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Minutes for To: September 20, 1960 Members of the Board From: Office of the Secretary 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. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Minutes of the Board of Governors of the Federal Reserve System on Tuesday, September 20, 1960. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman I/ Balderston, Vice Chairman Szymczak Mills Robertson Shepardson King Sherman, Secretary Kenyon, Assistant Secretary Hackley, General Counsel Solomon, Director, Division of Examinations Hooff, Assistant General Counsel Nelson, Assistant Director, Division of Examinations Mr. Benner, Assistant Director, Division of Examinations Mr. Sprecher, Assistant Director, Division of Personnel Administration Mrs. Semia, Technical Assistant, Office of the Secretary Mr. Mr. Mr. Mr. Mr. Mr. Continental Bank and Trust Company. 4 Sllit Mr. Hackley reported that against the Board had been filed yesterday by The Continental 44k and Trust Company, Salt Lake City, Utah, in the United States IA-strict Court for the District of Columbia. Although there had not Yet been an opportunity to examine the complaint, he understood that the bank was seeking a declaratory judgment on the grounds the Board lacked 411th°r1ty to issue its order of July 18, 1960, requiring an increase in eaPital and that its determination in the matter was not reasonable. (Later in the meeting Mr. O'Connell, Assistant General Counsel, et/tered the room and advised that a copy of the complaint had been served °II each member of the Board. He substantiated Mr. Hackley's comments Entered meeting at point indicated in minutes. 9/2o/6o -2- regarding the nature of the suit, and there was a brief discussion concerning the manner in which defense of the suit might be handled.) Old Kent Bank and Trust Company. Governor Mills referred to the Board's approval at the meeting on September 16, 1960, at which he had not been present, of a letter to the Department of Justice concerning the matter of Old Kent Bank and Trust Company, Grand Rapids, Michigan. The Department had requested the Board's views as to the desirability °f filing either a motion for leave to file a petition for rehearing en banc by the United States Court of Appeals or a petition for a writ Of certiorari to the United States Supreme Court. In reply the Board stated that in its judgment the probability of either petition being granted had been considerably lessened by the passage of the new merger legislation, although, if the Department of Justice should determine to Proceed further along either line of appeal, the Board would defer to the Department's decision and its legal staff would cooperate fully in l'endering whatever assistance was required. Governor Mills said that he was not clear as to the Board's l'e4e°ning in taking what appeared to be a neutral position after it he4 declared a principle in its decision on the Old Kent case and also 14 a similar case involving Wachovia Bank and Trust Company, Winston-Salem, Nor.+1, --“ Carolina. Although it was true that the new legislation now placed resPonsibility in merger cases indisputably with the Board, he felt that, 114ving declared itself in principle, the Board should have sought to '?r 0 R) 9/20/60 -3- have further appellate action taken. By failing to do so, it seemed to him the Board was saying, in effect, that the original case was ill-founded and that the Board lacked confidence in the principle it had established. Mr. Hackley then reviewed some of the considerations that had entered into the drafting of the letter to the Department of Justice, including the fact that the Supreme Court is reluctant to grant writs Of certiorari except where a precedent would be set for future cases, a factor no longer present in the Old Kent case in view of the passage of the merger legislation. Governor Robertson remarked that, as he had stated previously, he was surprised when the Justice Department petitioned for rehearing bY the original three-judge panel rather than by the court en bane. It Is unusual, he said, for a three-judge panel to grant a rehearing on a case it has previously considered. In the present circumstances it seemed to him that the possibility of obtaining a writ of certiorari fr°1n the Supreme Court was extremely slight, because, as Mr. Hackley had P°inted out, the Court usually grants such writs only when the case may 8et a pattern for similar cases. Therefore, he had gone along with the letter to the Department of Justice because he considered it futile to trY to carry the matter further and not because he thought that the case had been decided correctly on its merits. 