The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MS Minutes of actions taken by the Board of Governors of the Federal Reserve System on Wednesday, April 181 1951. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Evans Vardaman Norton Powell Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Minutes of actions taken by the Board of Governors of the Federal Reserve System on April 17, 1951, were approved unanimously. Memorandum dated April 10, 1951, from Mr. Leonard, Director Of the Division of Bank Operations, recommending increases in the basic annual salaries of the following employees in that Division, effective April 29, 1951: Name Gerald M. Conkling 14ertimer B. Daniels Salary Increase To Title From $9,000 Chief, Member Bank Section P700 8,600 Chief, Reserve Bank Operations 8,400 Section Approved unanimously. Letter to Mr. Harvey, Vice President and Cashier of the Federal Reserve Bunk of Boston, reading as follows: "In view of the circumstances described in Your letter of April 16, 1951, the Board of Governors approves the payment of salaries to E. Isabel Savage and Francis L. Myers at the rates of $3,300.00 and $3,180.00 per annum, respectively, which salaries are in excess of grade maximums." Approved unanimously. Sel 4/18/51 -2Letter to Mr. Armistead, Vice President of the Federal Reserve Bank of Richmond, reading as follows: "In accordance with the request contained in your letter of April 16, 1951, the Board approves the designation of the following individuals as special assistant examiners for the Federal Reserve Bank of Richmond: John F. Bohannon Thomas P. Hylton Chester D. Porter, Jr. Bernard L. Cummings Straughan S. Richardson Harry E. Dunn John J. Withers Welford S. Farmer William B. Harrison, III John F. Yancey" Approved unanimously. Letter to Mr. Denmark, Vice President of the Federal Reserve Bank of Atlanta, reading as follows: "In accordance with the request contained in your letter of April 13, 1951, the Board approves the designation of the following as special assistant examiners for the Federal Reserve Bank of Atlanta: Nashville Branch Birmingham Branch T. L. Webster" C. N. Hamilton Approved unanimously. Letter to Mr. Rounds, First Vice President of the Federal Reserve Bank of New York, reading as follows: ":1s requested in your letter of April 9, 1951, the Board authorizes the Federal Reserve Bank of New York to proceed with the installation of fluorescent lighting and the necessary revisions to the electrical distribution system throughout the main bank building, as outlined in your letter. It is understood that the estimated cost of the complete project is in the neighborhood of $6351000." Approved unanimously. 4/18/51 -3Letter to Mr. Winthrop W. Aldrich, Chairman or the Board, The Chase Bank, New York, New York, reading as follows: "This is with further reference to your letter of December 19, 1950, and the supplemental letter of February 28, 1951, from your counsel, Mr. William M. Evarts, of the firm of Milbank, Tweed, Hope and Hadley, regarding the possible investment by The Chase Bank in the stock of a corporation to be organized under the laws of the United States of Brazil. Both letters were transmitted to the Board of Governors through the Federal Reserve Bank of New York. "The present plan, as indicated in your letter, is that a corporation would be organized in Brazil with an authorized capital not exceeding Cruzieros t 100,000,000 (approximately U.S. $510001000 at presen rates of exchange); that The Chase Bank will subscribe for approximately 26 per cent of such authorized capital; that the International Basic Economy laws Corporation, a corporation organized under the of extent the of New York, will be a subscriber to l; capita ized author approximately 25 per cent of such ized author and that the remaining 49 per cent of such ian capital will be subscribed for by various Brazil ized author or other interests. Ten per cent of the the capital would be paid for upon subscription for time stock and the balance would be payable from ation. corpor the of to time upon call of the directors ment invest te ultima Under the present proposal the Bank in the capital of such corporation by The Chase which ,000, 26,000 would be approximately Cruzieros U.S. at present rates of exchange is approximately The of s surplu $1,300,000. The present capital and is which of Chase Bank is $12,0001000, 10 per cent $1,200,000. ation would "It is stated that the proposed corpor ate have power generally to purchase and sell corpor otherwise and other types of securities in Brazil and or with others) to deal in the same as underwriter (alone powers as other such or as agent or broker and have on to relati in ble desira may be deemed suitable and noted is that It the performance of such activities. ation would corpor it is not contemplated that such States of ,imerica engage in any business in the United S51 "except possibly such as in the judgment of the Board of Governors of the Federal Reserve System would be incidental to its international or foreign business. "The Board understands your present request to be in the nature of a general statement of a proposal, particularly since it does not appear that steps have been taken to draw articles of incorporation which would more definitely describe the powers of the proposed corporation. The Board has considered the proposal in that light and is inclined to feel that the proposed plan has possibilities of benefit to both this country and Brazil. "Accordingly, on the basis of the information presented, you are advised that upon presentation of a specific application for the investment by your bank In the stock of a corporation organized on the basis indicated, the Board would be prepared to take favorable action upon the application, subject to the conditions outlined below. "These conditions are believed to be consistent with your proposal and largely implicit in it, but it seems advisable that certain features be expressly stated in