Full text of The Northwestern Banker : November 9, 1970, No. 1256

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Oldest Financial Journal Serving The Central and W estern States
No. 1256

Des Moines, lowa

Justice Department Warns Against
Using Balances for Preferred LoanRate

November 9,1970
minimum, constitute a breach of
the fiduciary duty owed by the of­
ficials to the bank and might in
certain situations warrant prose­
cutive action.
“ In light of the foregoing, your
office, together with the Federal
Deposit
Insurance Corporation,
the Federal Reserve Board, and
the Federal Home Loan Bank
Board,
may wish to consider
advising
the banking industry
of our view that the above prac­
tice might constitute a violation
of Federal criminal statutes.”

Presidents of all national banks
concerning the practice of bank
were issued a tough warning last officials utilizing the correspon­
week by the United States Justice
dent accounts of their banks for
Department against using corre­
the purpose of compensating lend­
spondent bank balances to obtain
ing banks for loans granted to
loans at preferential rates of these officials. By using these
interest. The Department states
non-interest bearing correspondent
there are no cases at this time in
accounts in this manner, some
which this practice is construed
borrowing officials have been able
“ as a misapplication under the
to obtain loans at preferential
criminal statutes.”
The memo rates and to circumvent other
clearly includes loans to pur­
statutes and administrative regu­
Anticipating Prime Rate Cut
chasers of bank stock at preferred
lations promulgated for the pro­
rates of interest, which would
A continuing decline in loan
tection of Federally regulated or
have important ramifications for
demand
is being cited by bankers
insured banks. Since the borrower
those trying to purchase substan­
in
several
major cities as the fore­
maintains these balances as a
tial or controlling interest in
runner of another cut in the prime
condition of the loan, he is able
a bank.
interest rate from its present level
to utilize the funds and credits
The memo was transmitted by
of his bank for his own personal of 7%%. A reduction in the rate is
the Assistant Attorney General in
expected by some to come possi­
benefit.
charge of the Criminal Division of
“ Investigation into this area bly by Thanksgiving, even earlier.
the Department of Justice to the
While the demand for loans de­
disclosed that this practice is
Comptroller of the Currency, the
creases
as corporations pay off
fairly widespread, particularly in
FDIC, Federal Reserve Board and
bank
loans
at an accelerating rate,
certain areas of the country, both
the Federal Home Loan Bank
the
cost
of
money to banks has
Board, with the suggestion that in the initial acquisition of a bank
not
kept
the
same
downward pace.
it be distributed to all financial and at subsequent times. There
Bankers
would
rather
see a reduc­
institutions under their super­ are no c a se s, at the present time,
tion in the discount rate lead the
construing this practice as a mis­
vision. The memo from the Justice
way. The Federal Reserve, how­
application under the criminal
Department follows:
ever, appears to have a crucial
statutes. We believe, however,
“ Reference is made to the con­
decision facing it. It is generally
that where the facts demonstrate
versations which representatives
felt that the fires of inflation have
a clear detriment to the bank and
of the Criminal Division have had
a concomitant benefit to its of- not been banked enough. Yet, in
with you and members of your staff
(Continued on back page)
ficers this activity would, at a

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— M N B correspondents
Forbes Olberg
Executive V ice President

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CEDAR RAPIDS, IOWA

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IOWA-DES MOINES
NATIONAL BANK
Bob Buenneke

Member Federal Deposit Insurance Corporation

celebrate 25 years of banking service
in Marion with an open house Novem­
DUBUQUE: William G. Kruse, who ber 15 from 1:00 to 4:00 p.m. There
has been executive v ice president will be free gifts for everyone, a
and cashier of First National Bank, drawing for $500 in prizes, refresh­
will become executive vice president ments, and an appearance by Miss
and secretary, a new post. Robert G.
Iowa.
Koehler has been promoted from a s s is ­
Farmers State Bank moved from
tant vice president and comptroller A lb urnett to Marion in 1945 and has
to v ice president and comptroller. grown from $2.5 million in assets to
J. Bruce Meriwether w ill move from
$26 million.
assistant vice president to vice
president and cashier, and Daniel E. MAYNARD: At the Maynard Savings
Welu and Leo M. Mallie, who have Bank, H. A. Buenneke, formerly pres­
been assistant vice presidents, will ident, has become chairman, Paul A.
become vice presidents.
Harrison, formerly executive vice

LINCOLN: W. E. (B ill) Car ley, vice
president of First National Bank’s
Lincoln Tour & Travel division , was
elected to the nine-member board of
governors of the A ssociation of Bank
Travel Bureaus at the association ’s
annual convention last month in
Dubrovnik, Yugoslavia.

ILLIN O IS NEWS

IOWA NEWS

KEOKUK: Burtwin L. Day has re­
signed as v ic e president of the
Keokuk Savings Bank & Trust Co.
He has been with the bank since
January, 1967, as v ice president. He
started his banking career in 1961 as
an officer trainee at the Wright Coun­
ty State Bank in Clarion and left there
as vice president and cashier to join
the Keokuk Savings Bank. He has
not announced his immediate future
plans.
MARION: Farmers

State

Bank will

president, has become president and
Don W. Buenneke, formerly vice pres­
ident, has become senior v ice pres­
ident.

