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1)032 0.4 Ilinutes of actions taken by the Board of Governors of the 'al Reserve System on Friday, December 3/ 1948. t4 the Bc*-rd Rootii at 10:30 a.m. PREmIT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Szymczak Draper Evans Vardaman Clayton Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. There We The Board met Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board 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 Leonard, Associate Director of the Division of Bank Operations Young, Associate Director of the Division of Research and Statistics Horbett, Assistant Director of the Division of Bank Operations presented telegrams to the Federal Reserve Banks of York, P hiladelphia, Cleveland, Atlanta, Chicao, St. Louis, City, and San Francisco stating that the Board aporoves the es'4'.'1)111.114ent Without change by the Federal Reserve Bank of San Francisco '44verabe.r. 30, by the Federal Reserve Bank of St. Louis on December 1) Peciern.1 Reservr= Bnnks of New York, Philadelphia, Cleveland, iitirlt% eh tea4lo and Kansas City on December 2, 1948, and by the , e 0$341 12/3/48 ••• PelA Reserve Bank of Boston tociay, of the rates of discount and purtheir existing schedules. Approved unanimously. Fur swJit to the understanding at the meeting on Novenber 23, 9 'further consideration was given at this meeting to the question r".1,espz. - ye re(luirements of member banks should be increased. ' 711e,t1 1 :te the Mr. Thome s stated that there had been no significant change economic sit,uFition since November 23 at which time credit ex- 31°1111acl slackened since the increase in reserve reauirements efin September 1948, that there were indications that the .'4171t $lackening in various phases of the economy had included a illekellitg in th e sales of Government securities by nonbank investors, t4't ciliring the next few weeks banks would be under pressure because the h011daY demand for currency, and that although there would be in the reserve position of banks early in January when retura flow of currency, the second half of January would Peri°c1 of renewed pressure on banks becuse of tax payments. 11A, t4r. ThOrla S said that there was no particular reason for 4-ease reserve requirements at this tine unless it seeTed 1)4 , CO 111.1.1. 1.1 tne Board to impose additional pressure on the situation, to -11Prit . Q ne 'would not feel that an increase of more than one P°111t effective January I would be called for. 1*1's Et general discussion of the question and it was the no action should be taken at this time, but that the 2034 811 " --1-cl he considered again at the meeting on December 17, 1948. fl "nriPction with the discussion of reserve recuirements the (111 ti ciL°111,Tas raised as to Treasury policy with respect to reducing or i tic/'easing balances in 1-Tar loan accounts during the next few weeks l'ilaets the effects of seasonal withdrawals and returns of curothPr factors. Mr. Thomas suggested that through informal Isctleatc)ris with Mr. Bartelt Seh".tile Fiscal Assistant Secretary of the Trans- might be worked out to accomplish the desired objee- It lies u nderstood that '!r. Thomas would get in touch with ' l I nager of the System Open Market Account, with a view 'ary l Icing °tit with Mr. Bartell : a suitable prograti; of adjusting Treas'tnees 80 that they might serve to keep pressure on member bank evc1r th4 next few weeks. ivls81-6'• Leonard and Horbett left the meeting at this point. t It"er‘erIce was made to a bill, H. R. 6570 and S. 2842, intro11 the Ele,htieth Congress which would authorize nationaL banks Q"It rt • . 4 °I' Consolidate with State banks without going into tO the position that the Board had taken in its let1,key 1948, to the Chairman of the Senate Banking and CurIttee that it would not object to such legislation. sd ziclt -"les stated that he felt the situation had changed since lett„ waS approved, that in the meantime the Congress had LQ not make nonmember banks subject to reserve reS1s comparable to member banks, and that the Board 2035 1v3148 84°111(1 no longer take the position that it had no objection to the Pr°13°Bed le gislation since its enactment might result in numerous from membership in the System in order to escape the relat4elY high letter reserve requirements applicable to member banks. During the discussion, Mr. Clayton suggested that a draft of mr. a°qation, be Needham, General Counsel of the American Bankers Asorepared along the lines of the discussion which would elkitted to the Federal Reserve Banks for comment in accordance the procedure proposed at the meeting of the Presidents and th kard on D ecember 1, 1948' Mr. Clayton's suggestion was approved unanimously. tNriee Mr. Eva-Is stated that the final agenda for the Chairmen's Conto be held on