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'R 609
Minutes for
To:
Members of the Board
From:
Office of the Secretary
October 4, 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.
Chin. Martin
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Minutes of the Board of Governors of the Federal Reserve
System on Monday, October 4, 1965.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Shepardson
Mitchell
Daane
Maisel
Sherman, Secretary
Kenyon, Assistant Secretary
Molony, Assistant to the Board
Hackley, General Counsel
Solomon, Director, Division of
Examinations
Mr. Hexter, Assistant General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Leavitt, Assistant Director, Division
of Examinations
Mr. Smith, Assistant Director, Division of
Examinations
Mr. Sprecher, Assistant Director, Division
of Personnel Administration
Mrs. Semia, Technical Assistant, Office of
the Secretary
Mr. Plotkin, Senior Attorney, Legal Division
Mr. Heyde, Attorney, Legal Division
Mr. Egertson, Supervisory Review Examiner,
Division of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Report on competitive factors (Huntingdon-Alexandria, Pennsylvania)
A revision of the proposed conclusion having been agreed upon, unanimous
approval was given to the transmittal to the Comptroller of the Currency
of a report on the competitive factors involved in the proposed merger of
First-Grange National Bank of Huntingdon, Huntingdon, Pennsylvania, with
The First National Bank of Alexandria, Alexandria, Pennsylvania.
form in which approved, the conclusion read as follows:
In the
t)t
t god
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10/4/65
There is a small amount of competition existing
between First-Grange National Bank of Huntingdon and
The First National Bank of Alexandria. Consummation
of the proposed merger would increase the size of the
now dominant bank in Huntingdon County, and, correspondingly, the effect of the proposed merger on competition
is adverse.
Registration statement of Cleveland Trust Company (Item No. 1).
There had been distributed a draft of reply to a letter of September 20,
1965, from Chairman Patman of the House Committee on Banking and Currency
with further reference to the registration statement filed by The Cleveland
Trust Company, Cleveland, Ohio, pursuant to section 12(g) of the Securities Exchange Act of 1934 and the Board's Regulation F, Securities of
Member State Banks.
(Earlier related correspondence included a letter
approved by the Board on August 30, 1965, responding to Chairman Patman's
letter of August 6.)
After a discussion during which Mr. Plotkin commented on background circumstances, the letter was approved unanimously subject to
certain editorial changes.
A copy of the letter in the form transmitted
to Chairman Patman is attached as Item No. 1.
Messrs. Hexter, Plotkin, and Heyde then withdrew from the meeting.
Government security subscriptions by Reserve Bank directors,
officers, and employees (Item No. 2).
There had been distributed a memo-
randum dated September 22, 1965, from the Division of Examinations regarding a proposal initiated by the Conference of General Auditors of the
Federal Reserve Banks that the Board's outstanding instructions, contained
10/4/65
-3-
in a letter dated April 12, 1933, and supplemented by a letter of May 18,
1944, be modified to permit the respective General Auditors to use their
discretion in determining the scope of post-audit of subscriptions to
Government issues for the purpose of assuring that subscriptions handled
by a Reserve Bank for its directors, officers, and employees were not
given favored treatment.
The reasons for the proposal, as discussed in
the memorandum, were that (1) in recent years terms and circumstances
pertaining to offerings of Government securities had not generally presented opportunities for advantage through preferred treatment; (2) under
such circumstances detailed analyses of all offerings represented an
inefficient use of manpower in relation to results achieved; and (3)
present-day audit concepts favored an approach that took into consideration relevant circumstances and was tailored to the objectives sought.
Attached to the memorandum was a draft of letter to the Chairmen and
Presidents of all Federal Reserve Banks that would revise the outstanding instructions.
Mr. Smith made summary comutents, after which there was discussion of a question raised by Governor Daane as to the appropriateness
of the present time for the proposed revision of instructions.
Comment
was made that the proposed procedures were in accord with the presentday audit concepts that were reflected in procedures such as those now
followed by the Board's examining staff in its examination of Federal
Reserve Banks.
In line with this general approach, the Reserve Bank
s)d
)1
-4-
10/4/65
auditors would be given discretionary latitude, thus enabling them to
concentrate their efforts on situations where it appeared most likely
that any deviations from the principle laid down in 1933 could occur.
The general principle, it was noted, would be reaffirmed.
