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Minutes for To: Members of the Board From: Office of the Secretary August 5, 1957 Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. A Chin. Martin Gov. Szymczak Gov, Vardaman Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson x x 2159 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Monday, August 5, 1957. The Board met in the Board Room at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Balderston, Vice Chairman Vardaman Mills Shepardson Mr. Carpenter, Secretary Mr. Kenyon, Assistant Secretary Mr. Riefler, Assistant to the Chairman Mr. Marget, Director, Division of International Finance Mr. Masters, Director, Division of Examinations Mr. Koch, Assistant Director, Division of Research and Statistics Mr. Solomon, Assistant General Counsel Mr. Sammons, Chief, Latin American Section, Division of International Flmance Items circulated to the Board. The following items, which hal been circulated to the members of the Board and copies of which attached hereto under the respective item numbers indicated, 4 '.±.kP22/221, unanimously: Item No. Let t bers to the Federal Reserve Banks elo'liehmond, Chicago, and Dallas, °17Ing extension of the retirement --'es of certain specified employees. tetter to the Federal Reserve Bank of L• orr. °Ills approving salaries for two (), leers at rates fixed by the Board 4 Directors. e 1, 2, 3 8/5/57 -2Item No. Letter to Fidelity-Philadelphia Trust Company, Philadelphia, Pennsylvania, approving the establishment of a branch in the Bala-Cynwyd Shopping Center) Montgomery County, Pennsylvania, and an yaditional investment in bank premises attributable -c° establishment of the branch. (For transmittal thr°ugh the Federal Reserve Bank of Philadelphia) Discount rates. 5 There were presented telegrams proposed to be sent to the following Federal Reserve Banks approving the establishment without change by those Banks on the dates indicated of the rates of discount and purchase in their existing schedules: Boston New York Philadelphia July 29 August 1 August 1 The telegrams were approved unanimously. Vault facilities at Salt Lake City (Item No. 6). On July 12, 1957) the Board approved a change of plans for the new Salt Lake City ch ,puilding to provide for extra piling to permit construction of 4dditional vault facilities, either in connection with the original c°11struction or at a later date. This action was taken with the Ilrlderstanding that before proceeding with the construction of the 44ditinn,1 vault, the San Francisco Reserve Bank would submit the 414tter to the Board in accordance with the usual procedure. In a telegram dated July 31, 1957, Reserve Bank President e15 submitted cost estimates for two alternatives; namely, a 2161 8/5/57 -3- suPplemental vault to be built in the sub-basement in space designed for storage, or the conversion of the two-level vault into a threelevel vault by excavating deeper and adding another level below the two °riginnlly planned. The second alternative, while providing a valat about twice as large as the other (1,926 square feet against 921) would cost about three times as much (an estimated *235,602 against an estimated *78,050). In a memorandum dated August 1, 1957, 13rePared on the basis of information received in the telegram from the San Francisco Bank and conversation with President Mangels, Mr. Leonard there reported that in Mr. Mangels' view the question whether should be additional vault facilities at Salt Lake City was basically one for the Board to decide in the light of the System's 1314114ing for the storage of emergency supplies of currency, since the vault as originally planned appeared adequate for the needs of the Branch. However, if it should be decided to provide additional vault capacity, Mr. Mangels believed it would be preferable to build the larger vault. Mr. Leonard's memorandum also stated that, from an cilitect's point of view, Mr. Persina, Consulting Architect to the 13°14 ' cl, favored the three-level vault proposal and considered it a desirable way to provide vault space, if such space was needed. 811bmitted with the memorandum, copies of which had been sent to the rilenib ers of the Board, was a draft of telegram to the Federal Reserve Bahl, of San Francisco which would authorize expenditures incident to he estimated construction cost of the three-level vault. 8/5/57 There had also been sent to the members of the Board copies °f a supplemental memorandum, dated August 21 19571 in which Mr. Leonard reported that in a telephone conversation Mr. Swan, First Vice President of the San Francisco Bank, had provided a revised cost estimate for the larger alternative proposal of about $301000 less than originally estimated. The revised estimate, according had resulted from further discussion between the architect to M5qan and the general contractor and appeared to be much more definite. In a discussion of the matter Governor Mills suggested that, On the basis of experience in the construction of Federal Reserve 1144k and branch buildings, it seemed prudent to provide ample space, 1°r the alternative was apt to be the necessity to resort to some Inakeshift expansion project. Accordingly, it seemed to him that the larger alternative proposal was appropriate and the cost justified. In response to a question by Governor Shepardson, Mr. Carpenter stIlted that the downward revision in the cost estimate reported by Mr. Swan was attributable solely to further study of the alternative 11444 proposal and not to any change in the original specifications. Agreement having been expressed by the other members of the 80ard with the point of view stated by Governor Mills, unanimous was given to a telegram to the Federal Reserve Bank of San Fralleisco in the form attached hereto as Item No. Gold loan to Chile (Item No. 71. 