For immediate release

The Federal Reserve Board today announced its approval of the notice filed by First Union Corporation, Charlotte, North Carolina, to acquire Wheat First Butcher Singer, Inc., Richmond, Virginia, and thereby engage in a variety of securities-related activities, including engaging to a limited extent in underwriting and dealing in all types of debt and equity securities. Attached is the Board's Order relating to this action.

First Union Corporation Charlotte, North Carolina Order Approving Notice to Engage in Nonbanking Activities

First Union Corporation, Charlotte, North Carolina ("First Union"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire all the voting shares of Wheat First Butcher Singer, Inc. ("Wheat First"), and thereby acquire control of its wholly owned subsidiary, Wheat, First Securities, Inc. ("Company"), both of Richmond, Virginia.1 First Union would thereby engage in the following activities: (1) Underwriting and dealing in, to a limited extent, all types of debt and equity securities, other than ownership interests in open-end investment companies, that a member bank may not underwrite or deal in ("bank-ineligible securities"); (2) Providing financial and investment advisory services, pursuant to section 225.28(b)(6) of Regulation Y (12 C.F.R. 225.28(b)(6)); (3) Providing securities brokerage, private placement, riskless principal, futures commission merchant, and other transactional services, pursuant to section 225.28(b)(7) of Regulation Y (12 C.F.R. 225.28(b)(7)); and (4) Underwriting and dealing in government obligations and money market instruments in which state member banks may underwrite and deal under 12 U.S.C. §§ 335 and 24(7) ("bank-eligible securities"), engaging in investing and trading activities, and buying and selling bullion and related activities, pursuant to section 225.28(b)(8) of Regulation Y (12 C.F.R. 225.28(b)(8)). Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 55,403 (1997)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act. First Union, with total consolidated assets of approximately $155 billion, is the sixth largest banking organization in the United States.2 First Union operates bank subsidiaries in 12 states and the District of Columbia, and engages through subsidiaries in a broad range of permissible nonbanking activities. First Union currently engages in limited underwriting and is dealing in bank-ineligible securities that the Board has determined are permissible under section 20 of the Glass-Steagall Act (12 U.S.C. § 377).3 Company is, and will continue to be, a broker-dealer registered with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) ("1934 Act") and a member of the National Association of Securities Dealers, Inc. ("NASD"). Accordingly, Company is and will remain subject to the recordkeeping and reporting obligations, fiduciary standards, and other requirements of the 1934 Act, the SEC, and the NASD. Following consummation of the proposal, Company also would be registered as a futures commission merchant with the Commodity Futures Trading Commission ("CFTC") and would be subject to the recordkeeping and reporting obligations, fiduciary standards, and other requirements of the Commodity Exchange Act (7 U.S.C. § 2 et seq.) and the CFTC. Underwriting and Dealing Activities The Board has determined -- subject to the framework of prudential limitations to address the potential for conflicts of interests, unsound banking practices, or other adverse effects -- that the proposed activities of underwriting and dealing in bank-ineligible securities are so closely related to banking as to be a proper incident thereto within the meaning of section 4(c)(8) of the BHC Act.4 The Board also has determined that conduct of the proposed activities is consistent with section 20 of the Glass-Steagall Act, provided that the company engaged in underwriting and dealing activities derives no more than 25 percent of its gross revenues from underwriting and dealing bank-ineligible securities over a two-year period.5 First Union has committed that Company will conduct its bank-ineligible securities underwriting and dealing activities subject to the Board's 25-percent revenue limit.6 As a condition of this order, First Union also would be required to conduct its bank-ineligible securities activities subject to the Operating Standards for section 20 subsidiaries.7 Other Activities Approved by Regulation The Board previously has determined by regulation that the proposed financial and investment advisory services; securities brokerage, riskless principal, private placement, futures commission merchant, and other transactional services; and underwriting and dealing in bank-eligible securities, investing and trading services, and buying and selling of bullion and related activities to be conducted by Company after its acquisition by First Union are closely related to banking within the meaning of section 4(c)(8) of the BHC Act.8 First Union has committed that it will conduct each of these activities in accordance with the BHC Act, Regulation Y, and the relevant Board interpretations and orders.9 Proper Incident to Banking Standard In order to approve the proposal, the Board also must determine that the proposed activities are a proper incident to banking, that is, that the proposed transaction "can reasonably be expected to produce benefits to the public . . . that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."10 As part of its evaluation of these factors, the Board considers the financial condition and managerial resources of the notificant and its subsidiaries and the effect the transaction would have on such resources.11 In considering the financial resources of the notificant, the Board has reviewed the capitalization of First Union and Wheat First in accordance with the standards set forth in the Section 20 Orders. The Board finds the capitalization of each to be consistent with approval of the proposal. The Board's determination is based on all the facts of record, including First Union's projections of the volume of the bank-ineligible underwriting and dealing activities of Company. The Board also has reviewed the managerial resources of each of the entities involved in the proposal in light of examination reports and the Board's supervisory experience with First Union and FUCMC. The Board also has considered that First Union has established policies and procedures to ensure compliance with this order and the Section 20 Orders, including computer, audit, and account systems, internal risk management controls, and the necessary operational and managerial infrastructure. On the basis of these and all the facts of record, including the commitments provided in this case and the proposed managerial structure and risk management systems of Company, the Board has concluded that financial and managerial considerations are consistent with approval of the notice. The Board has carefully considered the competitive effects of the proposed acquisition. To the extent that FUCMC and Company offer different types of products and services, the proposed acquisition would result in no loss of competition. In those markets in which FUCMC's and Company's product and service offerings overlap, such as municipal finance underwriting, research, and placement and investment advisory activities for mutual funds, there are numerous existing and potential competitors. Consummation of the proposal, therefore, would have a de minimis effect on competition in the market for these services, and the Board has concluded that the proposal would not result in any significantly adverse competitive effects in any relevant market. The Board expects that the proposed acquisition would provide added convenience to customers of both First Union and Company. First Union has stated that the acquisition would expand the range of products and services available to its customers and those of Company. First Union also has stated that the proposed transaction would result in operational efficiencies that would allow it to become a more effective competitor. As noted above, First Union has committed that, following the proposed acquisition, Company will conduct its bank-ineligible securities underwriting and dealing activities in accordance with the prudential framework established by the Board's Section 20 Orders. Under the framework and conditions established in this order and the Section 20 Orders, and based on all the facts of record, the Board concludes that Company's proposed underwriting and dealing activities in bank-ineligible securities are not likely to result in significantly adverse effects that would outweigh the public benefits. Similarly, the Board finds no evidence that Company's proposed riskless principal, private placement, and other nonbanking activities -- conducted under the framework and conditions established in this order and Regulation Y -- would likely result in any significantly adverse effects that would outweigh the public benefits of the proposal. Based on all the facts of record, the Board has determined that performance of the proposed activities by First Union can reasonably be expected to produce public benefits. Accordingly, the Board has determined that performance of the proposed activities by First Union is a proper incident to banking for purposes of section 4(c)(8) of the BHC Act. Conclusion On the basis of all the facts of record, the Board has determined that the notice should be, and hereby is, approved, subject to all the terms and conditions in this order and the Section 20 Orders, as modified by the Modification Orders. The Board's approval of the proposal extends only to activities conducted within the limitations of those orders and this order, including the Board's reservation of authority to establish additional limitations to ensure that First Union's activities are consistent with safety and soundness, avoidance of conflicts of interests, and other relevant considerations under the BHC Act. Underwriting and dealing in any manner other than as approved in this order and the Section 20 Orders (as modified by the Modification Orders) is not within the scope of the Board's approval and is not authorized for First Union. The Board's determination is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. 225.7 and 225.25(c)), and to the Board's authority to require such modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to ensure compliance with, and to prevent evasion of, the provisions of the BHC Act and the Board's regulations and orders issued thereunder. The Board's decision is specifically conditioned on compliance with all the commitments made in connection with this notice, including the commitments discussed in this order, and the conditions set forth in this order and the above-noted Board regulations and orders. These commitments and conditions are deemed to be conditions imposed in writing by the Board in connection with its findings and decisions, and, as such, may be enforced in proceedings under applicable law. The proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Richmond acting pursuant to delegated authority.

