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1_93 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Tuesday, February 11, 1947. The Board met in the Board Roam at 10:35 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Draper Evans Vardaman Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Chairman Smead, Director of the Division of Bank Operations Mr. Nelson, Director of the Division of Personnel Administration Mr. Townsend, Assistant General Counsel Chairman Eccles stated that Mr. Vest, General Counsel, had received a telephone call from Mr. Van Arkel, Counsel for the Hatimal Labor Relations Board, stating that the Labor Board had received a complaint from Mr. Paul R. Hutchings, Presiden t of the trice Employees International Union, that the Federal Reserve Bank Dallas had been guilty of an unfair labor practice in connecti on With the discharge of 39 employees including certain employees who 11.84 ad long service records with the Bank and who had been active 14 efforts to form a union among the Bank's employee s. He stated that Messrs. Vest and Townsend had talked by telephone with Mr. Gilbert, President of the Dallas Bank, who had informed them that cause of a surplus of staff in fiscal agency functions, the Bank 194 2/11/47 -2- recently laid off 39 employees at the head office, mostly from those functions, including one employee who had worked for the Bank for 29 years, another who had a 20 year service record, and a third /(1th a 7 year service record. Following receipt of this information, Chairman Eccles said, he had talked with Mr. Parten, Chairman of the Dallas Bank, Who said the question of discharging the employees had been fully ecnsidered, that he had questioned whether the release of these Persons would raise labor problems, especially in the case of the e41Ployees with long service records who had been active in urging he formation of a union, and that the officers of the Bank had taken the position that the three employees in question were inthat they could not be transferred to other work in the 8allicA and that their entire personnel record would justify their discharge in view of the over-staffed condition of the Bank. Chairman Eccles also said that Mr. Parten had added that he had cillestioned the advisability of the action, even under these circlulistances, that he had told Messrs. Gilbert, Gentry, and Coleman that they should be prepared to defenc, any action that might be /*(3tIght. on behalf of the employees, and that the three officers hIld stated they were entirely ready to defend their action should 811cha question be raised. 195 2/11/47 -3Chairman Eccles went on to say that Mr. Van Arkel had indi- cated by telephone that the Labor Relations Board would be willing to conduct an informal investigation with the consent of the Board and the Federal Reserve Bank of Dallas to determine whether the evidence indicated the Bank had been guilty of an unfair labor Practice in the discharge of any of the employees concerned, that if no evidence of an unfair labor practice was found the matter INould then be dropped, and that if it appeared the Bank had been guiltY of an unfair labor practice the Labor Board would then have to hold a formal hearing in the matter. Chairman Eccles stated that Mr. Gilbert had been informed by telephone of this possibility, 444 that he had said he would welcome an informal investigatio n. There was a discussion of the matter and it was the view 0f the members of the Board present that the best course would be to have the informal investigation conducted, that if the investigation should necessitate a formal hearing the entire Sys+em would be involved because of the question whether the Labor Board had jullsdiction in the matter, and that in such an event it would be 68sai7 for the Board to intervene to represent the interests Of the System. There was a general discussion of the various steps that 41-teit be taken by the Board, and question was raised whether a l'ePl ' eeentative of the Board should be sent to the Bank to develop fual • Information regarding the matter. It was the consensus, 196 2/11/47 -4- hovvever, that that would not be necessary at this time. At the conclusion of the discussion, it was agreed unanimously to authorize Mr. Townsend (1) to advise Mr. Van Arkel informally that the Board and the Dallas Bank would be glad to have the proposed informal investigation for the purpose of determining the facts in the case, and (2) to request Counsel for the Federal Reserve Bank of Dallas to send to the Board a full statement of the circumstances relating to each of the 39 employees who had been discharged. The suggestion was made that the question raised by the Dallas action be discussed at the forthcoming meeting with the Presidents and the Secretary stated that the topics of salaries ancl recent trends in collective bargaining were already on the agenda for the Presidents' Conference, and the Dallas matter un- doubtedly would be fully considered. In connection with the foregoing discussion, Mr. Smead atated that the Treasury Department had been pressing the Federal Reserve Banks to reduce fiscal agency expenses, that the volume r fiscal agency operations had declined and had resulted in a 814 ' 131 "of employees engaged in such operations, that the Treasury had . raised the question in a letter to the Federal Reserve Banks of traqsferring functions from the branches to the head offices, 6114 that it was his thought that by shifting some of the internal 17'°1‘k from the branches to the head offices much of the saVing hoped for by the Treasury could be effected without changing the 197 2/11/47 -5- extent or quality of the service rendered to the public by the b reaches. He also said that he planned to ask some of the Banks for additional information in connection with the replies they