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216
A meeting of the Board of Governors of the Federal Reserve
PYstem was
held in Washington on Friday, February 15, 1946, at 11:00
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Eccles, Chairman
Ransom, Vice Chairman
McKee
Draper
Evans
Mr. Carpenter, Secretary
Mr. Connell, General Assistant,
Office of the Secretary
Mr. Morrill, Special Adviser
Mr. Thurston, Assistant to the Chairman
The action stated with respect to each of the matters hereinatter
referred to was taken by the Board:
The minutes of the meeting of the Board of Governors of the
Pede
ral Reserve
System held on February 14, 1946, were approved unanitouely.
Telegrams to Mr. Flanders, President of the Federal Reserve
Bank
•Of
°I
' Boston, Mr. Treiber, Secretary of the Federal Reserve Bank
New
*York, Messrs. Leach and McLarin, Presidents of the Federal
Reser
Ire Banks of Richmond and Atlanta, respectively, Mr. Dillard,
Vice 7,
rl'esident of the Federal Reserve Bank of Chicago, Mr. Stewart,
Secret
ItrY of the Federal Reserve Bank of St. Louis, Mr. Powell, First
Vice p
resident of the Federal Reserve Bank of Minneapolis
, Mr. Caldwell,
Feder
41 Reserve Agent at the Federal Reserve Bank of Kansas City, Mr.
44ert
2
President of the Federal Reserve Bank of DaJlas, and Mr.
11141gel
83 Vice President of the Federal Reserve Bank of San Francisco,
217
2/1546
-2etat
ing that the Board approves the establishment without change by
the Federal
Reserve Bank of St. Louis on February 12, by the Federal
Reserve Banks of Atlanta and San Francisco on February 13, by the Federal Reserve Banks of New York, Richmond, Chicago, St. Louis, Minneapolis) Tr
,vansas City, and Dallas on February 14, 1946, and by the Federal
Serve zank of
Boston today of the rates of discount and purchase in
their existing
schedules.
Approved unanimously.
Memorandum dated February 12, 1946, from Mr. Thomas, Director
Of the Division of Research and Statistics, recommending that the salof
WeeWileli3rn Morelle, an Economist in that Division, be in-
ed from
u1.4
$2,650 to $2,980 per annum, effective as of the begin-
cd* the first payroll period following approval by the Board.
Approved unanimously, effective
February 24, 1946.
Letter to Mr. Douglas, Vice President of the Federal Reserve
tank
Of New York, reading as follows:
"This is in reply to your letter of January 25, 1946,
J811PD.?suing
that the Board's authorization for payment of
-8141seal wages or separation allowances be broadened to
ver employees 55 years of age or older who are involseparated from service of a Reserve Bank who are
entitled to
a retirement allowance, having had 10 years
or8 more of service, but who have not had the 25 years of
,!rvice required for the supplemental payment authorized
griderthe Board's letter S-741.
"The Board is requesting the views of the Presidents
Conference on such a general authorization.
4J
218
2/15/46
—3—
"In view, however, of the circumstances in the indiIn:dual case referred to in your letter and which had been
dlscussed informally with the Board's Division of Personnel.-dministration,
A
the Board authorizes your Bank to pay
a.dlsmissal wage or separation allowance of not exceeding
six months' salary to Mr. Schumacher."
Approved unanimously, together with
a letter to Mr. Sproul, Vice Chairman of
the Presidents' Conference, reading as
follows:
"In a letter dated January 25, 1946, Mr. Douglas,
Vice President of the Federal Reserve Bank of New York,
suggested that the Board's authorization for payment of
dismissal wages or separation allowances in cases of in1._roluntary separation be broadened to cover employees who
are 55 years of age and who have 10 years or more but less
than 25 years of service.
The present authorization contained in the Board's
letter of December 11, 1943, S-7141 was issued in order
that the Reserve Banks might deal with cases of involuntary
separations which might arise pending consideration of
j
r c
ommendations from the Presidents Conference regarding
,ne payment of dismissal wages or of supplemental payments
? the Retirement System for the benefit of employees relring after age
55.
ma "The authorization contained in the Board's letter of
4..rch 17, 1944, 5-7411 for supplemental payments to the Retirement
System in cases of involuntary termination of
Service of members after age 55
and completion of 25 years
. service, was issued in accordance with the recommendat10
n of the Conference of Presidents.