1) 9/20/6o Governor Balderston stated that he had voted for approval of the letter to the Department of Justice because he thought the principle involved in the Old Kent case had been resolved by the merger legislation, aad therefore a continuation of the Old Kent proceedings might seem vindictive and, if not futile, at least wasteful. Governor Shepardson asked if it had not been the decision of the Department of Justice, rather than the Board, to take the petition for rehearing back to the three-judge panel. Mr. Hackley responded that that was correct, and that the question whether to seek a rehearing en bane or a writ of certiorari from the Supreme Court also was a matter for decision by the Department. It was his understanding that those in authority at the Department were not inclined to look favorably on Pursuing the matter further. Discount rates. The establishment without change by the Federal Reserve Banks of Boston and Atlanta on September 19, 1960, of the rates on discounts and advances in their existing schedules was approved tulanimously, with the understanding that appropriate advice would be seat to those Banks. Items circulated to the Board. The following items, which had been circulated to the Board and copies of which are attached to these 11.1.11tes under the respective item numbers indicated, were approved Ilnantmously: 9/20/6o -5Item No. Letter to The Chase Manhattan Bank, New York City, al) Proving an extension of time to establish a branch at 666-676 Forest Avenue, West New Brighton, Staten Island. 1 Letter to Girard Trust Corn Exchange Bank, PhiladelPhia, Pennsylvania, approving an extension of time to establish a branch at Comly Road and Roosevelt Boulevard. 2 Letter to The Reading Trust Company, Reading, Pennsylriania, approving the establishment of a branch at 1330 v ochuylkill Avenue. 3 L!tter to First-Peoples State Bank, Traverse City, -chigan, approving the establishment of a branch at , 1,11 cil East State Street. Letter to Wells Fargo Bank American Trust Company, San !l'anoisco, California, approving the establishment of a vranch in Oakland. 5 Report on competitive factors (Niles-Dowagiac, Michigan). Memorandum dated September A 9, 1960, from the Division of Examinations, %/hich had been distributed, submitted a draft of report to the Comptroller °f the Currency on the competitive factors involved in the proposed Purchase of assets and assumption of liabilities of The Dowagiac National BEttlk) Dowagiac, Michigan, by the First National Bank of Niles, Niles, Michigan. The report concluded with the statement that the proposed tl'ansaction would lessen competition and tend to increase further the 4°minance of the applicant in the area. In discussion of the matter, Governor Mills raised the question Ihether a barrier such as a State line (in this case the Michigan-Indiana 9/2o/6o -6- line) should be used to define the area in which the two banks involved competed, as was done in the report. After reviewing the sources of competition to the two banks, especially from banks in Indiana cities, Governor Mills expressed the opinion that the proposed merger would Provide better banking facilities to a community deserving them, and the banking structure in the area might be strengthened. Mr. Solomon agreed with Governor Mills' point about the State line not being significant in determining the area of competition, and It was understood that the report would be amended in this respect. He expressed the view, however, that the principal influences of the merger an competition would be felt in the territory north of Niles. There followed a discussion of the geographical relationships involved and the banking facilities available. Various suggestions were then made concerning the wording of the conclusion in the report, "Pecially with regard to the reference to the "dominance of the applicant" 811a to the desirability of defining the area affected as being north of The report then was approved for transmittal in a form that would take into account, in the conclusion, the suggestions agreed upon at this meeting. The report subsequently transmitted to the Comptroller of the eltrrencY contained the following conclusion: The proposed transaction 1.7°111(1 lessen competition and tend to increase the strong position of the 4PP1icant within an area extending 15 miles north of Niles. 9/20/60 -7Application to organize a national bank in Corpus Christi, Texas (Item No. 6). A file had been circulated regarding an application to organize a national bank in Corpus Christi, Texas. The Federal Reserve Bank of Dallas had suggested an unfavorable recommendation to the Comptroller of the Currency on the application, while the Division of Examinations concluded that a favorable recommendation would be warranted. Governor Mills had indicated, when the file was in circulation, that he agreed with the recommendation of the Federal Reserve Bank. Governor Mills stated that the reason for his position was that the proposed bank was to be located in the downtown business section of Corpus Christi, which appeared to be deteriorating to a degree. He could not convince himself that there was any need for an additional commercial hank in that locality or that such a bank could compete effectively with the well-established banks already located there. If the proposal had been to establish a bank in an outlying section of the city that had 13roapects for growth and ability to support a new bank, he might have felt differently. Also, he was not overly impressed by the stature of the organizers. Governor Robertson commented