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1737 ,inutes of actions taken by the Board of Governors on Friday, Dee ember 6, 46. 19 The Board met in the Board Room at 3:30 p.m. PRESENT: Mr. Mr. Mr. -Alr. Eccles, Chairman Draper Evans Vardaman Mr. Carpenter, Secretary Also P re8ideflt Present _ere Messrs. Dearmont and Davis, Chairman and respectively, of the Federal deserve Bank of St. Louis. Eccles read an excerpt from the minutes of the Board on 1946, which included the understanding that he aou1d Qa11Preaident Davis on the telephone and tell him that the luestion °I4the continuation of 44 beeil brou6.ht 110 . by Mr. Vardaman and that it had been suggested that the Bo,-,rd discus Davis c41d, directors, . Hitt as First Vice President of the Bank this and related personnel matters vdth Yr. If he .v vould prefer, 1,ith the Chairmen of the hoard of a comaittee of directors, or any other of the menibers of the board of airectors whom Mr. Davis might wish to have come to 4shlnetori for the purpose. .lee°N6nce With this understanding he called Mr. Davis and, hay- Mixid thaV ae Chairman Eccles also said that in Dearmont would be here today in connection the Conference of Chairmen of the Feder-el Reserve Banks, a e-11.1 of the Board With Messrs. Dearmont and Davis was arranged a fternoon. 4. Vardan stated that one of the first complaints that to -L1 h. afthe became a member of the Board was from the 1738 12/6/46 -2- 114.1 ' cli s Division of Examinations about the conduct of the FederL1 Rosel've Bank of St. Louis and that he then learned that Mr. Hitt, aPParently no one felt was adecuately qualified for the position, 1141 r°1' recently been reappointed as First Vice President of the Bank five-y-,Lr term. He said that no had discussed the matter Davis Aho indicated that there 14/2.9 some prospect that 14'Flitt would get a position outside the Federal Reserve Bank, that later some of the me,abrs of the board of directors complained to b.r. Vard;:..,m) about 1.1r. Hitt, and said that Mr. Fiitt as teleeteci F rst Vice President because it was understood by the (3Els Of cliroctoL.s that the Board of Governors wanted him reeleeicit He ride the further stataaent that at about the same 414ellen he 1-; ,s In Little Rock several b%nkers met with him inr°tlirglY to object to the sending of Mr. Peterson, Vice President "11 he e.8 office, to the Little Rock Branch to succeed Mr. Vice President in charge of the Branch, and that appar- Itl the bankecs felt that if Mr. Peterson were transferred to P,ock there would be no one at the head office ho knea the of the member banks except Mr. Attebery who had no authority Lia also said that he told the bankers that he 110t, tzd would not be in a position of interfering with the 4.he't€'enlerlt of a Federal Reserve Bank and particularly in St. Louis he 44 lived, but that he would advise the Board of Governors * of the convvrsaton. Ile wont on to say that the 1739 -3ers expressed the opinion that Mr. Hitt was not satisfactory S Vice President and said that they understood he was in the 441c b eeause the Board of Governors desired it. After that conver- aqiun -, Aar. Iiardalaan said, he desired to have the matter definitely el411fied and he had suggested that this meting be held for that krpos Chairman Eccles stated that the only new point brought into the Picture when Vardaman reported to the Board the conversations above referred to was a statement that Mr. Davis told his board of d4ecter that the Board had indicated that it wanted Mr. Hitt reeleeted and that some of the directors had said that they would not 44e licAed for Mr. Hitt if they had not understood that Mr. Hitt was the13°ard's choice for the position of First Vice President. Chairman Eccles then reviewed the circumstances under which 41\ Hitt Was selected as First Vice President of the Bank and later Pl'c)Pozed by the directors for President and the Board of Governors .411 to aporove his appointment to the latter Position. thq' 41e1.1 He stated he was in St. Louis some time ago on a return trip from City he told Mr. Davis that he hoped the board of directors .tind a Way to avoid reelecting 1,:r. Hitt as First Vice Presilqlt, because the then existing organization of the Bank was not good th mlich Davis agreed), but that if the board of directors was 1141'1144 to face up to the problem and decided to vote to reappoint 1740 -4141'' Ritt, he (Chairman Eccles) would vote to approve the appointment. the aPPointment was made and submitted to the Board for ayproval, Chairman Eccles said, the attitude of the Board was certailly nothing 14°1'e than nutrd. He made the additional comment that, so far as l'ec'ther officers at the Bank were concerned, the ability of Mr. .1.'tebt ' 171- as an operating officer was recognized and he and J,.essrs. 