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21813 Minutes of actions taken by the Board of Governors of the Pecieral Reserve System on Thursday, December 23, 1948. Illet ton the Board Room at 10:40 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. The Board McCabe, Chairman Szymczak Evans Vardaman Clayton Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Smead, Director of the Division of Bank Operations Thomas, Director of the Division of Research and Statistics Vest, General Counsel Nelson, Director of the Division of Personnel Administration Townsend, Solicitor Young, Associate Director of the Division of Research and Statistics Solomon, Assistant General Counsel Hackley, Assistant Counsel Chairman McCabe stated that Mr. A. L. M. Wiggins had declined 444044-4tinient as a Class C director of the Federal Reserve Bank of Rich- taitkci land designation as Chairman and Federal Reserve Agent tendered t° 1141 "a result of the action at the meeting on December 17, and that t he Personnel Committee would like to have the views of the Other members of the Board as to whether Mr. Wysor or Mr. McCormick be designated as Chairman and Federal Reserve Agent. 2187 12/2348 -2Following a discussion, upon motion by 14r. Vardaman, Charles P. McCormick was designated Chairman and Federal Reserve Agent of the Federal Reserve Bank of Richmond for the year 1949 and his compensation was fixed on the uniform basis for the same position at all Federal Reserve Banks; i.e., the same amount as the aggregate of the fees payable during the same period to any other director for attendance corresponding to his at meetings of the board of directors, executive committee, and other committees of the board of directors. Mr. Szymczak did not vote on this action, stating that he felt the Chairman of a Federal Reserve Bank should be a person living in, or having his principal business office in, the city in which the Bank was located. Chairman McCabe stated that the Personnel Committee was given -11sideration to recommending that Mr. Charles P. Thomas, Vice ?NIA C ' teat of the Monsanto Chemical Corporation, be appointed a Class eet'r of the Federal Reserve Bank of St. Louis for the three- Yeat ''erlx beginning January 1, 1949, that he had talked informally 'rith 4% Thomas by telephone to find out whether he might be inter%ted such an appointment, that Mr. Thomas was to call him on 1)ecerab the e- c9, and that before talking further with Mr. Thomas about ° s-Ality of appointment, the Committee would like to have an N)rees 1°11 of the views of the members of the Board. Upon motion by Mr. Vardaman, it was voted unanimously to tender to Mr. Thomas appointment as a Class C director of the Federal Reserve Bank of St. Louis for the three-year term beginning January 1, 1949. 12/23/48 _3.... Reference was made to a memorandum from Mr. Nelson dated Decenliler 17, 1948, reading as follows: "Upon the recommendation of the committee of Chairmen aPPointed to study the Retirement System of the Federal Reserve Banks, the Chairmen's Conference on December 9, 1948, Ilrged that prompt consideration be given to increasing the retirement allowances of employees of the Federal Reserve , now on the retirement rolls and that action be taken accomplish such increase without awaiting the completion °f Proposed revisions in the Retirement System. "The proposal considered by the Chairmen's Conference to increase the allowances being paid to retired em" 1 to what they would have been if these members were retired under the rules as they stand today. "During the early years after establishment of the Retirement System, retirement allowances were found to be ell'. inadequate due principally to the fact that the Fed: 1 Reserve System itself had been in existence for a j!tively short time and members reached retirement age /le very short service, a large number being retired with _!rvice ranging from ten to fifteen years. In recognition the low retirement allowances payable during the early ' v srs, the Board of Governors permitted the Banks to prosupplementary pensions on the basis of a fixed formula. formula was not applied consistently, with the result while a few Banks gave substantial supplementals, 0th ts ers did little or nothing. The result is that there ti larked inconsistency of the treatment of members re?4 1;sci in the various Banks and in some cases even within andank- In 1943, the benefit provisions were liberalized ,vra the minimum pension of $24.00 