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9/61 Minutes for To: Members of the Board From: Office of the Secretary September 21, 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 on Minutes of the Board of Governors of the Federal Reserve System Thursday September 21, 1961. PRESENT: Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Robertson Shepardson King Mitchell Mr. Sherman, Secretary Miss Carmichael, Assistant Secretary Mr. Fauver, Assistant to the Board Mr. Hackley, General Counsel Mr. Solomon, Director, Division of Examinations Mr. Leavitt, Assistant Director, Division of Examinations Item circulated to the Board. The following item, which had been circulated to the Board and a copy of which is attached to these nlirmates as Item No. 1, was approved unanimously: Letter to The First National Bank of Norman, Norman, Oklahoma, approving its application for fiduciary powers. Kansas Application to organize a national bank at Wichita, (Item No. e). ration At the Board meeting on September 15, 1961, conside 14/43 given to a request from the Comptroller of the Currency for a recomflie bank at Idetion with reference to an application to organize a national 141ellita, Kansas. the Both the Federal Reserve Bank of Kansas City and on the 13°"I's Division of Examinations had recommended unfavorably 4111a4cation. Solomon had Pursuant to the understanding at that meeting, Mr. Reserve Bank t4lkeci by telephone with Vice President Mills of the Federal .6 9/21/61 -2- °f Kansas City regarding the application, and a memorandum dated September 20 had been distributed spmmnrizing additional information furnished by the Reserve Bank. The memorandum had been accompanied by a copy of a letter dated August 3, 1961, from the First National Bank in Wichita to the Federal Reserve Bank of Kansas City setting forth reasons why the establishment of the proposed national bank would not be desirable at this time. As indicated in the memorandum, the Federal Reserve Bank of 4118as City and the Division of Examinations were still of the opinion that an unfavorable recommendation on the application should be sent to the Comptroller of the Currency for the reasons set forth in the Division's raera°randtmi of August 31, 1961, and presented at the September 15 meeting. Mr. Solomon said that the Kansas City Reserve Bank continued to reel that,if the proposed additional bank were to be established, it would Beriously raise the question of overbanking. There now seemed to be tail‘lY effective competition in the community, he added, noting that at Present two banks were operating in the area and a third was scheduled to Within a few weeks. The Kansas State Banking Department had turned request for a State bank charter from the same group that was now 4ttenaPting to establish a national bank on the grounds that there was no for another bank in that vicinity. It was the view of the Kansas CItY Reserve Bank that a fourth bank in the area might result in earnings 111‘c)b1ems for the other three institutions, especially the new bank that 1148 expected to open in the near future. 0,24 7r: 4,,41041.Ase 9/21/61 -3Governor Robertson said he felt that entry in the banking field Should, be kept as wide open as possible in order to provide adequate c°mPetition. Also, he believed that the overbanked argument was over- vorked as a reason for denying applications to establish banks. This argument seemed less important now than before provision was made for Pecieral deposit insurance. The application now before the Board had been. filed by a group with ample capital and, in general, the management tact°1" appeared to be satisfactory. On those grounds, it would seem aPPropriate to recommend favorably on the application. However, Governor Rckertson believed these factors were outweighed by the fact that a third would bEtziking institution for this locality had been approved and shortly °Dell for business. The State authorities were of the opinion that three 1144k8 would provide competition commensurate with the business of the ea• and that there was not room for a fourth bank at this time. ' 4l He th°11ght that it would be wise for a bank supervisory agency to wait tultil the third bank had opened for business and then review the situation bef°re approving a fourth. Also on the side of an adverse recommendation Ir48 the control that the sponsors of the fourth bank (the Garvey family) would eadY exercised over both the shopping center in which that bank ' EIll be located and a savings and loan association operating in that center. lithe, fore, on balance, he would favor an adverse recommendation to the ec41113troller of the Currency on the ground that the application was Premature. 9/21/61 Governor Shepardson expressed agreement with the views stated bY Governor Robertson. Governor King said that he would not be inclined to place much /reigh on the letter from the First National Bank in Wichita opposing tile establishment of the national bank. It appeared to him that the chief criticism in the letter was along the line that the main stockholder of the proposed bank was a domineering individual, and this did ti°t seem to be a sufficient reason for an unfavorable recommendation. Re agreed with Governors Robertson and Shepardson that there would be certain disadvantages to establishing a fourth bank in the area at this tie . However, his preference would be to recommend favorably on the 4P11cation, leaving the Comptroller of the Currency free to make a decision without having to take into account an unfavorable recommendation NIA the Board. Governor Mitchell expressed the view that the right of entry banking is basic and fundamental and should be restrained only 1411e4 it clearly was not in the public interest. In this case, there some complicating factors, one of which was that another new bank had. been approved but was not yet open for business. In his judgment ti/is vould not be a sufficient reason for an unfavorable recommendation. Ile believed it to be desirable to have people with new ideas in the ba.Ilking field and perhaps Mr. Garvey would be what the banking fratelllitY needed. People with new ideas who were willing to risk capital 1 04/: 9/21/61 -5- ought to be encouraged, he thought. Therefore, while he considered this to be a close