
11/22/65
-8-
items deposited in Federal Reserve Banks and branches would be inuaediately
credited to the depositing bank and immediately charged to the drawee bank;
and (b) ultimately the sorting and forwarding of checks would be eliminated
by having the Federal Reserve office in which they were first deposited
file them, after having recorded them on magnetic tape, so that the data
°II the tape could be used for the purposes now served by the checks themselves.
The proposed letter would contain recognition that such compre-
hensive
changes in Federal Reserve check collection procedures would
involve complex problems that might take some time to solve.
However, it
would conclude with the statement that these circumstances in themselves
suggested that there should be no delay in attacking the problem.
In discussion, Mr. Schwartz questioned the advisability of sending
such a letter.
He cited the studies being pursued actively by an ad hoc
C°nference committee headed by President Ellis, and by its subcommittee,
as reflecting a new approach by the Reserve Banks to planning for the use
Of comPuters and data communication techniques.
The regular committees
alid subcommittees were increasingly being expected to look into shorterProblems and solutions, while the Ellis committee was expected to
ilivestigate long-term possibilities.
In the circumstances, he doubted
heth r the Reserve Banks needed further prodding.
Governor Mitchell commented that nevertheless the issues here
1.417 I
°wed had been under discussion for a long time by various System
jg
•
11/22/65
6
-9-
co
mmittees.
Banks concerning
While there was interest within the Reserve
matters such as referred to in the draft letter, in his judgment it was
not adequately focused on the ultimate objective.
The program outlined
in the draft letter dealt with intermediate steps that could be phased
into the ultimate goal.
to take a
position.
for the Board
Thus, it seemed advisable to him
starting to
If the Reserve Banks were in fact now
Reserve
move, the letter would reinforce the position of those at the
Banks who had the ultimate goal in mind.
the
It would make it easier for
to come forward with a check collection system that was practical
in a logical way.
and would permit moving forward step by step
revised to
Mr. Schwartz then suggested that the letter be
reflect awareness of the studies currently in process under the auspices
them and
Of the Ellis committee and to reflect the Board's support of
its interest in developments.
such effect could be
Governor Mitchell agreed that changes to
made in the letter.
Put its
the Board to
The important thing, he felt, was for
Position on record.
of Mr. Schwartz that
Governor Robertson concurred in the view
the Ellis committee was likely to move in the right direction.
At the
Sallie time, he agreed with Governor Mitchell that the Board should go on
tecO rd and give the Ellis committee, along with other committees of the
Pr .
esldents' Conference working in the area of check collection, such
ene°uragement as they needed.
He made certain suggestions for changes
in the final part of the letter that he thought would be appropriate.
11/22/65
-10-
Other suggestions followed along the same general lines, and
unanimous approval then was given to a letter to the Chairman of the
Presidents' Conference in the form attached as Item No. 11.
Definition of business days under Regulation T (Item No. 12).
4 broker-dealer in Portland, Oregon, had asked the Board for an interpretation as to whether the seven full business days in which payment in
4 special cash account was required by Regulation T, Credit by Brokers,
Dealers, and Members of National Securities Exchanges, included a banking holiday on which the stock exchanges were open for transaction of
business.
In a distributed memorandum dated November 17, 1965, the
Legal Division recommended that a day on which the stock exchanges were
°Pen be considered a business day for the purpose of section 220.4(c)(7)
Of Regulation T, for reasons expressed in a proposed reply to the brokerdealer.
In discussion, it was suggested that emphasis be placed on days
°n which the brokerage house was open rather than days on which the
"changes were open.
Unanimous approval then was given to a letter in
he form attached to these minutes as Item No. 12.
All members of the staff then withdrew and the Board went into
e ecutive session.