Governor
Daane, who at the outset of the discussion had indicated that he was
sympathetic to the proposal and that his only question related to the
element of timing, expressed general agreement at the end of the discussion with the consensus that the proposed liberalization of the erstwhile rigid procedures was justifiable.
The letter was then approved unanimously.
A copy is attached
as Item No. 2.
Salary of officer at Boston Reserve Bank (Item No. 3).
Unanimous
approval was given to a letter, a draft of which had been distributed
with a memorandum from the Division of Personnel Administration dated
September 30, 1965, approving payment of salary to Donald A. Pelletier
as Assistant General Auditor at the Federal Reserve Bank of Boston at
the rate fixed by the Bank's Board of Directors.
A copy of the letter
is attached as Item No. 3.
Bank of Dublin matter (Items 4 and 5).
Earlier this year Peoples
Bank of Radford, Radford, Virginia, a subsidiary of The First Virginia
Corporation, a registered bank holding company, had merged with Bank of
Dublin, Dublin, Virginia.
The merged institution now operated under
the title Bank of New River Valley.
At today's meeting Mr. O'Connell
-5-
10/4/65
reported that First Virginia Corporation wished to file a fidelity bond
claim for recovery of certain losses sustained by Bank of Dublin, and
for that purpose had requested access to the confidential sections of
reports of examination of Bank of Dublin as of January 25, 1965, and
May 3, 1965, and also to any other materials or documents that might
support its claim.
(During the meeting a letter was received from the
Federal Reserve Bank of Richmond recommending that First Virginia be
given access to the requested reports of examination and stating that
the Bank did not have available any other material that might serve
the holding company's needs.)
A search of the Board's files had indi-
cated that two particular documents might be useful for First Virginia's
purpose; the first had been prepared by the Federal Deposit Insurance
Corporation and the second by the Federal Bureau of Investigation.
The
staff of the Corporation had advised informally that there would be no
objection to the Board's making a copy of the first document available
for inspection by First Virginia.
The Federal Bureau of Investigation
had asked that its authorization as to the second document be requested
in writing.
Mr. O'Connell recommended that representatives of First
Virginia be allowed to read, at the Board's offices, the confidential
sections of the reports of examination, and also the document prepared
by the Federal Deposit Insurance Corporation, and that a letter be
written by the Secretary of the Board requesting authorization from
the Federal Bureau of Investigation to grant similar access to the second
document mentioned.
-6-
10/4/65
The procedures recommended by Mr. O'Connell were approved unanimously.
A copy of the letter sent to First Virginia Corporation is
attached as Item No. 4, and a copy of the letter sent to the Federal
Bureau of Investigation is attached as Item No. 5.
Secretary's Note: The granting of access
to the FBI report was subsequently refused
by the Bureau.
Request for bank merger information.
Mr. Shay stated that he
had received a telephone call from Counsel for the House Committee on
Banking and Currency requesting on behalf of Chairman Patman, and within
the next day or so, the names of approximately 2,200 banks that had been
involved in mergers since 1950 and would be exempted by the terms of certain
pending legislative proposals from antitrust proceedings by the Department
of Justice.
Also requested were figures showing the assets of the partic-
ipant banks before and after each merger, both in dollar amounts and in
terms of percentages of local market.
Mr. Patman was understood to desire
this information because he was interested in how well the Board had exercised its authority under section 11 of the Clayton Act to enforce compliance with section 7 of the Act and because he felt that if past mergers
were to have antitrust exemption his Committee should have such information.
There ensued discussion bearing upon possible sources for the
requested information and problems involved in the appropriate delineation of local market areas.
There was agreement that in any event it
would not be possible to produce the information as quickly as Mr. Patman
wished to have it.
10/4/65
-7At the conclusion of the discussion it was understood that Mr.
Shay would inform the Conunittee's Counsel that the Board's staff would
explore the extent to which it would be feasible to supply the requested
data but that the project might take some time to complete.
The meeting then adjourned.
Secretary's Notes: On October 1, 1965,
Governor Shepardson approved on behalf of
the Board a memorandum from the Division
of Bank Operations recommending the reemployment following maternity leave of Mary Teresa
Atchison as Secretary in that Division, with
an increase in basic annual salary from $5,660
to $6,060, effective October 4, 1965.
Governor Shepardson today approved on behalf
of the Board the following items:
Letter to the Federal Reserve Bank of San Francisco (attached Item
No. 6) approving the appointment of Ira Kent Beckman as assistant examiner.
Memorandum from the Division of Research and Statistics dated
September 29, 1965, recommending that an additional economist position
be established in the Banking Section of that Division.
