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1902 A meeting of the Board of Governors of the Federal Reserve stem with the Presidents of the Federal Reserve Banks was held in the offices of the Board of Governors in Washington on Wednesday, ecember 14, 1949, at 10:40 a.m. PRESENT: Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Szymczak Draper Mr. Carpenter, Secretary Messrs. Erickson, Sproul, Williams, Gidney, Leach, McLarin, C. S. Young, Davis, Peyton, Leedy, Gilbert, and Earhart, Presidents of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco, respectively. Mr. Charles G. Young, Jr., Secretary of the Presidents' Conference. Mr. Davis stated that, pursuant to the discussion at the 4etth, Of the Federal Open Market Committee yesterday, the Presidents' Cokr,, 'rence at a separate session this morning considered the questions (1) the advisability of making savings bonds, particularly Series E 'eligible as collateral for bank loans, and (2) the advisability 13%418 Of 4, 'larther inducement to holders of maturing E bonds to reinvest in bonds. It was felt, Mr. Davis said, that since there was no 131'esstlre for immediate action, it would be helpful if the Board of qove *laors and the Presidents would study these questions, and that, with that 14 mind, the Presidents' Conference had asked its Committees on v"rch and Statistics and Bank Supervision to study the questions 12/14/49 -2- Preliminary to their further consideration by the Presidents and the 13°e'rd«It was thought, Mr. Davis said, that the studies by the two Co mnlittees and the Board would be coordinated and the whole matter Nay reviewed. Chairman McCabe stated that these problems were of special ilrt,erest to the Treasury and that it would be helpful in the System 8141111e8 to discuss the questions with Mr. Clark, National Director or the Savings Bond Division of the Treasury, so that the Board and the Reserve Banks could have the benefit of his views. Mr. Sproul stated th"the Secretary of the Treasury was meeting this week with the 41"cen Bankers Association Committee on Government Borrowing and thet it would be helpful in the study if the System could have the beh it of any views expressed by that Committee. At the conclusion of the discussion, Mr. Davis suggested that, the Board had selected the individual or individuals who would heasi 1113 its study of the matter, Mr. Williams, Chairman of the Presi- (1e4tAt - Conference Committee on Research and Statistics, be advised acso that the studies made by the Board and by the Presidents' Nll'erence Committees could be fully coordinated. The Presidents had met in separate session in San Francisco N°1tember 2 and 3, 1949, and following that meeting, Mr. Davis, Illan of the Presidents' Conference, addressed a letter to the Board 11114r date of November 9, 1949, advising of the actions taken by the 1904 12/14/49 -3- NIference on questions in which the Board was interested. On November 25 '1949, the Board sent to Mr. Davis a letter containing its views //itb• respect to the various matters, and this joint meeting was for the 14.1)°ee of such further discussion as might be called for in the light t the actions taken by the Presidents and the Board. The discussion abiadecisions reached in connection with each of the topics are set below: 1. Federal deposit insurance coverage and assessments. Mr. NI/ 4 '48 outlined briefly the consideration _which had been given to this tter by the Presidents at their meeting in San Francisco and their "Parate session today and there was a general discussion of what, It -44, action should be taken by the System in connection with the 151.131)c/88as outlined in the study prepared by the Board's staff on this aqiect. It was brought out during the discussion that the Board of vA --ttors as yet had taken no action on the recommendations contained illthe staff memorandum and the suggestion was made and concurred in tlIti:t it vould be helpful if the Board would adopt a statement of its Doaition and submit that statement to the Federal Reserve Banks for any tlItther comments that they might wish to make, after which the Board /1010 determine the procedure to be followed in the submission of pro171v4Iale for legislation to the Congress. 