for each year of service fi! established. Following this liberalization of bene,"s: the practice of supplementing was substantially aua adoned.111 "A number of Reserve Banks have mentioned cases of rule°Yees with long service who retired under the old where the retirement allowances are only $400 or sucl, Per year and there seems to be a strong feeling that arti,': allowances should be increased. As you will recall, ti ees retired under the Civil Service Retirement Sysoi',received an increase in their allowances last year 45 per cent or POO, whichever was less. 03 12/2 348 "Inasmuch as some allowances were supplemented at the . i4jnle of retirement and others were not, it is believed that .1i yould be most equitable to recompute the allowances on 'fle basis of the formula now in effect and make adjustments °111,Y in cases where it is necessary to bring them up to the eurrent formula. Rounds estimates that this might cost 4PPr0ximately $300,000 if all the Banks decided to make the suPPlemental payments for this purpose. "It may be argued that it would be best to await the e°mPleted revision of the Retirement System which is now uader study and then bring the retired employees up to a :7 1 4 formula which may be adopted for computing retirement _ llowances. However, there was a feeling among the Chair— that the need in some cases is urgent and it would be ue!t to act now and if considered advisable make another adjustment later. 4., "It is recommended that the question of increasing re— -4rement allowances of the retired employees of the Federal ;; e serve Banks be submitted to the Presidents of the Fed— f 41 Reserve Banks for their review end thEt if a majority or such action the Board authorize the Banks to make necessary contributions. talik "There are attached a suggested letter to the Reserve th4 8 and a tentative form of authorization to accomplish -Ls purpose." In this connection Mr. Carpenter read a draft of letter to the Fed eral Reserve Banks asking for comments on a proposed form of thort zation that would permit the Federal Reserve Banks to supple— " et4 r' - 1"ement allowances within the limits specified. During a e118810 11 of the draft, it was stated that the principal reason 7 ci 811PP1 enting retirement allowances was to help persons receiving l'e4tively small allowances and in great need as a result of the in— ill the cost of living, which raised the question whether the Droposed au thority should permit the Banks to supplement allowances t(Iler officers and others receiving comparatively large retire111' ql°wances. 21 0 12/23/48 —5— This point was discussed and, upon motion by Mr. Clayton, it was voted that the letter be revised along the lines suggested during the discussion and resubmitted to the Board. Chairman McCabe stated that yesterday afternoon he attended the taestiti g of the committee of which Dr. Nourse was chairman and which vas e °°rdinating the legislative program for the President, at which, ettl loursels request, he reviewed the problems confronting the S rstein - -,11 the field of credit control. He said he also presented the thre, st atements approved at the meeting of the Board on December 17 vith respect to further legislation on reserve requirements, and thEtt it appeared to be the consensus of the other members of the l'c)111) that no statement on additional credit controls should be in- ellIclecl in the President's State of the Union message inasmuch as that 4e8S4ge WES to be a broad general statement, but that a paragraph on the 81113.ject might well be included in the Economic Report. kdded, However, there was some question whether the paragraph should pro- 8Pecifically that the new authority over reserve requirements : 4111"e ePPlicable to all insured banks, and it was understood that 4) Dr. Nourse, and Secretary of the Treasury Snyder would consider t4roltter further. There was a discussion of the procedure to be followed in con- 1:1 Qttori 1.1ith legislation to be submitted in a so-called omnibus bill tc ollt the President's program, and the suggestion was made 12i/23/48 —6— that a more effective procedure right be to submit the legislation on l'"ellre requirements as a separate bill at a later date. It was the view of the members present that consumer credit legi., 'ation might be included in an omnibus bill such as that pro— PoaeA but that legislation with respect to reserve requirements Qio.taid be in a separate bill to be presented to the Congress after g