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no cash dividends would be paid out for the purpose

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of serving what is, in effect, acquisition debt?

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MR. TUTTLE: The first question, obviously,

would be, do you have a particular ratio in mind?
MR. RYAN: Well, that's something we could

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alternative.

It is difficult at this stage to determine whether that is the most appropriate means of maintaining adequate capital or whether in discussions with management, they might feel that there is a better Also you would get into the question,

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I think, of exactly what is the ratio, but I think

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it is a subject that we would be glad to explore with

MR. RYAN: The problem I have, you know,

is that adequate capital, is determining which adequate capital was more of an art form than a science. And

adequacy is often in the eye of the beholder, and the

management of an institution very often has a different

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view of what is adequate than the regulatory agency

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that is resonsible for the oversight, regulatory over-
sight institution.

MR. CLIFFORD: Often times there is a good

deal of difference, too, between a smaller bank and

a very much larger bank.

;

MR. RYAN: There certainly is, but we could explore that some more. As I say, it is so critical because of the addition of this $50 million of debt

in the organization that's not there now, and we,

at the Federal Reserve, don't want to be in the posi-
tion of approving a bank holding company that's going

to bring additional debt over a group of banks that
may cause those banks some difficulty over time trying

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to service that debt. That's kind of the reverse of

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the traditional role we see of bank holding companies
in providing a source of strength to subsidiary banks.
MR. ALTMAN: Well, it is certainly not the
intention of the investors through the financial struc-
ture to weaken or undermine the financial strength

LIBRARIES

160° that that would not occur, and we think that a rather conclusive assurance in that regard is given by the investors' statement that they would be willing, out of their personal funds, to pay the debt service in any year in which income was inadequate. But I do

believe that we are sensitive to the concerns of the
supervisory authorities and believe that it is a subject
that has merit and is worth exploring subsequent to
this meeting.

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MR. MANNION:

Why don't we move onto the

last area that we have, and that is the ongoing super

visory concerns that may exist with foreign individuals

owning a U.S. banking organization.

I think our initial concern in this area

is the prospect or the possibility that individuals,
investors that get control of a banking organization,
could conceivably use that banking organization to
further their own interest and thereby do a disservice
to the condition and the soundness of the banking organit

zation itself.

What plans do you have in mind for seeing

to it that the Financial General subsidiary banks are

not abused to further the individual interests of

the individual investors?

MR. ALTMAN: Well, the record should show

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Mr. Mannion, and I won't be labor it but there are built

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in protections as we visualize the future of Financial

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General.

First place, just very briefly, the funds

of the individual banks are under the control of the

management which, in turn, is under the control of

the Boards of Directors.

protection.

And there, as we mentioned, is the first

The management of that bank, supported

by the Board, has to make any kind of a decision
regarding loans, where the money of that bank goes.

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I'm saying that that is the kind of protection that will continue to exist. You have heard His Excellency

General toward extending continued autonomy to the
individual banks. You have also heard me reiterate

that in each instance that we have met with the indi

vidual banks, we have asked management to stay and

we have asked the Board members to stay.

I know of no way that instructions or directions can be given that would force the individual

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banks to lend money in a manner or transfer funds in

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a manner that would be inimical to the best interests

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will continue to be made up of Americans at the will

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and direction of the investors, so that there, again, they are not subject to the direction of anyone. They are the managers. The Board of Directors of Financial General sets the policy of Financial General. Nobody

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else sets the policy of Financial General. The Board

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of Directors does, and they, in turn, inform the manage

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ment of Financial General what that policy is.

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I say again that think the last level

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of protection is the fact that we have mentioned to you that we have agreed with the investors that we shall stay in the picture, and that we shall continue

to be close to it. We shall monitor what goes on at Financial General which, in turn, is in charge of seeing what goes on in the member banks.

Also at all stages, there are the regulatory

authorities

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state regulatory authorities of each

state and the federal regulatory authorities which

require periodic reports as to what is going on within

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