had seat to the Treasury letter so that the Board would have full in— f ormation. There was a discussion of the program followed in recent Years under which services rendered by branches of Federal Reserve Banks were increased and it was the consensus that it would be luldesirable to eliminate or curtail these services substantially. Chairman Eccles suggested, however, that nothing should be done t° Prevent the Reserve Banks effecting economies in their operations, elld that the Board must not be or seem to be in the position of elle°11raging the retention of staff or procedures which were not wareranted by the volume of work. t° the trig Chairman Eccles also referred suggestion made at the meeting of February 4, 1947, concern— the absorption of a greater portion of fiscal agency costs by the Pederal Reserve Banks, and stated that this matter would be die cussed with the Presidents when they met with the Board later thle month, after which it was contemplated the matter would be t'elriened with the Treasury Department. This procedure, he said, 114d been discussed with Mr. Sproul, President of the Federal ileeellre Bank of New York, who agreed that the matter should not bePresented to the Treasury Department prior to its consideration by the Presidents of the Reserve Banks. 198 2/11/47 Reference was then made to a wire received by Chairman Eccles from Mr. Tom K. Smith, a Class A director of the Federal Reserve Bank of St. Louis, concerning a request contained in a letter received from President Davis of that Bank under date of February 1 for approval of an additional contribution of t1,500 to the Jefferson National Memorial Association competition fund in St. Louis. Chairman Eccles stated that he discussed the matter with Mr. Smith yesterday at which time he told Mr. Smith of the consideration which the Board had given to this matter in the Past and stated that he would submit the request to the Board for clseision, but that he could make no commitment with respect to it. In this connection, Chairman Eccles rt,ad a memorandum prepared by the ,, ecretary under date of February 10, 1947, and reviewing the actions taken by the Board in connection with requests from the St 'L°11i5 Bank for authority to contribute to the Memorial funds. The S ecretary then read the letter from Mr. Davis dated February ' 1 1947, and the following draft of a proposed reply: "This refers to your letter of February 1, 1947, in -which you state that the Executive Committee of Your Bank's board of directors, at its meeting on January 29, directed you to communicate to the Board Of Governors a request that the Board reconsider its Previous action with respect to the Bank's contribution to the competition fund for the Jefferson National Expansion Memorial Association and approve a further contribution of $1,5001 which amount was disapproved in January 1946. Chairman Eccles has advised the Board of his conversation with Mr. Tom K. Smith about the same matter. 1_99 2/11/47 -7— "It is noted that the fund is now past the t200,000 mark; that the trustees are very anxious to complete it; and that since the downtown property owners are contributing most of the fund, the feeling is expressed that the Bank is not meeting its pro rata share of the cost of the improvement. "The Board has considered the request, but feels that it can not approve a further contribution by your Bank. The reasons for the Board's position are outlined In some detail in the Board's letter of May 13, 1946 (8-9111 F.R.L.S. #3189), and were also explained to you in January 1946 when the Board reluctantly agreed not to offer any objection to the contribution of 1,000, for which the Bank was in a sense already committed." Chairman Eccles stated that Mr. Smith and other directors felt the Federal Reserve Bank of St. Louis would benefit from the Increase in property values that would result from the Memorial and that the Bank was not doing its part in helpini, to make the Project a success. Chairman Eccles also said that he told Mr. 8Mith why it was felt that the Federal Reserve Banks differed from Private banks and why an appreciation in property values should 4° 'be considered in the same light as would be the case with a Privately owned bank. There was a discussion of the policy set forth in the 8°ard'5 letter dated May 13, 1946, to all Federal Reserve Banks with respect to contributions of this kind, and it was pointed °Ilt that aside from the residual interest of the Federal Governtent in the assets of the Federal Reserve Banks, it would not be Pl'acticable for the Banks to make contributions in one city in the diltriot unless they were prepared to do so for similar projects 200 2/11/47 -8- at other points in the district served by the Bank. It was also Pointed out that a number of the Presidents had indicated agreement With this position. Upon motion by Mr. Evans, unanimous approval was given to the foregoing draft of the letter to Mr. Davis. At this point Messrs. Smead, Nelson, and Townsend withdrew from the meeting and the action stated with respect to each of the matters hereinafter set forth was then taken by the Board: The minutes of actions taken by the Board of Governors of the Federal Reserve System on February 10, 1947, were approved tma nimously. Memorandum dated February 7, 1947, from Mr. Leonard, Director °I' the Division of Examinations, recommending that, effective as of the date upon which he enters upon the performance of his duties after having passed the usual physical examination, Jmes R. Boggs be appointed as an Assistant Federal Reserve Examiner, with basic 17 at the rate of .t3,021 per annum, and with official headgllarters at tashington, D. C. The memorandum also stated that it waa contemplated that Mr. Boggs would become a member of the FedReserve retirement system. By unanimous vote, Mr. James