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Minutes for
To:
Members of the Board
From:
Office Of the Secretary
November 281 1962
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
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Federal Reserve Bank of St. Louis
Minutes of the Board of Governors of the Federal Reserve
System on Wednesday, November 28, 1962.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
King
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Sherman, Secretary
Kenyon, Assistant Secretary
Molony, Assistant to the Board
Fauver, Assistant to the Board
Hackley, General Counsel
Solomon, Director, Division of
Examinations
Johnson, Director, Division of
Personnel Administration
Hexter, Assistant General Counsel
O'Connell, Assistant General Counsel
Hooff, Assistant General Counsel
Leavitt, Assistant Director, Division
of Examinations
Thompson, Assistant Director, Division
of Examinations
Sprecher, Assistant Director, Division
of Personnel Administration
Mattras, General Assistant, Office of
the Secretary
Lyon, Review Examiner, Division of
Examinations
Circulated or distributed items.
Or
The following items, copies
which are attached to these minutes under the respective item numbers
ladicated, were approved unanimously:
Item No.
Letter to Valley Bank and Trust Company,
ngfield, Massachusetts, approving
he establishment of a drive-in branch
4't Westfield.
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Federal Reserve Bank of St. Louis
1
11/28/62
-2Item No.
Letter to Irving Trust Company, New York,
New York, approving the establishment
Of a temporary branch at 2 Broadway,
Borough of Manhattan.
2
Letter to Fidelity-Philadelphia Trust
3
COMpany, Philadelphia, Pennsylvania,
aPProving (1) the establishment of a
branch at Wynnewood, and (2) an investtent in bank premises.
Letter to The Cleveland Trust Company,
Cleveland, Ohio, approving (1) the
establishment of a branch in the Biddulph
Plaza Shopping Center, Brooklyn, and
(2) a drive-in branch at the same approximate
location.
14
Letter to The Vienna Trust Company, Vienna,
Virginia, approving the establishment of a
branch at Church Street and Dominion Road.
5
Letter to Wachovia Bank and Trust Company,
6
Winston-Salem, North Carolina, approving
the establishment of a branch at 1065
Providence Road, Charlotte.
Letter to Whitney Holding Corporation,
7
'lel? Orleans, Louisiana, granting a
cl.etermination exempting it from all
"
(aiding company affiliate requirements
except those contained in section 23A
or the Federal Reserve Act.
Letter to the Securities and Exchange Commission
!:egarding possible violation of Regulation T
.
111 a transaction involving an extension of
'redit by a securities dealer to a corporation
, connection with the retirement of some of
,"e corporation's stock. (With the understandthat an interpretation based on the letter
t°414 be published in the Federal Reserve
411etin and the Federal Register.)
l
j
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Federal Reserve Bank of St. Louis
8
11/28/62
-3Mr. Hooff then withdrew from the meeting.
First Oklahoma Bancorporation (Items 9-14).
In connection
with the application of First Oklahoma Bancorporation, Inc., Oklahoma
City, Oklahoma, for permission to acquire stock of two banks and thereby
become a bank holding company, there had been distributed to the Board
a proposed order and statement that would deny a motion filed by a group
Of protesting banks to reopen the record to permit cross examination on
Matters received in evidence.
After discussion, the order and statement were approved and
their issuance was authorized, with the understanding that the wording
Of the statement would be revised slightly in light of a point raised
at this meeting.
Copies of the order and statement, as issued, are
attached to these minutes as Items 9 and 10.
Pursuant to the decision reached at the meeting on October 31,
1962, Governor Robertson and Governor King dissenting, there had also
been distributed a proposed order and statement reflecting the Board's
aPProval of the aforesaid application by First Oklahoma Bancorporation.
In discussion, authorization was given for minor editorial
changes in the wording of the proposed majority statement.
Governor
144g stated that he would file a dissenting statement, and it was
Uladerstood that Governor Robertson likewise would file such a
statement.
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Federal Reserve Bank of St. Louis
11/28/62
The issuance of the order, majority statement, and dissenting
statements was then authorized.
Copies of the order and statements,
as subsequently issued, are attached to these minutes as Items 11 through
14.
Messrs. Hackley, Solomon, Hexter, O'Connell, Leavitt, Thompson,
and Lyon then withdrew from the meeting.
Salary structure at Atlanta Bank.
There had been circulated
a memorandum from the Division of Personnel Administration dated
proposed
November 6, 1962, regarding an employee salary structure revision
by the Federal Reserve Bank of Atlanta.
The memorandum noted that during
out that
informal conversations with the Atlanta Bank it had been pointed
head office
the upper grades of the employees' salary structure at the
'were falling below the ranges for those grades at other Reserve Banks,
thus making it difficult for the Atlanta Bank to compete to fill professional
Iraoancies.
Board to
On October 15, 1962, the Atlanta Bank requested the
41010rove an amendment to its salary structure for grades 12 through 16,
competitive position.
would place the structure in a more favorable
structure (for those
Rowever, the Bank also proposed to make the new
as the head office.
grades) applicable to the Bank's branches as well
of the proposed
The Personnel Division favored approval
structure changes at the head office, but felt that a similar revision
at the branches was not justified.
There were no research or other
Professional employees at the branches, and the proposed revision would
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Federal Reserve Bank of St. Louis
45:11/28/62
-5-
Place the upper grades for the Atlanta branches higher than those at
most other branches throughout the System.
In discussion, Governor King expressed the feeling that the
Position of the Personnel Division was well taken, but that there were
some mitigating circumstances which would suggest caution.
He then
reviewed some phases of the history of salary administration at the
Atlanta Bank and pointed out that the move toward higher salaries for
UPPer-grade head office positions was in accord with views that had
been expressed to the Bank.
In the circumstances, although the ranges
Proposed for the top grades at the branches might not be entirely
realistic, he would be inclined to approve them, since he would not
yant to discourage the Bank from pursuing progressive salary administration practices in the future by turning down a part of its present
request.
If, however, the Board was inclined to adopt the position
cn the Personnel Division, he felt that the manner in which the subject
14as taken up with the Atlanta Bank would be important.
It was noted that both Chairman Tarver and President Bryan of
the Atlanta Bank were to be in the Federal Reserve Building in the near
fUture.
It was therefore agreed, at the suggestion of Governor Balderston,
that Chairman Martin might discuss the matter with Chairman Tarver and
that Governor King might explore the matter with President Bryan.
In
the circumstances, it was understood that no letter would be sent to
the Atlanta Bank at this time.
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Federal Reserve Bank of St. Louis
11/28/62
-6Chairmen's Conference.
There was an informal discussion with
respect to items on the agenda for meeting of the Conference of
Chairmen of the Federal Reserve Banks to be held November 29-30, 1962.
The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
a letter to the Federal Reserve Bank of
San Francisco (attached Item No. 15)
approving the appointment of Jack A. Byers
as examiner.
'L--1
Secretkal
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Federal Reserve Bank of St. Louis
Item
BOARD OF GOVERNORS
•
No. 1
8/62
11/2
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C..
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 28, 1962
Board of Directors,
Valley Bank and Trust Company,
Springfield, Massachusetts.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment of a drive-in branch by
Valley Bank and Trust Company, Springfield, Massachusetts,
at 7-9 School Street, Westfield, Massachusetts, provided
the branch is established within six months from the date
Of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
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.)
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Federal Reserve Bank of St. Louis
4542
Item No. 2
BOARD OF GOVERNORS
11/28/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November
28, 1962
Board of Directors,
Irving Trust Company,
New York, New York.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment of a
temporary branch at 2 Broadway, Borough of
Manhattan, New York, New York, by Irving Trust
Company, for the purpose of conducting the operations of certain of the bank's departments during
construction of a 30-story addition to its head
office. This approval is given provided the
branch is established within six months from the
date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
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.)
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
°10;CO's
ve$
414,0%
Vot$.haNt
Item No.
OF THE
3
11/28/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
AOORESS OFFICIAL CORREDPONOENCE
TO THE BOARD
'SLR
November 28, 1962
Board of Directors,
Fidelity-Philadelphia Trust Company,
Philadelphia, Pennsylvania.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment of a branch by FidelityPhiladelphia Trust Company, Philadelphia, Pennsylvania,
at 250 East Lancaster Avenue, Wynnewood, Lower Merion
Township, Montgomery County, Pennsylvania, provided the
branch is established within one year from the date of
this letter.
The Board of Governors also approves under
the provisions of Section 24A of the Federal Reserve
Act, an additional investment of $85,000 in bank premises
for leasehold improvements incident to the establishment
of the branch approved in this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
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.)
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
.
FEDERAL RESERVE SYSTEM
Item No. 411/28/62
WASHINGTON 25. D. C.s
ADORERS OFFICIAL CORRESPONDENCE
TO THE SOARO
November 28, 1962
Board of Directors,
The Cleveland Trust Company,
Cleveland, Ohio.
Gentlemen:
The Board of Governors of the Federal Reserve
by The Cleveland
System approves the establishment
a branch in the
Trust Company, Cleveland, Ohio, of
the intersection of
at
Center,
Biddulph Plaza Shopping
Ohio, and a branch,
yn,
Brookl
Ridge and Biddulph Roads,
approximate location
drive-in facility, at the same
shed within six
establi
are
provided both branches
.
letter
this
months from the date of
Very truly yours,
,(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
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 branches; and that if an extension should
be requested for either branch, the procedure prescribed
in the Board's letter of November 9, 1962 (S-1846), should
be followed.)
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Federal Reserve Bank of St. Louis
'
4545
BOARD OF GOVERNORS
Item No. 5
OF THE
FEDERAL RESERVE SYSTEM
11/28/62
WASHINGTON 25. D. C.
