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Minutes for
To:
Members of the Board
From:
Office of the Secretary
September 14, 1961
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard to
the minutes, it will be appreciated if you will advise
the Secretary's Office. Otherwise, please initial
below. If you were present at the meeting, your
initials will indicate approval of the minutes. If
You were not present, your initials will indicate
only that you have seen the minutes.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
LL)
6'
'_fi iiAt,
Minutes of the Board of Governors of the Federal Reserve System on
Thursday, September 141 1961.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Balderston, Vice Chairman
Robertson
King
Mitchell
Sherman, Secretary
Kenyon, Assistant Secretary
Thomas, Adviser to the Board
Shay, Legislative Counsel
Molony, Assistant to the Board
Fauver, Assistant to the Board
Hackley, General Counsel
Noyes, Director, Division of Research
and Statistics
Mr. Solomon, Director, Division of Examinations
Mr. O'Connell, Assistant General Counsel
Mr. Furth, Adviser, Division of International
Finance
Mr. Leavitt, Assistant Director, Division of
Examinations
Mrs. Semia, Technical Assistant, Office of
the Secretary
Mr. Lyon, Review Examiner, Division of
Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Items circulated to the Board.
The following items, which had
been circulated to the Board and copies of which are attached to these
Minutes under the respective item numbers indicated, were approved unaniy:
401.
1s1
ItemNo.
Letter to Seattle Trust and Savings Bank,
Seattle, Washington, approving an investment
in bank premises.
Letter to the Comptroller of the Currency
l'ecommending unfavorably with respect to an
!PPlication to organize a national bank at
Lloldenville, Oklahoma.
2
9/14/61
With respect to Item No. 2, Governor Mitchell expressed the view
that applications for entry into the banking field should be granted
unless there was clear indication that the proposed institution would
not be sound in some respect; the fact that someone was willing to put
11P the money for a substantial part of the capital seemed to be prima
facie evidence that the promoters judged that a new bank could survive in
local conditions.
Mr. Leavitt then reviewed the circumstances of the case
that had prompted the Division of-24xaminations and the Federal Reserve
Bank of Kansas City to advise an unfavorable recommendation to the Comptroller of the Currency.
Report on competitive factors (Burlington-St. Johnsbury, Vermont).
There had been distributed a draft of report to the Comptroller of the
Currency on the competitive factors involved in the proposed merger of The
First National Bank of St. Johnsbury, St. Johnsbury, Vermont, with and
illt° The Howard National Bank and Trust Company of Burlington, Burlington,
Vermont.
There being no objection, the report was approved unanimously for
transmission to the Comptroller of the Currency.
Its conclusion read as
r°110ws:
Due primarily to the distance separating Howard National
and First National, direct competition between them is nominal.
The proposed merger of these two banks would enhance slightly
the competitive position of Howard National in the State of
Vermont and would permit its entry into an area where it is
not now represented. This proposal should have little effect
on banking in Burlington where Howard National is subject to
keen competition from Chittenden Trust Company and Burlington
Savings Bank.
9/114/61
-3-
The merger would replace the smallest bank in the St.
Johnsbury area with a much larger banking institution able
to offer residents of that area increased banking services.
Competition for the remaining small banks in St. Johnsbury
and the surrounding area would undoubtedly be intensified.
Mr. Leavitt then withdrew from the meeting.
C. B. Investment Corporation
(Item No. 3).
At its meeting on
September 13, 1961, the Board deferred decision on a request by C. B.
Investment Corporation, Houston, Texas, a registered bank holding company,
for reconsideration of certain requests made by the Board in January 1961
for disposal of bank shares that had been acquired without the approval
()f the Board of Governors as called for by the Bank Holding Company Act.
A memorandum from the Legal Division dated August 25, 1961, set forth the
facts in the case and summarized the stock acquisitions in question as
follows:
(a) 925 shares (originally 1,520 shares, but subsequently
reduced) of First National Bank, La Porte, Texas, asserted by
the Corporation to have been acquired in July 1956 and January
1957 pursuant to a memorandum of agreement dated April 10,
1956. (The Division's memorandum noted that First National
Bank, La Porte, had subsequently converted to a State nonmember
bank and at the time of that conversion the holding company was
issued 925 shares of the new bank in exchange for its shares of
the old bank.)