case, he believed the Board should recommend favorably on the application. Governor Balderston remarked that he usimily favored additional In this case he was eatries into banking if conditions were favorable. concerned about two points raised by Governor Robertson. a third The fact that bank had been approved but was not yet open for business would eeem to make the establishment of a fourth bank premature. Also, he was bothered by the fact that the proposed national bank, if established, '4°104 be linked with a savings and loan association and a shopping center which were controlled by the same family. Accordingly, he believed the Board should recommend unfavorably on the application. After acceptance of an editorial change, the proposed letter to the Comptroller of the Currency recommending unfavorably on the applie4tion was approved in the form of attached Item No. 2, Governors King 44c1 Mitchell dissenting for the reasons indicated. Application of Wells Fargo Bank American Trust Company. At the eeting on September 18, 1961, there was a discussion of an application br Wells Fargo Bank American Trust Company, San Francisco, California, rol* Permission to merge with The Farmers and Merchants National Bank of S4/11tEt Cruz, Santa Cruz, California. During the course of the discussion °Ilernor Mitchell had stated that before arriving at a definite position het, woUld appreciate having an opportunity to review the memorandum of C 9/21/61 -6- August 3, 1961, from the Division of Examinations covering a study of bellking in the State of California, and further consideration of the 4PP1ication was deferred until today's meeting. Governor Mitchell reported that he had now reviewed the August 3 Study and was more strongly inclined than he had been on September 18 t0 favor disapproval of the Wells Fargo application. He was not sure Of the correct solution to the merger problem, but he did not believe that it could be resolved by continuing to permit further concentration °t hanking resources in California. If Wells Fargo wished to provide 41°Ile competition in the Santa Cruz area, he believed it preferable for the bank to establish a new branch in that city rather than to buy an established bank. Governor Robertson commented that Wells Fargo had shown a desire to compete with other banks in this community by filing with the CaliState Banking Department an application to establish a branch in Sculta Cruz, as well as applying for permission to merge with Farmers 441. Merchants. be 4 If either application were approved, Wells Fargo would 441 position to compete with the other banks of the area. If a new 114111z Were established and a consolidation of Wells Fargo and Farmers 41.4/ Merchants National Bank then were effected, competition would be (lecreased. Therefore, it would seem safe to conclude that the proposed tilell3er would result in a diminution of potential competition. This Ii°14-14 be but one step in the trend in the State of California toward 344.41, 9/21/61 -7- greater concentration of banking in large institutions. If that trend were not stopped at some point, eventually there would be only a few large banks in the State. Accordingly, since the proposed merger would eliminate a good small institution, Governor Robertson said it was his iaclination to deny the merger application but to allow the bank to proceed with its application for a branch. If the branch application 8hould be turned dawn, a new application to merge could then be considered. While the reason for denial here was not as clear as it might be in other c4ses, he believed that a court would uphold the Board's decision as a reasonable interpretation of the bank merger statute. Governor Shepardson said that at the time of the September 18 meeting his views had been similar to those just expressed by Governor Robertson. In reviewing the staff study of the banking situation in California however, he hPii observed that in Santa Cruz County in which the merger was proposed there was less population per banking office than the average for the State and that deposits in that county were less than the average for the State. In view of this and the improved, service that the merged bank would be in a position to offer, including loans at rates, Governor Shepardson said he was inclined to favor approval °r the application. At the same time he felt it should be recognized that any such merger was part of a total movement toward fewer banks in the State of California. I -4 9/21/61 -8Governor King reiterated the view he had expressed at the SepteMber 18 meeting to the effect that, since only a small increase in concentration of banking resources was involved in the proposed Illerg(7, this would not seem to be a suitable place for denial as a eans of preventing further concentration in California. For this as well as for the reasons mentioned by Governor Shepardson, he was inclined to approve the application. Governor Balderston said that, since there was a prospect for Wells Fargo to establish a new branch in Santa Cruz, this would provide that bank an opportunity to compete with Bank of America National Trust 4114 Savings Association, which was already well established in the area. It seemed to him preferable for Wells Fargo to establish a new branch r4t14er than absorb a bank already in existence, and his inclination was 14 the direction of disapproving the application. Since it appeared from the foregoing discussion that a majority °t the Board was inclined toward disapproval of the application, the Secretary referred to the procedure adopted at the meeting on July 27, 1961) in connection with merger applications. Under that procedure, %Illere a majority of the Board indicated a disposition to deny an appliellti°11, a letter would be sent inviting the applicant--in this case Wells elliC0--to submit further information or comments or, if it desired, to '8.ke an oral presentation to the Board. 