Classification of typing, stenographic, and secretarial positio
The Secretary was informed later by Governor Shepardson that
policy
dul'ing the executive session the Board approved the revised
11/22/65
-11-
d escribed in a memorandum from the Division of Personnel Administration
dated November 16, 1965, with regard to classification of typing, stenograPhic, and secretarial positions of the Board's staff, as follows:
1. The minimum for hiring typists is established at
Grade FR-2 and for hiring stenographers at Grades FR-3 and
FR-4, dependent upon educational background, experience,
test scores, etc., as determined by the Division of Personnel
Administration. Typists employed in Grade FR-2 and stenographers in Grade FR-3 may be reclassified to Grades FR-3
and FR-4, respectively, after six months' experience, upon
the recommendation of the Division concerned.
2. The secretarial position assigned to the Chief of
a Section shall be allocated to the Grade FR-5 level. Each
Division of the Board that does not have Sections in its
organization and where there are Grade FR-4 stenographic
positions may present, for review by the Division of Personnel
Administration, the allocation at the Grade FR-5 level of one
existing Grade FR-4 stenographic position.
3. The secretarial positions assigned to the levels (and
equivalents) of the following officials shall be allocated at
the grades shown:
Assistant Division Head
Division Head
Adviser to the Board
Legislative Counsel
Assistant to the Board
Senior Adviser to the Board
Member of the Board
Chairman of the Board
FR-6
FR-7
FR-7
FR-7
FR-7
FR-8
FR-11
FR-11 plus one step
in grade
With the exception of the six-month qualification period
designated for typists in Grade FR-2 to Grade FR-3 and stenographers in Grade FR-3 to Grade FR-4, one year of experience
In the next lower grade is required for the above designated
Positions before reclassification to the grade levels shown
through Grade FR-8.
11/22/65
-12-
The foregoing action was taken subject to the understanding, as
expressed in a memorandum from the Division of Personnel Administration
dated November 19, 1965, that the application of the revised policy
would not affect the classification of certain Grade FR-8 secretarial
Positions in the Board Members' Offices as long as those positions were
held by the incumbents.
The meeting then adjourned.
Secretary's Notes: On November 19, 1965,
Governor Shepardson approved on behalf of
the Board the following items:
Letter to the Legal Counsel for the Council of State Governments
(attached Item No. 13) transmitting a summary of information obtained
1964 from the Federal Reserve Banks concerning the operation and
egulation of nonbank money order issuers in their districts.
Memorandum from the Division of Research and Statistics dated
No
vember 18, 1965, recommending the establishment of an additional
ee°110mist position in the Business Conditions Section.
Bo
Memoranda recommending the following actions relating to the
ard's staff:
Selar
increases
f, Guy R. DeCarlo, Economist, Division of International Finance,
'
°14 $9,267 to $10,619 per annum, effective November 21, 1965.
William T. Houser, General Mechanic -Operating Engineer, Division
Of Admin
istrative Services, from $5,533 to $5,782 per annum, effective
vember 21, 1965.
ferers
Shaffer, from the position of Stenographer in the Division
ersonnel Administration to the position of Stenographer in the
sailsion of International Finance, with no change in basic annual
"arY
at the rate of $4,149, effective November 21, 1965.
of ,Judy
11/22/65
Transfers
-13(continued)
. Kathleen Thomas, from the position of Clerk-Stenographer in the
1)!Alls1on of International Finance to the position of Secretary in the
101171sion of Research and Statistics, with an increase in basic annual
Salary from $4,953 to $5,352, effective November 21, 1965.
Governor Shepardson today approved on behalf
of the Board a letter to the Federal Reserve
Bank of Richmond (attached Item No. 14)
approving the appointment of Edward T. Whitlock,
Jr., and Burrie E. Eaves, III, as assistant
examiners.
Secr
37S2
Item No. 1
BOARD OF GOVERNORS
11/22/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 20551
ADDRESS
st
arriaim. CORRESPONDENCE
TO THE looms°
•
....
November 22, 1965
Board of Directors,
Bankers Trust Company,
New York, New York.
