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Minutes for
To:
Members of the Board
From:
Office of the Secretary
October 29, 1965
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. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
- :3421
Minutes of the Board of Governors of the Federal Reserve System
on Friday, October 29, 1965.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Balderston, Vice Chairman
Robertson
Shepardson
Mitchell
Daane
Maisel
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Mr. Young, Adviser to the Board and Director,
Division of International Finance
Mr. Cardon, Legislative Counsel
Mr. Fauver, Assistant to the Board
Mr. Solomon, Director, Division of Examinations
Miss Eaton and Mrs. Semia of the Office of the
Secretary
Mr. Morgan, Staff Assistant, Board Members'
Offices
Messrs. Brill, Holland, Koch, Partee, Solomon,
Axilrod, Eckert, and Gramley of the Division
of Research and Statistics
Messrs. Hersey, Katz, Sammons, Reynolds, and
Baker of the Division of International
Finance
Mr. Furth, Consultant
Money market review.
Messrs. Axilrod and Eckert presented a
review of financial developments, with special reference to the Government securities market and bank credit.
Tables were distributed on
financial and monetary indicators, as well as perspective on money and
capital markets and bank reserve utilization.
demand deposits was also distributed.
A chart on growth in
The staff responded to various
questions asked by members of the Board, after which Mr. Baker discussed
foreign exchange market developments.
.
01A 1)1
t
404,
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10/29/65
All members of the staff then withdrew except Messrs. Sherman,
Kenyon, Young, Fauver, Brill, Solomon (Examinations), and Sammons,
and Mrs. Semia and the following entered the room:
Mr. Hackley, General Counsel
Mr. Johnson, Director, Division of Personnel Administration
Messrs. Shay and Hooff, Assistant General Counsel
Mr. Leavitt, Assistant Director, Division of Examinations
Mr. Via, Senior Attorney, Legal Division
Messrs. Achor, Egertson, and Maguire of the Division of
Examinations
Discount rates.
The establishment without change by the
Federal Reserve Bank of Minneapolis on October 27, 1965, and by the
Federal Reserve Banks of Cleveland, Richmond, St. Louis, Kansas City,
and Dallas on October 28, 1965, of the rates on discounts and advances
in their existing schedules was approved unanimously, with the understanding that appropriate advice would be sent to those Banks.
Circulated or distributed items.
The following items, copies
of which are attached to these minutes under the respective item numbers indicated, were approved unanimously:
Item No.
Letter to United California Bank, Los Angeles,
California, approving the establishment of three
branches at specified locations in San Francisco,
Pasadena, and La Jolla.
1
Letter to The Union Commerce Bank, Cleveland, Ohio,
approving an extension of time to establish two
branches in Shaker Heights.
2
Letter to Citizens National Bank of Dallas, Dallas,
Texas, granting its request for permission to maintain reduced reserves.
3
11)
k.),‘
10/29/65
-3Item No.
Letter to the Federal Deposit Insurance Corporation regarding the application of Fidelity Bank
and Trust Company, Houston, Texas, for continuation of deposit insurance after withdrawal from
membership in the Federal Reserve System.
Letter
noting
Bank's
a trip
to the Federal Reserve Bank of New York
without objection an extension of the
foreign travel program for 1965 to include
by Vice President Rozell to Ethiopia.
4
5
Letter to the Secretary of the Federal Advisory
Council transmitting a list of topics suggested
for discussion at the November 1965 meeting of
the Council.
6
Letter to the Federal Reserve Bank of Richmond
approving the payment of salary to Gerald L.
Wilson as Assistant Cashier of the Baltimore
Branch at the rate fixed by the Bank's Board
of Directors.
7
In connection with Item No. 1 Governor Maisel noted that the
related memorandum from the Division of Examinations indicated that
United California Bank proposed to acquire servicing contracts and
other assets of Marble Mortgage Company, San Francisco, and to establish the three branches for which approval was requested at the present
division offices of the mortgage company, with no intention of operating a general banking business at those locations.
In response to his
request for a review of the Board's general position in regard to
acquisition of mortgage servicing contracts by State member banks,
the staff brought out that this had come to be an established banking
practice and was not considered to be a change in the character of a
-4-
10/29/65
bank's business such as to require Board approval under the first standard
condition of membership.
Governor Maisel then inquired about objections the Board had
raised in regard to certain mortgage activities proposed to be undertaken by Mercantile Trust Company, St. Louis, Missouri.
The staff
brought out among other things that the problem in regard to the Mercantile Trust proposal had arisen partly because the bank sought to
acquire the stock of a mortgage company through a wholly-owned subsidiary.
United California's proposal, however, did not involve a
stock acquisition.
Further, the question in the Mercantile Trust
matter had turned upon the definition of a branch in Federal law and
the operation of out-of-State branches.
Report on competitive factors (Lebanon-Advance, Indiana).
A
report to the Federal Deposit Insurance Corporation on the competitive
factors involved in the proposed purchase of assets and assumption of
liabilities of State Bank of Advance, Advance, Indiana, by The Boone
County State Bank, Lebanon, Indiana, was approved unanimously for transmittal to the Corporation.
The conclusion read as follows:
The proposed acquisition of assets and assumption of
liabilities of State Bank of Advance by The Boone County
State Bank, Lebanon, would eliminate some competition between the two banks; however, in view of the relatively
small size of Advance Bank, as well as the existence of
other banking alternatives, the overall effect on competition should not be adverse.
