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To: Members of the Board From: Office of the Secretary t Attached is a copy of the minutes of the meeting of the _24rd of Governors of the Federal Reserve System with the Presidents vI the Federal Reserve Banks held on February 110 1958. It is not proposed to include a statement with respect to anv 4 of the entries in this set of minutes in the record of policy ?;etions required to be maintained pursuant to section 10 of the rederal Reserve Act. Should you have any question with regard to the minutes, it %I:118-1 be appreciated if you will advise the Secretary's Office. Otherele, if you were present at the meeting, please initial in column A to indicate that you approve the minutes. If you were not 13::°,81:z1% tellm a . initial in column B below to indicate that you have 1 A Chm. Go,. Gov. Martin Szymczak Vardaman 1/ Gov. Mills Gov. Gov. Robertson Balderston Gov. eve-77,) Shepardson a ccordance with Governor Shepardson's memorandum of March 8, tiaII . Iese minutes are not being sent to Governor Vardaman for 1T 503 A joint meeting of the Board of Governors of the Federal Reserve System and the Presidents of the Federal Reserve Banks was held at the Federal Reserve Building in Washington, D. C., on Tuesday, February 11, 1958, at 2:03 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak 1/ Mills Robertson Shepardson Mr. Carpenter, Secretary Mr. Kenyon, Assistant Secretary Messrs. Erickson, Hayes, Williams, Fulton, Leach, Bryan, Allen, Johns, Deming, Leedy, Irons, and Mangels, Presidents of the Federal Aeserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San 2rancisco, respectively 3/ Mr. Boysen, Secretary of the Conference of ?residents of the Federal Reserve Banks Study of small business financing. Pursuant to a suggestion whiC h had been made by the Presidents' Conference, Mr. Young, Miss Burrs andurKoch of the Board's Division of Research and Statistics attended this Pal'u c)f the meeting for the purpose ofmaidnga progress report on the .4. -kiudY of small business financing. Miss Burr summarized the reasons underlying the decision to make the ud_ , stY the scope of the survey program, the schedule for completion Of the 11°rk. first two parts of the program, and the current status of the Mr. Koch then discussed the processing of data from the current survey of business loans, conducted in relation to the small business messrs. Szymczak, Fulton, and Williams withdrew from the meeting at the points indicated in the minutes. 21.11/5:i 504 -2- financing study, and went on to describe plans for carrying out the third :part of the study, consisting of a survey of borrowers, including both corporations and unincorporated businesses. He concluded uith the observation that the study as a whole could be regarded as Progressing armroximately on schedule. ti'ollowing a discussion on the basis of the report by iss tlurr and Mr. 'Aoch, Chairman Aartin referred to the bills introduced in the House and Senate y Congresar.an Patlan and Senator Johnson, rc's:)ectively, which would authorize the estaLlishnent of a sstem of businrss capitol banl:s and said that, although the Board had not Yet had occasion to consider those bills, he would ask Mr. young for his tentative views because of the reference to the bills in the seventh -tu.c,ra of the statement of tonics distributed by the Presidents' Conference for d iscussion at this joint meeting. Mr. young first referred to the interest expressed on a recent °ccesion by members of the Senate Banking and Currency Committee in hay' inr the Board's views on the small business situation by the first Of even thouLh i 'formation from the small business financing ntu Y micht not be available by that time, in order that the Committee rrjint ore Pare for consideration of small business legislation. He then discussed : urincipal features of the Johnson and i'iltAan bills, tbe natJr,- the problems involved in formulating a position with respect to such 1°Eislation, and modifying suggestions that might be considered which 11°u1d be in the tone of constructive comments and thus avoid forcing thr, oystem into a defensive position. r. l'ons then stated that on the basis of a rather hasty review and dIscussion of the Johnson and Pitman bills, the Presidents had 2/11/58 505 -3- certain preliminary views which it seemed desirable to pass on to the Board at this time. First, although the System favored the repeal of section 13b of the Federal Reserve Act, there was some feeling among the Presidents about circumventing the Treasury in the disposition of section 13b surplus. Second, it was the view of the Presidents that careful consideration should be given to the question of transferring t120 million from the section 7 surplus accounts of the Reserve Banks direct to the small business capital banks. Third, considerable doubt had been expressed about the appropriateness of providing the capital banks space in the Reserve Bank buildings free of rental charges. Irons Mr. concluded by saying that the Conference Subcommittee on Legis- lati°n was going forward with a study of the two bills and would submit a report shortly. Ensuing comments were directed principally to the provisions of the Johnson and Patman bills which would require that space for the ofof the capital banks be made available by the Reserve Banks. It was suggested, among other things, that confusion on the part of the Public might be created by the joint occupancy, that some of the Banks d° not have space available beyond that required for their own operations, that the whole matter of rentals charged to other Government agencies vow, -1.