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1402 Minutes of actions taken by the Board of Governors of the ,Pecie,„ 'a-I -Reserve System on Tuesday, August 31, 1948. The Board met Boar,- Room at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Szymczak, Chairman pro tem. Draper Vardaman Clayton Mr. Mr. Mr. Mr. Mr. At Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Riefler, Assistant to the Chairman Townsend, Associate General Counsel SzYmczak's request, Mr. Carpenter read two letters Iteceiveci a this morning from Comptroller of the Currency Delano 4te-Allglist 30, 1948, and August 27, 1948, in response to the toA, letters to Mr. Delano dated August 24, 1948. The letters Delano were as follows: 14etter dated August 30, 1948 II n _ ist °wledgment is made of your letter of Auhtliee„'1948 with its reference to conversations elayto-11 Governor Szymczak and myself concerning the Act Proceeding of the Board against Transamerlca Corpora tion and the influence that branches granted the ' tfp-1,4(31' America may have upon such proceeding. s office has every desire to cooperate with .41e 130 ' 1. )roirci in all matters. However, I find it difficult ivrEtrIch s,c)/4 the reasoning that the granting of de novo . 1*1 it to the Bank of America embarrasses the Board Present action against Transamerica Corporation. 't AIC;11" °Pinion that branch applications of the Bank qoris'ea. fall into two classes: (1) those applicae°11trn1.1", 1 ich contemplate the branching of Transamerica, --'ed banks into the Bank of America system, with resto present ng extinction of the stock of such banks, (2) applications for new branches where no hee exist and where there is no interference in tts si 's quo of Transamerica-controlled institutions. 1403 -2tile "Since receipt of your advice of the intentio11 of TrallBoard to institute Clayton Act proceedings against to ;,, saillerica Corporation we have consistently refused 1,e—ant applications which fall into the first class, aPPlications for branching Transamerica-owned thi88 lhto the Bank of America system. We have followed 13cft1cY in ast, order that no question might be raised -,Possible interference with the Board's action. tact Where local need and convenience and all other fo-r rs clearly justify the approval of applications 014, "Jranches which fall into the second class, it fs th °1) ,.,1-rlion that such applications could only be denied 1310110,7,ground that the Bank of America is already a yoll v°17 or tending toward a monopoly in its field. , th4re aware, of course, that the Attorney General of rek:Illted States has stated both to the Treasury and the -sentatives of the Federal Reserve Board that at portPrtie,ztn-ITili.47 there is insufficient evidence to supthetnIt is also difficult to follow the reasoning of to ta ard in its contention that, where vitally needed (real:i: , e care of growing communities, domestic branches hY the Comptroller contribute to the Bank of 1308.rcica,,111°110p01y, while foreign branches granted by the 0111:4 Governors to the same institution do not. It kiale ti°13inion that foreign branches, in comparison with 11411t8 -'c branches constitute a greater expansion of the * capit°f America system and a much greater drain upon the al position of the bank." Letter dated August 27, 1948 1A8: : 1 !rMit me to acknowledge your letter of August 24, t th its comment upon the policy of this office ini ElJacisill branches to the Bank of America National Trust N1113. gs Association and to banks of the Transamerica l'espe,: t has been my understanding that our policy with to that situation was outlined by Secretary Vin1)etli7ticularly after the conversations in December 1945 /*14S %II the Secretary and the Chairman of your Board, and \ t's ;_ci)r°1-1ghlY understood by the Board. Subsequent con111 113%'011-5 between my office, the Attorney General and th4,,! Of the Board of Governors would seem to confirm 13011,--"dersta.nding We have consistently followed the -Y there outlined." 