Report on competitive factors (Colby, Wisconsin).
After a dis-
cussion during which editorial changes in the body of the report and
- 34
-5-
10/29/65
changes in the conclusion were agreed upon, unanimous approval was
given to the transmittal to the Federal Deposit Insurance Corporation
of a report on the competitive factors involved in the proposed consolidation of Colby State Bank and Security State Bank of Colby, both
of Colby, Wisconsin.
The conclusion, in the form approved, read as
follows:
Security State Bank of Colby and Colby State Bank are
banks of approximately equal size and competitive capability,
serving the same area with the same banking services. The
proposed transaction would eliminate the competition that
naturally exists in these circumstances as well as the potential for further competition. While there are several alternate banking facilities fairly close to Colby, there are no
others in the community, and hence the effect of the proposed
consolidation on competition is adverse.
Application of Union Bank (Items 8 and 9).
There had been
distributed drafts of an order and statement reflecting the approval
by the Board on October 13, 1965, of the application of Union Bank,
Los Angeles, California, to merge with The Republic National Bank of
San Diego, San Diego, California.
After a discussion during which there was agreement with several
suggestions for changes in the statement, the issuance of the documents
was authorized.
Copies of the order and statement, as issued, are
attached as Items 8 and 9.
Branches in mobile facilities (Items 10, 11, and 12).
There
had been distributed a memorandum dated October 26, 1965, from the
Division of Examinations regarding applications from Manufacturers and
10/29/65
-6-
Traders Trust Company, Buffalo, New York, for establishment of four
branches at specified locations in the Towns of Porter, Lewiston, and
Newfane, Niagara County, and in the Town of Clarence, Erie County.
Each of the branches was to be operated two days a week, with each of
two mobile units serving two of the locations.
The memorandum pointed
out that this was the first time the Board had been asked to approve
the establishment of mobile banking offices, although at least five
other applications of a similar nature were now under consideration
by state and Federal Reserve Bank officials.
(The present proposal
was to be distinguished from pick-up and delivery services at a
customer's office as agent of the customer.)
The memorandum discussed
guidelines established by the Superintendent of Banks of the State of
New York for mobile branch facilities and commented on alternative
degrees of restrictions that the Board might wish to consider if it
decided to approve the establishment of the branches.
However, it
was the Division's recommendation that the applications be approved
Without unusual conditions attached.
Attached to the memorandum was
an analysis of the member bank's proposal prepared by the Federal
Reserve Bank of New York, in which it was noted that a national bank
in Albany had introduced mobile banking in the Second Federal Reserve
District in June of this year under a mode of operation and through
the use of facilities similar to those contemplated by Manufacturers
and Traders Trust Company.
3430
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10/29/65
Governor Maisel suggested that if approval of the applications
would constitute a precedent decision, this fact be announced in the
Federal Reserve Bulletin.
In recent conversations with bankers' groups
he had found a great deal of interest in whether this type of operation
would be approved.
The staff brought out that the Board's general position had
been that provision of mobile service, such as armored car service,
constituted a branch operation; and under the definition of "branch"
in Federal statutes, a separate branch permit appeared to be necessary
for each stop at which such a unit operated.
Approval of the instant
applications would be consistent with that position, but this was the
first time the Board had been requested to approve establishment of
branches incident to such a plan.
The proposal of Manufacturers and
Traders Trust was compared with other arrangements the Board had approved,
such as seasonal facilities and temporary branch quarters in a trailer
during construction of permanent housing.
Suggestion was made that any
statement in regard to the Board's approval make clear the limitations
on the arrangement.
At the conclusion of the discussion the applications of Manufacturers and Traders Trust Company were approved unanimously.
A
copy of the letter informing the member bank of this decision is
attached as Item No. 10, and a copy of the transmittal letter to the
Federal Reserve Bank of New York is attached as Item No. 11.
It was
- 343I
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10/29/65
understood that the staff would consider what type of announcement of
the Board's action would seem most appropriate.
Secretary's Note: The Federal Reserve Banks
were subsequently informed of the Board's
action in a letter, a copy of which is attached as Item No. 12.
Request for Board letter regarding Citizens and Southern
reorganization (Item No. 13).
There had been circulated a memorandum
from Mr. Hackley dated October 22, 1965, in connection with a request
for a copy of a letter addressed by the Board on April 14, 1965, to
the Federal Reserve Bank of Atlanta in regard to a reorganization
proposal involving Citizens and Southern National Bank and Citizens
and Southern Holding Company, both registered bank holding companies
of Savannah, Georgia.
The proposal contemplated that shareholders of
the national bank would donate their shares in the holding company to
the national bank, which at that time held such shares as trustee for
those shareholders.
The Board's letter stated that consummation of
the proposal would not violate section 4 of the Bank Holding Company
Act, that Board approval was not required under section 3(a) of the
Act, and that the transaction would not constitute a purchase of stock
by the bank for its own account in violation of section 5136 of the
Revised Statutes.
A request for the letter had been made by an officer
of Bank of Indiana, National Association, Gary, Indiana, on the ground
that the latter bank was "interested in the possibility of owning the
- 34"2
t
'40
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10/29/65
stock of its holding company."
(The bank was not at present controlled
by a registered bank holding company, but was a subsidiary of a holding company affiliate that had been granted a section 301 determination.)