2. Relations with the American Bankers Association. Mr. 12/14/49 D18 14 stated that it was the view of the Presidents' Conference that tIlt Presidents in their respective districts should do what they could tO bring about a better understanding and working relationship with the 414erican Bankers Association. He said there were differences of " .ion among the Presidents as to the effectiveness of any such eftorts) since some of them felt that there was a fundamental conflict "hi ell mere friendly relations would not resolve. However, he continued, the P residents were in agreement that the effort should be made, partic —w, arlY in the New York District where the headquarters of the AssociaAl were located and the President of the Association for the current year reetlea. In commenting on the latter point, Mr. Sproul stated that lit 'Qatlk had already undertaken to establish better relations in the 4141 'York District and that it was understood that the Presidents would (10 ...at they could in their respective districts. He also pointed (Alt tu,_ LAtt the discussion of the Presidents at their Conference in San ?Na eisoo included consideration of the possibility of bringing about bettf, -r relations with the Reserve City Bankers Association and with the State Bank Supervisors and that it was understood that each of the Ire idents would do what he could in that connection. It was also the tee1 411g, he said, that it would be helpful if the members of the Board olF G °Ilernors would do what they could in the same direction not only e 8 of working out agreements on legislation affecting banking 91-)f-; 12/14/49 bt 11 terms of the whole concept of the relationships of a central bank, system with the banks with and through which the system works. It as the thought of the Presidents, Mr. Sproul said, that this was a 4Ettte „,„„ ' 1 Primary importance and that the Federal Reserve System should "at it could to try to improve its relations with the banking com- b11141t and with the organizations which represent the banks. Chairman McCabe outlined the consideration that he had given ' 1.6 matter recently and the steps he had taken to establish closer 41111g re1 ationships with the President of the American Bankers As- In the general discussion which ensued, it was the consensus e 17°Ile present that the Board and the Federal Reserve Banks should tlo a 4rerYthing they could to improve working relationships. 3. Increase in Reserve Bank capital accounts. Mr. Davis tIlt"' that while the issue was not presented in the Board's wire of rn:ber 25, 1949, to the Presidents, he wished to mention that five °It the 'residents felt strongly that the quarterly deductions from earn111, , r -r additions to reserves for contingencies should be continued. 4.1c1 that all of the Presidents had agreed, however, that the Ntr $4o °4 deducted from earnings for the first three quarters of this " °111d be retained. Iktter Chairman McCabe stated that the Board had discussed the 4 ain since its letter of November 25 to Mr. Davis and had Nehecl the same conclusion. t 12/14/49 -6- After a brief discussion, it was understood that, in the absence of some change in the situation which would make a resumption rdedUctions from earnings desirable, no further deductions should be Made for the present, and that the $4o million deducted so far this ear should be transferred to reserves for contingencies and shown 14 the reports of the Federal Reserve Banks in the same manner as dedUctions for the year 1948. 4. Copies of quarterly reports (S-953). -d Mr. Davis out- briefly the reasons for the view of the Presidents on this sub- iect ae set forth in his letter of November 9, 1949, to the Board, and 111141asized that if further reports requested by the Board were to be 4 bli°aCI in scope as the more recent reports, a great deal of additional vorl, 'would be required at the Reserve Banks including the utilization or e °MPetent research men to make field sampling surveys which could be c ried on only by additions to the staff. He said that the Presi- te Merely wished to raise with the Board the question whether in the circumstances it was desirable to depart from the original concept otiq. reports. In that connection, Mr. Williams stated that much of the efve statistical work done by the Federal Reserve Banks depended on texY cooperation on the part of member banks, business, and in17 1'v -al the respective districts and that if the Reserve Banks were -ed to obtain a great deal of additional information for the 908 12/14/49 -7- cillartezslY reports it might result in weakening the whole program. At the request of the Chairman, Mr. Carpenter stated that the 4". tad given further consideration to the matter since its letter of , kr '.raber 25 to Mr. Davis and had approved a procedure which would 1. That the form and content of the quarterly reports simplified and that only the highlights of developments 14 each district be reported henceforth (possibly a maximum c)f tvo or three pages). 2. That the function of gathering facts and opinions l'evert to the bank examiners and bank and public relations Qfficers, and that research staffs function only on a concUltative basis and as participants in any round table disuseions held for the purpose of summarizing the information co llected. 