-u be brought into question, that there would be a question of the Public identifying the capital banks as being a part of or associated With the Reserve Banks, and that providing space without charge would Obscure the actual costs of the capital bank system. Some of the Presidents made it clear that their views on the space question and its P°esible ramifications did not indicate that they were necessarily 2/11/58 506 resistant to the whole idea of the proposed capital banks; however, Mr. Erickson expressed the view, particularly on the basis of the experience of the development corporations in the New England States, that the possibility of obtaining private capital for the financing needs of small business concerns should be explored fully. During the foregoing discussion Governor Szymczak withdrew from the meeting. Membership dues and contributions. Mr. Shepardson reviewed the provisions of the letter sent by the Board under date of February 6, 1958, to the Chairmen and Presidents of all Federal Reserve Banks concerning the basis that should govern Reserve Bank expenditures for membership dues and contributions and discussed why the Board had coneluded that this approach was preferable to attempting to spell out Particular types of expenditures that were appropriate or inappropriate. He observed that discussions in which the Chairmen and Presidents had Participated with the Board appeared to have clarified greatly the Principles involved and said that he understood steps were already being taken within the feserve Banks in accordance with such principles. Mr. Shepardson then noted that the need for exercise of discretion in such matters was pinpointed by the remarks of Congressman Patman before the House Banking and Currency Committee on February 7, 1958) and that copies of the transcript of Mr. Patmanis remarks had been WaS made available to the Presidents while the Presidents' Conference in session yesterday. In further discussion Chairman Martin indicated that the Board would want to consider making a reply to Congressman Patman's criticisms 2/11/58 507 -5- at some point and that it would be desirable for each President to review the testimony as far as it affected his own Bank in order to prepare for such response as might be decided upon. Governor Robertson added that it would be helpful if the Board could have the benefit of each President's views after study of Mr. Patman's criticisms in the light of the Reserve Bank's records. In this connection it was noted that Mr. Patman apparently intended to insert certain material in the record and the Presidents were advised that copies of the complete record would be sent to them when it became available. Question was raised whether the Board's letter of February 6, 1958, superseded previous communications on the subject of membership dues and contributions, and the response was that the letter should be read in conjunction with Item #3187 of the Federal Reserve Loose-Leaf Service. Reserve requirements. Before this meeting there had been distributed to the Presidents copies of a memorandum prepared by Mr. Thomas, Economic Adviser to the Board, entitled "Program for Revision Of Reserve Requirements, ' which discussed proposals that the Board was considering for presentation to the Congress giving the Board authority to make alterations in the existing system of reserve requirements and also to change the level of total requirements in a manner intended to maintain equitable relationships among banks and avoid conflict with the aims of monetary policy. Distributed with the memorandum was draft legislation which would carry those proposals into effect. 4ieflY, the draft legislation would first permit member banks, subject to such terms and limitations as the Board might prescribe, to 2/11/58 -6- 508 count as required reserves all or part of currency and coin in vault or on hand. The second part of the legislation was in alternative forms. The first alternative would provide that a member bank in a reserve City might maintain the reserves required for country banks and that a central reserve city bank might maintain the reserves snecified for either a reserve city or country bank upon receiving permission from the Board, either in individual cases or under regulations of the Board, on such basis as the Board might deem reasonable and appropriate in view of the character of business transacted by the member bank; and for this purpose the Board might take into account the volume, composition or activity of the deposits of a bank, its location, or other relevant factors. The second alternative would provide in effect some- what greater latitude for Board action since the Board could require, ill the light of the same standard as under the first alternative, that a member bank maintain any level of reserve balances within the existranges on demand deposits down to the lower limit of the present "untry bank requirements. A third provision of the draft legislation llould allow the Board, within the maximum and minimum limitations specified for time deposits, to fix lower requirements for savings deposits than for other time deposits. At the beginning of the discussion of this matter, for which 11r. Thomas was called into the room, Chairman Martin reviewed the proP"ed legislation, including the alternatives set forth therein. He then stated that the Board would appreciate having the Presidents' tentative views. Pursuant to this request, each President in turn made a statement. 