The Board had not published the requested letter and, under the
Board's Rules Regarding Information, Submittals, and Requests, it might
not be disclosed unless the Board granted a request for access by a
person who stated the purpose for which he requested it, his interest
in the matter, and reasons why his request should be granted.
Although
the present request had not complied literally with all of those requirements, it had clearly indicated the nature of the interest and the reason
for the request.
Moreover, the Board's letter had received some pub-
licity in the press and as a practical matter its general substance had
been made public.
Disclosure of the letter might in fact be desirable
in order to avoid certain misinterpretations.
recommended that the request be granted.
On balance, Mr. Hackley
A draft of letter in those
terms to Bank of Indiana was attached to the memorandum.
During discussion Mr. Hackley commented that apparently Citizens
and southern had made the substance of the Board's letter available to
the press; it was evident that at least one publication must have had
virtually the complete text.
The letter to Bank of Indiana was then approved unanimously.
A copy is attached as Item No. 13.
343..
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10/29/65
Mr. Fauver asked if the Board's action contemplated that the
letter could be furnished also to any member of the press upon request,
and it was agreed that this could be done.
Assignment of Mr. Melichar.
After consideration of a memo-
randum dated October 28, 1965, from Mr. Brill, the Board approved
unanimously the assignment of Emanuel Melichar, Economist in the
Division of Research and Statistics, to serve on an interagency task
force exploring means for providing additional capital to rural areas,
this being one of the activities of the Rural Development Committee,
established by Executive Order 11122, dated October 16, 1963.
All members of the staff then withdrew and the Board went into
executive session.
The Secretary was advised later that during the executive session the following actions were taken:
The Board approved the recommendations in a memorandum dated
October 29, 1965, from the Division of Personnel Administration (copy
attached as Item No. 14) relating to a revision of the Board's regular
salary schedule, effective October 10, 1965.
The Board appointed the following persons to the positions
indicated on the Board's official staff, effective November 1, 1965:
3
-11-
10/29/65
Present position
Name
New position
Board Members' Offices
Ralph A. Young 1/
Adviser to the Board
Robert C. Holland
Associate Director,
Division of Research
and Statistics
Adviser, Division of
Research and Statistics
Robert Solomon
Senior Adviser to the
Board
Adviser to the Board
Adviser to the Board
Legal Division
David B. Hexter
Assistant General Counsel
Associate General Counsel
Research and Statistics
Albert R. Koch
J. Charles Partee
Stephen H. Axilrod
Lyle E. Gramley
Stanley J. Sigel
Tynan Smith
Associate Director
Adviser
Chief, Government Finance
Section
Senior Economist
Assistant to the Director
Senior Economist
Deputy Director
Associate Director
Associate Adviser
Associate Adviser
Associate Adviser
Associate Adviser
International Finance
Robert L. Sammons
Reed J. Irvine
John E. Reynolds
Ralph C. Wood
Adviser
Associate Adviser
Associate Adviser
Associate Adviser
Associate Director
Adviser
Adviser
Adviser
The Board approved the payment of salaries to members of its
official staff at the annual rates indicated in the list attached as
Item No. 15, effective November 1, 1965.
The Board authorized deferment of the retirement of Ralph A.
Young until June 30, 1967.
1/
Also Director, Division of International Finance
3e1
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10/29/65
The Board designated Robert C. Holland and Robert Solomon as
members of the Editorial Committee of the Federal Reserve Bulletin,
effective November 1, 1965.
The Board designated Daniel H. Brill as Chairman of the System
Research Advisory Committee, effective November 1, 1965, succeeding
Guy E. Noyes.
The meeting then adjourned.
Secretary's Notes: On October 28, 1965,
Governor Shepardson approved on behalf
of the Board the following items:
Letter to the Federal Reserve Bank of Cleveland (attached Item
No. 16) approving the designation of Terry D. Barnett and Robert S.
Heidler as special assistant examiners.
Letter to the Executive Secretary of the Interagency Committee on
Automatic Data Processing advising of the designation of David S.
Staiger, Senior Economist in the Division of Data Processing, to serve
as alternate to M. H. Schwartz on the Interagency Committee.
Governor Shepardson today approved on
behalf of the Board the following items:
Letter to the Federal Reserve Bank of New York (attached Item No. 17)
approving the appointment of William S. Spaulding, Jr., as examiner.
Memorandum from the Division of Research and Statistics dated
October 28, 1965, stating that it had been contemplated that the recent
trip to Scandinavia by Stanley J. Sigel, Assistant to the Director,
would be undertaken on the basis of per diem prescribed by the standardized Government travel regulations.
Secre ar
343.
BOARD OF GOVERNORS
Item No. 1
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October 29, 1965
Board of Directors,
United California Bank,
Los Angeles, California.
Gentlemen:
The Board of Governors of the Federal Reserve System
approves the establishment by United California Bank, Los Angeles,
California, of a branch at 601 California Street, San Francisco,
California, a branch at 790 Green Street, Pasadena, California,
and a branch at 7872 Ivanhoe Avenue, La Jolla, California, in
connection with the acquisition of assets and mortgage servicing
contracts of Marble Mortgage Company, provided the activities of
these branches are limited to the negotiating, processing, and
servicing of real estate mortgage loans.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
- 34
Item No. 2
10/29/65
BOARD OF GOVERNORS
OF THE
•
••
FEDERAL RESERVE SYSTEM
WASHINGTON. D. C. 2(451
11
4
AOOREIHI OFfICIIAL CORREEPONDENCIE
TO THE IPOANO
st
October 29, 1965
Board of Directors,
The Union Commerce Bank,
Cleveland, Ohio.