4ewart and Peterson had been there a long time and there was no Patti Ular question about them. In a further statement, Chairman Eccles said that, ,hen 1141clahlan.' s report was made to the Board, there was a discussion of 74t action, if should be taken by the Board, and Mr. Vardaman Ngested the Possibility of refusing to aprove Li-. Hitt's salary 4 ir8.t• Vice President, but that it was the view of the Board that recently approved Mr. Hitt's appointment it should not use 44th°rity over salaries as a means of removing him, and that as 1°I1 the hoard of directors continued/'"' _1_ • Hitt the Board of Govshould support the directors. 1'11% Vardaman stated trlat he thought the position of the °II the matter was well taken but that the Board was now in a I34&tion 4.41k t of ncvino. a man as First Vice President of a Federal Reserve nobody desired to have continue and that the situation should Davis stated that never at any time, directly or indi- 1741 1V6/46 —5— t'ectlY) had he created the impression nor had he told anyone that the B°ard of Governors favored the retention of Mr. Hitt as First \Tice Prezddent. In response to rl re;ue-J. from qate r. Davis that Mr. Dearaont Luat happened at the meeting of the board of directors of the r s reappointed for the five—year term beginning 411kv4lien Mr. Hitt 1-,, '4411'ch 1) 1946, Ir. Dearmont stated that the meeting was very clear Memory as it was the second meeting of the board of directors thEtt, he attended and his first as chairman. He said that at the end ()fthe formal rat of the meeting Yr. Davis stated that he would like toh4lre an executivc session because the appointment of officers of the .41 k for the succeeding year was to come LID, that he (Ilr. De,-.r— t()zit) called for 'n executive session, re_uesting Mr. Davis to re— l'4121) and that as the other ()Pricers were walking out he asked Mr. ' 4hether 11r. Hitt shou1(1 be asked to remain to v,h.Lch Mr. Davis %lied in the negative, stating that the board of directors should be etven eve opportunity freely to discuss Mr. Hitt's reappoint— tne4t 11411014 his being present. 141% 1 Lt that point, Mr. Dearmont said, presented the names of the officers of the Bank other than t4P1'esiderit and First Vice President, and a motion vas made and 11111Y carried to reelect theLe officers, after ;.h. ch the iues1.441 t rLdsed by 1:r. Tom K. 'Smith as to the election of the Presi— i First Vice President. Mr. Dearmont stated that he did not 1.742 1V6/46 -6141c/71 then that these two officers wore to be elected for five- reall terms, Pnd that he thought that the record would sho;. that Director that c motion that Messrs. Davis and Hitt be reelected, the 1;lth the Chairmen asked if anyone had anything to offer in connection motion, that nothing was said, and that 'Messrs. Davis and wsl'e unanously reelected. de added that he did not at that t e know anything about . hi urevious experience, that not eeveral months later did he know that any question had been 44eec, as to the need for a stronger man in the position, and that, he be asked Lr. Davis why he had not said something about the matter b et°17e Mr. Mitt was reelected, Mr. Davis replied that any comment th at cliPection Llmost of necessity would have to come from the (31' d irector-, since Mr. Davis had been a member of the Board Of Gov el ' ric)rc when it refused to a-Dprove the appointment of Yr. Hitt 4 prw 3-CIPY14and 7r. Daviswas selected as President instead. rr. Hitt First Vice President had been loyal and cooperative and he s) felt a considerable hesitancy and embarrassment about thirtg1-ien Mr. Hitt •:(7Ls up for reelection and when some the d• who voted for Mr. Mitt as President were still i3f the St. Louis board. 41)t Mr. Dearmont went on to say that tn' kik -e Present time no member of the board of directorn of the cj banker in the St. Louis district (and he had been over nO district) had said an unkind word about :r. Hitt. Fie 1743 —7— cided that no one had said to him while he was on the board of directol's that the Board of Governors wanted Er. Hitt retained. After an informal discussion of convcrsz:t'ons which Messrs. st 4ci and Peterson, Vice Presidents of the St. Louis Bank, had with 44 /1, ardaman when they were in Washington on separate occasions re%tiltan a report that had been made to Mr. Davis of one of the cortve rea'ttons regarding Vice President Attebery, Mr. Vardaman said that 6 had not made any comment on Mr. Attebery