ADDRESS orriciAL CORRESPONDENCE
TO THE BOARD
November 28, 1962
Board of Directors,
The Vienna Trust Company,
Vienna, Virginia.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment of a branch by The
Vienna Trust Company at the corner of Church Street and
Dominion Road, Vienna, Virginia, in connection with
your plan to move the bank's main office from this
location to subject's Maple Avenue branch, provided the
proposed branch is established within six months from
the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
, (The letter to the Reserve Bank stated that the Board also
aad approved a six-month extension of the period allowed to
establish the branch; and that if an extension should be
l'equested, the procedure prescribed in the Board's letter
clf November 9, 1962, (S-1846) should be followed.)
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Federal Reserve Bank of St. Louis
Item No.
BOARD OF GOVERNORS
6
108/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE BOARD
November 28, 1962
Board of Directors,
Wachovia Bank and Trust Company,
Winston-Salem, North Carolina.
Gentlemen:
The Board of Governors of the Federal
approves the establishment of a
System
Reserve
Bank and Trust Company at
Wachovia
branch by
Charlotte, North Carolina,
Road,
ce
1065 Providen
established within one
is
provided the branch
letter.
this
of
year from the date
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
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.)
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
7
11/28/62
WASHINGTON 25. D. C.
ADORES
OFFICIAL CORRESPONDENCE
TO THE BOARD
November 291 1962
Mr. Keehn W. Berry, President,
Whitney Holding Corporation,
NW Orleans, Louisiana.
Dear Mr. Berry:
This refers to your application of July 2, 1962, submitted
,
through the Federal Reserve Bank of Atlanta, for a Voting permit from
he Board of Governors of the Federal Reserve System to vote the stock
°!* Whitney National Bank of New Orleans, New Orleans, Louisiana, and
vhitney National Bank in Jefferson Parish, Louisiana.
The Board understands (1) that Whitney Holding Corporation
is a holding company affiliate by reason of the fact that it owns a
laiority of the outstanding shares of stock of Whitney National Bank
Qf New Orleans; (2) that the Corporation also owns a majority of the
°Iltetanding shares of stock of Whitney National Bank in Jefferson
'
sar-ish, but that such bank is not a member bank of the Federal Reserve
rlY tem as it has not commenced business; and (3) that the Corporation
;
1°se not, directly or indirectly, own or control any stock of, or
anage or control, any other banking institutions.
In view of these facts, the Board has determined that Whitney
'-‘J-rig Corporation is not engaged, directly or indirectly, as a busi;
ese in holding the stock of, or managing or controlling, banks, banking
a sociations, savings banks, or trust companies within the meaning of
jction 2(c) of the Banking Act of 1933; and, accordingly, the CorporaI is not deemed to be a holding company affiliate except for the
rlooses of section 23A of the Federal Reserve Act, and does not need a
ting permit from the Board of Governors in order to vote the bank
'
c)ek which it owns.
j
If, however, the facts should at any time indicate that
1kt
111,, neY Holding Corporation might be deemed to be so engaged, this
ter should again be submitted to the Board. The Board reserves the
t̀i&i lit to rescind this determination and make further determination of
lsmatter at any time on the basis of the then existing facts.
a-r"Licularly, should future acquisitions by or activities of the
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Federal Reserve Bank of St. Louis
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. Keehn W. Berry
Corporation result in its attaining a position whereby the Board may
deem desirable a determination that the Corporation is engaged as a
business in the holding of bank stock, or the managing or controlling
of banks, the determination herein granted may be rescinded. The Board
would consider the commencement of business by Whitney National Bank in
Jefferson Parish as a material variation in the facts upon which this
determination is made, and would make a new determination based upon
the facts then existing.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No.
OF THE
8
11/28/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 29, 1962
14r. Irving M. Pollack, Associate Director,
Division of Trading and Exchanges,
Securities and Exchange Commission,
Washington 25, D. C.
Dear Mr. Pollack:
This is in reply to your letter of May 23, requesting the
views of the Board on whether the transfer by Rowles, Winston & Co.
tO Tusco Corporation of 4,161 shares of stock of Tusco Corporation
!or a consideration of 03,288, of which only 10 per cent was paid
la cash, was in violation of Federal Reserve Regulation T. This
depends on whether such extension of credit by Rowles, Winston & Co.
Tusco Corporation was permissible if the transaction came within
he scope of section 220.4(f)(8) of Regulation T, which permits a
creditor" (such as Rowles, Winston & Co.) to
"Extend and maintain credit to or for any customer
Without collateral or on any collateral whatever, for any
Purpose other than purchasing or carrying or trading
securities."
Accordingly, the crucial question is whether Tusco Corporation, in this
..
..ransaction, was "purchasing" the 4,161 snares of its own stock, within
'he meaning of the Regulation.
Upon first examination, it might seem apparent that the
transaction was a purchase by Tusco Corporation. From the viewpoint
Rowles, Winston & Co. the transaction was a sale, and ordinarily, at
'
n east, a sale by one party connotes a purchase by the other. FurtheraOre, other indicia of a sale/purchase transaction were present, such
vs_ a transfer of property for a pecuniary consideration. However, when
:
le underlying objectives of the margin regulations are considered, it
?Pears that they do not encompass a transaction of this nature, where
"eurities are transferred on credit to the issuer thereof for the
.111.100se of retirement.
Section 7(a) of the Securities Exchange Act of 1934 requires
thC
Board of Governors to prescribe margin regulations "For the purpose
!
°
0 Preventing the excessive use of credit for the purchase or carrying
securities." Accordingly, the provisions of Regulation T are not
tended to prevent the use of credit where the transaction will not
:
qIie the effect of increasing the volume of credit in the securities
'4e*r4ts,
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Federal Reserve Bank of St. Louis
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
14r. Irving M. Follacl:
4 Fir-00
-2-
It appears that the instant transaction would have no such
effect. When the transaction was completed, the equity interest of
Rowles, Winston & Co. was transmuted into a dollar-obligation interest;
in lieu of its status an a stockholder of Tusco, Rowles, Winston & Co.
became a creditor of that corporation. And Tusco did not become the
owner of any securities acquired through the use of credit; its outstanding stock was simply reduced by 4,161 shares.
The meaning of "sale" and "purchase", as defined in the
Securities Exchange Act, has been considered by the Federal courts in
a series of decisions dealing with corporate "insiders'" profits under
section 16(b) of that Act. Although the statutory purpose sought to
be effectuated in those cases is quite different from the purpose of
the margin regulations, the decisions in question support the propriety
Of not rer7trding a transaction as a "purchase" where this accords with
the probable legislative intent, even though, literally, the statutory
See Roberts
definition seens to include the particular transacticn.
v. r,aton (CA 2 1954) 212 F. 2d 82, and cases and other e.uthoritieL;
there cited. The governing principle, of course, is to effectuate the
Purpose embodied in the statutory or regulatory provision being
interpreted, even where that Purpose may conflict with the literal
:Tnrdn. U. S. v. Amer. Trucking Ass'ns, 310 U. 3. 534, 511; (1940);
2 Sutherland, Statutory
L.ruciion
ed. 1943) eh.
There can be little doubt that an extension of credit to a
corporation to enable it to retire debt securities. would not-. be for the
Purpose of 'purchasing...securities" and therefore would come within
section 220.4(f)(8), regardless of whether the retirement was obligatory (e.g., at maturity) or was a voluntary "call" by the issuer. If
this is true, it is difficult to see any valid distinction, for this
Purpose, between (a) voluntary retirement of an indebtedness security
and (b) voluntary retirement of an equity security.
For the reasons indicated above, it is the opinion of the
Board of Governors that the extension of credit herDinvolved is not
Of the kind which the margin requirements are intended to regulate
and that the transaction described does not involve an unlawful extension of credit as far as Regulation T is concerned.
The foregoing interpretation relates, of course, only to cases
Of the type described. It should not be regarded as governinr; any other
situations; for example, the interpretation does not deal with cas:
'there securities are being transfcrred to someone other than the issuer,
or to the issuer for a purpose other than immediate retire:4ent. Vlhether
the margin requirements are inapplicable to any such situations woulc.
depend upon the re3evant facts of actual cases presented.
Very truly yours,
(Signed) Merritt Sherman
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Federal Reserve Bank of St. Louis
erritt Sherinan,
Secretary:
ass
UNITED STATES OF AlTRICA
Item No. 9
11/28/62
BEFORE THE BOARD OF GOVITNORS CF TEC FLDERAL RESERVE SYSELli
WASHI1TGTON, D. C.
1
Ia the liattor of the Application of
1
,D=T NO. BI-IC-64
PIRST OKLAHC1A BANCORPORATION, EX.,
OIZAHOITA CITY, OKLAHOla,
Plirsuant to Section 3 of the
Bank Holding Company Act of 1956
1
1
*ft
ORDER DENYEIG iiOT ION TO REOPEN RECORD
In connection with the above application, there has been
riled on behalf of parties opposin2; ap?rovaa of the application, a
1:°tion to Reopen Record to Permit Cross Examination on Batters
lecelived in Evidence.
Consideration has been given to the arguments
efted in support of said notion.
IT IS ORDERED, for the reasons set forth in the BoLIrdts
St
ater.ent acconpanying this Order, that the said Eot:Ton be and hcreby
Is denied.
Dated at aashington, D. C., this 29th day of November, 1962.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Nills, Robertson, Shepardson,
King, and flitchell.
