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Minutes for
To:
Members of the Board
From:
Office of the Secretary
November
4, 1964
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.
Chm. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
kJ,
Minutes of the Board of Governors of the Federal Reserve
System on Wednesday, November
4, 1964. The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Mitchell
Sherman, Secretary
Molony, Assistant to the Board
Fauver, Assistant to the Board
Solomon, Director, Division of
Examinations
Mr. O'Connell, Assistant General Counsel
Mr. Conkling, Assistant Director, Division
of Bank Operations
Mr. Goodman, Assistant Director, Division
of Examinations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mrs. Semia, Technical Assistant, Office of
the Secretary
Mr. Sanders, Attorney, Legal Division
Mr. Egertson, Supervisory Review Examiner,
Division of Examinations
Mr. McClintock, Supervisory Review Examiner,
Division of Examinations
Mr.
Mr.
Mr.
Mr.
Request of Marine Midland International (Item No. 1).
There
had been distributed a memorandum dated October 30, 1964, from the
Division of Examinations regarding the request of Marine Midland International Corporation, New York, New York, for consent to purchase the
entire outstanding capital stock of Traders Credit Bank, Athens, Greece,
at a cost of approximately $1,200,000.
Attached to the memorandum was
a draft of letter to Marine Midland International that would reflect
the Division's recommendation of approval.
11/4/64
-2During discussion Governor Mills raised several questions,
to which the staff responded, after which the letter, a copy of which
Is attached as Item No. 1, was approved unanimously.
Report on competitive factors (Decatur-Gadsden, Alabama).
There had been distributed a draft of report to the Comptroller of
the Currency on the competitive factors involved in the proposed
merger of The First National Bank in Gadsden, Gadsden, Alabama, into
State National Bank of Alabama, Decatur, Alabama.
After a discussion during which there was agreement with a
change in the text of the report suggested by Governor Robertson, the
Port was approved unanimously for transmittal to the Comptroller.
The conclusion of the report, as approved, read as follows:
The proposed merger of The First National Bank in
Gadsden into State National Bank of Alabama, Decatur,
would eliminate the small amount of competition which
exists between the two banks, and entry of State National
Bank into Etowah County would expose the remaining banks
in Etowah County to the direct competitive capabilities
of a substantially larger institution.
Messrs. Goodman, Egertson, and McClintock then withdrew from
the meeting.
Trading in bank securities (Items 2 and 3).
The 1964 amend-
ments to the Securities Exchange Act of 1934 required public disclosure,
through registration and periodic reports) of information regarding
corporations whose securities were actively traded "over the counter."
Aaministration of the disclosure requirements with respect to bank
11/4/64
-3-
stocks was vested in the three Federal bank supervisory agencies.
The
new legislation in effect required banks whose shares were traded over
the counter to register their stocks by the end of April 1965; however,
registration was a prerequisite to listing a bank's shares for trading
on a national securities exchange.
The Board was given authority to
exempt securities of State member banks from registration requirements
Where considered "necessary or appropriate in the public interest or
for the protection of investors."
The New York Stock Exchange had
expressed the hope that, pending adoption of appropriate regulations
and forms, temporary exemptions might be granted that would permit
securities of banks to be traded on national securities exchanges without registration.
The question as to the propriety of such exemptions
was submitted to the Securities and Exchange Commission; in a letter
of August 12, 1964, the staff of the Commission expressed disfavor.
The Board's proposed Regulation F, Securities of Member State Banks,
and a draft of registration statement were published in the Federal
Register.
All comments and suggestions to be considered were to be
submitted by November 23, 1964, earlier deadlines having been advanced
to that date.
During the Board's discussions on August 13 and 20 and
September 2, 1964, regarding implementation of the new legislation,
reference was made to a request by The Chase Manhattan Bank, New York,
New York (in a letter dated August 10, 1964, from Mr. Champion, Chairman
Of the Bank), for an exemption that would permit trading of the bank's
I
11/4/64
-4-
stock on the New York Stock Exchange prior to the adoption by the
Board of a form of registration statement.