Gentlemen:
The Board of Governors of the Federal Reserve
within which
System extends to January 24, 1966, the time
establish
The Union Commerce Bank, Cleveland, Ohio, may
of
corner
the
two branches, one a drive-in facility, at
s,
Height
Shaker
Van Ak.en Boulevard and Farnsleigh Road,
Cuyahoga County, Ohio.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 3
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October 29, 1965
Board of Directors,
Citizens National Bank of Dallas,
Dallas, Texas.
Gentlemen:
With reference to your request submitted through
s,
the Federal Reserve Bank of Dallas, the Board of Governor
Reserve
Federal
the
of
19
Section
acting under the provisions of
of Dallas
Act, grants permission to the Citizens National Bank
required
are
as
deposits
against
to maintain the same reserves
the
with
e
effectiv
banks,
city
to be maintained by nonreserve
the
after
g
beginnin
period
ion
first biweekly reserve computat
date of this letter.
Your attention is called to the fact that such
s.
permission is subject to revocation by the Board of Governor
'Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
Item No. 4
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October 29, 1965
The Honorable K. A. Randall, Chairman,
Federal Deposit Insurance Corporation,
20429
Washington, D. C.
Dear Mr. Randall:
Reference is made to your letter of October 13,
1965, concerning the application of Fidelity Bank and Trust
Company, Houston, Texas, for continuance of deposit insurance after withdrawal from membership in the Federal Reserve
System.
There have been no corrective programs urged upon
the bank, or agreed to by it, which have not been fully
consummated, and there are no such programs that the Board
would advise be incorporated as conditions of admitting the
bank to membership in the Corporation as a nonmember of the
Federal Reserve System.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 5
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
AI:MRCSS OFFICIAL CORRESPONDCHCC
TO THC SOAR°
October 29, 1965
Mr. Richard A. Debs, Secretary,
Federal Reserve Bank of New York,
New York, New York. 10045
Dear Mr. Debs:
With reference to your letter of October 25,
1965, the Board notes without objection the addition to
the New York Reserve Bank's Foreign Travel Program for
1965 resulting from Mr. Rozell's travel to Ethiopia.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
441
BOARD OF GOVERNORS
Item No. 6
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
AODRCIM OFFICIAL CORRESPONDENCE
TO THE •OARD
October 29, 1965.
AIR MAIL
Mr. Herbert V. Prochnow, Secretary,
Federal Advisory Council,
38 South Dearborn Street,
Chicago, Illinois. 60690
Dear Herb:
The Board of Governors suggests the topics shown
on the attached list for discussion at the meeting of the
Federal Advisory Council on November 15, 1965, and the joint
meeting of the Board and the Council on November 16.
Very truly yours,
Merritt Sherman
Secretary.
Attachment
Topics for Discussion at Meeting of
Federal Advisory Council
November 15-16, 1965
1.
Economic conditions and prospects.
A.
B.
respect to business
What are the Council's expectations with
cipated that overanti
it
fixed capital outlays in 1966? Is
stries?
indu
t
rtan
capacity will result in any impo
C.
eases will continue
Does the Council anticipate that price incr
general?
more
me
beco
or
r
to be selective in characte
D.
d in inventory
How are business expectations being reflecte
policies?
E.
2.
the U.S. economy
How does the Council appraise prospects for
t part of 1966?
firs
the
during the remainder of this year and
its in 1966? If changes
What are the prospects for business prof
are they likely to be
from this year's experience are foreseen,
for outside capital and
significant from the standpoint of need
effect on the course of
credit and from the standpoint of their
business investment?
Banking developments.
A.
B.
C.
D.
year-end business demands
What does the Council anticipate as to
onal needs?
seas
l
usua
for bank credit in relation to
s occurred in
To what extent have selected increase
customers, and
to various classes of business loan
terms? How
been other significant changes in loan
ple, have plans
reacted to such increases; for exam
accelerated?
the longer-term capital markets been
rates charged
have there
have customers
to finance in
affected the ability of banks to
How have recent developments
or through the issuance of shortattract funds in the CD market
term promissory notes?
recent slowdown in bank
How does the Council evaluate the
acquisition of municipals?
-2
3.
4.
Balance of payments.
A.
How does the Council appraise the strength of foreign demand
for U.S. bank funds?
B.
Have the Council's views on the effectiveness of the vdluntary
foreign credit restraint program changed materially since the
Council met with the Board in September?
C.
Are there any changes that the Council would recommend in the
details of the voluntary restraint program for banks in 1966?
What are the Council's views on monetary and credit policy under
current circumstances?
3Lj
BOARD OF GOVERNORS
Item No. 7
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS orriciAL CORREOPONDICHCIE
TO THE BOARD
October 29, 1965
CONFIDENTIAL (FR)
Mr. Edwin Hyde,
Chairman of the Board,
Federal Reserve Bank of Richmond,
Richmond, Virginia 23213.
