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Minutes of actions taken by the Board of Governors of the Federal Reserve System on Tuesday, August 5, 1952. The Board met in executive session in the Board Room at 10:00 a.m. PRESENT: Mr. Szymczak„ Chairman pro temo Mr. Mills Mr. Robertson Folloaing the executive session Governor Szymczak advised the Secretary that after Governor Vardaman had joined the meeting the Board considered and approved the recommendation contained in a memorandum dated August 1, 1952, from Mr. Dembitz, Assistant Director, Division of International Finance, that Robert Solomon, Economist in that Division, be loaned to the Mutual Security Agency, as requested in a letter ate of July 29, 1952, from Mr. D. A. Fitzgerald, Associ iapprox Director for Mutual Security, for a period of mately 90 days beginning as soon as the necessary arrangements could be completed, to assist the staff al of the Paris office of that organization. This approv would was given with the understanding that Mr. Solomon remain on the Board's pay roll on a nonreimbursable basis during the period of the special assignment but that the Mutual Security Agency would pay all other expenses incident to the assignment, including transportation and per diem, direct to Mr. Solomon, and would with the further understanding that Mr. Solomon expert serve in the capacity of a qualified technical for the Mutual Security Agency rather than in his capacity as a member of the Board's staff. The following additional actions were taken by the Board: of the Minutes of actions taken by the Board of Governors ?ederai Reserve System on July 31, 1952, were approved unanimously. of the Minutes of actions taken by the Board of Governors Federal Reserve System on August 1, 1952, were approved and the actions l ecorded therein were ratified unanimously. ' Memorandum dated July 29, 1952, from Mr. Bethea, Director, 41/ision of Administrative Services, submitting for approval a •4 ( 35 88/52 -2- voucher submitted by the Federal Reserve Bank of San Francisco, in the amount of $1,321.)J5, covering expenses for the period June 1-28, 1952, incident to the service of Mr. Eliot J. Swan as Acting Assistant Director of the Division of Selective Credit Regulation. Approved unanimously. Memorandum dated July 17, 1952, from Ir. Sloan, Director, Dilrisjon of Examinations, reading as follows: "Attached is a letter dated July 8, 1952, from Executive Vice President Russell G. Smith with further reference to the Board's letter of April 18, 1952, to Chairman Gook transmitting copies of the report of examination of Bank of America, New York, New York, made as of November 30, 1951, by examiners for the Board of Governors. Smith's letter states that, since receiving the report of examination, it has been carefully reviewed by the officers of the corporation and also by the Board of Directors, and that particular attention has been given to the recommendations and suggestions of the examiner as set forth on pages 13 and '4 of the report. "In reporting on the actions which have been taken, identicertain of the recommendations and suggestions are full; in with fied and indicated as having been complied With respect to the remaining recommendations and suggesnature tions, because of their character and the special comments , detailed of the corrective action suggested are submitted in the letter. "On the basis of the information submitted it with appears that substantial compliance has been made examiner, the the recommendations and suggestions of and the corrective actions taken or contemplated appear satisfactory to us at this time. Mile some question continues in our minds as to whether the action with respect to the auditor or control officer will meet the Objections made at each of the two examinations made of -3- 8/5/52 officer with "Bank of America, the bank reports that an ing has been train and ience auditing and inspection exper er - OperaManag tant appointed to the position of Assis s defined litie nsibi respo tions Officer with duties and priate appro ng senti repre which the bank considers as visited tly recen er offic action. The newly appointed mally infor ssing discu the Division for the purpose of t of repor the in made certain of the recommendations favora d forme both I examination, and Mr. Goodman and wed revie be will r matte able opinion of him. This whole is it ces, mstan circu the at the next examination.) In ction not believed there are any other matters in conne the to ht broug be d with the examination which shoul action at attention of the Board for consideration or this time." Approved unanimously. Subcommittee Letter to Mr. Melvin Purvis, Chief Counsel, °I1 Federal Manpower Policies, Committee on Post Office and Civil reading as Service, United States Senate, Washington, D. C., follows: 23, 1952, "This is in reply to your letter of July the with requesting certain information in connection nnel perso survey your Subcommittee is making of Federal parare and manpower practices. You indicate that you wed by ticularly concerned with the practices follo tive istra admin g makin in ies agenc various Government employees. checks and investigations of applicants and ve Reser "The Board of Governors of the Federal e priat appro System, pursuant to authority contained in has ed, amend provisions of the Federal Reserve Act, as Administration as designated its Division of Personnel applithe organization responsible for processing all makes ion Divis cants for positions at the Board. This tigainves suitability, loyalty, or security checks or ous previ tions of applicants and employees ghich cover of ds recor employment, school records, references, lnd 8/5/52 -4- "of police and Governmental intelligence agencies. Chile the Board of Governors does not conduct such checks or investigations for other Federal agencies, any information obtained by the Board may be made available to any agency having a legitimate interest therein. "By way of supplementing investigations made by the Board's staff, information is also obtained upon proper request from the files of the Federal Bureau of Investigation, Civil Service Commission, and, where necessary, any other Governmental intelligence or investigative agency. In any instance where a question of loyalty arises, the case is submitted to the Federal Bureau of Investigation for a full field investigation. The assistance thus provided to the Board by these other agencies of the Government is in accord with the policy expressed in Executive Order 9835." Approved unanimously. Letter to Mr. Alex Berger, Jr., 4605 Lindell Boulevard, St. Louis, Missouri, reading as follows: "This is in response to your letter of July 25, 1952, In which you have asked certain questions regarding the rights of minority stockholders in banks which are members of the Federal Reserve System. "The Board of Governors of the Federal -Reserve System is authorized to exercise certain powers of supervision over all 'member banks' which include all national banks and such State banks as have been admitted to membership in the Federal Reserve System. In addition, national banks are subject to the supervision of the Comptroller of the Currency; and the Federal Deposit Insurance Corporation has certain powers of supervision with respect to banks ahose deposits are insured under Federal law. Banks organized under State law, of course, are subject to supervision by the State banking authorities. "While, as just indicated, the Board exercises certain supervisory powers with respect to member banks, it cannot undertake to intervene or give advice regarding the rights 1t3G2 8/5/52 -5- "of stockholders and has no rules on the subject. Such controversies as may develop along the lines suggested by your questions are usually matters of negotiation between the parties or determination by the courts." Approved unanimously. Letter to the Presidents of all Federal Reserve Banks and the Vice Presidents in charge of the Detroit and Los Angeles branches, reading as follows: "In connection with an audit which the General Accounting Office is making as of June 30, 1952, of V-loans guaranteed by the Departments of the Army, Navy, and Air Force, it will be appreciated if you will furnish the Board, in duplicate, the following information with respect to loans purchased for account of each of the above guarantors. If no loans have been purchased, negative reports should be submitted. Name and address of borroaer. 2. Name and address of the financing institution. 3. Number of guarantee agreement. 4. Maximum amount of loan specified in guarantee agreement. 5. Per cent guaranteed. 6. Percentage of guarantee fee. 7. Date of purchase by Federal Reserve Bank. 8. Amount of principal and accrued interest purchased. 9. Additional amount advanced since purchase. 10. Balance of purchased principal and balance of purchased interest, if any, outstanding as of June 30, 1952. 11. Principal outstanding, including unguaranteed portion, as of June 30, 1952. 12. Schedule of collateral as of June .301 1952. 13. An opinion, if one can be rendered at this time, as to the collectibility of the loan." Approved unanimously. -6- 8/5/52- Letter to Mr. Lewis, Vice President, Federal Reserve Bank of St. Louis, reading as follows: "This is in reply to your letter of July 24, .19521 regarding the apaication of Regulation X to a situation Where an applicant for a loan owns a lot on which he wishes to construct a service station after certain existing structures are razed. You request the Board's opinion as to whether funds borrowed to defray the cost of razing the existing structures should be considered as credit for 'new construction'. "The term 'value' is defined in section 2(i)()4)(B) Which has application to nonresidential property, as the appraised value as determined in good faith by the Registrant who extends the credit.' Appraisers would in the case you have presented, as well as other cases involving the preparation of the site, including filling, grading, etc., take into account the reasonable cost of the site Preparation. Obviously, this cost will vary in different i_tuations and it would not be feasible administratively ?t, in each instance, the degree of difficulty involved in preparation of the site were required to be considered before a determination could be made of the maximum loan value. It is the Board's view that any borrowing to lefraY the cost incident to the preparation of the site, including the razing of old structures, is a part of the credit for the new construction. "In the hypothetical case to which you have referred, !there residential property was acquired within the past -12 months on which it is desired to build a residence eclulring the removal of a number of large trees 'value', r view of section 2(1)(2)(B)(i), would include the cost of tn°ving the trees. However, if the land was acquired more "an 12 months prior to the extension of credit, the language in section 2(i)(2)(B)(ii) would apply and 'value' uld be the 'appraised value as determined in good faith DY the Registrant who extends the credit'." Approved unanimously. Secretary.
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