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Minutes for
To:
Members of the Board
From:
Office of the Secretary
October 2, 1961
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
3366
Minutes of the Board of Governors of the Federal Reserve System on
Monday, October 2, 1961.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
"Balderston, Vice Chairman
Mills
Robertson
Shepardson
King
Mitchell
Mr. Sherman, Secretary
Mr. Young, Adviser to the Board and Director,
Division of International Finance
Mr. Fauver, Assistant to the Board
Mr. Landry, Assistant to the Secretary
Messrs. Noyes, Brill, Dembitz, Williams,
Eckert, Gehman, Solomon, Weiner, Wood,
Wernick, Freedman, and Yager of the
Division of Research and Statistics
Messrs. Furth, Hersey, Sammons, Katz, Irvine,
Wood, Gemmill, Maroni, and Reynolds of the
Division of International Finance
Economic review.
Members of the Divisions of International
Finance and Research and Statistics presented a review of economic
conditions in the United States and foreign countries.
staff
At the conclusion of this presentation, all members of the
except Messrs. Sherman, Fauver, and Landry withdrew and the following
entered the room:
Mr. Solomon, Director, Division of Examinations
Mr. Conkling, Assistant Director, Division of
Bank Operations
Mr. Hostrup, Assistant Director, Division of
Examinations
Mr. Leavitt, Assistant Director, Division of
Examinations
10/2/61
-2Items circulated or distributed to the Board.
The following
items, which had been circulated or distributed to the Board and copies
of which are attached to these minutes under the respective item numbers
indicated, were approved unanimously:
Item No.
Letter to American State Bank, Milwaukee, Wisconsin,
approving an investment in bank premises.
1
Letter to the Federal Reserve Bank of Chicago waiving
the assessment of a penalty incurred by State Bank of
Nappanee, Nappanee, Indiana, because of a deficiency
in its required reserves.
2
Letter to the Federal Deposit Insurance Corporation
regarding the application of Gruver State Bank, Gruver,
Texas, for continuation of deposit insurance after withdrawal from membership in the Federal Reserve System.
3
Telegram to the Federal Reserve Bank of New York
approving the extension of the arrangement to make a
loan or loans on gold to the Bank for International
Settlements.
1.
Letter to The Chase Manhattan Bank, New York, New York,
approving the establishment of a branch at 2 Knickerbocker
Avenue, Borough of Brooklyn.
5
Letter to The Chase Manhattan Bank, New York, New York,
approving the establishment of a branch at 2840 Jerusalem
Avenue, Unincorporated Area of North Bellmore, Nassau
County.
6
Application by Southern Arizona Bank and Trust Company (Item No. 7).
There had been circulated an application by Southern Arizona Bank and Trust
Company, Tucson, Arizona, for permission to establish a branch in the Park
Central Shopping Center, Phoenix, Arizona, and a memorandum dated September
10/2/61
-3-
15, 1961, from the Division of Examinations recommending favorably on
the application.
The Federal Reserve Bank of Dallas had also made a
favorable recommendation.
In February 1961 Southern Arizona Bank and Trust Company, a
subsidiary of Western Bancorporation (formerly Firstamerica Corporation)
made application to the Board for permission to establish two branches in
Phoenix, Arizona, one to be located in the central downtown financial
district and the other in the Park Central Shopping Center, a major
retail and business office complex situated two and one-half miles
north of "downtown" Phoenix.
Board approval was given to the mid-town
Phoenix branch application on April 28, 1961, which office was opened
for business on July 25, 1961.
The application for the second branch
had been withdrawn following disapproval by the State Banking Department
on the grounds that the bank had not selected a site and no building plans
had been formulated, but approval of the State Banking Department subsequently had been given after more specific plans had been submitted.
The
instant application in effect constituted a resubmission to the Board of
the latter request.
It was noted in the memorandum of the Division of Examinations
that the proposed branch, which would be an additional branch of a
Western Bancorporation subsidiary, would provide further competition in
Arizona for Valley National Bank and its associated institution, The
Arizona Bank (formerly Rank of Douglas), and that the Western
10/2/61
-4-
Bancorporation subsidiary banks in Arizona provided the only direct
*big bank" competition for Valley National and Arizona Bank.
