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9161 Minutes for To: Members of the Board From: Office of the Secretary September 22, 1961 minutes of the Attached is a copy of the eral Reserve System on Board of Governors of the Fed the above date. include a statement It is not proposed to ries in this set of With respect to any of the ent icy actions required to minutes in the record of pol of the Federal be maintained pursuant to section 10 Reserve Act. on with regard to Should you have any questi ed if you will advise the minutes, it will be appreciat , please initial the Secretary's Office. Otherwise t at the meeting, your below. If you were presen roval of the minutes. If initials will indicate app initials will indicate You were not present, your minutes. only that you have seen the Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell Minutes of the Board of Governors of the Federal Reserve System on IN11.(41.3r, September 22, 1961. PRESENT: Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston Robertson Shepardson King Mitchell Vice Chairman Mr. Sherman, Secretary Miss Carmichael, Assistant Secretary Mr. Thomas, Adviser to the Board Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Shay, Legislative Counsel Mr. Fauver, Assistant to the Board Mr. Noyes, Director, Division of Research and Statistics Mr. Holland, Adviser, Division of Research and Statistics Mr. Koch, Adviser, Division of Research and Statistics Mr. Yager, Economist, Division of Research and Statistics Money mprket review. Mr. Yager reviewed developments in the 4°Irernment securities market, following which Mr. Thomas summarized the berik credit situation. Messrs. Thomas, /bung, Holland, Koch, and Yager then withdrew 11 • teavi„ Hackley, General Counsel, and Messrs. Solomon, Director, and Assistant Director, Division of Examinations, entered the room. Discount rates. The establishment without change by the Federal 11(41e,, - ve Banks of New York, Philadelphia, and San Francisco on September 21, 1961 of the rates on discounts and advances in their existing schedules 1?48 e'r---ved unanimously, with the understanding that appropriate advice 1?°113-d• be sent to those Banks. 9/22/61 -2Items circulated to the Board. The following items, which had been circulated to the Board and copies of which are attached to these niinutes under the respective item numbers indicated, were approved unexiimously: Item No. tett xi er to The Savings Deposit Bank and Trust Company, VathOtto, approving an extension of time to establish Janke Avenue and Griswold Road in Elyria Oltlash te„tter to Wells Fargo Bank American Trust Company, San 45TELAco, California, approving the establishment of ' w e bbrUch in the vicinity of the intersection of Winding "Y and Manzanita Avenue in Sacramento County. 2 Aallcation of Wells Fare Bank American Trust Company (Item No. 3). 111xsUant to the understanding at the meeting on September 21, 1961, there 484 been prepared and distributed a draft of letter to Wells Fargo Blink AIrke/lean Trust Company, San Francisco, California, with reference to its WAcation to merge with The Farmers and Merchants National Bank of aellta Cruz, Santa Cruz, California. The letter would invite the bank to 814)4Lit further information or comments on the proposal and would indicate the Walingness of the Board to arrange for an oral presentation of such Ilt‘Jrmation and comments if desired. After Mr. Solomon had suggested a number of changes in the draft °t letter, Governor Robertson commented that he would have no objection to the letter, although he was doubtful that it would evoke any new facts. 32„4, 9/22/61 -3Governor Shepardson said the letter seemed satisfactory and would be in accordance with the procedure established at the July 27, 1961, nieeting with reference to merger application procedures. Governor King agreed that the letter seemed appropriate in the light of earlier discussions of the application and the procedure agreed 14)011 at the July 27 meeting. However, looking ahead, he wondered how a 13°s8ible adverse decision in this case would fit into the pattern of 13(38.rd decisions on merger applications, and what impression would be given by such an adverse decision. the He noted that the Board's report to Comptroller of the Currency on the competitive factors involved in the merger of City National Rank and Trust Company of Chicago into C°11tinental Illinois National Bank and Trust Company of Chicago, which 44 been approved unanimously, had expressed the view that the merger Ii°1-11'zi substantially lessen both existing and potential competition. 