Memorandum from the Division of Examinations dated October 1, 1965,
recommending that Frederick R. Dahl, Chief, Special Studies and Operations
Section, Division of International Finance, be commissioned as a Federal
Reserve examiner.
Memorandum from the Division of Data Processing recommending the
transfer of Mary Margaret Menegos from the position of Clerk-Typist in
that Division to the position of Stenographer, with an increase in basic
annual salary from $4,140 to $4,480, effective October 4, 1965.
ir".7
etto
,
BOARO OF GOVERNORS
Item No. 1
10/4/65
OF TH2Z
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE VICE CHAIRMAN
October 7, 1965.
The Honorable Wright Patman, Chairman,
Committee on Banking and Currency,
House of Representatives,
1136 Longworth Building,
Washington, D. C. 20515
Dear Mr. Chairman:
This is in response to your letter of September 20, 1965,
concerning the registration statement filed by The Cleveland Trust
Company pursuant to section 12(g) of the Securities Exchange Act of
1934 and Federal Reserve Regulation F.
Your letter is concerned with the fairness of disclosure of
Item 11(a) of the registration statement. It states that you "find
it impossible to concur" in our judgment that it is unlikely that a
reader of the registration statement would infer from the bank's
assertion concerning the registering of the stock that the bank also
had express statutory authorization for the voting of the stock.
The bank's statement in Item 11 is that:
"This method of registering stock [in the name of a
nominee partnership] is the commonly accepted practice by
corporate fiduciaries and is expressly authorized by
statute."
This statement is accurate. You assert that it is
advanced gratuitously as an attempt to justify the bank's practice
of voting its capital stock held by it through its nominees. Granting that the statement is "gratuitous", we do not believe that it
implies that the bank has express statutory authority to vote its
stock (as distinguished from registering its stock in the name of
a nominee).
Moreover, the registration statement indicates that the
bank votes its own shares. If there is a controversy as to the lawfulness or desirability of this practice, it should be resolved by the
courts, State banking authorities, or appropriate legislation, not by
debate in the bank's registration statement.
The Honorable
right Patman
-2-
Your letter further states that the bank's statement that
A. A. Welsh & Co. votes the shares held by it "only as it is directed
so to do" is a "gross misrepresentation of fact". We do not agree.
Immediately following this statement of the bank is a
description of the classes of beneficial owners of the shares held by
A. A. Welsh & Co., the percentage of such shares as to which the bank
has sole voting power, and the percentage of such shares as to which
the bank has less than sole voting power. The Item further discloses
that over 23 per cent of the shares as to which the bank has sole
voting power are held in trusts that may be terminated at any time
by the creators thereof. With respect to the shares as to which the
bank has less than sole voting power, the first footnote to the Item
indicates that (1) direction of the beneficial owner is required
before voting 59,504 of these shares, (2) approval of designated
persons is required before voting 59,997 of these shares, and (3) as
to 144,118 shares the bank may determine the manner of voting only
in the absence of instructions from one or more designated persons.
We believe, then, that the Item, read as a whole, is not at all a
"gross misrepresentation of fact". The Item read in its entirety
clearly indicates that A. A. Welsh & Co. does not in every case
receive active direction from the beneficial owners as to the
manner in which the shares held by it shall be voted.
We hope that these comments will help to clarify the
Position of the Board of Governors in this matter.
Sincerely yours,
(Signed) C. C. Balderston
C. Canby Balderston,
Vice Chairman.
4
+1'6430
3
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 2
10/4/65
S-1969
WASHINGTON, D. C. 20551
OIVISION
ar
ADMININTRATIVIC •IERVICSIS
October 11, 1965.
Dear Sir:
In a letter dated April 12, 1933 (X-7407, FRLS 9053), the Board
expressed the view that a Federal Reserve Bank, in carrying out its
responsibilities as fiscal agent of the Treasury Department for the
handling of subscriptions to notes, Treasury bills, certificates of ind ebtedness, and other Government obligations, should take special care
to insure that subscriptions filed directly with the Reserve Banks by its
d irectors, officers, and employees "are handled in strict accordance with
Treasury instructions and in no respect receive more favorable treatment
than is accorded other subscriptions of the same class." Later, the
coverage was expanded to include indirect subscriptions; i.e., subscriptions made through commercial banks. The principle implied here accords
with the general principle stated by the Board in another context in
'
8 1907, FRLS 9054 dated February 10, 1964 that "officers and employees
of a Federal Reserve Bank should refrain from placing themselves in any
Position that might embarrass the Bank or Federal Reserve System as a
whole in the conduct of its operations . . ."