Gentlemen:
The Board of governors of the Federal Reserve
Trust Com8Ystem approves the establishment by Bankers
Varick Street,
207
at
branch
a
pany, New York, New York, of
the
provided
York,
New
York,
Borough of Manhattan, New
of
date
the
from
months
six
branch is established within
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.)
-
f7
Item No. 2
11/22/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 22, 1965
Board of Directors,
Nevada Bank of Commerce,
Reno, Nevada.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Nevada Bank of Commerce,
Reno, Nevada, of a branch at the southeast corner of North
proCarson Street and East John Street, Carson City, Nevada,
the
from
months
six
within
ed
establish
vided the branch is
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.)
37S/I
Item No. 3
11/22/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADORES/
orricoAL
DORRIESPONOCNDC
TO THC BOARD
November 22, 1965
Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
Federal Reserve
The Board of Governors of the
System approves the establishment by Wells Fargo Bank,
y of
San Francisco, California, of a branch in the vicinit
Highway
the intersection of State Park Drive and State
California,
No. 1 adjacent to Aptos, Santa Cruz County,
one year from
provided the branch is established within
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.)
Item No. 4
11/22/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS
orrscula. CORRESPONDENCE
TO THE •OAIRO
November 22, 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 in the vicinity
of the intersection of Saratoga Avenue and Campbell
Avenue, San Jose, California, provided the branch is
established within one year 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.)
01'
Ai
BOARD OF GOVERNORS
.....
cs,,W 001;•.
Item No. 5
11/22/65
OF THE
k• •
•
•
FEDERAL RESERVE SYSTEM
T•
WASHINGTON, D. C. 20551
ADORERS orriciAL CORRESPONDENCE
TO THE BOARD
November 22, 1965
Mr. M. Monroe Kimbrel, First Vice President,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia. 30303
Dear Mr. Kimbrel:
This refers to your letter of
regarding a penalty of $179.51 incurred
and Trust Company, Arabi, Louisiana, on
in reserves of $78,000 for the biweekly
October 13, 1965.
November 3, 1965,
by the St. Bernard Bank
an average daily deficiency
computation period ended
because of
It is noted that the deficiency occurred
e and flood
hurrican
O perational difficulties as a result of recent
reserve
a
for
conditions and that the bank has been penalized
deficiency only once during the past five years.
your Bank to
In the circumstances, the Board authorizes
period ended
the
Waive the assessment of the penalty of $179.51 for
October 13, 1965.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
e
Item No. 6
11/22/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
AOONCell OFFICIAL COIRMIESPONCIENCIL
TO
THE 1110A140
November 22, 1965
Mr. Atherton Bean,
Federal Reserve Agent,
Federal Reserve Bank of Minneapolis,
Minneapolis, Minnesota. 55440
Dear Mr. Bean:
in your letter of
In accordance with the request contained
appointment of
the
es
!!!vember 6, 1965, the Board of Governors approv
at the Federal
Agent
e
Reserv
Raynold W. Anderson as Assistant Federal
on, effective
Anders
G.
Morris
eserve Bank of Minneapolis, to succeed Mr.
ilma
ediately.
tanding that Mr. Anderson
This approval is given with the unders
Board of
be solely responsible to the Federal Reserve Agent and the
during
that,
except
,
duties
?rernors for the proper performance of his
y in
vacanc
a
or
Agent,
e
absence or disability of the Federal Reserv
ors.
Govern
of
Board
at office, his responsibility will be to the
his duties as Assistant
When not engaged in the performance of
Fed eral
the approval of the Federal
Res
Reserve Agent, Mr. Anderson may, with
for the Bank as will
work
such
n_erve Agent and the President, perform
l Reserve Agent.
