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A; s?, LI I Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, August 8, 1952. The Board met in the Board Room at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Szymczak, Chairman pro tem. Vardaman Mills Robertson Mr. Vest, General Counsel Mr. Noyes, Director, Division of Selective Credit Regulation Mr. Hackley, Assistant General Counsel Following the meeting Governor Szymczak advised the Assistant Secretary that the discussion at the meeting, was as follows: Governor Vardaman referred to a letter received from the Ii°norable Jess Larson, Administrator of General Services, dated August 7) 1952, enclosing an authorization of a guarantee of a V-loan 140 be made to Reynolds Reduction Company by certain insurance companies and banks in the aggregate amount of $76,750,000. The Reynolds Metals 0°1aParlY) through a newly organized subsidiary known as Reynolds Recilletion Company, is to build and operate certain additional aluminum facilities, and the proposed loan is to finance this arrangement. 114til completion of the facilities the guaranteed percentage would be 100 per cent; for a period of five years thereafter the guaranteed 'llcentage would be 70 per cent; and at the end of that five-year PI each financing institution may select any guaranteed per"age it desires up to and including 100 per cent. During the 1.z 41. 8/8/52 five-year period when the guaranteed percentage will be 70 per cent there will be in force a supply contract between General Services Administration and Reynolds Reduction Company under which General Services Administration in effect will be committed to take over any excess aluminum production. Under Executive Order 10161, the Board LS required to consult with all the guaranteeing agencies regarding Changes in forms and procedures and guarantee fees in connection with V-loan guarantees. In its letter of August 7, General Services Adminis- tration stated that the proposed changes in the form of the guarantee agreement in this instance were technical only and not substantive and that the arrangement represents the most favorable which the Government could obtain; also that it should not be considered a precedent f°r future transactions. It was pointed out that representatives of the Board and General Services Administration had already consulted with the Defense Department, including the Departments of the Army, ll'alrY and Air Force, and also with a representative of the Atomic flergY Commission, at a meeting on July 22, 1952. The Defense Depart- Merit, through Mr. Bachman, has orally advised the Board's General C°11nsel that it does not object to the proposed guarantee if the 1)card believes that the arrangement will have no materially adverse ffect upon the V-loan program, with particular reference to guarantee ree e 8/8/52 -3After a discussion of the matter, it was agreed that, before the Board made any reply to Mr. Larson's letter, there should be a consultation with the guaranteeing agencies under the V-loan program other than those which had previously been consulted on this matter, and the staff was instructed to proceed with such consultation. It was also agreed that the authorization for the proposed guarantee should be transmitted to the Federal Reserve Bank of New York today on a tentative basis in order that the New York Bank could initiate discussions with the parties at interest on the basis of the detailed provisions of such authorization, pending further advice from the Board. Board: The following additional actions were taken by the Governors of the Minutes of actions taken by the Board of unanimously. Federal Reserve System on August 7, 1952, were approved al Reserve Bank Telegram to Mr. Erickson, President, Feder Of Boston, reading as follows: of discount "Refer your August 4 wire concerning rates of action and purchase in effect at your Bank. In view ted in letter of the Federal Open Market Committee as repor of Government dated July 30, 1_952, rates on purchases require approval not do securities under resale agreement establishment by the Board. For other rates Board approves discount and by your Bank, without change, of rates of e of which was purchase in Bank's existing schedule, advic t 4." Augus contained in your telegram dated Approved unanimously. 