14(31se recently the Board had approved the application of Manufacturers '411" Company to merge with The Hanover Bank. If, on the heels of the 141:t er decision, the Board were to deny this application of Wells Fargo °Ilthe grounds that it would permit further concentration of banking in 411fornia and reduce potential competition, he believed the public would Ill difficulty in understanding the Board's position. Governor Balderston then commented that Governor King had raised 1°01rit that the Board would want to recognize when making a final decision °Ilthe Wells Fargo application. I'4! ,Crki I 9/22/61 Governor Mitchell said he thought the issue was different in this C55e than in the Chicago Pnd New York mergers to which Governor King had l'eferred. So far as the Wells Fargo application was concerned, there 8 a general question as to the extent to which banks should be permitted ' 143 to merge their resources. In other words, should all banks be permitted t0 trY to become as large as the largest in the State? In regard to the litaft letter, Governor Mitchell stated that he was not happy- with it. He believed that the applicant bank might not know what to do if it received cual a letter and that it might place the Board in a poor light. Governor Balderston said he likewise had doubts as to the best )cedure in these cases. : ( ' 1)1 However, he had not been happy with the handling some months ago of the application of Dauphin Deposit Trust ec)n115anY to merge with Camp Curtin Trust Company, both of Harrisburg, ilerillsYlvania, on which the Board reversed an unfavorable decision ---‘"fing an oral presentation by the applicant and reconsideration by the Board. The procedure adopted July 27 was intended to eliminate the need for reconsideration after a decision was taken by giving the applicant %50rtunity to present additional information or arguments in favor of an abb -"oval when it appeared that the Board was inclined toward disapproval. Governor Balderston went on to say that he had talked with the 814trr regarding the possibility of sending Wells Fargo a letter that 144/1d specify more definitely the type of additional information in ()t; tiAaki(3 9/22/61 -5- the Board would be interested in considering the Santa Cruz appliceti011, but the staff had pointed out that if the Board's letter were O./relay specific it might be misinterpreted. He had concluded that the questions he had in mind, especially with reference to future plans of Wells Fargo, were of such a nature that they could best be asked directly Ilhen talking with a representative of the bank rather than in a letter. Governor King commented that he thought the Board probably was 11144rig a fundamental mistake in the way it was handling these applications. view, it was trying to have its cake and eat it too. 1/4 trying The Board to consider applications in a judicial manner but with equal attention being given to public relations, and he did not think this e°111-li be done successfully. In effect, the Board was saying that, if it 1°°ked as though it would deny an application, it would give the applicant 4110ther chance before doing so, and the latter step was supposed to get better public relations. He was afraid the Board had now reached the Pointwhere it would have worse rather than better public relations by thie Procedure, not only with the applicant directly concerned, but with the Public generally. He suspected that the Board would come to a pro'.re whereby it wide a single decision and then stood by it unless etsntial new information was presented. In doing this, however, he l'elt it would be important for the Board to take all the time necessary to reach that first decision, perhaps having more than one tentative 4ecUssion of a case before actunlly deciding it. The Board should # 9/22/61 -6all the information needed to make the decision, give full study sai consideration to that information and to the staff analysis and views On the case, and discuss and re-argue different points of view before making a definite decision. He would hope that when this was done each Inamber of the Board would arrive at a position that he was satisfied /11-th and on which he would be willing to stand unless and until substantial new facts were presented. Governor Robertson said that there was a great deal to be said tor, the comments put forward by Governor King. However, the question of Pr°cedures was one that the Board had put over for a full Board meeting Itt the end of October, at which time the whole question was to be reviewed, 411a his understanding was that the Board would not wish to make a change ill Present procedures before that meeting. Governor King said he agreed completely with that, that his ec)mments were made because he found that he was better able to prepare himself for consideration of a subject such as this if he had several Ilisetissions and "thought out loud" about the problem in advance of t4king action, and if he also had a chance to hear and reflect on the -qgnts of others on the same subject. The way this subject was cieliel°Ping, he felt that any thoughts any member of the Board might should be expressed at the earliest possible time so that others °11:1-li be thinking of the problem in the light of 01 the comments that 111-141.1at be made. 626( 9/22/61 -7Mr. Hackley noted that, in view of recent discussions of the 811biect of procedures, he was preparing an additional memorandum which /4)11-14 supplement his memoranda of May 26 and September 20, 1961. He hoPed this would serve to simplify and clarify some of the proposals contained in the earlier memoranda, and thus be of assistance to the 33°ard prior to consideration of the subject at the meeting at the end of Cktober. Governor Balderston then reverted to the draft letter to Wells klgo regarding the Santa Cruz merger application, and Governor Robertson 41115. others suggested several editorial changes which were accepted. val was then given to the letter in the form of attached Item No. 3. 