6. There had been sent to the me mbers of the Board copies of a memorandum from Mr. Marget 8/5/57 -5- dated August 1, 1957) and other pertinent documents relating to a request by the Federal Reserve Bank of New York for the Board's aPproval of a proposed loan or loans to Banco Central de Chile on gold collateral. The arrangement, which had been approved by the Reserve Bank's Board of Directors, would provide for (a) a loan of 143 to *5 million, to be drawn on or before September 301 1957, in illtatiples of million in the form of ninety-day loans, subject to renewal, with no commitment charge, and (b) a standby a"rrazigement, valid until January 311 19581 under which a total of 0.0 rallii°n in ninety-day loans might be drawn, with no provision for rellewal and with a commitment charge of 1/4 of one per cent on the 114Used Part of the commitment. As pointed out in a memorandum from Marget to Chairman Martin dated July 301 19571 which also had been distributed to the other members of the Board, the accommodation 14°111d fall under the "exceptional" category in the Statement of 1)°11eY on Gold Loans adopted by the Board on December 61 1955, since it would be intended to "support implementation of a program intended to el iminate major balance of payments difficulties arising from irlternal financial or monetary disturbances or from basic maladjustkelats in the economyv • Mr. Marget's memorandum of August I recommended 841Proval of the proposed arrangements on the terms suggested by the New york Reserve Bank and there was submitted with the memorandum a clraft of telegram to the Bank which would grant such approval. 21 8/5/57 —6— In commenting on the subject, Mr. Marget emphasized that 44 over-all stabilization program had been formulated and was being Pursued by the Chilean authorities, but that there had been developInents adverse to that program, including particularly the substantial ell ' oP in world copper prices. Turning to the position of United States agencies, he said that the Department of State and the Export-Import Bank had exhibited a stern attitude toward the Chilean situation, 48 had the International Monetary Fund, in developing programs of assistance to that country. In the circumstances, he had contacted all three organizations to ascertain whether the proposed gold loan arrangement would be inconsistent with their efforts and had been assured that it would not. The attitude of the State Department, he said) was such as to minimize the possibility that the Department cl later support any attempt on the part of the Chileans to renew the Proposed gold loans. Governor Mills then stated reasons in opposition to the l'ee°1141e1dation that the gold loan accommodation be granted. His 41)1'1118a-1 of the Chilean financial outlook led him to feel that a fUndamental disequilibrium in the balance of payments might be invc)ived, rather than a severe strain of a temporary nature which Mill 'ht reasonably be expected to be corrected within a relatively sh°rt period. On that basis, he felt that a gold loan, although 'safe from the standpoint of the collateral behind it, would be 216'5 8/5/57 -7- contrarY to sound lending principles because it seemed likely that repayment would have to depend on sale of the collateral rather than Oil a self-liquidating process and improvement in the borrowing e°uatrY's economic condition. It is a maxim of sound banking, he Pointed out, to avoid making a loan, irrespective of the collateral c)frered, if there is a prospect of forced liquidation and loss of g°°6-Ifill on the part of the borrower. In this case, Governor Mills said, the proposed loan seemed to him to contravene the philosophy underlying the Statement of Gi*"40a1 Policy, for it was basic to that philosophy that in the of a fundamental nationAl disequilibrium the country in question would sell its gold to meet the situation rather than borrow against the gold. ellibEtrked in According to his understanding, the Chileans had 1955 upon a comprehensive corrective financial program a401 had made a genuine and determined effort to improve the position of the country. These efforts, however, had not prevented a contirtuation of Governmental deficit finmacing, continued depreciation the Chilean peso, or a very distinct rise in the cost of living. M'e greatest difficulty that he saw in the recommendation to grant geticl loan to Banco Central de Chile at this time was that such actio 4 'Would very definitely set a precedent of coming to the rescue Or a r °reign nation, and this might well encourage similar applications bY other d istressed countries. In other words, it would indicate a 2166 8/5/57 -8- Position and policy on the part of the Federal Reserve System that gad loans