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Minutes for To: Members of the Board From: Office of the Secretary February 16, 1959. Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. Chin. Martin Gov. Szymczak iner Gov, Mills Gov. Robertson Gov. Balderston Gov. Shepardson 2 0) , ( 111,j x3 f;14 Minutes of the Board of Governors of the Federal Reserve System on Monday, February 16, 1959. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Szymczak Mills Robertson Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Thomas, Economic Adviser to the Board Young, Director, Division of Research and Statistics Hackley, General Counsel Shay, Legislative Counsel Solomon, Assistant General Counsel Hostrup, Assistant Director, Division of Examinations Daniels, Assistant Director, Division of Bank Operations Hill, Assistant to the Secretary Letter to the Association of Registered Bank Holding Companies (Item N After comments by Mr. Hackley, the Board approved unanimously a letter to the Association of Registered Bank Holding Companies in reply t° request from that organization for the Board's views on H.R. 2325, l'elating to bank mergers. A copy of the letter, which had been circulated t° the Board in draft form prior to the meeting, is attached as Item No. 1. Proposed emergency currency vault. There had been distributed t° the Board a memorandum from Mr. Farrell, Director of the Division of krik Operations, dated February 13, 1959, regarding the proposed bill 11rT 1 , 0 Provide for payment by the Federal Reserve Banks of the cost of cc418tructing a depository for the storage of Federal Reserve notes." In the ght of comments sent to the Bureau of the Budget by General Services 2/16/59 -2- Administration which suggested the desirability of an increase in the cost limitation, and after discussion with Mr. Farrell, the Treasury had advised him that it would have no objection to revising the proposed bill so as to increase the limitation from $1.5 million to $2 million. In view of these circumstances, the memorandum recommended that the Board authorize changing the pertinent phrase in the bill from "not exceeding $1,500,000" to "not exceeding $2 million". It was agreed unanimously to inform the Treasury that the Board would have no objection to such a change in the proposed legislation. Mr. Daniels then withdrew from the meeting. Study by Joint Economic Committee. Mr. Shay advised the Board that Senator Douglas, Chairman of the Joint Economic Committee, had f"nallY announced that the Committee would undertake a study with a icy to determining whether the objectives of substantially full employment, ee°11°mio growth and price stability could be reconciled. Mr. Shay said that he would have the announcement duplicated and distributed to the Itlealbera of the Board. Study of the Government securities market. Pursuant to the (118clisaion at the meeting on February 13, 1959, Chairman Martin called On G(wernor Mills for a further statement on the question he had raised CorIce rning the appropriateness of a study of the Government securities 441*.ket as outlined in the memorandum discussed at the meeting of the Board on February 11. 2/16/59 -3Governor Mills stated that the question he again wished to raise Ilas whether the Federal Reserve System should conduct what would amount "b3 an investigation. From the minutes of the Technical Committee of the New York Money Market and also from the still unpublished study by the New York Stock Exchange, there appeared to be a movement on the Part of both of those groups to disassociate themselves from any responsitY for what happened in the Government securities market last summer. In the Stock Exchange report some blame was cast upon the Federal Reserve 8Yetem for its policies with respect to the supplying of reserves in the first half of 1958. If that reasoning was widespread, there would aPPear to be a question whether the System was in a good tactical position to conduct an inquiry that, at least in the opinion of critics, might seem to constitute an attempt to shift blame from the System to others. , At vtrs, Governor Mills said, speculation is not illegal or criminal. That it had occurred in the Government securities market was unfortunate, but it vas his offhand feeling that the System might be in error in illicier.taking an investigation that would bring before representatives °t the Board individuals representing the elements in the market that laight have guilt or blame attached to them. Furthermore, lack of the 111111DP°ena power raised the question whether those invited to appear would be lung to give information that they might feel would leave them unfavorable position. In these circumstances, Governor Mills 2/16/59 -4- asked whether the Board should go further than to provide Congress 14ith factual information, thus allowing the appropriate committees to decide whether to conduct any investigation themselves or delegate the flanction to the Federal Reserve System. The Chairman then turned to Mr. Young, who distributed a revised versi°n of the study outline. In discussing it, Mr. Young emphasized that the study was intended to be a joint project, with both the Treasury and the Federal Reserve participating from beginning to end. With ' l eaPeot to the questionnaire surveys, it now appeared to be desirable to broaden somewhat the number of respondent groups, but this would not exPand greatly the scope of the survey work. With respect to the New Y°11c Stock Exchange study of members' participation in Government securities Market activities last year, a draft of which had been supplied to the Board on a confidential basis, he noted that the study was defensive in tone and placed a large share of the responsibility for what had occurred °II the Federal Reserve and the Treasury. Since it did not develop infor- 1114ti°n on the scope of customer participation, the Board's staff was cleveloPing schedules designed to produce such information. The purpose Or the Proposed consultations with certain financial groups was to gain °I.al impressions as to just what happened, and why, in the period of spon-, ative activity and to learn who those groups considered responsible. Alth0113 4, it might be expected that blame would be laid on both the 2/16/59 _5_ Federal Reserve and the Treasury, such consultations might also generate 8°ms public-spirited consideration as to how such an occurrence could be avoided in the future. As to the proposed staff analytical studies, l'thich