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ft & A JEX December 3, 1948. Mr. Elmer B. Staats, Assistant Director, Legislative Reference, bureau of the Budget, Washington 25> D. C. Dear Mr, Staats: This refers to your letter of November .-3, 194S, to Chairman McCabe, requesting an expression of the Board's vieva with respect to & draft of bill wTo increase the rate of conipens&.tion of heads end assist., nt heads of executive departraantr. tmd of other officers". The Board is in full ftgnMaaat vith the general objective of this measure. The Board fe~Is however thet the differentials in 9*1MTJ levci-is pro, osad in tha bill would ba distinctly prejudicial to the Fed.-rai reserve System. When the Federal Reserve System vas established in 1913 Mi the Government agency charged vitb prijMticy responsibility for national monetrry aai credit policieo Congress specified, for the then-as-nov full-time flafl'tl Board Members, s;.-.±c.ries equ:i to those of C&blnet lKM4Ul« oubee.uentiy, though not concurrently, •alarltf of Cabinet officers snd of Reserve Board members were incrs&sed to ^15,000, the levels fct which all ar>3 &t present. The bill proposes to taortftM Cabinet officer salaries to |S09000 and to pluc© those of WK&JHT* of thifl Board in a |X6tf00 category, while rtiising to $18,000 Under Secretaries, the Comptroller General, the Mdget Director, the Administrator of Vetorars1 Affairs, the federal Security or, the Chy.irra&n of the Atoxric Yxxergy Coramlsslon, the Housing Home Finance Administrator, the Federal Vorks idKinistrstor, e.n&, at the discretion of the President, the N&tional Security Council, the Mfetional Security Resources Bocrd, the Council of Economic adviser., and certain Positions in the President's executive office. Such a ciasaifie-tion vould imply an opinion that the status and responsibiiitlos of thy Board of Governors of the Federal Reserve System have becoi-ie :reiatively less then those of all the other officials mantionsd. 7\ie .-.oard does not perceive the reasons for thus substantially reversing the position tf-ken by Congress with respect bo the Bot.rd throughout its entire history. If the responsibiiitiee ana public services rendered by the federal Reserve System h&d diminished ovsr the yoars the logic of such realignnjent of salary relationships vou ..cl be understandEbi©. Tnc facts are however that the responsibilities anc function?- of th« Bo&rd and of the nationvide System vhich the Board su-ervises have cts^adily M M greatly enlarged not only during but particuierly since the fer, bMWNHMI of the phenomenal grovth of tto entire economy, the magnitude of the public debt and the problems of its management, and the critical position vhich central banking operations necessarily occupy in this tremendously expsunded economic picture. :taats -2- Aecordingly, the Board feels that the proposed subordination of the System in sai&ry et-t-tus mw|1 (I be detrimental to the System's best interests and NM not be justified in the light of th.> f«€ti or of the objective. The maintenance of BMJPi salaries at levels coffiparabie vith those existing throughout practically a l l of the Board's 35 JTMOn of existence wouid entail no charge on the Foder«:l Budget. Very truly yours, R. Carpenter, 3scret.--.r7r.
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