(b) 925 shares of the La Porte bank acquired in September
1960 as the result of a stock dividend.
(c) 925 shares of the La Porte bank acquired in September
1960 through exercise of stock rights without prior approval by
the Board.
9/14/61
-4-
(d) 873 shares of First
Texas--776 shares acquired in
of stock rights without prior
shares received thereafter as
shares.
National Bank, Port Arthur,
January 1959 through exercise
approval by the Board, and 97
a stock dividend on the 776
The Division memorandum, after reviewing the information offered
by the holding company as a basis for requesting relief from the Board's
letter dated January 30, 1961, directing that certain shares be divested
°0ncluded that that information, even when viewed in the light most
favorable to the Corporation, in no way affected the legal validity of
the position taken by the Board requiring the divestment.
The Federal
Reserve Bank of Dallas, however, had requested that the matter be reconsidered on the basis of good faith aspects and expressed hope that retention
°f the stock might be permitted.
The questions presented by the case were
°Iltlined as follows:
(1) Should the Board now permit retention of the
remainder of the shares of the La Porte bank (925) acquired
in July 1956 and January 1957 on the basis of the Corporation's arguments that they were acquired in good faith
Pursuant to an agreement made prior to the date the Bank
Holding Company Act became effective;
(2) If (1) were answered in the affirmative, should
the Corporation nevertheless be required to divest these
shares on the basis of its failure to obtain the Board's
Prior approval of the "exchange acquisition" of the same
number of shares in the newly organized State bank. (On
this point, the Legal Division suggested that the Board
not consider the exchange of shares as an acquisition, that
Position being consistent with the one the Board had taken
in 1959 in regard to a substantially similar situation
involving Brenton Companies, Des Moines, Iowa.);
9/14/61
-5-
(3) If the Corporation were allowed to retain the La
Porte bank shares that it previously had been directed to
dispose of, should the Board also allow the retention of the
925 shares acquired without Board approval in September 1960
through the exercise of rights (presumably the decision on
retention or disposal of the 925 shares received as a stock
dividend would parallel the Board's decision on the 925
shares discussed in (1));
(4) Should the Board reaffirm its January 30, 1961,
request for disposal of the 776 shares of the Port Arthur
bank acquired through exercise of stock rights without Board
approval, and in addition, require disposal of the 97 shares
of that bank received as a stock dividend on the 776 shares.
Two alternative drafts of letter to the Federal Reserve Bank
or Dallas accompanied the memorandum.
Alternative "A" would permit the
Corporation to retain the 925 shares of the La Porte bank acquired in
'MY 1956 and January 1957, plus 925 additional shares acquired through
a stock dividend in
1960. The same letter would require disposal of
the 925 shares of the La Porte bank acquired through the exercise of
stock rights in September 1960 and the 873 shares of the Port Arthur
bank "
, 176 shares acquired in January 1959 and 97 shares acquired as a
stock
dividend on the 776 shares.
Alternative letter "B" would, for the reasons stated therein,
den
Y the Corporation's request for retention of any of the shares
aiscussed
in its letter of March 15, 1961, and further, would require
clisPosal of the additional 97 shares in the Port Arthur bank.
A third course available to the Board would be to grant the
- moration's request in its entirety and permit the retention of all
9/14/61
-6-
shares now held in the La Porte and Port Arthur banks.
The Legal
Division recommended strongly against adoption of this alternative
for the reason that the magnitude of concession reflected in such a
Position bore no logical or legal relationship to the facts as the
Board now knew them.
Governor Robertson stated his conclusion that there was no
justification for reversing the Board's previous position.
It was clear
that there had been a violation of the Bank Holding Company Act.
The
facts presented as a basis for reconsideration had been before the
Board in January 1961 when it requested disposal of the shares; therefore, he would vote to send alternative letter "B", which would require
divestment of all shares acquired in violation of the law.
Governor Shepardson presented questions that led to discussion
Of the claim by the Corporation that it was obligated to buy the shares
°I the La Porte bank that it acquired in July 1956 and January 1957
because of a memorandum agreement Mr. Menasco, President of the Corporation, had executed on April 10, 1956, prior to the date of the enactment
°f the Bank Holding Company Act on May 9, 1956.
