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Minutes for November 7, 1966
To:
Members of the Board
From:
Office of the Secretary
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. Robertson
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Gov. Brimmer
Minutes of the Board of Governors of the Federal Reserve
System on Monday, November 7, 1966.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Robertson, Vice Chairman
Shepardson
Mitchell
Daane
Maisel
Brimmer
Sherman, Secretary
Kenyon, Assistant Secretary
Bakke, Assistant Secretary
Young, Senior Adviser to the Board and
Director, Division of International Finance
Mr. Holland, Adviser to the Board
Mr. Solomon, Adviser to the Board
Mr. Molony, Assistant to the Board
Mr. Cardon, Legislative Counsel
Mr. Fauver, Assistant to the Board
Mr. Hackley, General Counsel
Mr. Brill, Director, Division of Research and
Statistics
Mr. Solomon, Director, Division of Examinations
Mr. Shay, Assistant General Counsel
Mr. Partee, Associate Director, Division of
Research and Statistics
Mr. Sammons, Associate Director, Division of
International Finance
Mr. Leavitt, Assistant Director, Division of
Examinations
Mrs Semia, Technical Assistant, Office of the
Secretary
Miss Hart, Senior Attorney, Legal Division
Mr. Grimwood, Assistant to the Director, Division
of International Finance
Messrs. Egertson and Maguire, Supervisory Review
Examiners, Division of Examinations
Mr.
Mr.
Mr.
Mr.
Report on competitive factors.
There had been distributed memo-
randa dated November 3 and 4, 1966, from the Division of Examinations
relating to the report to be made to the Comptroller of the Currency on
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11/7/66
the competitive factors involved in the proposed merger of Daly National
Bank of Anaconda, Anaconda, Montana, and The First National Bank of Butte,
Butte, Montana.
Attached to the November 3 memorandum was a draft of
report, the conclusion of which read as follows:
There is very little present or potential competition
to be eliminated by the proposed merger of Daly National
Bank of Anaconda, Anaconda, Montana (a subsidiary of Northwest Bancorporation, Minneapolis, Minnesota), and The First
National Bank of Butte, Butte, Montana, and it appears that
the more aggressive policies and greater range of services
offered by the resulting bank would provide stronger competition to the other banks in the area. However, consummation of the transaction would increase the concentration of
Montana banking resources held by the parent company while
further adding to the already substantial share of such
resources controlled by the four holding companies operating in the State. The overall competitive effect would be
somewhat adverse.
The November 4 memorandum stated that the proposed merger had given rise
to concern in the Montana banking community in view of certain provisions
of State law that were somewhat conflicting.
One section of Montana law
Prohibited bank branches, while another provided that a branch could be
established as a result of a bank merger.
The latter statute had been
enacted during the 1930's and was reported to have been intended for use
in emergency situations.
The Federal Reserve Bank of Minneapolis under-
stood that the State Attorney General had held that the merger here
Proposed could take place, but that under the statute the continuing
bank could operate only a head office.
It was understood also that
Northwest Bancorporation had been asked by the Comptroller of the Currency to file a brief on this point, that a State member bank in Billings
11/7/66
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was soliciting funds to oppose the merger, and that the National Association of Supervisors of State Banks was considering the question.
At the beginning of the discussion there was agreement with a
suggestion by Mr. Leavitt that the conclusion of the report include
language stating specifically that the report dealt only with competitive aspects of the proposed merger and did not take into consideration
the question of State law that was at issue.
Governor Maisel raised a question whether the Board's supervisory
responsibility under the Bank Holding Company Act required that it intercede if a violation of State law was involved.
Staff comments pointed out that there was no application before
the Board to be acted upon, and that in any event it did not appear that
consummation of the proposed transaction would involve violation of any
provision of the Holding Company Act.
As to provisions of other Federal
banking laws, the staff pointed out that in the present instance the
aPPlicant was a national bank.
And it would not seem appropriate, in
the staff's view, for the Board to attempt to pass on the question of
the State branch banking law.
Governor Robertson observed that he felt it would be difficult
to substantiate the assertion that the merger would result in a bank
that was more competitive than the Butte bank.