December 9 and 10, 1948, provided that the give those attending the Conference a dinner at a hotel 14144644to1 on Thursday evening, December 9, 1948, and he recom441cHthat, tn. keeping with the custom that had been followed in the 14t) the 13°arcl Pay the costs of the dinner meeting. UPon notion by Mr. Evans, it was 4greed unanimously that, in accordance ;1--t.h the procedure followed in recent ..,7411's, a dinner would be given for the wiairmen of the Federal Reserve Banks °I the evening of December 9, 1948, the cost of such a dinner and appropriate tertainment to be paid by the Board. taking this action, it was understood uat the appropriate item in the 1948 11°r17persona1 budget of the Division of ' dmInistrative Services would be increased to cover the costs of the dinIler and entertainment. r 2036 12 3/48 -5Mr. Szymczak stated that a number of foreign central banks Practice of sendina Christmas greeting cards to the Board and 8"he question whether the Board should adopt a similar PNtic a, He said that he understood that the Federal Reserve Bank Of elq "1 . kiritatri Sent such greetings to the foreign central banks which ed accounts with it. Following a brief discussion, it was agreed that cards would not be sent by the Board but that there would be no objection to a member of the Board sending letters or other greetings if he cared to do so. Before this meeting there had been circulated among the memhr8 or the Board a memorandum from the Personnel Committee prepared Wider date of October 27) 1948, recommending the adoption of a re/1401 procedure with respect to approval of appointments, classificattollof positions, and salary changes. The SecretarY the proposed procedure and stated that reviewed 7eir(1418-4 had raiseda Nht question whether the Board had the legal to adopt it and that sel for the Board had answered that C°11n the Mr. Carpenter added that Mr. Vardaman affirmative. le°11esteci the desirability of requiring (1) that each recomth Ntern 0t1 for the apPointment of a new employee be accompanied by a r411-e4tit4t the head or assistant head of the division had perNit: ilitel'viewed the applicant, and (2) that the Division of Per411414istration make monthly reports on new appointments, 2037 i?/3/48 -6- t e ers resignations, salary increases, etc. (41 to vr. Carpenter went 88-3r that if the proposed procedure were adopted, the Personnel C°taittee had indicated that it would follow these suggestions. With respect to the proposal contained in the memorandum that ersonnel C ommittee approve recommendations for appointment of l'ersolls to 4c)t tore positions having salaries of not less than $4,855.80 and , the? th44 $7,432.20 per annum, Mr. Eccles suggested that all api)ttittnertta to positions having salaries above the rate of $4,855.80 l'er41111411 be submitted ql or to the entire Board for consideration so that the oteMbers of the Board would be kept personally in touch lith a 4)113illtizents at salaries above the lower amount. It was the 1441e that the memorandum should be revised to incorporate this k4estiort. atoll 'IRectlon with Mr. Vardaman's suggestion that the divior an a ssistant division head interview applicants before 1.1114iti, recom mendations for their appointment, Mr. Thomas raised Ilsi'484°4 o whether Mr. Noyes, Assistant to the Director of the Di4 Ot IN. Research and Statistics, would be authorized to hold such }IN th s, elle) and in. a discussion of the point Mr. ,alioll Vardaman stated 44 arrangement would meet his suggestion. Following a further discussion, it voted unanimously to approve the Proposed procedure as follows: t "It • the 41s the policy of the Board, and the instruction, Provide that each appointment to the Board's s ' 11 1 b : era 1,11ding transfers from one division to another) e --`'e (1) only for the purpose of filling a vacancy 2038 12/348 -7"or a the l_flew position authorized by the Board, (2) solely on qualified aw„ ' I Leis of merit and only of the best person wthin"lable for the position, and (3) by promotion from vhothe or ganization whenever there is someone on the staff on earl qualify to fill the position. The Board has placed each division head the responsibility of making a thorough rell , „ass v of all persons known to be available and to make a and otramendation for employment solely on the basis of merit of the person best qualified for the position, having cotitr i egard for veterans' preference. This policy should believed to be strictly adhered to. that However, it is adjue,„wie present procedure with respect to appointments and °' 6llentS in Of th salary can be simplified without loss of any the e safeguards of the quality of the staff provided by Policy appom .".11 ,11der the present procedure, memoranda recommending exce-Vilents or adjustments in salary (with two very minor , 1, 13ns) are