(Signed) Merritt Sherman
1,:erritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
Item No. 10
11/28/62
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
D. C.
Lithe Matter of the Application of
'PlARST OKLAHOMA BANCORPORATION, INC.,
uKT-AHOMA CITY, OKLAHOMA,
DOCKET NO. BHC-64
Pursuant to Section 3 of the
1/94-1t Holding Company Act of 1956
STATEMENT ACCOMPANYING ORDER
DENYING NOTION TO REOPEN RECORD
A motion filed on behalf, of Protestants requests that the Board
l'e9Pen the hearing record in this matter for the purpose of enabling Procounsel to cross-examine Mr. C. A. Vase as to (1) his verified
8tE terfient dated June 11 1962, received in evidence by the Hearing Examiner
14 Mr, Vosefs absence and over the objection of Protestantsf counsel,
(2) the
application in this matter, and (3) an affidavit of the same
11'* Vase containing what affiant stated therein to be, to his best knowledge and belief, a correct statement of the total shares of stock owned by
"ant or members of his family in banks within the State of Oklahoma
(eke
ePt shares owned in The First National Bank and Trust Company of
(3k4110ma City, affiantfs interest in which is identified elsewhere in
th
record), the total authorized issued and outstanding shares of
to
ck of each such bank, and the calculated percentage of total ownership
tlein of affiant and his family. The information contained in the
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Federal Reserve Bank of St. Louis
-2--
affidavit of C. A. Vose was submitted pursuant to a request of the
Board addressed to Applicant's counsel during oral argument before
the Board.
Protestants
present motion renews an earlier motion,
substantially to the same effect, that was denied by the Board by
Order dated October 11, 1962.
Protestants now assert that due process
Of law in the protection of their property and of their rights under
the law has been denied by "failure to permit cross examination upon
the two Vose statements (Applicant's Exhibit 1) and the purported listing of banks and upon the Application to which Mr. Vose is a signatory".
Protestants were not entitled under the Bank Holding Company
Act or other statute to a hearing on the application in question; nor,
°nee admitted as a party to the hearing that the Board, in its diseretion, held, were Protestants entitled as a matter of due process of
lawto the type of hearing required by sections 4 or 5 of the Administl'ative Procedure Act (5 u.s.c.A. §§ 1003, 1004) to be conducted pursI nt to section 7 of that Act.
First Fational Penk of McKeesport v.
& Loan Ass'n., 225 F. 2d 33 (D.C. Cir. 1955);
Brid
2rt Federal Savings & Loan Association v. Federal Home Loan,
1clas!, 199 F. Supp. 410 (D.C.3.D. Pa. 1961). The scope and nature
Protestants' participation in the hearing in question were to be
4terrained by the Board's Rules of Practice for Formal Hearings
(Z2 m,
"kin Part 263), no provision of which grants the right of cross-
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Federal Reserve Bank of St. Louis
_3"anlination to a party.
Under the Rules, "any oral or documentary
evidence may be received" (section 263.2M). Questions as to evidetrbial
Presentation and cross-examination are vested under section 263.2(g) in
the sound discretion of the hearing examiner.
Upon review of the
record, including the transcript of the hearing, the Board finds that
the Hearing Examiner's rulings as to admission of evidence and as to
recIllests made by Protestants for adjournment of hearing were sound and,
in all respects, fair to Protestants.
For the reasons hereafter in-
dicated, the Board concludes that in respect to the matters raised by
ctestantst motion, Protestants have been accorded full due process
'
Pl
Of law.
Pursuant to his authorization, the Hearing Examiner received
evidence the statement of Mr. C. A. rose, having ascertained through
lliry of Applicant's counsel that Mrd Vose was ill and, as best could
be determined, would be unavailable for several weeks. The statement
the
received "for whatever it may tend to prove in the light of
etliare record". The Hearing Examiner further stated that Mr. Vose's
tIlterest in the proceedings and the fact that the statements were hearof
declarations, not subject to cross-examination, were elements
0bati,re consideration in determining the weight to be assigned to
statements. It is noted that the Hearing Examiner also received in
'ence more than SO letters stating opposition to Applicant's pro1e (Board Exhibit 6), a certified copy of resolution of the Oklahoma
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Federal Reserve Bank of St. Louis
tankers Association opposing the granting of the application
(Protestants? Exhibit
5),
and an unverified, unsigned statement on
behalf of an opposing bank (Protestants' Exhibit 22), all of which evidence was characterized by the Hearing Examiner as hearsay declarations
l'eflecting opposition to approval of the application. It is clear that
no different or less favorable treatment was accorded evidence supportProtestants
position than was given to the Vose statement.
In
fact, the three exhibits lest mentioned were received in evidence with°Ilt a finding that they met any exception to the h arsay rule, a finding
kl.de by the Hearing Examiner in receiving the Vose statement.
In view of the well-established principle that in an
a
i
dThinstrative
hearing of the type conducted in this matter rules of
"-dence are not as strictly applied as they are in a judicial proceedthe Board finds that the receipt in evidence of the Vose statement,
"the refusal of the Eearing Examiner to recess the hearing in order
to enable Protestants' counsel, at a then unascertainable time, to
cr"s-examine Mr. Vose, constituted a proper exercise of authority and
d4cretion and accorded Protestants a fair hearing procedure and full
Process of law.
Even if the receipt in evidence of the Vose statement could
he n-j.d to have been in error under the procedures employed in this heart*
" Protestants are not adversely affected, if in fact they ever would
3
llnless and until it is made clear that such statement was relied
11Pon by the Hearing Examiner, without other corroborating evidence.
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Federal Reserve Bank of St. Louis
The
Rearing Examiner made no reference to the Vose statenent in his
findings. There is nothing to indicate that it was taken into consideration in the formulation of his Report
nd Recommended Decision.
Sinilarly, as to statements contained in the application, there is no
-adlcation that the Hearing Locauiner relied upon any statements, ineluding those attributable to Jr. Vose by reason of his having signed
the application, that were not corroborated by other probative evidence,
testimonial and documentary, to which Protestants had full access for
IlurPoses of inquiry and possible refutaton.
The Board rejects Protestants' assertions of denial of due
process of law insofar as the actions, rulings, and decision of the
liearinc Examiner are concerned.
In respect to Protestants' allegations of denial of due
process of law, either as resulting from previous action of the Board
Itself, or to follow from refusal of the Board to grant Protestants'
rletion„ the Board finds such assertions also to be without merit. In
the Board's Order of October 11, 1962, denying Protestants' motion to
Pen the hearing record, it was stated that a determination as to the
leiCht, if any, to be accorded the Vose statement would be made only
l'tcr the Board's review of the entire record. This review has now
bccn made incident both to this motion and to the Board's decision
11/1.ction in respect to the application. The Board finds that the Vose
st tcrient„ Applicant's Exhibit 1 in evidence, is, for the most part,
of other probative evidence in the record.
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Federal Reserve Bank of St. Louis
Substantially
5tr
—6—
identical asscrtiuns of fact, belief, intention, and opfnion are to be
found in the application to which Jr. \Tose has affixed his signature.
11-le fact that his signature is found in the application does not, however, recuire rejection of the assertions therein, since other persons
Ilho also signed the application, as well as a witness who acknowledged
Under oath his personal responsibility for preparation of the application,
were available for examination by 2rotestents.
testified
Two of the above -persons
by Protestants' counsel.
at length and were cross-cxaminod
For the reasons sct forth above, the Board finds it unnecessary
to rely men Applicant's 1,:thibit 1. Similarly, to the limited extent that
the contents of the application can be characterized as representing assertions or opinions that only 11'. C. A. Vosc is Qualified to make and express,
those will be given no consideration by the Board.
In all other respects,
ti-le weight that will be Fiven the application in this mater will be de"U rmined by the extent to which the Board finds its contents to be rolevent and either uncontrovertcd or supported by corroborative evidence
of.
- a probative nature.
Ath respect to the Vase affidavit dated October 16, 1962,
to shares of stock in banks stated to be owned by affiant and/or
hts
family,
while the Board finds no reason to question the fullness
411d accuracy ef the disclosures contained in the affidavit, the contents
thcreef are found to have little or no relevancy or materiality to the
is
sues under consideration.
Accordingly, the affidavit will not be
ec4Isidered by the Board in its determination of this matter.
In so
c°11oludng, the Board has considered the several lines of inquiry that
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Federal Reserve Bank of St. Louis
-7_
Protestants assert would be developed. through cross-e:mmination
relating to the Vase affidavit.
The Board finds that in major re-
sPects the lines of inquiry are immaterial to the issues before the
Board. To the extent that they can be said to be material, ample time
and opportunity have been afforded Protestants to develop such information either on the basis of the affidavit itself or from other
Probative evidence of record.
In respect to the Board's conclusion that refusal to "permit"
cross-examination of Hr. Vase has not deprived Protestants of due
Process of law, it is to be noted that the Board is not authorized by
the Bank Holding Company Act or by other applicable statute to issue
subpoena ad testificandum in connection with its determination of an
aPPlication under the Bank. Fielding Company Act. No persons, including
sienatories to an application under section 3(a) of the Act, can be
required by this Board to
E.;ubrait
themselves to interrogation, in any
farm, in connection with an application before the Board. Thus, if
reason in Protestants 1 favor had been found to reopen this hearing, the
8°arcl could not have, as suggested by Protestants, ordered Hr. Vase to
81.1bmit himself personally or through written interrogatories to Protestants! counsel. For the same reason, the mere reopening of the record
tO
tipermit" cross-examination of ilr. Vose, could not have assured Pro-
testants that lir• Vase would ever hrvc been available. In sum, even
had reason 'been found to justify a reopening of the record, under the
ei
reumstances such reopening might prove to be a meaningless act.