The
memorandum also referred to the fact that when in April 1961 the Board
considered applicant's request for permission to establish a branch in
mid-town Phoenix it was considered possible that Western Bancorporation,
which owned control of applicant and First National Bank of Arizona,
might be attempting to establish a branch or branches through its State
member bank subsidiary which had been denied the affiliated First National
by the Comptroller of the Currency.
However, upon consultation with the
latter on this point it had been determined that the Comptroller had not
recently denied any application of First National Bank of Arizona.
Further
inquiry along this same line with respect to the period since the previous
inquiry had produced the information that the Comptroller had not denied
any applications by First National Bank of Arizona in the Phoenix area.
Governor Mills stated that he would vote to disapprove the branch
application by Southern Arizona Bank and Trust Company as he had done in
the case of the earlier application by the bank for a branch in the
central downtown financial district of Phoenix, where another unit of
the same system, the First National Bank of Arizona, was already in
Operation.
His views on this question reflected a belief that continued
expansion of Western Bancorporation through its subsidiaries in Arizona,
in conjunction with continued growth of Valley National Bank and The
ô5 U
10/2/61
-5-
Arizona Bank,was inimical to the development of competition from independent banking sources in Arizona.
Governor Robertson said that he would vote to approve the
application.
Even though in retrospect it may have been unwise to
permit Western Bancorporation to acquire Southern Arizona in the first
instance, since that step had been taken it was now essential to provide
as much competition as possible between the two dominant banking groups
in Arizona referred to by Governor Mills.
After further discussion the application by Southern Arizona
Bank and Trust Company to establish a branch in the Park Central Shopping
Center, Phoenix, was approved, Governor Mills dissenting.
A copy of the
letter sent to Southern Arizona Bank and Trust Company pursuant to the
foregoing action is attached as Item No. 7.
Application of Marine Corporation (Items 8 through 11).
On
September 6, 1961, upon reconsideration, the application of The Marine
Corporation, Milwaukee, Wisconsin, to acquire stock of Wisconsin State
Bank, Milwaukee, was approved by a vote of four to two, Chairman Martin
and Governors Mills, Shepardson, and King voting for approval, while
Governors Balderston and Robertson voted to deny. Pursuant to the
understanding at the meeting on that date there had now been distributed
drafts of an order, a majority statement, and dissenting statements
reflecting the foregoing action.
-6-
10/2/61
Following a brief discussion, during which Governor Mitchell
asked that he be recorded as not participating in the Board's action on
this matter, the issuance of the order and statements was authorized,
Governor Mitchell abstaining.
Copies of the order, majority statement,
and two dissenting statements are attached as Items
8 throup 11.
Messrs. Hackley, General Counsel, and Potter, Assistant Counsel,
entered the room at this point, and Mr. Hostrup withdrew.
Request by United California Bank and Southwest Bank
(Item No. 12).
On July 27, 1961, consideration was given to an application by United
California Bank, Los Angeles, California, for permission to merge with The
Southwest Bank, Inglewood, California, at which time it was decided to
inform the applicant by letter of the desirability of receiving supplemental information covering certain points in the application.
Pursuant
to this understanding, a letter was sent under date of July 28, 1961, to
United California Bank requesting certain supplemental information and
indicating that, if desired, arrangements would be made for an oral
presentation before the Board.
The additional information referred to
was received from applicants under date of August
9, 1961, but no request
was received for an oral presentation before the Board.
On September 26,
1961, following further consideration, the application was denied.
Mr. Sherman reported receipt this morning of telegrams from
United California Bank and The Southwest Bank requesting that the Board's
10/2/61
-7-
action of September 26 disapproving their merger application not be
included in the Board's weekly announcement covering such actions that
would be handed to the press the afternoon of October 3, 1961.
The banks
gave as a reason for the request their view that the announcement might
have an adverse effect on The Southwest Bank, and they also desired time
in which to submit a petition for reconsideration of the application.