3. That the practice of submitting detailed or analytical estions from the Board in connection with this report be disb°4titued, such questions as may be submitted from time to time ,!ing limited in scope and nature to the original concept of le report, and that inquiries on specific details or on matters ch might require extensive analysis be transmitted by separate 4-etters as occasion demands. be r All of the Presidents indicated that such a procedure would 1)e "cePtable to them. 5. Bank and public relations. Mr. Davis stated that the desig4t40 4 (n Mr. Thurston to work with the Presidents' Conference Committee talik aM Public Relations was most acceptable to the Presidents be very helpful to the Committee, and that steps had already t t%sz) to put the suggestion into effect. 6. Increase in fees for copies of national bank examination Mr. Carpenter stated that yesterday the Board sent to the 1909 12/14149 -8- Reserve Banks a letter outlining the agreement that had been te"hed with the Comptroller of the Currency for standardization of the chEtrige to be made for additional copies of reports of examination or ta tional banks and reports of examinations of trust departments. In this connection, Mr. Gilbert stated that the situation 411't arise in some districts in which it would be necessary for the 4tIel'al Reserve Banks to make somewhat similar agreements with some of the state banking departments covering reports of examination of State 4nlber banks. 7. Distribution of committee reports. Mr. Davis stated that it 17°111c1 be helpful to the Presidents if they could be informed somewhat 140re r411Y as to what the Board had in mind in making its suggestion that eqies of reports of committees of the Presidents' Conference and the, 'Material sent by the Federal Reserve Banks to other Reserve Banks %11,14 be sent currently to the Board. Re also said that an understanding had been reached at the keeti 1,4 : : 1 of the Presidents' Conference on November 29, 1948, that the Ut Who was chairman of the Conference committee concerned would take to see that committee and subcommittee reports were distributed k4 'at to any reports in which the Board had an interest, would transmit Otte Of the report to Mr. Carpenter. Mr. Davis explained that the reports were in the nature of working papers and it was difficult to deterlelether they would constitute or reflect the views of the Presidents 12/14/49 -9- after the Conference had had an opportunity to consider and clisoUss them. He said that the Presidents had questioned whether re- 11°1*Its and other material of this nature should be sent to the Board there was some assurance that they represented the views of the ?1 'e8 delatS At the request of Chairman McCabe, Mr. Carpenter stated that %111Itt the Board had in mind was that it should receive currently c°4zlittee reports and other material which were of interest from a System standpoint, including committee reports and material sent by comblittees or by a Federal Reserve Bank to all other Federal Reserve Banks t°1' their information, but that it was not contemplated that drafts or committee reports or other preliminary "working material" would be ellt Unless it involved matters in the consideration of which a member rth° Board or its staff was participating. In the ensuing discussion all of the Presidents concurred in t avis t statement of the understanding that it would be the re4sibility of committee chairmen and the Federal Reserve Banks to that reports and other material of the kind referred to are sent Board at the time they are sent by committee chairmen to the 'a1 Reserve Banks or by one Federal Reserve Bank to the other Re41*v° Beliks 8. Other matters. There was no discussion with respect to (4)„ vaotographing outgoing country checks, (b) acceptance for collection 911 12/14/49 -10- cf checks of $10 or less drawn on nonpar banks in South Dakota, (c) 111811 Proposed by the Post Office Department for the issuance and colaection of Postal money orders, (d) restrictions on money shipments over star routes, (e) possible inclusion of Federal Reserve Bank em- 151°Yees under the Social Security program, and (f) group insurance 44a retirement system active service death benefits. This concluded consideration of the topics which were on the 8.1 de. for consideration at this joint meeting. Mr. Davis stated that the Presidents had not had an opportunity 14 their separate session to discuss the question of Government budget 4441 tiscal policy to which reference was made at the meeting of the 'keral open Market Committee yesterday. In this connection, he referred to e. report to be issued shortly by the Committee for Economic Development °Ilthie subject and the matter was discussed briefly. Thereupon the meeting adjourned to permit the Presidents and etbe 118 of the Board of Governors to attend a meeting of the Executive Collue 4A-tee of the Retirement System of the Federal Reserve Banks at ' the question of the procedure to be followed in the investment of ett rement System funds was to be discussed Secretary. Chairman.
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