were primarily political rather than central bank transactions. Due to the political overtones, he said, it was his opinion that the proposed loan should be made by some political source of credit rather than through the Federal Reserve System. Mr. Marget responded that he welcomed Governor Mills' remarks in the sense that he himself had felt strongly that the policy surroundthe extension of loans on gold should be in the direction of mAking such loans entirely consistent with good monetary policy elsewhere. Re Pointed out, however, that as opposed to certain cases where gold 1°ans had been made recently, a well defined stabilization program had been instituted in Chile and had been carried through actively bY the Chilean authorities for some time. While he did not want to PIcture the Chilean situation as better than it actually was, he felt that on the whole the stabilization program had been a sound one, ilarticularlY since it had previously appeared that the country was heacied for hyperinflation. At the moment, he said, the International M°11etarlor Fund was engaged in, so to speak, "bucking up" the Chilean a4thorit1es, and all interested agencies of the United States Governere supporting that attitude. He suggested that the judgment Of +1-. -"e Board on the proposed gold loan accomodation must be made &111111st the background of the stabilization effort and the question whether the granting of the accomodation would interfere with that etrort. 21(37 8/5/57 -9Governor Mills then stated that in the case of the Turkish loan in 1956 the Board was properly influenced to some extent by considerations of national security, but that in this case those considerations were not in the picture. He recalled that in re- viewing the purposes of gold loans at the time of the discussions preceded adoption of the Statement on Gold Loan Policy, the PartleiPants in those discussions seemed to have in mind that where 4 situation was clearly one involving fundamental difficulties, the Pr081Dective borrower should sell gold in the first instance or arrange fc)r a loan from sources other than the Federal Reserve. Against thi8 background, he said, it was disappointing to him to note the tatement on the part of Banco Central that at the end of a year the 8.1 of gold would be considered if it had not been possible to °therwise repay the loan or, in lieu thereof, that accommodation 1.1°41c1 be sought from private banking institutions. He was also 418aPPointed to observe that some of the proceeds of the loan were apparently housing going to be used to continue the financing of Projects in Chile. He gathered that, as in other countries, this sitllation probably reflected an ambitious program on the part of the government for the financing of housing. Mr- Marget agreed that if one were to look at the partial 118e °f the ' proceeds by the Chileans, the matter would look question- Or °ne would normally expect the dollar proceeds of a gold 2168 8/5/57 -10- loan to be used entirely for anti-inflationary purposes. Nevertheless, he felt that one must look at the loan more from the standpoint of the over-all financial program. With regard to the possibility of the Chileans going into the private market for funds or selling their gold, he said that he had raised the same question himself on Previous occasions. However, in neither of those instances had the aPPlicant country initiated or conceived a stabilization program, an he felt that this factor must be taken into consideration. Also, the question of timing seemed to deserve attention in the Chilean altue*tion. There had been a substantial drop in the price of copper, Which previously had provided the barrier behind which the implementa.ti°n of the stabilization program was possible. In the circum- 5t9riee8) the Chileans had gone to the Monetary Fund and the ExportInTort Bank. The funds anticipated from those sources were not yet e'vailable, however, and the proceeds of the gold loan would take cctre of the most pressing needs. Mr. Marget went on to say that this Was one of few cases to date where the borrower had explicitly 2tated that it would sell gold, if necessary, to repay the loan. 14 the circumstances, he felt that the Chileans would hardly be in 4 Po 8itiOn to claim bad faith if the necessity to sell gold developed. Governor Balderston then reported the views of Chairman Martin °4 the matter, stating that the Chairman said he had pondered the 8/5/57 -11- aPPlication at some length but felt on balance that the loan Should be aPProved. As for himself, Governor Balderston said that although he had a good deal of sympathy with the points raised by Governor Mills) he was rather impressed with the fact that Chile appeared to be taking a sincere and perhaps constructive effort to get its house in order. On that basis, he would favor approving the loan. Governor Vardaman asked M. Marget whether his last statement Ithould be taken to infer that the Chileans might repay the gold loan °ut of the proceeds of loans from the Monetary Fund or the ExportPort Bank, In response, Mr. Marget pointed out that it is difficult to 1)14 4 tag on a dollar. Nevertheless, he said, it was true that in the Period ahead the Chileans were expecting to get $12.5 million from tI1e1. and an equal amount from the