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1511 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, August 29, l9 2. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Evans Mills Robertson Mr. Sherman, Assistant Secretary Chairman Martin referred to an earlier informal discussion which he had had with members of the Board regarding a request of 14r. S teelman, Acting Director of the Office of Defense Mobilization, the loan for a short temporary period of the services of Messrs. ICenneth B. Williams and Guy E. Noyes, Assistant Directors, Division Of Research and Statistics, stating that Mr. Steelman had indicated that , lie would be very pleased if either Mr. Williams or Mr. Noyes, Or Possibly both, could assist on a temporary basis in his office. Ohairman the Martin stated that he had discussed this matter on basis that the Board would continue to pay the salaries of Messrs. Williams and Noyes, that it was unlikely there would be a call for the services of both, and that to the extent their assistance might he requested by Mr. Steelman, they would simply serve in his office tor pe rformance of their duties rather than here at the Board. Chairman Martin added if there was no objection he would have 40 /52 Mr. Noyes call on Mr. Steelman next week for the purpose of di8cussing further the proposed work. It was agreed unanimously that the services of Messrs. 4il1iams and Noyes would be made available to Mr. Steelman on the basis outlined by Chairman Martin Before this meeting there had been circulated among the Inembers of the Board a memorandum from Mr. Marget, Director, 810n of International Finance, dated August 22, 1952, re— co n encling that the Board indicate that it would be willing to grant a leave of absence without pay for one year to Arthur C. 84nce, Chief, Far Eastern Section, in the event a formal request was received from the Venezuelan Government for his services in 18veloPing a national program to increase agricultural production i4 that country. discussed Governor Szymczak stated that this request was with 114 _ J-111 informally some weeks ago, that he then indicated he would net look Bunce With favor upon approving the request since Mr. Wa8 n°4 working on financial matters relating particularly to the r-astern sector and was not engaged in the field of agriculture, that ,, 6ne matter had subsequently been discussed with him by Messrs. Llar get and Bunce, and that at Mr. Dunce's request it was being brOU „ g" to the Board for consideration. Governor Szymczak added 8/29/52 -3- that he was doing this without an affirmative recommendation; fact, he did not look with favor upon the request inasmuch as Mr. Bunco's services were needed at the Board during the c°11Ling year and it would not be desirable to have his position vacant for a year without being able to fill it with some other appointment. He added that he would have no objection to saying to Mr. Bunco that, if he chose to resign to accept the position, the Board would, of course, consider an application for employillent when and if he again sought a position with the Board. Governors Evans and Robertson stated that they would not Wish t0 approve the request of la-. Bunce under the circumstances °Iitlihed in Mr. Margetis memorandum, Governor Evans adding that 14 hi8 view a request of the type presented by the Venezuelan G"ernMent should be submitted to the Department of Agriculture *itch had numerous men qualified to assist in planning agricultural development programs. It aas agreed that Mr. Margot should be advised that the Board would not look with favor upon a request by Mr. Bunce for a leave of absence for the purpose indicated. There were presented telegrams to the Federal Reserve Banks Of Bost°n, New York, Cleveland, Richmond, Atlanta, Chicago, A .0 1,, .) 4t 8/29/52 14inneapo1is, Kansas City, Dallas, and San Francisco stating that the Board approves the establishment without change by the Federal Reserve Bank of San Francisco on August 26, by the Federal Reserve Bank of Atlanta on August 27, by the Federal Reserve Banks of New York, Cleveland, Richmond, Chicago, Minneapolis, Kansas City) and Dallas on August 28, and by the Federal Reserve Bank °f Boston on August 29, 1952, of the rates of discount and purchase in their existing schedules. Approved unanimously. The following additional actions were taken by the Board: Minutes of actions taken by the Board of Governors of the Feder al Reserve System on August 28, 1952, were approved unanimously. Memorandum dated August 25, 1952, from Governor Szymczak, recomm ending that Virginia J. Ogilvie, Clerk-Stenographer in the l'islon of Research and Statistics be transferred to the position e nographer in his office, with no change in her present basic salarY of $3,335 per annum, effective August 31, 1952. The memo11`4411M also