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Arthur F. Burns Papers
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The original documents are located in Box K41, folder "Wriston, Walter B. (2)" of the
Arthur F. Burns Papers at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Arthur Burns donated to the
United States of America his copyrights in all of his unpublished writings in National Archives
collections. Works prepared by U.S. Government employees as part of their official duties are in
the public domain. The copyrights to materials written by other individuals or organizations are
presumed to remain with them. If you think any of the information displayed in the PDF is subject
to a valid copyright claim, please contact the Gerald R. Ford Presidential Library.
Stephen S. Gardner
6/8/77
Catherine:
Governor Gardner had men-
tioned this to the Chairman
and they agreed this was the
proper response.
G
FORD is LIBRARY
COMMERCIAL TELEGRAM OR CABLE
BOARD OF GOV NORS OF THE FEDERAL RESER E SYSTEM
Wriston
call ltrs
KCB
charge to FEDERAL RESERVE BOARD
Rate:
via:
Walter B. Wriston
Chairman
Citibank
New York, New York
I have received your message of June 1 concerning prospective
legislation. Thank you for forwarding these comments.
Sincerely yours,
Arthur AFBcm F. Burns
Chairman, Federal Reserve Board
page 1 of 1
PLEASE TYPE OR WRITE PLAINLY WITHIN INNER BORDER--DO NOT FOLD
If additional space is required continue in space below.
call Itrs
KCB
charge to FEDERAL RESERVE BOARD
page 2 of
FORD & LIBRARY 070830
PLEASE TYPE OR WRITE PLAINLY WITHIN INNER BORDER--DO NOT FOLD
FOR OFFICIAL BUSINESS ONLY See Secretarial Handbook for Instructions and Rates
yardner
D062 190-1 D701 15 06/02/77 15:05
3A 06/02 01:57 F999 90-1 D062 391 06/02 02:12 RT AR
HONORABLE ARTHUR F. BURNS
CHAIRMAN
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
20TH ST. AND CONSTITUTION AVE., NW
#824
WASHINGTON, DC 20551
/GNR090 RAB200
NYIBGCB
LIBRARY GERALD FORD
FROM CITIBANK NEWYORK NYIBG
MESSAGE DATE JUN 01
WE UNDERSTAND THAT THE TREASURY DEPARTMENT, IN CONJUNCTION WITH
THE FEDERAL RESERVE BOARD, IS IN THE PROCESS OF DRAFTING LEGIS-
LATION DESIGNED, IN PART, TO COUNTER THE UNDERSIRABLE DECLINE IN
FEDERAL RESERVE MEMBERSHIP BY AUTHORIZING THE PAYMENT BY THE FED-
ERAL RESERVE BANKS OF INTEREST ON RESERVES REQUIRED TO BE MAIN-
TAINED BY MEMBER BANKS WHICH INTEREST WOULD HELP DEFRAY THE COST
OF BANKS PAYING INTEREST ON TRANSACTION BALANCES.
WE ALSO UNDERSTOOD THAT, IN ORDER TO AVOID EXCESSIVE ADVERSE IM-
PACT ON TREASURY REVENUES RECEIVED FROM THE FEDERAL RESERVE SYSTEM
THERE IS UNDER CONSIDERATION THE POSSIBLITY OF IMPOSING LIMITS
ON THE RESPECTIVE AMOUNTS OF RESERVES AS TO WHICH INTEREST WOULD
BE PAYABLE BY FEDERAL RESERVE BANKS.
WE BELIEVE THAT THE IMPOSITION OF SUCH LIMITS WOULD BE OF QUES-
TIONABLE CONSTITUTIONALITY AND CLEARLY DISCRIMINATORY AGAINST
THE NATIONS LARGER MEMBER BANKS AND WOULD FURTHERMORE SET AN
UNFORTUNATE PRECEDENT IN HAVING THE TREASURY DEPARTMENT REGARD
RESERVE REQUIREMENTS AS A POSSIBLE REVENUE SOURCE INSTEAD OF
AN INSTRUMENT OF MONETARY POLICY. IMPLEMENTATION OF SUCH LIMITS
WOULD. IN ANY EVENT, RESULT IN THE PROPOSED LEGISLATION MEETING
WITH STRONG OPPOSITION FROM THE LARGER MEMBER BANKS WHO, IN MY
OPINION, WULD OTHERWISE BE GENERALLY SUPPORTIVE OF THE LEGIS-
LATIVE PROPOSALS.
ACCORDINGLY, I RESPECTFULLY URGE YOU TO CONSIDER AVOIDING THE
FOREGOING PROBLEMS BY ABANDONING CONSIDERATION OF SUCH LIMITS
ON INTEREST-BEARING RESERVES AND INSTEAD GIVING FAVORABLE CON-
SIDERATION TO THE CONCEPTS OF PARTIALLY OFF-SETTING A POSSIBLE
DECLINE IN TREASURY REVENUES BY DIRECTING THE FEDERAL RESERVE
SYSTEM TO ADOPT AND IMPOSE FULL AND EXPLICIT PRICING FOR ITS
SERVICES AND REDUCING THE RATE OF INTEREST PAYABLE ON REQUIRED
RESERVES OR SUBSTANTIALLY REDUCING THE AMOUNT OF REQUIRED
RESERVES OR A COMBINATION OF SUCH CONCEPTS.
I AM SENDING IDENTICAL TELEGRAMS TODAY TO THE HONORABLE W.
MICAHEL BLUMENTHAL AND THE HONORABLE THOMAS BERTRAM LANCE.
RESPECTFULLY
WALTER B. WRISTON, CHAIRMAN
=06020556
NNNN
-- FAXGRAM ---
-- VIA GRAPHNET
April 12, 1977
Dear Walt:
I was pleased to get the reassurances in your letter
of April 6 and I also want to thank you for sending me today
the binders containing so much explanatory data. The senior
staff at the Board will review all this carefully and will also
talk to Mr. Piderit in New York after Mr. Eyre and Mr.
Angermueller have visited him.
Your prompt response following our discussion in
Phoenix is very helpful. I want to see our outstanding problems
resolved and the misunderstandings cleared up.
Sincerely yours,
Arthur F. Burns
Mr. Walter B. Wriston
Chairman
Citibank, N.A.
399 Park Avenue
New York, New York 10022
SSG/AFB:slc
#487 & 456
FORD & LIBRARY GERALD
CITIBANK
BOARD OF
nk. N.A.
Walter B. Wriston
ark Avenue
Chairman
'ork, N.Y.