Dear Mr. Hyde:
The Board of Governors approves the payment of
salary to Mr. Gerald L. Wilson as Assistant Cashier of the
Baltimore Branch of the Federal Reserve Bank of Richmond
at the rate of $12,000 per annum for the period December 1
through December 31, 1965. This is the rate fixed by your
Board of Directors as reported in your letter of October 14.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
- 3445
Item No. 8
10/29/65
UNITED STATES OF ALERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
UNION BANK
for approval of merger with
The Republic National Bank of
San Diego
ORDER APPROVING MERGER OF BANKS
There has come before the Board of Governors, pursuant to the
Bank Merger Act of 1960 (12 U.S.C. 1828(c)), an application by Union Bank,
Los Angeles, California, a State member bank of the Federal Reserve System,
for the Board's prior approval of the merger of that bank and The Republic
and
National Bank of San Diego, San Diego, California, under the charter
title of the former.
As an incident to the merger, the sole office of
The Republic National Bank of San Diego would become a branch of the
resulting bank.
Notice of the proposed merger, in form approved by the
Board, has been published pursuant to said Act.
Upon consideration of all relevant material in the light of
the factors set forth in said Act, including reports furnished by the
Comptroller of the Currency, the Federal Deposit Insurance Corporation,
- 3446
-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
Board's Statement of this date, that said application be and hereby
is approved, provided that said merger shall not be consummated
of this Order or
(a) within seven calendar days after the date
(b) later than three months after said date.
Dated at Washington
D. C., this 29th day of October, 1965.
By order of the Board of Governors.
Voting for this action:
Unanimous, with all members present.
signed)
Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
t_Y-11t)AI
'1
Item No. 9
10/29/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEU
APPLICATION OF UNION BANK
FOR APPROVAL OF 'MERGER WITH
THE REPUBLIC NATIONAL BANK OF SAN DIEGO
STA TEMNT
Union Bank, Los Angeles, California ("Union") with total
1/
deposits of $1.1 billion,— has applied, pursuant to the Bank Merger
Act of 1960 (12 U.S.C. § 1028(c)), for the Board's prior approval of
the merger of that bank and The Republic National Bank of San Diego,
San Diego, California ("Republic"), which has total deposits of $6.8
2/
million."
As an incident to the merger, the sole office of Republic
would become a branch of Union, increasing the number of its offices
to 13.
Under the law, the Board is required to consider, as to
each of the banks involved, (1) its financial history and condition,
(2) the adequacy of its capital structure, (3) its future earnings
prospects, (4) the general character of its management, (5) wheth.cr
its corporate powers are consistent with the purposes of 12 U.S.C.,
Ch. 16 (the Federal Deposit Insurance Act), (6) the convenience and
1/
2/
As of December 31, 1964.
As of September 13, 1965.
- 3448
-2-
needs of the community to be served, and (7) the effect of the transaction
on competition (including any tendency toward monopoly).
The Board may
not approve the transaction unless, after considering all of these
factors, it finds the transaction to be in the public interest.
Banking factors. - Union has a satisfactory financial history,
and both its asset condition and capital structure are reasonably adequate.
The earnings record of Union is above average and its future earnings
prospects are favorable.
Union's management is capable and progressive.
Republic opened for business on August 5, 1964, and, for
the period ending with the calendar year, realized above average operating
earnings.
However, in early 1965 Republic began to experience a deposit
decline and as of September 13, 1965, its deposits were down from $9.2
million to $6.8 million, a decrease of more than 25 per cent in less than
nine months.
In addition, while Republic's asset condition cannot be
described as critical at this time, the bank has a substantial volume of
loans which are of questionable quality.
Republic, since it opened for
business, has not been able to acquire and retain the services of an
experienced lending officer and, as long as the bank continues to operate
without such an officer, further deterioration in its asset condition seems
probaUe.
Republic's difficulties, manifested in its rather uncertain
earnings prospects, are complicated by some disharmony among its directors
as to a proper course for the bank's future.
344
-3-
Consummation of the proposed merger would remove the
uncertainty concerning Republic and would not adversely affect the
banking factors as they relate to Union.
There is no indication that the corporate powers of the banks
are, or would be, inconsistent with the purposes of 12 U.S.C., Chapter 16.
Convenience and needs of the communities. - Union is headquartered
in Los Angeles and all of its 12 offices are located in Orange and Los
Angeles Counties.
Republic's sole office is located in San Diego, some
128 miles southeast of Los Angeles.
The convenience and needs of the
communities served by Union's present offices would not be affected by
the merger.
San Diego, a major seaport, has a population of about 648,000.
Despite declines in certain industries in the past, notably in aviation
and fishing, the condition of the local economy appears to be satisfactory.
Nine commercial banks, five of them ranking among California's ten largest
in terms of total deposits, operate 64 offices in the city of San Diego.
Seven of these banks, including Republic, operate 14 offices in the
immediate downtown area of San Diego.
Union has received approval to establish a de novo branch in
downtown San Diego, but will abandon its plans in this respect if the
proposed merger with Republic is approved.
Thus, although Union would
replace Republic, and the total number of commercial banks and banking
offices serving San Diego would remain unchanged, the proposed transaction
- 3450
-4-
would result in the elimination of an alternate source of banking services.
However, this consideration must be weighed in the light of Republic's
relatively uncertain future and the fact that the banking needs and
convenience of the community are being satisfactorily met with the
existing number of commercial banks and banking offices.
On balance,
it does not appear that the convenience and needs of the banking public
would be adversely affected in any significant respect.
