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Minutes for
To:
Members of the Board
From:
Office Of the Secretary
November 23l962
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 Friday, November 23, 1962.
The Board met in the Board
Room at 10:00 a.m
PRESENT:
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Mills
Robertson
Shepardson
Sherman, Secretary
Kenyon, Assistant Secretary
Molony, Assistant to the Board
Cardon, Legislative Counsel
Solomon, Director, Division of
Examinations
Mr. Koch, Associate Director, Division
of Research and Statistics
Mr. Holland, Adviser, Division of
Research and Statistics
Mr. Sammons, Adviser, Division of
International Finance
Assistant to the Secretary
Landry,
Mr.
Government Finance Section,
Chief,
Yager,
Mr.
Division of Research and Statistics
Mr. Axilrod, Senior Economist, Division of
Research and Statistics
Senior Economist, Division of
Keir,
Mr.
Research and Statistics
Mr. Reynolds, Chief, Special Studies and
Operations Section, Division of International Finance
Mr. Goldstein, Economist, Division of
International Finance
Mr.
Mr.
Mr.
Mr.
Mr.
Money market review.
Mr. Keir reported on recent develop-
in the money market, referring in the course of his remarks to
celtain tables that had been distributed before the meeting with
beelpect to changes in the composition of the System portfolio of
Government securities and the level and structure of interest rates
°4 Government securities.
Mr. Axilrod then discussed bank reserves,
er'edit, and the money supply, following which Mr. Goldstein commented
°4 foreign exchange market developments.
11/23/62
-2At the conclusion of this presentation all members of the
staff except Messrs. Sherman, Kenyon, Molony, and Landry withdrew
ani the following entered the room:
Mr. Hackley, General Counsel
Mr. Farrell, Director, Division of Bank
Operations
Mr. Solomon, Director, Division of
Examinations
Mr. Hexter, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Goodman, Assistant Director, Division
of Examinations
Mr. Poundstone, Review Examiner, Division of
Examinations
Mr. Hill, Attorney, Legal Division
Discount rates.
Pecleral
The establishment without change by the
Reserve Banks of Cleveland, Richmond, Chicago, St. Louis,
on
Ilillneapolis, and Kansas City on November 21, 1962, of the rates
11-scounts and advances in their existing schedules was approved
be
114animously, with the understanding that appropriate advice would
sent to those Banks.
of which is
Circulated item. The following item, a copy
attached as Item No. 1, was approved unanimously:
Letter to County Bank of Santa Cruz, Santa Cruz, California, approving the establishment of a branch in the
East Cliff Village Shopping Center, Santa Cruz County.
ional
Proposed investment by Manufacturers Hanover Internat
Fitlance corporation.
There had been distributed a draft of letter
t° Manufacturers Hanover International Finance Corporation, New York,
11/23/62
-3-
New York, that would grant permission for the purchase of shares of
Corporation Financiers. de Colombians. de Desarrollo Industrial, Bogota,
Colombia.
With respect to a request by Chase International Investment
Corporation, New York, New York, for permission to purchase shares of
Financiera de la Pequena Empresa, S. A., San Salvador, El Salvador,
Governor Robertson had inquired at the meeting on Wednesday, November 21,
operations.
1962) whether the institution in El Salvador conducted banking
financing
It 80) there was the question whether purchase by an Edge Act
c°rPoration of shares in such an organization should be permitted.
AS a result of this inquiry, action on the request of Chase International
*ts deferred pending staff investigation.
Since the request of Manufacturers Hanover involved the same
Illestion, action on it was deferred pending further investigation.
Messrs. Shay, Goodman, Poundstone, and Hill then withdrew
trtin the meeting.
Application of Central Trust Company Rochester
(Items 2 and 3).
N. Y.,
Pursuant to the decision reached at the meeting on
statement
llovember 16, 1962, copies had been distributed of an order and
Ilith respect to approval of the application by Central Trust Company
Rochester
N.
y., Rochester, New York, to merge with Prattsburgh State
1144k) Prattsburg, New York.
statement was
Without objection, the issuance of the order and
111112211.E.ad....
Copies are attached as Items 2 and 3.
_)4..
11/23/62
Citizens Bank & Trust Company (Items 4 and 5).
Copies had
been distributed of a memorandum from the Legal Division dated
November 21, 1962, in further reference to termination by Citizens
8ank & Trust Company, Park Ridge, Illinois, of its United Security
Account Plan.
The Board had written to the bank on July 11, 1962,
stating that "discontinuance of the plan shall be completed not
later than August 27, 1962."
