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tko9 Minutes for To: Members of the Board From: Office of the Secretary september 14, 1964 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. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane ) Minutes of the Board of Governors of the Federal Reserve System on Monday, September 14, 1964. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Robertson Shepardson Mitchell Mr. Sherman, Secretary Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Solomon, Director, Division of Examinations Mr. Hexter, Assistant General Counsel Mr. Hooff, Assistant General Counsel Mr. Leavitt, Assistant Director, Division of Examinations Mrs. Semia, Technical Assistant, Office of the Secretary Mr. Egertson, Supervisory Review Examiner, Division of Examinations Mr. McClintock, Supervisory Review Examiner, Division of Examinations Ratification of actions. Actions taken by the available members or the Board at the meetings held on September 9 and 11, 1964, as recorded ln the minutes of those meetings, were ratified by unanimous vote. Condition of membership (Item No. 1). te moranda dated September 4, There had been distributed 1964, from the Legal Division and the Division °t Examinations relating to the proposal of Fidelity Bank, Beverly Hills, C411fornia, to acquire the business of McMillan Mortgage Company, Los '44*1ea, engaged in originating and servicing mortgage loans. The Legal Division's memorandum dealt with the question of the Zle- ssity for Obtaining the Board's approval of the acquisition. Fidelity 9/14/64 -2- Bank had joined the System in 1952, subject to the usual condition that except with the permission of the Board of Governors of the Federal Reserve System, such bank shall not cause or permit any change to be made in the general character of its business or in the scope of the corPorate powers exercised by it at the time of admission to membership." The question was presented whether the bank must obtain the Board's Permission under this condition of membership before acquiring McMillan Mc)rtgage company, which, on the basis of fairly recent figures, held Over 33,00o mortgage servicing contracts covering approximately Million in mortgages. WO Attorneys for the member bank had submitted a Memorandum taking the position that such permission was not necessary. They contended that, since Fidelity Bank was already engaged substantially 14 real estate loan servicing, there would be no change in the general tlaracter of its business, but simply an expansion of certain elements or its present banking business and a shift or redistribution in emphasis 841°ng the various components that maae up the operations of modern Q°mMercial banks. They believed that the Board's permission would be l'eluirc2d only if the bank entered an entirely new field of banking - a fl-Inklamental change in its business. Other aspects of the bases for the P°8ition of the member bank's counsel were explained in the memorandum, 4r.ter which the Legal Division presented reasoning and background facts 14 stIPPort of its opinion that a rapid increase of the mortgage servicing 9/14/64 -3- business by Fidelity Bank, through acquisition of such business now being conducted by McMillan Mortgage Company, would result in a substantial change in the general character of the bank's business and, therefore, l'rould require the Board's permission under the condition of membership. The Legal Division had also explored the question whether the Board had the right to impose the condition and had reached an affirmative conOn on this question. The memorandum from the Division of Examinations proceeded from the Legal Division's positive finding as to the Board's jurisdiction to the question whether or not the particular acquisition proposed should be aPpraved. On the basis of various facts relating to the nature of the bank's business, conditions disclosed by recent examinations of the be ' nk) and competitive considerations, the Division recommended that the 1)(34rd grant permission for the proposed acquisition. Attached to the two memoranda was a draft of letter that would 14rc'rm the member bank of such action by the Board. During discussion, Governor Mitchell raised a question as to Ilhether certain passages in the draft letter that would express the view that the Proposed acquisition would require the Board's approval were 11114ecessarily strong. In response, staff comments reviewed the steps aken by the member bank leading to submission of a contrary view by its ecilulsel, which had seemed to call for more than a brief reference to the 1)°1-rit. 3121 9/14/64 The letter was then approved unanimously. A copy is attached as Item No. 1. Nonbank money orders (Item No. 2). There had been distributed a memorandum dated September 11, 1964, from Mr. Bakke, Assistant Secretary, regarding a request dated September 3, 1964, from Senator Albert Gore for In letters information relating to regulation of the sale of money orders. of June 12, 1964, the Board had responded to inquiries from Chairman Robertson of the Senate Banking and Currency Committee and Senator Russell B. Long by furnishing a