Competition. - Union, with about 3.3 per cent of the total
deposits and .5 per cent of the offices, is the sixth largest commercial
bank in California.
The proposed merger would increase Union's share
of the State's total commercial bank deposits by about three one-hundredths
of 1 per cent.
Five of the State's ten largest banks in California hold
about 91 per cent of the total deposits held by the nine commercial banks
operating offices in San Diego, and about 90 per cent of such deposits
held by the seven commercial banks operating offices in downtown San Diego,
Republic accounts for 1.0 per cent of the city-wide commercial bank deposits
and 1.8 per cent of the total deposits held by the downtown commercial bank
offices.
The nearest office of Union to San Diego is located nearly
100 miles distant in Orange.
Union derives some business from the San Diego
area, but it is nearly all of a type and volume (e.a., interim construction
financing) that Republic could not handle or would not attract.
It does
not appear that any significant competition exists between the two banks.
- 3451
-5-
As mentioned earlier, Union plans to establish a de novo
branch in San Diego if its proposed merger witl Republic is not approved.
Thus, the transaction would foreclose such potential for competition as
may exist between the two banks.
In addition, the transaction may be
viewed as foreclosing a desirable step toward the deconcentration of
banking resources in the San Diego market.
However, to attach meaningful
weight to either of these considerations, it is necessary to conclude
that Republic is capable of becoming, and continuing as, a significant
competitive force.
The evidence, as discussed under the "Banking factors"
heading, rather than providing support for such a conclusion, raises
doubts concerning the bank's future.
Considering all the relevant
circumstances, it does not appear that the merger would adversely affect
any other bank, or that its consequences for banking competition in
general would be significantly adverse.
Summary and conclusion. - Although consummation of the proposed
merger would result in the elimination of an independent commercial bank,
it does not seem probable, particularly in view of the uncertainty
concerning Republic's future, that it would materially affect the banking
needs and convenience of the community or that the effect on banking
competition would be significantly adverse.
Further, consummation of the
proposed merger would afford an orderly and prompt resolution of the problems
that beset Republic and which make the bank's prospects uncertain.
Accordingly, the Board finds that the proposed transaction would
be in the public interest.
October 29, 1965.
k
BOARD OF GOVERNORS
rz
: *
l'hof
Item No. 10
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October 29, 1965
Board of Directors,
Manufacturers and Traders Trust Company,
Buffalo, New York.
Gentlemen:
The Board of Governors of the Federal Reserve System
approves the establishment by Manufacturers and Traders Trust
Company, Buffalo, New York, of branches (mobile facilities) at
the following locations, provided each is established within six
months from the date of this letter.
(1)
201 Lockport Street, Village of Youngstown, Town of
Porter, Niagara County, New York.
(2) 5910 Ward Road, Sanborn (unincorporated area), Town
of Lewiston, Niagara County, New York.
(3)
6488 Ridge Road, Wrights Corner (unincorporated area),
Town of Newfane, Niagara County, New York.
(4) 5820 Goodrich Road, Clarence Center (unincorporated
area), Town of Clarence, Erie County, New York.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
4.0
345"
BOARD OF GOVERNORS
Item No. 11
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS
orriciAL
CORRESPONDENCE
TO THE BOARD
October 29, 1965.
Mr. Fred W. Piderit, Jr., Vice President,
Federal Reserve Bank of New York,
New York, New York. 10045
Dear Mr. Piderit:
There is enclosed, for delivery to the applicant bank,
a letter indicating the Board's approval of the following branches
of Manufacturers and Traders Trust Company, Buffalo, New York.
(1)
201 Lockport Street, Village of Youngstown, Town of
Porter, Niagara County, New York.
(2)
5910 Ward Road, Sanborn (unincorporated area), Town
of Lewiston, Niagara County, New York.
(3)
6488 Ridge Road, Wrights Corner (unincorporated area),
Town of Newfane, Niagara County, New York.
(4) 5820 Goodrich Road, Clarence Center (unincorporated
area), Town of Clarence, Erie County, New York.
The Board has never placed restrictions on the days or
may be in operation, and does not believe such rebranch
hours a
strictions are necessary in approving the operations of mobile
facilities.
The letter to Manufacturers and Traders Trust Company proeach branch. The
vides a six-month period for the establishment of
period. If
that
of
Board also has approved a six-month extension
r apply for
hereafte
should
Manufacturers and Traders Trust Company
of
letter
Board's
the
an extension, the procedure prescribed in
.
November 9, 1962 (S-1846), should be followed
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary,
Enclosures.
315/4
Item No. 12
10/29/65
BOARD OF GOVERNORS
S-1972
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS orrsciAL CORRESPONDENCE
TO THE BOARD
November 9, 1965.
Dear Sir:
sted by a State member
The Board of Governors was recently reque
nated out-of-town
desig
at
es
e
offic
bank to approve the operation of mobil
ions on certain
locat
such
at
oned
locations. These offices would be stati
tes (12 U.S.C.
Statu
ed
Revis
the
days and hours each week. Section 5155 of
ve Act to
Reser
al
Feder
the
of
9
36), which is made applicable by section
term
the
es
defin
,
banks
r
the establishment of branches by State membe
ved,
recei
are
its
depos
which
"branch" as any "place of business . . . at
that
uded
concl
Board
the
y,
or checks paid, or money lent." Accordingl
at which some or all of
ess
busin
of
place
a
be
would
as each location
ssion to establish branches
such activities would be conducted, permi
ved by the Board when State
was required. Such offices may only be appro
locations. The approval of the
statute permits branch banking at such
the Board approved the establishState authorities had been obtained and
ment of branches at these locations.
the Federal Register
This interpretation will be published in
and in the Federal Reserve Bulletin.
