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Q e•"•:14`) Lt._, I Minutes of actions taken by the Board of Governors of the Pederal Reserve System on Thursday, December 8, 1949. The Board nlet in the Board Room at 2:40 p.m. PRESENT: Mr. Mr. Mr. Mr. McCabe, Chairman Szymczak Draper Vardaman Carpenter, Secretary Sherman, Assistant Secretary Corkhum, Minutes Clerk Morrill, Special Adviser Thurston, Assistant to the Board Leonard, Director, Division of Bank Operations Mr. Vest, General Counsel Mr. Millard, Director, Division of Examinations Mr. Smith, Special Counsel Mr. Mr. Mr. Mr. Mr. Mr. Mr. Vardaman stated that he had asked that Mr. Smith be 14ellt at this meeting for the purpose of informing the Board of the Procedure in the Clayton Act proceeding against Transamerica e(:1 .1)1'ation, and at his request Mr. Smith explained the procedure hieh it would be necessary to follow in accordance with the Board's 1114e8 of Procedure when the case had reached a stage where the 11412.1g. had been completed and the Hearing Officer had prepared hiz I'ecommended decision. Mr. Smith referred to the fact that 4111 r the Board's rules Counsel for each party could file exceptions to the recommended decision or to the admission or exclusion of and briefs in connection therewith, and that it was likely that slIch exceptions would be very numerous. He pointed out that erellment regarding the points raised could be permitted by the 611 ' 73 12/8/49 -2- 11°4rd and that, after the matter was submitted to the Board in this way, a considerable period of time, possibly several months, votad be necessary for the staff to review the entire matter and ")4111t anY desired comments or recommendations to the Board. He 44° eXPlained the possibility that, in the event the Board should reach the conclusion that evidence excluded on an important point have been admitted, it might be necessary to remand the cttse to the Hearing Officer for the admission of such evidence. Following Mr. Smith's statement, there was a brief dis°11 of the matter and it was understood that the specific procetittr e to be followed would depend upon developments, some of which hot be ascertained at this time. Mr. Vardaman then stated that in a recent conversation with 14. M. Giannini, President, Bank of America National Trust and l'es Association, San Francisco, the latter said that in an 'r conference he had been given to understand by Chairman .be that the only way Transamerica Corporation, Bank of America kltio 1141 Trust and Savings Association, or any bank connected with the rantamerica group could communicate with the Board was through the to Solicitor. tiler was He also said that he told Mr. Giannini that no fixed channel through which he had to communicate with Vardaman), that Mr. Giannini had the legal right to make 184 1VEV49 _0_ 41VProposal to him as a member of the Board that he wished to 4114) that upon receipt of such communication, he would turn it °Irer to the Board to be handled within the discretion of the Board, bIlt that Mr. Giannini did not need to feel that before talking a member of the Board he would have to talk with Mr. Townsend or exiYorle else. Mr. Szymczak stated that Mr. Giannini came in to see him esdaY of this week after talking with Chairman McCabe, the 6.11'(3tritment having been arranged while Mr. Giannini was in Chairman Ilhe's office. He also said that, in reporting his talk with the °heti rhin Mr. Giannini made it clear he was not "raising a white re ' but since it would take so long to complete the proceeding 11RetitIst Transamerica and was so expensive to the Corporation and the top A -1\4/ and inasmuch as Transamerica had disposed of approximately hear °f its holdings of the stock of Bank of America National Trust s avings Association, he thought some disposition of the case he Made, but that he had come away from his talk with Chairman kecv ue with the impression that if there was anything to discuss along thie 4-111s it would have to be taken up with the Board's Solicitor. s 4Yraczak added that Mr. Giannini also raised the question whether the 13 °all might change the position it had taken with the Office of the Co mPtroller of the Currency that during the Clayton Act proceeding the. .c)frice should not permit the conversion of Transamerica owned 1875 12/8/49 baro, -4- into branches of Bank of America, and that he (Mr. Szymczak) had responded that he could not discuss any phase of the case. Mr. Draper stated that he had had no communication of any from Mr. Giannini. Chairman