order to avoid any misunderstanding concerning the fact that appropriate separation between commercial banking, i.e., deposit banking, and investment banking is to be maIntained. "As you know, the principle of such separation for all banking operations in the United States is expressly stated in acts of Congress. Operations abroad of corporations organized under section 25(a) of the Federal Reserve Act naturally must to some extent be influenced by the conditions and practices of the countries in which the operations are conducted. However, a similar principle for such corporations is stated in the Board's Regulation K. Sections XIII and XIV provide that if any such corporation has outstanding debentures, bonds, notes, or other such obligations issued by it, the corporation may not accept drafts or bills of exchange and may receive abroad only such deposits as are incidental to the conduct of its exchange, discount or loan operations. "In order to maintain the separation of commercial and investment banking insofar as operations in the United States are concerned, the Board feels that before formal submission of a specific application, suitable steps should be taken -- including such things as appropriate 4/18/51 -5- "provisions in the charter of the proposed Brazilian corporation and any other measures that may be needed -to assure that the proposed corporation will not participate directly or indirectly in the underwriting, sale or distribution, at wholesale or retail, of securities of any issue that is wholly or partly underwritten, sold or distributed, at wholesale or retail, in the United States of America unless such activities in the United States are permitted under United States law to banks that are engaged in the business of receiving deposits. This would be in addition to the specific requirement in the law that the corporation will not transact any business in the United States except such as in the judgment of the Board of Governors of the Federal Reserve System would be incidental to its international or foreign business. "It is not intended to prevent the proposed Brazilian corporation from selling in Brazil long outstanding securities merely because they may in the past have been the subject of a separate and unrelated underwriting, sale or distribution in the United States. It also is not intended to prevent the proposed corporation from carrying out in Brazil any transactions with respect to securities that a bank of deposit organized and operating in the United States would be permitted to carry out in this country. "It is assumed that the proposed Brazilian corporation would not combine commercial banking and investment banking in its own operations in Brazil. The Chase National Bank and The Chase Bank do not now have branches in Brazil or own stock in any commercial bank in Brazil. Therefore, it appears that the investment which The Chase Bank is now considering making in the proposed Brazilian corporation would not present any question of direct or indirect commingling of commercial and investment banking in Brazil. Since that consideration is a factor in the Board's favorable conclusion in the present matter, it is natural to assume that they may be taken Into account at that time in case The Chase National Bank or The Chase Bank should apply for the establishment of such a branch or the making of such a purchase while having an interest in the presently proposed corporation. "It will be appreciated if you will keep the Board of Governors advised through the Federal Reserve Bank of New York of any developments in connection with the proposed corporation." 4/18/51 -6Approved unanimously for transmittal through the Federal Reserve Bank of New York. Letter to the Honorable Frederick J. Lawton, Director, Bureau of the Budget, Washington, D. C., reading as follows: "The Committee on Expenditures in the Executive Departments, by letter dated March 19, 1951, has requested the Board to report on S. 1139, a bill 'Making certain changes in laws applicable to regulatory agencies of the Government so as to effectuate the recommendations regarding regulatory agencies made by the Commission on Organization of the Executive Branch of the Government.' "There are enclosed four copies of a proposed report representing the Board's views on S. 1139. Please advise us as to the relationship of this legislation to the program of the President. "In this connection you will note that the Board submitted a report to Congress on a similar bill, S. 2340, in September 1949 and our records show that the Director of the Budget advised the Chairman of the Board at that time that there was no objection on the part of the Budget Bureau to the submission to Congress of the report which we made on S. 2340." Approved unanimously. Letter to Mr. R. F. Campbell, R. F. Campbell Finance Company, Oklahoma City, Oklahoma, reading as follows: "This refers to your letter of March 29, 1951, commenting on the terms of Regulation W relative to automobile financing. "The provisions of the regulation are constantly under study by the Board's staff and the staffs of the Federal Reserve Banks, with the aim of keeping the provisions constantly adapted to current economic conditions and conditions in the consumer credit field. In an economic situation 854 4/18/1 -7- "as flexible and uncertain as at present, the Board must be prepared to move at any time on short notice. You may be assured that any move the Board might make will be a result of serious study of all the relevant factors, including the opinion of persons such as yourself and of trade organizations. It is unfortunate that rumors must add to the burden at a time when people are already pressed to comply with a variety of regulations and controls. "Thank you for your views in the matter; we are always happy to receive informed and considered opinions from those persons and businesses who must live and operate under the regulation." Approved unanimously. Secretary.
@FedFRASER