"Attached is a proposed general letter to supersede
„rzie Board's
letter S-714 and which would extend the authorca
to pay dismissal wages or separation allowances to
re.
.
sas of involuntary separations of employees who have
. dmhed age 55 and who have had 10 or more years of servCe
Z
"The Board has not yet considered the proposal and bee0r reaching a decision as to the proposed letter would
"Preciate receiving the views of the Presidents as to the
liggested changes."
219
2/15/46
-4—
Letter to Mr. Brainard, Federal Reserve Agent at the Federal
Ileserve Bank
of Cleveland, reading as follows:
"In accordance with the request contained in your
letter of February 7, 1946, the Board of Governors approves, effective February 16, 1946, the appointment of
Mr. Karl
P. Wendt as Alternate Assistant Federal Reserve
Agent at his present salary of $3,750 per annum, to succeed Miss Anne Erste.
"This approval is given with the understanding that
Mr. Wendt will be placed upon the Federal Reserve Agent's
Pay roll
and will be solely responsible to him or, during
;vacancy in the office of the Agent, to the Assistant
ederal Reserve Agent, and to the Board of Governors, for
the proper performance of his duties. When not engaged
.1.11 the performance of his duties as Alternate Assistant
Federal Reserve Agent he may, with the approval of the
Federal Reserve Agent or, during a vacancy in the office
the Federal Reserve Agent, of the Assistant Federal
Fserve Agent, and the President, perform such work for
1Reserve
the Bank as
will not be inconsistent with his duties as
Alternate Assistant Federal Reserve Agent.
"Mr. Wendt should execute the usual oath of office,
"uloh should be forwarded to the Board of Governors."
Approved unanimously.
Letter to Mr. Fulton, Vice President of the Federal Reserve
441kof C
leveland, reading as follows:
19 "Reference is made to your letter of February 9,
46, submitting for the consideration of the Board of
ciGovernors the
proposal of The Cleveland Trust Company,
:-eveland, Ohio, to purchase acceptable assets and as:unle the deposit liabilities of the First National Bank
4in P
ainesville, Painesville, Ohio, the business assumed
be serviced by the branch now operated by The Cleve11'' Trust Company in Painesville.
It appears that the proposed transaction will not
8111 4"in any change in the general character of the assf,
0.-f-'
'S of The Cleveland Trust Company nor broadening of the
ilnotions now exercised by it and the Board will interpose
220
2/15/46
—5—
no objection to its completion as proposed."
Approved unanimously.
Letter to "The Okemah National Bank," Okemah, Oklahoma, read8.s follows:
"This refers to the resolution adopted on May 14,
1945, by the board of directors of your bank, signifying
the bank's
desire to surrender its right to exercise fiduciary powers heretofore granted to it.
"The Board, understanding that your bank has never
accepted or undertaken the exercise of any trust,
has
nas issued a formal certificate to your bank certifying that
it is no longer authorized to exercise any of the fiduciary
,°17ers covered by the provisions of section 11(k) of the
,sderal Reserve Act, as amended. This certificate is enclosed herewith.
"In this connection, your attention is called to the
fact that, under the provisions of section 11(k) of the
Federal Reserve Act, as amended, when such A certificate
,r-s been issued by the Board of Governors of the Federal
l eserve System to a national bank, such bank (1) sha31 no
0nger be
subject to the provisions of section 11(k) of
,sr Federal Reserve Act or the regulations of the Board
n Governors of the Federal Reserve System made pursuant
thereto, (2)
shall be entitled to have returned to it any
securities which it may have deposited with the State or
authorities for the protection of private or court
rusts, and (3) shall not exercise any of the powers conferred by section 11(k) of the Federal Reserve Act, except
!Ith the permission of the Board of Governors of the Fed'ral Reserve System."
e
1
Approved unanimously.
Letter to Mr. Dawes, Vice President of the Federal Reserve Bank
or
Chic
ago, reading as follows:
"Reference is made to your letter of February 7,
1946
_y
Chicago
U c,ock regarding two questions presented by the
Exchange under Regulation T.
221
2/15/46
—6—
"In the first question broker—dealer A sells certain
securities to broker—dealer B, and A wishes to know what
provisions of Regulation T apply to these financial rela—
tions with B.