1404 813v1,8 -34ached The letters were discussed in the light of the agreement 'fl 1942 between the Board, the Comptroller of the Currency, 44(1 the CILirillan of the Federal Deposit Insurance Corporation with re sPect t, --Policies to be followed in approving additional branches 8114erica-controlled banks and in the light of the possible qreet 'tize 141lich the policies set forth in Mr. Delano's letters might the Col„, instituted by the Board against Transamerica -vorati °II under section 11 of the Clayton Act. 131.1rillg the discussion it was pointed out that the letter Del ello dated August 30, 1948, might provide a basis for tlie°c)14troller of the Currency continuing to grant approval of de (31131'411ches for Bank of America N. T. & S. A. regardless of the °Iltee °I' the Board's proceeding under the Clayton Act on the theat the bank (as distinguished from Transamerica Corpora11'11) 1141i llot Izacier been found by the Department of Justice to be monopo- the terms of the Sherman Act. There was also a dis- the Policy referred198 to in the second paragraph of Mr. -*.tIllois letter of August 27, 4 Following the discussion, it was unanimously that the staff should el3are a memorandum reviewing the agreeamong the three Federal bank super.w-s°rY agencies in 1942 concerning the ' a llting of additional branches to Trans-'Isica-controlled banks and subsequent t 1403 vh/48 developments in connection with the agreement, (including a review of the discussions of the matter with SecretarY of the Treasury Vinson) and suggesting the substance of the replies to be made to the two letters from Mr. Delano. arPenter read a memorandum from Mr. Horbett to Mr. Under date of August 31, 1948, in which it was stated thrlt • Pirldeisen, Assistant Vice President of the Federal Re°f Cleveland, had telephoned yesterday afternoon to kZk l'Illether there would be any objection from the Board's stand- *tit 141 t° the Federal Reserve Bank of Cleveland holding Treasury "keeping for the Bankers Trust Company, New York. Ze'°teQ1111ill We The on to say that the Cleveland Trust Company, appar- NII IlleLlIticiPation of an increase in reserve requirements, dto 'P its funds as fully invested as practicable and yet 13(381t1 °/1 to make quick adjustments in its reserve position, Nt 1N„ c)ccasionally sold Treasury bills to the Bankers Trust Com- Y°1"k, under a repurchase agreement, and that it proposed e the bills held in safekeeping at the Cleveland Reserve Bank I,.'1)eci.ite ad t justments in the reserve position of the Cleveland 0114) ) i 1)1 (:)1 po since, if the bills were held by the Bankers Trust its account by the Federal Reserve Bank of New York, llot bc, Practicable to transfer their ownership late in the 11 IA; 8/31/48 -5ot the last day of the month if adjustments in reserves of la7elalld Trust Company were required at such times. kr. Vardaman suggested that the Federal Reserve Bank of el'a4c1 be 84111d advised to use its own judgment in deciding whether accede temporarily to the request of the Cleveland Trust I)a'q, with the understanding that if it should accede to the ellIBt the ba.nk should be informed that the action did not contlte a Pr ecedent and might be discontinued after further con- qat ion. of -the , 81.80 8 matter by the Board and other Reserve Banks. tit IlggeSted that the matter be placed on the agenda for 011ss • '1°4 at the next President's Conference. Mr. Vardaman's suggestions were aPProved unanimously. 0 u Ilere/-.nee was made to a draft of letter prepared pursuant " 'acti °11 at the Nt meeting on August 24, 1948, to Mr. Davis, 1 11()1 'th '4-,t1.14 -e President's Conference, asking that at the next lag Qf the 0 Conference 4r i4 lea there be a discussion of the desirability lire which would contemplate that no change would be made Ile seruo 1)fr teel, r examining staffs of the Federal Reserve Banks or in 'tl li a Respb -rve Bank branches without first taking the matter th tl,e .1.., qi2elis 4ard. The draft had been prepared in the light of at the meetings on August 24 and 26 concerning the litraellt -Y the Federal Reserve Bank of Minneapolis of Mr. Groth 407 -6Ass.: 4-stant Vice President assigned to the Helena Branch. Mr. Vardaman stated that he had asked that this letter be 131.1t that subsequently he had received a letter from Mr. l'it6-1'cle.tecl August 26 with further regard to the Board's action '11(3t al)Proving a salarY for Mr. Groth at the level originally the directors of the Federal Reserve Bank of Minneapolis. 1/41%18-111ari also said that Mr. Draper had received a somewhat 11 474.-ar letter, that telegrams had been sent by Mr. Peyton to •8zmezaa,and Evans, and that he (Mr. Vardaman) had preleci B. aratt reply to the letter he had received but that he be tla'slIggest that a reply to Mr. Peyton's several communications tbala ' c ver the Ysel)exate Secretary's signature on behalf of the Board rather replies by individual members of the Board. tur There was a discussion of the na, e of the reply that should be made mr m • Peyton and it was agreed unaninIslY that the Secretary should prePare a draft of reply for consideration by the Board. It was also agreed unanimously that the letter to Mr. Davis as Chairman of the P residents Conference, prepared in ITrdance with the action on August 24, ct ) should not be sent, and that further a9 on the matter should be deferred ,c1:,.L1 there appeandto be a need for taking "e matter up on a System-wide basis. lie ch ‘elaYton stated that at an informal conference yesterand Mr• Townsend had with Mr. Delano, Comptroller of 1408 8h01.8 -7tl*Cill ' reticY, and. Messrs. Han, Chairman, and. Cook, Director, of the 1, -e4ere 'l Deposit Insurance Corporation, reference was made to the 11111cat1on of Bank of America National Trust and. Savings AsOX' permission to establish branches at Bremen, Frank- "aill 'and Hamburg, Germany, and in the light of the dis,c1,14: 0 te r..cl t at that conference it would be his suggestion that the f(pr the comments of the Comptroller of the Currency and tePosit Insurance Corporation on the advisability of 'klt1101.. 1z1116 the establishment of the three branches in the light the position of the applicant bank and other relevant 4reNtiot. krt The reason for the reference to the two agencies, independently 88'id, would be to determine whether, the ClaYton Act proceeding, the Comptroller of the Currency the p (Ai ederal Deposit Insurance Corporation have any material ot 4Y14)11 tAeti °11S to the establishment of the branches. He also said : 1 14 the informal conference referred to above Chairman bilcated that he felt the establishment of the branches thzt: cotsidered from the standpoint of the additional risk 141. 141glit e invol ved in the insurance of the bank's deposits bth 4r• Delano questioned whether, because of its capital lending and dividend policies, the national bank It111)1.: perzitted to assume additional liabilities through the ellItlellt of foreign branches. 409 8/30,8 -8Iii c onnection with Mr. Clayton's suggestion, it was stated 115. the "ws of the Comptroller of the Currency had been requested kl,that a letter dated July 22, 1948 he had stated that his oftiee. liotad enter no objection to the establishment of the branches. ilefere)ace 114 Irievs Was also made to the fact that a further statement of Was c ontained in a memorandum addressed to the Board by szyzczalt un.der date of August 13, 1948. 141% Clayton stated that since he had not handled the aptt0 : : 111 118 for the three branches, he had not been aware that the (31' the Comptroller of the Currency previously had been re111.te elld that in the informal conference the Comptroller had tt4 riletitic)n of having written to the Board or having talked Szyraczak about the matter. thi, 141% Tc)wilsend stated that he favored Mr. Clayton's sugges- t() because, in. his opinion, the question whether the application 13erl11 ehoi4 tssi°11 to establish the three branches would be approved Civtcl be ecinsidered on its merits entirely independently of the °11 Act proceeding against Transamerica, and that if there c)i-ls from the standpoint of the bank's capital position tt)t blIzt or dividend policies why the application should 414"ove 413.a. °tad the decision of the Board should be on that not be related in any way to the Clayton Act 8/31/48 -9La a discussion of Mr. Clayton's suggestion, during which Director of the Division of Examinations, joined the -% the . Opinion was expressed that in view of developments qlice • Delezo's letter of July 22 was written, the Board would d in taking the matter up with him again. At the conclusion of the discussion, uPen motion by Mr. Vardaman, it was voted ,1 11animously to request the Legal Division t ) s Prepare for consideration by the Board ;arts of letters to the Comptroller of ,ue Currency and to the Chairman of the -'ederal Deposit Insurance Corporation al°11g the lines suggested during the discUssion. Mr. Qr, '43rmczak referred again to the report on the Board of 11°4 Prepared by Mr. George L. Bach for the Committee on In- Re6ulatory Commissions of the Hoover Commission, and "e4 t th : liot t 'al accordance with the action taken at the meeting of ttico d on August 26 he had talked with Mr. Bowie, a member of 111,1 )11% tii1-"ee, and Chairman McCabe about the report. He said he Ise had made it clear that he had in mind getting comments ztitl,t14, eDort from l'Isora the he as many individuals as he could but not neces- Board as such, and that Chairman McCabe was in- view that no comment should be made by the Board. There was a brief discussion, after II, at the suggestion of Mr. Szymczak, VaS unanimously agreed that the matter 'ould be placed on the docket for further it 8130,8 -10consideration at the meeting of the Board to be held on Tuesday, September 7, 1948, at which Chairman McCabe would be present. At this tit Point Messrs. Riefler, Townsend, and Leonard with- the action stated with respect to each of the matters herete "t forth was taken by the Board: 4U. Ilinutes Reserve of actions taken by the Board of Governors of the System on August 30, 1948, were approved unanimously. utter to mr. Volberg, Vice President of the Federal Reserve ‘ors_ ' 'LlaPrancisco, reading as follows: kr accordance with the request contained in the letter t of August 25, 1948, the Board approves aailli4P0intment of James Grant Bickmore as an ex01 the Federal Reserve Bank of San Franthe Please advise us of the date upon which "PPotntment becomes effective." Approved unanimously. Letter to It. r Wysor, Chairman of the Federal Reserve Bank hi1v4a, reading as follows: Ner At the completion of the examination of the eserve 7'aZi li Bank of Richmond, made as of June l'ePor0 bY the Board's examiners, a copy of the th4r examination was left for your information 0f the directors. A copy was also left for it Leach. Board advice that the reNre 8.s been will appreciate considered by the board of directors st°11s°11Thiellte offer regarding discustio4 With reYou may care to or as to aexamination, sPect to the tiori te'kela or to be taken as a result of the examlna11 also be appreciated." N Z Approved unanimously. -11Letter to Mr. McConnell, Vice President of the Federal ReOf Minneapolis, reading as follows: 1s4 "Reference is made to your letter of August 20, submitting the request of the Farmers and MerEtclai;s Bank, Huron, South Dakota, for approval of an b01 t10 investment in banking premises in connect or;Lwith its program for the expansion and remodeling ealcilb tLbanking quarters, installation of a new vault, ture ' chase of new equipment and furniture and fixat a cost of approximately $100,000. Boara 1-n accordance with your recommendation, the PrEti 4Proves the additional investment in banking i)rogr,.. -ses bY the Farmers and Merchants Bank under the "ara as submitted." Approved unanimously. letter to Mr. Arthur M. Hill, Chairman, National Security 13°Etra, reading as follows: klisn'ue Bard of Governors has reviewed Mr. Griffith 'Sottlet's PreliminarY memorandum of May 11 entitled Stabil'Uggestions for the Development of an Economic llotea-iation Program for a War Emergency', and has With Particular interest the sections dealing °Dllort etarY matters. The Board appreciates the 0"itY offered in your letter of May 21 to cornmemorandum in advance of its consideration ,A'oltional Security Resources Board. 14.r. Johnson's memorandum shows, under existing Q11.terile„'°ns even the most skillful handling of war pr?41'37' -re,/t would instantly release overwhelming inflation211res. Not only would we have little or no time dl'iT1, e,--'eration but also we would have much less leeta6s1' ab sorbing the consequence of the kinds of mis4t ; 11 financial policy that were made during the %Tit war emergency. A repetition of these ex. : change the future direction of our economic '04till'al development. It is urgent, therefore, to -the broadest counsel in exploring the foundations /31/48 -12- ttor riscal and monetary policy for an emergency. Exof these foundations, in our opinion, should laav i,: t.a.high priority in the advance development of any aze st abilization program. thHit is particularly important that the Treasury, financier of the Government and the chief warrower of funds, have the benefit of a full exOf information and views with other Government tabC i cial agencies or groups before undertaking to esGre,;s11 a wartime financial policy for the nation. ell:ter-1er consideration should be given in any future ka,-th erleY than was accorded in the past to the afterroll: war finance. Because certain policies were ed in the last war, the ability of the monetary ealtho : has j itles to cope with postwar stabilization problems "en greatly complicated. shollia'i,_11 Planning economic mobilization for war, it vela, Possible to consider the effects of emergency that °,4 . cies on postwar as well as war conditions so cieci ".iten reasonable alternatives present themselves, coxiss1011s can be made with Possible long range postwar lr Ete juences in mind. This objective can be best achieved Iritligencies concerned with a given field, both those %lith ated interests and responsibilities and those k'ti; : c re Primary statutory duties and responsibilities, jointly in the advance planning. 0l3tte The bearing of these general comments on the develettOr emergency policies in the monetary field is tilat 101,::„ In Mr. Johnson's memorandum, it is suggested or rial on 'Investment Expenditures and Limitation 11cti°11' might be prepared by the Department of ()(1 , ° 1,13 er ue th — e; that controls over real estate prices should Cohtrei subject of consultation with the Office of Rent •azd atl that 'the practicality of measures (such : 41610,...er-ed savings) designed to prevent or immobilize s"'Alorev ' s,s expansion in money and incomes' should be by the Department of the Treasury. It is Illicit/0— cl, with reference to the broad field of 'Fiscal eetarY Measures' that 'It is understood that the , „ s nlacle arrangements with the Treasury Department Droi mobilization plans for this area'. of these cases the problems are complex 11 each f' ling• Any program would affect the statutory -ities of several Government departments or V -13It is the view of the Board of Governors th l it-auequate consideration of all the important issues in each , sci stu lia °,"7 case can be obtained only through uY all the agencies directly concerned, and the pisest Possible exchange of information and views. : ex ),11 and monetary developments and policies, for col 'e, are very closely interrelated and should be 4E11120a dered together. The whole field of mortgage firel,;;' in farm as well as non-farm areas, is closely ezi)-'ed to the flow of savings and the inflationary Of bank credit and also to the operations of 11,011—al-It groups of financial institutions and of vas, suPervisory Government agencies. rilltbe TPreParation of specific plans will involve a will Probai, ri°f fairly detailed projects each of which have to be assigned to qualified individual, clesi ' interested agencies. In order to secure the kqAT j°int participation in developing plans and ecis-4 8 for fiscal, monetary, and related action, and the ' tilai ;sired understanding and cooperation in their eventheaC eelition, however, it is the Board's view that or Pr°jects could best be carried on under the aegis QI'tl-sPecialcommittee including representatives of each following agencies: Tle' lti°nal Security Resources Board Tre C°11-ncil of Economic Advisers ea'surY Department p2rd of Governors of the Federal Reserve System 1,'L'eral Deposit Insurance Corporation parta Credit Administration ilepartment of Agriculture )q!using and Home Finance Agency econ struction Finance Corporation pe, , c4rities and Exchange Commission a.rtment of Commerce ee°11ozie believe further that the broader objectives of , -c stabilization and effective mobilization for 'Illela°1, 16- be better served if the departments of the 0 41teci-srvices and other war agencies were also repreHT 4 this committee. 4 c onclusion, the Board wishes to say again that ' opport \rer, tlilltY to comment on Mr. Johnson's memorandum much appreciated." V Approved unanimously. 8131/48 Letter to Mr. Roger W. Jones, Acting Assistant Director, Legislat.4 --lie Reference, Bureau of the Budget, Executive Office of 'Qie plies iclent, reading as follows: reply to your letter of August 17, I wish to tlieZ°r111 You that the Board has no objections to Nrj!°Posed Executive Order entitled 'Regulations to 1,2111g the Furnishing of Statistical Information the '11.0 International Organizations as amended at glit-nional Advisory Council staff meeting on AuOf th '" It is our understanding that paragraph 1 amended Executive Order will now read: .f. xcePt as provided in paragraph 2 hereof, he Director of the Bureau of the Budget \!rreinafter referred to as the Director) 111-1 determine (a) in consultation with Secretary of State, what statistical Information should be provided in order that the Government of the 'United States 183r.comply with official requests received 1.37 lt from any public international organti°n, and (b) which Federal executive -p'encY or aaendies shall furnish the in- 7 t Approved unanimously.
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