By order of the Board of Governors,12 effective November 26, 1997. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Footnotes 1 First Union would merge Wheat First into itself, and, immediately thereafter, merge the existing section 20 subsidiary of First Union, First Union Capital Markets Corp., Charlotte, North Carolina ("FUCMC"), into Company. 2 Asset and ranking data are as of September 30, 1997, and include transactions approved by the Board after that date. 3 See First Union Corporation, 81 Federal Reserve Bulletin 726 (1995); First Union Corporation, 75 Federal Reserve Bulletin 645 (1989). 4 See J.P. Morgan & Co. Incorporated, et al., 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities Industries Ass'n v. Board of Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert. denied, 486 U.S. 1059 (1988); as modified by Review of Restrictions on Director, Officer and Employee Interlocks, Cross-Marketing Activities, and the Purchase and Sale of Financial Assets between a Section 20 Subsidiary and an Affiliated Bank or Thrift, 61 Federal Register 57,679 (1996), and Amendments to Restrictions in the Board's Section 20 Orders, 62 Federal Register 45,295 (1997) (collectively, "Section 20 Orders"). 5 Compliance with the revenue limitation shall be calculated in accordance with the method stated in the Section Orders, as modified by the Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989), and 10 Percent Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 48,953 (1996), and Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 68,750 (1996) (collectively, "Modification Orders"). 6 Company may provide services that are necessary incidents to the proposed underwriting and dealing activities. Unless First Union receives specific approval under section 4(c)(8) of the BHC Act to conduct the activities independently, Company must treat any revenues from the incidental activities as bank-ineligible revenues subject to the Board's revenue limitation. 7 12 C.F.R. 225.200. 8 See 12 C.F.R. 225.28(b)(6), (7), and (8). 9 Wheat First also engages in certain real estate and insurance activities that are not permissible for a bank holding company under section 4 of the BHC Act. First Union has committed that it will conform the real estate activities of Wheat First to the requirements of section 4 of the BHC Act within two years after consummation of the proposal, and will cease making any impermissible real estate investments immediately on consummation of the proposal. First Union also has committed that it will conform the insurance activities of Wheat First to the requirements of section 4 of the BHC Act within two years after consummation of the proposal, and will cease selling new insurance policies or annuities within six months after consummation of the proposal. First Union also has committed that it will conform its investment in certain limited partnerships that serve as investment vehicles for certain Wheat First employees to the requirements of section 4 of the BHC Act within two years after consummation of the proposal, and will terminate the mutual fund distribution activities currently conducted by Wheat First immediately on consummation of the proposal. 10 See 12 U.S.C. § 1843(c)(8). 11 See 12 C.F.R. 225.26. 12 Voting for this action: Chairman Greenspan and Governors Kelley, Phillips, Ferguson, and Gramlich. Absent and not voting: Vice Chair Rivlin and Governor Meyer.

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1997 Orders on banking applications