He suggested changes in
the conclusion of the report to remove that assertion and to state in
s tronger terms the adverse competitive effect of the proposed merger in
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11/7/66
view of the increase that would result in concentration of Montana banking resources in bank holding company systems.
The report was then approved unanimously for transmittal to the
Comptroller of the Currency in a form in which the conclusion read as
follows:
There is very little present or potential competition
to be eliminated by the proposed merger of Daly National
Bank of Anaconda, Anaconda, Montana (a subsidiary of Northwest Bancorporation, Minneapolis, Minnesota), and The First
National Bank of Butte, Butte, Montana. However, consummation of the transaction would increase the concentration of
Montana banking resources held by the parent company while
further adding to the already substantial share of such resources controlled by the four holding companies operating
in the State. In this respect the competitive effect would
be adverse.
This report deals only with the competitive aspects of
the proposed merger and does not take into consideration any
questions arising under Montana statutes as to whether a bank
headquartered in Montana may operate more than one office.
Application of Bank of New York (Items 1-3).
There had been
distributed drafts of an order and statement reflecting the approval by
the Board on October 17, 1966, of the application of The Bank of New
York to merge with Empire Trust Company, both of New York, New York.
Also distributed was a dissenting statement by Governor Mitchell, in
Which Governor Robertson concurred.
After a discussion during which there was agreement with changes
s uggested by Governor Maisel in the majority statement, the issuance of
the order and statement was authorized.
Copies of the documents, in the
11/7/66
-5-
form in which they were issued, are attached as Items 1 and 2.
A copy
of the dissenting statement by Governor Mitchell, in which Governor
Robertson concurred, is attached as Item No. 3.
Miss Hart and Messrs. Egertson and Maguire then withdrew from
the meeting.
Voluntary foreign credit restraint program.
Pursuant to previous
discussions by the Board of the possibility of suspension of the voluntary foreign credit restraint program applying to banks and to nonbank
financial institutions (a possibility opposed in principle by Governors
Daane and Brimmer), Governor Robertson had conferred with the Cabinet
Committee on the Balance of Payments regarding the advisability of such
a move in relation to the over-all program of the Administration regarding the U.S. balance of payments problem.
The Committee had asked that
alternatives to suspension be developed that would achieve the following
objectives:
(1) reduce or retard the ability of banks to use the present
large leeway (over $1.2 billion), and (2) give an additional stimulus to
credits to finance exports and to meet the bona fide credit needs of the
less developed countries.
Accordingly, at today's meeting Governor Robertson distributed
material regarding two alternative revisions of the 1966 guidelines for
commercial banks.
Both alternatives proceeded from the fact that during
the first 9 months of 1966 foreign credits of commercial banks had been
reduced by $520 million, with the result that banks were more than $1.2
billion below the 1966 guideline ceiling (109 per cent of the 1964 base).
11/7/66
-6The first alternative provided that each commercial bank with a
1964 base of $10 million or more be requested to limit the use of its
existing leeway so that it did not use more than 40 per cent thereof
before March 31, 1967, more than 60 per cent before June 30, 1967, and
more than 80 per cent before September 30, 1967.
Banks would be requested
also not to expand nonexport credits to developed countries between
October 1, 1966, and December 31, 1967, by more than 10 per cent of the
leeway.
For all banks combined, this would permit a maximum expansion
of nonexport credits to developed countries of about $120 million.
In
order to give a relatively larger scope of action to smaller banks so
as to enable them more easily to extend export financing, banks with an
original base between $500,000 and $10 million, in calculating their
leeway, would be authorized to use, instead of 109 per cent of their
1964 base, the amount of that base plus $900,000.
The second alternative would cut the $1.2 billion leeway in
half, but banks would not be requested to space out in any particular
waY their use of the available half of their leeway during the period
from October 1, 1966, to December 31, 1967.
Within this reduced leeway,
banks would be requested to limit the increase in their nonexport credits
to developed countries to one-tenth of the total expansion available.
The
second alternative, like the first, would provide that banks with an original base between $500,000 and $10 million be requested to limit their
outstanding foreign credits in 1967 to an amount not greater than their
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1964 base plus $900,000 (only 10 per cent of which might be in nonexport
credits to developed countries).