McCabe then made substantially the following state- My office received a call from Mr. Giannini's local °trice on Monday of this week asking for an appointment. I was very busy on Monday and could not see him then and an appointment was made for him for 3:00 p.m. on Tuesday, December 6. During the first twenty minutes the conversation was ?fl a very broad basis. We talked of the Douglas Committee flearings, of my philosophy on bigness and monopoly, and of v4riou6 other general subjects. The conversation was on verY friendly basis. I told him I had discussed with Stewart, Counsel for Transamerica, before the hearing 14 the Clayton Act proceeding commenced, my philosophy 8.bout the responsibility of the leaders in private life arid industry. After about twenty minutes, Mr. Giannini said he 'juld like to talk about the applications pending before bhe Comptroller of the Currency for branching a number of He said that on the advice of the Comptroller, he , 1 ,s. 4 au- withdrawn his letter of September 20, 1949, suggesting " c°4fere11ce between counsel for the Comptroller, the and Transamerica Corporation, but that he was still hered by the question because he did not want to stop or ordinary activities of Transamerica because of the e.!Yto4 Act proceeding. I said that in regard to a speile thing of that kind, my advice to him would be to ti. cuss it with the Board's Solicitor, Mr. Townsend. I t,744 him I could not discuss the hearing with him,that "e branching of Transamerica owned banks involved a legal lestion, and that I would advise him to discuss that quesit°11 with Mr. Townsend who was the best informed person on Mr. Giannini questioned whether Mr. Townsend would ''ve unbiased consideration to such a matter and I told Z 1876 12/8/49 -- him that I wanted to make one thing clear -- that I had seen Mr. Townsend in operation, both as an advocate and in a judicial capacity, and had found he was very fair minded and judicial minded. I then said to Mr. Giannini could not urge him too strongly to follow what I felt in my mind was the proper procedure. He brought up the building-up of Transamerica Corporation and Bank of America by his father, and the question that had been raised whether he, as his father's successor, would adopt any different policies. He said he did not want me to think that his father and he differed in philosophy, nor did he want us to feel that they were scared about this case. I said that the thing that I wanted to drive home with him was that he was going to get a fair hearing when he came before the Board, that there was nothlag punitive about the Clayton Act proceeding, that it would be considered completely on its merits, and that I did not believe there was a Board member that had his laird made up on it. I told him again that I could not discuss the case with him. Finally, he worked around again to the branches, stating that the branching of the banks would not affect the case. I said I could not discuss that with him and ! hat my suggestion was that he go to the Board's Solicitor. gs then brought up the letter to the Comptroller again and his thought was that their counsel and that of the (=l1QPtroller and the Board could get together. I said "You have asked for my opinion and I am saying to YO my advice to you is to follow my suggestion". I also flid, "You have never asked for an appointment with me Qhat I have rejected, and so far as our personal relations ,,ere /. concerned, we would maintain them on a friendly basis". e said he appreciated that and then he brought this quesmi ac/n of branches up again. I said, "I have advised you, , c 110/ what I think is your proper procedure". He then ' llggested that I talk it over with the Board and write him 184. letter. I told him that my advice was that if he was in ,”hington sometime in the future he come in to see me and 'flat if there was any change in the point of view I had exeesed, I would then let him know, but I did not say I would take the matter up with the Board. VoUld1 gathered from the language he used that he felt it be desirable if some way could be found to settle the case. I got by inference from what he said that he Z 1877 ,2/8/49 -6- would like to settle it. I said that I understood his Position very well and that I understood one of his directors had already called to see Mr. Townsend which I thought was all right. After reporting the foregoing discussion, Chairman McCabe 84:ted that he would like to have a clear understanding as to 141Ett 8 —ould be said if