Mr. Menasco also argued
that even if the Board's position was correct that title to these shares
cild not pass until July 1956, the acquisition should be permitted since
it Ilas completed before what he considered to be the effective date of
the Act. (Mr. Menasco considered the effective date of the Act to be
September 1, 1956, the effective date of Regulation Y, since that was
9/14/61
the date as of which he considered himself put on notice as to the Bank
Holding Company Act.)
Governor Shepardson then expressed the view that there was a
basis for some liberality, in regard to the shares of the La Porte bank
acquired in July 1956 and January 1957 and also the 925 shares subsequently
acquired as a stock dividend, although he believed the Corporation should
dispose of the shares acquired in 1960 through the exercise of rights.
Therefore, he would be inclined to adopt alternative letter "A".
Governor Robertson observed that the existence of the April 1956
°emorandum agreement had been known to the Board at the time the matter
was first considered, although it did not then have the actual document.
Since a contract of this type entered into prior to the date of a statute
was not enforceable, he did not feel that the subsequent securing of a
COIvo.
tv
of the agreement changed the situation sufficiently to warrant a
change in the Board's earlier decision.
Governor King expressed himself in favor of alternative letter
which reflected the Board's original position and which would be
the more severe.
Governor Mitchell remarked that he did not know what he would
have done when the case was originally before the Board, but since a
11°8iti0n had been taken and there was not a clear reason for change, he
11°111d go along with reaffirmation of that position.
9/14/61
-8Governor Balderston stated that on balance he would prefer
alternative letter "A" which would ease the Board's January requirement
for divestment.
Among his reasons for this preference were those advanced
bY the Federal Reserve Bank of Dallas, which had the problem of continuing
relations with member banks of its District and which recommended a
modification of the Board's earlier requirement.
Chairman Martin noted that from a strictly legal standpoint,
the more severe position that would be taken by alternative letter "B"
Igas justified, although his personal preference would be to modify the
Board's earlier requirement along the lines recommended by the Dallas
Bank.
However, he did not feel that this was sufficiently important to
warrant an evenly divided vote by the Board and for that reason he would
g° along with reaffirmation of the original position as set forth in the
alternative "B" letter.
Thereupon alternative letter "B", a copy of which is attached
az Item No.
3, was approved, Governors Shepardson and Balderston dissenting.
Request by Department of Justice in Manufacturers-Hanover merger
(item N
Chairman Martin referred to a letter dated September
8,
961) from Assistant Attorney General Loevinger which requested a copy
the Board's decision and any accompanying order relating to the proposed
nierger of Manufacturers Trust Company and The Hanover Bank, both of New
York City.
'
at
Judge Loevinger's letter was not received until September 12,
which time a reply was prepared that would furnish him the same two-page
9/14/61
-9-
summary of the basis for the Board's approval of the merger that had
been furnished to Representative Pathan on September 12.
For this
reason, the letter to Judge Loevinger was delivered by messenger on
September 13,
Item No.
1961.
A copy of the letter so sent is attached as
4.
Mr. Lyon then withdrew from the meeting.
Federal Reserve membership on Bank for International Settlements
bo : Chairman
„anl
Martin stated that he had placed on the agenda for
Preliminary discussion at this meeting the memorandum from Mr. Young
dated August 31, 1961, relating to possible membership of the Federal
Reserve on the board of directors of the Bank for International Settlements.
While he would not wish to have any action taken in the matter at
this time, he would find it helpful to have some discussion inasmuch as
he was leaving to attend the annual meetings of the International Bank for
Reconstruction and Development and the International Monetary Fund in Vienna.
The memorandum to which the Chaiiman referred stated that in
view of the present stress on cooperation among the central banks of
Ellr°13e and North America, it appeared appropriate to consider again the
problem of closer ties between the Federal Reserve and the Bank for
International Settlements, of which all major European central banks
are members.
Relationships between the Federal Reserve and the Bank
r°r International Settlements since 1929 were reviewed in the memorandum,
Es were the main legal questions that presented themselves regarding the
qUestion of Federal Reserve membership on the Bank's board of directors.
tr.1.1-14
9/14/61
-10-
Among those questions, two were salient.