The material distributed by Governor Robertson also contemplated
substantial changes in the voluntary foreign credit restraint program
for nonbank financial institutions in order to simplify both reporting
and the guidelines with which the institutions would be requested to
comply.
Governor Robertson stated that the objective had been to devise
a program for 1967 that would provide some stimulus for export credits
and a means of taking care of any foreseeable expansion of those credits,
yet would prevent a tremendous outflow of funds.
Under the first alter-
native, which was his preference, regular reporting would indicate the
actual outflow and the Board could change the guidelines at any quarter
if necessary.
The limitation on nonexport credit to one-tenth of a bank's
total leeway would press usage of the leeway toward export credits and
credits to less developed countries.
Under the first alternative, if
exports increased during 1967 at the rate that had been suggested by the
Department of Commerce, there should be adequate financing available for
them.
Somewhat different reporting methods would be required:
although
this might cause some difficulty, many banks had been setting up their
records anyway in the manner needed for the changed reporting in order
to take advantage of the Export-Import Bank program.
The second alternative, Governor Robertson continued, might
have some appeal for those who thought it desirable to show a posture of
11/7/66
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severity.
However, it would take away half of the leeway banks had
achieved by refraining from using to the full the amount of expansion
allowed them under the present program; and there would be no real
reason other than the fear of a greatly increased outflow.
The special allowance for small banks provided in both alternatives would put such banks in a better position to meet export needs
but would not amount to a great deal in terms of dollar outflow.
The
Program for nonbank financial institutions remained in virtually the
same terms as had been presented during the Board's recent discussions.
It was anticipated that whatever structure of 1967 guidelines the Board
agreed upon would be presented to the Cabinet Committee and, assuming
its agreement, would be announced at the same time the Administration's
1967 over-all program was announced.
In further comments in response to questions by other members
of the Board, Governor Robertson indicated that reliable figures were
not available to break down credit for less developed countries according to export and nonexport credit.
He also expressed the belief that
the special allowance for small banks would do no harm and would satisfy
some complaints that they were cramped.
A question having been raised
as to how a shift within a bank's existing holdings according to export,
nonexport, and less developed countries credits would become apparent,
Governor Robertson said it was expected that the Federal Reserve Banks
would review the situation carefully with each bank.
11/7/66
In response to questions by Governor Daane as to the reason for
preference for the first alternative, Governor Robertson commented that
if exports increased by $4 billion in 1967, the first alternative would
provide the funds to finance them.
At the same time, by using a quarterly
cumulative basis, developments could be watched and the Board would be in
a position to take action if necessary.
Specification of the quarterly
checkpoints implicitly put banks on notice.
Governor Daane then asked if consideration had been given to
rolling back the ceiling to 105 per cent.
Governor Robertson replied
that that possibility had been considered but was thought to be a less
desirable choice.
It could easily give rise to complaints from banks
that were near their ceilings at present and thus would have no opportunity to finance an expanding export volume.
Governor Daane said he disliked the "Indian giver" aspect of the
first alternative, following which Governor Mitchell expressed the view
that if the voluntary program was to be continued indefinitely it was
not conducive to good relations with the banks if their good performance
led to curtailment.
He believed there was much to be said for letting
banks have the advantage of the headroom they had achieved.
The banks'
cooperation had been excellent, and it would be well to retain it.
Mr. Solomon (Adviser) remarked that the choice might be whether
to appear in the role of an "Indian giver" now or at sometime during
1967.
If banks appeared to be using up their leeway rapidly under the
11/7/66
-10-
first alternative, the impact of the capital outflow on the balance of
payments would put the Board under pressure to retract part of the
expansion it had allowed.
Moreover, there might be a problem of deter-
mining bona fide export financing needs.
After further discussion of technical aspects of the alternative
proposals, Governor Brimmer said he had hoped for exploration of a number
of combinations other than the ones contained in the two alternatives.
He was concerned about the size of the leeway banks would have available
under the first alternative.
It had been his thought, for example, that
the ceiling might be reduced by perhaps a third, with exports exempted
within such a quota.
He also outlined certain other possibilities.