There had now been distributed a memorandum dated November 2,
1964,
from the Legal Division regarding a suggestion by the New York
Stock Exchange, in a letter of October 23, 1964, that the Board grant
a temporary exemption from section 12(a) of the Securities Exchange Act
Of 1934 to permit exchange trading in securities of "those banks which
have fulfilled certain obligations which give them the characteristics
Of an investment security" prior to registration of the securities with
the Board.
The letter referred to delays in the commencement of exchange
trading of Chase Manhattan's stock arising from the extensions of time
for receiving comments on the Board's proposed Regulation F and registration form.
Whether the Board should consider allowing such an exemption
at this time, the memorandum continued, would appear to depend to some
extent upon when Regulation F would be adopted:
the date planned for
adoption of the regulation was December 31, 1964.
It was believed that
inquiries received from the New York Stock Exchange and from Chase
Manhattan prior to the Board's August announcement of its proposed
Regulation F were based upon the assumption that considerable time would
elapse before the Board implemented the 1964 Act with respect to securities of member State banks.
Consequently, the Board's prompt publica-
tion of its proposed regulation was considered an implied answer to
those inquiries.
Only after the announcement of the extension of time
k
11/4/64
-5-
for receiving comments had the inquiries been renewed, apparently in
the belief that the extension meant that the Board was contemplating
delaying the effective date of its regulation.
On October 16, 1964,
in reply to a letter of October 14 from counsel for Chase Manhattan,
Mr. Hackley indicated his understanding that the Board remained hopeful that the regulation could become effective by December 31 and that
the Board did not consider that it was prepared to examine the questions of exemptions at this time.
The Legal Division recommended, for
reasons stated, that the Board reply in a similar manner to the October 23
letter from the New York Stock Exchange.
A draft of such a reply was
attached to the memorandum.
At the Board's invitation, Mr. Sanders commented on the request
of the Stock Exchange, expressing the Legal Division's belief that it
14as a controversial question whether or not granting the exemption
*would be in the public interest.
It did not appear that refusal would
harm Chase Manhattan or its shareholders. It was believed that the Board
vould be in the best position to consider granting any exemptions after
having the benefit of the staff's work on the development of the regulation in its final form, including study of comments received in response
to the invitation in the Federal Register.
The staff continued to hope
that the regulation might be adopted by December 31, and it expected to
have available all the material necessary to that end.
..‘,
0 dr "..)
11/4/64
-6Governor Robertson expressed the view that the approach sug-
gested by the Legal Division was the correct one; there would be grave
difficulties in granting an exemption before the Board was fully informed and had received all of the comments expected from advisory
groups.
Moreover, he felt that no one would be injured if the Board
declined to make an exemption at present.
He noted that the request
naw before the Board came from the Exchange rather than from an individual bank.
Governor Mills commented that a request from the Exchange,
Which had reasons to wish to promote trading in bank stocks, was less
persuasive with him than would be a request from an individual bank.
Be would be gratified if Regulation F could be adopted by December 31.
However, he did not believe it would be desirable to close the door
firmly to requests for exemptions prior to the adoption of the regulation, because as of the year-end there would be a flood of annual reports
of banks containing comprehensive statements.
If there should be requests
to consider such statements as substantially in conformance with the
/30ard's disclosure requirements, it would be well to have left open the
Possibility of granting exemptions.
Governor Shepardson remarked that, even if it should develop
that Regulation F could not be adopted by December 31, the Board, having
had an analysis of the comments received before then, would be in a
better position to appraise the advisability of granting an exemption.
;
11/4/64
-7-
The type of reply suggested by the Legal Division did not foreclose
the possibility of an exemption and, as he understood it, no bank was
Pressing for an exemption at the moment.
Governor Mitchell said that, although the motives of the Exchange
in making the request were not apparent to him, he did not believe that
the Board should judge what they were.
If the Exchange had had a good
reason for requesting an exemption at the present time, he would be
prepared to favor granting the request, but he did not see such a reason
disclosed in the record.
There ensued a discussion of impressions drawn from conversations with representatives of the New York Stock Exchange and of The
Chase Manhattan Bank bearing upon the probable reasons for requesting
an exemption from registration requirements and the degree of importance
°f such an exemption to Chase Manhattan.
