Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, April 13, 1954, Volume 41, Part 2

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Minutes of actions taken by the Board of Governors of the Federal Reserve System on Tuesday, April 13, 1954.

The Board met in the

Board Room at 10:00 a.m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.

Martin, Chairman
Szymczak
Evans
Vardaman
Robertson
Sherman, Assistant Secretary
Kenyon, Assistant Secretary
Thurston, Assistant to the Board
Riefler, Assistant to the Chairman
Thomas, Economic Adviser to the Board
Leonard, Director, Division of Bank
Operations
Mr. Vest, General Counsel
Mr. Young, Director, Division of Research
and Statistics
Mr. Youngdahl, Assistant Director, Division
of Research and Statistics

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Pursuant to the understanding at the meeting on April 7, 1954,
there had been sent to the members of the Board copies of a draft of
letter for the signature of the Chairman to the Honorable H. Earl Cook,
Chairman of the Federal Deposit Insurance Corporation, Washington, D. C.,
reading as follows:
The Board has reviewed the attached report of a study
of compensation paid officers and employees, of insured commercial banks, prepared by a joint committee representing the
three Federal bank supervisory agencies, and concurs in the
suggestion that it be submitted to Congressman Wright Patman
over your signature, in a letter reading substantially as
follows:
"I refer to your letters of December 14, 1953, addressed to the three Federal bank supervisory agencies,
and to other communications regarding compensation received by officers of insured commercial banks. .In
accordance with their expressed assurances, the Comptroller of the Currency, the Board of Governors of the




C

4/13/54
t In"Federal Reserve System, and the Federal Deposi
of
l
study
genera
surance Corporation have completed a
inees,
employ
compensation paid to bank officers and
examination
cluding data contained in the reports of
600 largest
the
made during the years 1947 and 1953 of
insured commercial banks.
attached
"This information is summarized in the
three agencies."
the
report which is submitted in behalf of
and of your
study
the
The Board also feels that a copy of
the
Honorable
to
sent
letter to Congressman Patman should be
g and
Bankin
on
tee
Jesse P. Wolcott, Chairman of the Commit
ation,
inform
his
for
Currency of the House of Representatives,
ure.
proced
this
and understands that you plan to follow
the members of the
Along with the draft there had been sent to
Board copies of the report referred to therein.
The letter was approved
unanimously.
al given at the meetGovernor Robertson referred to the approv
which senior personnel
ing on October 14, 1952, to an arrangement under
e banks would
of the bank examination departments of the Federal Reserv
on of Examinations
be assigned in rotation to duty with the Board's Divisi
for periods of six months, one at a time from each Federal Reserve Bank
with two men serving concurrently, in order to effect closer integration
ures with a view
of the System's bank supervision and examination proced
to achieving maximum effectiveness and benefit to member banks.

He said

, but that even
that the first two men so assigned served the full period
with so long a period of service it was fauna that the men could not conin the Division of Examinatribute materially to the handling of the work
tions.

d a severe
In addition, their assignment for such a period impose




577

4/13/54

-3-

handicap on the Reserve Bank examination department from which they were
assigned.

For these reasons, the next four men assigned served for periods

Of three months each.
Governor Robertson expressed the belief that the Reserve Banks had
benefited through having their personnel acquire an understanding of the
oPerating procedures in the Division of ExamirPtions and through having
their personnel learn something of the examining and supervising practices
Of other Reserve Banks.

He felt, however, that a period of one month was

sufficient for these purposes.

Also, since the present concept involved

Principally benefit to the Reserve Banks rather than the Board, he felt
that it was no longer incumbent upon the Board to offer to absorb the expenses of the men assigned.
Governor Robertson proposed, therefore, that in the absence of
Objection, the Division of Examinations would continue to invite the Reserve Banks to send senior examining personnel, particularly those concerned largely with supervision, to Washington from time to time on a purely
voluntary basis, and at the Banks' own expense, to observe and participate

in the operations of the Division of Examinations for periods of approximately one month.
The procedure suggested by
Governor Robertson was approved
liminimously, and he was authorized
to make the necessary arrangements.
Reference was made to a telegram dated April 8, 1954, from Mr.
Dawes, Vice President and Secretary of the Federal Reserve Bank of Chicago,