Federa
ant
uE be inconsistent with his duties as Assist
on is reminded of the
It will be appreciated if Mr. Anders
of the staff of the
member
:0rtance of his responsibilities as a
of independence from
nance
mainte
th eral Reserve Agent and the need for
these responsibilities.
e operations of the Bank in the discharge of
vbich
the usual Oath of Office,
Please have Mr. Anderson execute
ors.
Govern
of
Should be forwarded to the Board
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Item No. 7
11/22/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS
orriciAL
CDEaPONDENCE
TO THE "BOARD
November 22, 1965
CONFIDENTIAL (FR)
Mr. C. J. Scanlon, President,
Federal Reserve Bank of Chicago,
Chicago, Illinois. 60690
Dear Mr. Scanlon:
As requested in your letter of November 5, the Board
of Governors approves, retroactive to November 1, 1965, payment
by the Federal Reserve Bank of Chicago to the Bank's Electricians
of the following annual salaries, which are above the maximum of
the grades in which the positions are classified.
Title
Head Electrician
Electrician
Annual Salaries
$9,880
8,892
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
kJ, I ).
Item No. 8
11/22/65
UNITED STATES OF AITERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the
Ilatter of the Application of
INITED CALIFORNIA BANK
for
p
ePproval of merger with
-sether River
National Bank
ORDER APPROVING URGER OF BANNS
There has come before the Board of Governors, pursuant to the
tanklIerger Act of 1960 (12 U.S.C. 1828(c)), an application by United
Cal4c
"ornia Bank, Los Angeles, California, a State member bank of the
"O. Reserve System, for the Board's prior approval of the merger
() that
bank and Feather River National Bank, Oroville, California,
umer
the charter and title of the former. As an incident to the merger,
the
8°Ie office of Feather River National Bank would become a branch of
the,
esulting bank. Notice of the proposed merger, in form approved by
'
the t
"rd, has been published pursuant to said Act.
Upon consideration of all relevant material in the light of
lie f
-4etors set forth in said Act, including reports furnished by the
coptol
of the Currency, the Federal Deposit Insurance Corporation,
37r,'
-2and the Attorney General on the competitive factors involved in
the Proposed merger,
IT IS HEREBY ORDERED, for the reasons set forth in the
lloardis
is
Statement of this date, that said application be and hereby
c-PProved, provided that said merger shall not be consummated
Ilithin seven calendar days after the date of this Order or
(I))
ater than three months after said date.
Dated at Uashington, D. C., this 22nd day of November, 1965.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Shepardson, Mitchell, Daane,
and Masa.
Voting against this action:
Governor Robertson.
(sign)
Sherman
Merritt Sherman,
Secretary.
- 379i
Item No. 9
11/22/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION OF UNITED CALIFORNIA BANK
FOR APPROVAL OF MERGER WITH
FEATHER RIVER NATIONAL BANK
STATEMENT
United California Bank, Los Angeles, California ("United"),
ilith total deposits of $2.7 billion, has applied, pursuant to the Bank
lierger Act of 1960 (12 U.S.C. 1823(c)), for the Board's prior approval
Of the merger of that bank and Feather River National Bank, Oroville,
Ca
]
lifornia ("National"), which has total deposits of $3.6 million)
The banks would merge under the charter and title of United, which is
a member of the Federal Reserve System.
As an incident to the merger,
the one office of National would become an office of United, increasing
the number of its authorized offices to 180.
As required by law, the Board has considered, as to each
Of the banks involved, (1) its financial history and condition, (2) the
clequacy of its capital structure, (3) its future earnings prospects,
(4) the general character of its management, (5) whether its corporate
11°11ezs are consistent with the purposes of 12 U.S.C., Ch. 16 (the
l'ederal Deposit Insurance Act), (6) the convenience and needs of the
posit figures are as of June 30, 1965.
9
"P-'10
•,
-2-
ccsimunity to be served, and (7) the effect of the transaction on
c°rapetition (including any tendency toward monopoly).