Ilevember 29, 1962
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Federal Reserve Bank of St. Louis
SS'
Item NO. 11
11/28/62
=TED STATES OF AHERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
FIRST OKLAHOMA BANCORPORATION, INC.,
f(Ir permission to become a bank holding
c,?mpany through the acquisition of voting
'i,Iirlares of The First National Bank and Trust
1/1Pany of Oklahoma City, Oklahoma City,
'
Oklahoma, and The Idabel National Bank,
Iclabel, Oklahoma
DOCKET NO. BHC-64
ORDER APPROVING APPLICATION
UNDER BANK HOLDING CUIPANY ACT
Governors, pursuant to
There has come before the Board of
aection 3(a)(1) of the Bank Holding Company- Act of 1956 (12 U.S.C.
18112) and section 222.4(a)(1) of the Board's Regulation Y
(12 CFR 222.4(a)(1)), an application by First Oklahoma Bancorporation,
Board's prior approval of action
Oklahoma City, Oklahoma, for the
h the acy
eby Applicant would become a bank holding compan throug
voting shares of
gllisition of a minimum of 28.15 per cent of the
y of Oklahoma City, Oklahoma
Ihe First National Bank and Trust Compan
voting shares
eltY, Oklahoma, and a minimum of 50.5 per cent of the
ma.
01' The
Idabel TTational Bank, Idabel, Oklaho
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Federal Reserve Bank of St. Louis
140
-21
, no+ 2.fio .
As required by section 3(h) of the Act, the 7oar2
n and
the Comptroller of the Currency of the receipt of the applicatio
requested his views.
The Comptroller replied that he had no opinion
O' recommendation at that time.
However, in a subsequent letter, the
n be approved.
Comptroller recommended that the applicatio
cation was published in the
notice of receipt of the appli
Fed. Reg. 869), affording
Federal Register on January 30, 1962 (27
regarding the proposed
°Pportunity for submission of comments and views
ordered by the Board
acquisition. Thereafter, a public hearing,
Board's Regulation Y (12 CFR 222.7(a)),
Pursuant to section 222.7(a) of the
Examiner; proposed findings of
held before a duly selected Hearing
the parties; and the
fact and conclusions of law were submitted by
d Decision was filed with the
Hearing Examiner's Report and Recommende
application was recommended. Protestants'
1c)a.rd wherein approval of the
the Report and Recommended Decision,
exceptions, with supporting brief, to
been considered.
and Applicant's response thereto, have
parties opposing the application,
The Board, upon motion of
er briefs. In addition, the Board
held oral argument and received furth
the several motions and petihas received, considered, and ruled upon
parties opposing the application.
ti°ns filed in this matter by the
the reasons set forth in the
IT IS =EBY ORDERED, for
that the said application be and
/13ard's Statement of this date,
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Federal Reserve Bank of St. Louis
4561
hereby is approved, provided that the acquisition so approved 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 30th day of November, 1962.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Mills, Shepardson, and Mitchell.
Voting against this action:
and King.
Governors Robertson
(Signed) Merritt Sherman
Secretary.
(sEAL)
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Federal Reserve Bank of St. Louis
EOM) OF GOVERNORS
Item No. 12
11/28/62
OF THE
FEDERAL RESERVE SYSTEM
APP LICATION OF FIRST OKLAI-101-iA BAITCOPPORATIQT, LTC., OKLAHOMA CITY, OKLAHOLA„
OF THE FIRST NATIONAL
FOR APPROVAL OF ACQUISITION OF SHARTS
OKLAHOMA CITY, OKLAHOMA,
BP,NK AND TRUST COIPANY OF ONLAHOUA. CITY,
IDABEL, onAina
LTD THE IDABT,L NATIONAL BANK,
STATE-MENT
Inc. ("Bancorporation" or
First Oklahoma Bancor-)oration,
place of business in Oklahoma City,
"APP1-icant"), with its principal
pursuant to section 3(a)(1) of the
Oklahoma, has filed an application,
Earil= Holdinr7 Cormany ^_ct of 1)56 ("the Act"), for the Board's approval
cent and a maximum of up
Of the acquisition of a minimum of 23.15 per
First National Bank and Trust
to 100 per cent of the voting stock of The
Oklahoma (First National"),
Company of Oklahoma City, Oklahoma. City,
cent of the stock of The Idabel
and from 50.5 per cent up to 100 per
.
IT'otional Bank, Idabel, Oklahoma ("Idabel National")
By this acquisition,
holding company.
. ncorporation would become a bank
4
filing of the application and
Background. — Following the
vial's on the application wore requested
Pursuant to requirement of the Act,
of the Comptroller of the Currency.
Notice of receipt of the application waE
United States Department of Justice and was
transmitted in writing to the
on January 30, 1962. By letter dated
Published in the Federal Register
rollcr advised that he had no present opinion
F°bruary 28, 1962, the ComrDt
Following expiration of the
0r recommendation regarding the application.
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Federal Reserve Bank of St. Louis
-2-
Period allowed in the published notice for receipt of comments on
APPlicant's proposal, the Board ordered a public hearing to be con-'
thacted in Oklahoma City before a Hearing Examiner selected for this
P111Tose by the United States Civil Service Commission. This hearing was
rict required by law but was ordered pursuant to section 222.7(a) of the
1()e.rdis Regulation Y (12 CFR 222.7) promulgated under the Act, upon the
board:s finding that such hearing would be in the public interest.
By ruling of the Hearing Examiner, four of the banks ("Protestants"
that had expressed opposition to Applicant's proposal were admitted and particiPated as parties. Applicant and Protestants presented evidence and had
°1)Portunity for examination and cross-examination of persons appearing as
Ktnesses.
Among the documentary material received in evidence was a second
4t.ter to the Board on this application from the Comptroller of the Currency,
4ted June 51 1962, which reached Board counsel on the final day of the
411g, recommending that the application be approved.
'
Subsequent to the hearing, parties were afforded the opportunity
to ...
-1-11e, and did file, comments, proposed findings of fact and conclusions
law, with supporting briefs.
t
On August 20, 19620 the Report and Recom-
ed Decision of the Hearing Examiner was filed with the Board wherein it
144a recommended that the application be approved. Exceptions to the Report
allcillecammended Decision were filed by Protestants, together with a supbrief.
A response thereto was received from Applicant over Pro-
ttants,
objection.
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Federal Reserve Bank of St. Louis
Upon motion of Protestants, opposed by Applicant, the
4
-3
Board held oral argument id this natter and thereafter received briefs
in surDiport of positions stated.
On the basis of the entire record, formation of which has
been described principally above, the matter is new before the Board
for decision.
First National has 1,100,000 shares of stock outstanding of
or indirectly,
which 309,134 shares are owned or controlled, directly
bY hr. C. A. Vose and his family.
Mr. Vose is one of Applicants
of the
°rganizers and, with members of his family, owns a majority
the principal asset
Shares of Ravco Corporation, a holding comoany
Of which is its ownershi2 of 2901400 of the 399,134 First National
shares owned or controlled by the Vosc family.
The Vose controlled
Stock., plus 563 shares owned by Mr. Hugh L. Harrell
also one of
of First HaLionalTs
4Pplicantis organizers, represents 28.15 per cent
outstanding stock and the minimum amount of that Bank's stock proposed
t° be acquired.
of Idabel National,
There arc outstanding 1,000 shares
held by the same Vose family
Of which 505 shares (50.5 per cent) are
First National.
Ilhich is assorted to have effective control of
and the evidence of record
The Hearing T,xamfner has found,
than a numerical majority
111)Dorts the findings, that although less
controlled by the Vose interests,
°f 7irst :Ictionalts outstanding stock is
ITtional and Idabel National is
Present effective control of both First
hold by the Vose interests.
Consummation of this pro2osal would affect
these banks.
Principally the form of ownership of
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Federal Reserve Bank of St. Louis
First National is located in Oklahoma City, the State's capital
and largest city, with a 1960 population of 324,000.
At December 31, 1961,*
First National was the largest of 14 banks located in Oklahoma City, and
held deposits of
$284.8
million.
Its nearest Oklahoma City competitor,
Pleasured by deposits, is Liberty National Bank and Trust Company with
$198.9 million of deposits.
First National ranked third in size in the
Stat,!, behind The First National Bank and Trust Company of Tulsa
($350.1 million), and National Bank of Tulsa ($332.7 million).
Idabel National is one of the two banks located in Idabel,
bolit 250 miles southeast of Oklahoma City.
Idabel, the county seat of
Curtain County, had a 1960 population of 5,000; the County population
Ilas 26,000.
Idabel National's primary service area, the area from which
Li.ost 75 per ccnt of its deposits originate, has bn designated as
.()1'4'..sing Idabel and t'e portions of McCurtain Count/ southeast and
ouuth -vrest of Idabel.
At year-end 1961, Idabel National held deposits
Or $4.5 million, or 46.2 per cent of the deposits held by the city's two
1144ks combined.
The other bank, First State Bank of Idabel, held
$5.3 million of deposits.
Statutory factors. - In acting upon this application the Board
is required under section 3(c) of the Act to take into consideration the
Nacr,ring rive factors: (1) the financial history and condition of the
ADD)-icant end the banks concerned; (2) their prospects; (3) tha character
"their management; (4) the convenience, needs, and welfare of the cornt41411ties and area concerned; and (5) whether the effect of the proposed
"'-ese otherwise stated) all figures herein are as of this date.
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Federal Reserve Bank of St. Louis
_5-
1
of the bank holding
acquison would be to expand the size or extent
company system involved beyond limits consistent with adequate and
ition
Sound banking, the public interest, and the preservation of compet
in the field of banking.
ant and
Financial history, condition, and prospects of Applic
.trata. - In
is no operating
view of Applicant's recent organization, there
cial condition
history upon which to predicate a judgment as to its finan
Or prospects.
would consist of shares
However, since Applicant's assets
ial condition and
Of First National and Idabel National, its financ
, principally due to the sound
Prospects are considered to be satisfactory
First National.
financial history, condition, and prospects of
condition of Idabel National
The financial history and present
the City of Idabel
eApear reasonably satisfactory. The area surrounding
presently classified as
and encompassing most of McCurtain County is
economically distressed.