As to the latter point, there
seemed to be no indication that the matter was of great moment; however)
it was the consensus that, as a matter of good relations with member
hanks, there should be a formal response to Mr. Champion's letter of
August 10, 1964, even though it was understood that the Board's ann°uncement of its proposed Regulation F had been tantamount to a resPonse.
The suggestion was made that the Federal Reserve Banks be sent
Copies of the reply to be made to the Stock Exchange for their guidance
in the event they should receive requests for exemptions. However, the
view was expressed that the Reserve Banks might regard the letter as
11/4/64
-8-
signifying a more definite refusal to grant exemptions than was intended, and it was understood that such an indication should not be
tranamitted at the present time.
Certain changes that had been suggested in the draft were agreed
Upon, after which the letter to the Stock Exchange was approved unanimously in the form attached as Item No. 2.
It was understood that an
aPPropriate letter would be sent to Mr. Champion, Chairman of The Chase
Manhattan Bank, referring to his letter of August 10, 1964, and transmitting a copy of the letter to the Stock Exchange.
Secretary's Note: A letter was sent to
Mr. Champion in the form attached as
Item No. 3. A copy of the letter was
furnished to President Hayes of the Federal
Reserve Bank of New York for his information.
All of the members of the staff except Mr. Sherman withdrew
from the meeting at this point and Mr. Kiley, Assistant Director,
Division of Bank Operations, entered the room.
Employment of management consultant by Dallas Bank.
Governor
Mitchell stated that President Irons of the Federal Reserve Bank of
Dallas had raised with the Board's Committee on Organization, Compensati°n, and Building Plans the question of employment by the Dallas Bank
Of a management consultant firm for the purpose of reviewing the operations of the Bank and making suggestions as to improving its efficiency.
Pl'oPosals had been received from three firms, and Mr. Irons wished to
11/4/64
take up with his directors promptly the matter of entering into a
contract with one of the firms.
Governor Mitchell stated that the
Committee would appreciate guidance from the Board as to whether the
employment by a Reserve Bank of a firm for the purpose indicated
Should be encouraged or discouraged by the Board and the extent to
Which the Committee should pass on to Mr. Irons suggestions developed
by the Board's staff regarding the type of agreement that might be
entered into.
On the latter point, Governor Mitchell indicated that
the staff had reviewed procedures followed by the Bureau of the Budget
in entering into such contracts over a period of years.
The proposal
that President Irons would like to recommend to the directors of the
Dallas Bank did not contain as precise specifications as to the nature
of the work to be performed as might be desirable on the basis of the
experience of the Bureau of the Budget.
Following a general discussion, the Board indicated that it
14as strongly in sympathy with any steps that might be taken by a Reserve
Bank to improve operating efficiency through the employment of a management consultant firm such as was proposed by President Irons.
It also
indicated that Governor Mitchell should feel free to pass on to Mr. Irons
for his consideration any suggestions as to the type or scope of agreeMent that might be helpful in assuring that the firm employed would give
the Bank the maximum assistance.
The meeting then adjourned.
"
"s1
11/4/64
-10Secretary's Note: Governor Shepardsoa today
approved on behalf of the Board memoranda
recommending the following actions relating
to the Board's staff:
..1
.2pointment
Willie L. Leftwich as Messenger) Division of Administrative
Services) with basic annual salary at the rate of $31 385, effective
the date of entrance upon duty.
Salary increase
Bruce D. Shuter) Attorney, Legal Division, from $6,050 to $71 220
Per annum, effective November 8) 1964.
Acceptance of resignations
Janet P. Flow) Records Clerk, Office of the Secretary, effective
at the close of business November 13, 1964.
Emily Last) Programmer) Division of Research and Statistics,
effective at the close of business November 6, 1964.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 1
11/4/64
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 41 1964.
• Marine Midland International Corporation,
120
Broadway,
New York, 5, New
York.
G
entlemen:
In accordance with the request contained in your letter
of
27, 1964, and on the basis of the information furnished,
,
t,he Board of Governors grants consent for Marine Midland International
'
orporation ("MMIC") to purchase and hold all of the outstanding shares
of
Traders Credit Bank, S.A., Athens, Greece ("TCB"), at a cost of
aPProximately US$1,200,000, provided such shares are acquired within
"e year from the date of this letter.