In discussion it was brought out that after consideration of
a similar request from Deposit Guaranty Bank & Trust Company, Jackson,
Mississippi, in connection with its application to acquire Bank of
Hazlehurst, Hazlehurst, Mississippi, the Board had concluded at the
meeting on October 17, 1960, that the completeness of an established
statement made available to the public, including the press, should not
be brought into question by withholding announcement in the usual course
of an action taken.
There being unanimous agreement that a similar reply be made to
United California Bank and The Southwest Bank, it was understood that a
telegram would be sent to the Federal Reserve Bank of San Francisco
requesting that applicants be advised that their request for withholding
announcement of the Board's adverse action on the merger application was
being denied and that announcement would be made in the usual course.
copy of the telegram is attached as Item No. 12.
The meeting then adjourned.
.^\
Secretary
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BOARD OF GOVERNORS
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FEDERAL RESERVE SYSTEM
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Item No. 1
10/2/61
WASHINGTON 25, D. C.
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ADDRESS orriciAL CORRESPONDENCE
kt111114.
TO THE BOARD
A,
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October 2, 1961
Board of Directors,
American State Bank,
Milwaukee, Wisconsin.
Gentlemen:
Pursuant to your request submitted by the Federal
Reserve Bank of Chicago, the Board of Governors of the
Federal Reserve System approves, under the provisions of
Section 24A of the Federal Reserve Act, an additional
investment in bank premises by American State Bank of
$80,000, for the purpose of remodeling the bank building.
The amount approved includes $15,000 already advanced,
and capitalized as building improvements on the bank's
books.
Capital of this bank is somewhat low, and the
Board is pleased to note that it is planned to sell
common stock at a price which will provide additional
capital funds of approximately $275,000.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
(..1
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BOARD OF GOVERNORS
OF THE
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FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item NO. 2
10/2/61
4
ADDRESS orricIAL CORRESPONDENCE
*
TO THE BOARD
aa'f41.
I ti4t4**-
October 2, 1961
Mr. Laurence H. Jones,
Vice President and Cashier,
Federal Reserve Bank of Chicago,
Chicago 90, Illinois.
Dear Mr. Jones:
This refers to your letter of September 20, 1961, regarding
the penalty of $99.73 incurred by the State Bank of Nappanee, Nappanee,
Indiana, on a deficiency in its required reserves for the biweekly
computation period ended September 6, 1961.
It is noted that the deficiency resulted from two people in
the member bank who ordinarily handle transactions affecting its reserve account being away on vacation when a $1,000,000 increase in
demand deposits occurred; a relative increase in reserve balance was
not provided; the new funds were placed in correspondent bank balances
and as deduction items offset the increase in deposits, but the deficiency
occurred as they were gradually withdrawn; the bank has an excellent
record with its last penalty assessment being in 1945; and that worksheets and instructions have been furnished the bank for its use in
avoiding a recurrence of this incident.
the
In the circumstances, and in view of your recommendation,
of
penalty
the
of
Board authorizes your Bank to waive the assessment
$99.73 for the reserve computation period ended September 6, 1961.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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BOARD OF GOVERNORS
OF THE
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FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 3
10/2/61
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
-ria
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4'
October 2, 1961
Mr. Jesse P. Wolcott, Director,
Federal Deposit Insurance Corporation,
Washington 25, D. C.
Dear Mr. Wolcott:
Reference is made to your letter of
September 19, 1961, concerning the application of Gruver
State Bank, Gruver, Texas, for continuance of deposit
insurance after withdrawal from membership in the Federal
Reserve System.
No corrective programs which the Board of
Governors believes should be incorporated as conditions
to the continuance of deposit insurance have been urged
upon or agreed to by the bank.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Jt)
TELEGRAM
Item No.
LEASED WIRE SERVICE
4
l/21
BOARD OF GOVERNORS OF THE FEDERAL RESERVESYSTEM
WASHINGTON
October 2, 1961
SANFORD - NEW YORK
Your wire September 28. Board approves extension of the arrangement to make
loan or loans by your Bank to the Bank for International Settlements during
the period of one year, from November 1, 1961
through October 31, 1962,
Up to a total amount outstanding at any one time of $25 million, each
borrowing to mature in not more than seven days and total borrowings (the
maximum loan facility) during any calendar month not to exceed the equivalent
of $25 million for the total of seven days.