compilation of information submitted by the Federal Reserve Banks regarding the activities of nonbank money °rcler issuers and State legislation regulating such activity. Since the compilation fell within the purview of "unpublished information of the B°are under section 261.2 of the Board's Rules Regarding Information, 4nd certain factual details fell within the proviso of paragraph (b)(2) r that section precluding disclosure without Board authorization, Senator 4°re's request was submitted for the Board's disposition. It was believed that there was no reason to deny the request. After discussion, it was agreed that Senator Gore would be furnished ilir°rmation similar to that sent to Senators Robertson and Long. A copy or the letter subsequently transmitted to Senator Gore is attached as 2.• The meeting then adjourned. 00 i AgiadLidwiwirwit:tr Secretary 400 OF THE % • : Item No. 1 9/14/64 BOARD OF GOVERNORS ..... OF Coyi FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD September 14, 1964. hard of Directors, Pidelity Bank, elierly Hills, California. Ge ntlemen: The Board has been advised that Fidelity Bank proposes to acquire rtgage servicing business of McMillan Mortgage Company. Fidelity 11k became a member of the Federal Reserve System, subject to a condition themembership that "except with the permission of the Board of Governors of to Reserve System, such bank shall not cause or permit any change be corl' e made in the general character of its business or in the scope of the P°rate powers exercised by it at the time of admission to membership." the 4 Although Fidelity Bank is presently engaged to some extent in the rit°rtga ge servicing business, the amount of such business to be acquired from fieid&lan Mortgage Company will greatly expand the bank's operations in this applicable to „' The aforementioned condition of membership is particularly is also condition this but activity, bank's entering a new field of 8rizkial-cable in instances where a bank's operations are to be suddenly and 81.4 . lY expanded when related to an existing volume of business and to the tat °f the bank. Therefore, the Board is of the opinion that its permission ter,,essary before Fidelity Bank may acquire this large block of mortgage "Icing business. Since Fidelity Bank is already engaged in the mortgage servicing expa;ltess and is qualified to conduct such business, and it appears that the barii,,,sion of this business would not adversely affect the condition of the set ; i. the Board grants permission for Fidelity Bank to acquire the mortgage such acquieing business of McMillan Mortgage Company, provided that siti„ this letter. of date the -" is consummated within six months from Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON Item No. 2 9/14/64 OFFICE OF THE CHAIRMAN September 16, 1964. The H onorable Albert Gore, 1?ited States Senate, "ashington, D. 20510 C. Dear Senator Gore: Your letter of September 3, 1964, requested any material or tePort 8 that the Board might have available on the subject of money 0174:1 'r sales by nonbanking concerns. Willis Several months ago the Board was requested by Senator A. Robert. Currency and Banking aon, in his capacity as Chairman of the Senate ' Cormu extent of private money orde tit_ee, to furnish information regarding the the 40,r pusiness in the United States. At that time the Board, with amount considerable otuitstance of the Federal Reserve Banks, compiled a nf°rmation dealing with this subject, a digest of which is enclosed. Reserve Banks According to the information supplied by the Federal the , The issuers extensive. quite Of til vate" money order business appears to be either business, doing concerns dire ese instruments range from a number of Express American (e.g., basis Cortl,,etlY or through agents, on a multi-State Inc., toIrlY, Republic Money Orders, Inc., Travelers' Express Company, 11, " Union Western Corporation, Check Navigation Co., Inc., Nation-Wide of thousands literally be to appear locarph Company, etc.) to what would drugstores, (particularly merchants ''currency exchanges" and individual %ark prialete, and department or variety stores) that sell money orders, as eiPal, for the accommodation of their customers. Island, Eight States (Florida, Kansas, Kentucky, Nebraska, Rhode 8°11th n activity, either by statu -akota, Vermont, and Wyoming) prohibit this question whether existing the addition, batikite or administrative ruling; in money orders by organizati.0484 laws of West Virginia preclude issuance of other than banks is now before the Attorney General of that State. statutes providing Where the practice is not prohibited, State tb that are quite deti16'a regulation of money order issuers vary from those for ed, such as in California and Illinois, to those that provide Olily' nor legislation neither eiciro.221ftinal regulation. A number of States have ' l tstrative rulings on the subject. 3121 Senator Gore I trust the foregoing comments, together with the enclosed FtLation, will adequately serve your interest in this matter. COm.,4 Sincerely yours, Wm. McC. Martin, Jr. Eric] . °Sure
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