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Minutes for To: Members of the Board From: Office of the Secretary October 9, 1962 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 Minutes of the Board of Governors of the Federal Reserve System on Tuesday, October 9, 1962. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. Sherman, Secretary Kenyon, Assistant Secretary Fauver, Assistant to the Board Hackley, General Counsel Solomon, Director, Division of Examinations Goodman, Assistant Director, Division of Examinations Leavitt, Assistant Director, Division of Examinations Young, Senior Attorney, Legal Division Hill, Attorney, Legal Division Egertson, Review Examiner, Division of Examinations The establishment without change by the Il deral Reserve Bank of Minneapolis on October 6, 1962, of the rates on discounts and advances in its existing schedule was MIC_IaKTII. unanimously, with the understanding that appropriate advice would be sent to the Bank. Items circulated to the Board. The following items, copies Of which are attached to these minutes under the respective item Umbers indicated, were approved unanimously: Item No. Letter to Bank of America, New York, New York, granting consent to the establishment by Banca d'America e d'Italia, Milan, Italy, of branches 44d agencies in specified Italian cities. 1 10/9/62 -.2Item No. Letter to Chippewa Trust Company, St. Louis, Missouri, granting permission for the retirement of $100,000 outstsyding preferred stock. 2 In a discussion preceding the action granting consent to the establishment of certain branches and agencies by Banca d'America e WItalial Mr. Goodman responded to several questions raised by Governor Mills. With respect to the lack of more extensive information regarding the proposed branches and agencies, he noted that Consent to the establishment of such offices had already been given 17 the Bank of Italy. It appeared that the proposed offices would not be particularly large operations, and there was no indication of question from the competitive standpoint. In these circumstances 4e had doubted the need to request further information. As to the condition of Banca d'America e d'Italial an audit of the bank had recently been made by inspectors for Bank of America, New York. ritNever, the audit report seemed rather superficial, and he anticipated that this matter probably would be commented upon in connection lath the current year's examination of Bank of America. With respect to the suggestion contained in the recent report to the Comptroller Or the Currency by a special committee of bankers that specific 811Pervisory approval not be required for the establishment by United States banks of overseas branches, Mr. Goodman said that a Similar -3- 10/9/62 suggestion had been received by the Board in connection with the current review of Regulation K. However, since the suggestion did not go to the provisions of the Regulation, it was covered in the third of the series of three memoranda addressed to the Board in connection with the current study. With respect to a suggestion by Governor Mills, in connection with the memoranda that had been distributed relating to the study of Regulation K, that it might be helpful to the members of the Board if a summary could be prepared showing the effect on the present provisions of the Regulation of the various Proposals discussed in the memoranda, Mr. Goodman said he would give consideration to whether a comparative summarization along the lines mentioned could not be worked out. Mr. Goodman then withdrew from the meeting. Application of Union Trust Company. There had been distrib- Utea to the Board a memorandum from the Division of Examinations aated September 28, 1962, in connection with an application by Utlion Trust Company of Maryland, Baltimore, Maryland, for permission to Merge with The Liberty Bank, Easton, Maryland. The Federal Reserve ilank of Richmond and the Division of Examinations recommended aPPr°val. The Comptroller of the Currency and the Federal Deposit Insurance Corporation concluded that the effect of the proposed Inerger on competition would not be unfavorable, but the Department Cy( -4of Justice had expressed the opinion that the merger would have serious anti-competitive effects in the Easton area. At the Board's request, Mr. Leavitt commented in some detail on the application, his remarks being based substantially °la the memorandum that had been distributed. In a discussion that ensued, Governor Balderston referred to certain conditions comprehended within the so-called banking factors that would tend to support approval of the proposed Illerger. However, the report of the Department of Justice, which had to do only with the competitive aspects, was adverse. In its statements in support of orders on mergers approved ta the past, the Board had been reluctant to make strong comments about factors such as management deficiencies in a bank that was being merged. Therefore, if the Board approved the Union Trust 41115lication in the face of the adverse report from the Justice ElePartment, his question was whether the Board's reasons would be clear to the