The Board also approves the purchase and holding of shares
of TCB
within the terms of the above consent in excess of 15 per cent
of MMIC's
capital and surplus.
Shares
The Board's consent to the proposed purchase and holding of
of TCB by MMIC is granted subject to the following conditions:
That MMIC shall not hold any shares of stock in
TCB if TCB at any time fails to restrict its
activities to those permissible to a corporation
in which a corporation organized under Section
25(a) of the Federal Reserve Act could, with
the consent of the Board of Governors, purchase and hold stock or if TCB establishes any
branch or agency or takes any action or undertakes any operation in Greece or elsewhere, in
any manner, which at the time would not be permissible if TCB were a corporation organized
under said Section 25(a);
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Marine Midland International Corporation
-2-
(2)
That, when required by the Board of Governors,
MMIC will cause TCB to permit examiners selected
or auditors approved by the Board of Governors
to examine TCB and to furnish the Board of
Governors with such reports as it may require
from time to time;
(3)
That MMIC shall not carry on its books the shares
of TCB at a net amount in excess of the book
capital accounts of TCB, after giving effect to
the proposed revaluation of bank premises and the.
elimination of all known losses; and
(4)
That any share acquisitions or dispositions by
TCB be reported under Section 211.8(d) of
Regulation K in the same manner as if TCB were
a corporation organized under Section 25(a) of the
Federal Reserve Act.
Subject to continuing observation and review, the Board
susPends, until further notice the provisions of subparagraph (1)
()
rf the third paragraph of this letter so far as they
relate to
es
trictions on loans granted by TCB in Greece in the currency of
that country.
Upon the completion of the proposed acquisition, it is
!
equested that the Board of Governors be furnished,
through the
Federal
Reserve Bank of New York, with copies of the Articles of
Association,, Memorandum of Association, and by-laws of TCB.
Very truly yours,
(signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
‘), 4
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 2
11/4/64
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 4, 1964.
Mr. G. Keith Funston, President,
New York
Stock Exchange,
Eleven Wall Street,
New York, New York, 10005
Dear Mr. Funston:
This is in reply to your letter of October 23, 1964,
which you suggest that the Board of Governors might consider
:all:ting a temporary exemption from section 12(a) of the Securities
15,!!1_ange Act of 1934 to permit trading of securities of member State
87"48 on the New York Stock Exchange prior to registration of those
"urities on the Exchange and with the Board.
in
g
The Board considers that it would best be able to
aluate the merits of any possible exemptions from the 1934 Act
er it has had the full benefit of all comments received from
:crested persons and an analysis thereof by its staff. It is
_nt
emplated that such analysis can be accomplished. during December
that the Board could adopt its Regulation F ("Securities of
Menu)er
State Banks") by December 31, 1964.
ev
n
Very truly yours,
Merritt Sherman,
Secretary.
3';-6o
BOARD OF GOVERNORS
Item No.
11/4/64
OF THE
3
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November
4, 1964.
Mr, George
Champion,
Chairman,
Board of Directors,
The Chase
Manhattan Bank,
Chase Manhattan Plaza,
New York, New York. 10015
Dear Mr. Champion:
Reference is made to the subject of your August 10,
1964 letter to the Board of Governors, and to subsequent communica°ns and conversations between representatives of your bank and of
the
Board, all relating to your request for the Board to grant an
cemption from the provisions of section 12(a) of the Securities
(change Act of
1934 to permit trading in the stock of your bank on
the„ New York Stock Exchange prior to registration of the stock with
`41e Exchange and with the
Board.
Z
There has recently been submitted to the Board by
Mr* G. Keith Funston, President, New York Stock Exchange, a request
iso,imilar to that submitted by you but relating to all member State
the thought that its content would be of interest to
JYOU,
°11) there is enclosed a copy of the Board's reply to Mr. Funston.
Very truly yours,
Merritt S ermn
Secretary.
Erielosure
@FedFRASER