Very truly yours,
C
Merritt Sherma
Secretary.
RESERVE BANKS.
TO THE PRESIDENTS OF ALL FEDERAL
BOARD OF GOVERNORS
•
•••,
•
GON;
Item No. 13
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
1:
44i
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONOENCE
TO THE BOARD
.•....•.
kAL R.
November 2, 1965.
Mr. T. F. Gilmore, Cashier,
Bank of Indiana, National Association,
P. O. Box 330,
Gary, Indiana.
Dear Mr. Gilmore:
We regret that the material sent you in response to your
letter of October 1, 1965, was not the material you had in mind in
making your request.
Since your letter referred to "Federal Reserve Approval of
April 14, 1965", it suggests that you might be under the impression
that the Board on or about that date approved an application in
response to a request from Citizens and Southern National Bank.
Actually, no such application or request was received or approved
by the Board.
However, it is assumed that you had reference to a letter
of the Board regarding a proposed change in relations between Citizens
and Southern National Bank and Citizens and Southern Holding Company.
Accordingly, a copy of that letter is enclosed in response to your
request.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Enclosure
341.5f
BOARD OF GOVERNORS
Item No. 14
10/29/65
Or THC
FEDERAL RESERVE SYSTEM
Office Correspondence
To
Board of Governors
Prom Division of Personnel Administration
Date
October 29, 1965.
General Adjustment to the
Board's Regular Salary Schedule.
Background:
Legislation is before the President to sign into law "An Act to
adjust the rates of basic compensation of certain officers and employees
of the Federal Government---", to become effective retroactive to the
first day of the first pay period which begins on or after October 1, 1965.
The effective date for the Board, if approved, would therefore be October 10,
1965.
This Act provides for adjustments in salaries of general schedule
Government employees in grades corresponding to Grades FR-1 through FR-15
at the rate of approximately 3.6 per cent at all levels.
.
Recommendations
In keeping with the Board's policy of maintaining a salary structure for its employees comparable to that of other agencies of the Federal
Government, it is recommended that the Board approve the following, subject
to approval of the legislation by the President:
(1) Revision of the Board's Regular Salary Schedule retroactive
to October 10, 1965, in accordance with the attached table (Attachment 1),
which corresponds to the basic compensation rates established in this Act
as signed by the President; and, further, to adjust accordingly the basic
compensation of those employees under this schedule on October 10, 1965.
(2) Application and Implementation of Revised Salary Structure.
With the approval of the Board Member in charge of internal administrative
affairs, the Division of Personnel Administration shall be responsible for
making adjustments in (1) rates of per diem for WAE (when actually employed)
employees, (2) entrance salaries of pending appointments, etc.
(3) Administration and Procedure. The Office of the Controller
and the Division of Personnel Administration will use Government regulations
and interpretations as guides in deciding questions of administration and
procedure.
Exceptions
Not included in these recommendations are Board employees paid
under the Metropolitan D.C. Prevailing Rate Wage Schedule (mechanics, gardeners, painters, chauffeurs, etc.) and the Interdepartmental Lithographic
Board of Governors
Wage Board (printing) Pay Schedule. These employees receive periodic
salary adjustments as a result of annual area wage surveys.
No recommendations are made in this memorandum with regard to
the annual salaries of the Board's Official Staff. It is assumed that
any determination on this matter will be made by the Board, as in the
past.
Attachment.
- :14
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
REGULAR SALARY SCHEDULE
Basic Annual Pay Rates by Grades -- October 10, 1965
(Rates in effect July 5, 1964 to October 9, 1965 are shown
on the second line of each grade)
Progress Steps
One Year Periods
1
2
3507 3626 3745
3385 3500 3615
3814 3943 4072
FR-2
3680 3805 3930
4149 4289 4429
FR-3
4005 4140 4275
4641 4797 4953
Y11-4
80 4630 4780
150
5181 5352 5523
YR-5
1655000 5165 5330
5702 5894 6086
FR-6185
5505 5690 5875
6269 6476 6683
207
F11-7
6050 6250 6450
200
6869 7097 7325
228
FR-8220
6630 6850 7071
7479 7733 7987
0 7465 7710
245
?R-9
8184 8464 8744
280
PR-10
900 8170 8440
270
8961 9267 9573
306
PR-11
8650 8945 9240
295
10619 10987 11355
368
PR-12
l'el
a a 1.1
12510 12945 13380
PR-13
a
14680 15188 15696
508
'ta
'
17055 17645 18235
590
'Z/
.11
a $
rade
Step
ncrease
119
115
129
125
140
135
Two Year Periods
6
5
4
3864 3983 4102
3730 3845 3960
4201 4330 4459
4055 4180 4305
4569, 4709 4849
4410 4545 4680
5109 5265 5421
4930 5080 5230
5694 5865 6036
5495 5660 5825
6278 6470 6662
6060 6245 6430
6890 7097 7304
6650 6850 7050
7553 7781 8009
7290 7510 7730
8241 8495 8749
7955 8200 8445
9024 9304 9584
8710 8980 9250
a •
9879 1018
9535 9830 $
11723 12091 12459
13815 14250
.:
16204 16712 17220
.