1, ,j.1. on was obligedto leave the meeting before having an oPoortunity to express his views. 2/11/58 Nse 09 _7- expressions revealed a unanimity of opinion in favor of an approach such as contemplated by the draft legislation. The principal reservations, e:0101. essed subject to more thorough examination of the implications of the Ngested legislation, related to the extent of the administrative diffiiss that would be created for the Board in determining whether to grant permission to banks to carry lower reserve requirements within the allth°ritY which would be permitted by the legislation. While none of the -luents appeared to feel that these problems would be insurmountable, sorrle were inclined to feel that they might be severe. Others, however, sug?stscl that the magnitude of the administrative burden could easily be eXa ggerated. With reference to the alternative forms of draft legislation, Mr. Mills summarized at the request of the Presidents the arguments which rrlight be made for legislation along the lines of the first alternative Mr. Robertson reviewed the points tending to favor the second alter-. 4tive* While there were shadings of opinion, a majority of the Presi- (lents who expressed a tentative choice favored the first alternative because, in SUfluriary they felt that legislation phrased in such a manner 11041d find more ready acceptance within the banking profession and per— Lap5 the Congress, that the administrative problems would be less severe, 11'1 that 4.egislation in this form would be sufficient to permit the Board to A ''eal re asonably well with the situation of individual banks, even in :eit; 'Y like Chicago. Those Presidents inclined to favor the second alter- ' agreed generally with Mr. Robertson that there was much to be said th e greater flexibility of action which would be permitted thereunder. 510 2/11/58 The Presidents were unanimously in favor of the vault cash proposal. On the matter of obtaining legislation which would permit a differential between reserve requirements applicable to savings and to other time deposits, there was some difference of opinion. A num- ber of the Presidents indicated that the problem was not of such magnitude in their own districts as to make the question one of great significance. On the other hand, several stated that they would see no objection to permissive legislation of the kind envisaged by the draft legislation if the problem elsewhere, particularly in New York City, was substantial enough to seem to warrant a distinction between savings and other time deposits for reserve requirement purposes since the theoretical justification for such a distinction was quite apparent. The discussion concluded with a statement by Chairman Martin that the Board would appreciate having the Presidents' further comments as promptly as possible, for it had scheduled a meeting with representatives of the American Bankers Association for Friday, February 21, and might move rather quickly thereafter to submit proposed legislation to the Congress. Before this meeting the Presidents had submitted a memorandum listing tonics that they would like to discuss with the Board. topics, The the statement of the Presidents with respect to each, and the discussion at this meeting were as follows: 1. Arrangement for advising the Board of "straws in the 17/Inairraormation develo ed at directors' meetings relating to current economic situation. The Confer- , ence had before it the Board's letter of January 25,1/ 1958, asking that the Presidents discuss whether the 1/ Should have read January 23 2/11/58 -9- 511 existing procedure, established in response to Board's letter of March 19, 1956, or some other arrangement would be most effective in giving the members of the Board the benefit of comments of Reserve Bank directors with respect to experiences, conversations, or observations either in their awn business or otherwise which might indicate that the current over-all economic situation was different from what the available statistics showed it to be. The Presidents were of the view that a preferable procedure for passing on to the Board of Governors information of the kind contemplated would be meetings of the Federal Open Market Committee, in line with the suggestion made in the Board's letter on the subject. In commenting, Chairman Leedy pointed out that the procedure considered preferable by the Conference would permit all of the Presidents to have the benefit of such information as might be reported from the various Banks. Chairman Martin then stated that the Board would give further consideration to the matter and advise the Presidents of its conclusions. 