Subsequently, the August 27 desiline
lras extended on two occasions, more recently on October 25, 1962,
'
l'hen the Board extended the period until December 31, 1962, "with
the proviso that all depositors under the United Security Account Plan
be notified by December 1 that after December 31, 1962, no more checks
414Y be drawn thereunder."
On November 9, 1962, Citizens Bank wrote
to the Board through Mr. Hodge, General Cpunsel of the Chicago Reserve
Ilank, stating that the bank was "disturbed by the proviso" in the
11°4rcl i s letter of October 25.
As noted in the memorandum, the Board's letter of July 11,
1962, was sent in the hope, based on the belief of the Chicago Reserve
that this procedure would result in termination of the United
ry
SecuritY Account Plan without the necessity of formal disciplina
acti°11-
Account
However, should the Board now insist that United Security
clePositors be notified by December 1 that no more checks could be
ciremn thereunder after December 31, 1962, and should the bank fail to
section 9
ec)ril lY, the Board might have no alternative but to begin a
11/23/62
-5-
Pr*oceeding to terminate Citizens Bank's Federal Reserve membership.
Because of the seriousness of such a step, the Legal Division suggested
on
th4t Mr. Hodge, who would return to his office from vacation
November 27, have an opportunity to explore the matter informally with
Citizens Bank, at which time he might be in a position to form a
hdgment as to whether the member bank was engaging in dilatory tactics
Or vas attempting in good faith to discontinue the plan promptly.
It
1118 the Legal Division's recommendation, therefore, that no response
be made at the present time to Citizens Bank's November
9 letter, but
that immediately upon Mr. lodge's return to his office he be asked
to take up the matter informally with the appropriate officials of
Citizens.
Following such action, should Mr. Hodge be satisfied as to
the good faith of the bank's efforts, it might seem advisable, in the
°Pinion of the Legal Division, for the Board to grant additional time
rc)r the bank to effectuate termination of the United Security Accounts.
04 the other hand, should it appear that the bank was not genuinely
6.ttemPting to comply with the Board's order, it might seem necessary
rGr the Board to issue a "final warning," with the possibility of a
Proceeding against the bank thereafter under section
9 of the Federal
Reserve Act.
There was attached to the memorandum a draft of letter that
Might be used for reiterating the Board's insistence on termination by
be-Qiilber 31 of the United Security Accounts preceded by "sufficient"
4480
11/23/62
-6-
notice to depositors, but not specifying notice by December 1, since
that might not be practicable.
After comments by Mr. Hexter on the most recent development
in connection with the matter, there followed a discussion during which
Governor Mills stated reasons why he felt it would be desirable to
avoid the institution of a section
9 proceeding if possible. Governor
Shepardson, on the other hand, expressed a somewhat different view,
indicating that he felt the Board should be prepared to take whatever
action was necessary if it appeared that the member bank was pursuing
dilatory tactics and did not intend to discontinue the plan.
It was
brought out that in any event the present recommendation of the Legal
nivision was only for an interim handling of the problem and that a
final decision was not called for at this time.
Reference was made by
Mr. Hexter to a letter proposed to be sent to Mr. Hodge requesting his
further consideration of the matter, and it was understood that this
letter would be sent.
A copy is attached as Item No.
4.
Secretary's Note: Mr. Hodge subsequently
expressed the opinion that it would be
appropriate to send to the member bank
a letter in the form of the draft that
had accompanied the Legal Division's
memorandum to the Board. Accordingly,
the letter was transmitted by him to
Citizens Bank under date of November 26,
1962. A copy is attached as Item No. 5.
The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
the following items:
11/23/62
_7_
Memorandum from the Division of Administrative Services recommendacceptance of the resignation of Eleanor W. Yates, Cafeteria
lielper in that Division, effective December 14, 1962.
Memorandum from Mr. Landry, Assistant to the Secretary of the Board
dated November 20, 1962, recommending that a visit to the Board's
offices be arranged for participants in the Economic Development
Institute of the International Bank for Reconstruction and Development
O1 December 12, 1962, the program to include a luncheon in the staff
(lining room.
rT)
Secre
7'‘
'
BOARD OF GOVERNORS
Item No. 1
11/23/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADOUESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 23, 1962.
Board of Directors,
County Bank of Santa Cruz,
Santa Cruz, California.
Gentlemen:
The Board of Governors of the Federal Reserve System
approves the establishment of a branch by County Bank of
Santa Cruz in the East Cliff Village Shopping Center between
14th and 17th Avenues at East Cliff Drive near the city of
Santa Cruz, Santa Cruz County, California, provided the branch
is established within one year from the date of this letter.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
(The letter to the Reserve Bank stated that the Board also
the period allowed
had approved a six-month extension of
extension should be
an
if
to establish the branch; and that
the
Board's letter
in
requested, the procedure prescribed
followed.)