In the second paragraph of the 1933 letter there were suggested
certain procedures for the responsible officers and the General Auditor
to follow in examining the subscriptions to a Treasury offering. It has
efte to the attention of the Board that the precise procedures referred
may be more time-consuming than are warranted, inasmuch as a majority of
to
offerings of Government securities for the past several years have not
°een of such nature as to provide incentives for the seeking of personal
advantage by individual subscribers. Accordingly, while reaffirming the
Principle expressed above, the Board feels it appropriate to leave to the
aerating officers and the General Auditor of each Reserve Bank the
determination, in the light of the circumstances pertinent to a particular
°ffering, of the methods to be pursued in checking for compliance with
this principle.
This letter supersedes X-7407, FRLS 9053 dated April 12, 1933.
Very truly your,
Merritt Sherma
Secretary.
10 THE CHAIRMEN AND
PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
3228
Item No. 3
10/4/65
RD OF GOVERNORS
O r THE
FEDERAL RESERVE SYSTEM
W ASHINGTON, D. C. 20551
I
ADDRESS OrFICIAL CORRIC8PONDIENCC
TO THE BOARD
October 4, 1965.
CONFIDENTIAL (FR)
Mr. George H. Ellis, President,
Federal Reserve Bank of Boston,
Boston, Massachusetts. 02106
Dear Mr. Ellis:
The Board of Governors approves the payment of
salary to Mr. Donald A. Pelletier as Assistant General
Auditor of the Federal Reserve Bank of Boston at the rate
of $12,000 per annum for the period October 1 through
December 31, 1965. This is the rate fixed by your Board
of Directors as reported in your letter of September 27.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
322',
BOARD OF GOVERNORS
OF THE
,••••'''''''''''•.,
44,
FEDERAL RESERVE SYSTEM
to.
Item No. 4
10/4/65
WASHINGTON, D. C. 20551
tk
A
•
••
AOORICSel OFFICIAL OORRIESPONOICNCIC
TO ThIC SOAR°
44•
•kiL RES'.•
October 4
1965.
The First Virginia Corporation,
2924 Columbia Pike,
Arlington, Virginia, 22204
Attention:
Mr. Ralph A. Beeton, President.
Gentlemen:
This refers to your letter of September 28, 1965, requesting
access to (1) confidential sections of the reports of examination dated
January 25, 1965, and May 3, 1965, of the Bank of Dublin, Incorporated,
Dublin, Virginia, and (2) such other papers, documents, or materials as
may be made available to First Virginia Corporation ("First"
) for the
effective discharge of stated responsibilities assumed by it in the
matter of the Bank of Dublin. You advise that both requests relate to
efforts to be undertaken by First to realize upon the Bankers Blanket
Bond issued to the Bank of Dublin by Fidelity and Deposit Company of
Maryland. Such efforts arise from First's action in May 1965, in depositing $730,000 in Peoples Bank of Radford, Radford, Virginia, for the
credit of the Bank of Dublin following the disclosure that approximately
$700,000 of the Bank of Dublin's loans were worthless due for the most
part to the Bank's acceptance of fraudulent notes, collater
al papers,
and other documents incident to such loans. First's action
in making
the above $730,000 deposit was taken with the prior knowledge
and
consent of Federal and State bank supervisory authorities and with the
understanding that immediately thereafter the Bank of Dublin's assets
would be acquired and its liabilities assumed by the Peoples Bank of
Radford, Radford, Virginia, a subsidiary of First Virginia Corporation.
Your letter of September 28 sets forth in detail considerations
that you believe warrant the Board's acceding to your request, and
contains the assurance that should the Board grant access to the materials
requested, "First agrees that it will not cite, quote, or otherwise
reveal the source of any information that it may obtain from sich material,
nor will it reveal the fact that it has had access thereto, without first
O btaining from the Board
prior authorization to do so . . ". First
asks that its President, Mr. Beeton, and its attorneys Messrs.
Eberharter
and Potter, be given access to the material describe
d, on the Board's
s
Premises, and under such supervision as the Board may direct.