2. Safekeeping of securities by Federal Reserve Banks. Mr. Fulton, Chairman of the Committee on Miscellaneous Operations, presented for consideration by the Conference a report from the Subcommittee on Cash, Leased Wire and Sundry Operations dated January 23, 1958, dealing with various matters assigned to the Subcommittee for review, including the results of a study of current safekeeping practices of the Reserve Banks, which was conducted following questions raised in the Board's letters of September 6 and September 19, 1957, concerning the safekeeping function. With respect to the safekeeping of government securities awned by State and local governments, Which was the subject of the Board's letter dated September 6, the Conference noted that this topic was considered by the Presidents in June 1943, at which time the following agreement was reached: -10- 512 "Agreed that, while the members of the meeting were in sympathy with the desirability of encouraging the investment of state and municipal funds in government securities, it would be unwise to adopt a policy of extending safekeeping to all state and local governments because it might overload the Reserve Banks' vault facilities, and that, while the banks should be free to extend the service where it appeared to be desirable, there should be no general invitation to states and municipalities to deposit their securities for safekeeping," The topic was again considered by the Presidents in 1946 at which time the view was expressed that . . in large part, the service had been a war measure, and there was a general inclination to terminate the facilities where this could be done conveniently. Some Presidents expressed a desire to continue the service, and it was felt, therefore, that pressure should not be used to close out present accounts but that, where practicable, the opening of new accounts should be discouraged." The Conference at its current meeting reaffirmed the position taken in 1943 and 1946, and agreed also with the position originally taken by the Board in this matter when the Board said that it would interpose no objection to providing safekeeping facilities for government securities owned by states and municipalities. The Conference gave consideration also to the safekeeping of securities pledged by member banks as collateral to deposits of public funds, as requested in the Board's letter of September 19, 1957. Here, too, the Conference found itself in continuing agreement with the Board's letter of September 29, 1939, to the effect that this is a valuable service both to member banks and public officials and should be continued. The Conference accepted the report of the subcommittee with the understanding that each bank would review its over-all safekeeping practices in the light of the material presented in the report. After Chairman Leedy had reviewed the position taken by the C°nference, Mr. Johns noted that he was in disagreement with the 2/11/58 -11- majority view. 513 He said that he found himself quite uncomfortable about deciding questions of this kind on the basis of performing a service for s omebody. In his opinion the question of the authority of the Reserve Banks to perform certain functions under the statutes probably was not related to the question of service. Chairman Martin stated to Mr. Johns that the Board would bear his comments in mind when considering the subcommittee report which was accepted by the majority of the Presidents. 3. Study of the Federal Funds Market. In response to action taken at the May 1956 meeting of the Conference, which was subsequently approved by the Board, a special committee composed of representatives of the Reserve Banks and the Board was appointed to undertake a study of arrangements for, and the uses and volume of operations in Federal funds. The Conference received a report dated December 1957 presenting the findings of the committee's study and the committee's conclusions and recommendations. The Conference expressed the opinion that the report is of such merit, and there is so little existing material on the Federal Funds market, that the report Should be edited with the view to publication. The Conference also expressed the opinion that the studies referred to in recommendations numbered 1, 3, and 6 on page 23 of Part I "Summary and Recommendations" should be pursued with the view to reporting back to the Conference with respect to the manner of going forward with the studies recommended, but that studies contemplated in recommendations 2, 4, and 5 should wait until .reports under recommendations 1, 3, and 6 are available. It was also understood that the special committee's study would be furnished the Open Market Committee as a progress report in line with the understanding between the Conference and the Committee when the study was undertaken. Mr. Bryan made a brief statement on the subject in which he reed to the quality of the report, the recommendations therein, and 2/11/58 51,1 -12- the reaction of the Presidents' Conference to these recommendations. It was understood that the recommendations would be considered by the Board. L. Research committees of the Federal Reserve System. At the September 1956 meeting of the