Of November 91 19621 (S-1846) should be
1 .1
Item No. 2
11/23/62
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C,
0.0
In the Matter of the Application of
CENTRAL TRUST COMPANY ROCUSTER, N. Y.
Or approval of merger with
Prattsburgh State Bank
On.
ORDER APPROVING IIERGER OF BANKS
t to
There has come before the Board of Governors, pursuan
the Bank Merger Act of 1960 (12 U.S.C. 1823(c)), an application by
New York, a memCelatral Trust Company Rochester, N. Y., Rochester,
the
ber bank of the Federal Reserve System, for prior approval by
Board of the merger of that bank and the Prattsburgh State Bank,
Prattsburg, New York, under the charter and title of the former.
of Prattsburgh State
As an incident to the merger, the single office
tank would be operated as a branch of the Central Trust Company
Ro chester, N. Y.
Notice of the proposed merger, in form approved
bY the Board, has been published pursuant to said Act.
light
Upon consideration of all relevant material in the
°f the factors set forth in said Act, including reports furnished
bY the Comptroller of the Currency, the Federal Deposit Insurance
competitive factors
Corporation, and the Department of Justice on the
involved in the proposed merger,-
41SI
2
IT IS HEREBY ORDERED, for the reasons set forth in the
Board's Statement of this date, that said application be and ilereby
118
approved, provided that said merger shall not be consummated
(a) within seven calendar days after the date of this Order or
(b) later than three months after said date.
Dated at Washington, D. C., this 23rd day of November, 1962.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Robertson, Shepardson, King,
and Mitchell.
Absent and not voting:
Governor Mills.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(sEAL)
Item No. 3
11/23/62
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY CENTRAL TRUST COMPANY ROCHESTER, N. Y.
FOR APPROVAL OF NERGER WITH PRATTSBURGH STATE BANK
STATMENT
Central Trust Company Rochester, N. Y., Rochester, New York
("Central Trust"), with deposits of 0.0706 million as of June 30, 1962,
has applied, pursuant to the Bank Merger Act of 1960 (12 U.S.C, 1828(c)),
prior approval by the Board of the merger of that bank and Prattsburgh
State
Bank, Prattsburg, New York ("Prattsburgh Bank"), with deposits
°f $2 million as of the same date.
The banks would merge under the
charter and title of Central Trust, which is a member State bank of
the Federal Reserve System; and, as an incident to the merger, the
1e office of Prattsburgh Bank would become a branch of Central
1411st, increasing the number of offices of Central Trust from 10 to 11.
Under the Act, the Board is required to consider, as to each
°I' the banks involved, (1) its financial history and condition, (2) the
4c/equacY of its capital structure, (3) its future earnings prospects,
(4) the
general character of its management, (5) whether its corporate
Pc4relio are consistent with the purposes of 12 U.S.C., Ch. 16 (the
eral Deposit Insurance Act), (6) the convenience and needs of the
(:1111111 lity to be served, and (7) the effect of the transaction on
c°1nPetition (including any tendency toward 'monopoly).
The Board may
•
-211()t approve the transaction unless, after considering all these factors,
it rinds the transaction to be in the public interest.
Banking factors. - The financial history and condition of
Central Trust are satisfactory, and its capital structure is reasonably
adequate. The earnings prospects of the bank are favorable, and its
lriallagernent is competent. The financial history and condition of
Pratts-urgh Bank were regarded as reasonably satisfactory until 1957.
Sin
es then the bank has had difficulties resulting largely from poor
l'f3171 Prices that led to deterioration in the asset condition of the bank
44(ifro1n loan administration. The capital structure of Prattsburgh Bank
18 r
easonably adequate and its earnings have been satisfactory, but heavy
loss
es on loans have absorbed a large percentage of earnings. Consummation
of the transaction would provide strengthened management and resources
d
ealing with the difficulties that have faced the bank during recent
har,
'• The financial condition, capital structure, earnings prospects,
• Illanagement of the bank resulting from this transaction would be
• sraotory. There is no indication that there is or would be any in• lstenOy with the provisions of 12 U.S.C., Ch. l60
Convenience and needs of the community. - Five of the ten
ortiees
of Central Trust are in Rochester, the largest city in northNew York (1960 population 319,000); four of its other five
ottiees
are within a seven-mile radius of the city in Monroe County,
• orle
is about twenty-five miles east of Rochester, in Wayne County.
l'rattsburg (1960 population 690) is sixty miles south of Rochester, and
l'itlattsburgh Bank is the only banking office in the village.