First, in the Bank for Inter-
national Settlements' statutes, the terms "central bank" and "governor"
were so defined that in the United States they applied to the Federal
Reserve Bank of New York and its President.
It had always been understood
that the Board of Governors would consider Federal Reserve representation
on the Bank's board only if that provision of the statute were changed to
substitute the Board of Governors and its Chairman for the New York Reserve
44k and its President.
According to the memorandum, it appeared that it
Would not be difficult to arrange for such an amendment.
Second, in 1929 Secretary of State Stimson declared that the United
States Government would not permit any official of the Federal Reserve
SYstem either to serve as a member of the board of the proposed institution or to select American representatives for that purpose.
He based
this decision on the intimate relation between the proposed bank and the
Ilr°131em of German reparations.
However, that relation had long since
Passed) and in view of the postwar changes in the international situation
it seemed likely that the State Department at this time would interpose no
°bjection to Federal Reserve membership on the board of the Bank for International Settlements if the Board of Governors should deem such membership
clesirable,
The memorandum also commented on the advantages of membership of
the Federal Reserve under present conditions, and in the light of those
3133
-11-
9/14/61
advantages recommended Board action to authorize System membership, after
consultations with the Secretaries of State and Treasury.
Chairman Martin commented that the nature of the continuing
Problem arising out of the present provisions of the BIS statutes was
highlighted by the fact that the New York Reserve Bank had received a
letter from Mr. Holtrop, President of the Bank for International SettleIllents, dated September
5, 1961, inviting the Federal Reserve System to
1)art1cipate in a meeting of central bank economists at the Bank in Basle,
Switzerland, November 11-13, 1961, that had been called for the purpose
an exchange of views and experiences relating to the statistical
Illeasurement of the liquidity of the banking system and the instrument
bY which the central bank influences bank liquidity.
The New York
Reserve Bank was prepared to send a representative, and it was Chairman
Martin's view that, if the System participated, the Board should be
Included in any such meeting.
While he thought the addressing of a
letter by the President of the Bank for International Settlements to
the President of the New York Reserve Bank regarding Federal Reserve
8Ystem participation in the meeting was an inadvertence and need cause
0
4 concern, still it illustrated the course such matters might take as
1°ng as the central banking organization of the United States was not
clearlY recognized as being headed by the Board of Governors in
W4shington.
9/14/61
-12With respect to Federal Reserve membership on the BIS board,
Chairman Martin said that he had discussed the general question briefly
With Secretary of State Rusk and Secretary of the Treasury Dillon.
While
he would not wish to imply that either had indicated a position on the
question, it was Chairman Martin's expectation that both Departments
might arrive at the conclusion that it would be well for the Federal
Reserve to affiliate with the Bank for International Settlements.
At the Chairman's request, Mr. Furth then commented on Mr. Young's
Memorandum, after which there was a general discussion.
the
In this discussion,
Point was msde that the course of world events was such that it was
highlY desirable for the Federal Reserve to evidence the greatest possible
degree of cooperation with other central banks.
In recent years the Bank
for International Settlements had provided a forum for exchange of views
alm3ng the central bank members and, the identification of the Bank with
l'eParations problems having long since been extinguished, it might be found
that the Federal Reserve would find substantial advantages in representation
°4 the Bank's board without necessarily incurring serious disadvantages.
This was especially true since a principal duty of the System was to
Preserve the integrity of the dollar both at home and abroad.
However,
it w
as recognized that any move looking toward representation of the
?ederal Reserve on the Bank's board should be taken only after the most
ealleful exploration of every aspect of the subject.
9/14/61
-13Other parts of the discussion dealt
of the Bank for Internation81 Settlements.
with ownership of the stock
There was no question of
acquisition of stock by the Federal Reserve; stock ownership was entirely
Unrelated to board representation and, in fact, it probably would not
be legally permissible for the Federal Reserve to invest in the stock
under existing statutes.
It was understood that at the present time the
Pirst National City Bank of New York and several other privately owned
banks in the United States held shares.
The discussion also included comments on whether representation
°a the board of the Bank for International Settlements could be expected
to increase the availability of information to the Federal Reserve, as
I.tell as on the position in which System representatives who now occasionplly
attended
Bank for International Settlements meetings found themsleves
as invited guests, without System membership on the board.