Governor Robertson expressed the view that if the leeway was cut
back at the present time, it seemed probable that the banks would quickly
use the full amount of expansion available to them for fear of further
cutbacks.
Governor Daane stated that to him the second alternative seemed
more consistent with the total balance of payments program.
bias was toward minimum regulation.
Also, his
Maximum regulation required con-
tinuing surveillance and refinements.
He believed the banks would
cooperate if the Board said it must cut the leeway in half in the
national interest.
A question having been raised as to procedure, there was agreement that the alternative favored by a majority of the Board would be
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11/7/66
presented to the Cabinet Committee, without mention of the remaining
alternative unless the one offered initially failed to obtain support.
After additional discussion Governor Shepardson stated, in
response to a request by Chairman Martin for a summary of the views of
the individual members of the Board, that he continued to favor what
apparently it would not be possible to achieve, namely, suspension of
the program.
If the program must be continued, he would prefer the first
alternative, to be presented as a Board proposal with no mention of the
second alternative unless the Cabinet Committee found the first one
unacceptable.
Governor Mitchell also spoke in favor of the first alternative,
adding that if it did not find acceptance he believed the Board should
consider the reasons for rejection before an alternative was developed.
Governor Daane expressed the view that there was already a seed
of failure in the first alternative in that it allowed too much opportunity for outflow.
That, he believed, was contrary to the theory of
the over-all effort in regard to the balance of payments.
Consequently,
he would prefer the second alternative.
Governor Maisel said he would favor the first alternative.
He
believed the Board had a dual public relations problem--in respect to
the Government and in respect to the banks.
Full leeway, he suggested,
was not being allowed under the first alternative because of the subcategories specified in it.
That alternative would have the virtue of
11/7/66
-12-
putting tight ceilings on banks that had been using their quotas.
It
would allow expansion by banks that had stayed under their ceilings,
but the probability of full use by those institutions did not seem too
great.
Governor Brimmer said he preferred the second alternative.
He
did not like the idea of giving the banks a leeway of $1.2 billion.
Even though the rate of use would be limited by quarters, the banks
could accumulate their allowances, and thus by mid-1967 the potential
could exist for a substantial outflow over the remaining half of the
year.
Although it was suggested that cutbacks could be made if too
great an outflow developed, he believed such an action would be a shock
to the banking community and would raise questions as to the Board's
good faith when it put the program together.
There was a problem of
maintaining the credibility of the program, and for the sake of avoiding damage to credibility he thought it would be better to state the
limits at the beginning.
Although the first alternative had been
Presented as an inherently tightening measure, he did not believe it
was.
In his view, it would not meet the assignment specified by the
Cabinet Committee.
At Chairman Martin's request, Governor Robertson commented
further on the matter from the point of view of rescinding a privilege
Previously given.
It appeared to Governor Robertson that if such an
approach were taken, the reaction of banks would be to use up immediately
the remaining leeway for fear it would be withdrawn.
He believed that
11/7/66
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under the first alternative there would not be an outflow of $1.2 billion, but instead that the recent inflow would be likely to continue at
least through the first quarter of 1967.
Moreover, he thought the first
alternative would be more conducive to continuance of the cooperation
banks had previously shown with respect to adherence to the purposes of
the program and that there would be little inclination to attempt evasions by trying to represent nonexport as export credits.
If that did
happen, however, the necessary steps could be taken.
Chairman Martin said he thought the problem of credibility
Governor Brimmer had mentioned was a real one.
However, he felt it would
If
be minimized if certain developments occurred in the world economy.
conditions became such that it was clear that further restrictions were
needed in order to deal with the balance of payments problem, he believed
whatever restrictions were necessary would be generally accepted.
More-
over, at such a juncture the problem would require a broad-scale Government effort.
At this point, he would lean toward giving as much leeway
as feasible to banks that had supported the voluntary program.
Governor Shepardson remarked that if the situation worsened
aPPreciably, something stronger than a voluntary program would be called
for.
He would not like to see the first alternative thought of in terms
that adjustments were going to be made according to quarterly experience.
He believed a need for adjustment, if it developed, would signify the
need for a more fundamental change in the total balance of payments
PrOgram.