.
18825 19415 20005
Three Year
8
7
4221 4340
4075 4190
4588 4717
4430 4555
4989 5129
4815 4950
5577 5733
5380 5530
6207 6378
5990 6155
6854 7046
6615 6800
7511 7718
7250 7450
8237 8465
7950 8170
9003 9257
8690 8935
9864 10144
9520 9790
10797 11103
10420 10715
12827 13195
2180 1273.
15120 15555
a
17728 18236
Periods
9
4459
4305
4846
4680
5269
5085
5889
5680
6549
6320
7238
6985
7925
7650
8693
8390
9511
9180
10424
10060
11409
1 1 1
13563
1109D
15990
18744
10
4578
4420
4975
4805
5409
5220
6045
5830
6720
6485
7430
7170
8132
7850
8921
8610
9765
9425
10704
10330
11715
11305
13931
13445
16425
:
19252
1'1
: :1
20595 21185 21775
22365
00
'0
11
:i1
a
a
- 311:"
i$4
Item No, 15
10/29/65
Annual Salaries
Approved for Members of
Board's Official Staff
effective November 1, 1965
Name and Title
Division
Annual Salary
Board Members
Ralph A. Young, Senior Adviser to the Board and
Director, Division of International Finance
Robert C. Holland, Adviser to the Board
Robert Solomon, Adviser to the Board
Charles Molony, Assistant to the Board
Robert L. Cardon, Legislative Counsel
Clarke L. Fauver, Assistant to the Board
$27,500
26,000
25,000
24,500
23,500
20,250
Secretary's Office
Merritt Sherman, Secretary
Kenneth A. Kenyon, Assistant Secretary
Arthur L. Broida, Assistant Secretary
Karl E. Bakke, Assistant Secretary
Elizabeth L. Carmichael, Assistant Secretary
26,500
22,500
21,000
19,750
16,000
Legal
Howard H. Hackley, General Counsel
David B. Hexter, Associate General Counsel
Thomas J. O'Connell, Assistant General Counsel
Jerome W. Shay, Assistant General Counsel
Wilson L. Hooff, Assistant General Counsel
26,500
25,000
24,500
21,000
18,750
Research and Statistics
Daniel H. Brill, Director
Albert R. Koch, Deputy Director
J. Charles Partee, Associate Director
Frank R. Garfield, Adviser
Kenneth B. Williams, Adviser
Tynan Smith, Associate Adviser
Lewis N. Dembitz, Associate Adviser
Stanley J. Sigel, Associate Adviser
Lyle E. Gramley, Associate Adviser
Stephen H. Axilrod, Associate Adviser
26,500
26,000
25,000
23,000
22,500
21,000
20,750
20,500
20,000
20,000
Division
Name and Title
Annual Salary
International Finance
Robert L. Sammons, Associate Director
Arthur B. Hersey, Adviser
Samuel I. Katz, Adviser
John E. Reynolds, Adviser
Reed J. Irvine, Adviser
Ralph C. Wood, Adviser
$23,500
23,000
22,000
22,000
21,000
21,000
Examinations
Frederic Solomon, Director
Brenton C. Leavitt, Assistant Director
Glenn M. Goodman, Assistant Director
James C. Smith, Assistant Director
Andrew N. Thompson, Assistant Director
Lloyd M. Schaeffer, Chief Federal Reserve Examiner
25,500
22,500
20,500
20,000
20,000
20,000
Bank Operations
John R. Farrell, Director
John N. Kiley, Assistant Director
M. B. Daniels, Assistant Director
25,000
20,500
19,250
Personnel Administration
Edwin J. Johnson, Director
H. F. Sprecher, Jr., Assistant Director
24,000
19,500
Administrative Services
Joseph E. Kelleher, Director
Harry E. Kern, Assistant Director
21,000
16,000
Controller's Office
John Kakalec, Controller
Sampson H. Bass, Assistant Controller
17,000
15,000
Defense Planning
22,000
Innis D. Harris, Coordinator
Data Processing
Maurice H. Schwartz, Director
Lee W. Langham, Assistant Director
24,500
17,000
,
BOARD OF GOVERNORS
Item No. 16
10/29/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE aoAno
October 28, 1965
Mr, Harry W. Huning, Vice President,
Federal Reserve Bank of Cleveland,
Cleveland, Ohio. 44101
Dear Mr. Huning:
In accordance with the request contained in
of October 25, 1965, the Board approves the
letter
your
designation of Terry D. Barnett and Robert S. Heidler
as special assistant examiners for the Federal Reserve
Bank of Cleveland.
Appropriate notations have been made of the
names to be deleted from the list of special assistant
examiners.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmicheal,
Assistant Secretary.
- 346"
Item No. 17
10/29/65
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS orrIcIAL CORRESPONDENCE
TO THE BOARD
October 29, 1965
Mr. Fred W. Piderit, Jr., Vice President,
Federal Reserve Bank of New York,
10045
New York, New York.
Dear Mr. Piderit:
In accordance with the request contained in your
letter of October 27, 1965, the Board approves the appointment of William S. Spaulding, Jr., at present an assistant
examiner, as an examiner for the Federal Reserve Bank of
New York. Please advise the salary rate and the effective
date of the appointment.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER