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1542 A meeting of the Board of Governors of the Federal Reserve Systern was held in Washington on Wednesday, August 19, 1936, at 10:45 a. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Ransom, Vice Chairman Broderick Szymczak McKee Davis Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Thurston, Special Assistant to the Chairman Mr. Vest, Assistant General Counsel Mr. Dreibelbis, Assistant General Counsel Mr. Ransom stated that in accordance with the understaraing reached at the meeting of the Board on August 14, 1936, he had advised Pr'esident Harrison of the Federal Reserve Bank of New York over the telephone of the Board's attitude with respect to the proposed salary Mr. L. F. Sailer as Vice President of the bank for the period beginSeptember 1 and ending December 31, 1936, and that after several ellb eequent telephone conversations President Harrison had requested an °Pportunity to discuss the matter with the Board and had come to Washto meet with the Board today for that purpose. At the request of Mr. Ransom, Mr. Morrill reviewed briefly the e°nsideration which had been given by the Board during recent years to the salary fixed by the directors of the New York bank for Mr. Sailer 411d during the discussion which ensued Mr. Ransom stated that while talkwith Chairman Eccles over the telephone yesterday concerning another 1114tter he had mentioned the action taken by the New York directors with l'egard to Mr. Sailer's salary and that the Chairman had stated again 1543 8/19/36 -2- that although he was present at the meeting of the directors in New York When the action was taken he had made no commitment with regard thereto and that any action that the Board decided to take on the matter would be agreeable to him. Mr. Ransom read the following letter addressed to the Board by 4esident Harrison under date of August 18, 1936, which had been handed t° Mr. Ransom by President Harrison upon the latter's arrival in t148hingt0n this morning: "During the past few days we have had some talks over the telephone regarding my letter of July n, 1936 advising the Board of Governors that our directors had voted, subject to the approval of the Board of Governors, to fix Mr. Sailer's salary for the period beginning September 1, 1936 and ending December 51, 1956, at the rate of t30,000 per annum. "In that letter of July 31, I did not comment on the reasons for the action of our directors largely because I had had several talks with Chairman Eccles about Mr. Sailer's ease and had gained the impression that our proposal would be agreeable to him and probably to the Board as a whole. Furthermore, Chairman Eccles' letter of March 11, which advised us that the Board had approved Mr. Sailer's salary only until the end of August, 1936, stated that that action was taken 'for the reasons which I communicated to you during .Ir telephone conversation of March 7.1 In that converse°I tlon Chairman Eccles had made it clear to me that the action of the Board was not intended to indicate that Mr. Sailer's services with the bank should necessarily be terminated on August 311 but rather that the salary was approved only until August 31 because of the fact that by that time our directors would have to take action one way or another as to the date of Mr. Sailer's retirement from the bank. "In my subsequent and more recent talks with Chairman Eccles, as in my talks with you over the telephone, I pointed out certain considerations which made it seem advisable to Us to continue Mr. Sailer's services with the bank until the end of the calendar year. In the first place, we have adopted a general policy in the hank, now that we have a retirement 1_544 8/19/36 -3- "system, of retiring all clerical employees who shall reach the age of 65 on the first of May following. It has seemed to be a wise and workable general policy, preferable to retirement of each individual on the actual date of his 65th birthday. The only two official cases which have arisen since the adoption of this policy for employees, have been those of Mr. Dodge, our general auditor, who is 68 years of age, and Mr. Sailer. Mr. Dodge has been advised that his retirement Will become effective on December 31, and the Board of Governors has approved his salary until that date. Our directors to believe that similar action should be taken with respect the t, Augus in ed Mr. Sailer rather than to have him retir be month of his 65th birthday, or on next May 1, as would the bank. of staff the case were he a member of the clerical a con"Generally, or in the absence of good reasons for nue conti to e trary decision, it would seem to be appropriat until ed, retir the services of any senior officer about to be and the end of the calendar year, when official readjustments to than r salaries normally come up for consideration, rathe he happens to retire him during the particular month in which attain the age of 65. involved, how"Quite apart from the general principles of continuever, both the directors and myself are desirous ber. Ve are ing Mr. Sailer's services until the end of Decem Sailer, in the process of reorganization within the bank. Mr. funcwho is vice president in charge of the administration that function, tion, and who has for years been in charge of salary, expenses, Including various questions of organization, this period and budgets, will be particularly helpful during ces can of reorganization. Mile no one individual's servi his long of se becau be said to be indispensable, nevertheless on, Mr. izati organ service and experience in these matters of bank and the to ul helpf Sailer will be particularly useful and year. to me personally during the balance of the directors have voted "It is for these reasons that our I know that to fix his salary until the end of the year, and action." their of they will