9/21/61 Governor Robertson raised the question whether the Board now felt that the procedure agreed upon at the July 27 meeting was the correct °Ile * A general discussion of that procedure and various alternatives followed, at the conclusion of which Governor Robertson suggested, and there was agreement, that the procedure adopted at the July 27 meeting be fc/llowed in this case and that the staff submit for the Board's consider4ti°11 a draft of letter to Wells Fargo inviting comments with respect to ea4e of the questions raised in the course of the discussion. Interest rates. Governor Mitchell referred to discussion at the illeeting on September 18, 1961, of a letter that a Reserve Bank President 1184 sent to a member bsnk in which the view was expressed by the President that the Board should raise the maximum permissible interest rate ceiling under Regulation Q to 4 per cent. At that time Governor Mitchell 44 not yet had an opportunity to read the letter. He reported that he now read the letter and agreed with views expressed by other members "the Board at the September 18 meeting that the wording of the letter '448 unfortunate and that it would be appropriate for Governor Balderston t081enti0n the letter to the Reserve Bank President at an opportune time. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: No. 3 Letter to the Federal Reserve Bank of Richmond (attached Item approving the designation of Robin E. Snyder as special assistant 9/21/61 -10- Letter to the Federal Reserve Bank of Chicago (attached Item approving the appointment of Ralph L. Egeland as assistant cmuldmer. No 4% the Memoranda from appropriate individuals concerned recommending following actions relating to the Board's staff: Athens J. Messick, from the position of Secretary, Board Members' ' 41441tf, to the position of Secretary to Governor Mitchell, with an : licrease in her basic annual salary from $6,710 to $71260, effective QePtember 211 1961. Catherine B. Davian, from the position of Secretary in the Division International Finance to the position of Secretary, Board Members' Qtafrtth rate of $610151 e With no change in her basic annual salary a erre t duties. new her assumes eive the date she incase se wiry E. Johnson, Telephone Operator, Division of Administrative 'vices, from $41775 to $4,880 per annum, effective October 1, 1961. Secre BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 1 9/21/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD September 211 1961 80A1,..3 r/IC"A Of iT'tnati, Or Directors, National Bank of Norman) Oklahoma. ue First 4/Ale/n en: The Board of Governors of the Federal Reserve System has averi gr4„, c°nsideration to your application for fiduciary powers and 44.6s The First National Bank of Norman authority to act, when not travention of State or local law, as trustee, executor, 48,i4ustrator, registrar of stocks and bonds, guardian of estates, othegnee, receiver, committee of estates of lunatics, or in any otilj, fiduciary capacity in which State banks, trust companies, or kre corporations which come into competition with national banks e tell,P?rmitted to act under the laws of the State of Oklahoma. The aect74.86 of such rights shall be subject to the provisions of keirA°x1 11(k) of the Federal Reserve Act and Regulation F of the °f Governors of the Federal Reserve System. A formal certificate indicating the fiduciary powers that ' ., 4111c is now authorized to exercise will be forwardeJ in due kt11 Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE. Item No. 2 9/21/61 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE EIDARD September 21, 1961. C°rQPtroller of the Currency, Tr eaaury Department, ""hington 25, D. C. Attention: Mr. C. C. Fleming, Deputy Comptroller of the Currency. Dan.. Mr. Comptrollers 1961 Reference is made to a letter from your office dated July 7, S enclosing copies of an application to organize a national bank at '.0 s. Kansas and requesting a recommendation as to whether or 4 th41-ttS s application should be approved. w' A report of investigation of the application made by an trsh...1 ,--",--Lner for the Federal Reserve Bank of Kansas City indicates that the 10c)P'38ed capital structure would be adequate. Management of the proe:r: , )e4L bank is regarded as only fairly satisfactory due to rather limited efierlas of the active executive officer and some question as to the ex- 60 which the bank might be put by the Garvey family which will " cise control. During 1961 there have been three banks chartered in Wichita. On e 1.00:u these will soon be in operation and it plus two other banks ! .111 within three miles of the proposed bank will provide reasonably corm thi;luent banking services for the area. Establishing another bank in the section of the city would no doubt draw heavily on the deposits of ope tIte existing banks and would handicap the bank that is preparing to 4 11 about October 15, 1961. There exists a possibility that business 134,174ct be divided to an extent where profitable operations of one or more 4147 Inight be jeopardized. While the earnings potential of the proposed bank appears fairly satisfactory, the possibility of an overAec,,eq situation with attendant pressure on area bank earnings exists. preT.rdingly, the Board of Governors considers the application somewhat prolTisture and does not feel justified in recommending approval of the P°841 at this time. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 3 9/21/61 WASHINGTON 25. D. C. woosiEss orrecom:camouteroNoENcc TO THE BOARD September 211 1961 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 September 14, 1961, the Board approves the designation of Robin E. Snyder as a special assistant examiner for the Federal Reserve Bank of Richmond for the Purpose of participating in examinations of State member banks except Union Trust Company of Maryland, Baltimore, Maryland. The approval heretofore given your Bank to designate Mr. Snyder as a special assistant examiner is. hereby canceled. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. f: BOARD OF GOVERNORS 4 . filoi;.4 OF THE Item NO. FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. * * ADDRESS orrsamt. CORRESPONDENCE TO THE 'BOARD rat 444***" September 21, 1961 Mr, Hugh J. Helmer, Vice President, Federal Reserve Bank of Chicago, Chicago 90, Illinois, Dear Mr., Helmer: In accordance with the request contained in your letter of September 151 19610 the Board approves the appointment of *Ralph Le Egeland as an assistant examiner for the Federal Reserve Bank of Chicago. Please advise the effective date of the appointmento Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 4 9/21/61