submitted to the Personnel Committee, and t have been cleared by that Committee are sent to ' t"er members of the Board. This requires the circularaittee° 'and consideration by, not only the Personnel Cornbut also by all other members of the Board present, theeix'°us recommendations for appointments to positions crease -1-°%fer salary ranges and normal one-step salary inthe ti/n 8. This practice imposes an unnecessary burden upon other s of the members of the Personnel Committee and the arlteril , 4erabere of the Board and could well be eliminated by eotifor:C such cases in the minutes as approved when they the established policy of the Board. em 4-'llerp h-qra 1, --ore, it is recommended that the following prokerd i;e erauthorized by the Board: ?IL eonnel i!!eiate Recommendations for the appointment of heads, asat,p7,eads • tant heads of Divisions, members of 3411t al 43f t lhe anda Board sls s Members' section, and employees with kItth at the rate of 84 855.80 per annum and above shall Ile "ero t 1, e ue submitted to l the Personnel Committee and then DrA members of the Board in accordance with pre"the tTljeedure. Recommendations for increases in salaries : 111)1114 erilli, ernbere of the staff shall also continue to be 1,the Personnel Comiaittee and then to the other vr ve u Board, except that the ' increases in salaries up b 432,20 1141„t:'°Eirci ; A Per annum of employees who are not members of gNphs-embers' section shall be handled as provided in 2 and 3 below. 20:19 1.243/14 -8-11 ree 2- When approved by the Personnel Committee upon °rIlmendation of the appropriate division head with the A . --ence of the Director of the Division of Personnel ,,ecre_ istration and the Secretary of the Board, the or '' 7 shall be authorized to enter in the minutes approva 8Peoia1 increases in salaries below $7,432.20 per an um.c Upon the recommendation of the appropriate 1 mm l. 0171.en,,rith the concurrence of the Director of the Dithe to of rersonnel Administration and the Secretary of th 4rd, the Secretary shall be authorized to enter in sale Illiautes approval of appointments of employees with ohear ..., " i rates up to $4,855.80 per annum and normalof eitni.'''eP increases in 12 or 18 months in the salaries rj e„!ees up to 432.20 per annum, except that when a "imendation for $7,such an appointment or salary increase , -4701 reta,„_ v " a member of the staff of the office of the it Secor the Division of Personnel Administration, for also be submitted to the Assistant to the Chairman 8"1131Proval. sepeil„, 1 " A-11 recommendations relating to involuntary be eiii.,'1°ris and reductions in salary shall continue to porttiocer:nieittbtedersto the Personnel Committee and then to the of the Board in accordance with the present the iti;„.11re• Resignations shall be accepted by entry in , tile ..tes 11 Without prior circulation to the Board unless i'z'ought7e sPecial circumstances involved which should be N3ectilit° the attention of the Board. It would also be ec3ritez , --; that whenever a division head learned of the *Lich 1,1'4'8-fed resignation of a member of his division trt c"°4.11-1-ci result in the necessity of filling a vacancy tlittteea`jg°r7 requiring approval by the Personnel Cornhe will notify the Division of Personnel AdminisLtenti- l'Inich will promptly bring the matter to the ill trucct '. 11 of the Personnel Committee in accordance with 05.1°ris issued by the Committee. tul.,11qraerit r=commendations for appointments and adsalaries shall be made in accordance with rne a dOpted by the Board on March 18, 1948, and -4 "slii ,:er8 or -veci of the Board and the official staff shall PI, 41- care to see to it that the existing policy 81e'rnoti°n from within and appointment only on the 1)4iticif merit and of the person best qualified for the 116. 0 be filled is strictly adhered to. til()Yees 1. The responsibility for classification of b the various divisions of the staff, other &ttri ta t•v.1 ?ffices of the Board members, shall continue lritel h: . L8-1°t1 of Personnel Administration in collabora'ue heads of the respective divisions of the :.'31 2040 12/3/48 -9"staff • The existing practice of submitting all classificati It i°118 to the Personnel Committee shall be discontinued, but everthe • reach Division of Personnel Administration and the ttr7 of the division or office concerned are unable to ticagl'eement with respect to the classification of a posirt the matter shall be referred to the Personnel Committee 'or decision. "7. Except as changed by the procedure set forth above, the t:c1 Pocedures contained in the Statement of Personnel Policy !teed by the Board on March 18, 1948, shall be continued. "fnal Reserve Bank Persormel Vice 101. A ppointments of directors and of Presidents, First sear ,..Lreeidents, officers in charge of examinations and reIN +ell and statistics, and other principal officers requirof t.;;he aPproval of the Board, and salaries of all officers Bonn, ie !ederal Reserve Banks, shall be submitted to the Per‘icrnmittee and the Board for approval in accordance the no existing procedure. When submitted by the Federal Reserve Banks in actC'e with the existing procedure and when recommended vith tel,Director of the Division of Personnel Administration fetal : e, concurrence of the Secretary of the Board, the Secet (i5 8neal be authorized to enter in the minutes approvals teratttPPointments of Assistant Federal Reserve Agents, Alitgerrt,s; A,ssistant Federal Reserve Agents, and Federal Reserve 4eststa- 'lePresentatives, (2) appointments of examiners and c't the 11,,,,t examiners upon the recommendation of the Director threesuivieion of Examinations, and (3) salaries of emtIti ` °1* the Banks which are above the maximum or below "'torl 4. 1,71uicfl of their respective groups under the job evaluliic:n) except that if in any case there is any clueseetabiler such approval would be in accordance with the qtteci'ened policies of the Board the matter shall be sub-. o #1, PPrconnel Committee for approval." At th4 ' 4 8 Point Messrs. Smead, Thomas, Nelson, and Young withoi th e 'Peet' Ing and Mr. Townsend, Associate General Counsel, the 11,1s. 40/411eand referred to two motions which had been filed 1.01 7446 by Transamerica Corporation in the proceeding coz-,rd nad instituted against that Corporation under the 2041_ 12,64,8 —10— C4Ytori Act. The first motion sought to disqualify Messrs. Eccles Clb.ytori on grounds of personal bias and prejudice and the second d that the qualified mer:.bers of the Board hear and determine the Issles pre sented by all motions which may be filed or otherwise pre— 411teci °11 beh4 of Transamerica in advance or at the opening of th stEs‘teDletit t7 114 resi,ect to the first motion, Mr. Fccles referred to a 'which he gave to the press on Vednesday, December 1, 1948, Po% concerning the motion to disqualify him in which he ted thEt he eorne tiine wanted to make clear that the Board had understood that he had disqualified himself as a participant in decisions by the Board in the case for the reason that he was to be a 'witness, that ever since the proceeding was instituted ‘4'rizker1ca hr:d from time to time charged in the press thtt the 'eedltg itself came about as a result of his personal bias against itt end his associates in Transamerica, that one of the 8greed to the reuest of counsel for the Board to appear ttleSS in the case was to dispel once and for all the idea e°111d be any truth in the charges, and that he was in— tht upon taki the witness stand he subjected himself to eXkillEtion aS counsel for Transamerica might see fit to ‘zt con— Itch tt would Provide an opportunity for Transamerica to verify 4`1.1Zcrs, if there was any truth in them. 2042 W3/ 0 -1144141ft 141". Townsend stated that although Mr. Eccles had disqualified the question of the motion as applied to Ni'. Clayton still consideration. He read two affidavits filed with the motion tor di squal ification, one by L. M. Giannini dated November 29, 1948, 0 e 141er by Sam H. Husbands dated November 30, 1948, after Ntith orta : atated that Transamerica Cori,orction was entitled to an p on their motion if Mr. Clayton did not disc_ualify him- tti l that inasmuch as the entire proceeding nad been nede Fae the h g With resriect to the motion would also be public. 8IDc418e t° an incuiry, Mr. Townsend stated that if :4r. Clayton kith t cliecluallrY himself, he would have an opportunity to make exPlallation of his reasons for withdrawing as he desired. k :111-°/4111g a discussion of the motions, the meeting recessed °;14.e(1111'ellecl at 400 •m• with the same attendance as et the close the 111°11W -rig session. 1,tta ' 111% — vrialla stated that since the meeting recessed TransNit C°1T aticn filed another motion requesting the production llePect* ' g th 1°- of Board minutes, records, and papers as described til(Ition re lating to the Transamerica proceeding. qte 7141144 again to the motion of disqualification of Messrs. zerit1444 ClaYt°11) the latterthat while he had a feeling of e beeltil" of the length ss tat sdwhich Transamerica Corporation to 1.71-ng false deductions and making false insinuations 2043 trist him and the Board, and while his personal inclination was to %qualify himself and issue a statement which would answer the in411116tions in the affidavit, he would like frank expression of the %8 of the other members of the Board as to whether the proceedtigirist Transamerica Corporation would be enhanced or damaged bY disqualification• There q°4 followed a discussion of r. Clayton's cluestinn, at the Ihich he stated that he had reached a decision to disqualify At this toint all members cf the staff