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1532 The meeting' of the Board of Governors of the Federal Reserve 8Ystell with the Chairmen of the Federal Reserve Banks was reconvened Washington on Wednesday, December 6, 1939, at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Davis Draper Messrs. F. H. Curtiss, T. B. McCabe, G. C. Brainard, Robert Lassiter, W. T. Nardin, and R. B. Caldwell, Chairmen of the Federal Reserve Banks of Boston, Philadelphia, Cleveland, Richmond, St. Louis, and Kansas City, respectively C. Coffey, Tay Messrs. R. E. Wood, Taylor, and St. George Holden, Deputy Chairmen of the Federal Reserve Banks of Chicago, Minneapolis, Dallas, and San Francisco, respectively Mr. R. S. Parker, President of the Federal Reserve Bank of Atlanta Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman Thurston, Special Assistant to the Chairman Mr. Wyatt, General Counsel Mr. Goldenweiser, Director of the Division of Research and Statistics ead, Chief of the Division of Bank Mr. Operations Mr. Paulger, Chief of the Division of Examinations Mr. Parry, Chief of the Division of Security Loans Mr. Dreibelbis, Assistant General Counsel Mr. Thompson, General Assistant in the Secretary's Office Mr. Mr. Mr. Mr. Mr. Mr. Szymczak made a statement with respect to salaries of .,! 12/6/39 -2- °ITicers of Federal Reserve banks, a summary of which has been placed in the Board's files. During Mr. Szymczak's statement Mr. Wood said that, while cfri,,•4-d1 salaries at the Federal Reserve banks might be too high in scis cases, he did not believe it was good policy from the standpoint tha morale of an organization to reduce salaries, especially in any e"e where the officer or employee has served for a long time, and if it were felt that the employee should not be discharged, the Drobi Would have to be worked out as replacements were made by plac14 the thi8 new men on a lower basis. It was stated during the discussion Point that the procedure referred to by Mr. Viood has been t(lopted in a number of cases throughout the System. In connection with a reference by Mr. Szymczak to the salari 8 Peld in the highest Government positions in Washington, Mr. Uood t"ed that he did not believe that salaries in the Federal Reserve b"ks should be compared with the salaries paid Government officials 111 Washington. He also said that he had had experience with salary el"sification plans, that they do not work out very well in practice, thzt they cannot be substituted for the judonent of the operating °r1leel's of an institution, and that if an exceptional man is disered in the org bianeization it is necessary to pay him more than °the e rfi campara positions. Mr. Ransom, in connection with Mr. Szymczak's reference to 118 and expenses of the Federal Reserve banks, called attention 12/6/39 to the fact that the System has paid to the Federal Government a t"al of approximately c0290,000,000 in franchise taxes and for stock f the Federal Deposit Insurance Corporation, and that since its orElltizEttion the System has not received any appropriations from Conthe capital of the Federal Reserve banks having been provided by he member banks and all expenses, including those of the Board, havit g been met out of earnings of the Federal Reserve banks. At the conclusion of his statement Mr. Szynczak made the f‘irther canment that on some occasions in the past communications fr.131 the Federal Reserve banks relating to official salaries had bee.a stIbmitted by the Presidents or other executive officers of the banic 8 and that it was the feeling of the Board that these communicashould be signed by the Chairmen or the Deputy Chairmen. Chairman Eccles stated that inasmuch as some of the Chairmen Would have to leave the meeting at noon and others shortly thereafter w„, --`tld not be possible to discuss all of the topics on the program. Mr. Draper stated that because of time limitations he would 11114 R+ -' that the statement which he had prepared to submit to the 0 41rmi4 on the subject of loans to small business be dispensed with With t, understandin that it will be mailed to the Chairmen. This suggestion was agreed to unanimously and it was understood that a similar procedure would be followed in connection with the statements which were to have been made by Mr. Ransom on the Wegner Resolution and Mr. Davis on member bank and other public relations activities of the Federal Reserve banks. 1_535 12/6/39 In connection with the subject of membership in the Federal Reserve System, which Mr. McKee had intended to discuss, there were ded o the Chairmen statistical statements entitled "Membership ill the Federal Reserve System" and "Changes in State Bank Membership". Mr. Davis inquired whether the Chairmen felt that it would be ' e dviseble to plan for another meeting of the Chairmen in the near Alttlre. Mr. McCabe responded with the statement that he thought this l'148 highly desirable and that he thought it would be well to hold the meeting at a time determined well in advance, and at a place away rrom ni '4ashingt0n where the Chairmen and the members of the Board could their entire time to the Program of the conference during the d 1," 114Q it was in session. This suggestion was discussed and concurred in by the Chairmen. Mr. Wood expressed the opinion that the broad policies of