Export-Import Bank. In response t° another question by Governor Vardaman, Mr. Marget indicated that it the Chileans were unable to obtain accommodation in the form of 10821 on gold at this time, it seemed likely that the alternative vould be to sell some of their gold. Et Governor Vardaman then stated that in the circumstances surro , uualng the Chilean application he felt that the Federal Reserve haa little alternative and was almost "honor bound" to grant the reqUested accommodation rather than force the Chileans to sell their sold,vk "en, as he understood it, they were making an effort to improve 8/5/57 -12- their situation. In other words, he did not see what grounds the Board would have for refusing to approve the proposal. He felt that lt vas not possible to judge such an application in the light of the standards employed for the extension of bank credit. If the record sh°ved that the loans were fully collateraled, that the State Departillent approved the granting of the accommodation, and that the Chilean authorities were making, at least to outward appearances, an effort t° "get alone, he thought that the application should be approved. Aciding to the picture, he said, was the emergency situation relating t° the drop in world copper prices. While he had great sympathy with the stalldards Governor Mills would like to apply to gold loans, he 614 not believe it possible for the members of the Board to sit as e°1d-b1ooded bankers" and judge these applications. After Governor Shepardson had indicated that he would favor al311rOval of the application, Governor Mills requested that he be rec)1'-cled- as voting "no". He said that he would like again to call attention to the probable precedent which was being set and which 1.1°1114a involve difficulty in denying similar requests by central banks In Ott er distressed nations. He also called attention again to the ta.ct that if in the future it should become necessary, in the light °T thi s reasoning, to take favorable action with respect to other 108.11, of this kind, it should be borne in mind that the System would ' he 1 ending high-powered Federal Reserve dollars and that the amounts Of lcens could very well reach very substantial figures. 1 8/5/57 -13Governor Vardaman said he agreed with the apprehensions eXPressed by Governor Mills and that he had serious doubts about the propriety of the System being called upon to make loans of this kind. In recognition, however, of an existing situation he 140111d make the requested loan in this case regardless of precedent. While he regretted the injection of high-powered Federal Reserve dollars into such situations, he did not know what else the Board e°111d do. If the feeling was strong enough, he felt that the Board e0u13. Only go to the Congress with a recommendation that something else be set up to deal with this kind of problem. In response to a question whether it could be said in certain other cases involving possible gold loan requests that the countries had set up a systematic program in an effort to 141Proire their situation, Governor Mills said he had little doubt but that any central bank approaching the Federal Reserve for a g°1d loan would state that its country was making very genuine effortS to correct the difficulties in which it was embroiled. At the conclusion of the discussion, approval was given to the telegram to the Federal Reserve Bank of New York of which a copy is attached to these minutes as Item No. 7. On this action Governor Mills voted "no" for the reasons which he had stated. Messrs. Marget and Sammons then withdrew from the meeting arld m4 s Stockwell, Economist, Division of Research and Statistics, etltered the room. 21_72 8/5/57 -14Study of small business financing. toard On May 9, 1957, the requested the staff to explore the feasibility of a survey °I' small business financing problems. The initial report of the 81'°u1:0 organized pursuant to this request, known as the Ad Hoc SYstfti Research SUbcommittee on Small Business Financing, was submitted under date of July 31, 1957. O In this report, copies vbich had been distributed to the members of the Board, the 811bcom 1ittee cited as the two main objectives of such a survey: (1)to compile quantitative and qualitative information on the e°1it ata availability of credit and capital to small businesses 144 the effects of credit and monetary policies on the financing or businesses of various sizes; and (2) to develop basic data on 1208.4 1, wusinesses that would help to fill a long-standing gap in krio edge of their financial practices and problems, and that 11°144 also be useful to such statistical compilations as those °4 savings and the flow of funds. While the Subcommittee con- 8:41ered the small business financing problem an unusually difficult °4e Which to collect meaningful data, it had concluded that a l'esearch Project in this field to achieve the above Objectives 14)113'41 be feasible. It was suggested, however, that a large ex- --e in terms of time and money would be necessary. 8/5/57 The approach to such a study contemplated by the Subcommittee vould include (1) a review and analysis of existing material and data °II the financing of small businesses, (2) a study of the lending operations and policies of the principal types of suppliers of funds to small businesses, and (3) a study of the financial structure and *lancing experience of businesses of various sizes, based on interviews vith b usinessmen themselves. While it was felt that the first two parts c)r. the research project could probably be completed by the spring of 19581 the Subcommittee was of the opinion that the proposed business 8111'veY could not be completed before the end of 1958. It was also believed that this part of the project would undoubtedly involve an eq3encliture of at least several hundred thousand dollars over and 4b"e the expense attributable to time of System personnel. A firmer cost estimate of a full-scale survey was stated to be dependent on Nth er Prelia118. work, including determination of the appropriate Be of businesses to be studied, development of a feasible sampling ) 1 1441_ ' eIld testing of procedures by an exploratory field survey. According to the sub committee, these preliminary steps could probably be completed bY the A,, -"'4 of the current year at a relatively small cost. Submitted with the report were more detailed explanations of the th re- Parts of the proposed project which had been compiled by Otir4 aynn. ' 5° groups of the Subcommittee. 8/5/57 -16In response to a request by Governor Vardaman for further in- formation concerning the cost of such a project, Mr. Koch stated that, 48 indicated in the memorandum, it was almost impossible to be veryspecific at this time. He felt that the first two parts of the project Perhaps could be completed by March 1, 1958, and that their cost would he modest, but that to contribute materially to this problem it would be necessary to go to the small businessman himself. That would be a large and difficult project. It could not be completed, in his opinion, ill lass than perhaps 18 months and it would appear to involve an exPenditure of at least $300 to $400 thousand. Mr. Koch said that he had talked about this with Mr. Young via transatlantic telephone and it was their feeling that an expenditure of something in that neighborhood could Pr°duce meaningful information. In other quarters, however, the estimate Wae higher, and to really get a judgment on that matter it would be neceesarY to work out an interview sample and make a pilot field survpiy. Those Preliminary steps could probably be accomplished within a period of 611°14 six months at a cost of from $10 to $20 thousand. In reply to a gliesti°n by Governor Balderston, Mr. Koch said he had in mind that this liork cn„-.0, :1 be undertaken along with the first two parts of the survey 131'°Jeot outlined in the memorandum and that it should be possible to complete all of this work in about six months. Governor Vardaman then inquired whether the report of the SubcolaalittA --oa did not contempla te going forward with the full three-part attlely end Mr'. Koch replied that it was the definite and unanimous feelthat if any study was to be made the whole job should be undertaken. 8/5/57 Governor Vardaman suggested that this be made entirely clear to the Federal Reserve Banks in asking their comments. On the other hand, he did not feel that the letter to the Banks should intimate that a request had been received from the Senate Banking and Currency ecramittee or from other Congressional groups, for he regarded the requests of Senator Fulbright and Congressman Pathan as requests from individual members of the Congress. Governor Vardaman then said that, as he had stated before, he 14118 °PPosed to the Board undertaking a project of this kind. He thought the Board had in effect solicited the assignment in correspondence with the Banking and Currency Committee, and he did not feel that the Board waa the proper organization to make such an investigation. In the circumstances, he could not go along with launching a project which alight cost as much as $500 thousand and extend over a period as long as tc Years in the absence of a more formal request from the Congress or 4 atatement or resolution that the Board was undertaking the project on it8 °O. volition. In his view, he said, such a study should be made 141der the supervision of the Council of Economic Advisers or the Departof Commerce rather than under the supervision of the Board, because he thought the Board would be accused of presenting the bankers' 11'413°int. To summarize, he would like to be recorded as looking disfavor on the whole scheme, he felt that the Congressional e°1111aittsea had been encouraged to ask the Board to make the survey, and he did not think the Board should undertake to study a problem which 1411313ad over into the social side of Government. 8/5/57 In response to a question as to how the Board would answer Possible criticism that it was not keeping itself informed, Governor Vardaman said the Board had always maintained that it was keeping itself informed. He reiterated that he considered this a social Problem, or a broad economic problem, that the Federal Reserve 1/atiks were regarded as the representatives of commercial banking tr G overnment, and that he did not think they should engage in a etlAY of this kind. He did not think the System should be called 111)314 and, unless required, he thought that the Board should refuse to make the investigation. In this connection, he recalled that there was pending in the Congress at least one bill that would call for a study of small business financing by the Small Business Adniinistration. Governor Mills stated that he thought the Board was in effect • la midstream!' and that, therefore, it should undertake the at4(4. He said that frankly he had little enthusiasm for the project 411 that he was further dismayed by the heavy expense that would be lacurr...4 He then referred to his deep concern about the Board's -'arY procedures and the scope of the Board's expenditures. Governor Shepardson said he thought there was a real need tc'r the information that would be obtained, particularly by the thirA - Part of the proposed survey. He pointed out that data on /Ihst was being done for small business admittedly offered little Or 4° iaformation on matters such as turndowns and refusals; that is, 8/5/57 -19- what was not being done. While this would be valuable information, he lc4b concerned about the costliness of the proposed survey and about going ahead with the project in the absence of authoritative requests Of the kind that were made in the case of the consumer instalment credit study. As Governor Mills had pointed out, the Board seamed to he in midstream and it was a difficult situation. He was hopeful that a more authoritative request could be received, but it was not Clear at present whether Senator Fulbright would be able to get action by the Banking and Currency Committee requesting the study. He was not entirely sure, however, that the Board would be undertaking on ita own volition an expenditure that could properly be questioned, and he did not quite agree with Governor Vardaman as to the need for the 8°ard to be concerned whether some other agency of the Government made the 8tAldy It was a subject with which the Board was directly concerned and a etudY which he felt that the Board could appropriately make. His PrinciPal concern, therefore, was in incurring a large expenditure with014 more justification. Governor Vardaman said he wished to make it clear that he tho ught the study was essential and that there was a very serious gap thett - existing credit structure. In his opinion an important sector °I* the business economy was suffering for want of credit facilities. He 1141 "thought that the Board should be interested in and connected 4th anY such study, and if there should be a formal resolution by the ark ng and Currency Committee requesting the Board to head up a 8/5/57 -20with the cooperation of other interested agencies of the G°vernment, he would go along. On the other hand, he would prefer that such an investigation be headed by the Secretary of Commerce because of the nonbanking facets of the problem. In response to a question, he said that he did not think the Board's approach would be 847 more Objective than that of any other agency. He felt that in the eYas of politicians and the general public any report by the Federal 4serve would be regarded as a bankers' report. He did not think that the Federal Reserve, in making the study, would be any more free from Political influence than any other agency. In further discussion, Mr. Koch said he was concerned about the fact 1e .4 that the Congress wanted the results of a study by the first of for he was convinced that no very good answer could be by that time. The Subcommittee, he said, felt very definitely that a survey of borrowers was needed, and obviously this could not be nlaciS available by the time mentioned. Therefore, there would be only a Partial report, at best, and it appeared that some members of the Bank-ing and Currency Committee were anxious to proceed with legislation at the next session of the Congress. Governor Vardaman then suggested that the report of the Sub- el414littee be made available to the members of the Banking and Currency Com m4., tee so that the problem confronting the Board might be clear. ' 21'79 8/5/57 -21Governors Shepardson and Balderston also indicated concern about the points brought out by Mr. Koch, the latter stating that to Present the fraction of the report that could be ready by the first of March would involve the risk of presenting something that might be totally inadequate and even misleading. He felt that the tatter should be clarified before the Board went into the project "A that the Committee should understand that the most significant 1341't of the study could not be mrdie available by the date mentioned. Therefore, he considered Governor Vardaman's suggestion a good one. After further discussion, Governor Balderston said that the sit uation in summary appeared to be about as follows. The Board he4 asked the staff to plan how a study might be conducted. The ste-fr had now come back and said that two parts of the study probably could be completed by the date mentioned by Senator Fulbright, bUt that the most important part could not be completed by that date. This Part, the study of potential borrowers, would be an expensive study. Obviously, some members of the Banking and Currency Committee 14°111d like to have legislation passed next year, and this legislation Illight be of a type which the Board would heartily disapprove. Senator problem was the very difficult one of trying to get some legi slation prepared that would be constructive, or that at least *31441 be less undesirable than some proposals which had been made. -22- 8/5/57 Governor Balderston then asked whether the next step would aPPear to be for the Chairman to acquaint Senator Fulbright with the results of the Subcommittee's work. After some discussion, it was agreed that this would seem appropriate. Governor Vardaman suggested also that a letter be drafted which might be sent to Senator Fulbright, as Chairman of the Banking and Currency Committee. Pursuant to this suggestion, Governor Balderston requested 14essrs. Carpenter and Koch to prepare a draft of such a letter for the Bo rd.'s consideration. The decision to proceed in this way e°4templated that no letter would be sent at this time to the Presidents Of the Federal Reserve Banks requesting their comments on the proposed study. Luncheons in connection with Fund and Bank annual meetings. Governor Shepardson referred to a memorandum addressed to him under clate of Auzust 1, 1957, by Mr. Fauver, Assistant Secretary, raising f°r consideration whether the Board, in accordance with its usual 151'actice, desired to hold luncheons in its dining rooms for central bahl, ---ers attending this year's annual meetings of the International Monetary Fund and the International Bank for Reconstruction and ipevelopment, to be held in Washington in late September. 2181 -23- 8/5/57 Pursuant to Governor Shepardson's recommendation, it was unanimously that luncheons should be given again this year, Probably on September 24 and 26, and that the Board would absorb the cost for members of the staff invited to attend. The meeting then adjourned. Secretary's Notes: On August 2, 1957, Governor Shepardson, acting on behalf of the Board, approved a memorandum of the same date from Governor Balderston recommending that the appointments of Messrs. Leslie R. Rounds, Chester Morrill, and George B. Vest as Consultants to the Board be extended through August 16, 1957, on the same contractual basis as originally approved by the Board. Pursuant to the recommendation contained in a memorandum from Governor Vardaman dated July 30, 1957, Governor Shepardson also approved on behalf of the Board on August 2, 1957, an increase in the basic salary of Iola B. Morgan, Secretary in Governor Vardaman's office, from $4,350 to $4,620 per annum, effective August 111 1957. On August 5, 1957, Governor Shepardson approved on behalf of the Board the following items: biv.Memorandum dated July 311 1957, from Mr. Johnson, Director, °11 of Personnel Administration, recommending the appointment of bas7""e T. Roberson as Clerk-Stenographer in that Division) with Et8,'e annual salary at the rate of $3,670, effective the date she ' 14aes her duties. 218 8/5/57 -24- Letter to the Federal Reserve Bank of Boston: a copy of which is attached hereto as Item No. 8 : approving the designation of Richard Joseph Matulis as special assistant examiner. Letter to the Federal Reserve Bank of Atlanta : a copy of which is attached hereto as Item No. 9, approving the appointment of Ronald Charles McCracken as assistant examiner. 2183 BOARD OF GOVERNORS :;, OF THE FEDERAL RESERVE SYSTEM Item No. 1 8/5/57 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE HOARD August 5 1957 Mr. Hugh Leach, President, Federal Reservc Bank of Richmond, Richmond 131 Virginia. Dear Mr. Leach: In view of the circumstances outlined in your letter of July 25, 19570 to the Board concerning the extension of retirement date for your employee Mrs. Ellen R. Chapman, the Board of Governors approves the retention in service and Payment of salary to her through Auguut 31, 1957. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 2184 BOARD OF GOVERNORS OF THE Item No. 2 8/5/57 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 5, 1957 Mr. Carl E. Allen, President, Federal Reserve Bank of Chicago, Chicago 90, Illinois. Dear Mr. Allen: In view of the circumstances outlined in Mr. Bloomfield's letter of July 22 and Mr. Harris' wire of July 26, 1957, concerning the extension of retirement dates for three of the employees of the Detroit Branch, the Board of Governors approves the retention in service and the payment of salary to the following persons through OctOber 15, 1957: Ralph Sheldon John T. Neale Clarence Brinker It is understood that if the benefits from the changes in the Retirement System become effective Prior to October 15, 1957, these retentions will extend only to such prior date. Very truly yours, (Signed) S. R. Carpenter S. R. tvpenter, Secretary. CC: Mr. R. W. Bloomfield, Assistant Vice President, Detroit Branch. 218, BOARD OF GOVERNORS ott*,,,, lApt*Goi:*4 I1 OF THE .. FEDERAL RESERVE SYSTEM A* a 8/5/57 WASHINGTON 25 D. C. o % 04 Item No. 3 4 0 / ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August5, 1957 lir. Harry A. Shuford, Vice President, Federal Reserve Bank of Dallas, Dallas 2, Texas. Dear Mr. Shuford: In view of the circumstances outlined in Your letter of July 25, 1957, to Mr. E. J. Johnson concerning the extension of the retirement date for Your employee Mrs. Julia E. Brewton, the Board of uovernors approves the retention in service and payment of salary to her through August 31, 1957. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. BOARD OF GOVERNORS OF THE Item No. 4 8/5/57 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 5, 1957 222IPENTIAL (FR) Mr. Pierre B. McBride, Chairman, Pederal Reserve Bank of St. Louis, 4. Louis 2, Missouri. Dear Mr. McBride: The Board approves the payment of salaries to the following officers of the Federal Reserve Bank of St. Louis for the period September 1 through December 31, 1 957, at the rates set forth, which are the rates fixed 1 ) Y Your board of directors as reported in Mr. Johnst letter of July 11: Name Title Annual Salary Wilbur H. Isbell Assistant Chief Examiner $10,000 E. Francis DeVos Cashier, Memphis Branch 10,600 The Board also approves the designation of .:111% Isbell as a Federal Reserve Examiner for the Federal "eserve Bank of St. Louis, effective September 1, 1957. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 001 mr. Johns 218 BOARD OF GOVERNORS OF THE Item No. 5 FEDERAL RESERVE SYSTEM 8/5/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 5, 1957 Board of Directors, Pidelity-Philadelphia Trust Company, Philadelphia, Pennsylvania. G entlemen: Pursuant to your request submitted through the Pederal Reserve Bank of Philadelphia, the Board of Governors ! , f the Federal Reserve System approves the establishment of branch in the Bala-Cynwyd Shopping Center, Lower Merion ir)cwnship, Montgomery County, Pennsylvania, provided the 4nlIch is established within six months from the date of ;:le letter, and the approval of the State authorities .1- in effect as of the date of the establishment of the branch. In connection with the establishment of the bran u um-cu, the Board of Governors also approves, as required r the provisions of section 24A of the Federal Reserve up an additional investment of 00,000 in bank premises. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 2188 TELEGRAM' BOARD OF GOVERNORS OF THE Item No. 6 FEDERAL RESERVE SYSTEM 8/5/57 WASHINGTON August 5, 1957 Mange's — San Francisco Board approves change of plans for new Salt Lake City building to add a third level to the vaults outlined in Your telegram of July 310 at an estimated cost of approxi— mately $205,600 as subsequently reported by Mr. Swan,. Accordingly, Board increases authorized expenditures for the building program from approximately $2,607,000 as stated in Board's telegram of June 25 to approximately $2,8130000. (Signed) S. R. Carpenter CARPENTER. t7E , as 110Alh .1.b, 'ikrts 0 OF'THE FED EINVE SYSTEM TELEGRAM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 7 8/5/57 LEAEMOVVIRESMWACE WASHINGTON August 5, 1957 EXTER liEW YORK lourwire August 1. 1 . Board approves granting of loan or loans on gold by your Bank to Banco Central de Chile of up to $5,000,000 on the following terms and coladitione; A. Such loan or loans to be made up to 98 per cent of the value cif 04bars set aside in your vaults under pledge to you; 8* 'Such berore loan or loans to run for three months with option to repay maturity and to be renewable for a further period of three months; C. Bach such loan or loans to bear interest from the date they are 1444e until paid at the discount rate of your Bank in effect on the date c"rhich such loan or loans are made; 73, AnY such loan or loans to be requested and made on or before September 30, 1957; B* Pb-L '' 1 such loan to be requested or repaid in round amounts of 000 or multiples thereof. 2, to ard also approves the granting of a loan commitment (standby) whereby Ittuleo Central de Chile will be entitled to request and receive from your B04alk a lcsn or loans against gold up to a total of $10,000,000 of loans 144e3 °n the sane terms and conditions as noted in 1. above with the " 4-ng exceptions: Provision B. not to include any renewals, the til4te in Provision D. to read January 31, 19580 and Provision F. to be TELEGRAM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM LEASED WIRE SERVICE WASHINGTON tierER NEW YORK — PAGE 2 lidded to provide for 1/4 of 1 per cent commitment charge on that part of the commitment which is not used. It is understood that the usual participation will be offered to the Other Federal Reserve Banks. (Signed) S. R. Carpenter CARPENTER 21_90 BOARD OF GOVERNORS 4401014,,,,z, °I°6k 4. OF THE 4 Item No. 8 FEDERAL RESERVE SYSTEM * 4 * : ` u 8/5/57 WASHINGTON 25, D. C. 4 ei ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD , 4Pt t, 'kat 0400* ' August 5, 1957 Mr. Benjamin F. Groot, Vice President, Federal Reserve Bank of Boston, Boston 6, Massachusetts. Dear Mr. Groot: In accordance with the request contained in your letter of August 1, 1957, the Board approves the designation of Mr. Richard Joseph Matulis as a Special Assistant Examiner for the Federal Reserve Bank of Boston. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 2192 BOARD OF GOVERNORS nb. OF THE 9 FEDERAL RESERVE SYSTEM * WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 5, 1957 M.r. J. E. Denmark:, Vice President, Federal Reserve Bank of Atlanta, Atlanta 3, Georgia. Dear Mr. Denmark: In accordance with the request contained in your letter of July 31, 1957, the Board approves the appointment of Mr. Ronald Charles McCracken as an assistant examiner for the Federal Reserve Bank of Atlanta, effective August 12, 1957. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary.
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