since 1936, but that h th e --ought Er. Attebery was one of the best operating officers 14 the F ederal Reserve System, although he was not material for ?iret 113ne resident or President of the St. Louis Bank. P Chairman Eccles asked if there were any other matters in l'elation to the situation at St. Louis that Mr. Vardaman wanted to Inerltion at this time and Mr- Vardaman referred to the ill feeling e)`4tirig between Messrs. Hitt and Peterson. Mr. Davis said Mr. P. et 4 did not report to Mr. Hitt but directly to the President. At the conclusion of the discussion, Chairman Eccles stated 11111ess sonie member of the Bo. rd desired further information or Dearmont or Davis desired to ask something additional, there 'tared, to be nothing further for the Board to do at this time, but 1114t 44 t4le r°11e who desired could pursue the matter further at a later kpp th e basis of the record. 1744 1216/46 -01-,r. Vardaman said he was entirely satisfied to go along with the existin situation so long as it was understood by the board of 61reetOrs of the &a-1k that the Board of Governors was not responsible f°1' c°ntiliuinv 1.,r. Hitt as First Vice President. Mr. Davis referred to fir. Verdalfan's earlier corument thPt °41e Of -L the first things that came to his attention after he became am Q- or_ the Board was the conduct of the Federal Reserve Bank Of St. Lo„uI3,_ , and Mr. Davis stated that the ex.aminer in charge of the 'd force had been highly complimentary about conditions as he t°141(1 them in the the Bank, and that he (Mr. Davis) would like to know riature of the remarks the examiner had made in his confidentiP3 reP°rt,th,),, u sere not complimentary to the management. that 0 far It -vas stated as those present could recall the comments were nothing 1(11'e timn 11d been included in the reports for a number of years. Mr ttioNle • Dermont and Mr. Davis both expressed a view that the zPirit of coopration in the Bank were high at the et f. vime. IVIr. Vardaman referred to the circumstances surrounding the "1\rity of :4r. Bailey, Vice President in charge of the Little Rock kl(111, k-441 • 111 Protesting the transfer of certain activities of the ()(iltY Credit Cornorotion from Little Rock to Liemphis and he "cl the Opinion that, based on the information available to 4141 't 14. heOCr would be in error if it took nunitive action against 4-e7 for an activity which he undertook in good faith. 1745 12/6 /46 —9— In connection with this matter, reference was made to the letter of November 18, 1946, to Mr. Davis and to the in— t°1111ati0n Which Mr. Davis had forwarded to the Board in his letters Qt4lrember 261 December 2, and December 3, 1946. Mr. Davis re— the circumstances under which Mr. Bailey had acted and stated that he was satisfied he would not engage in any further activity of tIltekizd. Mr. Davis then referred to the problem confronting the Bank eeleeting someone to replace Mr. Bailey who became 65 years of 4ge°11 April 11 of this year and would retire shortly. He said that he telt that Mr. Peterson should be retained at the head office 141el'ehe could do more important work than at the Branch, that there : 411° 04e at the Branch who should be selected to succeed to Mr. -'411eV8 duties, that at the head office the logical man for the 41-tien would be Mr. Gilmore, who was understudy for Mr. Attebery to stay in St. Louis, and that while the matter had not 1)44 talc€z 114; _ 1110 with the board of directors of the Bank, he (Mr. Davis) 'ticained to believe that the best available man would be Mr. 4e1411't who had been with the Bank from the beginning and who was Weil , 4xi'val throughout the district. He added that it would not be tieee4at'Y to fill Mr. Stewart's position at the head office as his ll'eNtlt duties could very well be divided among the existing offi— the Bank, and that if the change were made it would be q t Nge to retE'in Mr. Bailey as Vice President in charge of the 1746 12/646 -10814111ch for three or four months of next year to enable him to accciraPellY Mr. Stewart on a visit to all of the banks in the Branch terri,_ to enable Mr. Stewart to became acquainted with his flewd before kir. Bailey left. The members of the Board indicated that, if the arrange411t.. (Mained by Mr. Davis were approved by the board of directors °.ft4 Federal Reserve Bank of St. Louis, it would be acceptable to t h pq e -oard of Governors. At this point Messrs. Dearmont and Davis withdrew from the Le 1-4 and the action stated with respect to each of the matters 4reinarter set forth was then taken by the Board: The minutes of actions taken by the Board of Governors of