excepting Mr. Carpenter '1(1 Y.orrill withdrew from the hleeting. VardPirlan stated that there was a matter which he felt 411e ix:mediate consideration by the Board. He pointed out Townsend had C4Yt beer. serving in effect as prosecutor in the cftl let NIttoris ha,ci Proceeding against the Transamerica Corporation and that arisen and would arise hereafter which necessitate the of the advisability of either borrowing or otherwise °1144tlitle the services of a special counsel with expert knowledge 11-1 ,Laricalrie oN1111, governmental proceedings under the Administrative 11141. Act -/.1d relevant provisions of law, to assist the General 841Iisin6 the Board in connection with this proceeding. tkcI It -ed out during the subsequent discussion that there was timt question of organization with respect to the Legal Di811011-1d be qiven full consideration. 2044 -13Mr. Eccles comented. m that the special counsel referred to by Vardaman should, be under the General Counsel, and suggested that kight be desirable for the Board to adopt an arrangement followed -pixie other organizations of having a Solicitor in addition to the 4 it C°11rIzel. Yr. Vardaman said that he felt that should hive 1)tithe atus of Mr. Townsend from the beginning. It was also st thet, w hatever the organizational arrangement might be, it l‘kse4ential that the General Counsel be kept currently informed * \''4e1°Pr,lents in all foiiria1 proceedings to which the Board as a 51‘tY 'P41 tht, he would be in position at all times to advise the zatters that might come before it. it All zerbers of the Board expressed agreement with these views Suggested that the Personnel Committee submit appropriate l'kkriletidations to the Board. Chairman t° be be the ch cCabe summarized the discussion by stating that it consensus of the Board that Townsend's title anced, to solicitor; that he should handle litigation and 4144t Proceedings on behalf of the Board; that he should keep zo th ihfc)rmed of all developments in connection with such actions 'tt tile LeLal Division would be in position to advise the Board that there should be obtained the services of a e°1-knsel wto was thoroughly versed in governmental administraeedure and who would be a member of the Legal Division reb4 to the GAneral and that the Personnel Committee 2045 —14— s4"'" take a recommendation to tte to the Board as promptly as possible as f01Tial actions which should be taken to put this arrangement 14 fIrect. ' Upon motion by Ni'. Vardaman, the Procedure outlined by Chairman McCabe was approved unanimously. The action stated with respect to each of the matters hereinerred to was then taken by the Board: R 4411ates of actions taken by the Board of Governors of the Fed- eS q/r L-.Isuem on December 2, 1948, were approved unanimously. Letter to Mr. Parhart, President of the Federal Reserve Bank Ileiseo, reading as follows: Na:The Board approves the payment of salaries to the 3g officers effective December 1, 1948 through 'ii rates 19491 kyo -Proved at the rates indicated which are the by the Board of Directors as reported letter of November 23, 1948: Annual 4rile Salary Title B Head Office e. arrett Assistant Cashier $6,500 Assistant Cashier 6,500 14. L. Seattle Branch Sandstrom Assistant Manager 6,000" Approved unanimously. Telegrat to the Presidents of all Federal Reserve Banks read- "A8 swkted at the joint meeting of the Board of Gov71,14.1, 111d the Presidents' Conference, the Board approves t;.e * ?efla Parecraphs for inclusion in the circulars of -44 Reserve Banks regarding the collection of "18"aPpraved by the Presidents' Conference; 2046 -15"that 4 j-S, as submitted with the report of the Committee on vt:Lections dated November 12, 1948 (as amended by Mr. utl-ist letter of November 22) and with the understanding 076 each Reserve Bank should have the option of including ttl e tl"i ding the paragraph headed 'Check routing symbol' tallat e circular or modifying the paragraph as the Reserve c°ncerned might deem appropriate or desirable." Cop te.tik Approved unanimously. Tel , eram to Mr. Knoke, Vice President of the Federal Reserve Na.„_ gti /ark, reading as follows: ov reto ,.1- c)ur wire December 2. Board approves three month bY Your Bank to Bank Polski of the following gold ceto (1) $10,000,000 of the $15,000,000 loan due De44;,. 2! (2) $1,500 000 of the $2,250,000 loan due De4/111 --1„2; and (3) $1,750,000 of the $2,6251000 loan due 1949, on the same terms and conditions as apPlYto 6hs maturing loans and on the same understanding, ir 4., that any further renewal of these loans would, 04 .gt)n'ed, l be contingent upon a repayment calculated °asis of at least 25 per cent of the amount out" on June 9, 1948. ' 41 is understood that the usual participation will ered to the other Federal Reserve Banks." be 04 Approved unanimously.
@FedFRASER