For this facility, it is understood that you will make a commitment charge
at the rate of one-fourth of one per cent per annum on that part of the
maximum loan facility not used in any calendar month.
The arrangement would
conform to your usual terms and conditions:
(a) Each such loan or loans to be made up to 98 per cent of the
value of gold bars to be set aside at the time of each drawing
under pledge to you;
(b) Each such loan
to bear interest from the date it is made
until paid at the discount rate of yoUr Bank in effect on the
date such loan is made0
It is
understood that the usual participation will be offered to the other
Federal Reserve Banks.
igned) Merritt Sherman
SHERMAN
3377
BOARD OF GOVERNORS
OF THE
0
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FEDERAL RESERVE SYSTEM
t3
°
Item No. 5
10/2/61
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October 2, 1961
Board of Directors,
The Chase Manhattan Bank,
New York, New York,
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by The Chase Manhattan
Bank, New York, New York, of a branch at 2 Knickerbocker
Avenue, Borough of Brooklyn, Kings County, New York,
provided the branch is established within twelve months
from the date of this letter.
Nary truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
33
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSWY1, Item No. 6
10/2/61
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October 2, 1961
Board of Directors,
The Chase Manhattan Bank,
New York, New York.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by The Chase Manhattan
Bank, New York, New York, of a branch at 2840 Jerusalem
Avenue, Unincorporated Area of North Bellmore, Nassau
County, New York, provided the branch is established
within twelve months from the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
3379
BOARD OF GOVERNORS
00***40,4
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OF THE
FEDERAL RESERVE SYSTEM Item No. 7
WASHINGTON 25. D. C.
0
0
10/2/61
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October 2, 1961
Board of Directors,
Southern Arizona Bank and Trust Company,
Tucson, Arizona.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Dallas, the Board of Governors
of the Federal Reserve System approves the establishment
by Southern Arizona Bank and Trust Company, Tucson,
Arizona, of a branch in the Park Central Shopping Center
in the vicinity of Osborn Road, Third Avenue and Fourth
Avenue in Phoenix, Arizona, provided the branch is
established within one year from the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Item No. 8
10/2/61
UNITED STATES OF AMERICA
BEFORE Ti BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
------------------In the Matter of the Applica
tion of
THE VIARINE CORPORATION
for prior approval of acquisi
tion of
voting shares of Wisconsin State Bank,
alwaukee„ Wisconsin.
------------------
ORDER APPROVING APPLICATION UNDER
BANK HOLDING COMPANY ACT
AND r.Evourn PRIOR ORDER OF DENIAL
WHEREAS, there has come before the Board of Governors,
Pursuant to section 3(a)(2) of the Bank Holding Company Act of 1956
(12 USC 1842) and section 4(a)(2) of
the Board's Regulation Y
(12 CFR 222.4(a)
(2)), an application by The Marine Corporation,
Milwaukee, Wisconsin, for the Board's prior approval of the acquisition of 80 per cent
or more of the voting snares of Wisconsin State
Bank, Milwaukee, Wiscons
in;
WHERELS, by Order dated June 29, 1961 (26 Federal Register
6114; 1961
Federal Reserve BULLETIN 763), the Board of Governors
denied said
application, and thereafter by Order dated August 3, 1961
(26 Federal
Register 7167), granted a petition of The Marine Corporation
3381
for reconsideration of the Board's June 29 Order, and in connection with
such reconsideration, on August 9, 1961, permitted The Earine Corporation
to present oral argument before the Board;
IT IS HEREBY ORDERED, upon reconsideration and for the reasons
set forth in the Board's Statement of this date, that the application
of The Marine Corporation to acquire voting shares of Wisconsin State
Bank be and hereby is approved, provided that such acquisition is
completed within three months from the date hereof, and, it is further
ORDERED that the Board's Order of June 293 1961, be and hereby is
revoked.
Dated at Washington, D. C., this 2nd day of October 1961.
By order of the Board of Governors.
Voting for this action:
Shepardson, and King.
