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Confidential
j
^ 5Q f 1955
MEMOKAMDUM ON TITLE II OF THE iuJMKISG BILL OF 1355
(Numbers r e f e r t o correspon 1
column of a t t a c h e d corr:
Hoa.se b U
mate
•
1«
The house
LX1 proposes to ce
fc
of governor
I of t.:e Fe-ere 1 Reserve b
Olatod
I
' of directors, suiject to the F
approv^JL over., three ye* I .
The Sent«e b i l l re
the t i t l e of the governor t
Federal Reserve BM
p
at f Ukd .r :e
•
•v
ject t
ever> -
director 02* the botrd but It ;n«cie chief executive officer I
Vftiile t;.e proposal in the House b i l l M 3
of vie?, o:
t
..ctorily under the Senate billj
:^> are aftte«
of direct
In vie^- of the fact that the 0
the 1
bj
aserve agaat
te b i l l t
a waste c.i
u..
occupy ing thftM
auggecte I :,
."V
I
lAlfttefctlTt effici ncy, i t voold be Te-
to function ..
officer
ok,
, i t would be
/ \01\ey t o have
•". Loion. . I n
,,
to m t I
UX I f t c i
^
I
agent could thei
.
_tuition, i t
,
rml
. : . . : :
.cip^iiy 1 traw»tee I
La
Federal Reserve notee, if thai :>roviaion
in general a loc^.1 re;>re-.":.j;;ti. live
would not be &
the Dot,
riced offici
I
,
irecU
U part
- 8
Of -:.
t.
.
Lttfl
\I
CO31-
,
verf
-rirmn o f bho e:-.~
Slid
oe MI out 1
.
be
-ttee -.
aent woul
loc
of
.-.jnce oeompjf t.-»e honorary po
I t would
.o obtain for t.
.
.
not
be hlrod ^o ;'.vt tholr ent-ro tiao to t.
ve
I t tooai , iiO«averf not interfere wi . iXXXjf litiich toul • center on
[ e
At Of
h
ilc.
i # i thttt the
ata
of I
. I t
would tje
L Mkkoi
Of o
•i
entlioij
L
, . .
.
-iOt bt
org<-i^
elect
:aent
o;1 L^e b i l l .
*.n \
.
.,
I reason;,- to Bttki tbo effectLv
VOttld give the boor'.* of dirooto .
0 u act to
.ro ^ei : (.lections of 0
UM NdSiml Reserve bo r:I,
oving ari^ •..
terms expire.
- 1
I t won.
D—Pitt
, . ,
.
.
t
;,
to
,
91 in of i ice UBtll
I
,
le
of not
-»en
to be rworgml»odj t
-nw
presidents and vice-presidents
be approved bj t* © ne* and not the old Beard*
4.
The Sonata b i l l provides for one vice- i
b i l l for one deputy governor.
In o
not U
tive set-up of the ^e^erve baakl , M0t C
ovem
•
e vice
Lneteai o: only one vice-praal ^ent, 30 tl.at e,
n<iy be necesaary to do I t
,.e b i l l
r*ot
£.
,rovi
.
tcutif
pro vis!.
Uiat %hm iirecto;
j serve in order to
n of
representatives of s^eci.
i-.x : co
..se9 i t
-
-
Jilt be three eon
terms instead of two, tx
.
a bill.
The H6use b i l l elimb. I
Kt to join t:
^n~
, but gives ~«
Lve
requireraente for admitting insured notuieaber ti
Reserve S^sterr: luitil June 1927,
T;
•ulsory for a l l irumn
LllLon dolleirs.
It U
.
i
.
-e^berii L
i
ver
Li' Uiut provision of tb« i
I
rtant to retain ulao tne Boui
to waive re,uirer.ent43 for
I
affect many of the bulks havin/ dl
,
rtac
,
,
over
t e
./. ler
obli^i.tion to join shall not
ive
.,
, X>«
?.
I
:
v
federal .reserve - •
& "*ell
In .1
. .
.
:.'•.,.
Ltuti
•
to c
.
>
•
.
-.
.
:
i
cert
find it
.
•
•
.
•
• | ..:
..re will
.
i
i#r« wo-..
•
ions x#o i
I
I
to
t
.
ic int
>
not
a.
HI
#ell
or
L,
Lc u]
i
.ce.
per.
•
.
.
.
.
.
of t
,
3 betweeii r t
eler:ei::
Ln t
.
I
.
it
ii,
i n
.
': t
I .
or to o t
.. ...
tic
.s&ice
. . .
_ad ,>«r. c<.- .