FEDERAL RESERVE SYSTEM
1977 APR 12 AH 9: 35
April 12, 1977
OFFICE
The Honorable Arthur F. Burns
Chairman
Board of Governors of the
RECEIVED CHAIRMAN #487
Federal Reserve System
Washington, D.C. 20551
Dear Arthur:
In my letter to you of April 6, I promised to research in depth the
background and current status of the review of Citibank Overseas
Investment Corporation by your examiners. In order to fit the
matter into perspective, you would want to note that the original
cost of the shares of this company which has some 87 major
affiliates was $25,000,000 plus additional capital contributions
totaling some $212,000,000. Our report to the Board of Governors
of the Federal Reserve System of the results of our research on our
attempted compliance with your Examiners' requests are contained
in the enclosed binder labeled No. 1. In order to give you an idea
of the scope and detail of the material requested by the Examiner
on one investment carried at $12 million in FNCB-Waltons, we
enclose binder No. 2 which contains this data.
I hope you will agree with me that this report provides no evidence
that we are in any way dragging our feet in attempting to satisfy
the informational requests of your examining staff. At the very out-
set of the examination, George Vojta, Executive Vice President,
sent a telex to all entities concerned dated December 24, a copy
of which is included in the report, ordering full compliance. I
believe that the report amply demonstrates our good faith while at
the same time raises in a constructive manner some issues for
discussion which might improve the process in succeeding years.
Tomorrow, Wednesday, April 13, Stephen C. Eyre, Comptroller,
and Hans H. Angermueller, Senior Vice President and General
Counsel, will be meeting with Mr. Fred A. Piderit, Jr., Senior
Vice President of the Federal Reserve Bank of New York, to go over
this report in detail.
FORD is LIBRARI 078830
The Honorable Arthur F. Burns
Page 2
April 12, 1977
As I have told you many times, we are fully aware of our obliga-
tions to the Board of Governors, and I hope that after you and your
staff have reviewed these two binders that you will be able to
agree with me that we are working to fulfill these obligations.
Sincerely,
Du
Enclosure: Two binders
FORD & LIBRARY 07VU30
April 6, 1977
#456
Citicorp
399 Park Avenue
New York, N.Y.
The Honorable Arthur F. Burns
10022
Chairman
Board of Governors of the
Walter B. Wriston
Federal Reserve System
Chairman
Washington, D. C. 20551
Dear Arthur:
Sometimes in life things come out the exact opposite
of the way in which they were intended because somewhere
along the line communications break down. As I explained
to you in Phoenix, this would appear to be the only
logical explanation for the unfortunate state of affairs
described in Mr. Allison's letter to me of April 1.
Let me say at the outset that Citicorp and Citibank have
always endeavored not only to comply with the letter of
the laws applicable to them, but also with their spirit.
In thinking about why we failed to communicate adequately,
I believe it is due to the fact that the dialogue was
conducted on two different levels without adequately
forging any connecting link. One level of dialogue
concerned an urgent business problem, and the other level
related to the regulatory process. In articulating the
former, it is clear that our words were construed to
deprecate our concern for the latter. Such was not our
intention, and I regret that action on our part may have
led to such an interpretation.
In order to understand where the dialogue went off the
track, it might be useful to summarize the two levels of
problems. The first one was an unforeseen business
development which required a virtually immediate business
decision in order to avoid substantial adverse consequences.
As you know, our affiliate, FNCB-Waltons, is an Australian
company, with an Australian board of directors, operating
in the Australian marketplace. Another Australian finance
company, having no connection whatsoever with either
Citicorp or Citibank, decided to write off some real estate
Ioans, in some of which FNCB-Waltons was a co-lender. The
WASAS gresulting
newspaper publicity put pressure on the Waltons board of
FEDERAL
FORD & LIBRARY PERALD
The Honorable A hur F. Burns
I il 6, 1977
directors to take similar action since Waltons had some
common assets with the other unrelated company. The
Australian board of directors, acting pursuant to
Australian law, duly voted to write off these bad loans
and concurrently sought to obtain a capital increase of
A$7 million from their two shareholders of which A$3.5
million was our share. The FNCB-Waltons board of
directors' judgment concluded that this new capital was
essential to absorb the write-down of the real estate
loans without violating the debt-to-equity gearing
ratio required by the indentures underlying their various
publicly held debenture issues.
In communicating this to the Federal Reserve Board, we
were accurately reporting the business decision which
had been taken in Australia by the FNCB-Waltons board of
directors whose judgment it was that, unless new capital
funds were immediately forthcoming, the company would
face serious trouble in the marketplace. On a business
level we perceived our A$3.5 million share of the capital
infusion to be a relatively small sum of money in relation
to the more than $3 billion of Citibank's equity capital.
Also, this capital infusion did not seem to be different
in substance from the similar capital infusions which we
had, with Board permission, been making at approximately
annual intervals since 1969.
In reciting this set of business facts, we were in no way
suggesting that any injection of new equity, great or
small, was not subject to the Board's approval process.
Quite the contrary, the facts are that we came down to
Washington and asked for that approval, even though there
was a body of opinion in our organization which argued
that these funds might be injected in a way which would
not require the Board's approval within the short time
frame available. We rejected this suggestion out of hand
as not being in keeping with the way we conduct business.
Instead we came down immediately to talk to your staff face
to face in order to tell them the facts, a course of action
that was surely not that of someone who was prepared to
violate the law.
In view of the importance of dealing as promptly as possible
with the matters which are discussed in this letter, I am
replying to you within the same day as I received Mr. Allison's
letter of April 1 and I am having my reply delivered to you
by hand. I have requested my associates to brief me on the
FORD & GENALD LIBRARY
The Honorable 7 thur F. Burns
ril 6, 1977
matters raised by Mr. Allison's letters of March 29, 1977
and April 1, 1977, as well as by the April 5, 1977 letter
of Mr. Frederick C. Schadrack of the New York Federal
Reserve Bank, all dealing with data to be provided to the
Board for supervisory purposes by Citibank and its
subsidiaries and I will reply to those issues as soon as
my associates report back to me.
Sincerely,
WH
FORD & 07V830 LIBRARY
March 25, 1977
Dear Walter:
I perused with interest the 1976 Review
of Citybank's Investment Management Group
that you recently sent me. Thank you for
bringing the report to my attention.
Sincerely yours,
Arthur F. Burns
Mr. Walter B. Wriston
Chairman
Citicorp
399 Park Avenue
New York, New York 10022
NB:ja
#354
FORD & LIBRARY 076830
CITICORP
+
Non
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
1977 MAR 23 AM 9: 24
March 21, 1977
RECEIVED
Citicorp
OFFICE OF THE CHAIRMAN
399 Park Avenue
New York, N.Y.
10022
Walter B. Wriston
The Honorable Arthur F. Burns
Chairman
Chairman
Board of Governors of the Federal Reserve System
Twentieth Street and Constitution Avenue, N.W.
Washington, D.C. 20551
#354
Dear Arthur:
The attached copy of our Investment Management Group's 1976
Review represents another step in our continuing efforts at
voluntary disclosure.
