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1322 A meeting of the Board of Governors of the Federal Reserve ''steni was held in Washington on Tuesday, August 14/ 1945, at 10:30 PRESENT: Mr. Ransom, Vice Chairman Mr. Szymczak Mr. Draper Mr. Carpenter, Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman Mr. Thomas, Director of the Division of Research and Statistics Mr. Kennedy, Assistant Chief, Government Securities Section During the course of an informal discussion in the Conference 11°°111 this morning of matters relating to Treasury financing policy, tIttative arm/1g aments were made over the telephone with Under Secret447 of the Treasury Bell for Messrs. Ransom and Thomas to see Secret47 of the Treasury Vinson for a discussion of these matters. At thi8 illeeting of the Board reference was made to that arrangement, and thelse was unanimous agreement that, during the conference with Secret417 Son,Mx'. Ransom should say that the Board did not regard the Illesti°11 Of eliminating the preferential discount rate as being closed 47 that it would like to discuss the matter further with the Treasury Elq, the first opportunity. Secretary's Note: Later in the day Mr. Ransom reported that he and Mr. Thomas had seen Secretary Vinson and had stated that the Board would like to renew the dlscussion of the preferential discount rate at the first opportunity and that Mr. Vinson made no comment. 1323 8/14/45 -2Mr- Ransom then presented a letter addressed to Chairman Eccles August 11, 1945, by Mr. Snyder, Director of War Mobilization and Rereading as follows: ."There has been established in this office a ReconYerelon Working Committee to advise and assist me on mattore pertaining to reconversion. The committee will .8tImu1ate the formulation of plans in the various execu7s.agencies concerned with reconversion and to assure the i ntegration of such plans. This committee will serve : 8 a task group for the committee of Agency Heads which fleets with MB regularly. t "The development of coordinated plans and the mainpenance of a critical review of planning and operational i,ths°gress under approved programs is of the first importance 17_: 1 Meeting the difficult transitional problems ahead. In : e n of current developments, this is of the highest urgency. : yol asking you therefore to appoint a Deputy to represent ter; agency on the Reconversion Working Committee, to atlte meetings and to participate in its work. I ask e:'84, the Deputy be fully acquainted with the major policies er operations of your agency and that his authority be asTtmeneurate with the importance of the tasks he may be lisnl to perform as indicated in the attached order estab"lg the Reconversion Working Committee. on u The first meeting of the committee will take place L funi,,, °11c1 4.aY, August 13 at 2:00 P.M. in Room 1143 of the a e ute 141'. Ransom stated that he had attended the meeting of the com44teeyesterday afternoon, that, in accordance with the decision reached an itlf° _411ingtaa meeting of the members of the Board who were in yesterday morning, he had stated at the meeting that Mr. Nould serve as the deputy to represent the Board on the Reconlrell Wor Ilecoliversiorikiii:vhCo ee, and that Mr. Nathan, Deputy Director for presided at the meeting, asked for a report by Thursday °I% t 111 Week from each of the agencies represented at the meeting cover- activities of the agencies which might be curtailed or terminated 132,4 8/14/45 —3— f141°wing the end of the war and the activities which should be continued and legislation that should be enacted as part of the immediate aarts for reconversion. There was a discussion of the matters to be covered in the relacTt to be made on behalf of the Board, and there was agreement that referenee should be made to consumer credit under Regulation II, financing of war production and war contract termination under Regulation V, atici the iNagner-Spence bill amending section 13b of the Federal Reserve Act. Other matters referred to, on which there was not unanimous IlDeement that they should be included in the report, were regulation "1° ns on securities under Regulations T and U, broadening the capital gaill8 tax base, and steps to be taken to maintain stability in the Goveltkett s ecurities market. At the conclusion of the discussion, it was understood (1) that drafts of statements covering these matters would be prepared by Messrs. Morrill, Thurston, and Thomas,(2) that Mr. Carpenter would can Messrs. McKee and Evans to ascertain if they had any other topics to suggest for inclusion in the report, and (3) that Mr. Ransom would state to Mr. Vinson when he saw him later in the day that the Board might wish to discuss with him certain statements that it might wish to make in the report for the Reconversion Working Committee with respect to System credit Policy and its relation to the Government securities market. Secretary's Note: When Messrs. Ransom and Thomas met with Mr. Vinson this 132' 8/14/45 —4— afternoon Mr. Ransom made the statement referred to above, and the Secretary re— sponded that the Treasury representative designated to attend the first meeting of the Reconversion Working Committee on August 13 was out of the city and, therefore, was unable to be present at the meeting, and that any matters which Mr. Morrill as the Board's representative on the committee might wish to take up with the Treasury Should be taken up with Under Secretary Bell. At this point Messrs. Thomas and Kennedy withdrew from the meeting. after The action stated with respect to each of the matters herein— referred to was then taken by the Board. Memoranda dated August 9, 1945, from Mr. Paulger, Director °II the 50 1"-L i n of Examinations, recommending that the basic annual ealari es of the following employees be increased, as indicated: „tame Title 1Cenrieth A. Kenyon Ro bert, 11111.L. 1141 PiPer Drake Assistant Federal Reserve Examiner Messenger Messenger Salary Increased To From $3,420 $3,60 1,770 1,836 1,836 1,902 Approved unanimously, effective Au— gust 26, 1945. Memorandum dated August 13, 1945, from Mr. Bethea, Director the D. (44 171810n of Administrative Services, submitting the resignation bi °1"1 Lee 'ha 'ck, Jr., Operator, Duplicating Devices, in that 11431/3 and recommending that the resignation be accepted effective 814145 —5— as Of the close of business August 25, 1945, with the understanding that the Board will be reimbursed for the amount of any overdrawn leave, The resignation was accepted as recommended. Letter prepared for the signature of Vice Chairman Ransom to At. Johnson, Director of the Office of Defense Transportation, 1741,1D. reading as follows: 10_,"As Mr. Eccles will not return from Utah until next I am acknowledging your letter of August 7 contain, 11g the rather startling estimate that Government transL'i3rtation requests on a not unusual day amounted to the 443vement in and out of Washington of about ten trainloads. ow, "I was relieved, therefore, to note that, like your dateOffice, this Board had but one such request on that 'this being for Mr. Robert Triffin, an economist on G11/. staff, who is en route to the Dominican Republic and e.,a., !Tale-. t Officials of both Republics had requested his bj-ru assistance in helping them to prepare programs for co ing and monetary reorganization in their respective "trles- These missions have had the endorsement of oll" State Department and were authorized by this Board theY are manifestly of importance in our relationOn this continent." Approved unanimously. Let ter to Mr. M. W. Harriss, President of the National Bank of Ord, s anford, North Carolina, reading as follows: '11With your letter of July 2 you sent us a copy of -ketter of the same date to the Comptroller of the by ' ltielneY in regard to the competitive situation created ,.,alosorption of exchange charges by some banks. ed.ile agree with you that the problem would be solved toarcil , -Y if all banks were on the par list, and the Governors is strongly in favor of par clearance. elter:04'y 11__I,Cso 8/14/45 —6- "However, its jurisdiction in this respect is confined to member banks and although Congress, by legislation enacted in 1917, has required par clearance of checks to the extent that they are collected through the Federal Reserve Banks, it has not seen fit to extend that policy t° all insured banks. On the other hand, in the majority Of States, all or nearly all banks are on the par list and within the past couple of years Iowa and Nebraska have adopted legislation requiring par clearance. In many other States the number of nonpar banks is declining and at the Present time, although the number of nonpar banks still s large, the amount of commercial deposits in such " 41 is States. less than 2% of the aggregate for the United Z "We Of such realize, however, that there is a concentration banks in the area with which you are mainly contrned and the difficulty created by that condition in South was recognized in the conferences which were held the past Spring prior to the issuance of the tl:Tu's letter of June 22, 1945. Nevertheless, the fact 0;a-c, there was such a problem did not relieve the Board to its responsibility for the enforcement of the law as 4._ member banks and its letter, therefore, was designed ieet the demand on the part of member banks for two a."41/g8: first, a definition of trivial items and, second, r,eiTiform date after which all member banks would be extd t0 cease the absorption of exchange charges, except vaer?. only trivial items were involved. The Board's letter pointrLeonformity with the suggestions made to it on these V cia ."In all the circumstances, it has been hoped that the obsrlfication of the Board's position and the conscientious to: 147ance by member banks of the requirement of the law, 121.-'ner 4 with the general trend toward par clearance, would thinsg about the solution, which we all earnestly desire, of we kailongstanding problem. There is no method, so far as of e,°w: by which this problem may be solved by the exercise ter ; Isting war emergency powers, as suggested in your let- Approved unanimously. Itle Let ter to Mr. Clarence C. Keesey, Schenley, Pennsylvania, readf°1-lows: ‘,08 8/14/45 —7— "Reference is made to your recent letter relating to the Board's margin rules, including the postscript. The letter describes the position of your margin account 4r2d indicates that you would like to switch out of one 86ock and into another without putting up the additional raargin required by the Board's rules. The postscript asks whether there is any remedy to be obtained. "You will have noted that, even though a customer's a ll-°?unt is undermargined by the new 75 per cent standard, , e 18 not required to bring his margin up to that standard. rnsequently, he is permitted to carry a given position 1,1retl though he is using more credit than he could get if ae were just opening the account. To that extent, he has advantage over anyone who might wish to buy and hold the o sme stocks on margin but who has waited until now take a position. In your own case, that advantage ap— pears to be substantial. be, iTe call this aspect of the matter to your attention betlse it will suggest that the new rules, instead of ti:" unfair to persons in your own situation, are rela— beve-V favorable to them. Another consideration that should th °f interest to you is that in a declining market, even bj .ugh ow it should have the effect of reducing your margin cp4 the 50 per cent level, the Board's rules do not re— broker to ca11 upon you to make up the reduction. spe An important purpose of the new rules is to restrain strelation in stocks on credit, at a time when such re— th4a ' llit appears to be in the general public interest. If should help in the long run to stabilize the market, should be of benefit to almost everybody. i40111:lie, hope that this presentation of our viewpoint will chati ate wily we do not see at this time adequate reason for g the rules to which you raise objection." Approved unanimously. Letter to Mr. L. E. Shuck, L. E. Shuck Realty Co., Los Angeles, OkItt orro reading as follows: "We acknowledge receipt of your letter of August 9. f rom the figures given in your letter it is clear that ' ace Zur margin account is at present an undermargyled asv:;L:Z. Trading in such an account is restricted in 'ways, some of which you mention, in the belief 1329 8/14/45 that at the present time there should be no buying of securities -- either in an old account or in a new one -on a basis of less than 75 per cent margin. You will fate, however, that the rules favor the undermargined account in that they do not require the account to be arglned up to the new standard except in case the cus— (14er wishes to do some buying in the account. , "Vie accordingly invite your attention to the fact 4L:hat the holder of an undermargined account is permitted ? 4 carry securities on a credit basis that is more liberal V_An that prescribed for other customers. Using the figures Your letter, for example, it would appear that in order 2,take a long position in $14,000 worth of securities, u ller Present rules, a customer depositing his margin in ..' ,.8:sh would have to put up, not the amount which you have Juurself deposited ($8,200), but a considerably larger 6.01nt ($10,500)." T V Approved unanimously. Thereupon the meeting adjourned. Vice Chairman.
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