the 1, "era. Reserve System must be determined largely in Tashington th1.1÷ °I)erati-on therefore, aside from being responsible for the efficient of the Federal Reserve banks and the determination of cer- te4, Zatters of Dailey, the boards of directors of the banks could bl or ) greatest assistance in times of an emergency and in studying the 1)r°131em5 which are certain to arise in the future particularly lr the wlir in Europe should last as long as three years when the fitEtnei 64-1 structure of the belligerent nations would be in danger 12/6/39 of complete collapse. Mr. Wood's statement was followed by a discus- Of the responsibility of the Chairmen and Federal Reserve Agents X. Brainard inquired as to the extent of the agents' responsibility 111 connection with the custody of collateral for outstanding Federal Reserve notes and of unissued Federal Reserve notes. Chairnan Eccles stated that when the Federal Reserve Agents wel 'e the full-time salaried representatives of the Board at the FedReserve banks they relied on Assistant Federal Reserve Agents .7el'Y largely for the daily routine operations of the lwent's department, ttit the assistant agents are bonded, that the department is audited r'egillarly by the Federal Reserve bank's auditors and examined annually the examiners for the Board of Governors, and that, therefore, it la /1,4_ expected that the Chairmen will devote any more time to the -e operations of the department than they deem necessary but that they will rely on the Assistant Federal Reserve Aents wham the Itett s should be satisfied are competent anployees. In response to an inquiry from Mr. McKee whether the Chairmen c°111(1 throw any light on the condition of the capital market, comments were made to the effect that there is no shortage of capital to proall of the things that the people are able to pay for, that many colace. s 411 have very substantial amounts in the form of depreciation, Q11°1eac°11ce and depletion cnarges that are available for capital 11111'P°ses, that concerns in satisfactory financial condition have no 1537 12/6/39 tuble ,n 1 getting additional capital, and that, with the exception "certain railroads, the demand for additional capital generally is "the Part of concerns for which there is no adequate economic justiIlcation and the financial condition of which is not satisfactory. Mr. Coffey said that the applications for industrial loans received at the Federal Reserve Bank of Minneapolis indicate that rixian . cially sound businesses are experiencing, no difficulty in gettit g all the capital or credit needed to carry on their operations. Mr. McCabe suggested that there be appointed a committee of 'moen which would serve as an executive committee for the Chairmen Of pe, ral Reserve banks to serve as a medium of contact with the 14/0Eird and to make recommendations with respect to when the next meet1/1g, ' ur the Chairmen should be held and with respect to the program re'r th_at meeting. It would be the duty of the Committee, Mr. McCabe Beid') t0 study the topics proposed for the program and make suggestions With /lespect to various phases of such topics so that a very constructive 1311°gram could be arranged and effectively discussed at the next 11S'. He added that the reason for this suggestion was that he reit t-Th if the System was to be continued as a genuine influence 14 t4 e --k-Lairs of this country, the Chairmen have a number of nroblems 4ein g them and it was essential that a representative group of Chairmen bleet - en attempt to crystallize the essentials of these problems 14to e Program for discussion at the next meeting. It would be exDeeted he Said, that the committee would keep in touch with the 1538 12/6/Z9 C4irmen and the Board of Governors and get their suggestions as to the+uopi and problems to be brought up for discussion. This suggestion was agreed to unanimously and it was understood that the Chairmen would remain in session for the purpose of selectinF, such a committee. Thereupon the members of the Board end its staff, with the on of Mr. Carpenter who was requested to remain and serve as Secret:arY of the separate meeting, withdrew from the room. Upon motion duly made and seconded, Mr. Coffey was appointed temporary Chairman of the meeting. Nardin moved that an executive committee consisting of three Chailmen be appointed. Mr. Nardin's motion was put by the chair and carried unanimously. It was suggested that during the early period of the committe t activities it would be well to select Chairmen from the Federal Rezerv tanks on the eastern seaboard so that they would be close to ghiII eton and readily available for discussion. In accordance with this suggestion the names of Messrs. Curtiss, McCabe and Lassiter were placed in nomination as members of the executive committee. Upon motion duly made and seconded, and by unanimous vote Messrs. Curtiss, McCabe and Lassiter were appointed members of the executive committee to serve until the adjournment of the next meeting of the Chairmen of Federal Reserve banks. 1539 M. Coffey suggested that Mr. McCabe call the first meeting of the executive committee with the understanding that at that meeting the committee would select its own chairman. Thereupon the meeting adjourned.
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