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August 15, 1955
>rcnaum for
the President
Enactment of the Banking Bill of 1335 marks a grett step forward in
banking t,nd monetary huminls^rtttion.

It represents; en authoritative

recognition ox* the fact Urtg whatever aay have been e&ld in the pact in
f vov of automatic regulators of money and prices, dependence on such
regulators ic not feasible in the post-w&r -vorld. The public h»s lost
faith in them because they have been proved to be unequal to the requirement* of aodern l i f e , and at the present tiae the entire world i s on sose
form of aaaaged credit and currency be*ia»
Xnporteace oj[ atron^: Board
The Banking Act of 1955 entrust* the management of Monetary and
ereait policy in this country to the governing board of the Federal fte»«rve

fthile the &y»te» i s given no nev? fur-reaching powers, the powem

that i t poeiieaaeB, ao far «• they concern national Monetary : oliciea, «re
centralized in the Board, which will no« have an uaeseapable re&ponaibilitj
for the Marnier in «hich they SLTP exercited,
Recognition by Congress of the increase in the Board*a recponiibilitiee finds expression in the advanoe iA salaries of — h e r s , the lengthening of their tern of office, the elimination of ex-officio Members, and
the provision for the reorganisation of the Board*
The unmifitakable feeling of the country i s that the Federal Rtserv*
System has failed to Measure up to i t s responsibllitiee*

To e certain ex*

tent this attitude i s an inevitable reaction &gaiast bank failures and the

j i then csf t!'- r#g snaibllitj rightfully


i to the F«?dem! E«$erv« ^nte--.:*, Wflitna of it;* fcdhercnea to tn
Leta t n d l t i f l i tsixder rife&di th?- f x i t r a l KentJ H 9yst«* *&s as .?. c t^d
• bo l^rwiy ^ pNfglvt Age^c^ fof tlM aOMMaaojtatiac oi nmmtrci wid

thl« ota^olet© tradition, bolsl«-red Up b/ ttti tu«t#d proTl*io

th« law, wsg MMatOtttwd bj-: • isc;: of conotDicti'?® l««i#rehl] In tb«
i«r«l F^aerve §f9tim*
Change? in the lew to hriaf i t In


witii w d w a Hioog) t *<'^c

••-CO',»tltution of thft Qovferaiag Bosrcs afford & ( m l opportunity for riv
• bilitating tht* FedtretL Reserve Syatea «?id regalaiag for i t t*»at d«gre
oi public ooafid«ne« without &:<ich i t cannot proDerly

An Ui'--ortant phase M thla rehR.bilitat.ion t i l l bt" M i%l««tioo of
Bo«rn tk&t irill ofiMMaki the respoct &nti —mfldtnt ttf th« peo of V;o ecrintrj*
I t i s of prijwiry i«iport«r.c« that aH th«» a«^iber« of th* ^oaH fhould
hai* *''« und«rst*n<iia.<7 of nations.1, economic p f 11—j wui ffhcral ba •.-r.lifted to s s t i a t in the foraitilition Of .sfonst«.r.y \:<Jlici©» ajajd t'-t- •oatlauoua
tttt4| •!* banking problems, fthil* th^ ttankin^ Act of 1935 ha* Umrovad Ih4
c-aerve atrucV-or* »n<t


h«lfwd to alai<> the F^Nvai taMTT*

in a aor» r«iion&X rtJuitlimahlp to H N country's econo-lk, IU>,

aany i^robleaia reiatiiig to our banking structure remain to be •mlf<<
of the taflke ttwtt will confront the M &o«rrl will be «. ntadv of HM
ne««e«arj.' to bring ab^ut onlfied banking under F«d#ral control,


-Iwnlfiootioa of tiMrtrtig supervision Md sdaialstratloa in Washington, the
prohlono of branch, group u d oasln banking, u d * praetleal eolation of
the problea of the proper relationship betveen soaaorolnl banking ssjd
t tanking*
Tor the purpose of M I M U I « individual Beard aoabsrs, it Mgr bo
to e U u U y tfco •poolflo duUoo glvom tb» %otom la aeoordanoo
with tho difforont pomooo of lto brood r«spon«iblliUoft for ouporvloion
ovor tho banking and ooBotary tytm.

It ahould bo oaphooiooflt howrwr f

that ouoh a <rom1ng of omttoro for tho primary oonoidoratioo of particular Board aoaboro dooo not M a n that ouch aattors aro not aloo to roooivo
tho ottontion of tho otfcor noB%m i or that tho Board on a whole would bo
rollovod of raapontibility for any pho#o of Its work* la a gonoral
tho dutloa of tho Board aoy bo daoaifiod aa follovot
(a) Monetary policy amttorof lagialation and public
International banking aad the capital aarketj
Boonoalo oertiooi
Federal noooi fo beak ead aoabor beak credit}
Jutolsaion to •oaworslrtp aad operations of aoaber
Fedoril Rooervo beak operations}
Seourltgr loeaof ead interlocking and other r*la~
tionaaipe of direetors9 officers wad eaployoeo
of •eobir banks aad Federal Ret e r f banks*
In the light of those duties, it *ould appear that tho Board, la
addition to the chairaant who would naturally have priaary responslbilitgr
for aoaotary policies, as well as geaeral azeeutive rosponsibllitj for all
of the Board's activities, should include one person with Federal Reserve
banking experience, one with ooanereial banking experience, one who is

- 4 familiar with the eecurity or lB*Mt»ont aarfcet, one who ia
with forelfttt exchange and foreign condition*, one qualified to Interpret
the toenomlo algnifloenee of bueineae and financial doreXopaonta9 and
one with experience and training In bonk oredit.
Thla arrmgawjajit of dutlea la not ruggeeted aa the aa2? one feaalble,
and roarranfawjontt nay booone neoeaaary in the light of the partloulax
Ulanta of appolntooa actually oolootort for nonbarahlp on the Board* fiomo
divlaion of dutlea, however, with •pacific prlnary roaponalbUltsr of each
ladlTldual nonbor for certain phaaee of the work la highly doalrable, not
only aa an aid in aelootlng nonhora with the right qualification but
alao aa an indaoenent for energetic non to aocopt poaitiona os the Board
and to facilitate the perfomanoo of the acjainiatraUve Aactione of the