Mr. Giannini or other representatives of Th— merica came back again. He also suggested that the Board u c hannel through one person all contacts with representatives or ransamerica having to do with the Clayton Act proceeding. Mr. Vardaman stated that he could not agree with that proeltlire if the Board's representative was the Solicitor. Chairman McCabe then suggested that the contacts be channeled thr0 Ugh one member of the Board and Mr. Vardaman stated that he agree to that procedure. Following a discussion, upon motion by Mr. Szymczak, it was agreed unanimously that if Mr. Giannini or other representative of his organization came to lashington to see a member of the Board or its staff on a matter relating to the Clayton Act proceeding, they would be referred to Chairman McCabe. Question was then raised as to what the Board's position be if Mr. Giannini again requested that the Board release the her of the Currency from the position he had taken at the 13°Ettclt 8 request that he would not approve, during the Clayton Act Nee e41.1143, applications for the conversion of Transamerica owned 12/8/49 blItlks into branches. Chairman. McCabe stated that he would still feel that the beet Procedure would be for Mr. Giannini to take the matter up %nth` the Board's Solicitor. In the ensuing discussion the members present agreed that the Board could not change the position that it had taken on this point, and Messrs. Vest and Smith were requested to prepare for consideration by the Board a draft of statement which the Chairman might use if Mr. Giaanini should bring the question up again. There was also a discussion of what Chairman McCabe would 841 14 the event Mr. Giannini or any other representative of TransCorporation should present some other proposal relating to t4 eclaYton Act proceeding,and it was the consensus that the 441 11/411 should listen to the representative's presentation rui thet. 1111:4g the matter before the Board for determination of the 40c eallre to be followed in the consideration of the proposal. HowEtt to15051, Chairuan McCabe's suggestion no action was taken in this c>11 with the understanding that Mr. Morrill would report to .44:4 s the e,14, 114.4 discussion at this meeting and the consensus of the the Board as stated immediately above and that if Mr. to objection it would be approved at a subsequent meeting BOe-rd for the guidance of the Chairman n any future discusith Transamerica representatives 12/8/49 -8- Mr. Vardaman stated that his opposition to referring to the t ' c ard's Lolicitor any proposal for settlement of the Clayton Act p roceeding which might be made by representatives of Transel4erice. Corporation was based on his understanding that Mr. Evans ' e rl'a the - Q olicitor had both stated at a formal meeting of the Board that th --eY hoped the Board would not consider any compromise settlement of the case, but that the case would be prosecuted to the litter end because of the principles involved and the precedents to be es tablished. He felt, therefore, that because of the position they had taken, Mr. Evans and Mr. Townsend were not the 11'()Perraen to have the respondents sent to to discuss a compromise, 11(1 he added that if this were not correct, he would like to have Ills'Evaris so indicate in the record. llys Note: When Governor Evans saw Governor 1.i.S an ruxdamts foregoing statement in the Minutes, he , equested that the following statement be inserted in 'rder to clarify the record: At the Board meeting on November 4, 1949, I discuss , ed. the Transamerica proceedings) and the Secretary's ePort of my statement at that meeting is both concise ' 4a accurate. As that statement indicates, I made a aneral report to the Board upon the proceedings to date c;'' discussed the probable future length of the prot,eding. In doing so, I called the attention of the .Co ird to the two fundamental issues which seemed to me th have emerged as the principal issues in the case, c, °ee being the issue of whether banking is interstate b'llIMerce and whether Transamerica's expnnsion in the aliking field had resulted in a tendency to monopoly. Z 1880 -9In thus reporting to the Board at the November meeting, I was not taking the position and it is not V Position that a satisfactory settlement of the Transamerica case might not be obtained. I have always recognized the possibility of a settlement. Most cases °T this kind offer that possibility. In fact, I have ueen aware for some time that overtures have been Made on behalf of Transamerica looking