Chairman Martin and Governors Mills,
Voting against this action: Governors Balderston and Robertson.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(sEA,L)
Item No. 9
10/2/61
BOARD OF GOVERNORS
OF THE
FaERAL RESERVE SYSTEM
APPLICATION OF THE MARINE CORPORATION, AILUAUKEE, WISCONSIN,
FOR PRIOR APFRom, OF ACQUISITION OF SHARES OF
WISCONSIN STATE BANK, MILWAUKEE, WISCONSIN
STATOENT UPON RECONSIDERATION
On June 29, 1961, the Board of Governors isoued an Order
denying the application of The MRrine Corporation, Milwaukee,
Wisconsin ("Marine"), under section 3(a) of the Bank Holding Company
Act of 1956 ("the Act"), to acquire 80 per cent or more of the voting
shares of Nisconsin State Bank, Milwaukee ("Bank"). (1961 Federal
Reserve BULLETIN 763)
On August 3, 1961, the Board granted Marine's petition for
reconsideration of this matter and, pursuant to Marine's request,
afforded representatives of Marine an opportunity to present further
views orally before the Board on August 9, 1961.
The decision of June 29, 1961, as indicated in the Board's
Statement in support of its Order, turned largely on considerations
under the fifth factor described in section 3(c) of the Act, whereby
the Board is required to take into consideration "whether or not
the effect of the proposed acquisition mould be to expand the size
or extent of the bank holding company system involved beyond limits
..2-
consistent with adequate and sound banking, the public interest, and
the preservation of competition in the field of banking".
The Board
remains of the opinion that there is little in the circumstances of
this case that weighs materially on the side of either approval or
disapproval in connection with the first four statutory factors, namely:
(1) the financial history and condition of the holding company and
bank concerned; (2) their prospects; (3) the character of their management; and (4) the convenience, needs, and welfare of tie communities
and area concerned.
However, in the light of further presentations by Marine in
connection with the Board's reconsideration of this matter, the Board
has altered its judgment as to the total effect of the proposed
acquisition on competition in the areas most affected, including both
Bank's primary service area and the larger trade area of Milwaukee
County.
It now appears that affiliation with Marine would strengthen
Bank's position principally in fields of banking service beyond the
competitive scope of the other independent banks in its area, each of
Which is less than half the size of Bank.
Changes in the residential
character of the area have apparently already been taking place and it is
expected that the area will become increasingly industrial and commercial.
After acquisition by Marine, Bank would be in an improved
Position to serve those accounts that would not look to the smaller
banks for service.
On the other hand, the affiliation would not
_
_3..
materially increase Bank's advantage in competition for the type of
accounts that the smaller banks are equipped to serve.
These banks
have themselves all shown substantial growth in recent years, and
there is no evidence that holding company competition in the area
has been overly restrictive. In this light, and since none of these
banks has expressed views adverse to the acquisition, we conclude
thac it would not have a significant adverse effect on the smaller
banks.
The potential benefits of strengthening Earinets competitive
position in Bankt s service area and in the County now appear to be of
sufficient weight to justify a decision of approval) although some
sligWzoffsetting elemdnts remain.
In 1958, First Wisconsin Bankshares Corporation, the largest
holding company operating in Milwaukee County, established a subsidiary within Bankts primary service area, about three miles from
Bank. Much nearer to Bank is a branch of the same holding companyts
largest bank. It appears also that banking offices of the Bank Stock
Corporation system compete for business from Bank's primary service
area. Thus the acquisition would enable Marine to compete more directly
With the two larger holding company systems in the local area.
The
addition of Bank to the Marine system should also, because of the
anticipated establishment of some larger businesses in Bank's area,
promote the referral to Marine National of banking business that Bank
could not accommodate and that might otherwise be more inclined to
use offices of First Wisconsin National Bank or of Bank Stock
Corporation's largest subsidiary, the Marshall and Ilsley Bank. Both
in Bank's service area and in the larger Milwaukee County area, therefore, the acquisition of Bank should somewhat improve Marine's competitive position as against the two larger holding company systems.
While the three holding company systems together hold about
75 per cent of the commercial bank deposits in Milwaukee County, the
degree of concentration reflected is not what it would be if such
control were distributed among only one or two organizations.