However, improved conditions are forecast based
Primarily upon discoveries of local gas deposits, development of water
facilities, and efforts by Federal, State,
transportation and recreational
ms looking toward economic adand municipal authorities to develop progra
National's prospects appear satisva ncement of the area. 1/hile Idabel
st for the area,
factory in the light of the economic recovery foreca
Bank's capacity to contribute to
it is the Board's judgment that the
would be increased to some
411c1 participate in this recovery effort
ence and initiative, procuree tent through greater managerial experi
Nnt of which, the Hearing Sxaminer has found, would be more assured
tinder Applicant's ownership.
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Federal Reserve Bank of St. Louis
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Management of Applicant and the Banks. - With respect to the
management of Bancorporation and the proposed bank subsidiaries, Protestants have urged that the Applicant has failed to adduce evidence
bearing on the character of Applicant's proposed management, and that
SlaCh
failure must be weighed against approval of the application.
Pr°testants have also taken exception to the asserted failure of the
Rearing Examiner to make a specific finding in relation to the character
of Applicant's management.
In the Board's judgment, neither of the
asserted failures constitutes a lack critical in nature.
No provision
ct the Act nor of Regulation Y dictates or requires a specific procedural
'
fernlat to be followed by an applicant in the course of a public hearing.
1°bIl0uely, an applicant assumes the risk of any deficiencies that may
be inherent in the form of presentation selected. The mere fact, how-.
ere,
that an applicant chooses a particular form of presentation over
ether does not in and of itself constitute an adverse consideration.
, while it may be argued that the best evidence of the character and
glIality of Applicant's proposed management would have been adduced by and
thr°1101. the appearance of Mr. Vose at the public hearing, if other evican base a
tienee of record is available upon which the Board reasonably
`ang on this issue, the directive of section 3(c) of the Act can be
"-sfied. Such evidence is available in this record.
Applicant's management will be nearly identical with the
esent management of First National. Mr. C. A. hose, Chairman of
'
k
Piz
St National's Board of Directors, has been associated with that Bank
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Federal Reserve Bank of St. Louis
-7...
executive positions.
tor over 40 years, serving in each of its prine.pal
s President. Similarly,
This experience should qualify him as Applicant'
y one-half a
APPlicant's Vice President, Mr. Hugh L. Harrell, has nearl
ce, He has been
century of experience in the fields of banking and finan
a Vice President of First National for 25 years.
Mr. W. H. McDonald,
President of First National, will act as Applicant's Treasurer.
Upon
mentioned individuals,
c°nsideration of the banking experience of the afore
in the soundness of First
the beneficial effect of which is reflected
ry
NationalTs operation, the Board finds ample evidence of the satisfacto
nce
character of management of both Applicant and First National. No evide
to the contrary was adduced at the hearing.
of management of Idabel National,
In respect to the question
cant asserts its confidence
the evidence permits of two conclusions. Appli
fl the Bank's present management, and the Bank's financial statements reits management is satisfactory.
ceived as evidence support a finding that
succession or
i lirther, Applicant's witnesses conceded that any management
might arise could be remedied by Bank's
1)er80nne1 replacement problem that
°Ilnership as presently constituted.
Thus, it can be concluded that Idabel
satisfactory
National's management is in all pertinent respects reasonably
finding that the presont owners
The Hearing Examiner: while
such problems as management
can be expected to provide some solution to
concluded that "future effective
Succession and eersonnel placement,
more assured under the proposed
staffing and the succession would be
This conclusion, in the Hearing
aminer's judgment, must be
this
1°i.ghed on the side of approval of the application. In reaching
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Federal Reserve Bank of St. Louis
conclusion„ the Hearing Examiner attributed significance to the recommendation
°f aPproval given by the Comptroller of the Currency (letter of June 51 1962),
which the Hearing Examiner found to have been rendered "essentially on the
1D4si5 of management considerations at the Idabel Bank".
Protestants assert the Hearing Examiner erred by attributing
°vidc:Ltiary weight to the Comptroller's letter "because the letter was
based upon asserted factual considerations, which were found to be contl 'rY to the actual facts prevailing as such facts were developed at the
of Protestants,
hearing in this proceeding". Contrary to the assertion
the Comptroller's comments with respect to present management problems
1/ere not related by the Comptroller to specific facts. Presumably, the
°Pinions expressed were premised upon the Comptroller's interpretation
"acts and data derived either solely from the application filed with
the Board or from that source and from such additional information
•
g
13-tiu in the performance of his supervisory functions.
'
the
In either event,
Board concurs in the action of the Hearing :xaminer in attributing
aim,•
. 12lic3nce to the Comptroller's opinion, It is the Board's judgment
.t"
that on the basis of the evidence presented, including the views of the
,
s, as affected
troller of the Currency, Idabel National's prospect
Present and prospective management, will be more favorable under the
Pl'013°sed affiliation than would otherwise be the case.
Convenience
needs
and welfare of the communities and areas
The communities and areas whose convenience, needs, and
axo are most directly affected by this application are Oklahoma City,
th
eitY of Idabel, and
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Federal Reserve Bank of St. Louis
cCurtain County in which Idabel is located.
_9_
First National is centrally located in Oklahoma City.
Its
Primary service area is described as comprising a major portion of
Oklahoma City and as having a population of approximately 200,000.
s of
Thirteen other Oklahoma City banks, with aggregate total deposit
%l7.5 million, are located within First National's primary service
area. Establishment of bank branches is prohibited by State law.
late any
Applicant concedes that its proposal does not contemp
d by First
substantial change in the type of banking service now provide
national to its primary service area, although expansion of several types
the vehicle of the
(31* service is suggested as being possible through
holding company.
of the leading role that
Applicant's uncontroverted statement
?irst National has played in the industrial improvement and economic
growth of the Oklahoma City area, in large measure made possible only
expansion in First National's
through a corresponding increase and
as to the present scope
Pscialized banking services, satisfies the Board
l.
arld adequacy of banking service rendered by First Nationa
Moreover,
banks in Oklahoma City, whose
there is no evidence that the remaining
, and loans
respective deposits range from V.1.3 million to $198.9 million
are not rendering similarly adequate
*Om '3811 thousand to $97.3 million,
a
erlTice to the businesses and residents of the Oklahom City area.
served by Idabel national that
It is principally the area
on as
4PP1icant asserts will be benefited by Idabel National's operati
4 subsidiary of Applicant.
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Federal Reserve Bank of St. Louis
The benefits foreseen by Applicant will
4571
-10-
allegedly derive from greeter availability of rcrerves for the protection
Of local depositors; idcreased availability of trust servIlces, bond ser,, including provision for management sucVices, and personnel trLin.:nr,
cessf_on; more effic4ent jijnn of excess loan participations; greater
facility in respect to conrunity service financing through the organization
aId operations of a small busThess investment corporation; operational
illprovements including improved audit system end other internal controls;
experienced judgment on miscellaneous bank operation problems; and provision for employee benefits such as a pension
emnloyeest thrift
Pln, and group life, health, and accident insurance coverage, all of
Ithich benefits, Applicant states, arc presently enjoyed by employees of
47-4'4 rst National.
Clearly, many of the services enumerated would inure directly to
thc benefit of Idabel National. As to those services that 1,ould be offered
clirectly to the public, in view of the apparently limited demand therefor,
it is concluded that such demand could be met by Idabel National, either
alone or with the assistance of correspondent banks.
Applicant has placed considerable stress upon the increasing
Idabe1/21cCurtaTh County area incibankinz needs that arc foreseen for the
rejuvenate the economy of that area.
d°1-Lt to the efforts now underway to
111 addition to Idabel National, throe other banks serve AbCurtain County:
ll'irst State Bank of Idabel
(5.3
million deposits); Citizens State Bank
(206 milliun deposits), 12 miles northeast of Idabel at Broken Dow; and
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Federal Reserve Bank of St. Louis
457'2
—11—
Farmers State Guaranty Bank ($636 thousand deposits), 17 miles northwest of
Idabel at Valliant.
These three banks are majority owned and controlled
bY the same person and/or members of his im!'dodiate family. Idabel National
and first State Bank of Idabel compete for custoncrs in Idabel and through—
out HcCurtain County.
The record reflects that some com?ctition exists
between Idabel National and the banks at Broken Bow and "Valldant.
In
Zeneral, the type and extent of banking services rendered by each of the
I:cCurtain County banks are similar.
Considering the population of the
Ccuntz- and its general characteristics heretofore discussed, the Board
cannot find that there exists, or will arise in the reasonably foreseeable
future, a demand for banking services frail within the area that could not
bc! satisfied to a reasonable degree by one or more of the licCurtain County
banks, alone or collectively, and as assisted in any necessary respect by
thoir respective correspondent banks in Oklahoma City, Tulsa, or elsewhere.
In substance, the foregoing finding was made also by the Hearing
t:x,
Iminer.
However, he further found that aceuisition and operation of
National by Applicant would assure to that Bank "greater continuity,
fle y.ibilitY and sta'Alit,;" in respect to management succession and personnel
r°cruitmcnt and retention than could be expected under present ownership.
T11.0 hearing 2xaminer cmcluded that
unless outweighed by adverse factors,
teC 2
.creroin,?; consideration tended to support approval of the application.
The Board finds the Hearing Examiner's conclusan reasonable.
In many applications under the Act, it is asserted that holding
co
riPony ownership of proposed bank subsidiaries will result in better
el."17ice to the public, or greater assurance of continuity of such service.
