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1922 A meeting of the Board of Governors of the Federal Reserve aY8ten1 was held in Washington on Friday, December 22, 1944, at 1100 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Smead, Director of the Division of Bank Operations Mr. Paulger, Director of the Division of Examinations Mr. Vest, Assistant General Attorney Mr. Wyatt, General Counsel Mr. Gardner, Chief, International Section, Division of Research and Statistics There were presented telegrams to Mr. Flanders, President of theD 'ederal Reserve Bank of Boston, Messrs. Treiber and McCreedy, Secre— t441-es of the Federal Reserve Banks of New York and Philadelphia, re— Mr. McLarin, President of the Federal Reserve Bank of 41411ta, Mr. D13lard, Vice President of the Federal Reserve Bank of Chic agO, Mr. Stewart, Secretary of the Federal Reserve Bank of St. Louis, vlabert, President of the Federal Reserve Bank of Dallas, and Mr. Vice President of the Federal Reserve Bank of San Francisco, sta.tin -Hg that the Board approved the establishment without change by the F ederal Reserve Banks of St. Louis, Dallas, and San Francisco on 1923 12/22/ 44 -2- December 19, by the Federal Reserve Bank of Atlanta on December 20, 117 the Federal Reserve Banks of New. York, Philadelphia, Chicago, and 84nPrancisco on December 21, 1944, and by the Federal Reserve Bank of Boston today, of the rates of discount and purchase in their existing sch edules. Approved unanimously. Mr. Szymczak referred to the brief recently filed by the Federal Reserve Bank of New York as amicus curiae in the case of John Barr the United States, which involved the certification by the Federal liese tire Bank pursuant to law of "official" and "free" rates for pounds Stel"ling. He said that, while Mr. Dreibelbis and the Treasury Depart- raerit were informed by the Federal Reserve Bank of New York that the brief 1%8 b e-ng prepared, copies were not received by the Board or the Treas- 1117 from the New York Bank until after it had been filed. After rerer,4 .4ng to comments appearing in the Jew York Times and The Amprican ' With respect to this matter, Mr. Szymczak stated that he had riet the brief and had come to the conclusion that no action was called tcr tY the Board in relation to it, at least at this time. In the disell8eLpn which ensued the other members of the Board concurred in Mr. 4YIllezak's opinion. Mr. Szymczak then stated that in accordance with the action tak 11 at the meeting of the Board on December 1, 1944, a meeting was ' held at the State Department, at which there were in attendance 1924 12/22/44 —3— Il l'ssentatives of the Board, the State Department, and the Federal Re"s Bank of New York, for a discussion of the action to be taken 14 connection with the acquisition by the central bank of Mexico of stock control of the Pan American Trust Company of New York. He said that, after reading the memorandum which had been prepared in the Boa AI 1\4's offices for presentation to the State Department, the repre— tatives of the Department expressed agreement with the position taken in the memorandum that a foreign central bank should not con— trt°1 a bank in this country and proposed that the matter be taken up 'the State Department with the proper Mexican authorities. Mr. SzYraczak also said that the day following the meeting with the repre— tatives of the State Department, Mr. Messersmith, the American Am— bate. ador to Mexico, was in Washington and the State Department arranged illeeting with him at which it was not possible for the representatives c/r the Federal Reserve Bank of New Short notice for the conference. to be present because of the At this second meeting Ambassador ke, 'ersmith as well as the other members of the State Department staff took the position that the matter should be taken up promptly with the key; —can Government, through the American Embassy and requested that be— that was done the State Department be furnished with additional '-mation with respect to the applicable law and central banking es. Mr. Szymczak went on to say that this material was being 192' 12/22/44 Prepared but that in the meantime Mr. Tiebout, Assistant General Counsel t the Federal Reserve Bank of New York, upon being advised by telePhoneof the conference with Mr. Messersmith, renewed a suggestion prey:4)1181Y made that the New York Bank invite Mr. Villasenor, Director General of the central bank of Mexico, to New York for a discussion of the matter looking toward the disposition of the bank's holdings in Pan Allerican Trust Company. The question before the Board, Mr. Szymczak said, was the procechlre that should be followed in the circumstances and, if Mr. aeenor should ask for an opportunity to be heard, whether he should be asked to come to the offices of the Board or the Federal Reserve 13tik °f New York. Members of the Board suggested that, inasmuch as the matter w e being treated by the State Department as one for handling through 41)4Mat10 channels, it should be handled by the State Department and 40 rUrther action should be taken by the Board or the New York Bank Perldirig further developments, it being understood that if a request 17el'e l'eoeived from Mr. Villasenor for a hearing the procedure to be ' vied in that connection would be determined following receipt of the request,. At the conclusion of the discussion upon motion by Mr. Szymczak, it was unanimously agreed that the matter should be handled in accordance with the above suggestion, and it was understood that the New York Bank would be advised by telephone accordingly. 1928 —5— During the discussion of the above matter Mr. Szymczak said that he had talked over the telephone with Under Secretary Bell about it and that the Treasury had been fully informed regarding it. So that the members of the Board might be kept informed, Mr. 82Y.Mozak reviewed in detail the status of the draft of the enabling le gislation in connection with the Bretton Woods agreements and the e°11terences which had been held since the meeting of the Board on Decenter r, 1944, with respect to various provisions of the legislation in Ilhich the Federal Reserve System was interested. Before this meeting there had been sent to the individual mem— bers of the Board copies of a memorandum dated December 21, 1943, from Mr. mead submitting requests from the Federal Reserve Banks for au' ILY to pay the regular semiannual dividend at the end of 1944 to de for losses and to make charge offs or other adjustments includi4 transfers from surplus to reserves for contingencies. The memo- ram 'UM stated that current earnings for 1944 would be about t,')104,000,000 arid Current expenses %.9,400,000, leaving current net earnings of 6n '-0,000; that additions to current net earnings including ,(3,200,000 $54 °t Profits on sales of Government securities would amount to about t3,e -0 n ° )-00; that deductions from current net earnings would amount to all°11t t500,000; and that net earnings for the year were estimated at t57 9 '00,000. 13b of Payments to the Treasury under the provisions of section the Federal Reserve Act were expected to total about 1,300,000 19"'" * r4.2.0 121'22/44 —6— arid member bank dividends $9,500,000, leaving net earnings available tor transfer to surplus (sec. 7) of about 48,000,000, of which amount the banks would transfer about 7,3OO,OOO to reserves for contingencies. The memorandum further stated that the Federal Reserve Banks f Richmond, Atlanta, and Kansas City, which at the present time had l'elatively large reserves for contingencies in relation to their surPills accounts, had proposed to make substantial additional transfers to . contingency reserves but that, since these transfers would further a ntuate the relatively high ratio of contingent reserves to surplus these banks, Mr. Smead, after conferring with Mr. Szymczak, tele- Phoned the Presidents of the three Banks and explained the situation tot hft with the result that Messrs. Leach and McLarin agreed not to ke any transfer to contingent reserves at this time and MT. Leedy ' rile eed to reduce the proposed transfer to $387,000, an amount suffi' agl ciEtt to bring the reserve for contingencies at that Bank up to 43)50 0,000. Recommendations contained in the memorandum with respect to the requests of the Federal Reserve Banks were approved unanimously as follows, with the understanding that the telegrams to the banks would state that it was assumed that "reserves for registered mail losses" would be set up by each bank at the end of the year in accordance with the procedure set forth on pages 40 and 41 of the revised earnings and expenses manual: 12/22/44 -7- 1. Each Federal Reserve Bank was authorized to pay the regular semiannual dividend on December 30, estimated to amount to a total for the 12 Banks of $4,804,000. 2. The following Federal Reserve Banks were authorized to transfer from surplus (sec. 7) to reserves for contingencies the respective amounts shown: Philadelphia Cleveland St. Louis Kansas City Dallas San Francisco $1,400,000 955,000 1,300,000 387,000 500,000 2,750,000 3. The Federal Reserve Bank of Cleveland was authorized to reduce the carrying value of land owned in Cincinnati from $600,000 to $200,000, the estimated value on the basis of an assessed valuation of $131,000, Which was said to be approximately 67 per cent of actual value. 4. The Federal Reserve Bank of Cleveland was authorized to set up a reserve for estimated losses on an industrial loan in an amount equal to the amount of net earnings on industrial loans and commitments for the year estimated at $5,800, and the Federal Reserve Bank of St. Louis was authorized to set up an additional reserve of $7,000 against an industrial loan. 5. The Federal Reserve Bank of Boston was authorized to decrease by $44,300 the amount of reserves carried against estimated losses on industrial advances under section 13b. At this point Messrs. Smead and Gardner withdrew from the Mr. Evans stated that the suggestion had been made that the "Prepared by Mr. Parry, Director of the Division of Security Loans, 11413 the title "Selective Instruments of National Credit Policy", which 12/22/4 4 -8- Ilas included among the papers on banking and credit policy which were slij ussed at the meeting with the Presidents on December 12, 1944, be 1311blished in the February issue of the Federal Reserve Bulletin. Mr. 4ans also said that this was the only paper in the group that was lie`OY for publication, and that therefore, the question of the publica41 of the remaining papers was not being raised at this time as that ' W°1-11d be a matter for later decision, but that he had talked to Mr. Wi 111ams, Chairman of the Research Committee of the Presidents' Confar'ence, who stated that the publication of Mr. Parry's paper now would be we,ft -1-1. timed and the Presidents' Conference Committee would have no objection. Mr. Ransom stated that he would