that he had not been able to find 411Y-thing in the file that supported the Federal Reserve Bank's recommendation. Although the proposed location was in the older section of tcYlgn, the organizers appeared to be successful businessmen, and he could not find justification for the Reserve Bank's reservations about the 9/20/6o -8- Proposed management. Therefore, he thought that the Examinations Division was correct when it suggested that the Board recommend approval, provided the Comptroller of the Currency was satisfied as to the management factor. Governor Shepardson expressed uncertainty about the application. He noted that Corpus Christi had had a tremendous growth based on the Placement there of a large Naval installation, but some of the operations Of that installation had been transferred to a Naval base in Florida, 'With a consequent setback to the Corpus Christi area. Nevertheless, he thought that the long-run growth prospects were good. He also believed in the principle that, as far as was reasonable, competent organizers Should be allowed to establish banks and compete. On balance, he was inclined to go along with the favorable recommendation of the Division Of Examinations. Governor King stated that a fact he considered important was that in the past few years two banks had been incorporated in Corpus Chllsti--one State and one national--and those banks had not experienced l's.Pid growth. As he saw the picture, Corpus Christi had two fairly large hallks and quite a few smaller banks. He was not convinced that the est ablishment of another bank to compete with those new, small banks, 'Which had already had difficulty in growing, would be a good thing. He th°11ght the difficulties these recently-established banks had experienced e a warning sign. ' Ifel Although the organizers of the proposed bank l ePortedly had pledges of $4 million in deposits, he noted that there ' 9/20/6o -9- no commitment as to what would happen to those deposits once they were in the bank. For these reasons, he would be inclined to recommend clisaPproval of the application. In his opinion, a city the size of Corpus Christi was not well served by having a large number of small banks. Mr. Nelson pointed out that the two banks Governor King had mentioned were outlying banks. In the downtown section, he said, there Were two banks of fair size, but an estate owned one of them entirely and part of the other one, so that they were not completely competitive. Governor King then expressed the thought that in a city the size °f Corpus Christi an outlying bank is still close enough to the business section to make its facilities easily available, whereas "outlying" would have a different meaning in a larger city. Governor Szymczak stated that he agreed with Governors Mills and King, and therefore with the Federal Reserve Bank's recommendation of disapproval. Governor Balderston stated that upon reviewing the file his lieaction had been favorable and that as a matter of principle he liked to see new banks starting. a However, he recognized that the question was close one. Accordingly, it was decided to recommend unfavorably on the 4PPlication, Governors Szymczak, Mills, and King voting for such a l'ecoMmendation, Governors Robertson and Shepardson voting against it, arId. Governor Balderston abstaining. 9/20/60 -10A copy of the letter sent to the Comptroller of the Currency Pursuant to this action is attached as Item No. 6. Salary structures at Federal Reserve Bank of Dallas and branches (Item No. 7). A draft of letter to the Federal Reserve Bank of Dallas had been circulated which would approve revised minimum and maximum salaries for the respective grades of the salary structures of the Bank a4d. its branches, effective October 1, 1960. The letter, a copy of which is attached as Item No. 7, was a Payfl unanimously. --P—E. At this point Mr. O'Connell entered the room and Mr. Sprecher w ithdrew. Absorption of exchange charges. 113ard's interpretation of August Following the issuance of the 4, 1960, regarding absorption of exchange hal'ges as payment of interest on demand deposits, a draft of possible s4amination procedures was sent by the Division of Examinations to the Vice Presidents of the Federal Reserve Banks in charge of examinations f°11 their comments. A draft of letter had now been distributed which V°41d inform those Vice Presidents that after further study of the suhieet, including consideration of the views expressed by the Presidents of the Reserve Banks when they met with the Board on September 13, 1960, It had been decided not to issue any specific suggestions or instructions or the subject at this time and to treat the matter like other examination qtlestions. 