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11/7/66
At the conclusion of the discussion it was understood that
to the
Governor Robertson would present the first alternative plan
Board members
Cabinet Committee, since it was preferred by all of the
except Governors Daane and Brimmer.
Time deposits and financial flows.
At this point Messrs. Brill
and Partee were joined by other members of the research staff and presented a chart show on time deposits and financial flows.
It was under-
charts would
stood that the text of the presentation and copies of the
be distributed to the members of the Board for study, and Chairman Martin
at some consuggested further discussion of the subject by the Board
venient time.
in
Copies of the text and of the charts have been placed
the Board's files.
then withdrew
All of the members of the staff except Mr. Sherman
from the meeting.
Leave of absence for Mr. Altmann.
Pursuant to the recommendation
Senior Adviser
in a memorandum dated November 2, 1966, from Mr. Young,
the
to the Board and Director of the Division of International Finance,
Murray
Board approved a leave of absence of not to exceed two years for
and Statistics, to
Altmann, Senior Economist in the Division of Research
directing a departPermit him to undertake an assignment of organizing and
ment of research for the Central Bank of Tanzania.
It was understood that
Nations.
Mr. Altmann's salary and expenses would be paid by the United
elISS
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11/7/66
Foreign travel.
The Board approved travel by Mr. Young to
Ottawa, Canada, on November 10, 1966, to attend a meeting of the U.S.Canadian Balance of Payments Committee.
The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
the following items:
Letter to the Federal Reserve Bank of Boston (copy attached as
Item No. 4) approving the appointment of Paul M. Metzger as assistant
examiner.
Letter to the Federal Reserve Bank of Philadelphia (copy attached
as Item No. 5) approving the appointment of John P. Lamond and David H.
Scott as examiners.
Memorandum from the Office of the Controller dated November 4,
1966, submitting a request from the Division of Personnel Administration
for authorization to establish a new position of Clerk-Typist in that
Division.
Memorandum from the Division of Bank Operations dated November 3,
1966, recommending that Charles W. Bennett, Analyst in that Division, be
designated to serve as a witness to the mutilation of facsimile signature
Plates of Reserve Bank officers in place of Robert B. Haycock.
4159
Item No. 1
11/7/66
UNITED STATES OF AMERICA
RESERVE SYSTEM
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL
WASHINGTON, D. C.
Ia the Matter of the Application of
RE BANK OF NEW YORK
f°r approval of merger with
Empire Trust Company
ORDER APPROVING MERGER OF BANKS
pursuant to the
There has come before the Board of Governors,
4* Merger Act, as amended (12 U.S.C. 1828(c), Public Law 89-356), an
a pplication by The Bank of New York, New York, New York, a State member
prior approval of
bank of the Federal Reserve System, for the Board's
Ncw York,
he merger of that bank and Empire Trust Company, New York,
u4der the charter and title of The Bank of New York.
As an ii-,odont
become
to the merger, the two offices of Empire Trust Company would
branches of the resulting bank.
Notice of the proposed merger, in form
approved by the Board, has been published pursuant to said Act.
in the light of
Upon consideration of all relevant material
he factors set forth in said Act, including reports furnished by the
Co
mPtroller of the Currency, the Federal Deposit Insurance Corporation,
4160
-2-
and the Attorney General on the competitive factors involved in the
Proposed merger,
IT IS HEREBY ORDERED, for the reasons set forth in the
Boardls Statement of this date, that said application be and hereby
is approved, provided that said merger shall not be consummated
(a) before the thirtieth calendar day following the date of this
Order or (b)
later than three months after said date.
Dated at Washington, D. C., this 7th day of November, 1966.
by order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Shepardson, Daane, Maisel, and
Brimmer.
Voting against this action:
and Mitchell.
Governors Robertson
(signed)
Merritt Sherman
Merritt Sherman,
Secretary.