.nt
I
-.ouce ohoul i
9.
Of :.
to altatni
jOCt
•
tC
part
mention o«
r i t t o:
1
.
LX1
.
iu<
« si;oul<] t>e w
for the of: ice.
r^mor or
•
•
'
.
- .
1 not
tn
II,
•
Lll pr
,
.
Of :
Ln
phi
.. .
QOt
on tae ou
von (k% %
•
.
.
^:e
L.-e
f] §
.i.-. | ^e
in
such until the further order
phftlfMNI i h a l l s e r v e
,
.
. . .
Ovid r # s t t l t ...
M I
itiafit
is sail
:ang© ll ::t? (
>
.it in e."
If it 1
.
would be bS8t t.o ue..ve aia aerve foj
member,
Ln
against U
..
. .
It
er to secure
•&
••
.
:
..
I:
.
^•ltion 9 «o BAB could oottht on it
.er th# Itiw provltei I
Ln office It
u ?ers entlrcl,.
. B
I -
bt co be i
ver> relu .
ICQ
:
-.
y -
in
,
report•
thort is no objection to
be ae::>ir<..t<~8 to 11 LI thi ri
-
,
t t o Bftttt
. Lotos | bec&u&e ;oiicy doc i^ ion t in ti.e Boa:
, c. recor
a
a l l o a t l B ti
I conce.
Li
I ar> wool: n o t b© pr.
e.
\±ae b i l l c ,
such O.L L
vl.
D iMro
al
lo.
•
iw,. -
p3 to
| not involve n;.
i%% i n
I t would be
I i t r;
m&ke i t etuier for Iho I
•blob oc
:legtte
'olicy to lndl-
b#ri or otter representatives•
^itiite b i l l .
•••n
Id
o x'roc
ucr: o:
o be iri t
I action of
.ore c-.
to
,:.
1;},
; .
v o , i .
r
| Q
I :-
• . • .
'•:. |
> r -
L
.
. >t i^e w o n
LI -
f v L©'>
t
-• t h o
. i.
i
. the Vodoral He
,Ue eon
ilit v ., MI
I general level
tion,' 1
-
,ve LO buainc
Lti La
xctiou,
tr*do(
Ion
ing
commerce
I
i
,
i
c o
. •
La 0:5,
, ..on
. Loni
. •:, e
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|
....
-
.
.
-on
Id ob,
to r^oognlj
:
xii
.
.live I
I L,
B rev.
I 6 0 flU
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,
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.,
{
17.
ihe
thi Pt lo -.1 Ee.erv
to biJ.
tor LTI o
.
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http://fraser.stlouisfed.org/Uroxent.
Federal Reserve Bank of St. Louis
he
.
.
ri
v
ve
Lonallyi to /.-.ve f u l l
it
> . r, Lscount rit#t«
•
- 11 e nece.
ope
Lac in
Lni
tt
:i one
>Ti ,
\
,
trovidei for i m n i Lt#e oi
.ock; po.
j fcttd .
Lvet. tl
i with ti.:e NmHlng *oint oi' vie
ver onti
,
f
.
. inci ity of "five out o:
Miteri therei'ora, I
OpMHiartot operation,.,
e.
C8 could t i e
D by wimiliuf over two •
dic^ contrarj' to the wishes 01 il.e Other five membe:
would weaken the sense of responBibilit; on che
would perpetuate a t l e ^ s t a part of tne diffusion
.
11s
r existing law.
The x^ouse proposal woulii serve the public i n t e r
the StMtt proposal.
£t wo
n
d e s i r a b l e , however, to -
in
t.-e iiouse prop#Ml the ^rovicion in the Senate b i l l
ak
resentatives vould be selected on a i
If I however, I
Ml iec
>ve re
laka on the Open Hartet C
MU1 Of Oov
.
Uiet;e five
ban
,
••-
i Fe^ei'Ll
.
,
tht
•. i
.
i ive,
•
ve
coastLtu^e Ibi OpM Htxtot Co ::T;:Ltceo,
, over
- thr#O inetrujaents of ^onet&ry policy—OpMHMrktt o JO
r a t e s , tnd reserve requirements,
ihe tT;o repre:entc-tlvot of I
should be elected tap directors of the
>r one ;
.,
discount
:ics
e resentatives
of the different bwiics should serve La r o t a t i o n , so %h*t fell the governors
would nt one tiruo or another s i t with the Itard in the determination of
policy.