The Board
considering all of
maY "t approve the transaction unless, after
thes
efactors, it
public interest.
finds the transaction to be in the
Banking factors. -
National opened for business a little
1°re than three years ago and its capital structure is adequate.
From
its inception, National pursued an aggressive policy of soliciting
lending
"szlercial and industrial loans well in excess of its
correspondent bank.
calIncitY, with overlines placed with a
Many of
were made to
these loans were for relatively long terms, and several
4rrowers outside the Oroville area.
As of June 16, 1965, the bank's
1°n11-to-deposit ratio exceeded 80 per cent.
The application states
tial loss to the
that this ratio cannot be reduced without substan
bank and that reduction of the ratio through the repayment of
five years.
c)4tst nding loans will take from three to
The bank's
deposits to
cnodition has been further affected by the failure of
-deposit
c"tinue to increase, and as a result of the high loan-to
forced
0 and its restricted secondary reserves, National has been
to
ments.
'imit its lending functions primarily to servicing prior commit
114,
d
'e the bank's future operating earnings prospects may be regarde
as loans are probable.
4airlY satisfactory, sizable losses on
difficulties.
National is experiencing management
4
b'n01 executive officer resigned in late 1964.
Its
At that time, its
_3-
- 3793
current president, uho is well past normal retirement age, assumed
%ecutive duties on a temporary basis until new management could be
Shortly thereafter, the bank's vice president resigned.
)2°und.
Ilational's current president has devoted a substantial amount of
43 time to a search for permanent management but has failed to
find
C qualified executive officer interested in supervising the
affairs
of the bank.
Consummation of the proposal would solve this
Problem.
Convenience and needs of the communities. - Because
44°nal is too small for consummation of the proposal to affect
t4
services that United can render, the effects of the merger
II"ld be felt only in the Oroville area.
As National is the only banking institution headquartered
e, merger of it into a large bank would deprive local
in
tamers
of
t the opportunity to do business with a local bank;
411ever, the number of alternatives in Oroville would remain
ch
National is not in a position to serve its community
to a,
g effective degree.
ar*etatUral
At present the Oroville area is predominantly
area, but with the completion of the nearby Oroville
(1a171 PrOject in 1960, rapid development is expected, particularly of
4teatiena1 facilities and attendant service establishments.
Ilatianal has
made relatively few loans to farmers, and the bank's
ial condition does not allow it to aid in the development of
-4it3
upon which
community or assist with the agricultural requirements
the area's economy is currently based.
In view of this condition and
the h
would
.ank's management difficulties, the needs of the community
be better served by approval of the proposed merger.
ion
Competition. - United is a State-wide banking organizat
°Perating branches in 33 of the 58 counties of the State.
National
°Perates primarily in the immediate Oroville area, and competition
between the two banks is insignificant.
The nearest offices of
2/
United are 23 and 25 miles from National, and the service areas,
Se
Parated by natural barriers, do not overlap.
Within the immediate vicinity of National are four branches
ef three
other banks:
(2)
First
(1) Bank of America NT & SA, San Francisco;
and (3) Central
Western Bank and Trust Company, Los Angeles;
ValleY National Bank, Oakland.
Each of these banks constitutes an
cti've competitive force throughout the central valley of California.
eliminate a
While approval of the proposed merger would
1°cal bank, National is no longer a significant competitive force
141 the Oroville area.
unit
The replacement of a noncompetitive
n
'11.th a branch of an aggressive institution would strengthe
'31.nPetiti0n in the area served, and the merger would have little
eff.
'et outside this area.
by the concentration
Banking in California is characterized
°f b
banking
cnking resources and banking offices in five large branch
4Yst m5,
some increase
Consummation of this proposal would result in
more of its
Zi
de The area from which a bank derives 75 per cent or
ons.
corporati
and
P°sits of individuals, partnerships,
3725
y
relativel
in this concentration, although such increase would be
insignificant.