(stAL)
4161
Item No. 2
11/7/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION OF THE BANK OF NEW YORK
FOR APPROVAL OF MERGER WITH
EMPIRE TRUST COMPANY
STATEMENT
The Bank of New York, New York, New York ("BONY"), with
total deposits of about $823 million, has applied, pursuant to the
sank Merger Act, as amended (12 U.S.C. 1828(c), Public Law 89-356),
with Empire
for the
Board's prior approval of the merger of that bank
Trust Company, New York, New York ("Empire"), which has total deposits
1/
and
Of about $295 million.—
The banks would merge under the charter
title of BONY. As an incident thereto, the two offices of Empire would
become branches of BONY, increasing the number of its offices to eight.
situated in
Competition. - The head office of each bank is
the downtown financial district of New York City.
The five branch
°ffices of BONY are in the midtown section of Manhattan, as is the
8ingle branch of Empire.
Insti
Both banks are essentially wholesale
relationships, and
tutions, dealing in large loan and deposit
ring specialized services.
BONY has made an effort in recent years
t° attract retail business, savings and special checking accounts.
-gures are as of March 31, 1966.
4162
-2EmPire is one of the few remaining commercial banks in the metropolitan
en which confines itself to wholesale business.
The retail market is
"nsidered to be preponderantly local in character, and dependent largely
"branching locations, although capable of being expanded to some extent
through banking by mail, specialized mobile offices, and the like.
that market, Empire and BONY are not present competitors.
In
Nor is it
Pnbable that the two would compete in this field in the future, were the
R1Plication denied, since Empire lacks resources to acquire the branches
that
would be needed for any important expansion into retail banking.
After consummation of the merger, both former offices of
trap
ire would, of course, offer retail services, and the addition of two
"es to its present system would make BONY a slightly stronger
"IlVetitor in the retail banking field. Nevertheless, the effect on
corn
"'Petition in the relevant market, whether regarded as the metropolitan
area
the City of New York (comprising the five boroughs), or the borough
Of
ua nhattan, would be minimal.
The resulting bank would operate, for
Q%alt
14e, eight out of some 700 banking offices in New York City and some
3,513 4
'n Manhattan or about 1 and 2 per cent, respectively. Moreover, each
thp- eight
offices of the two banks is located in a highly competitive
re,
'
with numerous offices of commercial banks in the immediate vicinity.
In the wholesale banking field, there is competition between
11°11 and Empire, but this competition is not regarded as important.
44) ins titutions are relatively specialized, BONY having developed
Nettise and customer connections in the fields of transportation,
The
-3-
163
communications, public utilities, commodities, and durable goods
nla nufacturing, while Empire has emphasized the oil and natural gas,
chemical and drug industries.
Nevertheless, changes in emphasis
could bring the two into more active competition in the future, if
the merger did not take place.
In addition, the two banks presently
c°mpete in the personal and corporate trust areas.
In the wholesale field, however, BONY and Empire compete
with other institutions of comparable and larger size in a market that
is far broader than New York City, that is indeed national, and at
tithes
international, in scope.
telatively minor role.
In this broader market, each plays a
Reliable figures on the wholesale market, as
tich, are not readily available, but taking the relative importance
Of the two banks in the New York City banking structure as a rough
iticlicator,
the resultant bank would have only about 2 per cent of
total
deposits and would rank ninth among commercial banks headin New York City, as against 1.5 per cent of such deposits
°Ild a rank of tenth for BONY at present.
Accordingly, the merger
tend to create a slightly stronger competitor for the largest
banks not only in New York but in other financial centers as well.
The competitive effects of the proposal would not be
ificantly adverse.
Financial and managerial resources and future prospects. - The
Ltulg factors with respect to both BONY and Empire are satisfactory,
44d vhould be satisfactory with respect to the resulting bank.
4164
-4Convenience and needs of the communities. -
Customers of
a
the two banks would benefit to some extent from the availability of
the merger. Both
larger lending limit as a result of consummation of
serving customers
SONY and Empire have experienced some difficulty in
ory limits
that have grown to a size where banking prudence or statut
its "lead" position
Prevented one bank or the other from maintaining
the interin loans to such customers. In addition, strengthening of
result of the merger,
national department of the combined bank, as a
which is
Would be of some benefit to that segment of the community
interested in international trade.
the Board, the
Summary and conclusion. - In the judgment of
be significantly
effect on banking competition would not, on balance,
community as a result
adverse and there would be some benefit to the
department
°f the increased lending limit and improved international
°f the resulting bank.
application should
Accordingly, the Board concludes that the
be approved.