towards a possible settlement. The only fault which I have found with such overtures has been the apparent desire on the part °f those making them to avoid doing so in the customary Itlid proper manner. So far as my attitude concerning a settlement is .c,„°11cerned, it may be stated very simply. The Board's 111,undamental responsibility in this case is to the public. °r almost ten years the Board, along with other agencies 1 the Government, has questioned whether the Transamerica 7 k expansion policy is in the public interest. The 4 legations in the complaint are premised upon the Board's ' iPinion that, if the allegations were proven after hearsa of the case, they would justify the issuance of a eorrective order under the Clayton Act. It is my view t1 Itt any settlement of this case should take full cog11? of the issues of fact and law which have been veloped in the course of the hearings. In my judgment, 2!)-Y by such a settlement will the public interest be equately protected. n As for the procedural method of obtaining such a set+wlement, it is my opinion that nothing short of a consent decree entered in a Federal court would offer a effective means for carrying out the Board's ,!sPousibility. Many cases instituted by the Department 'J Justice under the anti-trust laws are settled in arlis manner. Experience has amply demonstrated that sCreements which do not have the force of judicial celletion are not a satisfactory method of settling such 4!es. A consent decree, such as that which the Board 'ained in the Chereton case under Regulation IN, would, MY judgment, be the most logical and effective means carrying out an agreement with Transamerica. 4 1.881 -10So far as Governor Vardaman's reference to Mr. m 14:c_nlneend is concerned, Mr. Townsend advises me that he "48 on several occasions discussed the possibilities °f a settlement; that he has taken the position that a Bettlement of the case was entirely possible; and that ne and Chairman McCabe, with whom he discussed the Matter, were in complete agreement that any authentic (3ffer of settlement, through proper channels, should receive prompt and sympathetic consideration. t Mr. Townsend also advises me that shortly before ,? conclusion of the Christmas recess of the hearings, . Wallace Mein, a director of Bank of America N.T. & ,*A., called upon him at the Board's offices and offered 40 help in any way possible to bring about such a settlement. When Mr. Mein stated to Mr. Townsend that he, Mr. , e_14, did not have authority to represent Transamerica, 'r. Townsend suggested that Mr. Mein convey to Transerica officials the suggestion that a formal proposal 'td4 settlement would receive the very serious considerau!°11 of the Board. Mr. Townsend informs me that Mr. .7 not again been in touch with him regarding this t tlx1 7 n Chairman McCabe suggested that a discussion of this matter be "erred until Mr. Evans and Mr. Townsend returned to Washington le.te r this month. At this point Mr. Smith withdrew and Mr. Eccles, Mr. Nelson, biree tc11 'of the Division of Personnel Administration, and Mr. Daniels, al Assistant in the Division of Bank Operations, came into ttie bleeting. Reference was made to a memorandum prepared by Mr. Daniels Ikler pis tht Itte of December 7, 1949, with respect to reserves for contin- (3f the Federal Reserve Banks, a matter to be discussed with re84 -Lu.ents when they meet with the Board on Wednesday, December 1.8( -11The memorandum presented background information conc81110.kng the additions to such reserves and raised the following 9314tion5 in connection therewith: (1) Should the deductions %1111oh have been made each quarter since June 1948 before comkting interest payments to the Treasury on Federal Reserve notes be continued? (2) Should the $40,000,000 set aside from the 4.111i1g5 this year be restored to earnings and thus be paid in 111"t to the Treasury and in part transferred to surplus of the Petie_ 48.1 Reserve Banks? (3) Is there continuing need for the l'etelltion in reserves for contingencies of the $140,000,000 trans'vici to that account in 1948? In the ensuing discussion, reference was made to the clis telegram to the Presidents of all Federal Reserve Banks kted N ovember 2), 1949, expressing the view that there was no rzeed. to make a deduction from earnings for transfer to reserve rc) cont ingencies covering the fourth quarter of this year and tllee as a discussion of the question whether all or any part of the $40 Million set aside from Reserve Bank earnings thus far during 1101.11d be restored to earnings. It was the consensus that 811321 should be transferred to reserves for contingencies at the er4 of the year and that the matter should be discussed with he 11*esidents at the meeting on December 14. 