WYOMING NEWS
RAWLINS: First National Bank re­
cently opened a travel and recreation
department, according to F. A. Rummel, Jr., president. Henry Hewitt is
head of the new department which
w ill function in association with
Cheyenne Travel Service.

MATTESON: An application for a
permit to establish a new Illinois
state bank has been filed with the
Commissioner of Banks and Trusts.
The bank, to be called Heritage Bank
of Lincoln Mall, would be located at
the southeast corner of U. S. 30 and
state route 50. Capitalization would
be $800,000. The organizers are
Harold R. Spurway of Glenview,
Norbert F. Armour of Palos Heights,
Alfred J. O’Malley of C hicago, Walter
H. Ehrmann of Olympia Fields and
Donald O’ Toole of Flossm oor.

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BRIDGE VIEW: A charter for a state
bank to be called Bridgeview Bank
has been issued by the Illinois Com­
missioner of Banks and Trusts. The
bank w ill be located at 7940 South
Harlem Ave. in Bridgeview. Total
capitalization of the bank w ill be
$750,000. James W. Haleas is chair­
man of the board and George L. R as­
mussen, Jr., president.

Member: Federal Reserve System and
Federal Deposit Insurance Corporation

PEKIN: Ray Thurwanger has been
appointed to the position of market­
ing sp ecia list for First National Bank
& Trust Co. of Pekin. He has been
manager of the A&P supermarket in
Pekin sin ce 1932.

MINNESOTA NEWS

The Minnesota Bankers A ssociation
w ill hold four more session s in its
state-widfe series of regional staff
training and public relations meet­
ings at: St. Paul on November 10,
Bloomington on November 11, Windom
on November 17, and Albert Lea on
November 18. Meeting speakers will
be discussing the banker’s service
to the public, employee attitudes,
customer relations, and selling bank
services. The announcement was
made by D. A. Sirek, chairman of
the MBA’s public relations and
marketing committee and vice pres­
ident of the State Bank of New
Prague.
ADA: G. Howard Spaeth, president of
the First State Bank of Ada, has an­
nounced that Byron K. Miller has
been promoted to cashier, filling the
vacancy created by the resignation of

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Gerald G. Gast. Mr. Miller joined the
bank as assistant cashier in July.

sale of new stock was also authorized.

loan department manager sin ce January.

BEARDSLEY: Francis Miller, 52,
cashier of the Security State Bank
of Beardsley, died recently in Gracev ille . Funeral services were held
October 22 in Beardsley.

ST. PAUL: Richard E. Stevenson,
president of Highland Park State
Bank, St. Paul, since 1969, has been
elected president of the V alley Na­
tional Bank of Eagan Township.
Edward L. Kalafat will su cceed Mr.
Stevenson as president of Highland
Park State Bank. Mr. Kalafat joined
the latter bank as v ice president
in 1969.

VIBORG: The Security National Bank
recently moved to its new building
at the north corner of the business
district. More recently the bank held
an open house in its new quarters.

BLOOMINGTON: A charter has been
issued by the Banking D ivision for
the establishment of American State
Bank of Bloomington. The bank
opened for business November 3 at
10544 Frances Ave. South. The bank
has capital of $400,000, surplus of
$200,000, and undivided profits of
$300,000. Patrick W. Colbert, Jr., is
the president, Dwane E. Billbe and
William E. Guenther are v ice pres­
idents and Curtis A. Benson is cash ­
ier.
CARLTON: Stuart Beck has been
elected chairman of the board of the
new Carlton National Bank. The bank
was organized September 9 and pur­
chased the assets and assumed the
liabilities of the First National Bank
of Carlton, now in liquidation.
Odin Roberts has also joined the
bank and w ill go through a training
program. He had been with Conwed
Corp. as an accountant since 1966.
MANKATO: The Banking Division
has authorized a change of the name
of the Farmers State Bank of Rapidan
to Security State Bank of Mankato and
a change of location from Rapidan to
Mankato. An increase in the capital
stock from $50,000 to $200,000 by

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an appointment to see our
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this or any other service, call
Bill Rickert or Ken Young.

SOUTH DAKOTA NEWS
ABERDEEN: Fred B. S tiles, 83, died
recently in Aberdeen. He was active
in South Dakota banking for more than
50 years. He started in banking with
the Owanka State Bank in Pennington
County. From there he went to First
National Bank in Watertown and was
president there before becoming pres­
ident of the First National Bank in
Aberdeen. He retired as president of
the latter bank in 1952. At the time of
his death he was chairman of McCook
County Bank at Salem, one of about
a dozen banks he has owned or man­
aged in South Dakota.
HOT SPRINGS: The Hot Springs
branch of the National Bank of South
Dakota recently held open house in
celebration of its ten years of opera­
tion. Employees greeted customers
with cook ies andcoffee from 9:00a.m.
to 6:00 p.m.
MOBRIDGE: The board of directors
of First National Bank of Aberdeen
recently met to honor W. D. (Dan)
Heupel who retired recently as v ice
president and manager of the Mobridge
branch of the bank after 43 years in
banking.
The board elected Russ Ness to
su cceed Mr. Heupel as vice president
and manager. Mr. Ness has been with
the bank 16 years and was formerly
assistant v ice president and a s s is ­
tant manager, positions which will
now be assumed by Mike Stehly.
Mr. Stehly, who has been with the
bank sin ce 1959, had been install­
ment loan officer and installment