appreciate the Board's approval meeting at this point President Harrison was called into the e in connection 414 invited to make any comments that he might desir Thereupon Mr. Harrison diswith the proposed salary for Mr. Sailer. ed to above and, in ellesed the points mentioned in the letter referr 4dditi0n to stating the Position of his board of directors with respect 1545 8/19/36 -4- to Mr. Sailer's retention, emphasized his own feeling that because of 11 " Sailer's ability and past experience in connection with the operati°ne and personnel of the bank it would be especially helpful to him as President of the bank if Mr. Sailer could be retained until the end °f the year in connection with the completion of the reorganization now being made of the functions and personnel of the New York bank. President Harrison also stated that he had indicated to Mr. Sailer that he /1°111d be retired as of the end of the year end that if it were now decided to retire him before that time some embarrassment would result, but that as the reorganization plan of the bank, under which all of the operating departments of the bank will be placed under Vice President Rounds, would be completed by December 31, 1936, there would be 11° reason for retaining Mr. Sailer after that date. fliet, he He added that, in that date because would prefer not to retain Mr. Sailer after the reorganization plan in view made other provision for the perform411°0 of his duties. had been ample Upon inquiry from Mr. McKee as to whether there 11, 1936, to make since the receipt of the Board's letter of March the necessary reassignment of duties among the officers of the bank in contemplation of the termination of Mr. Sailer's services on August might have been possible 'Mr. 7arrison stated that such rearrangement 4 1144 he realized that it was contemplated that the services of Mr. Sailer wel'e to be dispensed with as of that date, that some time ago, in artici- 1546 8/19/36 Patio -5- of the retirement of Mr. Sailer, he had placed Mr. R. H. Kimball under Mr. Sailer for the purpose of learning his work and that Mr. 4111hall is to take over the principal duties of Mr. Sailer under the 8nPervi8i0n of Mr. Pounds upon completion of the reorganization now in Progress. Mr. Ransom pointed out that the Board had limited its approval Of Mr. Sailer's salary to August 31, 1936, with the express understandthat he would be retired as of that date and that the Board had not exPected a further request from the New York bank for the approval of 4 ealary for an additional period. President Harrison stated that he had not so interpreted the Board's letter of March 11, 1936, and that, while he was willing to take Dill responsibility for the misunderstanding, he felt it was highly desirable that Mr. Sailer's services be retained until the end of the year for the reason previously stated. Mr. Ransom then referred to a letter addressed to the Board by 131'esident Harrison on August 13, 1936, inclosing copies of correspondence with the Bank for International Settlements in May and July, 1936, bith respect to the renewal of the central bank credits to the National ap411k of Hungary which expire on October 18, 1936, and requesting Plio7a1 by the Board of Governors of the action taken by the board of directors of the Federal reserve bank in authorizing the officers to e"veY to the Bank for International Settlements for transmission to the National Bank of Hungary and all participants in the credits, the 1547 8/19/36 -6- views of the Federal Reserve Bank of New York which were set forth in Pr esident Harrison's letter as follows: 11(1) 11(3) that we should take issue with the implication in the Hungarian Bank's letter of July 4, that these central banks debts enjoy no priority of statusS That a further renewal of the credits without any transfer of repayment of principal is not warranted in the face of an improvement in the economic situation in Hungary, and that, therefore, this bank should not now readily join with the B. I. S. and the central bank governors of the Board of the B. I. S. in the acceptance of the Hungarian proposal of July 4 as modified by the directors of the B. I. S. unless the National Bank of Hungary is prepared, in return for the creditors agreement to renew for a period of nine months, to agree that in addition to paying interest in foreign exchange for the period of the renewal at the rate of 1% per annum on both the first and second syndicate credits, it shall, on October 18, 1936, transfer to each of the creditors in foreign exchange (a) the 2% amortization on the second syndicate credit placed to gold pengo blocked account on October 18, 1934, and the further 2% amortization so handled on October 18, 1935, as well as (b) a further 2% amortization of the second syndicate credit to be made and transferred as above on October 18, 1936. ed And, that, in the event this proposal is accept t withou York New of the Federal Reserve Bank ts prejudice to its rights regarding future paymen gold the have to should agree as heretofore, dollars due it under the proposal calculated er at the gold parity of the dollar on Decemb and , dollars S. 17, 1931, converted into U. upon receipt of the dollar proceeds, to credit as interest, a number of U. S. dollars equiva infor due s dollar lent to the number of gold terest, and to credit as a partial repayment of principal the balance of such U. S. dollars." 1548 8/19/36 -7Mr. Ransom stated that he had discussed this matter with Presi- dent Harrison over the telephone and he inquired of President Harrison whether he had any further information to give to the Board with respect thereto. President Harrison stated that he had sent a telegram to the Other Federal reserve banks inquiring whether they approved the terms Proposed by the Federal Reserve Bank of New York for the renewal of the credits and that he would advise the Board when replies were received from the Federal reserve banks. President Harrison was advised by Mr. Ransom that the Board would take no action in the matter until advice ' was received as to the attitude of the other Federal reserve banks. At this point President Harrison left the meeting. There followed a further discussion of the request of the Federal Reserve Bank of New York that the Board approve a salary for Mr. Sailer at the rate of 130,000 per annum for the period commencing September 1 and ending December 31, 1936. Mr. McKee moved that the Board adhere to the position taken in its letter of March 112 1936. This motion was put by the Chair and lost, the members voting as follows: Mr. Mr. Mr. Mr. Mr. Szymczak McKee Ransom Broderick Davis "aye" "aye" "no" tInoty "no" Mr. Broderick moved that, in view of made by President Harrison, statements the a salary at the rate of approve Board the Mr. Sailer for the for per annum 4,30,000 1549 8/19/36 -8period beginning September 1 and ending not later than December 31, 1936, with the definite understanding that Mr. Sailer will be retired on or before the latter date, that there will be no further request for approval of any compensation for him, and that this action of the Board is final. This motion was put by the Chair and carried, the members voting as follows: Mr. Mr. Mr. Mr. Mr. Ransom Broderick Szymczak Davis McKee "aye" "aye" "aye" "aye" "no" Mr. Ransom stated that a letter dated August 17, 1936, had just been received from Mr. Clerk, First Vice President of the Federal Reserve Bank of San Francisco, inclosing a copy of the complaint in equity filed in the District Court of the United States for the Northern DistIlet of California, Southern Division, in the case of Andrae B. Nord— sk°g, et., Plaintiff, vs. Federal Reserve Bank of San Francisco, et al., Nfendants. He suggested that the Federal Reserve Bank of San Francisco be requeaed to keep the Board advised of all developments in the case srld that a copy of the answer proposed to be made by the Federal reserve bilnk be submitted to the Board for consideration before it is filed. Mr. Ransom's suggestion was approved unanimously. At this point Messrs. Thurston, Vest and Dreibelbis left the r4eeting and consideration was then given to each of the matters hereinafter referred to and the action stated with respect thereto was taken bY the Board: 1550 8/19/56 -9The minutes of the meeting of the Board of Governors of the Fed- eral Reserve System held on August 18, 1936, were approved unanimously. Telegram to Mr. Young, President of the Federal Reserve Bank of 13"ton, stating that the Board approves the establishment without change bY the bank today of the rates of discount and purchase in its existing schedule. Approved unanimously. Letter to Mr. Walsh, Federal Reserve Agent at the Federal Reserve Dank of Dallas, reading as follows: "Reference is made to your letter of July 15, 1936, restaff garding the proposed reorganization of the examining of the Federal Reserve Bank of Dillas. an "It has been noted that at the present time you have assisthree examining staff consisting of four examiners and t tant examiners; that you feel that on the basis of the presen tion examina State bank membership in your district the future work can satisfactorily be conducted by a force of two exan aminers and two assistant examiners; and that you desire of a proposed expression of the Board's views as to the wisdom to Plan to dispense with the services of two examiners and the of .more or one release or transfer to another department ion express an also assistant examiners. You have requested of the Board's views regarding the release of Trust Examiner the work Neilan and the designation of Ir. Betts to perform of ments depart in connection with the examination of trust State member banks in your district. 1936, the view "In Chairman Eccles' letter of March 25, be efshould was expressed that economies in organization efthe ng impairi fected wherever possible to do so without ngly, Accordi banks. ficient operation of the Federal reserve s you stance circum If after full consideration of all of the overstaffed, the feel that the bank examination department is ion therein to reduct Board will interpose no objection to a proper functionthe a number sufficiently adequate to insure ing of the department. only three State "The Board has noted that there are 1551 8/19/36 -10-- "member banks in your district which operate trust departments, and that you feel that, in the event that the present Trust Examiner, Mr. Neilan, is released as proposed, Mr. Betts is capable of rendering satisfactory service as trust examiner for your bank. In view of al) the circumstances, the Board approves, in the event of the release of Mr. Neilan, the transfer of the trust examination work to Mr. Betts, With the understanding, of course, that the trust examination work will not be slighted under such an arrangement. "Please advise the Board of the action taken in connection with the reorganization of the bank examination department." Approved unanimously. Telegram to Mr. Sargent, Assistant Federal Reserve Agent at the Pederal Reserve Bank of San Francisco, reading as follows: "Board has given consideration to application of 'Cowlitz Valley Bank', Kelso, Washington, for permission to retire 151000 of capital debentures and, in view of the marked upward trend of deposits does not consider it advisable to approve the proposed retirement at this time, but will be glad to reconsider the matter after another examination of the bank has been made, if the situation at that time is such that you are willing to submit a favorable recommendation." Approved unanimously. Thereupon the meeting adjourned. Eb ) 1A-0.-/k g;j Approved: cLA:71 ice Chairman. LAJJA9 Secretary.
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