222uest of Warren Bank (Item No. 10., Mr. Solomon reported that 4 request had been received from Warren Bank, Warren, Michigan, for PezXasion to interchange the locations of its head office at 21532 17844 DYke Avenue and its branch at 27248 Van Dyke Avenue, Warren, keilligany such action to be effective Monday, September 25, 1961. There being no objection, the request was approved. The letter Bellt to Warren Bank pursuant to this action is attached as Item No. 4. At this point all of the members of the staff except Mr. Sherman Hackley withdrew from the meeting. Service of Class C director as a director of a small business corporation. Governor Balderston stated that he had received teighone call yesterday from President Allen of the Federal Reserve 9/22/61 -8- Bank of Chicago, who stated that Chairman Briggs of that Bank had informed 4111 of a request that he serve as director of a small business investment colToration being organized in the State of Michigan. Mr. Briggs inquired ' Irherther there would be an objection on the part of the Board of Governors to such service. Governor Balderston went on to state why, under some circumstances, he felt that service of a Chairman of a Federal Reserve Bank as an officer 011 director of a smAll business investment corporation could be embarrassing to the system. He pointed out, however, that he had informed Mr. Allen that he did not knot how the Board would feel and that he would prefer to 418e4ss the matter before responding to the inquiry. During the ensuing discussion, Governor Robertson indicated that vould have some concern about service of the type proposed, but he *kid not go further in indicating an objection. Governor Mitchell stated that in his view service of the sort silegested should be encouraged unless there was some reason why in the 1)Etztiou1ar instance the individual would prefer not to accept. More 8611°11111Y, Governor Mitchell felt that if Federal Reserve Bank directors Irel'e to be effective in their communities it was necessary to get individ„„, " - 4"twal who were actively in demand and who engaged in a variety of etions. His feeling was that the Federal Reserve needed to broaden its base by getting the most articulate, most active individuals of the 9/22/61 -9- business community to serve as directors; he doubted that this could be accomplished if the Board were to avoid appointing men of that type or "re to discourage persons already appointed from taking on additional activities of the sort under discussion. Governor King expressed views similar to those of Governor airlding that he dodbted whether it was appropriate for the Bceerd to impose as a condition to service as a director an understanding that man would not engage in activities of the type described by Gcvernor Balderston. Governor Balderston noted that it had been necessary for the 11'1141111 Reserve to indicate that certain activities--particularly a•et '-u-Les of a political nature--were inconsistent with the responsi- b4tties of officers or directors of the Federal Reserve Banks, and he °Italian instance in which a director himself felt that a specific 15"ica1 activity which the latter had decided to assume would preh5 continued service as a Reserve Bank director. At the conclusion of the discussion it was understood that G°IreTnor Balderston would inform Mr. Allen of the nature of the (1113.1asion that had taken place, indicating that none of the members crtbe Board were inclined to say that Mr. Briggs should not engage in tbe aCtiVity, that one view was that it would be desirable for him to and that, 'while some concern was expressed as to possible "1417.a8sment if he did accept, this was a matter for Mr. Briggs to 9/22/61 -10- decide rather than one on which the Board should take a definite position O y or the other. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: Memoranda from the Division of Administrative Services recommending le aPpointment of the following persons to the Board's staff, effective " ti e respective dates of entrance upon duty: Alfred J. Holston, Jr., as Clerk, with basic annual salary at the rate of $3,500. Marie E. Kinder as Cafeteria Helper, at the rate of $1.69 per hour, when actually employed. Memorandum dated September 22, 1961, stating that Reed J. Irvine, ) -car Eastern Section, Division of International Finance, would not tr-cf.5 advantage of the authorization given by the Board on August 4, 1961, actual expense reimbursement during a trip accompanying Governor leTston to the opening of the new building of the State Bank of u stan in November 1961, but would travel on the usual per diem that "c d ,_ thi uu provided under the Board's travel regulations for travel of 8 nature. n, C a Letter to the Federal Reserve Bank of Boston (attached Item No. 5) nving the designation of Harry R. Mitiguy as special assistant 4 --,----\---- r Secret 7 - "261 BOARD OF GOVERNORS :f. :t (ri,6, ,.,. ,„ OF THE FEDERAL RESERVE SYSTEM Item No. 1 . ...', 1, 9/22/61 4 1% t.4 * WASHINGTON 25. D. C. * Vtig t., ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD - caotiGt)September 22, 1961 Board of irectors, The Savings Deposit Lank and Trust Company, 11;iyria, Ohio. Gentlemen: The Board of Governors of the Federal Reserve System has approved an extension until November 1, 19o1, Of the time within which The Savings Deposit Bank and Trust Company, hilyria, Ohio, may establish a branch at Lake Avenue and Griswold goad in Liyria Township, Ohio. The establishment of this branch was authorized in a letter dated February 25, 19o0. Very truly yours, (Signed) Elizabeth L. Carmichael EltLabeth L. Carmichael, Assistant Secretary. 3265 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 2 9/22/61 WASHINGTON 25. D. C. ADORES!, OFFICIAL CORRESPONDENCE TO THE BOARD September 22, 1961 Board of Directors, Wells Fargo Bank American Trust Company, San Francisco, California. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment of a branch in the vicinity of the intersection of Winding Way and Manzanita Avenue, in an unincorporated area of Sacramento County, California, by Wells Fargo Bank American Trust Company, provided the branch is established within one year from the date of this letter. Very truly yours, (signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS tItt a',0440k,*4 OF THE FEDERAL RESERVE SYSTEM Item No. 3 9/22/61 WASHINGTON 25, D. C. / 6: #0 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD 4RtscO* September 229 19610 Board of Directors9 Wells Fargo Bank American Trust Company) Sall Francisco, California. GentleMen : Reference is made to your request2 submitted through the Fe deral Reserve Bank of San Francisco, for the consent of the Board Governors, under section 18(c) of the Federal Deposit Insurance e °Afct, to merge with The Farmers and Merchants National Bank of Santa I*11 , Santa Cruz, California. MeThe Board wishes to offer your bank and The Farmers and irirrochants National Bank of Santa Cruz an opportunity to submit further (iN rmation or comments on the proposal, particularly with respect to: 4e) how this proposed merger would better serve the convenience and ! cis of this community which now has several banking offices offering 1"; °road range of banking services; (2) competition between the two inks, particularly potential competition, in view of your bank's ;',tcention to compete more directly in the area as indicated by the (rication for permission to establish a branch in Santa Cruz; and Arri) cumulative effects of this and other mergers of Wells Fargo Bank si!rican Trust Company upon other banks and the general competitive -‘Alation. Accordingly, the Board will receive any such further information or comments by October 10, 1961, or, if desired, will arrange for 8.4 tu- presentation thereof before the Board. Very truly yours, Merritt Sher Secret 3267 BOARD OF GOVERNORS OF THE 4;VD0700044 11 .0* .4 r> FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. li. 9/22/61 ADDRESS OFFICIAL CORRESPONDENCE TO TI-4E 00ARD September 22, 1961. Board of Directors, Warren Bank, Warren, Michigan. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment of a branch at 21532 Van Dyke Avenue, Warren, Michigan, by Warren Bank concurrently with removal of the head office from that location to 27248 Van Dyke Avenue. This approval is given provided the branch is established within six months fram the date of this letter. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS 0010**4 OF THE 014000 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. 0 0 0 0 Item No. 9/22/61 ADDRESS 5 CORRESPONDENCE TO THE SOAR° orrictAL September 22, 1961 Mr. B. F. Groot, Vice President, Federal Reserve Bank of Boston, Boston 6, Massachusetts. Dear Mr. Groot: In accordance with the request contained in your letter of September 13, 1961, the Board approves the designation of Harry R. Mitim as a special assistant examiner for the Federal Reserve Bank of Boston for the purpose of participating in examinations of State member banks. Very truly yours, (signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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