Concluding the discussion, Chairman Martin suggested that in
anticipation of a further meeting on the subject, it would be helpful if
each member of the Board would prepare a list of any questions to which
he
vould like to have answers in order that additional information might
be developed for the next discussion. He emphasized the importance of
full consideration of the matter before reaching a decision, adding that
a.
CleeiSiOn. to enter into active membership on the board of the Bank for
International Settlements should not be taken lightly.
9/14/61
-14Chairman Martin then referred to the letter of September
5, 1961,
from Dr. Holtrop to the New York Reserve Bank inviting System participation
in a meeting of economists to be held in Basle, November 11-13.
The Chair-
inquired whether the Board was prepared (a) to authorize the Federal
Reserve Bank of New York to participate in the meeting, and (b) to send a
Board representative to the meeting.
The members of the Board having
indicated they would favor such participation, Chairman Martin was authorized
to work out with Dr. Holtrop and Mr. Hayes an arrangement under which the
13(Dard would send a representative if there was to be System participation,
it also being understood that the Federal Reserve Bank of New York would
be authorized to send a representative to the meeting of economists if the
Board did so.
Mr. Furth withdrew from the meeting at this point.
Patman staff comment regarding Manufacturers-Hanover merger.
111111.416Ln Martin referred to a memorandum from Mr. Shay distributed on
September 13,
1961, regarding a telephone call Mr. Shay had received from
141% Houghton of Representative Patman's staff in connection with the
1114terial relating to the Manufacturers Trust-Hanover Bank merger that had
been suPPlied to Mr. Patman with the Board's letter of September 12
1)111"snant to the Board's action on September 11, 1961.
Mr. Houghton had expressed the view that the Board's reply was
11°t responsive to Mr. Patman's request of September
8. He felt that
l'ePorts on competitive factors received from the bank supervisory agencies
1
kJ -a_ LP I
9/14/61
-15-
and the Department of Justice were "materials presented to the Board of
Governors for consideration" within the meaning of Mr. Patman's request,
and
he also expected to see in some form an analysis of the evidence
along the lines of the Board's report to the Comptroller of the Currency
in the Continental Illinois National Bank-City National merger in Chicago,
which also had been furnished to Mr. Patman.
Mr. Houghton described the
tw°-Page "basis for approval" that had accompanied the Board's September
12 letter to Mr. Patman as containing only general statements of conclusions
without analytical support, but he had indicated uncertainty as to whether
Mr. Patman would want to press for a more expansive explanation of the
11°ard i s approval of the merger.
Governor Balderston, at Chairman Martin's request, outlined a
15°88ible procedure for supplying Mr. Patman with additional material
regarding the Manufacturers-Hanover merger by sending him a copy of the
staff memorandum of July 14, 1961, from which all opinion-comment had
been excised.
Chairman Martin said that Governor Balderston had talked with
him about
the subject this morning and that he (Chairman Martin) was
(11ePosed to let the matter lie for the time being. He questioned whether
it was
vise to send a copy of the staff memorandum from which opinione°14111ent had been excised; it was his thought that if Mr. Patman desired
e information regarding the Board's handling of this case, the
'
111(31
413P1'opriate procedure would be for him to ask for a Congressional
0_1o.
9/14/61
-16-
investigation.
The Chairman commented that basically the procedures that
the Board followed in handling and announcing its actions on merger applications were involved.
He also stated, in response to a question from
Governor Shepardson, that no formal request had been made by Mr. Patman
for additional material, Mr. Houghton's informal discussion with Mr. Shay
aPParently having been only an expression of his personal views.
After some further discussion, there was concurrence with Chairman
Martin's suggestion that no steps be initiated to furnish Mr. Patman
additional information regarding the Manufacturers-Hanover matter.
In
this connection, it was noted that the staff had been requested to prepare
ill due course a statement regarding the Board's action on this merger
aPPlication in a form similar to the statements prepared in connection
'with Board
decisions on bank holding company applications.
Governor Robertson then inquired when the Board might take action
°n Proposed changes in the procedures followed in processing merger ana
hold
ing Company
applications, as discussed in the Legal Division's memo-
Of May 26, 1961.