EATON
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COLORADO NEWS
DENVER: The Federal Reserve Board
has approved the applications of the
United Banks of Colorado, Inc. to
acquire controlling interest in The
Colorado Springs National Bank,
Colorado Springs, and the Mesa Na­
tional Bank, Grand Junction.
Colorado Springs National Bank
has assets of over $44 million and
Mesa National Bank has assets of
nearly $9 million.
DENVER: The Federal Reserve Board
has approved the application of
Colorado CNB Bankshares, Inc., of
Denver to acquire control of Arapahoe
Colorado National Bank in Arapahoe
County near E. Arapahoe Road and
S. University Blvd. The Arapahoe
bank is a proposed new institution.

MONTANA NEWS
T . C . Beyrodt, publicity chairman
of the Glacier Chapter of the Bank
Administration Institute, has an­
nounced that the chapter w ill hold
its quarterly meeting at the Rainbow
Hotel in Great F alls on December 5.
Managing officers of all Montana
banks w ill be invited, since this is
a “ managing officers meeting.”
The featured speaker w ill be Chet
Huntley, former NBC news com ­
mentator. He w ill speak at the
symposium and dinner at 6:00 p.m.
Among the speakers scheduled during
the meeting, which begins at 9:00 a.m.
and includes a noon luncheon w ill
be: Charles R. Walker, vice president
A professional service to
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Commerce
and auditor of the U. S. National
Bank of Oregon, Portland; Dr. Samuel
B. C hase, research professor of
econ om ics, University of Montana,
M issoula; Harold Uecker, personnel
officer, Great Falls National Bank;
Stanley L. Schmuckler, vice president
and personnel director, Seattle First
National Bank; and Paul Olander,
v ice president, First National Bank
of Great F alls.
BIGFORK: The FDIC has approved
coverage for the First State Bank of
Bigfork, which has total capital
accounts of $250,000. President of
the bank is Henry H. Arndt.
DEER LODGE: Burton W. Gilmore,
executive vice president and cashier
of the Deer Lodge Bank and Trust
C o ., died suddenly October 29. Ser­
v ice s were held in Deer Lodge.

Prime R ate...
(Continued from Page 1)
view of the decreasing loan demand,
pressure is reported to be mounting
for the Fed to stimulate the economy.
The Fed Governors, then, would

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I would like to sell my
maiority bank stock.
I would like to buy majority
bank slock.

P lease

Contact:

J.

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H enry,

Pres.

CHARLES E. WALTERS CO., INC.
P. O. Box 1313, Om aha, Neb. 68101
Phone: (402) 553-6400

prefer to see the rate reduction led
in this case by a drop in the prime
rate by banks.
The bank prime rate was reduced
earlier this year from a record-high
8.5% to 8%, and was further reduced
to 7.5% in September.
Emmett G. Solomon, chairman of
Crocker Citizens National Bank, San
F ran cisco, stated last week that the
demand for bank loans has gone down
to the point where there is now “ room
to consider credit accommodations
that we could not have considered
six months a g o .” Without a sharp
upswing in loan demand, he noted,
the 7.5% rate could be pressured
downward.
In C hicago, several leading bank
executives voiced similar opinions
in an earlier report. Donald C. Miller,
senior v ice president of the Continen­
tal Bank, said “ Company after com ­
pany is reducing or paying off its
bank lines of credit. Many of these
companies feel they have been over­
using their bank credit lines, and
they’ve been under bank pressure for
some time to cut b a ck .” Mr. Miller
explained that many of these com­
panies have bank loans falling due
every few months are now beginning
to issue their own longer-term bonds
and other securities. As a result of
this large drop in loan demand, Mr.
Miller said, a cut in the prime rate
by Thanksgiving is “ very p o ss ib le .”
William J. Korsvik, vice president

Ron Francis

Elmer Erisman

of Kansas City

and econom ist at First National Bank
of Chicago, voiced similar thoughts.
He said , “ Companies are getting
religion ,” and he se e s no big rise
in bank loans in the next few months.
Mr. Korsvik also noted there could
very well be two reductions in the
prime rate by next June, and by mid1971 we will have seen the end of
the down-swing.
Robert E. Hunt, executive vice
president of Northern Trust Company,
Chicago, described his bank’s re­
duced loan demand as “ a slow gen­
eral d eclin e, not a precipitous drop.”

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N o. 1256 Northwestern Banker is published five times monthly (including magazine issue) by the Northwestern Banker Company,
306 Fifteenth Street, Des Moines, Iowa 50309. Subscriptions 50£ per copy, $6 per year. Second c la ss postage paid àt Des Moines,

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