This year's report highlights the wide range of client
investment goals and the variety of investment vehicles used
to meet the objectives of the broad cross section of the
public that we serve.
You may also be interested in the section dealing with our
success in passing through voting power to beneficial owners
and co-fiduciaries, as well as our policies on insider
information.
Sincerely,
WAL Wriston
FORD : LIBRARY DERALD
December 22, 1976
Mr. Walter B. Wriston
Chairman
First National City Bank
399 Park Avenue
New York, New York 10022
Dear Walter:
My colleagues and I were pleased to learn that you
have been selected by the Federal Reserve Bank of New York
to represent the Second District on the Federal Advisory
Council during 1977. I am happy to welcome you into the
official Federal Reserve family, and I look forward to our
association during the coming year.
The other Board Members join me in extending to you
our cordial greetings and best wishes for the holiday season
and the New Year.
Sincerely yours,
Arthur F. Burns
AWH:NB:ja
FORD is LIBRARY 928470
Peol e, Politics and Produc vity:
The World Corporation in the 1980s
GERALD LIBRARY ₹ FORD
by Walter B. Wriston
Pe le, Politics and Prod tivity:
The World Corporation in the 1980s
by
Walter B. Wriston
Chairman
Citicorp
FORD & 076830 LIBRARY
at
London, England
September 15, 1976
Much has been said and written about the future fate of all of us who live on this planet. In this era
Mr. Macrae asks simple questions about productivity, such as: "By how much have crime rates
of almost instantaneous communication, any new intellectual fashion that catches the attention of
gone down? How far has the legal system become more expeditious? By how much is the urban
the media is repeated endlessly throughout the world. In recent years, these fashions have ranged
environment more beautiful and its infrastructure better fitted to meet changing demands?" You
from the desirability of unlimited growth all the way to the Club of Rome's no-growth formula.
can make your own list of questions, but the answers will always be the same. If we in fact have a
Intellectual tides have moved from predictions that the world will soon run out of food and natural
negative marginal productivity in government, it is clear that if we are to be able to feed ourselves
resources to a blind faith that new technology will provide for us all. The common denominator of
in the future, we cannot do so through government action.
most predictions of doom and gloom is a simplistic belief in straight-line projections combined
with an unwillingness to believe that man is capable of innovation to meet his own needs. Like
The alternative to declining productivity in the public sector is the increasing productivity of the
most things in this world, history would suggest that trends, no matter how strong, are not
great global corporations of the world. They are even now the principal agents for the peaceable
inevitable and can be changed by the concerted actions of mankind.
transfer of technology and ideas from one part of the world to the other. Since no country has a
monopoly on industrial and agricultural skills, the transfer of men, money, and ideas is necessary
Today, as always, there is good news and there is bad news. The bad news is that more and more of
if we are to raise the world's living standards. The perceptions of the needs of mankind are not
our human resources are being diverted from productive work into government bureaucracy. The
uniform in the public and private sectors. As a general rule, the politicians have been engaged in
good news is that more and more people all over the world have come to this conclusion. Guido
fragmenting the world, while the multinational corporations have been viewing the planet as one
Carli recently wrote, "In the last five years public expenditure has more than doubled with no
marketplace. The clash of these perceptions has understandably created a great deal of
noticeable improvement in the quantity or quality of service, and with more and more funds going
intellectual friction, which has been manifest in great outpourings of scholarly and
to replenish the coffers of the countless public bodies that dot the Italian landscape."
not-so-scholarly attempts to clarify the issues between the public and the private sectors. We have
witnessed lengthy United Nations debates about such weighty details as whether we should call a
In the same vein, Norman Macrae has stated that he believes "the marginal productivity of new
company multinational, transnational, international, supranational, or perhaps some other term in
employees in the government sector has for some time been negative." The point is easily made.
some other language. None of this rhetoric has really been useful. It is the kind of clarification that
consists of filling in the background with so many details that the foreground sinks out of sight.
4
What has tended to be pushed from sight in the current debates is the real nature of the choice
5
Today, much of the criticism of the global company is really the disquieting voice of
confronting us. The arguments that use the world corporation as their focus are only a proxy for the
neomercantilism. In this larger historical context, the themes being repeated today are
real issue. The present struggle for control of the future is not between national companies vs.
distressingly familiar. Protectionist movements are becoming prominent, and governments are
international, nor European companies vs. American or Japanese, nor even the currently
manifesting desires to restrict and control the freedom of the world corporation to conduct its
fashionable theme of the developed countries vs. the developing. The debate is really the
business. It has all been heard before; the challenge comes again from sovereign authority and
continuation and intensification of the battle between two historic ideas concerning economic and
from affected interest groups using that authority to resist the market allocation of capital, labor,
social behavior.
and purchasing power to areas of greater productivity.
One idea, associated with words like free trade and free enterprise and laissez-faire, holds that
Sometimes it would seem that the more successful the enterprise is in supplying the real needs of
business is politically neutral, existing only to satisfy the economic desires of the world's people.
the world's people, the louder become the voices of protest. Often, nationalism is used as the stick
The other, older idea holds that business is-or should be-the chosen instrument of the state.
to beat a world corporation. At the beginning of the 1960s, when more than 60% of the large
Or, what amounts to the same thing, that the state should be the chosen instrument of business.
multinationals were based in the United States, best-selling books all over Europe were sounding
the alarm over what Servan-Schreiber called, "This strange phenomenon, dangerous and massive
Today's global corporation is the modern heir to the tradition planted here in the United Kingdom
in
its
size
and power so hypnotizing and overwhelming, that it threatens to plunge us from our
by the Industrial Revolution and harvested most abundantly in the singularly free economy of the
present ignorance into total despair." This inflammatory rhetoric never had any connection with
early United States. Despite the enormous success of the world corporation in supplying the
reality, but it served a political purpose. Ten years later, only slightly more than half of the world's
world's needs, the state-dominated system that it displaced not only dies hard, but in some areas
multinationals were headquartered in America, and books were being published in New York with
is expanding. That system, once known as mercantilism, remained dormant for a period, but it has
titles like The Infiltrators, warning Americans about the impending takeover of their factories by
already been resurrected twice, first as nineteenth century imperialism and then as twentieth
Volkswagen and the Rothschilds.
century totalitarianism.
All such controversies overlook a fundamental point. In the tough, competitive global
z
corporations abroad, labor leaders at home are averring that multinationals are exporting capital,
marketplace, it doesn't matter where a multinational corporation's headquarters are located. Any
technology, and jobs that might otherwise be used to build the domestic economy.
global company, whether based in America, Europe, Japan, or somewhere else, will sooner or
later have to operate under the same economic and political rules that govern its international
It has become a two-front war. If the international managers prove to a host country that they are
competitors. In order to stay in business, any company will be compelled to get its materials for
creating more wealth for it than they are taking out, this very evidence will be used against them at
production from wherever they are available most cheaply, conduct its processing activities
home. If they prove to the labor unions at home that, on balance, they are creating more jobs at
wherever they are most efficient, and market its goods wherever there is a demand. And all of this
home than they export, or prove to their governments that the repatriated foreign earnings are good
has to be done in compliance with a bewildering variety of laws and value systems which have
for the country's balance of payments, that evidence fuels the arguments of their foreign critics.
been constructed by our nation-states.
Because of their intellectual training, many of the critics are quite sincere in believing that
It is precisely this economic necessity that makes the multinational enterprise our best instrument
international managers are lying when they say that everybody profits from their operations, home
for assuring the most efficient, most thrifty use of the world's resources. In an era when many
and host countries alike. The critics cannot accept this simple truth because they have been taught
people express concern that those resources might be squandered, the need to make them go as far
to believe that business is what twentieth century mathematicians call "a zero-sum game. They
as possible and to avoid waste is an economic and human necessity. Yet, efficient use of the world's
believe that a profit for anyone must mean a loss for someone else. But business is not a poker
resources does not generate much applause for the world corporations.
game that transfers a static pot of money from one player to another. It is a creator of wealth.
The neomercantilistic ideas have never died and furnish amunition for critics of multinationals
The zero-sum-game concept of business is the modern reincarnation of pure mercantilism. It
both at home and abroad. These familiar themes are articulated by some in developing countries
belongs to the age of Louis XIV and the economic philosophy of Colbert, who said of French
who accuse multinational companies of milking the economies of their host countries by taking
prosperity, "This state is flourishing not only in itself but also by the deprivation which it has
more out of them than they put in. At the same time these charges are leveled at the world's
inflicted on all the neighboring states."
The dead hand of Colbert is easy enough to see when one country after another hoists the flag of
The concept of global efficiency, however, places a great strain on even the most liberal of modern
protectionism. But there is another, less familiar ingredient in his unhappy legacy with which we
nation-states. Each ruling government is primarily concerned with optimizing conditions within its
are also burdened. Adam Smith described Colbert as "
a
man of probity
and of
own boundaries. All countries today participate to some degree in international specialization,
abilities
every way fitted for introducing method and good order into the collection and
contributing to the world economy what they can do best, and therefore most profitably. But every
expenditure of the public revenue." Smith went on to say that because Colbert was "accustomed to
country at some point subordinates its possible economic advantages to considerations of military
regulate the different departments of public offices, and to establish the necessary checks and
security, domestic stability, the protection of home industries or economic groups, and even
controls for confining each to its proper sphere he endeavored to regulate the industry and
national pride. Many of the developing countries struggling to feed and educate their people deem
commerce of a great country upon the same model as the departments of a public office."
it more prestigious to build a steel mill than a fertilizer plant or public schools.
The economic consequences of Colbert's policies were, of course, disastrous. Business can no
National governments often assert their dominance over business enterprises not only in pursuit of
more be run like a government than a government can be run at a profit. But there are still people
competitive advantage abroad, but also in furtherance of domestic political policies. No country
of "probity and ability" who do not understand the difference and who, with what they believe to
permits completely free enterprise, but controls in today's world tend to come from one of two
be the best of intentions, may wind up doing for the global economy what Colbert did for Europe.
diametrically opposed political extremes, with the freer countries positioned somewhere in the
middle of the spectrum.
Free enterprise, as preached by Adam Smith and his band of disciples, has never meant license to
conduct business without limitations imposed by government. It is the acknowledged function of
One type of government tends to organize its economy to favor public ownership of enterprise.
government to formulate and enforce laws designed to insure, so far as possible, equality, liberty,
It adopts policies of income redistribution, regulates consumption, maximizes central planning
and justice for its citizens. Free enterprise asks only that, within those guidelines, no commercial
and government allocation of resources. At the authoritarian extreme of this system are countries
enterprise should enjoy extraordinary privileges, and none should be laid under extraordinary
like The Peoples Republic of China, the USSR, the nations of Eastern Europe, North Korea,
restraints. This is all the modern global company requires to become a highly effective institution
Vietnam, Cambodia, and the socialist countries of Africa. The fruits of this system are written
for making optimum use of the world's resources.
plain in history.
10
The medium-term economic consequences of such policies always involve depressed internal
11
In the long run, both types of controlled economies are unstable. The progressive ruination of the
growth rates and can lead to extreme economic degeneration, as we saw in Nasser's Egypt,
economy in the one case and the social regimentation and inequitable income distribution in the
Sukarno's Indonesia and Allende's Chile.
other cause internal pressure that will press for radical change. Such countries can either change
rather slowly, or they can abruptly flip, from one kind of economy to the other. When internal
At the other end of the political spectrum, another group of countries pursues policies that favor
pressures become irresistible, the regimes in charge may either give ground gradually or be
private business ownership, deliberately depress current consumption in favor of capital
quickly replaced. The transfers of leadership from Sukarno to Suharto, Nasser to Sadat, Allende to
accumulation, permit market mechanisms rather than fiat to allocate resources, tightly control
Pinochet, and Spinola to Soares are but very recent examples of how rapidly events occur.
their labor unions, and generally practice social regimentation. These states tend to take a positive
view of the world economy and favor policies that foster global interdependence. They usually also
No matter where a government is positioned on the political spectrum, often the public and private
experience relatively strong growth rates. But very often these societies produce an increasing
sectors are in conflict. This natural interplay has generated a great deal of nonsense about the
maldistribution of income which may ultimately create an explosive social situation. If the
relative power of multinationals and governments. The facts are clear and simple.
situation deteriorates, it is not unusual to see what one economist euphemistically calls "a strong
military infrastructure" take over the government.
A multinational corporation, no matter how large, is essentially helpless in the hands of a
nation-state, no matter how small. Despite overwhelming evidence of this truism, investigations
All the other national economies are strung out somewhere along the spectrum between these
abound. The Group of Eminent Persons appointed by the United Nations Economic and Social
extremes. The most comfortable location is somewhere as close as possible to the middle, but it
Council in 1972, at the instigation of the then-communist government of Chile, started an
takes an effort to stay there. Every economic crisis creates pressure on governments to flirt with
investigation of the relative powers of multinational companies and the sovereign states. It is not
one extreme or the other, sometimes with both at the same time. There is always the temptation to
now, nor ever has been, a contest. I can give them one example right next door to the UN
solve short-term problems by exchanging them for long-term instability.
headquarters in New York, where I happen to live.
12
New York, as you may know, is a hard place to park an automobile. Members of missions assigned
13
no one asserts there is a surplus. Since men and money will in the long run go where they are
to the UN enjoy diplomatic immunity. They can, if they choose, ignore the No Parking
wanted and stay where they are well treated, capital can be attracted but not driven.
signs-which many of them do, to the constant irritation of less privileged New Yorkers. If I park
my own car in the neighborhood, the Police Department tows it away. And the head of every global
In the long run, it all comes down to this: the future of the global company in any one area will be
company is in the same fix.
determined by the-degree to which a particular government is willing and able to sacrifice the
material well-being of its citizens to noneconomic factors. Everything we've discussed thus far will
There you see the true difference between sovereignty and the lack of it. If the example I chose
be resolved almost automatically when our nation-states make up their minds concerning this one
seems a little absurd, it is no more so than books with titles like Sovereignty at Bay. Or for that
basic question.
matter, some of the reports that were turned out by the Group of Eminent Persons who parked their
cars outside the UN building, in clear defiance of local laws.
The reality of a global marketplace has been the driving force pushing us along the path of
developing a rational world economy. Progress that has been made owes almost nothing to
The same may be said of the accusations of neocolonialism. Paolo Rogers of Olivetti put it well
political imagination. It has been the managers of the multinational corporations who have seen
when he asked: "What kind of colonialism could it be when taxes are paid to the colonized
the world whole and moved to supply mankind's needs as efficiently as politics would allow. The
country? Multinational corporations, whether U.S.- or Europe-based, when investing abroad,
thousands of products that have helped raise the living standards of mankind have made this
have no power to infringe on the sovereignty of host governments, and like it or not, they are
economic process highly visible to millions of people. Far too many of the world's people have now
bound to abide by local laws, rules and regulations."
seen what the global shopping center holds in store for them. They will not easily accept having the
doors slammed shut by nationalism. The reason for optimism about the future of the world
As a last resort, all the multinational company can do in its relations with a sovereign state is to
corporation rests on the solid base that it is the best way that has yet been found to organize our
make an appeal to reason. If this fails, capital, both human and material, will leave for countries
society to give it the optimum chance of supplying the needs of mankind in an increasingly
where it is more welcome. Whether or not there is a shortage of capital is the subject of debate, but
crowded world.
FORD is GERALD
For additional copies write to Publications Unit,
18th Floor, 399 Park Avenue, New York, N.Y. 10022
9-150-76 Printed in U.S.A.
CITICORP
+
March 18, 1976
Mr. Walter B. Wriston
Chairman
First National City Bank
399 Park Avenue
New York, New York
Dear Walter:
I have examined with great interest the
Review of 1975 by Citibank's Investment Manage-
ment Group that you recently sent me. Thank you
for bringing the publication to my attention.
Sincerely yours,
Arthur F. Burns
AFB:ccm
FORD : LIBRARY 070830
non
COTEANK WATIONAL CITY BANK FIRST
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
NEW
YORK
FIRST NATIONAL CITY BANK
1976MAR -8 AM 10: 24
RECEIVED
OFFICE OF THE CHAIRMAN
WALTER B. WRISTON
399 PARK AVENUE, NEW YORK, N.Y. 10022
CHAIRMAN
March 4, 1976
The Honorable Arthur F. Burns
#316 316
Chairman
Board of Governors of the Federal Reserve System
Twentieth Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Arthur:
I thought you would like to have a copy of our Investment
Management Group's Review of 1975, the sixth annual voluntary dis-
closure of the investment activities carried out on behalf of our
clients.
Consistent with our belief that the public benefits from
broader awareness of the principles and practices of fiduciaries,
the report contains a brief statement of our outlook for the econ-
omy and the securities markets, followed by quantitative informa-
tion on our investment activities. The report concludes with some
comments on trends in the disclosure arena that concern us from
the standpoint of fiduciary responsibility and the public interest.
Please let me know if you would like additional copies
for your staff.
Sincerely,
W.H.
FORD & LIBRARY 076830
BANK FIRST CITY NATIONAL
NEW YORK
FIRST NATIONAL CITY BANK
WALTER B. WRISTON
399 PARK AVENUE. NEW YORK, N.Y. 10022
CHAIRMAN
May 23, 1975
Dear Arthur:
Thank you for your nice note of
May 19 about my recent speech. I appreciate
it more than I can say.
Sincerely yours,
D.A
The Honorable Arthur F. Burns
Chairman of the Board of Governors
Federal Reserve System
Washington, D. C. 20551
FORD is 07V839 LIBRARY
MATIONAL CITY FIRST BANK
FEDERAL RESERVE SYSTEM
BOARD OF OF GOVERNORS Nov
NEW YORK
FIRST NATIONAL CITY 975FFB.26 AM 10: 3
OFFICE OF THE CHAIRMAN
RECEIVED
WALTER B. WRISTON
399 PARK AVENUE, NEW YORK, N.Y. 10022
CHAIRMAN
February 21, 1975
Dear Arthur:
Congratulations on the superb job you
did in testifying before the House Committee!
Sincerely yours,
The Honorable Arthur F. Burns
Chairman of the Board of Governors
Federal Reserve System
Washington, D. C. 20551
FORD is LIBRARY 02RALD
May 19, 1975
Dear Walt:
I just read your speech of May 5, and
you have my warm congratulations.
Sincerely yours,
Arthur F. Burns
Mr. Walter B. Wriston
Chairman
First National City Bank
399 Park Avenue
New York, New York
AFB"cc.
FORDO :- LIBRARY GLUBLD
Mr. Walter B. WRISTON
Chairman
First National City Bank
399 Park Avenue
New York, New York
7/23/74
See Storage Files for complete file.
FORD is LIBRARY 076838
25
PM
CORPORA
OFFICE
FIRST
ATION
FIRST NATIONAL CITY CORPORATION
#1314
WALTER B. WRISTON
399 PARK AVENUE, NEW YORK, N. Y. 10022
CHAIRMAN
July 23, 1974
Recome
The Honorable Arthur F. Burns
Chairman, Board of Governors
Federal Reserve System
Washington, D. C. 20551
Dear Mr. Chairman:
On July 9, just two weeks ago, you asked us to postpone for an
interval of two weeks (that is to say, until July 23) the public offering of our
new note issue in order to enable the Congress and the government officials
principally concerned to study with due deliberation the economic and financial
implications of this financing.
The House Committee on Banking and Currency held hearings on
July 15, 1974. As you know, representatives of the Treasury Department, the
Federal Reserve Board, The Federal Deposit Insurance Corporation, and the
Federal Home Loan Bank Board all appeared at the hearing. The private sector
was represented by a panel of witnesses speaking for the AFL-CIO, the National
Association of Home Builders, National Association of Mutual Savings Banks,
the United States League of Savings Associations, and the American Bankers
Association.
Since our note issue was in registration with the Securities and
Exchange Commission at the time these hearings were taking place, I was
advised that it would be inappropriate for me to testify, but I did have an oppor-
unity to respond to Chairman Patman's letter, which I did on July 9. In addition,
the Comptroller of the Currency made his views known to the Committee by letter
dated July 17, 1974.
Concerrently with these events, Citicorp responded promptly and
fully to the requests of the Securities and Exchange Commission and provided
a great deal of information in furtherance of the legal mandate to make full
disclosure. The positions taken by various groups which opposed the issuance
of these notes assured wide publicity and I think helped fulfill the Board's
request that our issue be thoroughly discussed.
FORD is LIBRA 07VE
The Honorable Arthur F. Burns
SIZE -2-
July 23, 1974
In short, the Board's request of July 9 has, I believe, been fulfilled
completely, and our underwriters plan to offer the issue in the reduced amount
of $650, 000, 000 tomorrow, July 24.
Sincerely yours,
We
FORD is LIBRARY GERALD
July 12, 1974
Dear Walter:
In view of your modification of the terms of the
projected Citicorp note issue, as explained in your second
letter of July 11, 1974, namely that no holder of the notes
would have the right to request payment from Citicorp before
June 1, 1976, the Board feels that its concern about the effects
on thrift institutions is substantially reduced. From the view-
point of the Board, you have met the basic concern that gave
rise to our request for a postponement of the issue.
However, there may still be serious doubts on the part
of Congress and the other regulatory agencies, and you may
therefore still want to consider the suggestion for a postponement
that I made in my communication of July 9.
Sincerely yours,
Arthur F. Burns
Mr. Walter B. Wriston
Chairman
First National City Bank
399 Park Avenue
New York, New York
AFB:ccm
FORD & LIBRARY 077835
July 12, 1974
Mr. Walter B. Wriston
Chairman
First National City Bank
399 Park Avenue
New York, New York 10022
In view of your modification of the terms of the projected
Citicorp note issue, as explained in your second letter of
July 11, 1974, namely that no holder of the notes would have
the right to request payment from Citicorp before June 1,
1976, the Board feels that its concern 2 about the effects on
thrift institutions is substantially reduced. From the view-
point of the Board, you have met the basic concern that gave
rise to our request for a postponement of the issue.
However, there may still be serious doubts on the part of
Congress and the other regulatory agencies, and you may
therefore still want to consider the suggestion for a post-
ponement that I made in my communication of July 9.
ARTHUR F. BURNS, CHAIRMAN
FEDERAL RESERVE BOARD
2
FORD is LIBRARY 070839
AFB:slc
SYSTEM
CITY
1974 JUL -5 PM 5:06
CORPORATI
OFFICE
RECEIVED
FIRST
FIRST NATIONAL CITY CORPORATION
#1118
#
WALTER B. WRISTON
399 PARK AVENUE, NEW YORK, N. Y. 10022
CHAIRMAN
July 2, 1974
The Honorable Arthur F. Burns
Chairman, Board of Governors
Federal Reserve System
Washington, D. C. 20551
Dear Chairman Burns:
As you are aware, Citicorp has filed with the Securities and
Exchange Commission a registration statement covering $850, 000, 000 of
its 15-year floating rate notes to be listed on the New York Stock Exchange.
On June 26, Mr. Norman Strunk, the Executive Vice President of a trade
association called the United States Leagues of Savings Associations, wrote
you a letter complaining about the Citicorp note issue, apparently on the
ground that the "astronomical rates" of the notes would make the small
consumer in America aware of the interest return which is available in the
"big money markets. " Mr. Strunk suggests that making comparable rates
of return available to the small investor would constitute a "disservice" to
him or her.
It is difficult to believe that in today's value system, with Congress
constantly concerned about the treatment of consumers, that responsible people
would seriously advance the thesis that large investors are somehow entitled to
a higher return on their money than the consumer. And yet, this appears to be
the thrust of Mr. Strunk's letter. The underwriters of this security tell us that,
as we had hoped, small investors are expressing interest on the basis that they
will, when the securities are offered, be able to get an even break with large
investors. Mr. Strunk confirms this in his letter to you when he says: "Spot
checks with brokerage firms confirm that a great deal of interest has already
been expressed from small investors."
Some vague reference is made in Mr. Strunk's letter to the fact that
some people with savings accounts might use their savings to purchase Citicorp's
note issue. Mr. Strunk obviously must have access to the fact that Citicorp's
note issue represents less than 1/5 of 1% of the consumer savings accounts in
the United States. If you were to make the unlikely assumption that every one
of our notes would be bought with money withdrawn from a savings account, a
FORD
is
LIBRAR
The Honorable Arthur F. Burns
-2-
July 2, 1974
fifth of one percent of the total deposits could hardly be called disintermediation
on any material scale. Our subsidiary, the Citibank, has over two billion
dollars of consumer savings accounts which it is forced to solicit from the
general public at a rate of interest lower than savings banks are permitted to
pay and does not share Mr. Strunk's concern.
Mr. Strunk's innuendos that a Citicorp security listed on the New York
Stock Exchange is in fact a deposit in a bank is startling. As you are undoubtedly
aware, the amended preliminary prospectus dated June 27, 1974, carries on the
very first page of the text the following statement:
"The Notes offered hereby are unsecured debt obligations of
Citicorp and do not represent indebtedness of, or deposits with,
Citibank or any other commercial bank and, accordingly, are
not insured by the Federal Deposit Insurance Corporation."
I do not share Mr. Strunk's obvious belief that the consumer cannot
differentiate between a listed security on the New York Stock Exchange and a
deposit in a bank. I have far more confidence in the consumer apparently than
does he.
Sincerely yours,
WALL B. Wriston
FORD is LIBRARY GERALD
April 19, 1974
Dear Walter:
I found our discussion last Wednesday
useful as well as pleasant. Many thanks for
arranging the dinner meeting.
With kind regards,
Sincerely yours,
THE
Arthur F. Burns
Mr. Walter B. Wriston
Chairman
First National City Bank
399 Park Avenue
New York, New York
AFB:ccm
FORD LIBRARY is 076839
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
NATIONAL
FIRST
COTBANK
CITY
BANK
1974am3 AM 9: 42
NEW
YORK
FIRST NATIONAL CITY BANK
OFFICE OF RECEIVED THE CHAIRMAN
# 491
WALTER B. WRISTON
399 PARK AVENUE, NEW YORK, N.Y. 10022
CHAIRMAN
March 27, 1974
Dr. Arthur F. Burns
Chairman of the Board of Governors
Federal Reserve System
Washington, D. C. 20551
Dear Arthur:
As you can appreciate with such a peripatetic group, it is impossible
to get the chairman of each New York bank in town on the same day, but we
have assembled for your dinner on April 17 a member of the senior manage-
ment of each of the twelve banks making up the New York Clearing House.
For your convenience, I am enclosing a copy of the names of the people who
will be attending and, of course, Al Hayes will be there also.
We plan to gather at the Sky Club which, as you undoubtedly know, is
on the top floor of the Pan American Building at 6:30 p. m. The Pan American
Building is located at 200 Park Avenue and is reached by turning off Lexington
Avenue at 45th Street and going about a half a block toward Vanderbilt Avenue.
We all look forward to the occasion.
Sincerely yours,
Enclosure
FORD LIBRARY 3
Arthur Burns Dinner
Wed., April 17, 1974
Elliott Averett, President
Charles F. Mansfield,
The Bank of New York
Chairman of the Executive Committee
48 Wall Street
Marine Midland Bank - New York
New York, N. Y. 10015
140 Broadway
New York, N. Y. 10015
George A. Roeder, Jr.,
Vice Chairman of the Board
Charles W. Buek, President
Chase Manhattan Bank, N.A.
United States Trust Co. of NY
1 Chase Manhattan Plaza
45 Wall Street
New York, N. Y. 10015
New York, N. Y. 10005
Walter B. Wriston, Chairman
Harold V. Gleason,
First National City Bank
Chairman of the Board
399 Park Avenue
Franklin National Bank
New York, N. Y. 10022
450 Park Avenue
New York, N. Y. 10022
Norborne Berkeley, Jr., President
Chemical Bank
John H. Vogel, President
20 Pine Street
National Bank of North America
New York, N. Y. 10015
44 Wall Street
New York, N. Y. 10005
Ellmore C. Patterson,
Chairman of the Board
Morgan Guaranty Trust Co. of NY
23 Wall Street
New York, N. Y. 10015
Charles E. Woodruff,
Vice Chairman of the Board
Manufacturers Hanover Trust Co.
350 Park Avenue
New York, N. Y. 10022
Joseph A. Rice,
Vice Chairman of the Board
Irving Trust Company
One Wall Street
New York, N. Y. 10015
FORD is LIBRARY
John W. Hannon, Jr.,
Chairman of the Executive Committee
Bankers Trust Company
280 Park Avenue
New York, N. Y. 10017
February 5, 1974
Dear Walter:
Thank you very much for sending me a copy
of Mr. Christophe's study of competition in the
financial services industry. Mr. Christophe is to
be commended for a very useful study.
Sincerely yours,
(signed) Arthur
Arthur F. Burns
Mr. Walter B. Wriston
Chairman
First National City Bank
399 Park Avenue
New York, New York 10022
NB:slc
#146
FORD LIBRARY is 07V839
BOARD OF GOVERNORS
OF THE
NATIONAL
FIRST
CITBANK
CITY
FEDERAL RESERVE SYSTEM
BANK
NEW YORK
FIRST NATIONAL CITY BANK
1974 FEB - I PM 3:01
OFFICE OF RECEIVED THE CHAIRMAN
WALTER B. WRISTON
399 PARK AVENUE, NEW YORK, N.Y. 10022
CHAIRMAN
#146
January 31, 1974
NB.7
The Honorable Arthur F. Burns
r.1AFB
Chairman of the Board of Governors
Federal Reserve System
Washington, D. C. 20551
X
Dear Arthur:
You will recall that last year we published a study on bank capital
adequacy in an effort to make a constructive contribution to the continuing
dialogue on that subject. Mr. Cleveland Christophe of our bank has now
finished a new study on the competition in the financial service business.
As you know, the share of financial assets held by the commercial banking
system is steadily declining, but few people are aware of the extent to which
personal financial services are being delivered to the consumer by non-bank
organizations. The booklet, which is enclosed, is our effort to dimension
the nature of our competition on as scholarly a basis as possible. I think you
and your colleagues will find it quite interesting.
Kind regards.
Sincerely yours,
Enclosure
WALL
FORD is LIBRARY GENALD
" Competition in divancial Senice
NATIONAL
COTTRANK
CITY
BANK
BOARD OF GOVERNORS
#841
FIRST
OF THE
NEW YORK
FIRST NATIONAL CITY BANK
FEDERAL RESERVE SYSTEM
1973 APR 24 AM 9:47
WALTER B. WRISTON
399 PARK AVENUE, NEW YORK,
OFFICE OF RECEIVED THE CHAIRMAN
CHAIRMAN
of
April 20, 1973
ng
Dr. Arthur F. Burns
Chairman of the Board of Governors
Federal Reserve System
Washington, D. C. 20551
Dear Mr. Chairman:
This letter is written in response to your request for a clarification
of the Citibank's statement yesterday concerning its floating base rate. Let
me say at the outset, that as a result of a misprint on page 13 of "The Wall
Street Journal" of April 20, 1973, a false impression was left with the public.
"The Wall Street Journal" reported that "Mr. Palmer indicated the bank was
likely to move
" when what he actually said was that the bank was "unlikely
to move
" Since we did not spell out the time interval over which our rate
would move in harmony with the marketplace, I can clarify this by stating to
you that the transition to the full formula basis will be administered in such a
way as to be fully responsive to all the expressed guidelines of the Committee
on Interest and Dividends.
Kind regards.
Sincerely yours,
44 Bhtal
FORD & LIBRARY 07V839
TELEGRAM
LEASED WIRE SERVICE
RECEIVED AT WASHINGTON
1973 APR 23 PM 2 42
FED RES BD DC
BOARD GE BUVERNORS
THIS IS FIRST NATL CITY BANK NY APR 23
OF
THE
RESERAL SYSTEM
FEDERAL RESERVE BANK WASHINGTON DC
MR JOSEPH COYNE
ARPIL 20, 1973
DR ARTHUR F BURNS CHAIRMAN OF THE BOARD OF GOVERNERS FEDERAL RESERVE
SYSTEM WASHINGTON DC 20551
R
DEAR MR CHAIMAIN COLON
THIS LETTER IS WRITTEN IN RESPONSE TO YOUR REQUEST FOR A CLARIFICATION
OF THE CITIBANKS STATEMENT YESTERDAY CONCERNING ITS FLOATING-JASE
k
RATE PERIOD LET ME SAY AT THE OUTSET COMMA THAT AS A RESULT
OF A MISPRINT ON PAGE 13 OF QUOTE THE WALL STREET JOURNAL UNQUOTE OF AP
*
APRIL 20
COMMA 1973 COMMA A FALSE IMPRESSION WAS LEFT WITH THE PUBLIC PERIOD
STREET
R
QUOTE THE WALL DYTRRY JOUNAL UNQUOTE REPORTED THAT QUOTE MR
PALMER INDICATED THE BANK WAS LIKELY TO MOVE UNQUOTE WHEN WHAT HE
ACCTUALLY SAID WAS THAT THE BANK WAS QUOTE UNLIKELY TO MOVE UNQUOTE
SINCE WE DID NOT SPELL OUT THE TIME INTERVAL OVER WHICH OUR RATE WOULD
MOVE IN HARMONY WITH THE MARKET PLACE COMMA I CAN CLARIFY THIS BY
STATING TO YOU THAT THE
TRANSITION TO THE FULL FORMULA BASIS WILL BE ADMINISTERED IN SUCH A WAY
ON INTERESTS AND DIVIDENDS
KIND REGARDS SINCERLY YOURS
GEBALO FORD LIBRARY
W B WRISTON FIRST NATL CITY BANK FA
FED RES BD DC
2121
TELEGRAM
LEASED WIRE SERVICE
RECEIVED AT WASHINGTON
X
1973 APR 23 PM 3 25
FED RES BD DC
BCARD OF ADVERNORS 'RE
a
FEDERAL SYSTEM
THIS IS FIRST NATIONAL CITY BANK NEWYORK APRIL 23 1973
THE FOLLOWING IS A REPEAT AND CORRECTED COPY OF MESSAGE SENT
EARLIER TO MR JOSEPH COYNE
QUOTE
MR. JOSEPH COYNE
FEDERAL RESERVE BANK
WASHINGTON D.C.
APRIL 20, 1973
DR. ARTHUR F. BURNS
CHAIRMAN OF THE BOARD OF GOVERNORS
FEDERAL RESERVE SYSTEM
WASHINGTON D.C. 20051
SERALD FORD LIBRARY
DEAR MR CHAIRMAN:
THIS LETTER IS WRITTEN IN RESPONSE TO YOUR REQUEST FOR A
CLARIFICATION OF THE CITIBANKS STATEMENT YESTERDAY CONCERNING
ITS FLOATING BASE RATE . LET ME SAY AT THE OUTSET, THAT
AS A RESULT OF A MISPRINT ON PAGE 13 OF QUOTE THE WALL STREET
JOURNAL UNQUOTE OF APRIL 20, 1973, A FALSE IMPRESSION WAS LEFT WITH
THE PUBLIC. QUOTE THE WALL STREET JOURNAL UNQUOTE REPORTED THAT
QUOTE MR. PALMER INDICATED THE BANK WAS LIKELY TO MOVE... UNQUOTE
WHEN WHAT HE ACTUALLY SAID WAS THAT THE BANK WAS UNLIKELY
TO MOVE... UNQUOTE SINCE WE DID NOT SPELL OUT THE TIME
INTERVVAL OVER WHICH OUR RATE WOULD MOVE IN HARMONY WITH THE
MARKETPLACE, I CAN CLARIFY THIS BY STATING TO YOU THAT THE
TRANSITION TO THE FULL FORMULA BASIS WILL BE ADMINISTERED IN
SUCH A WAY AS TO BE FULLY RESPONSIVE TO ALL THE EXPRESS GUIDELINES
OF THE COMMITTEE ON INTERESTS AND DIVIDENDS.
KIND REGARDS
SINCERLY YOURS
W.B. WRISTON
UNQUOTE
April 20, 1973
10 a.m.
Notes on Conversation Between Dr. Arthur Burns
and Mr. Walter Wriston Chairman, First National City Bank of New York:
Mr. Wriston: What can I do for you?
Dr. Burns:
Walter, I learned of the your intention to restore the
floating prime rate and would like to chat with you about it.
Wriston:
All right.
Burns:
Can you tell me just what your plans are?
Wriston:
Sure. What we did was that we read what the CID said as an
indication the prime would be linked to market rates and
sort of isolated from small business rates. Also what we
did was said we're going back to the floating and going to
take a while to get it. It went up by 1/4 to 6-3/4 where
the market most banks are today.
B:
That's right.
W:
The thought was that over time we would merge our rate
with the paper rates. You said don't do anything presumptuous
or don't do anything in one jump. Did not think it would move
any quicker or sooner than other banks.
B:
My concern is that your move is now being interpreted by
some observers and by some banks to mean that the prime
rate charged by your bank on the basis of the formula will
move up rather quickly and reach a level of 7-1/2 or 7-5/8
rather quickly.
W:
I don't expect that would be the case.
FORD is OFRALO LIBRARY
B:
Could you issue a clarifying statement ? I think that it
is essential that it be done promptly.
W:
I don't know exactly what you would say. What we said was
that it would move over time. The only thing I could think
of to clarify would be if you put some time frame in there.
B:
That might be helpful.
W:
I wouldn't know how to arrive at that period. That would be
my problem.
B:
I understand that. But you see I have worked awfully hard
with bankers all over the country and with Members of the
Congress. I succeeded in stopping very damaging legislation
on the basis of a plan for the dual prime that I was working
out and what you have done now in view of the interpretation
2
B :
that is being placed on your action in some quarters -- and
(cont'd)
I'm not saying the interpretation is right, but it is a human
interpretation -- but may undo all that I have tried to
accomplish and so far have succeeded in. Therefore a clarifying
statement from my viewpoint is essential.
W:
Let me see what we can dream up.
B:
All right.
W:
Obviously we don't want to undo any work. The concept of
the prime as a market rate to begin with is an essential
difference. I read your CID statement that you agreed that
it was a market not an administered rate.
B:
I don't want to get into semantics. I have a practical
objective and the practical objective is to have this
committee no longer concern itself with the large business
prime rate. But to accomplish my purpose I put in
paragraph 8 in the committee statement, to you see, calling
for increases if they should occur that they be made in
moderate steps.
W:
Right.
B:
And your statement could be read to many that all this
would be accomplished and that your formula be fully
operative in the two to three weeks. And that is just
unsatisfactory. Another point is the paragraph that
deals with profit constraint. I would like to see a
clarifying statement indicating that these two paragraphs
on guidelines are understood, would be respected and once
that becomes known to the banking community then I think
everything I have been working out can go forward smoothly.
As things stand now, two things can happen. Another bank
or a number of banks may move rather quickly and undo
what I have tried to accomplish. I may have trouble on
Capitol Hill again. The Economic Stabilization Act is
not completed. Even if the it were, seething under the
surface. Unfortunately it is stirred up again. If down
gradually, committee can forget about this and the committee
can concern itself with those areas that are politically
sensitive. That is the interest rate on business loans to
small enterprises, home buyers, etc. And I'll we'll all
be better off, including you and your bank.
W:
OK. Let me see what I can think up to say. The problem
is that issuing something may confuse it more than saying
nothing and doing nothing.
FORD is LIBRARY 078836
3
B:
If you don't issue a clarifying statement, I'll have to take
action. I don't want to take action.
W:
Let me see what you we can do.
B:
Will you let me know later on in the day?
W:
Yes, surely.
B:
Thank you very much.
FORD LIBRARY is 028870