be very much in favor of the Pliblication of the paper for the reason that it related to a number of 'illestions involved in the future policy with respect to Regulation 11 and that it would be beneficial to have the widest possible discus- eioti of various views relating to these matters. At the conclusion of a discussion, upon motion by Mr. Evans, the publication of Mr. Parry's paper was approved unanimously with the understanding, however, that Mr. Thurston would first clear the matter with Chairman Eccles, and that if he had any question regarding it, it would be considered by the Board again. There was then read a circular letter dated December 18, 1944, aPhv'llently addressed to all nonpar banks by R. E. Gormley, Chairman of them "ational Association of Nonpar Banks, with respect to the recent 1930 12/22/44 —9- effort to bring about the passage of the Brown-Maybank bill in the Senate. All of the members of the Board present were of the opinion that the failure of the Senate to act on the Brown-Maybank bill had 14/t settled the matter, and Mr. Gormley's letter only served to em,Phasize that opinion. sit,eps 118 There was a brief informal discussion of further that might be taken by the Board in the matter, but no action taken, it being understood that drafts of letters were being pre- pared Which would be submitted to the Board for approval at a later kte. At this point Messrs. Thurston, Goldenweiser, Paulger, Vest, 41aciut_ ivatt withdrew from the meeting. The action stated with respect to each of the matters hereinatter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Pect— " 41 Reserve System held on December 21, 1944, were approved unanikotisiy. Letter to Mr. Ruml, Federal Reserve Agent at the Federal Re3(*Ire Bank of New York, reading as follows: "In accordance with the request contained in Mr. Iticels letter of December 16, 1944, the Board of Governors approves the payment of salaries to the following meMbers of the Federal Reserve Agent's staff, at the rates shown, effective January 1, 1945: Annual Salary Title Name Alternate AssistNorman C. Cooper $4,000 ant F. R. Agent -,1̀ Cl‘_,-4 CA,-X_ 12/22/44 -10- "Name: (Continued) Joseph H. P. Farnon Edna K. Reynolds (Mrs.) Title Alternate Assistant F. R. Agent Alternate Assistant F. R. Agent Annual Salary $3,800 2,800" Approved unanimously. Letter to Mr. Hugh Leach, President of the Federal Reserve sank of Richmond, reading as follows: "The Board of Governors approves the payment of sal7 to Mr. Edward A. Wayne, Vice President, Federal Reserve Bank of Richmond, for the period January 1, 1945 to May 31, 1945, inclusive, at the rate of $11,000 per annum, which is the rate fixed by your Board of Directors as reported in your letter of December 15, 1944." Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks readas follows: "Reference is made to the Board's letter S-803, dated October 27, 1944, regarding reports on Form F.R. 579 of Regulation V loans. In order to assist the Office of Contract Settlement in the preparation and maintenance of essential statistical records, it will be appreciated if, in the future, you will indicate on Form F.R. 579, following the name of the borrower, under each T loan guarantee and 1944-V loan guarantee, the date the application for such guarantee was received by your Bank." Approved unanimously. Letter to Mr. Jenks, Vice President, Peoples National Bank of taw-A_ ''41-1gton, Seattle, Washington, reading as follows: "In the absence from the city of Chairman Eccles, I am replying to your letter of December 6. In your letter you set forth the difficulties and delays you have exPerienced in connection with an application for the _LZ.74t34e 12/22/44 -11- n guarantee of a VT loan for the Lamb-Grays Harbor Company, Hoquiam, Washington. It is regretted that there has been SO much delay in arranging for the adequate financing of this Company. This delay, as you know, has been due to the fact that the war contracts of the borrower involve at least two of the Armed Services, namely, the Maritime Commission and the War Department. In fact, the predominant interest has shifted from time to time, resulting in a present guarantee by the Maritime Commission but a contemplated refinancing in the near future with the War Department, which will hold the predominant interest as soon as the increase is awarded in the ordnance contract. . "Following receipt of your letter, the War Loans Commlttee has been in touch with the Services and with the Federal Reserve Bank of San Francisco. From information now available, it would appear that the financing problems of the Company will be shortly taken care of in a satisfactory manner. However, should you have any further difficulty or experience any unreasonable delay, you should not hesitate to take the matter up with the Federal Reserve Bank of San Francisco which, in turn, will promptly communicate with the Board's War Loans Committee." Approved unanimously. Telegram to the Presidents of all the Federal Reserve Banks read141g as follows: "The Board of Governors has received from each Federal Reserve Bank an executed counterpart original of the revlsed Loss Sharing Agreement between the Federal Reserve I.3anks, and pursuant to the provisions of Section 14 thereof the revised Loss Sharing Agreement will take effect January 1, 1945." Approved unanimously. Thereupon the meeting adjourned. try. 4P Proved: Vice Chairman.
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