As noted
in the previous Statement, the expansion of Marine by the proposed
acquisition to a point where it would hold about 15 per cent of commercial bank deposits in Milwaukee County would not of itself cause
undue concern in this case from the standpoint of expansion
of that
holding company system.
First Wisconsin National Bank, with almost $715 million of
deposits at December 31, 1960, holds virtually all of the 41 per cent
Of Milwaukee
County commercial bank deposits controlled by the First
Wisconsin Bankshares system.
First Wisconsin National has 12 branch
Offices which it is allowed to retain because they were established
prior to the 1947 State law prohibiting branch banking.
banks have no such branches in the County.
The Marine
Therefore, although the
First Wisconsin system has only three commercial banks in the County
as against five for Marine, First Wisconsin Bankshares has three
times as many offices, giving it better physical coverage of the
33
area, centralized in a branch banking system.
The resulting
competitive advantage is in addition to that reflected in the
comparison of deposit figures.
The prospective elimination of some existing competition
between Bank and Marine National remains, as does the matter of
concentration, a consideration somewhat adverse to approval.
How-
ever, a valid distinction may be drawn between the situation where
a certain amount of banking business is subject to competition
betreen only two banks and the situation where it is subject to
competition among a number of banks.
In the former case, the merger
or common ownership of the two banks could completely eliminate
competition for that amount of business, while in the latter case
that business remains subject to competition among the remaining
unaffiliated banks.
Thus, the amount of banking business subject to
competition between two banks to be affiliated cannot be used as a
measure of competition to be eliminated without taking into consideration the number of banks that would still compete for that
business.
There are 33 commercial banks in Milwaukee County, 22 of
which are independent.
In this situation it is apparent that, while
the volume of banking
business conceded to be subject to competition
between Bank and Marine National may not be insignificant when viewed
in terms of the deposits of those two banks, the elimination of
competition
between the two banks would not take that amount of
-6banking business out of competition among area banks generally, since
neither bank is the principal, let alone the sole, competitor of the
other.
Thus, in this case, the amount of competition that might be
eliminated "in the field of banking" in the area should not be measured
solely in terms of the deposits of the banks to be affiliated.
From the point of view of the public interest, the competitive
situation in a °articular trade aria is more significant than the
situation of two particular banks, although the effect of an acquisition on the latter situation may, in some cases, be determinative
of the effect on the former. In this case it is not. The number
of alternative sources of banking service available to the public is
not greatly reduced, either at the county or at the local level.
In summary, the Board is satisfied, upon reconsideration of
the matter, that competition both in Bankts primary service area and
in Milwaukee County would be enhanced in certain respects by the
acquisition without apparent risk to the smaller banks, and that the
considerations favoring approval of the application are not outweighed
by those of
opposite tendency.
For the reasons stated, it is the judgment of the Board that
the proposed
acquisition would be consistent with the general purposes
Of the Act and the
factors enumerated in section 3(c), and that the
aPplication Should be approved.
October 2, 1961.
338:L,t
Dissenting Statement of Governor BaldfIrston
Item No. 10
10/2/61
••••=..w
The issue in this case is whether The Marine Corporation,
the smallest of three holding company systems operating in Milwaukee
County, should be permitted to absorb an indeperOent bank having
some $37 million of deposits and located in the same County. Persuasive arguments can be advanced that Marine should be allowed to
reduce the size gap between it and the other two holding company
systems, the largest of which) First Wisconsin Bankshares Corporation,
holds over 41 per cent of the County's commercial bank deposits.
Neither the formation of The Marine Corporation nor its growth are
contrary to the intent of the Holding Company Act.
Consequently,
as Governor Robertson comments in his dissent, the approval of the
proposed acquisition must be determined in the lignt of the relevant
facts and circumstances of the particular case.
What are the relevant facts?
Nearly all of Wisconsin State
Bank's deposits are derived from Milwaukee County, and that County
constitutes the primary service area of The Marine Corporation's
largest subsidiary, namely) the Marine National Exchange Bank. It
would seem inevitable, therefore, that the amount of competition that
would be eliminated between the two banks if both were under the
control of the same holding company is significant. Furthermore,
in a locality where the three holding companies already control
75 per cent of the
commercial bank deposits, this acquisition would
Shift more than 8 per cent of the total deposits of independent banks
to the
control of a holding company which, though the smallest of the
three, is very much larger than any independent bank in the area.