1380 8/8/52 Telegram to Mr. Clarke, Secretary and Assistant Counsel, Federal Reserve Bank of New York, reading as follows: "Board approves establishment by your Bank, without change of rates of discount and purchase in Bank's existing schedule, advice of which was contained in your telegram of August 7. It is noted that in view of recent change made by Federal Open Market Committee in authorization with respect to fixing rates for purchases of Government securities under repurchase agreement your directors did not establish any rate with respect to such purchases." Approved unanimously. Telegram to Mr. Blair, Vice President, Federal Reserve Bank of Cleveland, reading as follows: "Refer your August 7 wire concerning rates of discount and purchase in effect at your Bank. In view of action of the Federal Open Market Committee as reported in letter dated July 30, 1952, rates on purchases of Government securities under resale agreement do not require approval by the Board. For other rates Board approves establishment by your Bank, without change, Of rates of discount and purchase in Bank's existing schedule, advice of which was contained in your telegram dated August 7." Approved unanimously. Telegrams to the Federal Reserve Banks of Philadelphia, Richmond, St. Louis, Minneapolis, Dallas, and San Francisco stating that the Board approves the establishment without change by the 4deral Reserve Bank of St. Louis on August 8411k of San Francisco on August 5, and 4, by the Federal Reserve by the Federal Reserve Banks O.r Philadelphia, Richmond, Minneapolis, and Dallas on August 7, or the 1952, rates of discount and purchase in their existing schedules. Approved unanimously. 1381 8/8/52 -5Memoranda recommending that the basic annual salaries of the following employees be increased in the amounts indicated, effective August 17, 1952: Salary Increase From To n.4it2...!......„)f Memorandum . Name and Title Director, Assistant Dembitz, Mr. from Memoranda Division of International Finance 7/18/52 7/21/52 Edward Ames, Economist Robert Solomon, Economist $7,240 $7,440 6,140 4 7,00 52o6o 5,185 71240 7,440 3,535 3,660 4,295 4142o 3,175 3,255 3,795 4,205 3,795 4,205 Memorandum from Mr. Sloan, Director, Division of Examinations 7/11/52 H. F. Stone, Assistant Federal Reserve Examiner Memorandum from Mr. Leonard, Director, Division of Bank Operations 7/17/52 Raymond J. Collier, Technical Assistant Memorandum from Mr. Allen, Director, Division of Personnel Administration 7/2l/52 Gena E. Gander, Secretary Sylvia I. Clements, Secretary Memoranda from Mr. Bethea, Director, Division of Administrative Services 7/18/52 8/5/52 Mildred D. Spano, Stenographer Joseph W0 Wright, Photographer (Offset) Hugh T. Ladd, Offset Pressman Approved unanimously. 1:382 8/8/52 -6Telegram to Mr. Latham, Vice President, Federal Reserve Bank Of Boston, reading as follows: "Reurtel August 6. Board approves designation of Stanley Joseph Hrydziusko as special assistant examiner for the Federal Reserve Bank of Boston." Approved unanimously. Letter to Mr. Denmark, Vice President, Federal Reserve Bank of Atlanta, reading as follows: "In accordance with the request contained in your letter of July 31, 1952, the Board approves the designation of the following as special assistant examiners for the Federal Reserve Bank of Atlanta for the specific Purpose of rendering assistance in the examinations of State member banks only: Walker, Chas. R. Forbes, James B. Hammond, 0. a. Medlock, G. C. Morgan, Wm. B. Andrews, Robert R. Junca„ Rene' Y. M. Burrell Shealy, Webb, G. D. , Vestus L. GruaW. Wilbur Lawrence, Goss, Woodfin John S. Ray, Edward Jones, Jas. L., Jr. Clegg, Edgar M. Vallette, Bernard Martinez, Dupert M. N. Floyd Greer, Dill, Richard A. Walter, Theodore G. A. Kofford, Dexter, Richard N. Chapman, C. Ray Davis, 0. E., Jr. Miller, Marvin L. Hooper, J. 0. M. F., Jr. Dastugue, Webster, T. L. Thurman, W. Ralph L. R. Allenbach, Victor A. Foushee, Smith, Edward E. N. C. Hamilton, Burson, W. C. Waller, Wm. A. M. E. Stringfellow, Thomas, J. Ernest Hicks, W. Lester officers of have eliminated from our list the names and employees heretofore approved as special assistant examiners for general purposes." Approved unanimously. Letter to Mr. Diercks, Vice President, Federal Reserve Bank of ClI cago, reading as follows: 8/8/52 -7- "In accordance with the request contained in your letter of July 31, 1952, the Board approves the appointment of Richard A. Moffatt as an assistant examiner for the Federal Reserve Bank of Chicago. Please advise us of the date upon which the appointment becomes effective." Approved unanimously. Letter to Mr. Woolley, Vice President, Federal Reserve Bank Of Kansas City, reading as follows: "Pursuant to your letters of July 30, 1952, the Board approves the designation of the following as Special assistant examiners for the Federal Reserve Bank of Kansas City for the specific purpose of rendering clerical assistance in the examinations of Commerce Trust Company, Kansas City, Missouri, and The International Trust Company, Denver, Colorado: j1cr, 7,1A. R. Abbott, Claude Andrews, Stanley Flanagan, Grover D. Barry, W. J. Fogle, William C. Beck, E. 0. Gable, Jerry Blair, John Goyette, D. R. Brauninger, T. F. Hain, W. M. Brown, F. E. Hollcroft, Keith L. Calvin, B. R. Huffman, L. D. Campana, F. E. Johnson, Carl Chick, W. W. Keithley, Vern A., Jr. Chinn, G. S. Kemner, E. W. Cockrell, Paul E. King, C. E. Coleman, P. E. La Rose, Sylvester Craig, J. C. Laskey, 1/.m. Crouch, John H. Mathews, F. J. Culbertson, W. E. McCarty, E. A. Cunningham, D. C. McCormick, Robert R. Curtis, Ernest McDowell, Leon Dewey, Geo. A. Meeker, Louis H. Diehl, Dale Mignery, A. H. Elder, Wm. Lloyd Moran, G. E. Euans, Joe R. Munsey, Lawrence Ewing, C. A. Parsons, John F. 1384 8/8/52 -8- Dorothy Burns "Patterson, Charles Alice Dune Pope, Joseph M. Joyce Estep Preston, E. J. Mary Helen Haines Price, H. E. Hansen Marjorie Ratkie, M. E. Hirsch Catherine Reynolds, F. A. Aileen Johnson Rhodes, Fred C. Mary Lynn Roche, John 0. Edna Polfer Scott, C. B. Helen Reynolds Sheppard, Charles Ann Beumer Snell, 0. M. Marie Blair Spuriock, John B. Wanda Buckles Swanson, Estus A. Mary Bush Tangney, Leo Beverly Curp Terrell, Birney Lavina Emrick Thomas, Robt. E. Pattie Grasby Tindall, Keith Sophie Glinka Trimble, Harry B. Agnes Masur Wangler, Arthur Ernestine Miller Whitsitt, W. h. Mildred Neudorff Willock, Edwin S. Isabel Satterfield Wysong, P. V. "As requested, we have eliminated from our list the names of officers and employees heretofore approved as special assistant examiners for general purposes." Approved unanimously. Telegram to the Presidents of all Federal Reserve Banks, l*eading as follows: "Letters May 29, 1952, to Federal Reserve Agents and July 3, 1952, to Banks referred to possibility of increased printings of Federal Reserve notes. "As part of emergency program a Government Committee on Post-Attack Functioning and Rehabilitation of Banking Institutions, on which Board is represented, has recommended that supply of Federal Reserve notes be built up to a twoYears' supply. "To accomplish this, Board is prepared to place a supplementary order of 45,000,000 sheets of Federal Reserve notes to be printed during the remainder of fiscal year 8/8/52 -9- "ending June 301 1953. Printings under present order would be stepped up and distribution of supplementary order by Banks and denominations would be made later. Is this program agreeable to you?" Approved unanimously. Letter to Mr. S. B. McKinney, Special Assistant, National Association of Credit Men, 229 Fourth Avenue, New York, New York, reading as follows: "In response to your letter of July 21, there are shown below statistics as of June 30, 1952 and December 31, 1951 of the number of banks on which checks are drawn, distributed according to Federal Reserve par status: Dec. 31, June 30, 1952 1951 Total number of banks on which 13,987 13,968 checks are drawn Number of banks on Federal Reserve Par List: 12,158 Total 12,145 6,835 6,810 Member banks 5,323 Nonmember banks 5,335 Number of banks not on Federal 1,829 Reserve Par List 1,823 "There is also enclosed, in further response to your request, a table showing as of June 30, 1952 the number of banks on the Federal Reserve Par List and not on the Par List in each of the States in which there were one or more nonpar banks. "These statistics are published in and may be obtained semiannually from the Federal Reserve Bulletin, which is sent to you each month. For December 31, 1951 they appear on page 202 of the February 1952 issue; for June 30, 1952, they will appear in the August issue, which will be released around August 20. If you need the statistics in advance of publication in the Bulletin, please so advise us." Approved unanimously. 1386 8/8/52 -10Letter to Mr. Gilbert, President, Federal Reserve Bank of Dallas, reading as follows: "The Board has given careful consideration to the application for full fiduciary powers forwarded with Vice President Pondrom's letter of June 12, 1952, on behalf of The Waggoner National Bank of Vernon, Vernon, Texas. "As you know, in acting upon applications of this . kind, the Board gives special consideration to various facts and circumstances bearing upon the eligibility of the applicant to receive permission to exercise fiduciary Powers. Important among these is the general condition of the bank, particularly the adequacy of its net capital funds in relation to the character and condition of its assets and to its deposit liabilities and other corporate responsibilities, including the proposed exercise of trust Powers. In view of the nature of the responsibilities involved in the exercise of fiduciary powers and the potential liabilities inherent in such undertaking, it would seem clear that fiduciary powers should not be granted to a national bank unless its capital position is such as to afford adequate protection not only to its depositors but tO the settlors and beneficiaries involved in the fidu°?-arY relationshins in which it seeks to act. The inadyisability of a grant of fiduciary authority to a bank even more clear when it is questionable whether or not net capital funds are sufficient to afford adequate Protection to its depositors. "Net sound capital has been low in relation to the - aggoner general volume of business and risk assets of The : the Despite National Bank of Vernon for nearly two years. s examination r,et?ntion of a substantial portion of earnings, for need cluring this period have reflected an increasing ?A ditional capital funds. It is true that the May 26, -952.condensed statement of the bank, submitted with its 9Plication for trust powcrs, shows capital funds considerably excess of those shown in the February 7, 1952 report of r 8/8/52 -11- "examination. However, in the more recent statement it ls not apparent that provision has been made for interest, taxes and dividends accrued during the first five months of 1952. Based on operating experience in the past, and assuming the maintenance of the present dividend rate, it seems clear that retained earnings in 1952 will not alone be sufficient to correct the adverse capital Position of the bank even though there is no further expansion in the volume of its business. "While not disregarding the capability of the bankls management, the conservative policies in effect, the generally high quality of assets and the good earning power demonstrated, it is nevertheless the view of the Board that a broadening of corporate powers of the kind requested would be inappropriate until such time as the capital position of the bank has been improved at least to.a point which will provide an acceptable relationto the character and volume of its banking business. At such time the Board will be glad to consider a new aPplication by the bank for fiduciary powers." Approved unanimously. Telegram to Mr. Knoke, Vice President, Federal Reserve Bank Of New y ork, reading as follows: "Your wire August 7. Board approves granting of loan °,1 'loans by your Bank to Banque Centrale de la Republique as Turquie not to exceed $30 million in the aggregate at nY one time outstanding over and above the loans outstandILg under the arrangement which expired June 30, 1952, on wle following terms and conditions: or A. Such loan or loans to be made up to 98 per cent the value of gold bars set aside in your vaults under p.Ledge to you; B. Such loan or loans to run for three months but may be at any time before maturity; Any such loan or loans to be requested and made h °- or before February 9, 1953; D. Each such loan to bear interest from the date such 10 i , an is made until paid at the discount rate of your Bank " effect on the date on which such loan is made; 8/8/52 -12- "E. The amount advanced at any one time and the amount repaid at any one time to be in round amounts of not less than $500,000. "It is understood that the usual participation will be offered to the other Federal Reserve Banks." Approved unanimously. Letter to Mr. Winthrop W. Aldrich, Chairman of the Board of Directors, The Chase Bank, Pine Street corner of Nassau, New York, New York, reading as follows: "There is enclosed a copy of the report of examination of the Head Office of The Chase Bank, New York, New York, made as of June 20, 1952, by examiners for the Board of Governors of the Federal Reserve System. The figures for the foreign branches shown in the combined statement of condition, as well as the figures for The Chase National Executors and Trustees Corporation Limited and Union Provinciale Immobiliere, were supplied by the Head Office. "Your courtesy in acknowledging receipt of the report will be appreciated." Approved unanimously, together with a copy to Mr. Wiltse, Vice President, Federal Reserve Bank of New York.
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