United ranks fifth in deposit size in California
Ilith 8.2 per cent of the total deposits in the State.
The addition
cent of
°E National's deposits, which comprise 4/100ths of one per
tc/tal deposits in the State, uould not change United's relative
of
! The small increase in concentration
PcIsition in California)
be more
bankirg resources that would result from this proposal would
on
than offset by the other factors in this case and the restorati
°f the office of National to a significant competitive position.
United's total
During the period 1955-1964, 38 per cent of
ciePosit growth and 59 per cent of its total increase in number of offices
l'esulted from mergers.
It should be noted that 28 per cent of the
t°tal deposit growth and 36 per cent of the total office growth resulted
Trust Company into
ft.°111 Only one merger, that of First Western Bank and
California Bank (United 's predecessor)
to provide
Summary and conclusion. - National has failed
its
ttlerlingful competition in the Oroville area, and in view of
itq
inability to acquire
uity position, developing loan problems, and
slice
needs of the area
ession to its temporary management, the banking
1101141
effectuated. These factors
be better served if the proposal were
offs
that United
et the adverse considerations that arise from the fact
the high degree of
'allowed an expansive merger policy and from
corv,
entration existing in California.
'
proposed merger would be in
Accordingly, the Board finds that the
the
Public interest.
11(5\*Iber 24, 1965. (Revised)
/ Th
ese figures are as of December 31, 1964.
379(
Item No. 10
11/22/65
ON
DISSENTING STATEMENT OF GOVERNOR ROBERTS
and National
The effect of the proposed merger of United
United and the
1314st be assessed in the light of both the history of
degree of concentration of banking resources in the State of California
in the hands of a few large banks.
United's proposed acquisition is
°n1Y the latest of a series of similar acquisitions by United and other
oligopoly in
large California banks that could lead to a complete
caulmercial banking in the State.
ion in the
National is the only local banking institut
since its
C)rcville area, and it has shown increasing profits every year
inception.
are huge, State-wide
Two of the three other banks in this area
Valley National Bank,
banking institutions, and the third bank, Central
Oakland, with deposits of $156 million, is an aggressive competitor
throughout the central valley of the State.
Elimination of National
large,
leaves the residents of Oroville with only a choice among
far removed from the
41"01ithic banking institutions with home offices
(4'°ville area.
elimination of National
The majority attempts to justify the
loan-to-deposit ratio,
"a local banking institution by citing its high
its
for
inability effectively to serve the community, and its need
would not, in
successor management. Perhaps it is true that National
the
effectively as if
immediate future, be able to serve its community as
- 3797
-2it had a
lower loan-to-deposit ratio.
However, rejection of the
aPPlication would mean that the bank would remain an alternative source
"banking services, and I am unconvinced from the record before the
board that the bank would not soon be in a position to compete
qgressively once again for new loan business.
In my opinion, the
bank's difficulties were alleviated with the institution of its current
Management.
I realize that the current management is in a sense only
temPorary, but I believe that a diligent search would produce an
lternattve more in the public interest than the present proposal.
United has compiled an extremely aggressive merger record
ver the past ten years.
In the period 1955-64, United's deposits grew
hY $2,050 million, and mergers accounted for approximately 38 per cent
Of
this growth.
During the same period, mergers accounted for 59 per
cent of United's increase in number of banking offices.
The Department
Of Justice sued to prevent one merger - the 1961 merger of California
tan,.
"(United's predecessor) with First Western Bank and Trust Company charging violations of both the Sherman and Clayton Acts. As a result
Of
this suit, 65 banking offices of First Western Bank and Trust Company
/4ern
'
sold to a new State-wide banking organization.
However, United
8411 ranks fifth in size of all banks in the State of California with
8 2 Per cent of total deposits.
'
small,
Not only do I view United's aggressiveness in acquiring
ces,
'Pendent banks with apprehension, but, absent unusual circumstan
the
concentration of banking resources in the five largest banks in the
3798
State
Should in itself prohibit further bank acquisitions by any of
-1/
of all deposits in
these five, which together hold 78.5 per cent
the State.