9/20/60 -11It was noted that there had been distributed to the Board copies Of letters from the Bank Management Commission of the American Bankers Association, from other groups of bankers, and from individual banks requesting modification of the position taken in the Board's interpretation, and that additional letters had been received and were likewise being distributed. It was pointed out, also, that the American Bankers Association was meeting this week, that the question of absorption of exchange charges was a matter of discussion among the bankers attending, and that some further representation from the Association seemed possible. There was general agreement that in the circumstances it would he desirable not to write to the Vice Presidents in charge of examinations about the matter at the present time, and that after the meeting of the Alaftican Bankers Association was concluded representatives of the Association should be invited to meet with the Board. After discussion °11 the possibility that the Federal Deposit Insurance Corporation might change its position on the absorption of exchange charges, it was suggested that the Board might invite representatives of the Corporation to attend 411Y meeting with representatives of the American Bankers Association, and e'greement with this suggestion was expressed. Pan American Bank of Miami. In regard to the Pan American Bank f Miami, Florida, Governor Robertson stated that, as previously reported to the Board, two of the Sottile banks were to be sold with net proceeds Of 4. Y2 ,130,000, and Connecticut Mutual Life Insurance Company originally 9/20/60 -12- intended to apply these proceeds to a reduction of its claim against Sottile, Inc., and payment of arrearages. Governor Robertson had suggested that the insurance company consider using the funds to purchase stock in the Pan American Bank in order to place the bank in sound condition. Representatives of the company stated that consideration would be given to the matter at a meeting of the executive committee on September 19, and asked Governor Robertson to determine the amount of eaPital needed to restore the capital accounts of the bank to sound condition. An appraisal by the Chief Examiner of the Federal Reserve Bank of Atlanta indicated that the net capital deficiency of the Pan American Bank was about *2,140,000, and Messrs. Solomon and Benner c oncurred. Governor Robertson said that yesterday he had conferred by telephone with Mr. Tenney, Vice President of the insurance company, and III'. Weir, Assistant Vice President. After considerable discussion they illelicated an inclination to employ the net proceeds from the sale of the tlgo banks to increase the capital of Pan American. They suggested, however, that the funds be used to purchase preferred stock instead of common, a Ilr°Posal from which Governor Robertson had attempted to dissuade them. Governor Robertson reported that a common stock issue of *2.5 was contemplated, with the insurance company taking up something '*2 million of this amount and at least part of the balance sold °vex thr ough the exercise of rights by present shareholders. Thus it seemed 9/20/60 -13- p1'Obable that the capital deficiency estimated by the Atlanta Reserve Bank's Chief Examiner could be covered. After discussion of the developments outlined by Governor Robertson, agreement was expressed that the plan seemed a suitable one 'which deserved Board support, and Governor Robertson was authorized to Proceed in his discretion. Chairman Martin joined the meeting at this point and Governor Balderston described certain matters that had been discussed, including the prospective meeting with representatives of the American Bankers Association regarding the Board's interpretation on absorption of exchange charges. Chairman Martin expressed no objection to the con- plated procedure. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board a memorandum dated September 20, 1960, from Messrs. Noyes and Kelleher recommending that the purchase option covering the IBM 650 computer which will expire on October 6, 1960, not be exercised nor renewed. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 1 9/20/60 ADDRESSOFFICIAL CDRRESPDNOEf'4CE TO THE SOAR° September 20, 1960 Board of Directors, The Chase Manhattan Bank, New York, New York. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of New York, the Board of Governors extends to May 1, 1961, the time in which to establish a branch at 666-676 Forest Avenue, West New Brighton, Staten Island, New York, by The Chase Manhattan Bank under the authorization contained in the Board's letter of March 28, 1960. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS . 44ixt***4 ..%10174t4,0* .t, OF THE Item No. 2 9/20/60 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD September 20, 1960 Board of Directors, Girard Trust Corn Exchange Bank, Philadelphia, Pennsylvania. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Philadelphia, the Board of Governors has approved an extension of time until March 25, 1961) in which Girard Trust Corn Exchange Bank may establish a branch near the northeast corner of Comly Road and Roosevelt Boulevard, Philadelphia, Pennsylvania. The establishment of this branch was authorized in a letter dated October 5, 1959. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. I5/50, BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 3 9/20/60 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO TI-4E BOARD September 20, 1960 Board of Directors, The Reading Trust Company, Reading, Pennsylvania. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Philadelphia, the Board of Governors of the Federal Reserve System approves the establishment of a branch at 1330 Schuylkill Avenue, Reading, Pennsylvania, by The Reading Trust Company, provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. !TSC'7' BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 4 9/20/60 WASHINGTON 25, D. C. ADDRESS OFFICIAL. CORRESPONDENCE TO THE BOARD September 200 1960 Board of Directors, First-Peoples State Bank, Traverse City, Michigan. Gentle en: Pursuant to your request submitted throuJ1 the Pederal Reclerve Bank of Chicago, the Board of Governors of the Federal Reserve Syster approves the establishment of .! branch at 231 East State Street, in Traverse City, by tirst-Peoples State Bank, provided the branch is established within ninety days. It is understood that this branch is to be Aerated for a temporary period while the street providing to the main office drive-in window is closed due to 'le construction of a new bridge across the Boardman River. Very truly yours (Siepaed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. r-,!1 BOARD OF GOVERNORS 444*****4 "owcov OF THE Item No. 5 FEDERAL RESERVE SYSTEM 9/20/60 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE _4141 ‘4‘,xtiatIA TO THE BOARD September 20, 1960 Board of Directors, Wells Fargo Bank American Trust Company, San Francisco, California. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of San Francisco, the Board of Governors of the Federal Reserve System approves the establishment of a branch in the vicinity of 22nd and Webster Streets, Oakland, California, by Wells Fargo Bank American Trust Company, San Francisco, California, provided the branch is established within nine months from the date of this letter. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 6 9/20/60 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD September 20, 1960 2,0mptroller of the Currency, 4Ur Department, aahington 25, D. C. Attention Mr. G. W. Garwood, Deputy Comptroller of the Currency. 1)ear lir. Comptroller: 20, Reference is made to a letter from your office dated June 1960 in bank national senclosing copies of an application to organize a ! corp or whether 1t1 Christi, Texas, and requesting a recommendation as to 40,t ; he application should be approved. A report of investigation of the application made by an n -u-Lner for the Federal Reserve Bank of Dallas indicates that the pro!" capital structure of the bank would be adequate. The proposed t° 0 b:4 of directors is composed of a group of substantial businessmen 1/112:e of the individuals has had any banking experience question as to the qualifications of the proposed Ative officer, the management factor can not be favorably evalqatell neeli a at this time. Information available does not indicate a pressing tItifor a downtown bank at the present time and the prospects for to i7e earnings of the institution are somewhat uncertain. This appears information, l3 a borderline case and after considering all of the the e of the applicaapproval t404.0ard does not feel justified in recommending The Board's Division of Examinations will be glad to discuss kaY desiZects of this case with representatives of your office if you so Very truly yours, e,c(iHt . t,)(1 , Elizabeth L. Carmichael, Assistant Secretary. C.) L. BOARD OF GOVERNORS OF THE tr FEDERAL RESERVE SYSTEM I WASHINGTON 25. D. C. No. 7 9/20/60 Item 4 ADORERS OFFICIAL CORRESPONDENCE TO THE SOAR° September 20, 1960 . COITTNTTAT, (F1) Mr. Natrous H. Trons, President, Federal Reserve Bank of Dallas, Dallas 2, Texas. Dear Mr. Irons: In accordance with your letter of September 8, 1960, the Board of Governors approves the following minimum and maxlmum salaries for the respective grades of the salary structures of the Federal Reserve Hank of Dallas, effective October 1, 1960: Grade --T-2 3 Dallas-El Paso-Houston Maximum Minimum 73,240 f;r155 3,300 2,460 6600 4 5 2,860 3,13'; 3,450 7 8 9 10 11 12 13 14 15 16 3,820 14,200 4,680 5,2oo 5,800 6,hoo 7,10) 7,900 8,800 9,800 3,515 3,860 4,230 4,660 5,150 5,670 6,320 7,025 7,800 8,700 9,600 10,700 11,900 13,300 San Antonio Minimum Maximum 42,400 757E0 3,300 2,460 3,360 2,500 2,700 3,645 2,920 3,940 4,320 3,200 3,50o 3,830 4,220 4,650 5,200 5,700 6,300 7,000 7,800 8,700 4,725 5,170 5,695 6,280 6,900 7,700 8,500 9,500 10,600 11,700 The Board aporoves the payment of salaries to the emPlovees other' than officers within the limits specified for the ra,' in which the positions of the respective employees are Tt is assumed that all employees whose salaries BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. Irons - 2 are below the minimums of their grades as a result of these structure adjustments vill be brought within the appropriate range as soon as practicable and not later tan January 1, 1961. The Board understanils that the anticipated increase in salary expense resulting from the ad:lustments in salary structures can be handled within the limits of 1960 and 1961 budget estimates. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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