the Pedera Reserve System on December 5, 1946, were approved unan- Telegrams to Mr. Whittemore, President of the Federal Bank of Boston; Mr. Treiber, Secretary of the Federal rIre Bank of New York; Mr. R. R. Maliams, Assistant Secretary hel'ederal Reserve 13:,41k of Philadelphia; Mr. Stewart, Secretary the Federal Reserve Bank of St. Louis; and Mr. Volberg, Vice Are 41clerit of the Federal Reserve Bank of San Francisco, stating tikt; the Board Ntieral approves the establishment without change by the Reserve Bank of San Francisco on December 3, by the Federal 4ellre Bank of St. Louis on December 4, by the Federal Reserve -4. He York, Philadelphia, and San Francisco on December 5, 1.747 12/646 -11allci bY the Federal Reserve Bank of Boston today, of the rates of 48 e°1111t and purchase in their existing schedules. Approved unanimously. . Memorandum dated November 7, 1946, from Mr. Thomas, Director tthe Division of Research and Statistics, recommending the perma48 aPPointment of the following professional members of the staff Ot that Division nov on temporary indefinite appointments, effective today, with no change in their present basic salaries: Name cqilip T. Allen CE.gle 4eorge H. Cleaver ter qoretIce Je.ffy Sert LE r R. Koch 'r 8. Pa inter Jaze P. e K. Roberts Thompson is.'vraY S. Wernick ;11°relioe Guild arleY Nix°n Schelling Title Economist Economist Economist Economist Economist Economist Economist Economist Economist Economist Research Assistant Research Assistant Approved unanimously. liemorandum dated November 5, 1946, from hlr. Thomas, Director the kvision of Research and Statistics, recommending the permaaP klintment of the following nonprofessional members of the zto. ? t f that Division now on temporary indefinite appointments, eck e today, with no change in their present basic salaries: N,11,41 Blake iPPre Title Clerk-Stenographer Clerk-Stenographer Clerk-Stenographer 1748 -12Tfl L. Hempstead ' 4earior Lollise Richards Coon° 'pl'etchenRfli Fouler lth J• Halvorsen 17'-een `nepit.-ierd ' 14ettla L. Hodge :1 cCormick D. Foo7.ers Clerk-Stenographer Clerk-Stenographer Ulerk-Typist Clerk Clerk Clerk Clerk Library Assistant i&aftsman iessenger Approved unanimously. Memorandum dated December 2, 1946, from hr. Smed, Director Or +.1, sj'ie jy SiOri of Bank Operations, stating that 0. B. Lorrissette, 8e111-°/' Clerk in that Division, attained the retirement age of 65 011Noverrber 29, 1946, and will retire effective January 1, 1947. The P'leril°r'cindum A_so stated that Mr. liorrissette was a mehAber of the 411kP41,1 of the Federal icoerve hetir,,Tuent System. Noted. Pet, ,terel etter to lip. Guthrie, Vice President and Cashier of the t'servo BLn: of Helmond, reading as tonal's: 11, "The Board of Governors annroves, effective Jan-. 1, 1947, the change in the -personnel classification -,1 of the Federal Reserve Bank of Richmond consisting ti06'rl increase in the maximum annual salary of the posi4141 of Assistant to Counsel, as submitted with your uter of 1, ovmber 29, 1946. viz "In response to your specific Liuestion, you are adthat the authorization to exceed maximum ,nnual 19Zies contained in the Board's letter of June 25, also applies to the increased maximum s,,,lacy for Position of Assistant to Counsel." 4 Approved unanimously. 1749 -13ent of the Federal Letter to Mr. Lassiter, Federal Reserve A, Re n loanK of Richmond, reading as follows: "In accordance with the request contained in Mr. Le"e“- 1, t s letter of November 29, 1946, the Board of Govhors approves, effective January 1,'1947, the payment °,,t4- salaries to the following members of the Federal "serve Agent's Staff at the rates indicated: Name Robert L. Shepherd Be verley P. Higgason Eagene L. Shipley T. Viesley Bagby Annual Salary Title Head Office Asst. Federal Eeserve 0,000 Agent Alternate Asst. Fed2,700 eral Reserve Agent Laltimore Branch Federal Reserve Agent's Representative 3,960 Charlotte Branch Federal Reserve Agent's Representative 3,300" Approved unanimously. Na, a Letter to Mr. Meyer, Assistant Vice President of the Fed- esetTe Bank of Chicago, reading as follolAs: "The Board of Governors approves the changes in PerL'onnel classification plan of the Federal Reserve e‘; of Chicago consistig of increases in the maximum pirw'l salaries for the positions of Watch Engineer, erilan, and Window Lasher, as submitted with your etter of November 26, 1946." the Approved unanimously. Letter to the board of directors of "The Farmers Bank of 144),4,4 (itti orle 11,0 Din7iddie, Virginia, stating that, subject to conof membership numbered 1 to 3 contained in the Board's '"tkqi the Board