"Section 4(f)(3) provides that subject to certain
conditions regarding delivery and payment, a broker or
dealer m47 'purchase any security from any customer who
is a broker or dealer, or sell any security to any such
customer'. Presumably, the conditions of payment and
delivery
are met in this case. The Chicago Stock Ex—
nsalge feels, however, that 4(f)(3) is unavailable if
is acting as agent for a customer rather than selling
.11.e security for his own account (or if B is acting as
gent rather than for his own account). Since it would
l e difficult to separate such 'agent' transactions from
*Principal' transactions, such an interpretation would,
practice, exclude most inter—broker—dealer transactions
I
.Lram the section. The Exchange, therefore, assumes that
tille transaction must fall under section 4(c), and it in9.uires as to the application of certain features of the
latter section.
"It is the view of the Board, however, that if the
??nditions of payment and delivery are met, the transac-_t:lon may be effected under
4(f)(3) even though A or B,
both, are acting as agents for customers rather than
:
IT Principal. Hence, it is not necessary to consider
'
41e question raised as to the application of 4(c).
of "The second question relates to purchases and sales
unissued securities by customers who are not brokers
dealers. Several different phases of the question
e presented. All involve the question of when an un8sued security has been 'paid for in full' as specified
Za section
4(c)(8).
'In the first case under this question, the customer
Pays for
the unissued security and then sells it before
settlement.
The broker—dealer wishes to remit to
thee
customer the amount paid on the purchase less any con—
•'-'_-ngent loss incurred on the transaction. The question
'8:t'sked whether this remittance -- if made before final
1 tlement -- would mean that the security had not been
1,1:d
13
for in full' before it was sold, and thus would dis4('t3fY the customer for a 90—day period under section
'
eiks). The answer is that it would not disqualify him.
t
r
222
2/15/46
—7--
"The next case is the same as the previous one ex—
cept that the question is asked whether, when the security
goes regular, the broker—dealer must again obtain payment
from the customer, and whether the broker—dealer may settle
ou balance. The answer is that the broker—dealer does not
have to obtain payment from the customer again when the
Security goes regular, and he may settle on balance.
"The third case raises the question of whether the
effective interest and accrued dividends on unissued se—
?urities -- which often cannot be known until some time
_?-11 the future --must be paid in order for the security
have been 'paid for in full' within the meaning of
Section 4(c)(8). The answer is that the requirement of
‘ti payment under 4(c)(8) does not require these uncer—
tain sums to be taken into account."
Approved unanimously.
Letter prepared for the signature of Chairman Eccles to Mr.
Bailey,
(4 the
Assistant Director, Legislative Reference, Executive Office
President, Bureau of the Budget, reading as follows:
el "This is in reply to your letter of January 23 en—
Closing a draft of a proposed reply by the Secretary of
he Treasury to a request for the Department's views on
tb 1334, 'To provide for the establishment of a Bank of
"e United States, and for other purposes.'
In general, the proposed reply, which is returned
herewith as requested, seems to us to cover the situation
,
e
On previous occasions the Board has indicated
5
views regarding bills of this general character and
concerning the
limitations and objectives of monetary
,
,
t)°licY. These views, which are set out in the enclosed
t:Ilphlet 'Monetary Measures and Objectives', indicate the
,
111ef
13111. reasons for the Board's opposition to the present
The Board also concurs fully in the criticisms in
m7z.Proposed reply regarding the organizational and ad—
Z-Lalstrative aspects of the bank that would be established
the bill.
ti
"We doubt the advisability of suggesting, in connec—
with this particular bill, a comprehensive inquiry
;-'
,-Le the
kind mentioned in the last sentence of the proposed
lAY- Hence we suggest that the following be substituted
l 17well.
223
2115/46
-8-
"for the last sentence of the proposed reply: 'They also
indicate why it is believed that this far-reaching and
drastic bill would not contribute to the economic welfare
of the nation.'
Me would also suggest that consideration be given
to the
following changes, which relate chiefly to form
rather than to substance:
"(1) In the fourth from the bottom line on page 1,
Change 'control by' to 'coordination with'.
At the top of page 2, leave out the phrase 'the
Feder:12)
Reserve Banks are not owned by the Government' and
substitute the following: 'the capital of the Federal Reserve Banks has been contributed by the member banks and
that only the surplus would accrue to the Treasury in the
event of liquidation.'
"(3) In the last sentence of the next to the last paragraph, change 'a central bank' to 'such an institution'."
Approved unanimously.
Thereupon the meeting adjourned.
Chairman.
@FedFRASER