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1946 A meeting of the Board of Governors of the Federal Reserve S Sten1 was held in 'Washington on Wednesday, December 12, 1945, at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman McKee Draper Evans Mr. Carpenter, Secretary Mr. Connell, General Assistant, Office of the Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman Mr. Smead, Director of the Division of Bank Operations Mr. Leonard, Director of the Division of Personnel Administration Mr. Vest, General Attorney ALSO PRESENT: Mr. Creighton, Chairman of the Federal Reserve Bank of Boston Following an informal discussion of certain matters relating to aPPointment of officers and Class C directors at the Federal Reserve Of Boston, Mr. Creighton referred to the Board's letter of February : 15: 1945, in which the Boston Bank was authorized to proceed with its 4418 for the remodeling of its present building and the construction ot 641 extension at a cost of approximately $2,000,000. Reference was 64)144de to the Board's letter of September 14, 1945, in which it was 141.ted that it was the view of the Board that no building projects 40t 11(47 under way should be undertaken by a Federal Reserve Bank until It _ kta '-ear that labor and materials were readtly available and the of the construction would be in harmony with the transition and DO8tAtta.z. building program. 1947 12/12/45 —2— Mr. Creighton said that the board of directors felt that the 13(t011. Bank should be authorized to proceed with its construction and l'eat0deling program, as it was very badly needed and would be a morale blailder at the Bank. In the discussion which ensued Mr. Eccles stated that, in ew of the very acute need for low priced housing, it would be un— rable for any Federal Reserve Bank to undertake a construction 1111lect which would utilize skilled labor or materials that would be to supply this need or in any way add to the inflationary pres— " 111 In this field, and that if approval were given to the Federal ' Bank of Boston proceeding with its plans, the Board would have t() ta ke similar action on building programs which other Federal Reserve krat, Q have in contemplation. Mr. Creighton felt that inasmuch as the plans were all ready the b ullding could be undertaken now without interfering with housing °118t.1.1, and that in any event, the Bank should undertake a pro— gram (4 renovation and modernization of its lighting and air condition— ttle f • acilities. It was indicated as the consensus of the members present that 171141e the Board would not be willing to approve the remodeling of the g or construction of the addition at this time, it would be g to consider a definite proposal of renovation and moderniza4°11 o f lighting and air conditioning equipment to the extent that 1948 12/12/45 —3- 46d41 not draw on skilled labor or scarce materials needed in housinconstruction and would fit in with the complete program. At the conclusion of the discussion, it was understood that Mr. Creighton would take the matter up with his directors and submit a further recommendation in writing as to what the Bank would like to do along these lines. Reference was then made to letters received from Mr. Flanders, esdent of the Federal Reserve Bank of Boston, under date of November 19 and December 3, 1945, and a subsequent letter addressed by Mr. Landers directly to Chairman Eccles, which Chairman Eccles read durItle the meeting, concerning the employment by the Bank of Mr. Alfred "eel as Director of Research. These letters were considered in the light of the contents of a memorandum dated December 10, 1945, from Leonard, Director of the Division of Personnel Administration, and 41148 the opinion of the members of the Board that the appointment of 1111 4ee1 as Director of Research, at a salary not to exceed $8,000 per 4t1111113 should be approved and that it should be left to the directors t"etermine whether he would be regarded as an officer or as an emof the Bank. Accordingly, unanimous approval was given to the following letter to Mr. Flanders: or The Board of Governors approves the appointment e2r. Alfred C. Neal as Director of Research of the Fed,44t. Reserve Bank of Boston and payment of salary to him the rate of $8,000 per annum for the period ending 1949 12/12/45 -4"April 30, 1946, the rate fixed by the board of directors as reported in your letter of December 3, 1945. Please advise us as to the date Mr. Neal enters upon the performance of his duties. "It is noted that Mr. Neal's connection with the Bank is to be on a year-to-year basis." At this point Messrs. Smead, Leonard, Vest, and Creighton withcil'ew from the meeting. The action stated with respect to each of the matters herein4er referred to was then taken by the Board: The minutes of the meeting of the Board of Governors of the Nies_ "al Reserve System held on December 11, 1945, were approved unani4) 4. Letter prepared for the signature of Chairman Eccles to Dr. Gold_ " nwelser, Economic Adviser, Division of Research and Statistics, tead..L. -41g as follows: "On behalf of RJ1 of the members of the Board of G°vernors, I am writing, reluctantly and belatedly, this eceptance of your resignation in accordance with your etter of October 11. Your desire, expressed to each of Us long ago, to be relieved of the heavy responsibilities Y°u have so long and so ably borne is the more understandflow that the war is ended and you have an opportunity `43 join the Institute for Advanced Study at Princeton. "In the twenty-six years of your life which you have clevoted to the Board and to the System you have made an 13.