Conference and at the joint meeting of the Board and the Presidents held in conjunction therewith, a discussion was held with respect to the need for reviewing the existing mechanism for clearing research projects. In further pursuance of this matter, a review has been conducted of the history of the research organization in the System and the evolution of the existing committee mechanism. A document has been prepared on this subject, which was received by the Presidents, and Will be made available to the Board. Mr. Bryan sumarized developments since the problems involved in the clearing of research projects were mentioned in September 1956 ana commended to the Board's attention the interesting document which had been prepared on the history of the research organization in the SYstem, The document concluded, he said, with the suggestion for a fresh look at the research mechanism and the Conference expressed a great deal of sympathy with that suggestion. It was the consensus of the Conference that the present mechanism for clearing research projecte was excessively cumbersome and that some simpler structure of c°mmittees would be desirable. As a first step therefore, the docu- ment which he mentioned was being transmitted to the Board for consi deration. 5. Policy with res ect to distribution of Federal Reserve Bulletin and other System publications. The Conference gave consideration to the basis upon which the Federal Reserve Bulletin and other System publications are made available to member banks and others. In the light of information given in the Board's letter of January 24, 1958, supplemented by comments of Governor Shepardson before the Conference, the Conference concurred in the proposed plan of discontinuing the 2/11/58 515 -13present policy of furnishing additional free copies of the Bulletin to branches of member banks, and adopting a policy of providing one copy without charge to all member banks, with a charge of 32.00 per annual subscription to be made for any additional copies desired by member banks. The Presidents also were in agreement that if the proposed policy were adopted there would be few instances which would justify the Reserve Banks to furnish free copies to member or nonmember banks in their respective districts. The Presidents were also in agreement that it is desirable to furnish the Bulletin and other System publications free to former directors who request them. Following a statement by Chairman Leedy, Mr. Shepardson re- ferred to a question which had arisen during his discussion with the Presidents' Conference concerning possible distribution by the Board to Reserve Bank directors of items such as speeches, statements before Con gressional committees, and similar items. He said it was the feeling Within the Board that it would be preferable to continue the procedure according to which the Board sends such items to the Federal Reserve BanIcs with the understanding that the respective Presidents will make the decision regarding distribution to the directors. In response to a question by Mr. Allen, Chairman Martin indicated that the Presidents would be informed when the new policy for dist ribution of the Federal Reserve Bulletin was placed in effect. 6. Contributions by Reserve Banks to NABAC Research Institute. The Federal Reserve System has been asked to lend financial support to NABAC Research Institute, a division of the National Association of Bank Auditors and Comptrollers. The initial solicitation was made to members of the Board's staff who suggested that the matter be taken up through NABAC headquarters in Chicago with President Allen of the Chicago Reserve Bank, with the view to having the question placed before the Presidents' Conference for discussion. It was the view of the Conference that the Reserve Banks have their own special problems in the 2/11/58 -14- 511; area of bank operations and the System is presently proceeding with the necessary research with respect to them, through committees and subcommittees of the Conference, supplemented by the employment of outside research organizations, such as Stanford Research Institute which is presently engaged in research in the mechanization of check handling operations. The Presidents also expressed the opinion that if the System lent its financial support to the research programs of individual organizations such as the NABAC, the System would be hard put to refuse requests for support from other similar organizations. It was also the view that operational research expenditures by the System should be channelled as directly as possible along lines which Will lead to results in the operating problems facing the Reserve Banks; also, a question was raised as to the appropriateness of the System turning over substantial funds for operational research Without retaining some voice in the manner in which the research is conducted. The Presidents agreed that NABAC is not the best vehicle for conducting research in which the System is interested and that the Reserve Banks Should not provide financial assistance to the project. Following comments by Mr. Allen, Chairman Martin stated that the Board concurred in the views of the Presidents' Conference and it Ilas understood that Mr. Allen would advise the National Association of Bank Auditors and Comptrollers of the decision that had been reached. 