been discussed informally with the Chairmen of the House and ellata Bank4 _ and Currency Committees. It was agreed that Chairman McCabe would call Dr. Nourse and advise him accordingly. In connection with the discussion of legislation on reserve tegiatx. ements, the suggestion was also made that the Board take a po— °PPosing authority for further increases in reserve require„ 8 member banks unless such authority covered all insured Iktats. While all members present were in agreement with this sug— aeati 11) no formal vote was taken on it. Vardaman stated that he would oppose a proposal that the Pel'al Reserve Banks pay interest on member bank reserve balances ttItthat since the Board had approved a statement including such a 14'°1)°4-1 at a meeting on December 17, 1948, at which he was not pre— et 1,Tou1d not reopen the matter at this time. or14 connection with the discussion, reference was made to the bill on reserve requirements and to a list of questions to 12/2348 —7111"ecided in connection therewith, copies of which had been sent to the members of the Board with a memorandum from Mr. Vest dated Decem41722, 1948, in accordance with the understanding at the meeting heterday.. It was agreed (1) that the members of the Board would review the questions referred to in LI% Vests memorandum and give the staff any comments that they might have with respect thereto, and (2) that the staff would consider the matter further and report to the Board again, but that no copies of the draft of bill would be distributed outside the Board's offices. In a further discussion of the proposed advisory group to co- 0%ate domestic policies of Federal lending agencies, Mr. Young • ted t, a meeting of the technical group considering the matter • t -° be held on Tuesday, December 28, 1948, and it would be exthat he and Mr. Solomon would have a draft of executive order • letter ready for submission at that time. It was agreed unanixiously that Mr. Young would request that the meeting be deferred until Tuesday afternoon, December 28, 1948, so that the draft of letter to be prepared in accordance with the action at the meeting on December 21 could be considered by the Board at its meeting on Tuesday morning. . 441%1 Mr. Clayton stated that this morning he ta]ked with Chairman °f the Federal Deposit Insurance Corporation by telephone and, to the understanding at the meeting on December 21, 1948, 12/2348 -8- °Utlined to him the views of the Board with respect to proposed legis14ticin which would permit national banks to convert to or consolidate l'tth s tate banks without going through voluntary liquidation, and Hanl agreed with the Board but felt strongly that, before t'llinsititting the views of the Board to the American Bankers AssocilitiC34) the matter should be discussed with Mr. Rapport, Chairman of the 4ecutive Committee of the National Association of Supervisors of State Banks, so that that organization would know of the Board's %8 before the proposed letter was sent to the American Bankers 488()ciation„ Mr. Clayton recommended that he be authorized to follow PrOCedUre. Mr. Clayton's recommendation was approved unanimously. At this point Messrs. Riefler, Smead, Thomas, Vest, Nelson, .44Berici 'Young, Solomon, and Hackley withdrew from the meeting and the Ilett °11 stated with respect to each of the matters hereinafter tet torth was taken by the Board; Minutes of actions taken by the Board of Governors of the Fedleserlre System on December 22, 1948, were approved unanimously. Memorandum dated December 20, 1948, from Mr. Thomas, Direct1211% °I th e -Avision of Research and Statistics, recommending the th,43rer. of Lee W. Langham, a sergeant on the guard force in the 41E1.04 of Administrative Services, to the Division of Research %rith tis tics as a research assistant, effective January 9, 1949, change in his present basic salary of .”1024.96 per annum. 