Accordingly, even the slightest increase in concen-
t
ration of banking resources through the acquisition of sound,
illdePendent banks cannot be said to be "insignificant". Each
aquisition by these giants makes it more difficult for the small
banks to compete, which could result in a banking structure that
14ould be the very antithesis of that contemplated by the Bank Merger
Act of
1960.
would disapprove the appl cation.
November
22, 1965.
ls percentage is as of December 31, 1964.
Item No. 11
11/22/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
CE
ESPONDEN
ADDRESS OFFICIAL CORR
TO THE BOARD
November 29, 1965.
Mr. Karl R. Bopp, Chairman,
Conference of Presidents,
phia,
Federal Reserve Bank of Philadel
1
1910
.
ania
Philadelphia, Pennsylv
Dear Mr. Bopp:
its September 27, 1965, meeting,
The Board has noted that at
in
idered proposals for improvement
the Conference of Presidents cons
the
At that time,
the Federal Reserve check collection system.
would give early
that
y
stud
ommittee
Conference authorized a subc
consideration to the following topics:
ement of all types of local
The promotion and encourag
arrangements or facilities.
or regional check clearing
transportation of checks.
Improvements in the means of
es by country banks, such
Revision of payment procedur
, in lieu of present
as an automatic charge plan
remittance practices.
idents,
report of the First Vice Pres
The Board also has noted that the
ded
mmen
reco
her
furt
ies,
above stud
which originally recommended the
and
sion
smis
Tran
Data
y
stud
d to
that the Ad Hoc Subcommittee appointe
sion
of electronic transmis
P rocessing should consider the development
the check as a payment
of
ce
importan
sYstems designed to reduce the
mmendation.
Conference approved this reco
mechanism, and that the
the prospect of studies along
The Board is gratified at
ram and
include both a short-range prog
these lines, which in effect
there is
that
ection, it believes
a long-range program. In this conn
rmediate
inte
an
ed
might be call
also a need for the development of what
the
ble
tica
prac
as
member banks as soon
Program aimed at extending to
k
chec
d
mate
auto
be derived from
full potential, of benefits that can
ude:
incl
ld
shou
handling. Such a program
near future of a plan under
(1) The development in the
s and Branches would serve
which Federal Reserve Bank
all items fully qualified
as clearing centers for
380
Mr. Karl R. Bopp, Chairman.
-2-
such a plan
for electronic handling. Hopefully,
other
and
ng
endi
would eliminate the direct-s
er banks
memb
upon
sed
sorting requirements now impo
on
facilities.
ecti
coll
k
that use Federal Reserve chec
(2)
lems that would
A survey of the possibilities and prob
lopment of
deve
the
in
need to be taken into account
e all cash
stag
ial
init
a plan under which (a) in the
Branches
and
s
Bank
rve
items deposited in Federal Rese
ng bank
siti
depo
the
to
would be immediately credited
(b)
;
and
bank
ee
draw
and immediately charged to the
would
ks
chec
of
ng
ardi
ultimately the sorting and forw
ce in
offi
rve
Rese
ral
Fede
be eliminated by having the
ng
havi
r
afte
them
file
d
which they are first deposite
the
on
data
the
that
so
tape
recorded them on magnetic
the
by
ed
serv
now
oses
purp
tape could be used for the
checks themselves.
rehensive changes in Federal
The Board recognizes that comp
would involve, among other
Reserve check collection procedures
relations, the possible need
c°nsiderations, legal questions, bank
ems, and the
for adoption of new check and account numbering syst
es that in each of
acquisition of new equipment. It also recogniz
may take some time to
these areas there are complex problems that
ver, suggest that there
solve. These circumstances themselves, howe
and the Board will
should be no delay in attacking the problem,
ittee or committees
aPPreciate your conveying to the appropriate comm
d in this letter.