7.. Small Business Capital Banks. Mr. Irons reviewed With, the Conference certain of the major proposals included in the Small Business Capital Banks bill introduced by Congressman Patman and a companion bill by Senator Johnson. The members of the Conference expressed the view that a number of the provisions seemed to have special interest to the System, which the members of the Conference desire to discuss with the Board. There was no further discussion of this topic, which had been eovered earlier in the meeting in connection with comments on the small -15- 2/11/58 517 business financing study. 8. Currency and coin collectAons. Consideration of this subject, dealing with currency collections, was initiated by the Federal Reserve Bank of Chicago and referred to the Presidents' Conference in Mr. Carpenter's letter of October 11, 1957. The Conferenimapproved the following recommendations submitted by Mr. Allen, Chairman of the Committee on Bank and Public Relations: (1) Until October 1, 1958, no bank dispose of duplicate or miscellaneous items except to another Federal Reserve Bank. During the intervening period, any bank which is seeking items to round out its displays will make its wants known to, and endeavor to secure the desired items from other banks. (2) Beginning October 1, 1958, the banks will be free to dispose of miscellaneous and duplicate items in accordance with procedures to be fixed by a committee appointed b; the Board of Governors. The Committee suggested that the committee include, among others, Board staff members from the Division of Bank Operations and from the Legal Division, and expressed the view that consultation with the Treasury Department on the legal aspects of disposing of currency items may prove desirable. In reviewing the background against which the question had been raised by the Federal Reserve Bank of Chicago, Mr. Allen explained that the problem involved particularly the disposition of certain currency items which, although not in suitable condition for inclusion in Reserve Bank currency exhibits, were known to be worth more than face value. He said that both he and the Board's General Counsel, with whom he had disel'ssed the matter informally, considered it doubtful whether a Federal Reserve Bank could sell such items at higher than face value and that "nsultation with the Treasury Department at some point seemed desirable. It was understood that the Board would consider the matter. 2/11/58 9. -16- 518 Rebate of unearned interest on prepaid borrowings from a Reserve Bank after a rate change. Presently, Reserve Banks rebate unearned interest on borrowings repaid before maturity at the rate at which the advance or discount was made, provided that such rate is not higher than the rate prevailing at the time of the rebate, and in the latter event, the rebate is made at the rate then prevailing. This practice which stems originally from a ruling of the Federal Reserve Board in 1915, was reconsidered by the Presidents in 1923 and 1930, and reaffirmed on both occasions. The question was raised at the current Conference in the light of objections made by member banks to the present policy, with the view to suggesting that the policy be changed. The discussion in the Conference revealed divided Opinion as to the appropriateness of the present practice. It was agreed, however, that there was no particular need for uniformity in the practices of all the banks, and that the matter should be referred to the Board with the suggestion that each bank might determine its own policy with respect to the rate at which rebates should be made. Chairman Leedy reported that cases had been noted where resent- !lent arose on the part of member banks, particularly country banks, if a borrowing from the Federal Reserve Bank extended some little time after a reduction of the discount rate and upon repayment prior to maturity the rebate of unearned interest was made at the rate then prevailing. It was against this background that the question was raised within the Pl'esidentet Conference, particularly since the Board's 1915 ruling was issued when borrowing from a Reserve Bank was limited to rediscounting f Paper and differentials in the rates for different maturities were *equent. their Discussion of the matter found the Presidents divided in opinion as to the preferable policy and it had been suggested that perhaps this was a matter of discount window administration on /4hich there was no need for uniformity throughout the System. However, -17- 519 in view of the 1915 ruling the Presidents would like to obtain the views of the Board. Mr. Deming stated that he had found the Minneapolis Bank following the practice of making rebates at the rate applicable to the original note, presumably on the theory that the 1915 ruling was not quite at point. He went on to suggest that a Reserve Bank is not in the rediscount operation to make money and that the administration of the discount window does not turn on whether a member bank pays a little more or a little less. In this light, and since banks should borrow only when there is a valid need, he wondered whether a Reserve Bank might not just