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The original documents are located in Box B114, folder "United States National Bank, San
Diego" 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. The Council 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States of America his copyrights in all of his unpublished writings in National Archives collections.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.
NATIONAL ARCHIVES AND RECORDS SERVICE
WITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)
FORM OF
CORRESPONDENTS OR TITLE
DATE
RESTRICTION
DOCUMENT
1. memo
Brenton C. Leavitt to the Board of Governors re United
6/19/73
C
States National Bank, San Diego
2. memo
Brenton C. Leavitt to the Board of Governors re pro-
10/16/73
C
posed acquistion of United States National Bank,
San Diego
open DAH slor
FILE LOCATION
Arthur Burns Papers
SR
Federal Reserve Board Subject File, Box B114
10/29/84
United States National Ban, San Diego
RESTRICTION CODES
(A) Closed by Executive Order 12065 governing access to national security information.
(B) Closed by statute or by the agency which originated the document.
(C) Closed in accordance with restrictions contained in the donor's deed of gift.
GENERAL SERVICES ADMINISTRATION
GSA FORM 7122 (REV. 1-81)
Digitized from Box B114 of Arthur F. Burns Papers at the Gerald R. Ford Presidential Library
CHAIRMAN BURNS
For Information Only
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date June 6, 1973
Board of Governors
To
Subject: United States National Bank,
From
San Diego, California
B.6.K. Brenton C. Leavitt
VERY CONFIDENTIAL F.R.
On June 5, 1973, the problems of this bank were discussed with
Governor Bucher and Mr. O'Connell. During the day Mr. O'Connell and I
spoke with four representatives of the Federal Reserve Bank - Senior Vice
President Kelly, Vice President Jamison, Vice President Reilly, and
Associate General Counsel Cooper. Mr. Jamison is in charge of examinations
and discount while Mr. Reilly is general counsel. Later in the day
Mr. O'Connell and I spoke with First Deputy Comptroller Watson.
The purpose of the call to the San Francisco group was to impress
on them the need to keep a careful detailed and precise record if the
Federal Reserve Bank extended credit to United States National. We
particularly stressed the need for perfecting liens on collateral and
discussed the possibility of obtaining an affidavit from the bank that
the collateral posted to secure loans was free, clear, and available for
pledging.
The Reserve Bank discussed the type of collateral available.
As mentioned in my memorandum of June 4 there is available in the Treasury
Tax and Loan Account $10 million of excess collateral which is in the form
of U.S. Government bonds. It was mentioned that we could not require the
bank to leave these securities with us as possible collateral should they
wish to withdraw them. But in the event they asked to have the collateral
-2-
return d, the Federal Reserve Bank will point out that they might have
to borrow and that this would be very acceptable collateral. They will
.be urged to leave the securities with us as possible collateral.
The loans available for collateral were discussed, and the
Reserve Bank said that if necessary, as many as 25 examiners could be
detailed to consider collateral. It was agreed that loans to C. Arnholt
Smith and his interests would be accepted as collateral only after other
collateral is exhausted.
When question was raised about a visit to the bank by Federal
Reserve examiners, Mr. O'Connell and I instructed the Reserve Bank
personnel that they were not to go into the bank without receiving prior
authorization from the Board. It is most unlikely that there would be
any justification for our examining any aspects of the bank's operations.
After that discussion Mr. O'Connell and I talked with First
Deputy Comptroller Watson who is going to provide for us a copy of the
cease and desist order issued against the bank and the debenture agree-
ments representing the $15 million of subordinated debt carried in the
bank's structure. Most, if not all of the debentures, are owned by
Franklin National Bank of New York. Mr. 0' Connell and I told Mr. Watson.
we were doing some preliminary planning in the event the System has to
advance money to the bank. We indicated to Mr. Watson our desire to have
a complete record and mentioned some problems both our agencies had had
at the time of the San Francisco National Bank failure. Mr. O'Connell
asked Mr. Watson if he would call Mr. Larson, Regional Administrator in
-3-
San Francisco, and request Mr. Larson to provide any information that
might be necessary for us to have in connection with our discount
function. Mr. Watson said he would do that.
Mr. Watson mentioned that the last time they had reviewed the
liquidity of this bank it had about $120 million of liquid assets over
reserve requirements. He also said that there is the possibility of a
merger if the situation gets extremely serious. The merger partner might
be Crocker National Bank and it is estimated that the price of United
States National should be about $100 million. It was mentioned that if
necessary the purchase price could be escrowed and Crocker given a
reasonable time in which to work out bad loans and charge them to the
escrow account.
It was agreed by all concerned that we will keep each other
informed of any material fact.
Distribution: Messrs. Holland
Melnicoff
Solomon
O'Connell
Smith
Partee
Ring
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date June 12, 1973
To
Board of Governors
Subject:
United States National Bank,
From
Brenton C. Leavitt
B.G.L.
San Diego, California
VERY CONFIDENTIAL (F.R.)
On June 11, 1973, Vice President Jamison called twice to report
developments about this bank. In the first call he said that everything
appeared normal in that there was no deposit run-off and the reserve
account excess is now at $51 million. It is likely the bank had run down
the reserve account on the last day of the accounting period in order to
sell the excess in the Federal Funds market.
Late that afternoon Mr. Jamison again called to state that the
bank had asked that $10 million of excess collateral in the Treasury Tax
and Loan Account previously referred to is to be transferred to collateral
to secure borrowings from the Federal Reserve Bank. United States National
informed the Los Angeles office that it expects to borrow $10 million on
June 12.
I told Mr. Jamison he should contact Regional Administrator Larsen
to inform him of this borrowing and also to ask Mr. Larsen if the bank was
solvent.
Mr. Jamison said that a meeting with bank representatives was
scheduled for later this week. I asked him if the meeting could be
scheduled earlier this week, and he thinks it can be scheduled for June 13.
Board of Governors
-2-
June 12, 1973
At the meeting the bank's representatives will be asked what they expect
to happen and what is the worse they think can happen. They will also
be asked how they propose to deal with the problem.
On the morning of June 12 I called First Deputy Comptroller
Watson to inform him of developments. At that time he .told me that
representatives from the Comptroller's department had entered the bank
as of the close of business May 31, 1973, to check the schedule of
maturing CD's. We will be given a copy.
Mr. Watson also confirmed Mr. Jamison's comment that Bank of
America has discontinued selling Federal Funds to United States National
and that Crocker National proposes to do likewise. President Peacock of
Crocker recently discussed with Mr. Watson the possibility of merger.
however, Mr. Peacock does not know how serious the problem is. Once he
does know he may lose interest.
Distribution: Messrs. Melnicoff
Solomon
O'Connell
Smith
Partee
Ring
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date June 18, 1973
Board of Governors
To
Subject:
United States National Bank,
From
Brenton C. Leavitt
San Diego, California.
VERY CONFIDENTIAL (F.R.)
On June 15, Governor Bucher, Mr. O'Connell and I talked with
First Vice President John Williams and Vice Presidents Jamison and Reilly
of the Federal Reserve Bank of San Francisco. They mentioned that the
executive committee of the Federal Reserve Bank's board of directors had
indicated concern about requiring Regional Administrator Larsen to certify
by letter that the bank is solvent. They wondered if a letter was
necessary and asked why we could not rely on his oral statement. It was
stated that if Mr. Larsen is willing to state orally the bank is solvent,
he should not object to confirming this view in writing. Mr. Williams
stated that the directors of the Federal Reserve Bank want the System
to loan money to United States National citing as reasons the importance
of the bank in local economy and the impact its failure would have on the
San Diego and even the California economy.
We were informed that representatives of Crocker National Bank
are meeting with representatives of United States National on June 15.
It is understood that United States National wants assurance from Crocker
that money, presumably through the medium of Federal Funds, will be made
available. The leason for the meeting is to consider the possibility of
Crocker merging with United States National. Crocker is known to have
been interested for sometime and from a competitive view might be favored
as it is not so heavily represented in the San Diego area as are other large
banks which might be merger possibilities.
-2-
Despite our understanding that the bank would not submit as
possible collateral loans of any interests of Mr. Smith an undetermined
amount represent such obligors. This is not regarded as acceptable
collateral since it is impossible to appraise it. Mr. Williams noted
that the bank has a large volume of installment loans, and it was agreed
that where such loans were reasonably made and are "aged" it would
probably be reasonable to loan 90 per cent of face. The Reserve Bank
plans to appraise this collateral over the weekend. Interestingly,
C. Arnholt Smith was with the bank's representative when the loan
collateral was delivered to the Los Angeles branch on June 14.
We emphasized the Board's strong feeling that prior to lending
there should be a written statement from the Comptroller's representative
regarding solvency and the loans pledged as collateral should have been
reviewed. The suggestion that the installment loans be verified, on a
sample basis, was accepted. It was stated categorically by Reserve Bank
staff that no advance to the bank would be made without prior checking
or notification to the Board.
The Federal Reserve Bank has retained as outside counsel
Judge Elderkin of the Brobeck firm which earlier represented the Reserve
Bank. General Counsel O'Connell is in San Francisco today (June 18) to
discuss various legal aspects which can be anticipated in this situation.
Distribution: Messrs. Melnicoff
Solomon
O'Connell
Partee
Ring
Smith
Ryan
GERALD R. FORD LIBRARY
This form marks the file location of item number
as listed on the pink form (GSA Form 7122, Withdrawal Sheet)
at the front of the folder.
OF
CONSTMENT THE THE TREASURY
THE ADMINISTRATOR OF NATIONAL BANKS
WASHINGTON, D.C. 20220
1789
Office of the
Comptroller of the Currency
June 19, 1973
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Attention: Governor Jeffrey M. Bucher
Gentlemen:
In reply to your request for a statement concerning
the condition of the United States National Bank of San
Diego, California, as of the close of the last full
examination of the subject bank which terminated on
March 22, 1973, the bank was found to have potentially
severe credit problems but was adjudged to be solvent.
To date, we have not received any information which would
materially alter this conclusion. If there is any significant
change in the condition of the bank, this Office will promptly
advise you.
Sincerely,
J. Watson J. T. Watson
Acting Comptroller of the Currency
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date June 25, 1973
To
Board of Governors
B.G.L.
Subject: United States National Bank,
From
Brenton C. Leavitt
San Diego, California.
Very Confidential (F.R.)
On June 22, 1973, Governor Bucher, Mr. O'Connell and I visited
with representatives of the Federal Deposit Insurance Corporation and the
Comptroller of the Currency.
During the morning of that day the three of us met with FDIC
Chairman Wille, General Counsel Bransilver and Mr. Roddy, Chief of the
Examination Department. We informed them of the current status of the
U.S. National Bank and of our intent that they be kept currently informed
about the bank. To this end we told them that we would ask the Federal
Reserve Bank of San Francisco to arrange for weekly meetings to which
their local representative would be invited. Moreover, should any
important developments occur between such meetings, their local represen-
tative would be informed promptly.
The liability of the FDIC was specifically discussed. Mr. Wille
noted that the bank recently had about $900 million in deposits. Of this
$300 million was secured by pledge of bank assets, $300 million was
insured by FDIC, and $300 million represented uninsured and unsecured
money.
We discussed the possibility of a merger, and noted that from
a competitive view Crocker National, Wells Fargo, and Bank of California,
N.A., are the most likely candidates. As the Board has been informed
Board of Governors
-2-
June 25, 1973
Crocker is interested, but only if such a merger can be on an emergency
basis.
During the afte rnoon the three of us met with Acting Comptroller
of the Currency Watson and General Counsel Bloom. We informed them that
the Board felt strongly that an examiner should be in the bank at all
times. Mr. Watson said that they now have an examiner visiting the bank
frequently, but were concerned with placing an examiner in the bank full-
time for two reasons. The first is that this might increase concern on
the part of the banking community if it became known; the second is that
the Comptroller's Office might be accused of having participated in
management if the bank were ultimately to fail. When these possibilities
were discussed, Mr. Bloom said that at a recent meeting in California
much of the talk had been about the problems of U.S. National. As the
bank's problems seem well known, we suggested that a full-time examiner
in the bank might not have the unfavorable results envisioned.
We then indicated our very grave concern with what we construed
to be Mr. Smith's continuing to participate in management. We mentioned
that he had been one of those delivering collateral to the Federal
Reserve Bank and that he was negotiating sales of blocks of installment
loans. The question was raised as to whether or not this might not violate
the terms of the cease-and-desist order. The Comptroller's representatives
stated that in their view Mr. Smith had to act as consultant in connection
Board of Governors
-3-
June 25, 1973
with liquidation of the Westgate and BCIC lines since he was the only
one really familiar with the credits. We made it very clear that in
our view Mr. Smith's relations with the bank should be specifically
limited to acting in this capacity.
Messrs. Watson and Bloom were told of the weekly meetings, and
they said Mr. Larsen would be glad to participate. When we left it was
agreed we would keep each other fully informed of any important developments.
Distribution: Messrs. Melnicoff
Solomon
O'Connell
Partee
Ring
Smith
Ryan
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date June 26, 1973
To
Brenton Board of C. Governors Leavitt B.G.L.
Subject: United States National Bank,
From
San Diego, California.
Very Confidential (FR)
On June 26, 1973, I talked with First Vice President Williams
and Vice Presidents Jamison and Reilly about this matter.
The U.S. National Bank continues to bring in collateral. The
Reserve Bank estimates that it could now loan $40,350,000 on the collateral
thus far analyzed.
When I asked what would be the source of funds to repay any
borrowing, the following information was given.
$13 million - sale of foreign time-deposit open accounts.
A $1 million time account was recently sold at a 9-1/16 per cent discount.
$7 million - sale of loans to United California Bank.
$5 million - sale of loans to Harris Trust Company.
$5 million - sale of loans to Union Bank.
$10 million - sale of loans to First National City Bank.
$30 million - sale of additional consumer credit loans.
$87 million - sale of Westgate properties.
Total - $157 million.
The bank had earlier thought of reducing public funds; however,
it has reconsidered as such reduction would necessitate sale of securities
pledged to secure the funds. Many of these securities are said to yield
Board of Governors
-2-
June 26, 1973
about 4 per cent and would thus have to be sold at big discounts.
There is just a little bit of concern that in view of these increasing
yields and declining bond prices, some public treasurers will demand
additional collateral in order that the market value of pledged securities
will not be less than the deposits.
Messrs. Thomas and Rafanello (a very competent credit man
borrowed from the Federal Reserve Bank of New York) are appraising
collateral which the bank is continuing to bring in. Moreover, the
Federal Reserve Bank has employed an experienced examiner to review
collateral. The Reserve Bank thought it advisable to have someone with
a different point of view analyze the pledged loans.
Yesterday U.S. National was borrowing $54,300,000 in the Federal
Funds market. If forced, it could probably continue to obtain funds from
this source; however, the Reserve Bank is concerned that forcing
U.S. National to borrow too heavily in the funds market might result in
drying up that source of money. To this end representatives of the
Reserve Bank think it desirable that the bank lend $10-$20 million prob-
ably today to take off some of the pressure. Mr. Jamison said he will
let me know if they get a request from U.S. National today and what is
the decision of the Reserve Bank.
Distribution: Messrs. Solomon
Melnicoff
O'Connell
Partee
Ring
Smith
Ryan
CHAIRMAN BURNS
For Information Only
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date July 2, 1973
To
Board of Governors
B.C.L
Subject:
United States National Bank (USN)
From Brenton C. Leavitt
San Diego, California.
VERY CONFIDENTIAL (F.R.)
On June 28, 1973, Messrs. Balles, Williams, Reilly, Jamison, and
Thomas of the Federal Reserve Bank and special counsel Elderkin met with
Chairman Woltman and Senior Vice President Swinney of USN. Also in
attendance were Messrs. Glover and Walt Smith representing the Comptroller
of the Currency and Federal Deposit Insurance Corporation.
The meeting began with President Balles stating the ground rules
under which credit would be advanced. We will grant no line of credit as
requested; representatives of the FDIC and Comptroller's office will be
kept informed and will participate in at least weekly meetings; no actions
should be taken that will be in violation of the Cease and Desist Order.
At the present time collateral available will support a maxi-
mum borrowing of about $47 million (includes the $10 million of United
States bonds on which we have advanced $10 million). The amount of
collateral on hand is not increasing. This is a matter of concern for
it may indicate few loans acceptable for even 10(b) collateral. Bank
representatives stated they hope to be able to provide about $12 million
collateral the week of July 2.
Arrangements have been made for daily contact between the
Reserve Bank and borrower so that the bank's current position can be
known. Also, on each Tuesday the Reserve Bank is to get a weekly fore-
cast of needs of the coming week.
Board of Governors
-2-
The Reserve Bank is pressing USN for its plans on liquidating
the indebtedness of BCIC. As information is developed this huge concen-
tration of credit becomes of even greater concern. It had earlier been
thought that BCIC loan totals (including letters of credit) were in the
area of $250 million. Bank officials recently stated that an additional
$50 million in loans was also related making the total concentration
something over $300 million. It is also understood that some financing
of BCIC has been with Eurodollars through USN's Nassau branch.
The Reserve Bank was informed by officials of USN that they
were thinking of advancing $4 million to a BCIC subsidiary to construct
a tuna boat. This advance was being made pursuant to an "oral commit-
ment." Bank officials were informed that this was regarded as an
improper use of Federal Reserve credit and quite likely a violation
of the Cease and Desist Order which refers to "legal commitments."
Legal commitments are not usually of an oral nature and this one is
particularly suspect as it is understood the commitment was made solely
by C. Arnholt Smith.
The Reserve Bank has asked for a detailed list of commitments
indicating those made for a fee, those made in writing, and those orally
committed.
Statements of USN officials about liquidation of BCIC indebted-
ness thus far seem based more on hope than reality. For example, in one
instance a possible sale of a parcel of real estate for $10 million was
to be financed by USN. I told Mr. Jamison the only way that the BCIC
Board of Governors
-3-
line could be straightened out was to arrange some independent
financing.
The Comptroller of the Currency has two men in the bank
full-time, and has said they will develop any information we request.
Among other things I asked that they verify sales of loans.
V. P. Jamison said the Reserve Bank expects to be asked for
a loan of about $45 million today. Of this $10 million would be a
renewal of the loan now outstanding and secured by U.S. bonds. The
other would be a new advance and would be secured by loans.
Distribution: Messrs. Melnicoff
Solomon
O'Connell
Partee
Ring
Feldberg
Ryan
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date July 3, 1973
To
Board of Governors
B.B.L
Subject: United States National Bank (USN)
From
Brenton C. Leavitt
San Diego, California
Very Confidential (FR)
Vice President Jamison called today to tell me that on Friday,
June 29, the Federal Reserve Bank of San Francisco made an additional
$30 million loan to USN. The Federal Reserve Bank now has loaned $40 million
to USN: $10 million collateralized by U.S. securities and $30 million by
loans.
On Thursday USN had been borrowing $58 million in Federal Funds.
On Friday, after our advance, the bank borrowed $44.5 million in Federal
Funds. The bank plans to stay in the Federal Funds market as long as
possible. Most of the banks lending to USN are Eastern banks. Chemical,
Bankers Trust, Irving Trust, Chase, and Mellon each have loaned $5 million.
First National City has loaned the bank $8 million. The other banks are
West Coast banks including United States National Bank of Oregon, and First
Western Bank and Trust Company.
On Friday the bank had to pay maturing certificates of deposit
totaling $10 million and honor a $3 million letter of credit pledged to
support sale of commercial paper.
Later in the day (July 2) Mr. Jamison again called, and said
that the loan to USN would be reduced by $10 million today. Federal Funds
borrowings should be $41 million. The bank needs slightly fewer borrowings
as total deposits increased $11 million on June 29.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date July 6, 1973
To
Board of Governors
Subject: United States National Bank
From
Brenton C. Leavitt
2.6.L.
(USN), San Diego, California.
Very Confidential (FR)
On Tuesday, July 3, USN borrowed $30 million from the Federal
Reserve Bank of San Francisco. It also succeeded in selling $5 million
in installment loans to Harris Trust Company of Chicago.
On Thursday, July 5, the bank has stated it will have to
borrow $35 million. We have on hand collateral sufficient to permit
a total loan of about $42 million.
On June 29 President Balles and Vice President Jamison visited
with Mr. Clausen of the Bank of America. The purpose of the visit was
to discuss the possibility of selling a pool of installment loans to a
group of large California banks. Mr. Clausen thought it a good idea,
and Mr. Medberry, Chairman of the Board of Bank of America, talked to
Mr. Swinney of USN. Mr. Swinney also thought it a good idea and talked
to Messrs. Mulvaney and Woltman who agreed. The Bank of America was
advised and efforts are said to be underway which should result in sale
of a significant volume of these loans to a consortium of California
banks. A reason for the sale is to permit USN to reduce its borrowings;
Federal Funds are said to have cost it 12 percent on July 2 and 15 per
cent on July 3.
Mr. Jamison told me that he asked Regional Comptroller Larsen
if the bank has met the conditions imposed by the Comptroller in the
-2-
Cease and Desist Order. To this Mr. Larsen replied to Mr. Jamison
that he had sent a "dunning letter."
The steps that have been taken or are planned provide
day-to-day operating funds. But no final resolution of the bank's
problems can be made until the bank and supervisory agencies face up
to the problems contained in BCIC, and to a lesser extent, in
Westgate. I keep urging Mr. Jamison to keep pressing the Regional
Comptroller, and I plan to discuss this with the Comptroller's office
very soon.
Distribution: Messrs. Melnicoff
Solomon
O'Connell
Partee
Ring
Feldberg
Ryan
CHAIRMAN BURNS
For Information Only
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date July 11, 1973
To
Board of Governors
From
Brenton C. Leavitt
B.C.L.
Subject: United States National Bank
(USN), San Diego, California
Very Confidential (FR)
On July 10 I talked about the bank with Vice President Jamison
who had been in Los Angeles visiting with representatives of the Federal
Reserve branch on July 9. He stated that at this time the bank is borrow-
ing $35 million from the Federal Reserve System, and $45.5 in the
Federal Funds market. Deposits are down about $3 million (mostly demand)
and now total $916 million. Loans are down $2.3 million due largely to
a sale of the Westgate foods line to United California Bank; it is
understood United California Bank will take on all indirect liabilities
related to this particular loan.
While in Los Angeles Vice President Jamison discussed with
Assistant Vice President Thomas means to check the accuracy of USN's
forecast. Forecasts made by USN will bè checked against actuality. We
are receiving statements of all activities, either payments, renewals
or necessary additional loans, in the BCIC and Westgate lines.
Progress in solving the bank's problems is distressingly slow.
Hopefully at the meeting today between five representatives of USN and
the new Comptroller of the Currency with his associates, some plans for
solving the bank's problems will be developed. Governor Bucher,
Mr. O'Connell, and I are to meet with Comptroller of the Currency Smith,
First Deputy Watson, and General Counsel Bloom on July 12.
Distribution: Messrs. Melnicoff, Solomon, O'Connell, Partee, Ring,
Feldberg, and Ryan
CHAIRMAN BURNS
For Information Only
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date July 12, 1973
Board of Governors
To
Subject: United States National Bank
Brenton C. Leavitt
From
(USN), San Diego, California
Very Confidential (FR)
The Cease and Desist Order of the Comptroller of the Currency
requires the submission. of monthly reports by USN with such reports to
be submitted the 10th of each month. These reports indicate that in
the BCIC and Westgate lines the following changes occurred between
June 10 and July 10:
Control group loans
June 10
July 10
Difference
BCIC
$313.4 million
$327.9 million
+ $14.5 million
Westgate
$ 70.4 million
$ 87.9 million
+ $17.5 million
The report states that the increase was "due to letters of credit
and bankers acceptances maturing without payment." This I do not under-
stand as both these contingent items were supposed to have been included
in the total loans to BCIC and Westgate. It was stated that letters of
credit and bankers acceptances totaled approximately $115 million.
The report states that liquidity was equal to 18 per cent on the
Comptroller's form as of June 29.
From June 1 to July 6 time deposits decreased $40 million, partially
offset by an increase of about $7 million in savings accounts. Mr. Jamison
said that Union Bank has committed to buy $30 million in loans and Bank
of America has committed to buy $50 million. We know that Bank of America
may buy $50 million; however, we do not regard this as a firm commitment
by Bank of America. Mr. Jamison has no knowledge of any commitment by
Union Bank and frankly doubts there is one.
-2-
The report is optimistic with respect to progress stating that
Westgate is on its way to solution. The fact that total loans have
increased in this line do not support this view. Incidentally, Mr. Swinney
of USN recently informed Mr. Jamison that he had been misinformed when
he told Mr. Jamison that UCB had taken over the Westgate Foods line
from USN. What Mr. Swinney now says actually transpired was that a
good loan of about $4.5 million to a savings and loan association was sold
to the Bank of California, N.A.
The bank's report states that they expect soon to come up with a
proposal on BCIC similar to the one on Westgate. Mentioned were some
recent sales of real estate in Bakersfield County for $3,600 per acre.
Representatives of USN now seem to feel that they can sell all the property
for this amount; however, Mr. Jamison noted that much of this property
would not fall into this high-priced category and would sell for sub-
stantially less.
CHAIRMAN BURNS
For Information Only
uly 12, 1973
Memo to: Board of Governors
Subject: United States National Bank (USN),
From:
San Diego, California
Brenton B.6.L C. Leavitt
Very Confidential (FR)
On July 11, 1973, Vice President Jamison called to report
on USN. Deposits and loans as of the close of business on July 10 were
$912 million and $588 million respectively. These figures have changed
little over the past several days.
The bank has an excess in average reserves for the weekly period
amounting to about $10 million; thus, the loan for today (July 11) will
be $25 million. Federal Funds purchased on July 11 total $41 million.
The group of banks willing to purchase the block of consumer credits
continue to work on the problems involved. It is understood that two
representatives of the Bank of America are currently in USN reviewing the
loans.
A letter is being dispatched from the Federal Reserve Bank to
USN asking for additional information on such areas as commitments,
maturities of large loans, and concentrations to the controlled group.
Mr. Jamison said there was another article in the Los Angeles Times about
USN and possible sale of real estate in Bakers Field County, California.
This involves a big farmer named Hollis Roberts who has some undetermined
relationship with BCIC. He is said to be attempting to sell lands (some
of which are presumably BCIC loans) to Superior Oil Company for $48 million.
Any indebtedness of Hollis Roberts was not included in the Comptroller's
examination and this relationship has been determined subsequently.
A story on the radio is to the effect that the City of San Diego
is pressing C. Arnholt Smith to come to an agreement with the city on the
use of its stadium.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
July 20, 1973
Date
Board of Governors
To
Subject:
United States National Bank
Brenton C. Leavitt
(USN), San Diego, California
From
B.6.L.
Very Confidential (ER)
On July 18 Messrs. Balles, Jamison and Elderkin, representing
the Federal Reserve Bank of San Francisco, Messrs. Edgington and Roddy
from FDIC and I met with Messrs. Smith, Watson, Bloom and Larsen of the
Office of the Comptroller of the Currency. The purpose of the meeting
was to relay to them our grave concern about USN.
President Balles opened by defining our role as a lender and
noting specifically that in no way was it our intention to usurp their
proper regulatory authority. Rather in view of our loan to the bank and
the possibility that it will increase dramatically we wished that office
to know of our concern and to ascertain their plans for dealing with the
bank's problems.
President Balles noted that the System has not accepted either
BCIC or Westgate loans as possible collateral in view of the difficulty
of appraisal of total indebtedness. It was noted that these loans had
increased a total of $37 million (adjusted upward from $32 million after
further analysis) between June 10 and July 10. President Balles expressed
concern about this noting that such advances might well be an improper
use of Federal Reserve credit.
Comptroller Smith stated that procedures for advancing new
loans to BCIC and Westgate are being tightened. As I understand it,
-2-
additional advances will be made only (1) if there is a firm binding
legal commitment or (2) when necessary to complete some project well
underway. At the conclusion of the meeting it was stated that the
Comptroller will require prior approval of his office before any loans
are made to either company.
One of the requirements in the Cease and Desist Order dated
May 24, 1973, was that C. Arnholt Smith would execute a trust agreement,
the net effect of which would be to give to a trustee the power to vote
stock owned by C. Arnholt Smith. This trustee would have to be approved
by the Comptroller. While this agreement has not yet been executed,
Comptroller Smith stated that it was to be completed soon.
In the next two and one-half months maturing letters of credit
used as guarantees and unsecured CD's will total about $110 million. The
amounts are $35 million in July, $34 million in August, and $42 million in
September. How many of the letters of credit will have to be honored by
the bank, and how many of the maturing CD's will not be renewed is
unknown. At the present time documented discount notes, i.e., those
using letters of credit as guarantees, total about $65 million.
Comptroller Smith stated that possibilities for a takeover are
being explored. It is his view that the office could approve such a take-
over on an emergency basis. But before this could be done a bank would
have to review the assets and this could take as much as 90 days. In
connection with talk about the possibility of a takeover (by merger, or
purchase of assets and assumption of liabilities) there was a discussion
-3-
of the bank's plan to sell about $50 million of its consumer loans.
Comptroller Smith indicated some concern with this noting that if all
the good assets were sold, it might make it more difficult for the bank
to be merged into some other institution. He would prefer that the
Federal Reserve System loan on these consumer notes rather than having
them sold to a bank or group of banks.
The Comptroller's Office was informed that if the bank does
suffer significant deposit losses or if it must honor letters of credit
given as guarantee, few additional advances can be made on the collateral
presently held by the System. We noted that additional collateral would
have to come from the BCIC and Westgate lines. Moreover, it was agreed
that a comprehensive review of these lines was essential if the true
condition of the bank were to be known. To obtain this appraisal the
Comptroller will have some very senior examiners analyze advances to the
two companies and set them up as money good, substandard, doubtful and
loss. These examiners will be in addition to the resident examiners
(currently two) who will remain in this bank continuously until problems
are resolved.
The meeting was worthwhile, particularly when coupled with the
other two meetings of Board personnel with Comptroller's personnel, as
they point up very clearly the System's concern. Of major importance is
the commitment on the part of the Comptroller to analyze the BCIC and
Westgate lines, for as previous memoranda have indicated we will not know
what is the condition of this bank until that has been done.
-4-
On July 20, 1973, Mr. Blanchard of the Office of the Comptroller
of the Currency called to state that the office was trying to work out a
sale of USN to Crocker National, Wells Fargo, or Barclays Bank of
California. He asked if Barclays could acquire USN by purchase and
assumption and I told him it could. This was checked with Board counsel
who agrees.
Distribution: Messrs. Melnicoff
Solomon
O'Connell
Partee
Ring
Feldberg
Ryan
Leavitt
Jamison, V.P. Federal Reserve Bank of
San Francisco
CHAIRMAN BURNS
For Information Only
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date July 25, 1973
To
Board of Governors
Subject: United States National Bank
From
Brenton C. Leavitt
B.G.L
(USN), San Diego, California
Very confidential (FR)
On July 23 this bank was borrowing $20 million from the
Federal Reserve System and $30 million in the Federal Funds market.
Vice President Jamison said that the same borrowingswere expected for
July 24 and 25.
The Bank is issuing 4-year certificates of deposit at a 7-1/2
per cent rate. Thus far it has attracted about $21 million from this
source, and the current rate of sales is about $3.5 million per day.
On July 23 examiners from the Office of the Comptroller of
the Currency started a credit investigation. Presumably they will
concentrate almost exclusively on BCIC and Westgate loans and possibly
some other troublesome loans at the Fidelity office.
The Comptroller's examiners were accompanied by representatives
of Wells Fargo bank. That bank is considering a purchase of assets and
assumption of liabilities of USN with their decision dependent upon the
findings of their investigators.
Distribution: Messrs. Melnicoff
Solomon
O'Connell
Partee
Ring
Feldberg
Ryan
Leavitt
Jamison, Federal Reserve Bank of San Francisco
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date August 31, 1973
To
Board of Governors
Subject: United States National Bank
From
Brenton C. Leavitt
(USN), San Diego, California.
Very Confidential (FR)
On Tuesday, August 28, Governor Bucher, Mr. O'Connell, and I
met with Chairman Wille, Comptroller Smith, FDIC Director LeMaistre,
and several of the senior staff of those two organizations. The purposes
of the meeting were (1) to be briefed by National Bank Examiner Hans Reiss
who was in charge of the credit investigation of USN and (2) to discuss
in general terms the possibility of FDIC assistance to USN or guaranty to
a bank that might acquire USN.
Mr. Reiss commented on the recently completed credit investi-
gation which was concerned only with loans to C. Arnholt Smith and his
interests. Based on his investigation he concluded that: loss classifi-
cations totaled $45,466,000; doubtful classifications $98,330,000; and
substandard classifications were $193,043,000. Mr. Reiss briefly
commented about some of the poorest of these loans stating that many
classified as doubtful or loss either had no collateral, collateral
appraised at only a fraction of the total of the loans, or no discernable
means of payment. Many of the appraisals on real estate were said to be
made by C. Arnholt Smith with little thought given to them. For example,
it was reported that he made five appraisals on different parcels of
real estate while seated in his office one morning. The bulk of these
loans are in the BCIC group. Mr. Reiss stated that loans to the Westgage
group are regarded as collectible although substandard in quality.
-2-
The equity capital funds of the bank total $47,557,000 and
debentures equal $14,750,000. Deposits are continuing to increase,
borrowings from the Fed are remaining in the neighborhood of $25 million
and a like amount is being purchased daily in the Federal Funds market.
Uninsured deposits are equal to 43 per cent of total deposits. This
amounts to a little over $300 million. Four banks are known to be
interested in acquiring USN. They are Wells Fargo, Crocker National,
United California Bank, and Bank of California, N.A.
It is understood that banks interested in acquiring USN would
be willing to do so only with some sort of guaranty by FDIC that would
limit their exposure. Comptroller Smith stated that in his view, it
was inconceivable that a bank of this size would be permitted to fail.
Mr. Wille stated that the FDIC was willing to study very carefully
questions raised by FDIC assistance in this matter. In response to a
question Mr. Wille stated that the corporation would need probably at
least two months to determine how and what shape such assistance might
take.
During the next 60 days a total of $68 million of certificates
of deposit and letters of credit will mature. The Comptroller's office
made no estimate of how many of these can be rolled over. Another prob-
1em discussed was that there will be a request for a report of condition
from all banks around the first of October, give or take a few days.
Issuance of a report by this bank indicating a reasonably satisfactory
-3-
condition when its true condition is known to supervisors is a question
to which the Comptroller's office plans to give consideration.
On August 30 Mr. Coyne told me that he had had a call from
a reporter for a San Diego based newspaper. The reporter stated that
he had been informed that United California Bank was going to take over
USN. He was told that no application had been submitted to the Fed and
that we knew of no such proposal.
Distribution: Messrs. Solomon
Melnicoff
O'Connell
Partee
Ring
Feldberg
Ryan
Coyne
Jamison
Ro: Exec. Jession
U.S note Bb- Diego
AI WASHINGTON
1973 SEP 6 PM 600 00
BOARD OF BUYLANDRS
OF
FEDERAL RECEIVE SYSTEM
130.
121 o' CONNELL
IN ACCORDANCE WITH OUR TELEPHONE COVERSATION TODAY AND FOR COMMUNICATION
TO THE OFFICES OF THE COMPTROLLER OF THE CURRENCY AND THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THERE FOLLOWS THE TEXT OF A RESOLUTION ADOPTED TODAY
BY OUR BOARD OF DIRECTORS:
IT IS MOVED AND SECONDED THAT THE BANK IS AUTHORIZED TO MAKE FURTHER ADVAN
CES TO THE PROBLEM BANK IN LIGHT OF THE NEEDS, AMONG OTHERS,
TO MAINTAIN SOUND CREDIT CONDIDIONS AND A SOUND AND ORDERLY FINANCIAL
SYSTEM. THE BANK IS DIRECTED TO CONVEY ATHE URGENCY OF THE SITUATION
TO THE COMPTROLLER OF THE CURRENCY AND THE FEDERAL DEPOSIT INSURANCE
CORPORATION AND TO REQUEST THAT APPROPRIATE ACTION BE TAKEN AS RAPIDLY
AS POSSIBLE TO EFFECT A RESOLUTION OF THE MATTER IN THE BEST INTEREST
OF THE PUBLIC. THE BANK IS FURTHER DIRECTED T O KEEP ITSELF AND THIS
AND THIS BOARD FULLY INFORMED AS TO THE ACTIONS OF THE COMPTROLLER AND
FDIC IN THIS REGARD AND TO CONTINUE TO OFFEER WHATEVER ASSISTANCE
THOSE AGENCIES MAY REQUIRE
REILLY
3087CC 09061803 A3AEH 09061759 066 A3BEN 078
CHAIRMAN BURNS
Exec
AGENDA ITEM #
SEP 7
1973
(DATE)
FOR INFORMATION PRIOR TO CONSIDERATION
AT A BOARD MEETING
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date September 6, 1973
To
Board of Governors
Subject: United States National Bank
From Brenton C. Leavitt
(USN), San Diego, California.
Strictly Confidential (FR)
When Governor Bucher, Mr. O'Connell, and I met on August 28,
1973, with representatives of FDIC and the Comptroller's office to discuss
this very serious problem bank (refer to my memorandum of August 31) the
need for an additional letter to the Board from the Office of the
Comptroller was discussed. This seemed advisable since the Comptroller's
earlier letter stated that we would be informed of significant changes in
the bank's condition. The Comptroller's representatives said that such a
letter would be forthcoming.
On September 4 I called First Deputy Comptroller Watson to ask
about this letter. Mr. Watson stated that he had been out of town the
latter part of the previous week and that we would have the letter soon.
On September 5 I spoke with representatives of the Federal Reserve Bank
of San Francisco to tell them about the letter, and to determine the
attitude of the Federal Reserve Bank in view of the condition of the bank
as reflected by the recently completed credit investigation. A copy of
my August 31, 1973, memorandum had previously been sent to the Reserve
Bank.
Later that afternoon President Balles, First Vice President
Williams, Vice Presidents Jamison and Reilly, and special counsel Elderkin
called to discuss the matter and to indicate considerable concern about
Board of Governors
-2-
September 6, 1973
Strictly Confidential (FR)
the letter. The entire situation was discussed and arrangements were
made for Mr. O'Connell and me to talk with representatives of the Federal
Reserve Bank later that day.
Late in the day Mr. O'Connell and I spoke with the same group
for a little over an hour. During that time we explained to them that
it was our view that the System had been officially placed on notice when
Governor Bucher, Mr. O'Connell and I met with several representatives of
FDIC and the Office of the Comptroller. The sending of a letter would
merely place in writing something that had been transmitted orally. This
position was discussed and I believe there is general agreement that our
view was the correct one.
President Balles expressed particular concern about the Reserve
Bank's liability and that of the bank's board of directors in lending to
an institution that is either insolvent or probably insolvent. These
terms were used by the Comptroller's representatives during the August 28,
1973, meeting, and again on September 5, 1973, when Comptroller Smith
spoke with Mr. O'Connell at the same time I was talking with the San
Francisco representatives.
The directors of the Federal Reserve Bank meet today, and
President Balles will inform them of the condition of this bank. It is
understood that he will say that they have been lending to a solvent bank,
but that future loans will be to a bank that is probably insolvent. We
Board of Governors
-3-
September 6, 1973
Strictly Confidential (FR)
discussed the appropriateness of the Federal Reserve Bank lending to
USN with this knowledge. Specifically noted was the fact that in lend-
ing to banks a Federal Reserve Bank was "to give due regard to the
purpose of the credit and to its probable effects of the maintenance of
sound credit conditions, both as to the individual institution and the
economy generally." The Federal Reserve Bank can, if it wishes, continue
to loan to this institution if it makes a finding that to discontinue
such lending would have adverse effects on the economy and if there is
security available to collateralize the loan. But it should be noted
that in such lending any Reserve Bank may be faced with a loss should the
institution be closed. The collateral held by the Federal Reserve Bank
could then well be subject to a determination by the courts. The Bank
might be placed in the position of a general creditor. If the Reserve
Bank wished to cease lending it would be very important to have a letter
from the Comptroller's office commenting on the bank's condition.
As of September 5 USN was borrowing $15 million from the Reserve
Bank and $20 million in Federal Funds. Recently there has been a consider-
able amount of publicity about the bank, and President Balles is concerned
that a deposit outflow may materialize which would require greater lending
by the Federal Reserve Bank.
During Mr. O'Connell's conversation with Comptroller Smith he
was told that the FDIC is moving as rapidly as possible to come to some
Board of Governors
-4-
September 6, 1973
Strictly Confidential (FR)
determination as to the form of assistance they can appropriately
provide. It looks as though the corporation will either guarantee a
clean bank, a 90 per cent clean bank, or something along this line.
Interested bankers will then be informed and bids requested. Mr. Watson
told me today that Wells Fargo is weighing the possibility of acquiring
USN without FDIC assistance.
A copy of the Comptroller's letter dated September 6, 1973,
just received this afternoon, is attached.
Distribution: Messrs: Solomon
Melnicoff
O'Connell
Partee
Ring
Feldberg
Ryan
Coyne
Jamison
DEPARTMENT THE OF THE TREASURY
THE ADMINISTRATOR OF NATIONAL BANKS
WASHINGTON, D.C. 20220
1789
Office of the
Comptroller of the Currency
September 6, 1973
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Attention: Governor Jeffrey M. Bucher
Gentlemen:
By letter dated June 19, 1973, the Acting Comptroller advised you
that our most recent examination of United States National Bank, San
Diego, California, had shown that bank to have potentially severe
credit problems. You were also told that this Office would advise you
of any significant change in the condition of the bank.
On August 28 Governor Bucher and Messrs. Leavitt and 'Connell
of the Board staff attended a meeting at the FDIC at which time we
reviewed the status of this bank as reported by our examiner who had
been visiting the bank for the last two months and who was present at
the meeting. We understand that you wish written confirmation of the
review we conducted at this meeting.
As you are well aware from the reports made by the bank to the
Federal Reserve Bank of San Francisco, United States National Bank
experienced a deposit runoff of approximately $100 million during
June 1973, the month following the filing of the SEC lawsuit against
Mr. C. Arnholt Smith, Westgate California Corp. and others. Most of
this runoff resulted from the withdrawal of money market certificates
of deposit. The bank, however, picked up approximately $35 million in
deposits during July 1973 through aggressive use of the newly permitted
four year certificate of deposit with an unlimited interest rate.
Deposits in the bank have been stable at approximately $935 million for
more than a month.
Since May 1973 the management of United States National Bank has
been working diligently with the collection of loans required by our
cease and desist order of May 24, 1973. Some progress has been made,
and the loan portfolio probably is in better shape now than it was when
we wrote you on June 19, 1973. A collateral and operating Preend has
SEP 6 1973
JEFFREY M. BUCHER
- 2 -
been obtained with Westgate California Corp. and all of its subsidiaries,
and we believe the approximately $85 million in loans to these companies
are better secured, supported by more relevant credit information, and
are more likely to be collected than they were three months ago.
Similarly, Mr. Hollis Roberts, who controls agricultural companies which
have borrowed approximately $100 million from the bank, has been most
cooperative in supplying credit information and has indicated a willing-
ness to sign an agreement similar to that of Westgate. Our examiner
believes these loans to be ultimately collectible.
On the remaining loans whose collection is required by our cease
and desist order, the credit files of the bank still have many
deficiencies which make it difficult to evaluate the loans. Our
examiner's best guess is that approximately $32 million of these loans
ultimately will be uncollectible. In addition, he believes that $13.5
million in contingent liabilities in the form of letters of credit
or bankers acceptances will become payable by the bank, without the
bank being able to collect ultimately from the borrowers. In accordance
with your request, a copy of our examiner's visitation report containing
these evaluations is enclosed.
I have not yet adopted the figures contained in the examiner's
report, and I have not determined the bank to be insolvent. I am, of
course, seriously concerned about the condition of the bank and believe
that its ultimate failure is probable. As a precautionary measure,
therefore, I am vigorously pursuing the potential sale of United States
National Bank to a larger institution. I am also exploring with the
FDIC the possibility of that Corporation assisting in any such purchase,
if such assistance appears necessary.
As you know, the deposit runoff has caused severe liquidity problems
for United States National Bank. The bank's ability to pay its obligations
when due has been maintained by borrowings from other commercial banks and
from the Federal Reserve Bank of San Francisco. Any new restrictions on
these borrowings might cause the insolvency of United States National Bank
with consequent damage to the uninsured deposits at that bank, and to the
banking industry and the economy as a whole. I assume that no changes are
contemplated in the borrowing arrangements between United States National
Bank and the Federal Reserve Bank of San Francisco, and that I will be
consulted well in advance of any proposed changes in these arrangements.
Very truly yours,
Comptroller Jin the Smith Smill Currency
Enclosures
CHAIRMAN BURNS
For Information Only
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date September 20, 1973
To
Board of Governors
From
Brenton C. Leavitt
B.b.L.
Subject: United States National Bank
(USN), San Diego, California
Strictly confidential (FR)
On September 19 President Balles and Special Counsel Elderkin
representing the Federal Reserve Bank of San Francisco, Messrs. o' Connell
and Leavitt of Board's staff met with Chairman Wille, Director LeMaistre,
and General Counsel Bransilver of FDIC. The purpose of the meeting was
to discuss FDIC's efforts to work out some solution to the problems con-
fronting USN. President Balles opened the meeting by indicating his
deep concern about this problem and specifically noting a story which
recently appeared in a San Diego newspaper. That story stated that USN
had recently lost deposits and a run on the bank was possible. Mr. Balles
stated that in his view USN should not be permitted to fail and that it
was necessary to solve its problems as soon as possible.
Chairman Wille told the Federal Reserve representatives of
FDIC's progress to date. The Corporation has concluded that the only
reasonable way in which it can be of material assistance is to offer to
provide a "clean bank" which could be merged into some other large
California bank. The three California banks which have evidenced an
interest in acquiring USN have been briefed by FDIC. These banks are
Crocker Bank, Wells Fargo, and Bank of California, N.A. Briefly the
FDIC's plan is that USN would be placed in receivership and most liabi-
lities (on the basis of current figures about $900 million) would be
-2-
assumed by a bank. The only liabilities to be excluded would probably
be $10 or $11 million related to some foreign transactions and deposits
of individuals, partnerships, and corporations having business dealings
or connections with C. Arnholt Smith. The assuming bank would not be
expected to acquire any of the Smith related loans and other assets
whose values appear to be inflated. In order to provide a clean bank
with assets equal to liabilities to be assumed, FDIC would have to put
up somewhere between $200 and $300 million in cash. (Since total loans
to Smith, his interests, and business associates totaled over $400 million
about three months ago and since these will all be retained by FDIC,
their cash contribution would likely be toward the upper end of their
estimate.) Under the Corporation's plan the Federal Reserve System and
probably banks selling Federal Funds to USN would be paid. The FDIC
would enter into a "save harmless" agreement with the assuming bank so
that it would be protected against lawsuits, unbooked liabilities, and
other contingent liabilities arising from other transactions taken
against USN.
Chairman Wille noted that the Corporation would not be ready
to proceed during September, but he hoped that the assumption could be
accomplished during the month of October. Chairman Wille mentioned that
if the bank were placed in receivership, there will be a period of
uncertainty before it would be known if any large California bank will
acquire USN. Hopefully there will be more than one bank bidding for
the clean bank; if there is not, FDIC will attempt to negotiate with any
-3-
single bank that might be interested. If the bank is to be acquired
by a California bank, it is possible that USN would be closed for a
day or two until such time as the assuming bank takes over and reopens
offices. If there is an assumption, of course, depositors (other than
possibly those mentioned above) will suffer no losses. Chairman Wille
stressed that the Corporation was bound by the statute to take that
course of action which will result in least loss to the Corporation.
For instance, if the Corporation concluded that it would suffer less
loss by liquidating the bank than by providing a clean bank, by law it
would be forced to liquidate the bank. In that instance depositors
having more than $20,000 on deposit presumably would suffer some loss.
Chairman Wille stated that he and Comptroller Smith plan to
visit with the Department of Justice to determine if the Department
would be agreeable to foregoing suit on competitive grounds if either
Bank of America or Security Pacific Bank of Los Angeles were to acquire
USN. If the Department will agree not to sue, these banks will be con-
tacted to determine if they might be interested.
It was pointed out that Mr. Elderkin is a member of the same
law firm (Brobeck, Phleger and Harrison) that represents Wells Fargo
Bank. The possibility of conflict of interest was raised; however,
Mr. Elderkin stated that careful measures had been taken to assure that
there would be no conflict. He mentioned that he does not discuss this
matter with other members of the law firm and those individuals working
on the Wells Fargo account have been instructed not to discuss this case
with him in any way.
-4-
General Counsel Bransilver stated that Corporation would
reasonably soon have a draft of the agreement under which some bank
might acquire USN. Mr. Elderkin asked if a copy could be sént to him.
After discussion, it was concluded that the document should be sent
to Vice President Louis Reilly, general counsel for the Federal Reserve
Bank. It seemed best that no such document be mailed to the firm of
Brobeck, Phleger and Harrison. Mr. Bransilver was later asked by
Mr. O'Connell if he would also make available to Board staff the draft
and subsequent final memorandum. Mr. Bransilver agreed to do this.
There was some discussion of the extent to which the Federal Reserve
might make additional loans. (As of September 18 the Federal Reserve
Bank had $30 million loaned to USN.) Mr. Balles noted that they had
sufficient collateral to make loans totaling about $105 million; if
the Reserve Bank was asked for more, the position would have to be
studied carefully.
The meeting then adjourned. Chairman Wille was extremely
forthright in providing Federal Reserve representatives a complete
picture on the Corporation's activities to date. It seems that the
Corporation is as concerned as is the Federal Reserve System in bring-
ing this problem to a satisfactory conclusion.
Distribution: Messrs. Solomon
Melnicoff
O'Connell
Partee
Ring
Feldberg
Ryan
Coyne
Jamison
CHAIRMAN BURNS
For Information Only
BOARD OF GOVERNORS
OF THE
EDERAL RESERVE SYSTEM
Office Correspondence
Date
October 5, 1973
Board of Governors
Subject:
United States National Bank
To
Brenton C. Leavitt
(USN), San Diego, California.
From
Strictly Confidential (FR)
Representatives of FDIC, including Mr. Wille at least some of
the time, have spoken to the following seven California banks about
acquiring USN: Security Pacific, Union Bank, United California Bank, all
of Los Angeles, Wells Fargo Bank, Bank of America, Bank of California,
and Crocker National, all of San Francisco. Three banks continue to
evidence some interest in acquiring USN. These are Security Pacific,
Bank of America, and Wells Fargo. The first two would pose significant
competitive problems and are said to be less interested than is Wells.
Wells continues to be by far and away the bank most interested in acqui-
ring USN.
It is reported that FDIC is offering a clean bank with all
"Smith" loans taken out and also power of the acquiring bank to return
an additional $15 million in loans to FDIC for any reason. When, or even
if, an acquisition will occur, is not yet known. It may possibly be as
soon as this weekend, but is more likely to be over the weekend beginning
October 12.
As of October 2 USN was borrowing $40 million from the Reserve
Bank and $25 million Federal Funds from five different commercial banks;
Chemical, New York, First National State, Newark, Irving, New York,
Seattle First, and Mellon of Pittsburgh.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date June 19, 1973
Board of Governors
To
Subject:
United States National Bank,
Brenton C. Leavitt
From
San Diego, California.
B.C.L.
Ve y Confidential (F.R.)
On June 18, 1973, Messrs. O'Connell, of the Board's staff,
Kelly, Jamison, Aamodt, and Thomas of the Reserve Bank's staff, and
Elderkin, outside counsel, met with Chairman of the Board Richard Woltman,
President James Mulvaney, and Senior Vice Presidents Richard Spencer and
John Swinney of U.S. National.
President Mulvaney opened the meeting by commenting about the
cease-and-desist order issued by the Comptroller of the Currency. That
order contains a number of provisions including (1) indemnification
against loss to the bank by C. Arnholt Smith, (2) that the only relationship
of Smith with the bank will be that of consultant, (3) that Smith will place
his bank stock in a voting trust, and (4) that activities of Westgate and
affiliated companies will be completely separated from the bank.
Westgate has several subsidiary companies of which the most
important from the point of view of dollars involved are the following:
1. Air California. Efforts are underway to sell this company.
During the first five months of 1973, the company had a profit of
$700,000 which is regarded as rather surprising since it has been
operating unprofitably for some time.
2. Yellow Cab companies operating in several California cities.
The value of these companies is estimated at $20 million and the
investment therein is $8,700,000. No figures were given on debts
against the cabs although it is known that they are pledged as
collateral.
-2-
3. San Diego Real Estate. The two principal parcels involved
are Westgate Plaza, an elegant hotel, and a 25-story office building.
The hotel is a cash drain on the company and it is generally believed
Westgate will be lucky to get its money out of it. The office build-
ing cost $10,700,000 and has an estimated value of $22 million.
4. Westgate Foods. The parent Westgate corporation owns 49 per
cent of this operation. Westgate's investment in the company is
$17,600,000 and the entire company is valued at $80 million. If this
company were sold, the purchaser would have to assume a long-term
debt of $48 million. The company is engaged in catching and canning
fish and owns and operates a large number of tuna boats. It is known
that some, possibly all of these boats, have been pledged as collateral.
The other major loans to Smith companies are those to British
Columbia Corporation represented by loans totaling $188 million on various
parcels of real estate in Kern and San Diego counties. This real estate is
becoming increasingly difficult to sell as much of it lacks utilities and
ecological groups are opposed to further development. Purchasers would
very likely hope to pick up bargains and attempt to bid down asking prices.
The bank's liquidity needs for the period to the end of September
are as follows. Virtually all of these certificates, bankers acceptances,
and letters of credit will have to be paid as there is virtually no chance
of roll over.
-3-
Bankers
Time CD's
Acceptances
Letters of Credit
To June 29
$12,300,000
$4,694,000
$ 9,104,000
July
6,000,000
5,300,000
15,250,000
Aug.
15,500,000
5,027,000-
1,151,000
Sept.
19,950,0002/
75,000
4,200,000-
Liquidity needs to July 31 are $52 million and to September 30 are
$94 million.
On June 18, 1973, the bank was borrowing $42 million in Federal
Funds from six banks. Bank of America had loaned $8 million secured by
$14 million time certificates due from foreign banks. United California
Bank, First National City Bank, and City National of Beverly Hills had
each loaned $8 million in Federal Funds. United States National of
Portland, Oregon, and Irving Trust of New York each loaned $5 million.
The bank would like to have a Federal Reserve loan of $50 million
for 60 days (this represents an additional $40 million as we are now lending
$10 million to the bank). This loan would be used to pay Federal Funds to
show the banking industry that the bank has the ability to clear these.
On June 18 the bank had $41 million in its reserve account.
Should the Federal Reserve Bank make this $50 million loan and
then have to cover CD's, etc., maturing in July, we could have
$90-$100 million loaned out by July 31.
1/ $1,000,000 self liquidating, secured by warehouse receipts
$3,200,000 "
"
II
"
"
"
$ 307,000 "
"
"
"
"
"
2/ Should be netted as $4,200,000 included in $19,950,000
-4-
Examiners worked over the weekend appraising collateral.
Loans totaling $11,600,000 have been found acceptable and an additional
$39,700,000 will be acceptable as soon as a few minor technical defects
are cleared. This amount. to $51,300,000. On the afternoon of June 18
an additional $61 million worth of loans was submitted to the Reserve
Bank as possible collateral.
Planning on the part of U.S. National has been poor. They have
not sold any assets and they do have good loans they could sell to raise
funds. They are talking in terms of borrowing $90 million (it could be
much higher) for one or maybe two years. Equity of the bank is equal to
about $45 million.
I asked Mr. Jamison for his appraisal of management. He said
he was not impressed with the four senior officials with whom he visited.
They did not seem to be well informed, were not knowledgeable about
specifics of the bank, and acted like individuals who had long worked for
a domineering personality.
There is a copy of a letter addressed to the Board of Governors
from Acting Comptroller of the Currency Watson in which he concluded that
at the time of March 22, 1973, examination the bank was solvent.
Attachment
Distribution: Messrs. Melnicoff
Solomon
O'Connell
Partee
Ring
Smith
Ryan
CHAIRMAN BURNS
AGENDA ITEM #
(DATE) OCT 1 7 1973
FOR INFORMATION PRIOR TO CONSIDERATION
AT A BOARD MEETING
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date October 17, 1973
To
Board of Governors
Subject: Proposed acquisition of assets
and assumption of liabilities of United
From
Legal Division (B. B. Tuttle)
States National Bank (USN), San Diego
California, by Union Bank, Los Angeles.
Strictly Confidential (FR)
Attached is correspondence from the Comptroller of the Currency
and the Department of Justice relating to the above matter.
cc: Mr. Melnicoff
Mr. Feldberg
Mr. Leavitt
Info: Min Bickel
BOARD OF GOVERNORS
1016
OF
DEPARTMENT THE TREASURY THE
OF THE
FEDERAL RESERVE SYSTEM
THE ADMINISTRATOR OF NATIONAL BANKS
1973OCT17 An 9.24
WASHINGTON, D.C. 20220 ECEIVED
1789
OFFICE OF THE CHAIRMAN
Office of the
October 16, 1973
#2205
Comptroller of the Currency
orig. Tuttle
The Honorable
Arthur F. Burns, Chairman
Federal Reserve Board
20th and Constitution
Washington, D. C. 20551
Dear Mr. Burns:
We understand that Unionamerica Company, the parent holding
company of Union Bank of Los Angeles, California, has requested the
Board of Governors to grant provisional approval to the acquisition
by Union Bank of the assets and liabilities of United States National
Bank, San Diego, California. As you know, contingency plans are
presently being made by this Office in conjunction with the FDIC for
a possible emergency takeover transaction of USNB in the event that
such action becomes necessary because of the deteriorating condition
of USNB. Present plans call for the solicitation of sealed bids by
the FDIC, as receiver, from the various interested and eligible
California banks. The Union Bank has in effect requested permission
from the Board of Governors to submit such a bid.
This is to advise that the condition of USNB is such as to
necessitate and justify expedited handling of the Union Bank request
and we would very much appreciate it if the Board could take whatever
action is necessary in this regard at its meeting tomorrow.
Sincerely,
Comptroller
Ji James E. of the Smith Smith Currency
Files
Corres
Baker
Grossman
Sims
Hold (3)
JSims/DIBaker:ala
October 5, 1973
DIB
60-111-0
CONFIDENTIAL
Honorable Frank Wille
Chairman
R.
Federal Deposit Insurance Corporation
GERALD
FORD
550 17th St., N.W.
Washington, D.C. 20429
LIBRARY
Dear Frank:
When we last discussed the United States National Bank
("USN") situation, I promised that we would undertake an
expedited analysis of the competitive relationship between
USN and the other large banking organizations mentioned as
possible purchasers.
Because of the time pressures, we have concentrated on
the effect on direct competition. If USN were a fully viable
organization, we would probably be concerned about the purchase
of USN by any of the other large California banking organizations,
from the standpoint of potential competition and the competitive
structure in the state as a whole. However, given USN's present
difficulties, we feel that the horizontal analysis we have
undertaken provides a reasonable guide to the relative competitive
impact of the sale of USN to any of the banking organizations
discussed.
One additional caveat should be noted. The actual statistics
used represent our best effort in the time available, and there
may well be slight variations or inconsistencies contained
therein. We are of the present opinion, however, that they
are representative of what a fuller and more precise analysis
would disclose. If any errors are immediately noticeable, we
would appreciate being informed.
The statistics are presented in 4 different tabulations.
The first shows the percentage of offices held by all banks
in all cities in which USN has offices; the second shows
the percentage of deposits held by all banks in such cities;
the third shows for each such city the number and amount of
both offices and deposits held by all banks in such cities;
and the fourth shows, for each major bank, the number of
offices and amount of deposits held in all cities in which
USN has offices. All deposit data represent total deposits
as indicated in the FDIC Summary of Deposits for June 30, 1972.
From these tabulations, it is clear that Bank of America
("B of A") and Security Pacific National Bank ("SP") are
dominant competitors in almost every city in which USN has
offices. In Los Angeles and San Diego, the cities in which
USN has both its largest number of offices and its greatest
amount of deposits, B of A and SP are the largest competitors.
In Los Angeles, B of A holds about 28% of the offices and about
27% of the deposits; in San Diego, it has 32% of the offices
and over 30% of the deposits. For SP, the comparable figures
in Los Angeles are 23% of the offices and 26% of the deposits;
in San Diego, SP has 14% of both offices and deposits. B of
A and SP each have offices in all but five of the 38 cities
in which USN has offices; in 22 of the 30 cities in which both
B of A and SP have offices, they hold the two largest positions,
and one or the other holds the largest position in 11 other
cities. Acquisition of USN by either B of A or SP would clearly
present serious antitrust problems.
United California Bank also presents serious antitrust
problems, although even 80 it would still be preferable to
B of A or SP as a purchaser of USN. It has offices in 24 of
the 38 USN cities, and either a leading or substantial market
share in at least 13 of those cities. In Los Angeles, United
California has 10% of the offices and 14% of the deposits;
in San Diego, 5% of the offices and 3% of the deposits. In
Buena Park, Costa Mesa, El Monte, Hemet, Huntington Beach,
Monrovia and Rolling Hills Estates, all cities in which USN
has at least a 5% market share, United California has substantial
(over 10%) market shares.
GERALIA FORD
2
of the remaining potential purchasers, Crocker-Citizens
would appear to present the most competitive problems, followed
(in descending order of problems) by Wells-Fargo, Union Bank,
First-Western and Bank of California. Bank of California
clearly presents the least competitive problems, with offices
in only 8 of USN's cities, and a major market share in only
one such city. Based on our present information, I believe
that the Department would not seek to challenge the purchase
of USN by any member of this latter group. This is not to
say, however, that a choice between these banking organizations
should ignore competitive factors, and assuming that any bids
received from any of these banks are in a relatively small
range, we would hope that both the FDIC (as receiver) and
the approving agency would give primary consideration to the
organization presenting the least competitive problems.
As you will recall, I gave you a rather rapidly-done
staff memorandum on the legal issues involved in this situation
when we last met. We have found nothing since our meeting
which would alter the conclusions expressed in that memorandum,
and you should understand that it represents the Department's
position. We are in the process of putting some polish on
that document, and we willsubmit the finished product to
you in the near future.
Clearly, this whole matter is of great importance to
the Department. We appreciate being consulted in advance
the way we have, and will do the best we can to contribute
constructively when the day of reckoning is at hand.
Sincerely yours,
DONALD I. BAKER
Deputy Assistant Attorney General
Antitrust Division
CC: Edward Bransilver
GERA
ABRARY
BOARD OF GOVERNO OF THE FEDERAL RESERVE SYSTEM
Charman Burns- -
FORD & BRARV
For use if
Union Bank is the
successful hidden to
National Bank of
acquire united States
San Diego Bidding
totah place 10/18. Thursday
B.O.L.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date October 18, 1973
To
Chairman Burns
Subject:
Possible acquisition of United
States National Bank, San Diego, Calif.
From
Brenton C. Leavitt
by Union Bank, Los Angeles, California
(Strictly Confidential (RK)
Bidding for United States National Bank is now scheduled to take
place the afternoon of October 18 instead of October 19. The bidding will
be at the Federal Reserve Bank of San Francisco. In the event Union Bank,
a state member bank, is the successful bidder, you may have calls from
newspaper reporters or you may wish to inform senior members of the banking
and currency committees of reasons for our action.
The Board has known for some time that this bank was in trouble
and has been extending credit through the discount window since June 13,
1973. At first our loan was secured by U.S. bonds. Later a portion of it
was secured by pledged loans, and then loans were made only after consulta-
tion with the FDIC and Comptroller of the Currency. Recently our loan has
been for about $30 million.
The Board knew that determined efforts were being made to salvage
this bank and it was the System's judgment, both Reserve Bank and Board,
that the public's interests would be best served by lending to the bank in
order that a salvage operation could be worked out. At all times our
loans were secured and advanced in accordance with the statutes.
The acquisition of certain assets and certain liabilities of
United States National Bank by Union Bank was approved pursuant to the Bank
Merger Act (12 U.S.C. 1828(c)). The Board received information from the
Comptroller of the Currency that an emergency situation existed which
-2-
required that the Board act immediately pursuant to the provisions of the
Bank Merger Act in order to safeguard depositors of USN. It was the
Board's view that any anti-competitive effects, and these were adjudged
to be minor, were clearly outweighed by the public interest factors. These
public interest factors were that depositors would not lose money, that
business could be continued as normal, and that a severe adverse impact to
the economy resulting from the closure of a large bank could be avoided.
CHAIRMAN BURNS
Exc.Sign
AGENDA ITEM #
OCT 17 1973
(DATE)
FOR INFORMATION PRIOR TO CONSIDERATION
AT A BOARD MEETING
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date October 17, 1973
To
Board of Governors
Subject: Proposed acquisition of assets
Legal Division snt
and assumption of liabilities of United
From
States National Bank (USN) San Diego.
(B. B. Tuttle)
California, by Union Bank, Los Angeles.
Strictly Confidential (FR)
Attached is a draft Order to be carried by a representative
of the Board if the Board wishes to approve the proposed transaction.
cc: Mr. Feldberg
Mr. Melnicoff
Mr. Leavitt
DRAFT
FEDERAL RESERVE SYSTEM
UNION BANK
Order Approving Acquisition of Assets
Union Bank, Los Angeles, California, a member State bank
of the Federal Reserve System, has applied, pursuant to the Bank
Merger Act (12 U.S.C. 1828(c)), for the Board's prior approval to
acquire certain assets and assume certain liabilities of United
States National Bank, San Diego, California ($873 million in deposits),
and, as an incident thereto, to operate the present 62 offices of
United States National Bank as branch offices.
Published notice of the proposed acquisition of assets
and assumption of liabilities and requests for reports on the competitive
factors involved therein have been dispensed with as authorized by
the Bank Merger Act.
The Board has considered all relevant material contained
in the record in the light of the factors set forth in the Act,
including the effect of the proposal on competition, the financial
and managerial resources and prospects of the banks involved, and
the convenience and needs of the communities to be served and finds
that:
On the basis of the information before the Board, including
information from the Comptroller of the Currency, the Board finds
that an emergency situation exists so as to require that the Board act
immediately pursuant to the provisions of the Bank Merger Act in order
to safeguard depositors of United States National Bank.
-2-
Such anticompetitive effects as will be attributable to
consummation of the transaction will be clearly outweighed in the public
interest by considerations relating to and involved in the emergency
situation found to exist. From the record in the case, it is the
Board's judgment that any disposition of the application other than
approval would be inconsistent with the best interests of the depositors
of United States National Bank, and the Board concludes that the proposed
transaction should be approved on a basis that would not delay consum-
mation of the proposal.
It is hereby ordered, On the basis of the record, that the
application be and hereby is approved and that the acquisition of
assets and assumption of liabilities and the establishment of the branch
offices may be consummated immediately but in no event later than
three months after the date of this Order unless such period is
extended for good cause by the Board, or by the Federal Reserve Bank
of San Francisco pursuant to delegated authority.
By order of the Board of Governors effective October 19,
1973.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date October 17, 1973
To
Board of Governors
Subject: Proposed acquisition of assets
and assumption of liabilities of United
From
Legal Division
States National Bank (USN), San Diego,
(B. B. Tuttle)
California, by Union Bank, Los Angeles.
Strictly Confidential (FR)
Attached is a draft Order to be carried by a representative
of the Board if the Board wishes to approve the proposed transaction.
cc: Mr. Feldberg
Mr. Melnicoff
Mr. Leavitt
DRAFT
FEDERAL RESERVE SYSTEM
UNION BANK
Order Approving Acquisition of Assets
Union Bank, Los Angeles, California, a member State bank
of the Federal Reserve System, has applied, pursuant to the Bank
Merger Act (12 U.S.C. 1828(c)), for the Board's prior approval to
acquire certain assets and assume certain liabilities of United
States National Bank, San Diego, California ($873 million in deposits),
and, as an incident thereto, to operate the present 62 offices of
United States National Bank as branch offices.
Published notice of the proposed acquisition of assets
and assumption of liabilities and requests for reports on the competitive
factors involved therein have been dispensed with as authorized by
the Bank Merger Act.
The Board has considered all relevant material contained
in the record in the light of the factors set forth in the Act,
including the effect of the proposal on competition, the financial
and managerial resources and prospects of the banks involved, and
the convenience and needs of the communities to be served and finds
that:
On the basis of the information before the Board, including
information from the Comptroller of the Currency, the Board finds
that an emergency situation exists so as to require that the Board act
immediately pursuant to the provisions of the Bank Merger Act in order
to safeguard depositors of United States National Bank.
-2-
Such anticompetitive effects as will be attributable to
consummation of the transaction will be clearly outweighed in the public
interest by considerations relating to and involved in the emergency
situation found to exist. From the record in the case, it is the
Board's judgment that any disposition of the application other than
approval would be inconsistent with the best interests of the depositors
of United States National Bank, and the Board concludes that the proposed
transaction should be approved on a basis that would not delay consum-
mation of the proposal.
It is hereby ordered, On the basis of the record, that the
application be and hereby is approved and that the acquisition of
assets and assumption of liabilities and the establishment of the branch
offices may be consummated immediately but in no event later than
three months after the date of this Order unless such period is
extended for good cause by the Board, or by the Federal Reserve Bank
of San Francisco pursuant to delegated authority.
By order of the Board of Governors effective October 19,
1973.
COMMERCIAL TELEGRAM OR CABLE
BURD OF GOVERNORS OF THE FEDE AL RESERVE SYSTEM
Burns
GDC 1029471
NBX
charge to FEDERAL RESERVE BOARD
Rate:
via:
November 2, 1973
National Westminster Bank, Ltd.
London, England
Telex number 885361
In response to your telegram of October 31 to Chairman Burns,
you are advised that the United States National Bank of San
Diego was closed by the Comptroller of the Currency on Oct. 18
at which time the Federal Deposit Insurance Corporation was
appointed receiver under Section 12 U.S.C. 191. The receiver
entered into an agreement for the purchase of certain assets
and assumption of certain liabilities of United States National
Bank by Crocker National Bank which purchase and assumption
was approved by the U.S. District Court for the Southern
District of California.
page 1 of 2
PLEASE TYPE OR WRITE PLAINLY WITHIN INNER BORDER-DO NOT FOLD
If additional space is required continue in space below.
GDC 1029471
NBX
charge to FEDERAL RESERVE BOARD
A representative or representatives of the Board of Governors
are willing to meet with representatives from various English
banks. It is understood that you will contact Brenton C.
Leavitt, a member of the Board's staff, to make arrangements
for the meeting.
I trust that our prompt response to your telegram reflects also
the Board's concern that there be no damage caused by this
event to international banking relationships and especially to
relationships with banks in England.
CU
Feldberg
Federal Reserve Board
page 2 of 2
PLEASE TYPE OR WRITE PLAINLY WITHIN INNER BORDER-DO NOT FOLD
#2307
FOR OFFICIAL BUSINESS ONLY-See Secretarial Handbook for Instructions and Rates
116843 FEDR 01
(
MINESSAN LDN
180 DVS 31/16/1973
TELEGRAM
EASED WIRE S: VICE
EIVED AT WASHING TON
TEM ION
1973 OCT 31 PM. 3 24
(BAIRMAN,
DARD OF GOVERNORS,
REDERAL RESERVE SYSTEM
BOARD OF GOVERNORS
WASHINUTON(OC)
OF THE
EDERAL RESERVE SYSTEM
#2307
HAVING AWAITED AND NOW HEARD THE STATEMENT OF CROCKER NATIONAL
BANK, WE ARE GREATLY CONCERNED AT THE WAY THE MATTER OF UNITED
Days
bye.
STATES NATIONAL BANK OF SAN DIEGO HAS AND 19 BEING HANDLED.
AS SUBSTANTIAL CREDITORS WHOSE INTERESTS APPEAR TO HAVE BEEN
REJUDICED, WE REQUEST IMMEDIATE OFFORTUNITY TO DISCUSS
THIS WHOLE MATTER WITH YOU. #8 ARE ALSO CONCERNED
4 THE POSSIBLE DAMAGE WHICH MAY BE CAUSED 38 THIS EVENT TO
INTERNATIONAL BANKING RELATIONSHIPS AND ESPECIALLY
TO RELATIONSHIPS WITH UNITED STATES BANKS: THIS NESSAGE 15
EING SENT WITH THE KNOWLEDGE OF THE BANK OF ENGLAND
w WITHOUT PREJUDICE TO LEGAL RIGHTS OF ALL CONCERNED
SIGNED
MIJONAL WESTMINSTER BANK LIMITED FOR
INTERNAT IONAL WESTMINSTER BANK AND COUITS AND CO
BARCLAYS INTERNAT TONAL BAN LIMITED
INTERNAT IONAL COMMERCIAL BANK LIMITED LONDON
WHOPERATIVE COMMERCIAL BANK LONDON
Wire BRANDT'S SONS AND CO LTD FOR
MERCATOR INVESTMENT CO LTD
SENT BY NATIONAL WESTRINSTER BANK LMITED
OVERSEAS BRANCH s LONDON
TELEX NUMBER 885361
410043 FEDR UI
MTWESBAN LDN
PLEASE ACKNOWLEDGE RECEIPT OF THIS CABLE AND THANK YOU FOR YOUR
CUPERAT ION
for IT AND TNXX
476643 FEDR 01
MATWESBAN DDN
TELEGRAM
FEDERAL RESERVE COMMUNICATIONS SYSTEM
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
November 8, 1973
Banco Popular Espanol
Madrid, Spain
Telex number 22511
In response to your telegram of November 7 to Chairman Burns,
you are advised that the United States National Bank of San
Diego was closed by the Comptroller of the Currency on Oct. 18
at which time the Federal Deposit Insurance Corporation was
appointed receiver under section 12 U.S.C. 191. The receiver
entered into an agreement for the purchase of certain assets
and assumption of certain liabilities of United States National
Bank by Crocker National Bank which purchase and assumption
was approved by the U.S. District Court for the Southern
District of California.
2
I can also inform you that claims are now being filed with
the Federal Deposit Insurance Corporation as receiver of the
United States National Bank. If you wish to make a claim, it
may be filed with the Federal Deposit Insurance Corporation at
the United States National Bank of San Diego.
It is hoped this information is adequate for your needs.
Feldberg
Federal Reserve Board
FORD
BCL:bh
cc: Governor Bucher, Messrs. O'Connell and Leavitt
LIBRARY
B.6.K.
2
FILE COPY
I REPEAT
BUARD OF GOVERNORS
FEDERAL RESERVE SYSTEM
1973NOV - -7 AM 10: 40
+
440643 FEDR UI
OFFICE OF RECEIVED THE CHAIRMAN
22511 BPEMB E 7.11.73 RE. 30505/MM
16.30
FROM: BANCO POPULAR ESPANOL - MADRID
FEDERAL RESERVE SYSTEM
OF THE
TO: FEDERAL RESERVE BOARD - WASHINGTON
BOARD OF GOVERNORS
1973 NOV 7 AM 10 35
RECEIVED AT WASHINGTON
LEASED WIRE SERVICE
D.C.
TELEGRAM
Phone
ATTN. THE CHAIRMAN
LITRARY
HAVING AWAITED AND NOW HEARD THE STATEMENT OF CROCKER NATIONAL
BANK, WE ARE GREATLY CONCERNED AT THE WAY THE MATTER OF UNITED
FCRD
STATES NATIONAL BANK OF SAN DIEGO HAS BEEN AND IS BEING HANDLED,
AS SUBSTANTIAL CREDITORS WHOSE INTERESTS APPEAR TO HAVE BEEN
PREJUDICED. WE ARE ALSO CONCERNED AT THE POSSIBLE DAMAGE WHICH
MAY BE CAUSED BY THIS EVENT TO INTERNATIONAL BANKING RELATIONSHIPS
AND ESPECIALLY Γo RELATIONSHIPS WITH UNITED STATES BANKS.
THIS MESSAGE IS BEING SENT WITH THE KNOWLEDGE OF THE BANK OF SPAIN
AND WITHOUT PREJUDICE TO LEGAL RIGHTS OF ALL CONCERNED.
HEASE LET US HAVE YOUR COMPLETE INFORMATION THEREON AT YOUR
EARLIEST CONVENIENCE AND BE ALSO ADVISED THAT A REPRESENTATION OF
OUR BANKS WOULD BE IN A POSITION TO HAVE THIS MATTER HANDLED
DIRECTLY WITH YOU, SHOULD YOU DEEM CONVENIENT TO DO SO.
BANCO ATLANT ICO
BANCO POPULAR ESPANOL - MADRID (SPANEEE SPAIN)
TELEX NR. 22511
+
1709 NW, D.C.
440043 FEDR UI
WKQQ BPEMB El
NOV 23 1973
Mr. Leavitt (original wire)
CC: Chairman Burns
Governor Bucher
Mr. O'Cennell
LIBRARY
Wille
A 1+1
western union
Telegram
LLE142
WAE248(2031) (1-035409C325003)PD 11/21/73 2028⁷³NOV21 PM 9: 20
ICS IPMWAWH WSH
08122 WASHINGTON DC 228 11-21 713P EST
#2437
PMS HONORABLE ARTHUR F. BURNS CHAIRMAN
DLR c/o
OFFICE OF OF THE
X
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
RECEIVED
WASHINGTON DC
20t t COMST. AJE
CHAIR
22 AU
AM10:
FEDERAL RESERVE SYSTEM
OF THE
BOARD OF GOVERNORS
YOUR TELEX OF NOVEMBER 20 RELATING TO CERTAIN CLAIMS AGAINST THE
U.S. NATIONAL BANK OF SAN DIEGO IN RECEIVERSHIP HAS BEEN RECEIVED.
AS INDICATED TO YOU AT OUR MEETING ON NOVEMBER 9 IN WASHINGTON,
WE WOULD BE PLEASED TO RECEIVE THE DOCUMENTARY EVIDENCE
DESCRIBED IN PARAGRAPH 4 OF YOUR TELEX AND ASSURE YOU THAT WE WILL
REVIEW SUCH EVIDENCE AND YOUR PROOF OF CLAIM AS PROMPTLY AS
POSSIBLE. I WOULD ALSO REITERATE FDIC'S POSITION THAT IF IN FACT
A PARTICULAR LETTER OF CREDIT MERELY EVIDENCED A DIRECT INTERBANK
LOAN OR DEPOSIT IN THE NORMAL COURSE OF BUSINESS, THE PURCHASE
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- ICS IPMWAWSH WSH 08122/2
1973NOV 21 PH 9:21
AND ASSUMPTION AGREEMENT ENTERED INTO BY FDIC AND CROCKER
CONTEMPLATES ASSUMPTION OF SUCH A LOAN OR DEPOSIT BY CROCKER
AND A FURTHER CASH ADVANCE BY FDIC TO CROCKER.
IT IS OBVIOUSLY IMPRACTICAL, HOWEVER, TO PROVIDE EACH CLAIMANT
IN THE RCEIVERSHIP AN OPPORTUNITY TO SUBMIT PROOF OF CLAIM TO
THE CHAIRMAN PERSONALLY, ESPECIALLY WHEN SUBSEQUENT ACTION
ON THE CLAIM WILL BE TAKEN BY THE FULL FDIC BOARD OF DIRECTORS.
I MUST ADVISE YOU, THEREFORE, TO FOLLOW THE FDIC'S NORMAL
RECEIVERSHIP PROCEDURES BY FILING YOU DOCUMENTARY EVIDENCE AND PROOF
OF CLAIM EITHER WITH THE LIQUIDATOR IN SAN DIEGO OR WITH MR.
JOHN SLOCUM, CHIEF OF THE FDIC'S DIVISION OF LIQUIDATION, HERE IN
WASHINGTON. ANY OTHER COURSE COULD BE CRITICIZED BY OTHER
CLAIMANTS AS UNDULY FAVORING THE BANKS YOU REPRESENT.
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GERALD
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ICS IPMWAWSH WSH 08122/3
1973 NOV 21 PM 9:21
to
FRANK WILLE CHAIRMAN FEDL DEPOSIT INS CORPORATION
NNNN
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