Consummation of this proposal would affect principally the
e°47enience and needs of the Prattsburg area. The Prattsburgh Bank, as
branCh
of Central Trust, would offer a number of banking services not
available in Prattsburg, such as trust services, home equipment loans,
411c1 various types of business and installment loans.
Competition. - The competitive position of Central Trust would
11°-t he appreciably changed by this merger. It is now, and would continue
to
ve after the merger, the fourth largest bank in the city of Rochester.
Ar
attsburgh Bank is over 50 miles from the nearest branch of Central Trust,
44(1 there is little, if any, competition between the two banks.
Prattsburgh Bank is regarded as having a possible service area
1"Iih a l7-mile radius of its office. It ranks fifth in deposits among
the
elght banking offices within this area and competes to a small degree
11411 them,
but it serves principally Prattsburg and its immediate environs.
Summary and conclusion. - Consummation of this proposal should
riot
the
have a significant effect upon banking competition. If effectuated,
'erger would provide the office of Prattsburgh Bank, as a branch of
44
'
14-, Trust,
the
with strengthened management and resources in dealing with
Problems confronting the bank. Broader banking services would be
°I'rel'ed to the banking public in Prattsburg and vicinity.
Accordingly, the Board finds the proposed transaction to be
the
public interest.
lic,vernber 23,
1962
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
11/23/62
4
WASHINGTON 25, D. C.
ADORERS OFFICIAL CORREBPONDENCE
TO THE BOARD
November 23, 1962
Mr. Paul C. Hodge, Vice President,
General Counsel & Secretary,
Federal Reserve Bank of Chicago,
Chicago 90, Illinois.
Dear Mr. Hodge:
Enclosed is an undated letter from the Board to Citizens
Bank & Trust Company, Park Ridge, Illinois, relating to (1) the date
Of termination of operations under that bank's United Security Account
Plan and (2) notification of depositors of such termination.
The Board has adopted the procedure recommended in the
enclosed memorandum on this subject, dated November 21, 1962, from its
Legal Division. The Board requests that you discuss with such officer
or officers of Citizens Bank as you deem appropriate, as promptly as
ts, in
Possible, the bank's November 9 letter and subsequent developmen
in
good
is
attempting
the
bank
whether
order to reach a judgment as to
to
say,
Needless
ry
manner.
satisfacto
a
faith to terminate the plan in
of
ance
discontinu
purported
a
by
the problem would not be solved
, in place
Operations under the plan if the bank offered to depositors
of form
in
it
details
from
differed
that
Of the plan, an arrangement
make
that
the
plan
substance
of
but not in the essential respects
Objectionable under Regulation Q.
Your conversation with representatives of Citizens Bank may
cause you to conclude that the enclosed letter from the Board to that
batk is unsuitable to the circumstances disclosed. In that event, of
course) the letter should not be dated and mailed, but instead you are
requested to telephone the Board's Legal Division and inform it as to
the situation and the course of action you may wish to recommend. On
the other hand, if you decide that the enclosed letter meets the needs
of the situation, you are authorized to have it dated and mailed on
behalf of the Board.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Enclosures
BOARD OF GOVERNORS
Item No. 5
OF THE
11/23/62
FEDERAL RESERVE SYSTEM
0
WASHINGTON 25. D. C.
*
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 26, 1962
Board of Directors,
Citizens Bank & Trust Company,
Park Ridge, Illinois.
G
entlemen:
This refers to Mr. Reilly's letter of November 9, 1962,
l'egarding the date of December 1, 1962, specified by the Board in its
letter of October 25, 1962 for notification to your customers that
°Perations under the United Security Account plan will be discontinued by December 31, 1962.
Although your bank was informed many months ago that the plan
d°e8 not comply with the provisions of Regulation Q4 and on July 11
Ilae ordered to discontinue its operation, the Board allowed a reasonnle time (until August 27, 1962) for this action. At your request,
'
4e Board extended this time to October 27, 1962, so that your bank
4l1ght obtain advice of counsel and thereafter provide customers with
a reasonable period to make necessary adjustments of their banking
arliangements. On October 25, 1962, again at your request, the Board
e tended the time for termination of the plan to December 31, 1962,
i °vided depositors were notified by December 1 that no more checks may
se drawn under the plan after the end of the year. This further exten,
1°n was chiefly on grounds of fairness to your depositors, who otherwise
ght suffer a relatively substantial loss of interest.
As the United Security Account plan must be terminated by
ecember 31, 1962, your depositors should be given a period of notice
tEricient to enable them to decide what banking arrangement they care
flake after that date.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
@FedFRASER