as well rebate at the original rate. Discussion ensued concerning the practices of commercial banks, following which some of the Presidents whose Banks had experienced little or no difficulty with the present procedure stated reasons which might be given against a change in policy. Chairman Leedy then stated that even if the present policy were continued it would be helpful for the Board to issue an up-todate ruling on the subject so that it might be apparent to inquiring nlember banks that the matter had been the subject of decision on a more current basis than the 1915 ruling. At the conclusion of the discussion, it was indicated that the Board would take the matter under consideration and advise the P residents of its views. During the foregoing discussion Mr. Williams withdrew from the meeting. 2/11/58 10. -18Financial Institutions Act of 1957. In reviewing pending bills affecting banking in the 85th Congress, reference was made in the Conference to the provision in the Financial Institutions Act which makes it a criminal offense for a Board or Reserve Bank employee to accept employment in a member bank within two years of terminating employment with the Board or Reserve Bank except upon approval of the Board. Members of the Conference desire to discuss the subject with the Board with particular reference to the type of rule or regulation the Board might possibly adopt which would permit employment by a commercial bank. Mr. Irons explained that this provision might have an adverse effect on the recruitment of Reserve Bank employees, particularly in certain functions, unless the conditions upon which the Board would grant approval were quite clear. In response, Chairman Martin and Mr. Robertson assured the Presidents that, although the Board had not yet had occasion to consider anything specific on the subject, any rule or regulation would be directed toward the prevention of abuses and would be designed not tO make more difficult the problems of recruitment at the Reserve Banks. It was pointed out that there are similar provisions in the bill which apply to the Comptroller of the Currency and the Federal Deposit Insurance Corporation. Additional items of information arising out of current Conference meeting. In addition to the foregoing matters, the following items of possible interest to the Board were considered by the Conference. They are reported herein as a matter of information. a. The Conference approved a report of the Subcommittee on Collections dated December 24, 1957, containing a recommendation fcr approval of a proposal by the Bank Management Commission of the A.B.A. for simplified encoding of transit number 2/11/58 -19-, routing symbol in magnetic ink characters on checks, and other recommendations pertaining to routine matters affecting the conduct of the cash and noncash collection functions of the Reserve Banks. b. The Conference received a report of the Subcommittee on Accounting dated November 12, 1957, recommending expense items considered appropriate for inclusion in the gross expense figure of the Provision of Space function, which is used as a basis for calculating space rental charges to the Treasury and other governmental agencies. The report was referred to the Committee on Fiscal Agency Operations for use in reconsideration of the question of the rate of reimbursement charged government agencies for rental of bank owned space. c. In response to an assignment to study the question of the disposition that should be made of records accumulated by the chairmen of committees and subcommittees of the Conference of Presidents, the Subcommittee on Retention and Disposal of Records submitted a report dated December 11, 1957, expressing the view that there appeared to be no packaged solution to the disposition of such records, and suggested that the retention or disposition of such records be governed primarily by the judgment of the respective chairmen based on the recommended retention periods appearing in the Manual Relating to Retention and Disposal of Records at Federal Reserve Banks, as revised April 1, 1957. The Conference approved the report. d. The Conference received a memorandum dated November 22, 1957, from the Subcommittee on Electronics covering a meeting held by the Subcommittee in New York on November 6, 1957, to discuss various matters concerned with the research program into the mechanization of the Reserve Banks' check 521 2/11/58 -20- 522 handling operations which is being conducted under the direction of the Subcommittee by Stanford Research Institute. e. A progress report of the Subcommittee on Cash, Leased Wire and Sundry Operations, dated November 21, 1957, was received by the Conference, which dealt with routine matters pertaining to the Federal Reserve Leased Wire System. There was no discussion of these items which, as the Pre dents, Conference had indicated were presented as matters of information only. Chairman Leedy reported that Mr. Erickson and Mr. Johns had been elected Chairman and Vice Chairman, respectively, of the Presidents, Conference to serve until the conclusion of the first meeting of the Conference held in or after February 1959. The meeting then adjourned. re ax',
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