approves the bank's application for member- 1750 12/6/46 -14— 443 in the Federal Reserve System and for the appropriate amount 8tc'elc in the Federal Reserve Bank of Richmond. The letter also contained the following special comment: "It appears that the bank possesses certain powers vthich are not being exercised and which are not neces8arilY reuired in the conduct of a banking business, ellch as the power to guarantee the payment of bonds and Zitiller obligations. Attention is invited to the fact e't if the bank desires to exercise any powers not c%stually exercised at the time of admission to memberit will be necessary under condition of membership ellrabered 1 to obtain the permission of the Board of Gov13111Ors before exercising them. In this connection, the srrd understands that there has been no change in the tl,°13e of the corporate powers exercised by the bank since ' e date of its application for membership." Approved unanimously, for transmission through the Federal Reserve Bank of Richmond. Letter to the board of directors of the "Bank of Sheridan", 4hip Montana, stating that, subject to conditions of membernizabered 1 to 3 contained in the Board's Regulation H, the (141'ci aPProves the bank's application for membership in the Federal , 6"Ve d-Ysteni and for the appropriate amount of stock in the FedIlleserire Bank of idinneapolis. The letter also contained the following special comment: to _ "Such Bank shall increase the oz:ot less than five, the minimum 31 e of all memb.;r bniks under the 'of the Banking Act of 1933, as number of its directors number required in the provisions of section amended." 1751 -15Approved unanimously, together iAth a letter to Mr. Peyton, President of the Federal Reserve Bank of Minneapolis, reading as follows: "The Board of Governors of the Federal Reserve System „ aPproves the application of the Bank of Sheridan, Qneridan, 7 ontana, for membership in the Federal Reserve 8rtem, subject to the conditions prescribed in the en0sed letter wlAich you are requested to forward to the Oard of directors of the institution. Two copies of 81ch letter are nlso enclosed, one of which is for your fIles and the other of which you are requested to forto the Superintendent of Banks for the State of ontaha for his information. "In connectIon with condition of membership number, ek4 4, it is noted that your recommendation contem, 1 ed ' ated provision for compliance Athin a reasonable If you are satisfied that the reauired action be taken within a reasonable time after admission, t0 hemBoard will not object to the admission of the bank embership with only three directors. "Since the amount of losses estimated in the report ;1.4 examination for membershio is relatively small, the condition of membership requiring elimination of ses has not been prescribed. It is noted that such , es are to be charged off if not collected by the „year end. ir re "The special condition of membership recodimended, to;Tiring that, prior to admission, the officers and Re °Yees of the applicant shall be acceptable to the chserve Bank, has not been prescribed. However, the cle,11racter of management is a primary consideration in be erMining the acceptability of an applicant for memthrshiP and the Board has approved the application with bee Understanding that the quest on of management will resolved in a manner satisfactory to the Reserve Bank, bec.consultat;_on with the Board's Division of Examinations, dijre the enclosed letter containing the prescribed conk 1°ns of membership is transmitted to the Board of l'ectors of the applicant bank." Lett --uer to Mr. Rouse, Vice President of the Federal Leserve kik r N evi York, reading as follows: 1,52 12/6/46 —16— "This refers to your letter of November 27, 1946, Narding section 6(1) of Regulation T, which was added ,c) , the Regulation effective December 1, 1946, and re— to the acquisition of registered securities 'flmugh the exercise of certain 'rights to subscribe'. "In reply to the question presented, you are ad— dvised that exempted securities may be used to make the , eP031t required under the provision, and that for this vtlripcse they may be assigned the customary good faith ?'4-X1 value as specified in section 3(c) of the Regula— a_on. Febr, "The Board's letter (S-896; F.R.L.S. #7903.3) of Lic-17 4, 1946, to which you refer, is not affected IS ruling. It remains unchanged, being limited its application, as heretofore, to the question of against a deposit of exempted securities." Approved unanimously. Thereupon the meeting adjoirned. Secretry. Chairman.
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