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Federal Reserve Bank of St. Louis
-12-
The credibility of the evidence adduced in support of such an assertion
must be determined by the Board.
In the Board's judgment, the present
record contains sufficient credible evidence that Applicant's ownership
of the Banks concerned will result in personnel benefits and more
assured management continuity in respect to Idabel National, with
reasonable probability that such benefits will inure indirectly to
those served by that Bank, to constitute a consideration somewhat favorable to approval of the application.
In concluding that the affiliation
Proposed should prove beneficial to Idabel National, and ultimately to
it3
present and potential customers, the Board has considered as support-
ing this conclusion the judzmcnts in this r spcct rcachcJ by Applicant's
organizers, one of whom, with his family, has owned a majority of the
Ifoting stock of Idabel National for over
40 years. This same organizer
has been a principal operating officer of First National since 1923, and
with Applicant's other organizers, owns 28.15 per cent - effective
control - of First National.
It is the considered business judgment of
these organizers, a judgment reached after more than a score of years of
ownership and/or control of the Banks involved, that the Applicant's
°Iinership and operation of the Banks, particularly Idabel National,
14c)uld advance the Banks' interests and the interests of the public.
It has been vigorously urged by Protestants that Idabel National's
'Present majority owners could today utilize First National's financial
44d manpower resources on Idabel National's behalf as effectively as could
be done by and through Applicant.
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Federal Reserve Bank of St. Louis
Despite the apparent effective control
-13-
of First National represented by the 28.15 per cent of its voting stock
held by Applicant's organizers, the fact remains that the owners of
72 per cent of First National's voting stock, numerically representing
actual control, have no ownership interest, as far as this record shows,
In Idabel National.
Accordingly, it is not unreasonable to believe that,
despite the "effective control" of First National by the Vose interests,
the majority stockholders of that Bank might reject and prevent efforts
to use the resources and facilities of First National on behalf of
Idabel National, to the extent that such use would be disproportionate
to that usually made available to other correspondent banks of similar
size.
moreover, an awareness of the uncertainty attending any such
assistance proposal might well discourage even the formulation thereof
by Idabel National's majority owners.
Thus, Applicant's proposal to
acquire up to 100 per cent of the stock of First National and Idabel
National holds sufficient probability of resulting advantages to Idabel
National and to those it serves as to support the conclusion now reached
that the proposal would tend to contribute to the convenience, needs,
and welfare of the area served by Idabel National.
Effect of proposed acquisition on adequate and sound banking,
121111)11c interest, and banking competition. -
Section 3(c)(5) of the
Act requires that the Board reach a judgment as to whether the proposed
transaction would expand the size and extent of the proposed holding
company system beyond limits consistent with adequate and sound banking,
the public interest, and the preservation of competition in the field of
banking.
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Federal Reserve Bank of St. Louis
Applicant's
First National and Idabel National will comprise
System as pro-)osed by this application.
Accordingly, in combination,
reflect the size
their size and the elftent of their operations accurately
First
and extent of Applicant's system as proposed. The relative size of
comoarison of
National and Idabel National is indicated by the follauinc,
with the deposits and loans
deposits and loans held by the two Banks
in the
held by other banks, individually or in combination, located
nt for purposes of
State and uithin areas thereof considered pertine
comparison.
ng First National, hold
In Oklahoma City 14 banks, includi
million and total loans of
combined total deposits of '/023
$363
million.
deposits and 43 per cent of
First National holds 41 per cent of such
such loans.
the City's
l
In terms of deposits held, First Nationa is
two blocks of
largest bank. Three competing b2n1:s, all located within
and fourth in size in the City, Iiith
first National, rank second, third,
deposits of $195.9 million,(,:S4.5 million, and $39.14 million, respectively.
other 10 banks range from .;30,.8 million
Deposits hold by each of the City's
to J,3 million.
(including the 14 Oklahoma City
In Oklahoma County 24 banks
million and loans of
banks) hold, combined, deposits of :,738.9
.377
per cent of such deposits and
million. First National holds 39
42 per cent of such loans.
s of
In the City of Idabel, two banks hold, combined, deposit
million and loans of
million.
Idabel National holds 46 per cent
Of such deposits and 149 per cent of such loans.
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Federal Reserve Bank of St. Louis
In HcCurtain County, four banks (including the two Idabel
banks) hold, combined, deposits of (1.3 million and loans
Of
$5.8
million. Idabel National holds 35 per cent of such deposits
and 40 per cent of such loans.
In the State of Oklahoma, there are 386 banks operating
415 banking offices (including drive-in and walk-up facilities).
These
banks, combined, hold deposits of $2,925 billion and loans of $1,327 billion.
Pourteen of these banks hold deposits exceeding $20 million. Of the
latter brnks, six are located in Oklahoma City and five in Tulsa.
Only
four of the 388 banks in the State - two in Oklahoma City and two in
Tulsa - hold deposits exceeding $300 million.
Analysis of the foregoing comparative data, while identifying
in the State, does
the prominent position occupiod by a few large banks
/lot reflect that First National or any other bank is so dominant in the
State as a whole, or within a specific area of the State, that approval
of Applicant's proposal would have an adverse effect upon the existing
banking structure.
The variety of sizes of the City's banks appears
City area and
compatible with the service requirements of the Oklahoma
corm,'with the demands from banks in other areas of the State for
uPoncletlicnk service.
The record does not reflect a harmful imbalance
or
in competition in the areas served by either First National
ample evidence that,
Idabel National. To the contrary, there is
at the present, competition among the several banks located in the
vigorous.
areas pertinent to consideration is
Combining under
APPlicantts control the deposits and loans held by First National and
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Federal Reserve Bank of St. Louis
45 f l
-16Idabel National would result in an increase of only .15 per cent in the
Percentage of the combined deposits and loans of all commercial banks in
the State now held by First National (9.74 per cent).
The proportion of
the deposits and loans of all commercial banks in Oklahoma City and
Idabel that would be held by subsidiaries of Applicant would be identical,
of course, with those now held, respectively, by First National and Idabel
National.
In respect to the competitive aspects of this proposal, the
Hearing Examiner concluded, in part, that consummation of the proposal
would not result in expansion of banking operations into new competitive
areas, and that there would be no elimination or modification of any
existing correspondent or other business relationship of either Bank with
any other bank in their respective service areas.
Assuming that the
reference to "new competitive areas" was intended to mean geographic
areas, as distinguished from product areas, the Hearing Examiner's conclusion, literally read, is justified, since no additional or different
banking facility will be introduced into either Oklahoma City or Idabel.
Realistically, of course, a holding company system of bank operations will
be introduced into the areas involved.
However, it does not appear that
Bancorporation's acquisition of First National or Idabel National would
give to either Bank an undue advantage over its competitors. In respect
to First National, this was the candid opinion of more than one of Protestants' witnesses, one of whom appeared on behalf of First National's
1)rincipal competitor in Oklahoma City, and another of whom is associated
with a bank second largest in Tulsa and in
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Federal Reserve Bank of St. Louis
the State.
-17-
In regard to Slay undue competitive advantage that Idabel National
might realize from the proposed affiliation, the President of the First
State Bank of Idabel who owns a majority of the stock of that bank and,
with members of
his family, a majority of the stock of the other two banks
in McCurtain County outside of Idabel, expressed the opinion that a holding
company controlled bank could not offer the citizens of Idabel anything
that tirst State Bank of Idabel could not now offer them.
The witness did
express apprehension over the adverse effect on the First State Bank of
Idabel that he believed might result from the many changes in services at
Idabel National that Applicant asserts will come about.
Weighing in a
light most favorable to the Protestants the testimony adduced in respect
to the probable impact on competing banks from Applicant's control of the
Banks, the Board concludes that such testimony does not support a conclusion that an undue competitive advantage will result.
An aspect of Applicant's proposed ownership of First National
and Idabel National on which considerable opinion has been voiced is
the effect that the resulting affiliation may have upon established and
Potential correspondent bank relationships.
The evidence presented
satisfies the Board that the rendition of services to smaller banks by
tlearlY all medium and large size banks in Oklahoma constitutes an
-portant part of the business of those banks.
The obtaining and re-
tention of correspondent accounts appears to be a vigorously competitive
hjective, the seeking for which has resulted, as earlier noted, in the
liailability to smaller banks, and through them to the public, of
titIllIerous services that might otherwise be unavailable.
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Federal Reserve Bank of St. Louis
-18Applicant asserts there would be ilO change in any existing
correspondent bank relationship considered pertinent to this application.
Protestants' witnesses who testified on this matter forecast immediate
and continued adverse effects on established correspondent relationships
between and among the banks that now compete State-wide for correspondent
bank business. The Hearing vaxaminer concluded that there would be no
elination or modification of any existing correspondent or other
business relationship of either First National or Idabel National with
anY other bank in their respective areas.
It may not be assumed logically that the affiliation here
Proposed will have no effect on presently existing correspondent bank
relationships. However, for the reasons hereafter discussed, it is
the Board's judgment that such effects as reasonably may be anticipated
from approval of this application will not, under existing circumstances,
constitute an adverse consideration. The record reflects that banks in
Oklahoma City and McCurtain County presently have adequate alternative
sources of correspondent bank services.
Normally) an affiliation such
48 that proposed would reduce by one the number of alternative sources
°f correspondent banking services available, as a practical matter, to
banks in competition with the affiliating bank.
This reduction in the
Umber of alternative sources has been viewed by the Board as a consideration militating against approval of such a proposed affiliation. In the
Matter of the Application of First Security Corporation (Carbon Emery
48 Federal Reserve Bulletin 295, 297 (March 1962).
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Federal Reserve Bank of St. Louis
-19-
In the present case, the apparency of loss to Idabel National's
McCurtain County competitors and their customers of an alternative source
Of a correspondent bank loses its significance in the light of existing
facts. Similarly diminished in significance is the asserted removal, as
an object of active competition among the Oklahoma City banks, of Idabel
National.