3389
-2A decision in this case must therefore balance the advantages
Of the increase in the relative size of the smallest of these holding
companies that would result from the acquisition against the diminutIon
of existing
competition. It seems to me that to permit The Marine
Corporation to take over a growing, independent competitor of Marine's
own largest subsidiary would unduly reduce existing and potential
competition. Therefore, I would deny the application.
October 2 1961.
Dissenting Staterent of Govenlor Robertson
Item No. 11
10/2/61
...1.1MM.P.MINIMEN........111.1•••••••••111011
When the Board first considered this application, it
concluded that the extent to which the proposed acquisition would
reduce the relative dominance of First Wisconsin Bankshares Corporation
In the Milwaukee
area and increase competition between The Marine
Corporation and the larger holding companies was insufficient to
warrant the elimination of a well-managed, fast-growing, $37 million
bank as an independent competitor, particularly when 75 per cent of
commercial bank deposits in Milwaukee County are already in the banks
Of the three
holding company systems. In my opinion, that judgment
was correct. On reconsideration, Marine did not submit either facts
or arguments not
already available to and considered by the Board.
Hence, I fail to see
a valid basis for reversing our decision.
The majority of the Board now find that the anticompetitive
effects of the acquisition are outweighed by the benefits of slightly
increasing Marine's relative size and of improving Marine's geographical coverage of an area where the First Wisconsin Bankshares has
cfrices.If that conclusion can be reached on the facts of this case,
similar reasoning could be applied to permit the absorption of virtually
anY independent
bank whenever an applicant holding company is significantly Smaller
than a competing system, or even than a competing bank.
I find no evidence that Wisconsin State Bank cannot continue
t° grow and prosper despite the changing character of its service area,
or that the
present or future banking needs of that area cannot be
edequately served unless this bank is acquired by Marine.
Holding company banks already hold a substantial amount of
the banking business of Wisconsin State Bank`s service area.
The ec-
quisition would transfer nearly half of the deposits remaining in
independent banks to holding company control. It would increase the
already high levels of concentration in Milwaukee County as well, and
would eliminate present and potential competition between Wisconsin
State Bank and Marine National Exchange Bank, Marinets largest
adbsidiary.
Compared to the increased competitive imbalance between
and large institutions and the elimination of competition that
would result from this acquisition, the possible beneficial effects on
competition between holding companies in the area are insufficient to
support approval of the application.
MY opinion in this case is based on consideration of the
Particular acquisition proposed, not on any general view that Marine,
OZ* any other
holding company system, is of such a size that it should
not be
permitted any further acquisitions. Whether a proposed acquisition merits approval must be determined in the light of all the
relevant facts and circumstances of the particular case. Having so
evaluated the
present proposal, I conclude that the acquisition of
'
ill8consin State Bank by The Marine Corporation would not be consistent
with the
statutory objectives or the public interest, and I would
disapprove the application.
October 2, 1961.
TELEGRAM
LEASED WIRE SERVICE
Item No. 12
10/2/61
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
October 2, 1961
Swan - San Francisco
Re wires addressed to Board under date of September 30,
1961, by United California Bank and The Southwest Bank requesting
that Board's action of September 26 disapproving application for
merger not be included in weekly release K.3 to be handed to press
afternoon of October 3, 1961, because of possible adverse effect
on The Southwest Bank.
Understand copies of one or both wires
sent to your Bank.
Please advise Messrs. King and Illitch, Chairmen respectively
of the banks, that their wires were considered by the Board this
morning and that announcement will appear in usual form in tomorrow's
statement.
For your information, Board previously has considered
similar request and concluded that completeness of an established
statement made available to the public including the press should not
be brought into question by withholding announcement in usual course
of an action taken. Please note that K.3 statement concludes with
the statement, "No changes in other categories covered by this release",
thus indicating that all actions in the respective categories are
reported in a routine manner for the period indicated.
Sherman
@FedFRASER