Chairman Martin stated reasons why he did not feel the immediate
tlIttlre was a desirable time for the Board to make a major change in these
Procedures.
He also said, in response to a question from Governor
Roberta°n, that he felt it preferable to have all members of the Board
Darti4
-c4ate in any decision to revise the procedures. He noted that there
11°1116
'be a few days at the end of October when all Board members expected
31'6:)
9/14/61
-17-
to be present, and he suggested that the matter be scheduled for consideration by the Board at a meeting on one of those days, probably October 30.
There was agreement with this suggestion.
At this point all of the members of the staff withdrew and the
Board went into executive session.
Following the meeting the Secretary
le-s informed that during the executive session the Board took the following
actions:
Approval of payment of salary to a Reserve Bank officer (Item No.
The Board approved payment of salary to Mr. William H. Leedy as General
C°uneel and Secretary of the Federal Reserve Bank of Kansas City at the rate
Of $15,000 per annum, for the period October 1, 1961, through December 31)
1961.
Secretary's Note: Pursuant to the foregoing
action, the letter of which a copy is attached
as Item No. 5 Was sent to the Federal Reserve
Bank of Kansas City on September 19, 1961.
Directors' Day--1962.
In accordance with a recommendation in a
raelll°randum from Mr. Fauver dated September 14, 1961, the Board fixed
fl'hUrsday, March 15, 1962, as the date for the next Directors' Day, with
the understanding that the customary dinner would be given on Wednesday
ing, March 14, and that a program along the usual lines would be
1:TePared and submitted for the Board's consideration prior to the date
the meeting.
The meeting then adjourned.
3410
9/14/61
-18Secretary's Notes: Governor Shepardson today
approved on behalf of the Board a statement
relating to the re-employment or replacement
of an employee who has been on maternity leave,
transmitted with a memorandum from the Division
of Personnel Administration dated September 13,
1961, with the understanding that a copy of the
statement would be sent to each Division and a
copy furnished to the employee at the time
maternity leave is discussed with the individual.
A copy of the statement is attached to these
minutes as Item No. 6.
Pursuant to the recommendation contained in a
memorandum from the Division of Research and
Statistics, Governor Shepardson today approved
on behalf of the Board the appointment of
Kathryn H. Fortunato as Library Assistant in
that Division, with basic annual salary at the
rate of $4,1k5, effective the date of entrance
upon duty.
Seer
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 1
9/14/61
WASHINGTON 25. D. C.
ADDRESS orrictAL CORRESPONDENCE
TO THE BOARD
September 14, 1961
Board of Directors,
Seattle Trust and Savings Bank,
Seattle, Washington.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves, under the provisions of Section 24A of
the Federal Reserve Act, an additional investment in
bank premises by Seattle Trust and Savings Bank of not
to exceed $150,000 for the purpose of constructing a new
building to house the bank's Des Moines Branch,
including the cost of land.
In view of the continuing expansion in the
volume of operations, the present capital structure of
the bank is believed to be below the desired level. The
Board wishes to emphasize the need for early consideratim of a definite program for providing additional
capital funds.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
3142
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
.0 *
0 ti
1 *
a
Item No. 2
9/14/61
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONOENCE
4A
SI
TO THE BOARO
September 14, 1961
Comptroller of the Currency,
Treasury Department,
Washington 25, D. C.
Attention Mr. C. C. Fleming,
Deputy Comptroller of the Currency.
Dear Mr. Comptroller:
Reference is made to a letter from your office dated
June 30, 1961, enclosing copies of an application to organize a
national bank at Holdenville, Oklahoma, and requesting a recommendation as to whether or not the application should be approved.
A report of investigation of the application made by
an examiner for the Federal Reserve Bank of Kansas City indicates
that the proposed capital structure would be adequate and that
the general character of proposed management would be regarded
as fairly satisfactory, although the chief executive officer has
not yet been chosen. Future earnings prospects, however, are
only fair and there has been no demonstrated need for additional banking facilities in Holdenville at this time. Accordingly, the Board of Governors does not feel justified in
recommending favorable consideration of the application.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM Item No. 3
WASHINGTON 25, D. C.
9/14/61
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 14, 1961
Mr. Watrous H. Irons, President,
Federal Reserve Bank of Dallas,
Dallas 2, Texas.