4/13/54
Stating that the Bank's board of directors had voted that day to establish a rate of 1-1/2 rather than 1-3/4 per cent on discounts for and
advances to member banks under sections 13 and 13a of the Federal Reserve Act.
Governor Szymczak stated that Mr. Young, President of the Chicago
Bank, called him on the telephone on April

8, prior to the meeting of

the Bank's board of directors, and said that he was going to bring up

the matter of the Bank's discount rate, which had been the subject of
discussion by the directors

on previous occasions. Governor Szymczak

said that in response to an inquiry by President Young as to the feeling
of the Board of Governors on the matter, he told Mr. Young that he
thought a decision whether to act was up to the Chicago directors, that
there would not be a quorum of the Board of Governors available until
this week, and that, if the Chicago directors acted, the Board of Governors
you'd take the matter under consideration when a quorum was available.
Governor Szymczak went on to say that he discussed the matter further with
President Young and some of the Chicago directors while he was in that city

the past week end, and that he gained the impression that the directors
'ere thinking of a reduction in the discount rate mostly in terms of its
being a first step toward a reduction of reserve requirements, including a
ehange in the requirements against member banks in New York and Chicago.

lie added that he understood the vote of the Chicago directors to reduce the
d iscount rate was unfinimous.




4/13/54
There followed statements by members of the Board and the staff
regarding the implications of a differential in the discount rate as
between Federal Reserve banks, during Which reference was made to the
effects of a rate differential linder varying economic conditions, reasons for the lack of rate uniformity at times in the past, and reasons
why uniformity had prevailed in recent years.

It appeared to be the

consensus that except at certain times, for example when Federal Reserve
Policy was directed toward combating inflationary tendencies, a lack
Of uniformity in the discount rate would present no policy or operating
Problems of serious consequence.

However, it was felt generally that a

reduction of the rate by one Reserve Bank at the present time was likely
to be followed by similar action on the part of other Reserve Banks
Within a short time thereafter.
There was also a discussion of the question whether a reduction
in the discount rate should precede or follow a reduction in member bank
reserve requirements under prevailing circumstances, and the members of
the staff who were called upon for expressions of opinion indicated that
they had no strong feeling as to the order in which such actions should

be taken. They were somewhat inclined, however, to favor a lowering of
the discount rate first, one thought being that if it should become desirable to tighten the credit market at any time, the rate would then be
at a point from which it could be raised without difficulty.
Further discussion concerned the reasons which might be given for
lowering the discount rate at this time.




The principal reasons

580
4/13/54

-6-

advanced for such action were that it would bring the discount rate more
nearly in line with short-term money market rates and that it would reaffirm the System's current policy of active monetary ease and ready
availability of credit.
It was then agreed that the Board should meet again this afternoon, following the meeting of the executive committee of the Federal
Open Market Committee, for further consideration of the action taken by
the directors of the Chicago Reserve Bank.
The meeting then recessed and reconvened at 3:00 p.m. in the
Board Room with the same attendance as at the morning session except that
Mr. Molony, Special Assistant to the Board, was present and Mr. Youngdahl
vas not present.
Chairman Martin stated that Mr. Riefler had received a letter
dated April 12, 1954, from Miss Mildred Adams, Research Director for the
Committee on the History of the Federal Reserve System, stating that in
connection with a call at the home of the late Dr. Adolph C. Miller, mem/)er of the Board from 1914 to 1936, she had been informed that the Miller
estate had been left to the University of California and that the Regents
Of the University had passed a resolution authorizing delivery of a small
collection of papers in Dr. Miller's estate to the Federal Reserve System.
C hairman Martin explained the circumstances under which Miss Adams had
accepted the papers from Mrs. Wesley C. Mitchell, a sister of Mrs. Miller,
Ida° is an invalid and unable to manage her own affairs, after which she