stated that the Divisio n of Research and Statistics Was agreeable to this transfer. Approved unanimously. Memoranda recommending that the basic annual salaries of the °11"ing employees be increased in the amounts indicated, c. r „S V29/52 -5- efective August 31, 1952: Salary Increase Date of To From Name and Title Memorandum Board the of Secretary the from Memorandum 8/12/52 Margaret J. Holster, Records Clerk Jeanette E. Devlin, File Clerk Frances B. Smith File Clerk Jean F. Stockwell, File Clerk $3,415 $3,495 3,350 31430 3,190 3,270 3,110 3,190 Memoranda from Mr. Young, Director, Division of Research and Statistics 7/21/52 8/25/52 Lorman C. Trueblood, Economist Caroline H. Cagle, Economist Evelyn H. Hurley, Clerk Mary R. Lynch, Clerk 8,560 8,760 6,340 6,540 3,175 3,255 3,255 3,335 Memorandum from Mr. Marget, Director, Division of International Finance 8/20/52 Frank M. Tamagna, Chief, Financial Operations and Policy 10,800 Section Wendell E. Thorne, Assistant to the 9,800 Director 11,050 10,000 Memorandum from Mr. Leonard, Director, Division of Bank Operations 8/25/52 Mabel E. Nike, Statistical Clerk 3,030 3,110 _14) f; 8/29/52 124I!UoLE[2.2211-alaia 8/18/52 _6_ Name and Title Memorandum from Mr. Allen, Director, Division of Personnel Administration June E. Ayers, Administrative Assistant R. H. Van Devanter„ Administrative Assistant Marjorie Kidd, Clerk-Stenographer Salary Increase From To $61140 $6,340 5190 6,140 3,110 3,190 4,035 14,160 14,035 14,160 14,035 14,160 3,785 3,910 3,070 3,150 2,700 2,770 2,500 2,750 2,500 2,750 3,255 .3,410 Memoranda from Mr. Betheal Director, Division of Administrative Services 8 • 19/52 8/20/52 8/26/52 8/21/52 Thomas N. Buckley, Telegraph Operator W. S. Pool, Telegraph Operator G. L. March, Telegraph Operator L. H. Cooley, Telegraph Operator H. H. Florea, Guard Constance Richardson, Charwoman Lura Jean Mull, Teletypist Mary M. Tolle, Typist Wanda H. Herbough„ Operator (Tabulating Equipment) Memorandum from Mr. Boothe, Assistant Director, Division of Selective Credit Regulation 8/22/52 Dorothy Drayer, Clerk-Typist Approved unanimously. 2,750 2,950 1 _5r7 8/29/52 -7Letter to Mr. Wiltse, Vice President, Federal Reserve Bank of New York, reading as follows: "In accordance with the request contained in Your letter of August 191 1952, the Board approves the appointment of Edward F. Odell as an assistant examiner for the Federal Reserve Bank of New York." Approved unanimously. Letter to Mr. Hill, Vice President, Federal Reserve Bank of Philadelphia, reading as follows: "In accordance with the request contained in Your letter of August 211 19521 the Board approves the appointment of J. Donald Murray and Walter J. Brobyn as special assistant examiners for the Federal Reserve Bank of Philadelphia." Approved unanimously. Letter to Mr. Denmark, Vice President, Federal Reserve Barlk of Atlanta, reading as follows: "In accordance with the request contained in Your letter of August 131 19521 the Board approves the designation of 1. H. Thomas as a special assistant examiner for the Federal Reserve Bank of Atlanta for the specific purpose of rendering assistance in the examinations of State member banks only, rather than as a special assistant examiner for general purposes. 'We have deleted the name of Marvin L. Miller from the list of special assistant examiners authorized to Participate in examinations of State member banks." Approved unanimously. Letter to Mr. Powell, President)Federal Reserve Bank of nneaPelis, reading as follows: 1518 8/29/52 -8- "In accordance with the request contained in Your letter of August 11, 1952, the Board approves the appointment of Walter S. Ferrian as an examiner for the Federal Reserve Bank of Minneapolis." Approved unanimously. Letter to Mr. Shepard, Federal Reserve Agent, Federal Reserve Bank of Minneapolis, reading as follows: "In accordance with the request contained in Mr. Powell's letter of August 11, 1952, the Board approves, effective September 1, 1952, the payment 9f salary to Mr. Walter S. Ferrian at the rate of $6,600 per annum as Assistant Federal Reserve Agent." Approved unanimously. Letter to Mr. Pondrom, Vice President, Federal Reserve 1341k of Dallas, reading as follows: "In accordance with the request contained in Your letter of August 22, 1952, the Board approves the designation of Morris Simpson Moore, as a special assistant examiner for the Federal Reserve Bank of °allas." Approved unanimously. Letter to Mr. Clark, First Vice President, Federal Reserve Bank cf Atlanta, reading aE follows: "Reference is made to your letter of May 9, 1952, requesting the Board of Governors' approval for an increase of approximately 7 per cent in the salary structure of the Federal Reserve Bank of Atlanta. "The Board of Governors approves the following miniIlium and maximum salaries for the respective