Dear Mr. Irons:
This refers to the matter involving actions by the C. B.
Investment Corporation, Houston, Texas ("CB"), earlier determined
bY the Board to be in violation of the Bank Holding Company Act of
'
t956. Particular reference is made to the Board's letter of
vanuarY 30, 1961, and to Mr. Pondrom's reply of April 7, 1961,
Previously acknowledged.
The letter of April 7 transmitted letters of March 15 and
Mareh 30, 1961, together
t
with enclosures, from Mr. W. C. Menasco,
'
1'esident of CB, wherein he has set forth a description of the
a4tent to which CB has complied with the Board's January 30 directive,
!Id wherein Mr. Menasco reargues his case in opposition to the Board's
carective that
CB dispose of those shares in the First National Bank
(
1.:f La Porte, Texas (now La Porte State Bank), and the First National
;
4nk of Port Arthur, Texas, determined by the Board to have been unawfully acquired. Mr. Pondrom requests that the Board reconsider
t!! earlier directive of divestment on the basis of the apparent good
J-Lth attending CB's acquisition of the La Porte shares. However, he
:
I leurs in the Board's original decision to require CB to divest the
t ares of both La Porte and Port Arthur that have been acquired through
"e exercise of stock rights without the Board's prior approval.
l
A review of CB's position as stated in the above enclosures
ellbs+
vantiates, in the Board's judgment, the soundness of the legal
eition taken in the Board's letter of January 30, 1961, that
the
t:1520 shares of La Porte stock (now reduced in
number to 925) acquired
14, Pursuance of the understanding expressed in the April 10, 1956,
1.:
merandum of agreement", were "acquired" in July 1956 and January
tte 7, subsequent to the effective date of the Bank Holding Company
to
: May 9, 1956, and that the acquisition of such stock without the
'd i e prior approval was in violation of the Act.
r
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. Watrous H. Irons
314
-2-
While the Board has given full weight to the equities attending
CBI8 acquisition of the above-mentioned La Porte shares, the Board is
unable to attribute to them sufficient weight to warrant a change in its
earlier position. The Board appreciates the problems attending your Bank's
day-to-day relationships with the member banks and bank holding companies
in your District, particularly, as in this case, where they relate to
effecting compliance with a directive of the Board. However, study of
the documents submitted by CB in support of the asserted validity of its
acquisitions of the La Porte shares in 1956 and 1957 warrants the conclusion that the parties concerned intended precisely that which occurred,
namely, the transfer of title to and possession of the shares in July 1956
and January 1957. The fact that Mr. Menasco was, according to his statement, acting under a mistake of fact in connection with the "effective"
date of the Act is not sufficiently persuasive to warrant a change in the
Board's position originally taken. Nor do the facts attending CB's failure
to obtain prior approval for its acquisition of stock in La Porte and Port
Arthur through the exercise of stock rights warrant the Board's taking a
Peeition, different from its original position, that might subsequently be
cited as precedent under equally tenuous circumstances. Similarly, the
divestment order relating to shares of La Porte encompasses the 2,775
Shares now held - constituting the 925 shares remaining from CB's original
acquisition, 925 shares received as a stock dividend in September 1960,
and 925 shares acquired in September 1960 through the exercise of stock
rights.
In reference to the 776 shares of Port Arthur, it has come to the
13
°ardI s attention that subsequent to the acquisition of these shares, CB
lesleceived an additional 97 shares of Port Arthur as a stock dividend on the
dI6 shares. In the Board's judgment, the considerations that have compelled
4:vestment of the shares unlawfully acquired by rights equally compel divest'
ient of any shares received in connection with those unlawfully acquired and
.etained. Accordingly, the Board's present order of divestment of Port
'
Arthur shares relates to the total of 873 of the shares of Port Arthur now
held by CB.
T
CB should be advised that within three months from the date of
reeeipt of the Board's views herein expressed, it must dispose of all shares
11awful1y acquired in La Porte and Port Arthur as herein directed. CB
12,,
:ruld be asked also to advise your Bank of the fact and date of compliance
th the Board's present directive. Further, you are requested to make
atever restatement of the remainder of the Board's January 30, 1961,
''I'ective as may be considered appropriate.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
314
opyDerj*,„
BOARD OF GOVERNORS
OF THE
A^
FEDERAL RESERVE SYSTEM
WAS
eiP
Item No.