Such an arrangement t u l i i h^ve t
vmit&f
aeping
- IS the banke la touch with Board problems) i t woulc mean that the hooda of
the banks would be on the committee one ye&r out of every six, and would
cevote a considerable porliM of their time to tne;.e duties during the
>ear of their service•
Thie would give the ?uei:erve banks a feeling of
pttttioipttlm in the formulation of neticu<.1 >oliciew.
ra uce the
from seven to live M
|
I t woui * al
r. i s better foi
n
administrative board of full-time Mftfeort*
t compromise betv-een full control over national mont
Igf the i^oard an . ti.e proposal in trie Senate tnat Ihi
icy
Lioli
e con-
trolled taf a l^rge arid awkward comiittee of twelve nit] : ive
tives of the bariits, the five to two pro..
As a l&at resort, to prevent
onta-
M >uac.i la i%
/or.
lock in the conference committee,
ament might receive com; iteration where'.y the
woula consist of the seven members of the I
o^' (
pg banka selected regionally.
EOttld give the Reserve bft
iwoul - r.fcve I..
four re.u
.
-re rtpiejienttllon
.nt^ge over the Sen
tee
uives
^, though i t
.
.
!•§
•
Q©
consist of eleven rcther tnan twelve r-enu.eiv, thtti i.voi Lo
of
.
of reducing b^ one t
Ltjf
rve
oanks on tr.e conufiittoe.
D \±<>. $ o: U:<: •
9rve b' .
,> o u t ti.e Joe L: ion.
in rog&rd t o M X M OI pwrabM«(
I LB t..
be foi
[
.ce t i l l ,
a to t:eii^Jige ox- doelln
1
ae
I ^nt se>
- 15 operations except in accordance with regulations adopted kq the
.too."
Iti-e1
The Senate language would leave the qmitl— i I to the eoi
MNHT
to enforce its open-a&rket policies o >en tc
atter /
of thia sort the language of the law should be un.
,
however, i s only a matter of dimftiBf zna c
1J.
The Senate b i l l provides that the ^e.erve b*
ever,) fourteen dtyftj or acre often if deex.ed noce.
d l t
rates bubject to revier 6n
its r e .
Bo
,
ete.:
)ly unl
i t cl
e control
.
e \et. r
count I
On tl.o ."it.t»er of e l the Ke erve L
i j iftlM a-ivancei- tc
ii
I
by any souna d^aetb.
-rer!
;
wber b
tion on papw t
•--Ag
Ld obt
not ccme unier t
at could do so only mhen t n e i r e.
penalty T+%% Of &h
B% t.bc
The ^'eu-.te ^ro\
aot be Ln OOOfo
the b i l l to iMOttrtfi
i s hc.e b e e n f r a q u s n t l ;
o
r
t ^ o b i l l i o n s o f §m
t
t
—
I]
0 long
^>e people 1
nve ten billioi.
h
of
to meet the local ne#dc of their coa
Dot:: for long-time txnd short-tiiae c r e d i t , T-
h o l d iAf i
Lsoount rate»
t
ue :, t
i
.
s r avi
.
.
.
,
.
ut
cent c
L4 wo t u e qu
ir on
It Li
.
terete uore I
to
M tl 9 'Ui
rose
, before t:^ej
aki on ino
co
on i't
1 aper, •
Lr eligible
7.
/e
rate t.
11
BTfttMQTv/oui.: be
Lve
on t o I
i^ong
i be r e p r e s e n t ^ t i v e a of eoeipetia
5i i n
in lue
Lll J
Li
Le«
Ions
1 bLll perpetuate the dlscrLminttion again:.
.lort-ti.-ne coramercitl paper*
aot In aocordAnoe wi
-
U
[i to nine
....
^r
':
.nking deveix
lae i t
.one:
:.e
.
:.le
..ace ltt
.t c:,e
-1 be ucce
(<^) t. lL".it^^tion of the maturity
ta to aeaber
. oy the longest
(b)
tutlOB i'or |he •
\tlV'
O f
I.
f
:
'•: '
•
-
-•iln inalc
ofterlbi
* Btea
Thie problem
^e l e f t
of
1
I t Li B
to
of Boundnesi
a,
to t.
be
expected to petlAf^ '^.easelvej; t a e t t.
The nouse Ci.oui
:oe two conceLiL»io;i. •
of the b i l l .
It
-t an r o U l n i
1
.^ one of 1
!
:iportant. b) Ibe fftct ihet the ;OL..
the pover to raiae reserre requirement ,
»OB Ul 1
1
t
1 :orce aoae b^nks
1'
- 1
to borrow fro- tLe ;;8^erve ^ l i s : .