581
4/13/54

-7-

had taken them to the Brookings Institution and placed them in her
office until she could communicate with the Board.
had not yet reChairman Martin stated that although the Board
ceived formal advice that the Regents of the University of California
had authorized delivery of the papers to the Board of Governors, if
such advice were received it would seem to him appropriate to receive
s
the Papers and to have them sorted and classified by member of the
Board's staff, after which they would be available for the use of the
Committee on the History of the Federal Reserve System in the same manner
as other records to which that Committee had been given access by the
action of the Board at a meeting on January 4, 1954.
the
Following a brief discussion,
Martin
procedure suggested by Chairman
was approved unanimously.
the action of the
There was a brief additional discussion of
directors of the Federal Reserve Bank of Chicago on Thursday, April 8,

1954, establishing a rate of 1-1/2 per cent on discounts for and advances
to member banks under sections 13 and 13a of the Federal Reserve Act.
had been nothing
It was the view of the members of the Board that there
it the discussion at today's meeting of the executive committee of the
Pederal Open

indicate that the Board should
Market Committee which would

aPprove the action of the Chicago directors.
al
Accordingly, unanimous approv
Dawes,
was given to a telegram to Mr.
the
Vice President and Secretary of
o,
Chicag
of
Bank
Federal Reserve
reading as follows, with the understanding that advice would be sent by




582
-8-

4/13/54

telegram to the Presidents of all
Federal Reserve Beaks and the Vice
Presidents in charge of Federal
Reserve Bank branches, and that a
notice would be sent to the Federal
Register:
effective April 14,
Reurtel April 8. Board approves,
for and advances
unts
disco
1954, rate of 1-1/2 per cent on
Otherwise Board
13a.
and
to member banks under sections 13
change, of
ut
witho
approves establishment by your Bank,
ing schedule,
exist
s
B-3,nk'
rates of discount and purchase in
of April 8.
ram
teleg
your
advice of which was contained in
4:30 p.m.
at
press
to
d
Board's announcement will be hande
se.
relea
ate
immedi
Eastern Standard Time today for
The press statement referred to
ReIn the telegram to the Federal
ved
appro
serve Bank of Chicago was
folthe
in
unanimously by the Board
lowing form:
Chicago
The directors of the Federal Reserve Bank of
have established a discount rate at that Bank of 1-1/2 per
action,
cent, and the Board of Governors has approved this
ously
previ
rate
effective Wednesday, April 14, 1954. The
in effect at the Bank was 1-3/4 per cent.
following addiThe meeting then adjourned. During the day the
tional actions were taken by the Board with all of the members except
Governor Mills present:
of Governors of the FedMinutes of actions taken by the Board
era,

ved unanimously.
Reserve System on April 12, 1954, were appro
Memorandum dated April

5, 1954, from Mr. Sloan, Director, Division

Of Examinations, recommending the appointment of Francis D. Dargo as Assistant Federal Reserve Examiner in that Division on a temporary indefinite
and with official
'818, with basic salary at the rate of $3,410 per annum,
1)8




5
4/13/54

-9-

headquarters in Washington, D. C., effective as of the date upon which
he enters upon the performance of his duties after having passed the
usual physical examination and subject to the completion of a satisfactory
employment investigation.
Approved unanimously.
Letter to the Board of Directors, Ridgefield State Bank, Ridgefield, Washington, reading as follows:
Pursuant to your request submitted through the
Federal Reserve Bank of San Francisco, the Board of
Governors hereby gives its written consent, as required under Section 18(c) of the Federal Deposit Insurance Act, to the merger of the Ridgefield State
Bank and the State Bank of Battle Ground, Washington,
under a new title and location at Hazel Dell, Washington, and approves the operation by the surviving bank
of branches at Battle Ground and Ridgefield, Washington, provided (a) the merger is effected substantially
In accordance with the plan submitted; (b) formal approval of the appropriate State authorities is obtained;
and (c) the branches are established within six months
from the date of this letter.
Approved unanimously, for
transmittal through the Federal
Reserve Bank of San Francisco.
Telegram to the Presidents of all Federal Reserve Banks requesting
that a call be made on behalf of the Board on all State member banks on
11 19, 1954, for reports of condition as of the close of business on
'
41
11 15, 1954, on forms furnished with the Board's letter of April 12,
'
41
1954.




Approved unanimously.