there would be four, discussion with the Treasury and President Hayes of the Federal Reserve Bank of New York had found them strongly i s uPPort of a "team" approach, with each team comprised of representatives Of the Board, the Treasury, and the New York Bank, even though this might take somewhat longer than to have the studies assigned to individuals. Mr. Young felt that a target date of the first of May for sub' lltia1 completion of the study might not be unreasonable. ete He recognized that 41, uus undertaking of a study such as planned would involve risks of the 1Q mentioned by Governor Mills. On the other hand, he said, legislative interest in a subject generally finds the staff of the interested cornrai "‘tee or committees looking to the agencies concerned for information and. as sistance, which would indicate the desirability of being prepared as Nrel, as possible to deal constructively and in the public interest vith the problem of preventing, insofar as possible, any recurrence of the k. incl of speculation that developed in the Government securities tar'ket last year. After further discussion of the proposed study in the light of the c °mments by Governor Mills and Mr. Young, during which the responses of the Federal Reserve System in this area were measured against the 'axs involved in proceeding along the lines indicated, Chairman Martin -6- 2/16/59 suggested that, except for staff preparatory work, the study be held 14 abeyance pending discussion by the Board with Under Secretary of the Treasury Baird on Wednesday, February 18. Secretary's note: The Board met with Mr. Baird on February 18, 1959, and at the conclusion of that meeting it was understood that the staff would proceed with the study. Spring call. The Secretary reported that a letter dated FebruarY 10, 1959, had been received from the Comptroller of the Currency cating his intention to make a spring call upon national banks for rePorts of condition. Accordingly, a telegram was sent to all Federal Reserve Bon February 13 indicating the Board's intention to make 4 similar call upon State member banks. The action taken in sending the telegram to the Reserve Banks -111.1qaT1 by unanimous vote. The meeting then adjourned. Secretary's note: Governor Shepardson today approved on behalf of the Board the recommendation contained in a memorandum dated February 11, 1959, from Mr. Johnson, Director, Division of Personnel Administration, that the Board adopt for its employees the "administrative leave" policy set forth in Civil Service Commission Mobilization Circular No. 5 which states, as a general policy applicable to all agencies of the Executive Branch of the Federal Government, that administrative leave shall be granted civilian employees who are prevented or relieved from reporting for duty because of disaster conditions in a national emergency. 2/16/59 -7Governor Shepardson also approved today on behalf of the Board the recommendations contained in a memorandum from Messrs. Farrell and Young dated February 9, 1959, (attached Item No. 2), pertaining to distribution and sale of the All-Bank Statistics volume. BOARD OF GOVERNORS OF THE Item No. 1 2/16/59 FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN February 16, 1959. Mr. Donald Rogers, Executive Director, Association of Registered Bank holding Companies, 730-15th Street, N. W., Washington 5, D. C. Dear Mr. Rogers: This refers to your letter of February 5, 1959, asking regarding your analysis of Congressman Celler's per2Merger notification bill, H.R. 2325, in so far as bank holding umPanies are concerned and regarding a suggested amendment to bill. for that As you know, a number of other bills regarding the subject Of bank in mergers, but with various approaches, have been introduced the present session of Congress. It is likely that, as in the ' 048t, the Board will be requested by the appropriate committees of eolniFess to submit its views with respect to these bills. In th:,ection with consideration of similar bills in previous years Board has indicated its position with respect to bank merger e ' ; l islation, and you are doubtless familiar with that position. Howorer, the Board has not yet had occasion to consider the exact nature statement that it may submit to Congress regarding the bills -11 Pending. In the circumstances, while I do not mean to seem unZPerative, I believe it would be preferable for me not to express lett°Pinion at this time regarding the matters discussed LA your eoni er. Your letter will be brought to the attention of the Board in ction with its future consideration of this subject; and in the meal : teci;I'M° I am sure that the Board's staff will be glad to discuss aspects of the subject with you on an informal basis. Sincerely yours (Signed) ihn. NeC. idartin, Jr Wm. NeC. Martin, jr. BOARD OF GOVERNORS OITHC Item No. 2 2/16/59 FEDERAL RESERVE SYSTEM e Correspondence BOa A rq of Governors John R. Farrell and Ral h Young Date February 9, 1959 Subject: Recommendation for distribution and sale of All-Bank Statistics The All-Bank Statistics volume is now in the process of being Prtated and is expected to be ready for distribution by mid-April. It is recommended: (1) That the complimentary distribution recommended by * . tem°Leonard in his memorandum of October 29, 1954, be followed. His ,dura Provided for furnishing the volume to the following groups: Ped,:811 bluVq. Reserve Banks and branches; Federal Advisory Council; national ,State bank, and Federal Deposit Insurance Corporation supervisory orri) c Aals; banking and currency committees of the House and Senate; J4ar, tien#`' Committee on the Economic Report; and a selected list of Governate °fficials, foreign central banks, banking organizations, economists, caeriodicals and newspapers. It is also planned to make the publiciai°4 available upon request, without charge, to other Government off1reign central banks, and members of the press, and to public and libraries of educational institutions. (2) That the paperbound copies be sold for $4.00 per copy. It "°41d boulad be noted that the only copies available for sale will be the papergrou °"El; clothbound copies will be distributed, without charge, to P8 or Persons listed in the preceding paragraph. The suggested sale price for the paperbound copies is based on 41 q, , 1 esti ute e„Tated unit-cost of $3.95 for printing and mailing such copies. ukaaaated unit-cost of clothbound copies is $4.50.
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