.
lid
on gool ticket.,
t h e i r lonu
rotect
r.ort-tirse • l l g l b l i
bank:.
r
\M&% v i o l e n t
ltd
>lvesfcprconfining
xt .
o essential to pro!
llqul
correct one of tie r.^.jor defects in the ¥
no conce. tloai otuer ihta the tvvo MBtlMt
1.
.0... t
lt«
e Senate bille
ftki to
I
iiect
fully guarantee
.
it en t
, but tr.e fen
»urcuL.;;ei> ol Go.
It l b MldsntOOd
t. -I t. e S M N t e l ^
o i ' t . e i r e iUTJ
I f i t ifi > — t i f c r y t o mak© a c;
be borne j r o v i i i o n Mkdi f o r Itapori
• rt-ticr.o
Lshment.
.
:tice Ittryihtrt
Ace of the federal BtlTTt
Inf-bilit v
|
D v#uld
^o excentutte
on
.3 vorl
iiaot their
iurj to obtain te.;.
Income t&a elateo airiit ))e a serious inconvenience! »oul
purpOMj
t . e UoUi
. l i o n t o feht Ti^-
MT« Til.
i t h^c been
•,:>..
urineceoi5arv
.
on
re no useful
.
tiona In member bftftk reserves **dj therefore, in MUrtet conoition: on
dates Of iuive fU: cul
'.,
i'iie iiouaS o i l l repeals
.
I Cone Ln exl. L
c o l l a t e r a l for Feieral jjliAH note^ f T^r.ile Ihl Itttatt UL1
tut-
- 16 rovii La
i M well
: I
currency.
;> no ;•;
- t tiMJ i
- :uit
Ett pOliOQTi ^ r t i c u i
er.ent Wl under we ;
influeiice
Bftttor '
.
time I m
In view of the ft'
t of I
OT#maMttt
that t;
ly In I
th« J'e ir^l
Ltic
t:^e (MUf -»8t»i
|#l
|
§r
ve ban
vion^ a^ collateral i'cr I1
.
,
ver will iindoubte.Uy be ren-
Lttd
* ve not
a 193V, t
not no*, of vital La ortanoo«
not ec::erit.
onlj in return
ice.
It
.
te
i
of
•
.
.
i
of
lit
to which the
x lei.
.
• .
Tension in t
limitation, hovtw^fi
eucrr;:ou^
to t
ftdditioaal
I
prowth '.
If b i l l i o n ; -
<um
iTicient
r
;
exees.
• If increased through further kcce^si
certificates or greenb&c. ,
i txptndituri "'-.
I
of the increment arieing from the de
-~«
possibilities of §m increase in member b*-nk ex
to i>Lx billions which would make it impossible, u
f
for the Federe.1 reserve ^ystem to combat ia infj-
-'<i on t I
reserves*
In or ier to
Boar
s*
orthorltj La t L
t%*
i l l n o t b« exei-
to L1
with thei.
.on, Lt
to incre!:e
reserve require
>u]
could only ralM reserve re>;
nta la
that co
Loo*
would not
.
Thie 11
the Bo<.rd Ln comD^tti
develop from %h* c
. ed above,
dice r e t ion in tiie rnttt- ,
tire not in tue
fa
f jcee:>ing a;-
vc , l%\
reserve revjuirenients would be s t r i c t .
te b i l l furthermore
>rov:
t, vote of five members of the BLi special re
re
f Governess o
Hit
not in keeping with the fact I
Ltt •
e to t
-
I
±e
\>e
- 1
truollf
,
.
-
CO'.-
-.
i
/
,•
it
•
L •etate loans i t
. .it f«O| pa phi i
It]
I t;.e d e f i n i t i o n or r e t l
. -oent l^w. On gunortist I loac , .
. . .
•
to
. ould ba on t h e I
,:.:
.
t e n J% . , I I
...• ed
I bill
•
. ,
.
t
rht
ta
. • •
.
>
H
D
e n t 1c;
imr for the borrc
.
i
Ltioo
.
I
y
'
.
•;. -
,
tMj will b a n r
to
^
i re 1 e, li.te i-
borifcy to
':'•
D - Lilt
:
.
'
•
of Govor.orc of
I
Lbi r'aie.. in
I
t conditions, i t
tiou
th
-• ar..ie«
onl;, t,o B
-
-ilao t o S t a t e member b D
iOt
, • <
- 19 •: .• . U I ^
:overa State
Li not
,;e over ZH
.
-
i#itive
i banks in t^e m tter of re
jruer not to in t e n
L&t
^et: to
. l o . O;
'
oh t . ' i e c
•
,
. e
:ower ol regulf lien
er
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