grades of the Federal Reserve Bank of Atlanta, including the Branches, effective June 1, 1952: 1519 8/29/52 -9— Minimum 'trade 1g 1,620 2 1,680 Maximum $ 2,160 2,220 3 1,800 2,h00 4 5 1,980 2,220 2,640 2,90 6 2,i60 2,760 7 8 3,060 3,h20 9 10 3,800 ,200 114 3,300 4,600 12 135,100 3,700 0 0° 141:1° 5,100 5,600 6,200 6,800 14 5,700 7,500 15 6,300 8,200 16 6,900 / "The Board approves the payment of salaries to the employees, other than officers, within the limits specified for the grades in which the positions of the respective employees are classified. It is assumed that all emPloyees whose salaries are below the minima of their ades as a result of the structure increase will be rought within the proper range as soon as practicable and not later than 90 days after approval by the ;iage and Salary Stabilization authorities. "In granting its approval of this request by the Federal Reserve Bank of Atlanta, the Board notes that the Branches at Birmingham, Jacksonville, and Nashville "cuPY a much more favorable position in relation to their respective markets than do the main office and the New Orleans Branch. The Board, therefore, requests that the Atlanta Bank consider the advisability of creating a dual structure for these two groups at the time of its next salary survey. "The Board's approval in this matter is subject to .1.ina1 clearance by the Wage and Salary Stabilization officials." r Approved unanimously. 1520 8i/29/52 -10Letter for the signature of the Chairman to Mr. Frank 14. Browning, President, Ogden Buick Sales Company, Ogden, Utah, reading as follows: Your letter of August 9, 1952, in which you submitted your resignation as a director of the Salt Lake City Branch of the Federal Reserve Bank of San Francisco because of your association with a commercial bank recently chartered, has been brought to the attention of the Board of Governors, and in the circumstances the Board has reluctantly accepted your resignation, effective today. "In taking this action the members of the Board requested me to convey to you their appreciation of the contribution you have made to the Federal Reserve System through your service as a branch director. The provision in the Board's regulations that directors of branches of Federal Reserve Banks appointed by the Board of Governors Shall be persons not primarily engaged in banking and Preferably not directors of banks represents an extension of the principle established in the Federal Reserve Act that some of the directors of a Federal Reserve Bank should not be associated with commercial banks. -ae feel Sure that you will appreciate the reasons underlying his policy of diversified representation. "The comments contained in your letter with respect tO your association with the Federal Reserve System are most gratifying, and the Board trusts that you will con-ulnue to maintain an active interest in the System and its problems." Approved unanimously. Letter to the Board of Directors of Richmond County Bank, Roctczn guam, North Carolina, stating that, subject to conditions of IliellibershiP numbered 1 and 2 contained in the Board's Regulation H, 1521 8/29/52 -11- and the following special condition, the Board approves the Bank's aPPlication for membership in the Federal Reserve System and for the alpriate amount of stock in the Federal Reserve Bank of Richmond: At the time of admission to membership, such bank Shall have a paid-up and unimpaired capital stock of not less than 4100,000. The letter also contained the following paragraph: "The Board of Governors also approves the retention and operation of the present out-of-town branch of the bank located at Ellerbe, North Carolina." Approved unanimously, for transmittal through the Federal Reserve Bank of Richmond. Letter to the Board of Directors of The Peoples State Bank, Niee Lakes, Wisconsin, stating that, subject to conditions of mem- 4 numbered 1 and 2 contained in the Board's Regulation H, the Board approves the bank's application for membership in the Federal Reserve System and for the appropriate amount of stock in thm r-ederal Reserve Bank of Minneapolis. Approved unanimously, for transmittal through the Federal Reserve Bank of Minneapolis. Letter to the Board of Directors, Chesterton State Bank, ChestA -rton, Indiana, reading as follows: 'Pursuant to your request submitted through the Federal Reserve Bank of Chicago, the Board of Governors ?Proves the establishment and operation of a branch in farYton, Indiana, by the Chesterton State Bank, provided 02rmal approval of the Department of Financial Institutions the State of Indiana is obtained, the common capital 8/29/52 -12- "stock of your bank is increased to $100,000, and such branch is established within six months from the date of this letter." Approved unanimously, for transmittal through the Federal Reserve Bank of Chicago. Letter to :Ir. L. G. Laurell, Vice President, First National Bank of Lawrence County, New Castle, Pennsylvania, reading as folloas: "This refers further to your letter of August 1, 1952, and its enclosure, which was referred to the Board by the ?face of the Comptroller of the Currency under date of ttlgust 12, 1952, and also to your letter of August 20, 1952, to the Board, regarding the question whether a Proposed agreement between your bank and the Pennsylvania l'oNer Company, referred to in the agreement as 'Utility', conforms to the provisions of this Board's Regulation Q 2 particularly in view of section 7(b) of the proposed agreement. "It is understood that the features of the agreement Which are relevant to your question are substantially as follows: "The bank would agree to purchase from Utility, without re?ourse, installment paper arising out of sales of electrical appliances by Utility and to pay for such paper 85 per cent of the total amount of deferred payments then outstandlng thereon, less finance charges included therein. The remaining 15 per cent of the total amount of deferred pay1 ,1ents outstanding on the paper, less finance charges, would be credited to a so-called 'Liability Reserve' to be set up on the books of the bank. In this connection, your letter of August 20 states that the paper would be purchased at 103ar and title to the Paper would immediately pass to the 'Ilk, but that the consideration would not be wholly paid at that time, part being paid at that time and part being Withheld as a reserve for losses. "It is further understood that at the time of any puru.aase by the bank of the paper in question, the bank would °Ieduct from the total finance charges payable with respect to 1523 8/29/52 -13- "the paper a certain percentage of such finance charges and this amount would also be credited to the Liability Reserve. Each month, there would be credited by the bank to this Reserve, out of income received from the paper, the sum of 3-1/4 cents for each payment accepted by Utility during such month and, in addition, under section 7(b), an amount equal to 3 per cent per annum on the average balance remainimg in the Liability Reserve during such month. The bank would be authorized to charge to such Reserve any losses and expenses incurred by the bank in connection with such paper. The agreement further provides that, 15 days after the end of each calendar month, the bank 'shall pay' Utility the balance, if any, remaining in the Liability Reserve as of the end of such calendar month after deducting all amounts charged to such Reserve or paid therefrom to the Utility and retaining in the Reserve 15 •per cent of the total amount Of deferred payments on all paper remaining outstanding at the end of such month. "In these circumstances, the so-called 'Liability Reserve' represents amounts placed to the credit of Utility on the books of the bank in part payment for the paper Purchased by the bank from Utility. These amounts are liabilities of the bank and the 3 per cent per annum payments which are credited monthly to the Reserve, even though derived from income on the paper, appear to constitute payments of interest thereon. It is the view of the Board, therefore, that the Liability Reserve would constitute a deposit within the meaning of the law and the Board's Regulation Q. Since this deposit would not conform to the definition of a !time deposit' set forth in Regulation Q, it would constitute a demand deposit Within the meaning of that Regulation and, consequently, lInder the law and the Regulation, the payment of any inerest on such deposit would be prohibited. If the agreement should be modified to bring the deposit into conformity With the definition of a time deposit, interest could be Paid thereon but only at a rate not in excess of the maxiIlium rates prescribed in the Supplement to Regulation Q. "It should also be observed that the Liability Reserve Would constitute a demand deposit against which it would be 8/29/52 -114- necessary for the bank to carry reserves under the law and the Board's Regulation D. In this connection, it is toted that under section 5 of the proposed agreement provision is made for the setting up of a 'retailer's reserve' at the time of any purchase by the bank of installment paper from any retailer of electrical appliances and that, while no question involving Regulation Q would be involved in such cases, any such reserve would constitute a deposit against which the member bank would likewise be required to maintain reserves with its Federal Reserve Bank. "If you should have any further questions with regard to this matter, it is suggested that you communicate with the Federal Reserve Bank of Cleveland." Approved unanimously. As ist t Secretary.
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