public. Comments made by the staff on this point were to the effect that if the Board should approve the proposed merger, elferY effort would be made to present fully in the Board's stateE nt a satisfactory explanation of the factors that were felt by the Board to warrant approval. Under the Board's practice, the l'eloort received from the Department of Justice would not be made 10/9/62 -5- Public by the Board at this time. As required by law, the summary of the Department's report would be included in the Board's Annual Report, together with a statement of the basis for the Board's aPproval. The statement of the basis for approval would be Patterned after the statement issued by the Board in support of as order. In this manner, it should be possible to make clear in the Annual Report why the Board, despite the recommendation of the Department of Justice on the competitive factors, had found sufficient favorable considerations to conclude that the merger /las in the public interest. The members of the Board then expressed their views on the merger application, and Governor Mills said that he would favor aPProval. He found this a rather close case, with the weak management situation at Liberty Bank being almost the determining factor in his mind. Looking ahead to the statement that would be issued by the Board, if the merger were approved, he suggested that care be ex ercised not to leave the impression that an important basis for aPProval was the setting up of Union Trust Company as a competitor for the Maryland National Bank, which already had offices in the 4ston area. If that were done, it might appear as though the Board was encouraging the very concentration of banking resources aboUt which it had concern. To illustrate his point, Governor S turned to the suggested "basis for approval" contained in the Division memorandum and indicated how he felt that certain parts Of it might be modified. 3F-4St" 10/9/62 -6Governors Shepardson and Balderston indicated that they would favor approval of the proposed merger on the basis of the staff recommendation, and Chairman Martin expressed himself to the same effect. Accordingly, the application of Union Trust Company was aPproved unanimously, with the understanding that the Legal Division would draft for the Board's consideration an order and a supporting statement reflecting this decision. Messrs. Hill and Egertson then withdraw from the meeting. Application of Union and New Haven Trust Company (Items 3-5). Pursuant to the Board's decision on October 3, 1962, to approve the 4PPlication of The Union and New Haven Trust Company, New Haven, Connecticut, to merge with The Madison Trust Company, Madison, Connecticut, there had been distributed drafts of an order and a supporting statement reflecting that decision. In discussion, Governor Mills suggested certain changes in the proposed statement, the intent of which was to avoid implications (3f the kind that he had cautioned against in connection with consideration °f the Union Trust Company case just acted upon by the Board. The suggested changes having been agreed upon, the issuance °f the order and statement was authorized. Copies of the order and statement, as issued pursuant to this authorization, are attached as itelaa 3 and 4. A copy of the letter sent to the applicant bank is attached as Item No. 5. 10/9/62 -7Recent procedural change by Comptroller. Mr. Fauver called to the Board's attention that the Comptroller of the Currency had instituted a procedure, in connection with the issuance of decisions on merger cases, of releasing to the public the competitive factor reports that had been received by him from the other Federal bank supervisory agencies and the Department of JUstice. The Board had not been following such a practice. Inquiries received by the Board concerning competitive factor reports had been referred to the originating agency. After a brief discussion, it was agreed to make no change in the Board's present practice at this time. Visit of Governor Coombs. Reference was made to the forthcoming visit to Washington of Governor Coombs of the Reserve liank of Australia, and it was noted that the Governor was scheduled to be the guest of honor at a luncheon at the Federal Reserve 81411ding on Tuesday, October 23. The suggestion was made that, if Governor Coombs' schedule would permit, he might be invited also to have dinner at the Federal Reserve Building with available Members of the Board and appropriate members of the staff. There agreement with this suggestion. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following Items: 10/9/62 Letter to the Federal Reserve Bank of Richmond (attached Item No 6) approving the appointment of Fred L. Bagwell as assistant examiner. Memoranda from appropriate individuals concerned recommending the following actions relating to the Board's staff: Transfer Mary V. F. Baker, from the position of Senior Clerk in the Division of International Finance, to the position of Statistical Assistant in the Division of Research and Statistics, with no change in basic annual apiary at the rate of $5,3351 effective October 14, 1962. ary increase Peggy H. Reaves, Senior Clerk, Division of International Pillance, from $4,460 to $4,6750 effective October 14, 1962. (Change in title from Clerk.) Edna Kiatta Noyes, Statistical Clerk, Division of Bank Operations, ror the period beginning September 30 through October 31, 1962. Secretary BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 10/9/62 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 9, 1962 Bank of America, 41 Broad Street, New York 15, New York. Gentlemen: In accordance with the request contained in your letter of September 11, 1962, transmitted through the Federal Reserve Bank of New York, the Board of Governors grants its consent to the establishment by Banca d'America e d'Italia, Milan, Italy, of branches and agencies in the following Italian cities: Branches Salerno Taranto Arenzano (Province of Genoa) Agencies Milan - Garibaldi District Rome - Due Pin! District Turin - Barriera Milano Bologna - Via A. Saffi District Unless the branches and agencies are actually established and opened for business on or before November 1, 1963, all rights .ranted hereby will be deemed to have been abandoned and the authorltY hereby granted will automatically terminate on that date. It is understood that Banca d'Italia has granted permission tO the establishment of these branches and agencies. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. aDARD OF GOVERNORS Item No. 2 10/9/62 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 90 1962 Board of Directors, Chippewa Trust Company, St. Louis, Missouri. Gentlemen: The Board of Governors of the Federal Reserve System hereby gives its consent, under the provisions of Section 9 of the Federal Reserve Act, to the retirement of $100,000 outstanding preferred stock of Chippewa Trust Company. This approval is given with the understanding that capital structure of the bank will be increased by not less than $130,000 by December 31, 1962, through the sale of common stock for cash. The Board notes that outstanding capital notes in the amount of $100,000 maturing November 15, 1962, are to be paid. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. Item No. 3 10/9/62 UNITED STATES OF ATAERICA SYSTEM BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE WASHINGTON, D. C. In the Itztter of the Application of IRE UNION AND NEW HAVEN TRUST COIPANY aporoval of merger with "le iladison Trust Company ORDER APPROVING MERGER OF BANKS to There has come before the Board of Governors, pursuant the Bank Merger Act of 1960 (12 U.S.C, 1828(c))„ an ap)lication by The ,• Connecticut, a member 1J"lon and Now Haven Trust Company, New Haven, bayq, of the Federal eserve System, for the Boardts prior approval of them -,creer of that bank and The iladison Trust Company, Madison, Connecticut, 1111cler the charter and title of the former and, as an incident to the merger, branch would be operated at the location of The Madison Trust Company. Board, has been 11()tice of the proposed merger, in form approved by the Ishod pursuant to said Act. light of Upon consideration of all relevant material in the the -tactors set forth in said Act, including reports furnished by the elriPtroller of the Currency, the Federal Deposit Insurance Corporation, tho Department of Justice on the competitive factors involved in the Proposed merger, IT IS HETZE9Y 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 (a) within seven calendar days after the date of this Order or (b) later than three Months after said date. Dated at Washington, D. C.1 this 9th day of October, 1962. By Order of the Board of Governors. Voting for this action: Chairman Martin, and Governors Balderston, Mills, Shepardson, and Mitchell. Absent and not voting: Governors Robertson and King. (Signed) Merritt Sherman Merritt Sherman, Secretary. (SUL) Item No. 4 10/9/62 BOARD 07 GOVERNORS CF THE FEDERAL RESERVE SYSTEM APPLICATION DY THE UNION AND NEW HAEN TRUST COITANY FOR APPROVAL 07 MEHGE,i, IIITH THE n:iDISql TRUST COMPANY STATEMENT The Union and New Haven Trust Company, New Haven, Connecticut "Icn Trust"), with deoesits e 1961 3 , 714 million as of October 10, abo'A'3 a State member bank, has applied, pursuant to the Bank Merger Act merger of196° (12 U.S.C. 1028(c)), for the Boardls prior approval of the ()-f that bank and The Madison Trust Company, Madison, Connecticut Madison 6 with deposits of about P,Rr, million as of March 5, 1962. Under the or-it of Merger the banks would merge under the charter and title of t;11111 Trust, and the office of Madison Trust would become a branch of Tru-t. Under the Act, the Board is required to consider (1) the cial history and condition of each of the banks involved, (2) the qkla-cY of its capital structure, (3) its future earnings prospects, (4) th o genera' character of its management, (5) whether its corporate 'rs are consistent with the purposes of 12 U.S.C., Ch. 16 (the NraQr a1 Deposit Insurance Act); (6) the convenience and needs of the -2community to be served, and (7) the effect of the transaction on e°mPetition (including any tendency toward monopoly). The Board may not approve the transaction unless, after considering all these factors, it finds the transaction to