That Bank's sole correspondent account in Oklahoma City is
with First National.
The placement of this account can be explained by
the identity of interest in the two Banks.
That relationship can also
fairly be viewed as having removed Idabel National from serious consideration by First National's competitors as an object of competition for its
correspondent business.
As to the availability of First National as a
al competitor, First State
correspondent for Idabel National's princip
Bank of Idabel, and for the two remaining banks in McCurtain County, both
ip,
of which are affiliated with the latter bank through common ownersh
the acquisition Proposed portends no real disadvantage.
Each of these
Oklahoma City correspondent
banks presently uses but one and the same
Company, even though ample adbank, The Liberty National Bank and Trust
ng First National, are available.
ditional or alternative sources, includi
that the affiliation of the
It is the judgment of the Board
now exists, under control of the
two Banks, as to which common control
bankholding company system proposed would not represent a concentration of
sound banking or adverse to the public
ing resources inimical to adequate and
interest.
e to either First National or
No undue competitive advantag
of the acquisition proposed,
Idabel National is foreseen as a result
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Federal Reserve Bank of St. Louis
45S1
-20.-
nor would consummation of the proposal appear likely to affect adversely
the correspondent relationships between and among banks whose interests
are most directly affected bj the present application.
In reaching the foregoing conclusions, the Board has necessarily
formed judgments as to probable or possible future occurrences flawing
from or attributable to approval of Ap
-Icntis proposal. Cno such
in this case is the possiconsequence as to which concern is 0:Tressed
certainty, that approval of
bility, characterized by Protestants as a
this application will be folloued by additional acquisitions throughout
competitively necessary step, by
the State by the Applicant and, as a
equal or creator size.
creation of other holding ce:drany systems of
Such
a consequence, it is argued, will magnify the adverse consequences asserted
tO be inherent in A-mlicant's immediate proposal.
In particular, emphasis
is placed upon the elimination of choices of correspondent banks that would
accompany each additional acquisition by Applicant, and each new holding
company system formation.
The Board has carefully considered the testimony of record in
forming a judgment as to the real likelihood of the occurrences predicted
and concludes that there is insufficient evidence of the need, as a competicompany formations predicted, to
tive measure, for the additional holding
support a finding that the Boardts approval of the pronosal under consideration will either precipitate or result in mass activity toward such
formations.
Should that occur, however, it cannot be assumed, as Protestants
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Federal Reserve Bank of St. Louis
-21-
appear to have done) that the Board will abdicate its statutory
responsibilities in passing upon any future application, or that approval
in the present case constitutes a position of commitment to approval of
any application that may hereafter be filed. As to any such application,
the Board will make a judgment premised upon full consideration of all
Pertinent facts presented.
As to the present application, upon consideration of all the
section 3(c) of the Act and
relevant facts in the light of the factors in
the underlying purposes of the Act, it is the Board's judgment that the
with the statutory objectives,
Proposed acquisitions would be consistent
Principal among which is the public interest.
State law. - A final
Board's authority to act as affected by
must be given involves the
aspect of this matter to which consideration
law prohibits the operation of a
assertion by Protestants that Oklahoma
bank holding company within the State, and that under section 7 of the
sank Holding Company Act, the present application may not be approved.
Section 7 of the Act provides:
of the Bank
"Sec. 7. The enactment by the Congress
ed as
be
constru
not
shall
Holding Company Act of 1956
and
such
powers
ng
preventing any State from exercisi
have
with
er
hereaft
may
jurisdiction which it now has or
and
es,
subsidcompani
respect to banks, bank holdjng
iaries thereof."
In asserting that provisions of law as contemplated by section 7 are in
9, Section 41, of the
effect in Oklahoma, 2rotestants cite Article
Constitution of the State of Oklahoma which provides, in part:
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Federal Reserve Bank of St. Louis
-22-
'To corporation chartered or licensed to do
business in this State shall own, hold, or control,
in any manner whatever, the stock of any competitive
corporation or corporations engaged in the sane kind
of business, in or out of the State, • •
and further cite the provisions of Title 79, Section 31, Statutes of
Oklahoma, which provide in pertinent part that:
"Every corporation which shall awn, hold or control,
in any manner whatever, the stock of any competitive corporation or corporations engaged in the sane kind of
business, in or out of this State, in violation of the
Constitution and laws of this State, shall [enumeration
of penalties]; provided, however, that this section
shall have no application to corporations awning or
holding stock of subsidiary corporations; when such
no
ownership of stock in subsidiary corporations in
trade."
way furthers monopoly or restrains
It is
be acquired
asserted that the Applicant and the two Banks proposed to
would be engaged "in the same kind of business" within the meaning of the
cited constitutional and statutory provisions.
The Hearing Examiner rejected 2rotostantst proposed conclusion
law and concluded that
as to the prohibitory effect of the Oklahoma
the provisions cited did not "purport to outlaw bank holding companies".
It is not, of course, within the province of the Board to determine
authoritatively the validity or applicability of provisions of State
lalT.
e,
Nevertheless, in the interest of orderly administrative procedur
and in the absence of judicial decisions as to the effect of such
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Federal Reserve Bank of St. Louis
-23-
to whether
Provisions: the Board properly may form an opinion as
Provisions of State law clearly would prohibit the formation of a
benh holding company and thus render futile the Boardts
approval of
such formation. In this case, the Board has reviewed the provisions
Of the Constitution and Statutes of the State of Oklahoma cited by
, that these
Protestants and has concluded, as did the Hearing Examiner
Provisions do not clearly prohibit the acquisition here proposed.
The provisions in ouestion relate to unlawful combinations
in restraint of trade and prohibit corporate ownership or control of
the stock of a competitor engaged in the same kind of business. Obto either of the
lileusly, Applicant does not now stand as a competitor
Proposed subsidiary Banks. It is not, nor, assuming the acquisition
Proposed would it be, engaged in the banking business as conducted by
its banking subsidiaries.
The several services and facilities that
arC made available by a bank holding company to its subsidiary banks
of banking, as conare admittedly activities incident to the business
ducted by its subsidiaries.
They do not, however, constitute an en-
of the banking business,
gagement by the holcdng company in the conduct
While the availability to a bank holding company's subsidiaries of
the resources of the holding company can constitute, as this Board has
noted, a very real competitive advantage, the actions of the holding
company in thus aiding its subsidiaries are not in fact or in law the
eXercise of banking functions or powers.
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Federal Reserve Bank of St. Louis
In the event, however, that the Oklahoma statute here in question
Should be interpreted by a court of competent jurisdiction to be applicable to Applicant's ownership of the shares in the Banks, it seems
likely that the exclusionary provisions of the same statute mould be
held equally applicable, since the ownership proposed would not appear
to further monopoly or to constitute a restraint of trade within the
aPparent meaning of the statute.
The Board's position in this matter is taken with awareness
the District
°f a recent decision of the United States District Court for
of Columbia" wherein the Comptroller of the Currency was permanently
enjoined from issuing to a national bank a certificate of authority
to commence business, where a law of the State in which the bank would
be located made it unlawful for the bank to commence business as a subsidiary of a bank holding company.
Passage of the law in question was
held by the court to be within the power reserved to the States under
section 7 of the Bank Holding Company Act.
13ven apart from jurisdic-
ti-onal and other issues that raise question as to the applicability of
that the decision
this decision to the Board, it is the Boards view
does not govern the instant situation.
The Court's decision was premised
Upon the stated finding that the State statute was "directly applicable
to the proposed Defendant . .. [national bank] and that said statute
illakes it unlawful for said bank to commence business".
For the reasons
heretofore given, the Board cannot find that the quoted provisions of
°klahoma law apply to the Applicant and the proposed acquisition.
__nk of New Orleans and Trust Company, et al., v. James J. Saxon,
.'4211ZE211er of the Currency, et al., C.A. No. 1857-62, decided Nov. 5, 1962.
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Federal Reserve Bank of St. Louis
A r-25-
In relation to the Board's conclusion that the State law in
question is not applicable to the acquisition here proposed, it is noted
that the Board has received a letter from a Special Committee of the
State Legislative Council, State cf Oklahoma, dated November 7, 1962,
advising of the decision of that Committee to recommend for enactment
in the Twenty-ninth Legislature of the State of Oklahoma, which convenes
on January 8, 1963, "proposed legislation prohibiting the creation of
bank holding companies in this state".
A copy of the proposed legisla-
tion was attached for the Board's information.
It may reasonably be
assumed that the Oklahoma State Legislative Council would not propose
to recommend legislation prohibiting the creation of bank holding companies
if creation of such companies were presently prohibited by State law.
Conclusion. - The findings of the Hearing Examiner contained in
Report and Recommended Decision of August 20, 1962, insofar as they
are consistent with this Statement, are hereby adopted.
Protestants'
have been considered
exceptions to the Report and Recommended Decision
and the merit of certain of those exceptions is reflected in the Board's
findings and conclusions.
Otherwise, Protestants' exceptions are found
to be without merit.
Accordingly, it is the judgment of the Board that the application
should be approved.
4ovenber 30, 1962
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Federal Reserve Bank of St. Louis
15?
Item No. 13
11/28/62
DISSENTING STATEN= OF GOVERNOR ROBERTSON
Until enactment of the Bank Holding Company Act of 1956,
no Federal law (other than the antitrust laws) controlled the creation
or the expansion of bank holding company systems.
Having concluded
that absence of regulation in this field was contrary to the public
interest, Congress decided not to prohibit creation and expansion of
bank holding companies but rather to "control their future expansion",
as stated in the title of the Act.