R. Boggs was appointed an examiner to examine Federal Reserve Banks, member banks of the Federal Reserve System, and corporations operating under the provisions of sections 25 and 25(a) of the Federal Reserve Act, 201 2/11/47 -9for all purposes of the Federal Reserve Act and of all other acts of Congress pertaining to examinations made by, for, or under the direction of the Board of Governors of the Federal Reserve System, and was designated as an Assistrnt Federal Reserve Examiner, with official headquarters at Washington, D. C., and with basic salary at the rate of 13,021 per annum, all effective as of the date upon which he enters upon the performance of his duties after having passed the usual physical examination. Letter to the Presidents of all the Federal Reserve Banks reading as follows: "This supersedes the Board's letter of October 17, 1934 (X-8082, F.R.L.S. #3514), and broadens the authority heretofore granted the Presidents of the Reserve Banks to approve on behalf of the Board within certain limitations, Proposed investments in bank premises submitted by State member banks under conditions of membership. "Under letter X-8082 (as amended by the Board's letter of January 22, 1937, X-9799, F.R.L.S. #3501), the Presidents were authorized, without referring the matter to the Board, to grant permission to member banks subject to former standard condition of membership numbered 8 to 'flake alterations and improvements to their banking quarters wnen the cost of such improvements would not be in excess ?f 10 per cent of the bank's capital stock and would not Increase the bank's investment in bank premises to an amount in excess of 100 per cent of the bank's capital stock. "The President of each Federal Reserve Bank is hereby authorized on behalf of the Board, whenever in judgment such action is desirable, to approve any request received from a member bank in his district, whether for original investment in bank premises or for alterations or improvements in existing bank Premises, submitted under former standard condition of membership numbered 8, or any similar condition, Provided the proposed investment will not increase bank's investment in bank premises to an amount ln excess of 100 per cent of the bank's capital stock, 202 -10"the limitation imposed by Section 24A of the Federal Reserve Act. "For your convenience, standard condition of membership numbered 8, which was prescribed for some time, is quoted below: 'Such bank shall not permit any investment in a bank building or a site for a bank building to assume such proportions as, in the judgment of the Federal Reserve Board, would endanger the bank's solvency or liquidity or would otherwise be unduly large or improper, and before any investment is made in a bank building or a site for a bank building the bank shall refer the matter to the Federal Reserve Board for consideration.' "As stated in the Board's letter X-80821 it was not contemplated that the terms of the condition would include minor alterations which are charged to expenses and not capitalized. "It is requested that the Board be advised of all Permissions granted under this authorization." Approved unanimously. Letter to Mr. Edward E. Brown, President of the Federal Advisory Council, reading as follows: "In anticipation of the meeting on March 10 and 11, the Board has been considering subjects on which it would like to have the benefit of the Council's views. We would very greatly appreciate the Council's ()Pinion with regard to the following four matters. shall undertake to state the first two in question form. , 1. Should the margin requirements prescribed by tne Board in its Regulation U for banks be lower than those prescribed in Regulation T for brokers? 2. Consumer credit has practically reached the Prewar level and probably will continue to rise. As the Council is aware, if regulation of this type of credit is to be permanent Congress will have to enact the enabling legislation. Should the Board be given some definite but regulatory authority in this field or should there be no Federal regulation of consumer credit? 203 2/11/47 -11-- "3. The Board has recommended legislation to make Permanent the authority to make direct purchases up to 5 billion dollars from the Treasury and would welcome the Council's support of this measure or an expression of the reasons for contrary views in case there is disagreement with the Board's recommendation. 4. It is expected that bank holding company legislation will be introduced at this session of Congress. The Board has discussed this subject with the Counci l and will be ,Jad to give the Council any additional .information it desires. The Board would also like to know the Council's general attitude toward the holding company legislation. "In the meantime, purely as a matter of informal, confidential information, the staff is preparing some material to outline in a general way the pros and cons With respect to the first two subjects. Copies of this background material will be available to the Council on their arrival in Washington. May I suggest that the Secretary of the Council communicate with the Secretary of the Board so that if it is desire d, he may send copies of this material to the Council's Secretary for distribution to each member of the Counci l." Approved unanimously. Letter to Mr. Williams, President of the Federal Reserve 411k of Philadelphia, reading as follows: . "The Board has considered the proposals for alterations and additions to your Bank building as outlin ed in Mr. Poorman's letter of February 1. It will interPose no objection to your undertaking the work, if authorized by the Civili an Production Administration, at a cost of approximately al7,022." Approved unanimously. Thereupon the meeting a 4 Secretary. Chairman.
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