4
9/14/61
OFFICE OF THE CHAIRMAN
September 13, 1961.
The Honorable Lee Loevinger,
Assistant Attorney General,
Antitrust Division,
Department of Justice,
Washington 251 D. C.
Dear Judge Loevinger:
This will acknowledge your letter dated September 8, 1961,
received in my office on September 12, requesting a copy of the
decision and any accompanying order related to the Board's
action in approving the merger of Manufacturers Trust Company
and The Hanover Bank, both of New York City.
There is enclosed a copy of the letter addressed to the
Board of Directors, Manufacturers Trust Company, announcing the
Board's consent to the proposed merger, a copy of the Board's
press release in the matter, and a copy of a statement of the
Board's basis for approval of the application that has been
Prepared for publication in the Board's Annual Report and is
suPplied to you in advance of such publication.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
WM. McC. Martin, Jr.
Enclosures
014o
BOARD OF GOVERNORS
OF THE
'roof Q444'0,
toti
4,
Item No.
FEDERAL RESERVE SYSTEM
%*
*
*
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
0
TO THE BOARD
4r
4** 4il faSt
September 19, 1961.
CONFIDENTIAL (FR)
Mr. George H. Clay, President,
Federal Reserve Bank of Kansas City,
Kansas City 6, Missouri.
Dear Mr. Clay:
The Board of Governors approves the payment of
salary to Mr. William H. Leedy as General Counsel and
Secretary of the Federal Reserve Bank of Kansas City, for
the period October 1 through December 31, 1961, at the
rate of $15,000 per annum, the rate fixed by your Board of
Directors as reported in Mr. Boysen's letter of September 14,
1961.
5
9/14/61
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
314
Item No.
Policy for Reemployment or Replacement of
6
9/14/61
Employee on Maternity Leave
L
When an e •lo ee states she •lans to -• 1 for reem lo
ent:
(a) The position held by her will be reserved for her, with the
approval of the head of her Division, and no permanent replacement will
be made.
(b) The Division ordinarily will be expected to absorb the work of
the employee during maternity leave. Any recommendation for temporary
replacement involving a disbursement of Board funds will require approval
bY the Office of the Controller.
It When an em loyee states she does not .lan to aI.ly for reemployment
l'aless some unforseen circumstance arises:
(a) With her application for maternity leave, the employee must
submit to her supervisor a written statement to the effect that she does
not plan to return to duty unless some unforseen circumstance arises.
(b) The employeels name will be retained in her present position,
with the approval of the head of the Division, until expiration of the
Stipulated period of maternity leave (under leave regulations current at
he time) or until resignation is received if prior to that date.
(c) Replacement can only be effective on the date of incumbent's
Physical separation from position, even though dual occupancy may result.
(d) Should an unforseen circumstance arise whereby the employee
wishes to apply for reemployment, and she is favorably considered for
1 eemp1oyment, arrangements will be made by the Division of Personnel
:
Ltd-ministration to place her in a position at the same level as previously
I.ecupied. However, the Board does not assume any obligation to place
'
er in her previous position.
When an
lo ee states she does not
lan to
.041
1 for reem lo
ent:
(a) The employee's name will be retained in her present position,
the approval of the head of the Division, until expiration of the
'!tit:iPulated period of maternity leave (under leave regulations current at
ue time) or until resignation is received if prior to that date.
Ph
(b) Replacement can only be effective on the date of incumbent's
separation from position, even though dual occupancy may result.
-2 -
IV
• When an em loyee does not wish to apply for maternity leave but expects
to resign:
The employee must report pregnancy and must resign in accordance
with current leave regulations (i.e., employee will not be allowed to
remain on duty longer than the period stipulated in the leave regulations.)
In all the foregoing instances, the employee must report pregnancy
in accordance with current leave regulations and must submit the attached
form indicating her intentions.
In all instances, failure to resign or apply for reemployment before
the period terminates (as provided for in current leave regulations)
automatically terminates employment with the Board.
This policy is meant to implement the Board's leave regulations
and is in no way intended to change or be substituted for any part of
those regulations.
@FedFRASER