be in the public interest. re, Banking factors, - The financial condition, capital structu future earnings prospects, and management of each of the banks are satdsfactory, as would be true of the resulting bank. There is no indication that the powers of either of the banks are, or would be, inconsistent with 12 U.S.C., Ch, 16. of Convenience and needs of the communities. - The economy •M•IM•Mi~M•01 Mell Raven light (1960 population about 152)000) is baJed upon heavy and ind'Istry. and is also influenced substantially by Yale Universityls location in the city. The proposed merger would have little effect on thc) c onvenience and needs of the communities now served by Union Trubt, located in Presently operates seven offices in five cities all Hell/ Haven County. Union Truot is the third largest among the six comillrcial banks in New Haven and as a result of the merger would advance t° sccond position but by only a narrow margin. residential Madison (1960 population about 4,500) is a growing arld rcsort community, located in New Haven County on Long Island Sound, 19 m., its 14-es east of New Haven. At the height of the tourist season, P°Ipulation is estimated to be about 150000. iladison is primarily a establish1‘°sidontial community with the customary retail and service ' Dairy and truck farming are the main occupations in the outyears and arca, Madtionts population has increased rapidly in recent • the re is every prospect this will continue. lilt if,t2tr( in 1:ndison Trust is the only bank, commercial or savings, nEldison. somewhat larger, Three other banks, one slightly smaller and two 11'-ve offices from four to five miles away. As Connecticut law prohibits the establishment by commercial banks of de novo branches in another city ill which any comercial bank has its head office, :adison Trust is the grcuing °11.1Y bank which may now legal-I.:: establish branches in ladison. The iladison area would benefit by the wonosed merger as broader banking serother Vices would thereby be made available and a basis laid for bringing e()tiPetitive banking services into the connunity. and 1Mison Cornetition. - The nearest of ices of Union Trust are about 19 miles apart. Between these offices, there are five °ffficos of other commercial banks and one office of a savings bank. Inter- Trust and offices and the distance betueen the offices of Union amount of liadison Trust limit competition between them. Only a slight c°I -Potition would be eliminated by the proposed merger. Consummation of Haven this Pr000sed merger would have very little effect on banks in the New area It would also have only a minor effect on banks in the Ladison which are well established and which serve their can trade areas. be elimiSummary and conclusion. -Very little competition will flatn,, by banking focilithis proposed merger inasmuch as there are several tiQ-s between the nearest offices of the two banks which are 19 miles apart. The -kladison area is grcwing. A merger of these two banks will lay '°vido broader banking services for which a need exists and will Pl the b`lsis for increased banking competition in the area and additional banking zervices for the public. in the Accordingly, the Board finds the proosed merger to be PlIblic interest. °etoher 1962 Jt Item No. 5 10/9/62 BOARD OF E3OVERNOR8 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, 0. C. ADDRESS OFFICIAL COKIRESIPONOENCE TO THE BOARD October 9 1962. a.J TERED - RETURN RECIE5T RE UESTED , 111,,le Union and New Haven Trust Company, 'u.5 Church Street, Ilev Haven, Connecticut. lemen: The Board of Governors has approved the application, under the co Dank Merger Act of 1960 (12 U.S.C. 1828(c)), for the Board's prior sent to the merger of The Madison Trust Company, Madison, Connecticut 4C13 The Union and New Haven Trust Company, New Haven, Connecticut. It is understood that within 30 days following the effective ate 216 f the merger The Union and New Haven Trust Company will sell the shares of its own stock which it will acquire under the merger. Enclosed are the Board's Order of this date, the accompanying t, and the press release on this action. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. ci ure 4, • BOARD OF GOVERNORS Item No. OF THE ,.•.DOT Gov.!. '• 6 10/9/62 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS arricIAL CORRESPONDENCE • TO THE BOARD RESts-•• ••....•• October 10, 1962 CONFIDENTIAL (FR) Mr. John L. Nosker, Vice President, Federal Reserve Bank of Richmond, Richmond 13, Virginia. Dear Mr. Nosker: In accordance with the request contained in your letter of October 4, 1962, the Board approves the appointment of Fred L. Bagwell as an assistant examiner for the Federal Reserve Bank of Richmond, effective today. It is noted that Mr. Bagwell is indebted to The Peoples National Bank of Greenville, Greenville, South Carolina.. Accordingly, the Board's approval of Mr. Bagwell's appointment is given with the understanding that he will not participate in any examination of that institution until his indebtedness has been liquidated. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. r
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