&asurable and unique contribution. It is visible in Zfle development of the research work of the Board and of 'ne Reserve Banks. It has been felt constantly in policy aking by the Board and Open Market Committee over a long ;Pan of years. Under your leadership the Division of Rearch and Statistics has earned an enviable reputation l T 1950 12/12/45 "for the highest professional competence. You deserve he credit for this accomplishment and you will take lasting satisfaction in it. "It is impossible in a letter such as this to measure or appraise the distinguished public service you have rendered during more than a quarter of a century, much of it in time of national crisis. You are aware of the high esteem in which you are held by all of us who have been closely associated with you. We will miss your wisdom, your philoe0-1— viay, your friendly counsel, and your trenchant wit. "You are closely bound by ties of friendship and of interest to this System. We hope to see you often and to have the benefit of your counsel. Needless to add, you take with you the best wishes of all of us who have been associated with you. May you find refreshment of spirit, continuing success and satisfaction in the years ahead." Approved unanimously, with the understanding that a lump sum payment would be made for any annual leave remaining to the credit of Dr. Goldenweiser at the end of the year. Secretary's Note: Although the Board accepted Dr. Goldenweiser's resignation, actually he requested to be retired effective January 1, 1946, under an optional provision of the Board's plan which provides for retirement with no actuarial reduction after at least 30 years of Government service and attainment of age 60. Memorandum dated December 11, 1945, from Mr. Paulger, Director ot the Division of Examinations, submitting the resignation of Elmer W. T '4Y8ter, that t he an Assistant Federal Reserve Examiner, and recommending resignation be accepted effective as of the close of Decem,- 1 1945, and that a lump sum payment be made for any accumulated ' krIci crued annual leave remaining to his credit at that time. The resignation was accepted as recommended. Telegram to Mr. Hodge, Assistant Secretary of the Federal ReBank of Chicago, reading as follows: 1951 12/12/45 -6"Referring Townsend's letter November 30, 1945, oral argument in Motor City Credit Jewelry Company matter postPoned to 2:30 p.m. Friday, December 14." Approved unanimously, together with a similar telegram to Mr. Hugh W. Allin, Detroit, Michigan. Telegram to the Presidents of all the Federal Reserve Banks, 34red in accordance with the action taken at the meeting of the " 8oard On December 7, 1945/ and reading as follows: "In reviewing the subject of contingency reserves the Board has noted from pages 21 and 22 of the Minutes s the June 18, 1945, Conference of Presidents that in °Pinion of the Subcommittee considering this subject :11u of the Special Committee of the Presidents Conference 'Ile purpose of contingent reserves is to provide for genuine contingencies to which the account should bear a ; easonable relationship. The Board also notes that the , t.lboemmittee agreed that by this standard the present con'i ,Ingent reserves are, on the average, excessive. The zsoard concurs in the views of the Subcommittee and of the Pecial Committee of the Presidents Conference. Board rerds present contingent reserves as merely a segregation vl surplus accounts. Regardless of the purposes of this ! egregation it would be difficult to defend present rebefore a committee of Congress or otherwise, parin view of the provisions of the law which rere all earnings after the payment of expenses and divinds to be transferred to surplus. The Federal Reserve vil!.:Iks now have contingent reserves of $68,476,000, of m!„Itch $5,560,000 are earmarked as reserves for registered 11 losses. After a careful review of this matter it b ears to the Board that each Federal Reserve Bank would ae Justified in carrying a contingent reserve of as much ! 13 $1,000,000 to take care of losses of a kind which would 1 7Covered by the bankers blanket bond were it not for the 40.14.11tation of that bond to $500,000. It is also of the 1, , 131flion that each Reserve Bank would be justified in carrytt:g a reserve of a maximum amount of $500,000 to cover conIngenoies that may arise which are not of a kind covered Zf n h e 7 1952 12/12/45 -7-"bY the loss sharing agreement between the Federal Reserve !anks. If each Reserve Bank were to set up reserves in elese amounts the aggregate contingent reserve for each rederal Reserve Bank would be $1,5001000, plus its reserve fO' registered mail losses, making a total for the System of approximately $2410001000 at the present time. The Board is definitely of the opinion that no contingent reserve should be provided to take care of possible future losses on the System's holdings of United States Govern"lent securities. In view of the above, the Board will appreciate your taking this matter up with your Directors Promptly so that appropriate entries may be made at the nd of this year to transfer to surplus any amounts now "eld in contingent reserves in excess of needs to cover contingencies of the kinds referred to above. Your coop!ration in this matter will be greatly appreciated by the Board. Please advise Board of action taken at your earliest convenience." Approved unanimously. Thereupon the meeting adjourned. Chairman.
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