Congress might have effected control of holding companies by
Prescribing specific standards in the form of quantitative limitations.
Por example, the law could have provided that no holding company
sYstem could comprise more than 10 per cent of the deposits (or banking
offices) in a State, a group of States, or the nation, and that all
bank holding company systems, in the aggregate, could not hold more
than 40 per cent of deposits or offices.
Instead, Congress decided to
delegate to the Board of Governors of the Federal Reserve System discretion to approve or to disapprove proposed transactions by individual
holding companies or proposed holding companies, according to the
130ardis judgment, in each case, as to which course would better serve
the general welfare.
Although the Board of Governors is vested with broad discretion
14 this field, section 3(c) of the Act requires that a number of enuIllerated "factors" be taken into consideration in determining whether to
843Prove any acquisition.
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Federal Reserve Bank of St. Louis
However, these factors do not constitute a
el 5
-2-
standard to govern the Board's actions.
The only requirement is that
consideration be given to the factors named; the weight to be accorded
to each is completely within the Board's discretion.
Because of
Special circumstances--for example, the existence of a plethora of
banking facilities in the relevant area--the Board might conclude, in
a particular case, that circumstances related to "the convenience..,
Of the communities and the area concerned" were entitled to no weight
Whatever,
The choice before the Board, in each case under the Act, is
to approve or disapprove the proposed acquisition.
The Board must
decide which answer--"Yes" or "No"--will better promote the general
Welfare of the country.
This is the only "standard" under the Act; the
enumerated factors are matters that must be considered before the
decision is made, but the evidence under each is to be given such
14eight--much, little, or none--as the Board regards as warranted.
Applying these principles to the instant application, I am
compelled to conclude that its approval is contrary to the best interests
Of both the people of Oklahoma and the people of the country generally.
The proponents of the proposed holding company system contend that the
financial condition, the prospects, and the management of the smaller
bank, although presently satisfactory, may be improved by vesting conof that bank in the holding company, and the majority of the Board
aPparently are prepared to give these contentions substantial weight on
the side of approval of the application, even though it is conceded
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Federal Reserve Bank of St. Louis
-3that there will be no change in the actual control of the two banks by
the Vose family.
On the other hand, the majority of the Board appear
to conclude that less weight should be given to the immediate and
Potential anticompetitive effects of approval, its effect on concentration of banking resources and power, and other public-interest
aspects of the situation.
It would be shortsighted indeed to regard this application
as no more than a proposal to bring under common control a large bank
in Oklahoma City ($285 million of deposits) and a bank with less than
$5 million of deposits in a small town 250 miles away.
By approving
this application, the Board is permitting the first short step in a
series that could transform Oklahoma from a State with almost
400
independent banks to a State in which banking will be dominated by a
handful of holding companies.
As the Board's Statement points out, only four banks in the
State--two in Oklahoma City and two in Tulsa--hold deposits exceeding
$100 million.
There is ample evidence that interests associated with
all of these contemplate the organization of holding companies, if the
Board authorizes the establishment of this bellwether system.
Scores of banks throughout Oklahoma have asked the Board to
clenY this application.
It is not to be supposed that these institutions
(Many of which have no direct relationship to the banks immediately
involved or the areas in which they operate) would be disturbed if they
believed that no more is involved in this case than bringing together
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Federal Reserve Bank of St. Louis
One bank in Oklahoma City and one in Idabel.
Their protests reflect
their conviction that First Oklahoma Bancorporation will not remain a
two-bank holding company system or the only holding company in Oklahoma.
The Board's Statement denies that "approval in the present
case constitutes a position of commitment to approval of any application
that may hereafter be filed."
But although no such legal commitment
IS involved, of course, it is difficult to see how the Board could deny
future applications for the organization of similar holding companies
in Oklahoma, or applications by First Oklahoma Bancorporation to acquire
additional widely separated banks in the State, without drawing arbitrary
and capricious distinctions.
Since the Board presumably would not take
action of this character, I reluctantly conclude that, unless there is
a reversal of Board policy or the State legislature takes preventive
action, domination by holding companies will characterize banking in
Oklahoma in the years ahead.
In the long run, the course of decision of the Board in cases
or this kind necessarily will depend on the convictions of its members
as to whether the public interest will be better served by a banking
sYstem made up of many independent units or by a banking system dominated
bY relatively few organizations, each with numerous offices.
Multiple-
°trice banking—whether in the form of branch banking or holding company
banking—results in both benefits and detriments.
Although difficult
to measure or evaluate, advantages such as economy, efficiency, uniform
(31.1nd policies, scope of available services, and the like, sometimes
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Federal Reserve Bank of St. Louis
FifA
_5_
accompany a multiple-office system, and most countries actually have
banking systems of this nature.
On the other hand, the American
tradition, in banking as well as other industries, has favored a relatively large number of separate institutions, in the belief that such
an arrangement promotes initiative, vigorous competition, beneficial
risk-taking, opportunities for development of leadership, and similar
benefits.
In my judgment, the advantages of the traditional American
banking system, necessarily modified to meet changing conditions,
outweigh the benefits to be derived from a banking system made up of
a relatively small number of regional or national institutions.
I
believe that this philosophy underlay the enactment of the Bank Holding
Company Act and, as an expression of national will reflected in legislative intent, should be taken into account by the Board in the
administration of that Act.
Relevant in this connection is the decision of the Supreme
Court of the United States in recent antitrust litigation.
Referring
to "the economic way of life sought to be preserved by Congress", the
Supreme Court spoke of Congress' desire to prevent "adverse effects
Upon local control of industry and upon small business", and stated:
"Where an industry was composed of numerous independent
units, Congress appeared anxious to preserve this structure....
* **
”
... we cannot fail to recognize Congress' desire to
Promote competition through the protection of viable, small,
locally owned businesses." Brown Shoe Co. v. United States,
370 u.s. 294, 333, 344 (1962)
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Federal Reserve Bank of St. Louis
-6Also relevant in the instant case is the Supreme Court's reference, in
that case, to "the mandate of Congress that tendencies toward concentration in industry are to be curbed in their incipiency.... In the
light of the trends in this industry we agree...that this is an appropriate place at which to call a halt."
Id. at 346
In my opinion, the record in this case indicates that slight,
if any, benefits may reasonably be anticipated from the creation of
the proposed holding company system.
On the other hand, it is likely
to lead to the replacement of the present independent banking system
in Oklahoma with a system consisting principally of a few large banks
in Oklahoma City and Tulsa, each associated with a large number of
satellite banks throughout the State. This would eliminate, in large
measure, competition for correspondent banking business within the
State, and that business is an important part of the operations of the
large banks in the two major cities. It seems to me that these
detrimental effects outweigh the admittedly limited benefits that may
be anticipated.
Accordingly, the application should be denied.
November
30, 1962
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Federal Reserve Bank of St. Louis
'193
Item No. 14
11/28/62
DISSENTING STATEMENT OF GOVERNOR KING
Although the complete prohibition of branch banking in
Oklahoma may produce certain benefits, it also prevents bankers in
that State from developing a structure that might serve the economy
more adequately in some respects.
Consequently, if this were a
Proposal to establish a holding company for the purpose of bringing
additional banking facilities to parts of a metropolitan area where
a need existed that otherwise would not be met as effectively and
there was no adverse competitive effect, I would probably favor the
Proposal.
See Whitney Holding Corporation, New Orleans, 1962 Federal
Reserve Bulletin 560.
In this case, however, we are asked to permit common
ownership in a holding company of a bank in Oklahoma City and another
in a far corner of the State.
If this proposal is approved, it is
difficult to see how similar applications, by this or other organizations, to acquire banks in widely separated parts of Oklahoma could
consistently be denied.
In other words, a favorable decision in this
matter amounts to acceptance of the principle of state-wide holding
company systems, subject to control over further expansion only after
a. substantial proportion of the State's banking structure has come
Under holding company control.
We must recognize that our decisions
necessarily serve either to encourage or discourage efforts looking
toward the growth of existing holding companies and the creation of
new ones.
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Despite this adverse consideration, I might nevertheless
favor the pending application if it appeared that banking service to
the public would be materially improved.
However, it is practically
conceded that the operations of the large Oklahoma City bank will not
be affected by holding company control, and in my opinion the record
falls short of supporting an expectation that there will be any
significant change in the services rendered by the Idabel bank, either
in scope or quality.
We must bear in mind that the Bank Holding Company Act was
Passed by Congress with the express intent to control the future
expansion of holding companies.
In the circumstances, it appears to
Ifle that the Congressional purpose and the public interest would be best
served by denying this application to open Oklahoma to a state-wide
holding company system, particularly on the basis of a record that
does not support a finding that any substantial benefits would result.
The extent to whioh multiple-office banking within a single urban
area is in the public interest may be left to the will of the people
Of Oklahoma expressed through the legislative process, or for decision
by this Board if and when holding company proposals of that nature
should come before it.
For these reasons, I conclude that the application should
be denied.
November 30, 1962
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Federal Reserve Bank of St. Louis
r
BOARD OF GOVERNORS
Item No. 15
11/28/62
OF THE
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FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
•.;
ADDRESS arriciAL CORRESPONDENCE
TO THE BOARD
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November 28, 1962
Mr. H. E. Hemmings, First Vice President,
Federal Reserve Bank of San Francisco,
San Francisco 20, California.
Dear Mr. Hemmings:
In accordance with the request contained in
your letter of November 16, 1962, the Board approves
the appointment of Jack A. Byers, at present an
assistant examiner, as an examiner for the Federal
Reserve Bank of San Francisco, effective January 1$
1963.
Very truly yours,
(signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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