BOARD Dr CIOVERNORS
or THE
IrEDERAL RESERVE SYSTEM
The First Virginia Corporation
In view of the action taken by First in May 1965, earlier
described herein, and the purpose for which access to the Board's
records is now sought, the Board grants to First access to the confidential portions of the January 25 and May 3 reports of examination,
and to certain other materials in the Board's files relating to the
subject of First's request. The Board's staff has been authorized
to make available these materials to one or more of First Virginia
Corporation's representatives above named. Communication by your
representatives with Mr. Thomas J. O'Connell of the Board's staff
(telephone REpublic 7-1100, extension 583) will serve to set a mutually
convenient time for your representatives to review the materials in
question at the Board's offices, subject to the understandings and
conditions set forth in your letter and made the subject of the Board's
authorization herein given.
Very truly yours,
(Signed) •Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
,
1"
BOARD OF GOVERNORS
L) THE
FEDERAL RESERVE SYSTEM
Item No. 5
10/4/65
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOAR°
October 4, 1965.
The Honorable J. Edgar Hoover,
Director,
Federal Bureau of Investigation,
Department of Justice,
Washington, D. C. 20530
Re:
Fradulent Financing of House Trailers and Cars
in amount of approximately $700,000, Bank of
Dublin, Virginia; Field Office File 29-866;
Bureau File 29-39290.
Dear Mr. Hoover:
This refers to the investigation of the above matter
conducted by the Federal Bureau of Investigation during July and
August 1965, and to the report thereon, a copy of which you forwarded
to the Board on September 3, 1965.
At or about May 3, 1965, with the prior knowledge of this
Board, the Federal Deposit Insurance Corporation, and the Virginia
State Corporation Commission, The First Virginia Corporation,
Arlington, Virginia ("First"), a registered bank holding company,
deposited approximately $730,000 in Peoples Bank of Radford, Radford,
Virginia, for the credit of the Bank of Dublin, and subsequently,
With authorization of appropriate bank supervisory authority, effected
a merger of the Bank of Dublin into and with the Peoples Bank of
Radford under the title of Bank of New River Valley.
First, through its majority ownership and control of the
Bank of New River Valley, has undertaken to realize upon the Bankers
Blanket Bond issued to the Bank of Dublin by Fidelity and Deposit
Company of Maryland, in respect to a portion or all of the $700,000
loss represented by the alleged fraudulent house trailer and automobile loans found on the books of the Bank of Dublin. First advises
that it will file prior to October 15, a proof of loss claim under
the Bankers Blanket Bond. In respect to its preparation of this
proof of loss claim, First has asked assistance in the form of access
to portions of two reports of examination of the Dublin Bank (reports
of examinations at January 25 and May 3, 1965), one of which was
The Honorable J. Edgar Hoover
prepared by the Federal Reserve Bank of Richmond, and the other by
the Federal Reserve Bank and the Virginia State Banking Department.
First has also requested access to such other papers, documents,
or materials pertaining to the subject losses as may reasonably be
made available to First in perfecting its claim under the Bankers
Blanket Bond.
Among the materials in the Board's files relating to the
subject of First's request is the report of investigation prepared
by your Bureau to which earlier reference has been made. It is
noted that the report states that the same is the property of your
Bureau, is loaned to the Board, and its contents are not to be
distributed outside the Board. While the Board is aware of the
general need and justification for the limitation to access placed
by your Bureau upon its reports of investigation, it is believed
that in the circumstances presented, First's access to this report
would be justified. While we have no reason. to believe that First
is aware of the Board's possession of this report, upon your
authorization the Board would make known its existence to representatives of First and permit their access to the same at the Board's
offices and under the supervision of the Board's staff. Absent such
authorization, the Board does not propose to voluntarily make known
to First's representatives the Board's possession of this report.
In view of the limited time which First advises it has
to prepare its proof of loss claim, expeditious consideration of
the Board's request for authorization for First's access to this
report will be appreciated.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 6
10/4/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON. O. C. 20551
AOORIESS OFFICIAL CORRIERPONOLNCIE
TO THIC SOARO
October 4, 1965.
Mr. E. H. Galvin, Vice President,
Federal Reserve Bank of San Francisco,
San Francisco, California. 94120
Dear Mr. Galvin:
In accordance with the request contained
in Mr. Davenport's letter of September 29, 1965,
the Board approves the appointment of Ira Kent Beckman
as an assistant examiner for the Federal Reserve Bank
of San Francisco, effective today.
Very truly yours,
(Signed) Karl E s Bakke
Karl E. Bakke,
Assistant Secretary.
@FedFRASER