12/23/48 _9_ The memorandum also stated that the Division of Administrative Services agreeable to the transfer. Approved unanimously. Memorandum dated December 23, 1948, from Mr. Bethea, Director 01. L the Division of Administrative Services, recommending the 4144.1 ntmant of Richard Shaker as a guard in that Division, with besie salary at the rate of $2,350 per annum, effective as of the date Pon which he enters upon the performance of his duties after -11g the usual physical examination. Approved unanimously. Letter to Mr. Volberg, Vice President of the Federal Reserve (3f San Francisco, reading as follows: c_. "In accordance with the request contained in your Tter of December 17, 1948, the Board approves the ealis .Ignation of the following as special assistant exTiers for the Federal Reserve Bank of San Francisco: Seattle Branch Head Office • Heron G. T. Case M. E. A. K. Jorgensen Lile W. A. Kind D. F. Reightlpy D. F. Underhill W. D. Wood Ang&les Branch Los C. Portland Branch Hale S. T. J. D V ' Hiriman Carter E. W. Frandsen H. C. Oakley I APPropriate notations have been made in the 80a," 'd e records of the names reported as deletions." Approved unanimously. : 12/23/48 -10- Letter to Mr. Phelan, Vice President of the Federcl Reserve tank of New York, reading as follows: "Thank you for your letter of December 15 with which 3:ou enclosed copies of several wires and letters received rrom automobile dealers, Kaiser-Frazer for the most part, Proposing that Regulation W be amended to permit more liberal terms in connection with the instalment sale of automobiles. They are typical of many which are being received here. "On the basis of its study of the whole economic ! ituation, the Board concurs, at present, with your 'hought that the time is not yet here for relaxation • instalment credit terms." Approved unanimously. Letter to Mr. Harold W. Bangert, Bangert and Bangert, 404 814ek Building, Fargo, North Dakota, reading as follows: "Receipt is acknowledged of your letter of December 4!,1948, with further reference to the practice of cer-4/I correspondent banks in routing checks drawn on m°11.4tr3r banks in such manner as to permit them to re4"" at less than par. "The Board is in agreement with your view that the Pte'r clearance of checks is desirable in the public inthest but, with respect to checks not collected through ti Federal Reserve System, the bringing about of effecthvs Par clearance must depend largely upon action by : pa aPPropriate legislative bodies. Restrictions on the : ti4 ent of interest by member banks through the absorpgu-n of exchange charges are, of course, related to the eetion of par clearance; but arrangements between btiro, may well serve to facilitate the making of ex• t;• !ge charges or be used in competing for deposits "°ut necessarily involving the payment of interest. check"Where a member bank nays an exchange charge on a 11114 collected by it and does not absorb such charge opiljasses it back to its customer, it has been the Inenti41 of the Board's Counsel that there is no paythe member bank and therefore no payment of triter 411 est within the meaning of the prohibition of the ikn3 the Board's Regulation Q. We understand that 7 J 12/23/48 -11- "this is the situation in the present case; in other words, that the city correspondent banks to which you refer pay exchange charges imposed by country nonpar banks and pass such charges back to the commercial depositors who deposited the checks for collection with the correspondent bank. "If you feel that a further exploration of this matter Would be helpful, we would, of course, be glad to have you ?(3141e to Washington for such a discussion. In such event ?-t would be well for you to wire us as to dates which would suitable for you, in order that a convenient time may ! t arranged. We feel that we should point out, however, as indicated above, it is not apparent that this is ;' matter over which the Federal Reserve System can exeriBe 84y- control or authority." ir Approved unanimously. or Letter to Mr. McLarin, President of the Federal Reserve Bank a reading as follows: lc "Reference is made to your letter of December 17, , 748, in which you advised that it appears expenses at EIr head office and branches will exceed budget esti' 1'es for the year as follows: JackNash New BirmHead Office ingham sonville yule Orleans Gelleral Overhead 20,000 $ 2,700 Provision of Space 3,400 3,200 °1 itUre & Equipment $4,200 rrovision of Personnel $1,800 2,800 2efleral Service 300 11,200 restage & Expressage 12,000 5,000 2,800 7,000 6,200 700 130 '4)/Isumer Credit 16,000 3,600 3,320 2,500 4,500 Securiti es 600 .IYreneY & Coin 6,000 5,200 19,500 ;'geek Collection 1,000 11,100 "(3/leash Collection Accollating 205 600 2,500 1,800 900 & Public Relations 3,000 1,200 ?eating 1,400 ;* R. Note Issues 150,000 2,300 .vlscal Agency 23,000 "The Board accepts the revised figures as submitted, 134c1 appropriate notations are being made in the Board's re cords." Approved unanimously. Secretary.
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