01* the third question referred to above. There was no discus- 12/8/49 -12Mr. Daniels withdrew at this point. Reference was then made to a memorandum dated December 8, 1949, from Mr. Thomas, Economic Adviser to the Board and Mr. Millard, tilsector of the Division of Examinations, with respect to quarterly l'el*Its submitted by the Federal Reserve Banks pursuant to the Board's letter of January 27, 1947, (S-953), which the Presidents' Conference "ite the meeting in November of this year requested be discussed at next joint meeting of the Board and the Presidents. The memo- 1.1/4141 contained the following recommendations: (1) That the form 81115' content of the quarterly reports be simplified and that only the 1„, "ghlighte of developments in each district be reported hence(Possibly a maximum of two or three pages). (2) That the -on of gathering facts and opinions revert to the bank examiners --- and public relations officers; that research staffs function c411-tr 4 on a consultative basis and as participants in any round table `48sions held for the purpose of summarizing the information cqlected. (3) That the practice of submitting detailed or analytical ue8t1°1:18 from the Board in connection with this report be discontinued, 811eh qUestions as may be submitted from time to time being limited e°13e and nature to the original concept of the report; inquiries °114e0ific details or on matters which might require extensive '14161481s to be transmitted by separate letters as the occasion demands. gitela Messrs. Szymczak and Vardaman withdrew during the foregoing ssion. Mr. Carpenter stated that these recommendations substantially 1S84 12/V49 %.e -13- -n accord with the suggestions made by the Presidents' Con- The foregoing recommendations were approved unanimously. Reference was made to a memorandum from the Personnel C(3rulilittee dated November 16, 1949, recommending that J. R. Van Posseli formerly Assistant Director of the Division of Bank Operations 114° retired on December 31, 1948, and who was retained as a consultant that Division during the year 1949, be appointed as a consultant f°1' all additional period of one year on a part-time basis beginning 4411arY 1, 19)0, at a fee of $1,200 per annum, payable on a bi- basis. The memorandum had been circulated among the members c)f Board before Mr. Evans left for the west Coast and he and III% V ardaman had indicated that they did not wish to vote to approve the emorandum. Following a discussion, upon motion by Mr. Draper, it was agreed that Mr. Van Fossen would be retained for the year 19)0 under the terms outlined in the memorandum from the Personnel Committee, with the understanding that the Board's action was based on the unusual circumstances involved and would in no way establish a precedent for any case that might arise in the future. Mr. Vardaman voted "no" on this motion. At this point Messrs. Leonard, Vest, Nelson, and Millard ' l e14, and the action stated with respect to each of the matters 11 1*e4 'Ilafter referred to was taken by the Board: 1885 L?N49 Minutes of actions taken by the Board of Governors of the ?ecier8-1 Reserve System on December Memorandum dated December 7, 1949, were approved unanimously. 7, 1949, from Mr. Bethea, Di- of the Division of Administrative Services, recommending that 4., 611e resignation of Miss Eleanor Simmonds, a stenographer in that -ulvision be accepted to be effective, in accordance with her lest, at the close of business December 22, 1949. Approved unanimously. Memorandum dated December 6, 1949, from Mr. Leonard, Di- Itel" of the Division of Bank Operations, recommending an increase 111 t he basic salary of Mrs. Charlotte A. Kelly a statistical clerk 111 t. —' IA-vision, from $2,650 to $2,730 per annum, effective December ' 1, 1949. Approved unanimously. Letter to The Honorable, The Comptroller of the Currency, S1.7 Department, reading as follows: "It is respectfully requested that you place an '31%1er with the Bureau of Engraving and Printing supplethe order of June 20, 1949, for printing Federal eserve notes of the Federal Reserve Bank of St. Louis 111 the amount and denomination stated below: Number of DenomiAmount sheets nation 800,000" 18,000 $)0 Approved Secretary.
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