Of the Presidents' Conference the views expresse
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
cc:
Mx. Lawrence C. Murdoch, Jr.,
Presidents.
Secretary, Conference of
- 38111
Item No. 12
BOARO OF GOVERNORS
11/22/65
OF THE
P.- 1DtFRAL IRESERVt SYSTEM
WASHINGTON, O. C. it551
ADORES* OFFICIAL CORREISPONOENCE
TO THE •CARO
4anuary 14, 19661
Mr. Louis Berelson,
Lind, Somers & Co.,
U.S. National Bank Bldg.,
97204
Portland, Oregon:
Dear Mr. Berelson:
This is in tesponse to your letter of October 15, 1965,
in which you request an interpretation of the meaning of a "business
day" as that term is used in section 220.4(c)(7) of Federal Reserve
Regulation T, "Credit by Brokers, Dealers and Members of National
Securities Exchanges". In particular, you wish to know if a banking
holiday on which the stock exchanges are open is a business day for
the purpose of calculating the "7 full business days" that are the
maximum time for payment for a security purchased in a special cash
account.
As you know, transactions in a Special cash account must
be bona fide cash purchases; the customer Must be in a position to
make prompt payment and is tequired to do sot As sdon as it appears
to the creditor that the customer will not pay, he must liquidate the
transaction. The "7 full business days" rule refers only to the maximum
Accordtime that a broker may wait for payment, before such liquidation.
days
business
banking
inglY, the business days referred to represent not
on
days
business
rather
but
On which the customer may obtain the cash,
which the brokerage house is open to receive payment.
Therefore, the Board concludes that any day on which the
brokerage house that effects a transaction is open for the transactioft
of business constitutes a "business day" within the purview of section 220.4(c)(7).
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
3802
Item No. 13
11/22/65
BOARD OF GOVERNORS
OF THE
•„
0.
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
CE
ADDRESS OFFICIAL CORRESPONDEN
TO THE BOARD
November 22, 1965.
Mitchell Wendell, Esq.,
Legal Counsel,
Council of State Governments,
1755 Massachusetts Avenue, N.W.,
Washington, D. C. 20036.
Dear Doctor Wendell:
g Director
At the request of Mr. Grove Smith, Actin
rce,
Comme
of
of the Marketing Division, BDSA, Department
in 1964
ned
obtai
n
there is enclosed a summary of informatio
operation
the
rning
conce
from the twelve Federal Reserve Banks
Distheir
in
rs
issue
and regulation of nonbank money order
proa
of
ion
derat
tricts, for use in connection with consi
that the Council of
posal made by the Department of Commerce
State regulatory
State Governments develop a model code of
legislation with reference to such activity.
been made availAlthough the enclosed document has
to requests
nse
respo
in
ess
able to certain members of Congr
for publicared
prepa
not
was
it
for information on the subject,
use it only in evaluating
tion, and it is assumed that you will
the proposal in question.
will be helpful to
We trust the information supplied
we might be
which
in
way
You, and should there be any further
Mr. Smith
st
that
sugge
to
ate
of assistance, please do not hesit
discuss the matter with us.
Sincerely,
Vet..St
Karl E. Bakke,
Assistant Secretary.
Enclosure.
cc:
Mr. Smith
-38er-P
Item No. 14
11/22/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS
OFFICIAL
CORRESPONDENCE
TO THE BOARD
November 24, 1965
Mr. John L. Nosker, Vice President,
Federal Reserve Bank of Richmond,
Richmond, Virginia. 23213
Dear Mr. Nosker:
In accordance with the requests contained in
your letters of November 18, 1965, the Board approves
e E.
the appointments of Edward T. Whitlock, Jr., and Burri
ve
Eaves, III, as assistant examiners for the Federal Reser
Bank of Richmond, effective today.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER