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31-') Minutes of actions taken by the Board of Governors of the Federal Reserve System on Tuesday, December 1, 1953. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Evans Vardaman Robertson Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Thurston, Assistant to the Board Leonard, Director, Division of Bank Operations Mr. Vest, General Counsel Mr. Mr. Mr. Mr. Mr. Governor Robertson presented information on several possible appointees to the board of directors of the Omaha Branch, Federal Reserve Bank of Kansas City, as set forth in his memorandum dated November 30, 1953. Five of the persons mentioned were from Lincoln, Nebraska, while one, Mr. Gilbert C. Swanson, President of C. A. Swanson and Sons, was from Omaha. Governor Robertson suggested that the Board might wish to appoint someone from Omaha in view of the fact that the Omaha Branch building program will be in process over the next two years. If so, he proposed to advise Mr. Leedy, President of the Kansas City Re_ serve Bank) by telephone in order that the Bank's directors might consider the appointment of a branch director from Lincoln rather than from the State of Wyoming, as they had had in mind, thus providing representation from Lincoln on the Branch board. Following a discussion, Mr. Hall, Chairman of the Federal Eeserve Bank 203!) -2- 12/1/53 of Kansas City, was requested by unanimous vote to ascertain and advise the Board whether Mr. Gilbert C. Swanson would accept appointment, if tendered, as director of the Omaha Branch for the two-year term beginning January 1, 1954. Referring to the action taken at the meeting on November 16, 1953, Chairman Martin said that Mr. Harry A. Batten, Chairman of N. W. Ayer and Son, Philadelphia, Pennsylvania, had advised that he did not wish to accept appointment as Class C director of the Federal Reserve Bank of Philadelphia because of the fact that he is a director of a tion. commercial bank and he did not see fit to relinquish that posiChairman Martin also said that Mr. Meinel, Chairman of the Philadelphia Reserve Bank, had suggested the appointment of Mr. Lester V. Chandler, Professor of Economics, Princeton University, Princeton, New Jersey, particularly because of the fact that he would replace a Class C director who also is connected with a university. Thereupon, Chairman Meinel was requested by unanimous vote to ascertain and advise the Board whether Mr. Chandler would accept appointment, if tendered, as Class C director of the Federal Reserve Bank of Philadelphia for the three-year term beginning January 1, 1974. Prior to this meeting there had been sent to the members of the Board copies of a memorandum which Mr. Vest submitted to Chairman Martin Under date of November 24, 1953, regarainz his conversation on that day 20' 12/1/53 with Mr. J. P. Dreibelbis, Vice President of Bankers Trust Compsny, New York, New York, concerning the present status of a proposal for the purchase of assets of the Reconstruction Finance Corporation by commercial banks. This proposal was the subject of discussion at the meeting on July lit, 1953, at which time it was agreed that the Board should have no part in a decision by the Reconstruction Finance Corporation as to what legislation relative to the matter might be suggested to the Congress and that, although therO would be no objection to the Board's legal staff assisting the staff of the Reconstruction Finance Corporation with the technical wording of a legislative proposal which would permit member banks to participate in the plan, it should be clearly understood that the staff was offering technical assistance only and that the Board was reserving the right to oppose such legislation if introduced in the Congress. Chairman Martin stated that he would like to have a discussion of the proposal for the sale of Reconstruction Finance Corporation assets in view of the fact that Mr. Cravens, Administrator of the Corporation, had expressed a desire to meet with him regarding the matter. At the request of the Chairman, Mr. Vest commented on various aspects of the proposal, as explained to him by Mr. Dreibelbis, and Mx. Vest's remarks were followed by a general discussion during the course of which Mr. Cherry, Legislative Counsel, was called into the 204 -4- 12/1/53 meeting. The discussion included reference to the status of the legislative proposal submitted to the Congress by Mr. Cravens last summer, the functions which the Federal Reserve Banks„ as fiscal agents, might be culled upon to perform in connection with the servicing of loans sold to commercial banks, and alternative methods by which the liquidation of the Reconstruction Finance Corporation's assets might be handled. Emphasis was placed on the difficulty of appraising the plan without having available a statement setting forth in detail how it would operate. At the conclusion of the discussion, it was understood that Chairman Martin would indicate to Mr. Cravens that the Board did not wish to express itself on the proposal until such time as it had had an opportunity to examine a statement describing the operation of the plan, including the services which the Federal Reserve Banks might be requested to perform. Messrs. Vest and Cherry then withdrew from the meeting. Mr. Carpenter discussed an Informal inquiry from the Treasury Department as to whether the Board would be willing to Pay the cost of Postage and envelopes used in connection with the distribution to all banks and certain other parties of counteeeit warning cards, which since 1949 have been printed for the United States Secret Service on a basis whereby the Board absorbed the cost of labor and material involved 12/1/53 in the printing of the cards, the cost of addressing the cards or envelopes, and the cost of labor in the actual mailing of the cards. Mr. Carpenter's comments were based on information contained in a memorandum submitted to him under date of November 25, 1953, by Mr. Bethea, Director of the Division of Administrative Services. The matter was discussed and it was agreed that the Board would not be justified in absorbing the cost of postage and envelopes used in connection with the distribution of the cards, it being felt that these expenses should be covered by Congressional appropriations. It was pointed out, however, that the distribution of the warning, cards Is of great value in the control of counterfeiting, and It vas suggested that the Treasury Department, if it lacked the necessary funds, might wish to inquire whether the American Bankers Association would assume the cost of the distribution, at least until such time as the necessary funds could be provided. At the conclusion of the discussion, it was agreed unanimously that the views of the Board as stated above should be transmitted informally to Mr. Bartelt, Fiscal Assistant Secretary of the Treasury. Prior to this meeting there had been sent to the members of the Board copies of a memorandum from Mr. Leonard dated November 30, 1953, regarding the proposal of the Federal Reserve Bank of Cleveland for the construction of a security court for the Cincinnati Branch in leased space in a public garage located across an alley from the rear of the 204 -6- 12/1/53 branch building. The memorandum stated that the proposed rent for approximately 6,254 square feet of space would be $9,600 per year, under a perpetual lease or long-term lease with option to renew, plus a proportionate share of the taxes and any other assessments and insurance, estimated at approximately $1,227, which would make the total rental at current rates about 0.0,827 per year. estimated at approximately *100,000. Alteration costs were The memorandum stated that the Cleveland Bank also had requested advice as to whether the expenditure for alteration should be considered as cost of "building proper" and subject to the over-all limitation of $30,000,000 on such costs of branch buildings. Based on advice from the Board's Counsel, the memo- randum recommended that, regardless of any technical arguments that might be offered to the contrary, the expenditure be considered to be subject to the statutory limitation. There was a discussion of the need for the proposed security court and reasons why it was not feasible to construct a court within the Cincinnati Branch building. During the discussion, question was raised as to the advisability of an expenditure of the amount proposed for construction of the court in rented space, it being suggested that at some future time it might be considered desirable to move the branch to another location and that, if so, it would be doubtful whether the Reserve Bank could recover the investment in the security court when selling the present building. On the other hand, it was brought out that current arrangements 2044 12/1/53 for handling receipts and deliveries of currency are inadequate and present a security problem which may be expected to increase. No action was taken on the matter, and it was understood that it would be given further consideration at a meeting when all of the members of the Board were present. The meeting then adjourned. During the day the following ad- ditional actions were taken by the Board with all of the members except Governor Mills present: Minutes of actions taken by the Board of Governors of the d Federal Reserve System on November 30, 1953, were approve unanimously. Letter to the Board of Directors, Industrial State Bank of Kalamazoo, Kalamazoo, Michigan, reading as follows: Pursuant to your request submitted through the Federal Reserve Bank of Chicago, the Board of Govof ernors approves the establishment and operation oo, Kalamaz a branch at 1605 North Burdick Street, within Michigan, provided the branch is established six months after the date of this letter. Approved unanimously, for transmittal through the Federal Reserve Bank of Chicago. Letter to the Board of Directors, Security Trust and Savings Bank of San Diego, San Diego, California, reading as follows: Pursuant to your request submitted through the Fedof Governors eral Reserve Bank of San Francisco, the Board a of branch at on operati and approves the establishment ity Avenues in Univers and the southwest corner of Fourth and Trust Savings y Securit the the city of San Diego by d the nia, provide Califor Bank of San Diego, San Diego, 204. -8- 12/1/53 branch is established by May 10, 1954, the date of expiration of the approval of the State Banking Authorities. Approved unanimously, for transmittal through the Federal Reserve Bank of San Francisco. Letter to the Presidents of all Federal Reserve Bank redrafted in the light of discussion at the meeting on October 27, 1953, and reading as follows: The purpose of this letter is to consolidate instructions regarding approval by the Board of Governors of building operations of the Federal Reserve Banks, to clarify and bring up to date the outstanding letters, and to supplement the request for specific data on building programs. This supersedes the Board's letters of January 5, 1922 (Y-3295; F.R.L.S. #3052), December 51 1947 (5-1003; F.R.L.S. #3053), and December 71 1950 (S-1220; F.R.L.S. #3053). When a Federal Reserve Bank or branch is contemplating any new building program, either purchase of property or erection of a new building or an addition to its existing quarters, it is requested that the Board be advised of the program. Initial information on a proposed building program should include a general idea as to size and an estimate of the cost. It is realized that at the preliminary stage precise estimates of cost can not be provided. The need for some early estimate of cost is particularly important in the case of branch building programs because of the limitation on the aggregate amount which the Reserve Banks may expend for "building proper" costs of branch construction with the approval of the Board of Governors. In this connection estimated costs of branch construction should give a figure for "building proper" under the Persina formula (Board's letter of September 25, 1952, S-1474; F.R.L.S. 0053). The purchase of real estate is subject to the Board's approval) but after the Board has had opportunity to consider the general proposal to acquire real estate, the taking of an option, or options, at reasonable figures, does not require prior approval of the Board, although exercise of the option does. 2(0 12/1/53 -9- Similarly, after the Board has had opportunity to consider a general building program, there is no objection to the employment of architects to prepare preliminary plans. However, the Board should be informed concerning the details of any agreements made with architects, which agreements should include a provision that the Federal Reserve Bank is not obligated to retain the architect for any work beyond the preparation of preliminary plans, but that if he is retained the payment for such work will he taken into account in the final fee. No comnitmont should be entered into for the preparation of detailed plans and specifications until the preliminary plans have been reviewed by the Board. The above does not relate to normal maintenance, that is, to such repairs and alterations as are chargeable to "Repairs and alterations" on Form F. R. 96, or to minor replacements chargeable to the appropriate allowance for depreciation. However, alterations and improvements, including replacements, and new construction of a major character shculd not be undertaken without prior consideration by the Board. The request for general information on building programs does not apply to projects for which preliminary plans have been submitted to the Board, nor to other programs concerning which the Board has current information. The various steps in the Board's consideration of a building program after it reaches the stage of architect's preliminary plans are in connection with: 1. Preliminary plans and outline specifications, together with estimated cost and other data, as outlined in the attachment to this letter. Following review of the plans, if there is no objection to the program, the Board authorizes preparation of-2. Detailed plans and specifications, which, when forwarded to the Board, should he accompanied by current estimates of cost in the same detail as the estimates accompanying the preliminary plans. The nest step, after review, if there is no objection to the program and policy permits undertaking construction at the time, is authorization by the Board to call for-3. Bids. A summary report of the bids with the various alternatives, if any, should be forwarded to the Board together with the recommendation of the Bank as to acceptance. 204 -10- 12/1/53 The report should include a breakdown of cost in the same detail as the estimatcs accompanying the preliminary plans. The last step is authorization by the Board to award contracts. Approved unanimously. Letter to Mr. Leach, Chairman, Conference of Presidents of the Federal Reserve Banks, reading as follows: You will recall that at the meeting of the Board of Governors and the Presidents on March 5, 1953, Chairman Martin suggested that the individual Federal Reserve Banks quietly undertake an informal study of the Reserve Bank and branch territories to determine whether changes in transportaticn facilities and other conditions, either in their own districts or adjoining districts, since the existing boundaries were established would call for any changes in district lines or head office and branch zones. This matter was referred to briefly at the joint meeting on June 11; 1953. Some of the Federal Reserve Banks have submitted to the Board the results of their studies and the Board would appreciate it if the respective Presidents would be prepared at the joint meeting in December to discuss any situations disclosed by their studies which raise a question whether some change in present boundaries should be made. Approved unanimously.
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