N
ovember 7, 1966.
IA t
Item No. 3
11/7/66
DISSENTING STATEMENT OF GOVERNOR MITCHELL
IN WHICH GOVERNOR ROBERTSON CONCURS
In the world's largest financial center the merger of two
banks, one with $932 million in resources and the other with $341 million,
4
likely to be slurred over as an insignificant transaction because of
the giant size of the major banks in that community.
But, looking at
the United States instead of New York, even the smallest of these two
b"ks is a large bank.
Each is among the 1 per cent or so of U.S. banks
th4t control over 50 per cent of the nation's deposits.
Combined, they
1/111 become the 35th or 36th largest bank in the country.
No merger
48ulting in a $1 billion bank can be dismissed summarily as one unlikely
t0 have a substantial effect on banking competition,
Both banks serve some routine local needs for which there
at'e numerous banking office alternatives, but in the aggregate these
acttvities appear to constitute only about 10 per cent of their business.
CItir concern is for the particular needs of industrial or public utility-
4Pe customers in which both banks have specialized. These clients are
Now York, elsewhere in the nation, and abroad.
Stich
The record shows that
services are available at other large New York banks with whom the
0ing
bank expects to be in more aggressive competition.
The managements of both banks clearly are of the view that
thei
r corporate interest will be served by the merger.
But the Board's
1:1°11sibility is to consider the implication for the public interest.
stz
alone, in a financial institution, is not necessarily inimical to
416
-2the public interest, and even if achieved by merger, the anticompetitive
statute.
effects of great size can be outweighed by other factors under the
In this case, however, the applicant desires increased size in order more
either
aggressively to seek out and service larger corporate customers than
of the proponent banks individually is now able to satisfy.
In this frame
ef reference, what happens to the less formidable among their present
customers?
potentially--and in our judgment--they may well get the kind of
attention that goes to less-than-carload-lot customers when the same salesman
handles carload lots, and sees the possibility of a trainload sale!
Many alternatives for financing and technical industrial
ktl°11-how are available to our largest corporations at several large U.S.
and
foreign banks.
is not so prized.
bus;
The intermediate and smaller-sized company's business
The applicant has made it plain that it seeks such
ss now only in default of larger accounts.
It asks for approval of
his merger in order to enable the on-going bank "to compete more effectively
with the larger wholesale banks for a principal role in serving commercial
customers [of BONY] with growing credit requirements."
The applicant
believes that a higher loan limit will enable the on-going bank "to compete
fOr
Empire
Position as a principal bank of the large corporate customers of
//hieh now use that bank chiefly for special banking and financial services
arld
do
not utilize it as one of their principal banks in New York City."
a World in which time, attention, and credit are not unlimited, the
ilicderate-sized customers for whom each now serves as a principal bank
11111 be left to fend for themselves as best they may.
%04.„
116
The anticompetitive effects of the proposed merger not only
are not outweighed by the probable effect of the transaction in meeting
the convenience and needs of the community to be served, but are
reinforced in our view by an actual detriment to present customers of
both banks,
ould deny the application.
November
7, 1966.
BOARD OF GOVERNORS
Item No. 4
11/7/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 8, 1966
Mr. Luther M. Hoyle, Jr., Vice President,
Federal Reserve Bank of Boston,
Boston, Massachusetts. 02106
Dear Mr. Hoyle:
In accordance with the request contained in
your letter of November 1, 1966, the Board approves the
appointment of Paul M. Metzger as an assistant examiner
for the Federal Reserve Bank of Boston. Please advise
the effective date of the appointment.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
/1169
Item No. 5
11/7/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS or-riciAL CORRESPONDENCE
TO THE BOARD
November 8, 1966
Mr. Joseph R. Campbell, Vice President,
Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania. 19101
Dear Mr. Campbell:
In accordance with the request contained in
your letter of November 2, 1966, the Board approves the
appointments of John P. Lamond and David H. Scott, at
present assistant examiners, as examiners for the Federal
Reserve Bank of Philadelphia, effective December 26, 1966.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER