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, Minutes of actions taken by the Board of Governors of the pederai Reserve System on Thursday, February 24, 1949. The Board met in the Board Room at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Szymczak Draper Vardaman Clayton Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Vest, General Counsel Leonard, Director of the Division of Bank Operations Mr. Nelson, Director of the Division of Personnel Administration Mr. Millard, Director of the Division of Examinations Mr. Townsend, Solicitor Mr. Mr. Mr. Mr. Mr. Mr. Mr. At Chairman McCabe's request, Mr. Townsend discussed a reof the bank holding company bill which had been preDal% d 4 the light of discussions by the Chairman and Messrs. Clay- Vest, and Townsend held during recent months with representa- t41E of the American Bankers Association, the Association of Re- 4.rve CitY Bankers, independent bankers associations, the National Ats°ciation of Supervisors of State Banks, bank holding company NreEelltatives, and others. Mr. Townsend outlined the changes ttle‘4 from the bill introduced In the 80th Congress, S. 829 and 33 51, stating that the bill had been taken substantially in 2/24/49 -2- the form in which it was previously considered and such changes had been made as appeared reasonable in the light of the fundamental 1)1/115°Eies of the legislation. He said that the first of these changes /148 the elimination of the declaration of policy formerly contained 14 section 2 and he recommended this change since the declaration not -Important to the bill. With respect to the definition of hold ""IK companies formerly contained in section or the 3, paragraph (a) there was a discussion of the question whether a bank °Perating one or more branches should be considered by definition to b' a holding company. It was the consensus of the discussion that the definition should be changed to provide that if a company exer cised a controlling influence over the management or policies or - or more banks or of only one bank if such bank operated Nar • °r more branches it should automatically be included within the der inition of a holding company. There was also a discussion of the provision contained in the 6 ectien relating to the acquisition of bank shares or bank 488et 8' formerly section 6(d)), referring to the "national policy kver restraint of trade and undue concentration of economic alla in favor of the maintenance of competition in the field bEttoo 41e. Mr. Townsend stated that this language had been obie tea bY various organizations and he suggested that it be tt ha4ed provide that, in determining whether to approve any 2/24/49 -3subject to the section, consideration should be given to ''whether or not the effect of such acquisition may be to expand the size and extent of a bank holding company system beyond limits e°11sistent with adequate and sound banking and the public interest". Ile stated that he felt this language would give the Board the same alltbority as the previous language but that it would be highly desirable to have the legislative history of the bill show that the c _ hellge from the provisions which had been in preceding bills on bame riolding company legislation was not intended to change the ng as contained in the previous bill. It was the consensus t118:t the change should be made with the understanding that an eftort would be made to have the legislative history show that no hatiqe in authority was intended by the change in language. Following a discussion of other changes in the language, upon motion by Mr. Clayton, the draft of bill was approved unanimously for transmission to the Treasury Department, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation asking for their comments. During the foregoing discussion Mr. Carpenter withdrew from Meeting. *. Eccles withdrew from the meeting at this time. 4ttire Reference was made to drafts of letters to the Federal ReellIkS of Boston, Cleveland, and Minneapolis with respect to 2/24/49 -4- their 1949 budgets, as discussed at the meeting on December 6, 1948. he letters would (1) raise no further question regarding the photoof country checks by the three Banks for the remainder of tills Year and stated that, since the practice if adopted by all FedReserve Banks would cost the System more than $1,000,000 a relEti.') the Board felt the matter should be discussed at a Presidents' ectrererice later this year, (2) ask that Boston review its procedure 1)(11 'double listing outgoing country checks to see whether it might 11°'411e advantageous to eliminate that operation, (3) approve $5,000 ilIthe budget of the Cleveland Bank for a bank-made movie and a cash bY Minneapolis of not to exceed ten thousand dollars for a teviei °4 in the Bank's motion picture "Behind Banks and Business", 4/14(4) state that the Board would raise no objection to the MinIII44) 01i„ — "'"ank proceeding with plans for its annual Federal Reserve Ookter ence but that before any plans were made for a Conference in 1950 t11 Board wished to discuss the matter with Messrs. Shepard E141 PeNr4 v"°13-, Chairman and President, respectively, of the Minneapolis Following a discussion, the draft Of letter to the Federal Reserve Bank of Boston was approved unAnimously as follows: 194,"Reference is made to your reply, dated January 19, ada.'1) to the Board's letter of December 27 requesting Pea:ti°nal information regarding the 1949 budget of the ,ral Reserve Bank of Boston for the Check Collection 2/24/49 -5- "function. The material which you submitted has been helpful in considering the questions which have been raised. "With regard to the practice of photographing country checks, it is noted from the information which You submitted, as well as that received from the other two Reserve Banks following a similar procedure, that much emphasis is placed on the resulting improvement in the service rendered member banks. In the circumstances, the Board will not further question the confor the remainder of the year of the photographing of country checks by your Bank and the other two Federal Reserve Banks. "However, since it would appear that if the practice were extended to all Reserve Banks, the annual cost to the System would be perhaps more than $1,000,000, the Board feels that this matter should be discussed at some meeting of the Conference of Presidents later in the Year, at which time the situation could be reviewed in the light of the conclusions and experiences of those IZtinks which do photograph checks and those which do not. -rne Board is advising Mr. Davis, Chairman of the Presicl"ta l Conference, to this effect. "With reference to that part of your letter relating to the practice in effect in your Check Department of ( 41,ouble-listing all outgoing country checks, it is noted lat you refer to a letter addressed to the Board by "ice President Hult under date of September 6, 1945, ! III- have summarized the advantages of this procedure .Z11 set forth in that letter. In view of the fact that e comparisons then made by Mr. Hult were mainly with 1,1-Itch card procedure and that generally speaking there been an improvement in the selectivity of personnel ilnce the war, the Board would be interested in learnwhet. you feel that in the ensuing three years the yjlciency of employees performing this type of work in trii"r Check Department has improved to a point where it tight be advantageous for your Bank to give consideraA:on to the elimination of the double-listing operation. Zcordingly, it is suggested that your method of handling efulltrY checks be reviewed before submission of your budgvifor 1950, and your further advice in this connection it2- be aPpreciated. It would be helpful if this advice 1411;:Luded data with respect to the additional equipment 2- Your letter Indicates would be required if doublewere discontinued." e V 362 2/24/49 -6With respect to the proposed letters to the Cleveland and 14111neapolis Banks, Mr. Vardaman expressed the feeling that if funds Veroto be spent on making moving pictures they should be for a SystelProject and that there was a question whether any expenditure cltrIl°11eY for the purposes proposed was desirable. He also raised theWestion whether, if some expenditure was to be approved, the 11°841 should revise the amount requested by the Banks or whether It Should permit them to proceed on the basis which they outlined. During the discussion of the moving picture project, Chair41"cCabe suggested that it would be desirable to talk with Messrs. 4;14eY and Peyton, Presidents of the two Banks, respectively, while they 'ere in Washington for the Presidents' Conference during the llet rev days with a view to asking them whether they would color work together to develop a picture which covered the ti0118 Of the Banks and which might afford a basis for developrtlelat later on of a movie sponsored by the System as a whole. It was agreed unanimously that Chairman McCabe and Mr. Vardaman would talk with Messrs. Gidney and Peyton concerning the movie project while they were in Washington attending the Presidents' Conference. R 11,14k r eference °t its 1949 st was then made to the plans of the Minneapolis Annual Federal Reserve Conference. Mr. Vardaman atecl that, inasmuch as the Conference was to be held this spring :3G3 2/24/49 _7- and since plans had already been laid for it, it did not appear pract icable to request the Bank to make any change in the program. He "'ed, however, that he felt the Board should ask the Bank not to " ntake Plans for a Conference in 1950 until the matter had been discla4ed with the Board by Messrs. Peyton and Shepard. Following the discussion, unanimous approval was given to a letter to the Federal Reserve Bank of Cleveland as follows: , "Reference is made to your reply, dated January 18, ' 949, to the Board's letter of December 27, 1948, re"sting additional information regarding the 1949 budget °I the Federal Reserve Bank of Cleveland for the Check C ollection and Bank and Public Relations functions. The Zaterial which you submitted has been helpful in considering the questions which have been raised. With regard to the practice of photographing country checks, it is noted from the information which you submitted, as well as that received from the other two Re:ne BAnks following a similar procedure, that much s'Pnesie is placed on the resulting improvement in the rvice rendered member banks. In the circumstances, BOard will not further question the continuation the remainder of the year of the photographing of CO ii( 211ntrY checks by your Bank and the other two Federal 'esrve Banks. Ile "However, since it would appear that if the practice tje extended to all Reserve Banks, the annual cost to e System would be perhaps more than $1,000,000, the B m:ard feels that this matter should be discussed at some yeetimg of the Conference of Presidents later in the thn et which time the situation could be reviewed in 1ght of the conclusions and experiences of those TC48 which do photograph checks and those which do not. cies Board is advising Mr. Davis, Chairman of the Presi4t8: Conference, to this effect. pr,_ No further comment is made at this time about the b -Yision in the budget for the motion picture project, Chairman McCabe and Governor Vardaman hope to talk j 2 2/20 1 19 -8- "with you about this matter while you are in Washington for the Presidents' Conference." Unanimous approval also was given to the following letter to the Federal Reserve Bank of Minneapolis: "Reference is made to your reply, dated January 12, 1949, to the Board's letter of December 27, 1948, requesting additional information regarding the 1949 budget of the Federal Reserve Bank of Minneapolis for the Check Collection and Bank and Public Relations functions. The material which you submitted has been helpful in conthe questions which have been raised. "With regard to the practice of photographing country checks, it is noted from the information which you submitted, as well as that received from the other two Reserve Banks following a similar procedure, that much emPhasis is placed on the resulting improvement in the !!rvioe rendered member banks. In the circumstances, .re Board will not further question the continuation r the remainder of the year of the photographing of 14/3u4trY checks by your Bank and the other two Federal -,eserve Banks. 4, "However, since it would appear that if the pracce were extended to all Reserve Banks, the annual t !" to the System would be perhaps more than $1,000,000, 8"e Board feels that this matter should be discussed at Ime meeting of the Conference of Presidents later in i_e Year, at which time the situation could be reviewed bu the light of the conclusions and experiences of those Tire which do photograph checks and those which do not. de Board is advising Mr. Davis, Chairman of the Presilite' Conference, to this effect. "The Board would like to discuss further with you uairman Shepard the matter of the Annual Federal h04:erve Conference. Since it is your usual practice, ever, to hold this conference in the spring of the Ye Ijr and in view of the time element, the Board will erPose no objection to your proceeding with plans ro; ce,a the 1949 conference. It is believed that this prothtlIre will allow ample time for full consideration of re - matter and the reaching of definite conclusions in 1,1 41'd thereto sufficiently in advance of the time for "anning your program for 19,0. r J 2/24/49 -9- "No further comment is made at this time about the provision in •the budget for the motion picture project, as Chairman McCabe and Governor Vardaman hope to talk With you about this matter while you are in Washington for the Presidents' Conference." The following letter to Mr. Davis, Chairman of the Presidents' Conference, was also approved unanimously: "In connection with the review by the Board of the 1949 budgets of the Federal Reserve Banks, it was noted that the Federal Reserve Banks of Boston, Cleveland, and Minneapolis had made provision in the Check Collection function for photographing all outgoing country checks. two, "This matter has been taken up with each of the concerned, and the Board has been informed that 2ns of the principal benefits of this procedure is to lUrnish more complete service to member banks. In the ! ircumstances, the Board is advising the Presidents of these three Banks that it will not further question the °11tinuation of their practice in this respect for the ! remainder of the year. , "However, since it would appear that if all Federal 'eserve Banks photographed outgoing country checks, the cost to the System would perhaps be somewhat more than $1 ,000,000, the Board feels that this matter should discussed at a meeting of the Conference of Presii4Ats, at which time the situation could be reviewed Be. the light of conclusions and experiences of those "which photograph checks and those which do not. Ill "It will, therefore, be appreciated if you will . 17a this topic placed on the agenda for a meeting of . Conference of Presidents later in the year." 4 - the 8 ty EtlIcl 1 ( E14 The meeting then recessed and reconvened at 2 p.m. with 6thle attendance as at the close of the morning session except r. ccles and Messrs. Thomas, Young, and Solomon, Director 86°ciate Director of the Division of Research and Statistics, "istant General Counsel, respectively, were also present. 1St; 2/24/49 -10A draft of a letter to Bank of America N.T. & S.A., San ?I'alacieco, prepared pursuant to the understanding at the meeting c3a February 21, 1949, informing the bpnk that the Board had denied it8 aPPlications for permission to establish three branches in 1‘1118-11,1T and had approved an application for permission to establish branch in Bangkok, Siam, was read and discussed. It was understood that the draft would be revised along the lines of the discussion and, after it was approved by Messrs. Szymczak and Clayton, resubmitted to the Board for consideration. Reference was made to memoranda prepared by Mr. Nelson under date Of February 9, 1949, and furnished to each member of the Board respect to contemplated changes in the Bank plan of the Retiretaeiat Stem of the Federal Reserve Banks. Mr. Nelson stated that the ersonnel Committee of the Presidents' Conference had prepared e. 1 report in connection with the study being made by a special °111111itteof the Chairmen's Conference as discussed at the meeting ollbece fiber 23, 1948, that it was expected that the Presidents' eolltere lice would discuss the report at its meeting later this week, 414 that c() be etb the special committee of the Chairmen's Conference hoped le to submit its final report and recommendations to the 11() kra con "lining changes which the Chairmen of the Federal Reserve 1104143 telt should be made to the Retirement System early in March. easo stated that if any changes were to be made effective as of 2/24/49 -11- Me ' rch 1/ 1949, it would be necessary to act upon them during the tirst half of March in order that the Trustees of the Retirement S:Ntem could adopt the necessary changes in the Rules and Regula- ti0418 and permit the retirement office to put the changes into "rect. It was agreed imanimously that the matter should be placed on the agenda for consideration at the meeting on Friday, March 4, 1949. Chairman McCabe stated that he had been giving consideratioh, (.0 assignments of Board members for the coming year and that he /pi °Ilid suggest that in the future he serve as Chairman ex officio th e Personnel Committee, with the understanding, however, that orai 11411.1Y he would attend meetings only when matters of special st sueh as appointments of directors or salaries of Federal " rv e Bank officers were under consideration, that there be two Nta ar Members of the Personnel Committee with the senior member b as Chairman in the absence of the Chairman, and that Mr. 8• attend all meetings of the committee as a staff member so thm h • 101.11d be in a position to keep the Chairman informed. He 0 ested that Mr. Szymczak and Mr. Clayton be appointed as ANIlers °f the Personnel Committee for the year beginning March 1 1949. Question was raised as to whether other changes in assignor BOard members were to be made at the same time and Chairman 2/24/49 McCabe tilie stated Stated that he had no further recommendations to make at this ut that he would be glad to receive suggestions from the other r4erabers of the Board as to any changes they felt should be made. After a discussion, Chairman McCabe's suggestions with respect to the Personnel Committee were approved unanimously with the understanding that the question of assignments of members of the Board be considered at an early meeting of the Board in executive session. At this time Mr. Nelson withdrew from the meeting and Mr. Levi . Chief of the Consumer Instalment Credit Section of the Dl810n °f Bank Operations, and Mr. Pawley, Economist in that Divi- Stori entered. In connection with a discussion of a possible amendment to ti°4 14/ Consumer Instalment Credit, Mr. Thomas presented data shovi 4€ changes in consumer credit outstanding during the month of 4411zaa.1, 1949 which indicated that the reduction during that month .11 substantially greater than In January 1948. rai There was a --°cussion of the questions whether economic conditions 11 1" a change in the terms provided under the regulation at ' 1' t 114e "d if so, what the changes should be, and whether the %1Ret should be made effective immediately or postponed until eCon 41-ic outlook could be further observed. ChaiMen McCabe raised the question whether the staff had cl a slIggestion made by Mr. Evans at the meeting on Monday 2/24/49 -13- that maturities be set at 21 months for new automobiles and 18 months krused automobiles and Mr. Leonard stated that the suggestion had been considered and that the staff committee recommended against such Et" change. Various suggestions for changes were discussed further but no e°4cInsions were reached and it was understood that the matter would be clIsidered again at a meeting next week. At this point Messrs. Riefler, Vest, Thomas, Leonard, Millard, Imse14, Young, Solomon, Lewis, and Pawley withdrew and the action 11144";ed vith respect to each of the matters hereincifter referred to %14 taken by the Board: Minutes of actions taken by the Board of Governors of the Feder al Reserve System on February 23, 1949, were approved unani111°111-Y. Memorandum dated February 21, 1949, from Mr. Carpenter rece13413ag the appointment of William Russell Corkhum as a minutes 4 or in the Secretary's Office, on a temporary basis for a period 13ttonths, with basic salary at the rate of $3,100.20 per annum, %trecti e II- as of the date upon which he enters upon the performance t his 'uties after having passed the usual physical examination. Approved unanimously. Telegram to Mr. Young, President of the Federal Reserve t Chicago, reading as follows: 370 2/24/49 "Board approves application for membership of City Bank, Detroit, Michigan, effective if and when the bank is authorized to commence business by the appropriate State authorities subject to the two standard conditions. Letter follows." Approved unanimously. Letter to the Honorable A. Willis Robertson, United States Ser, prepared for Chairman McCabe's signature in accordance with the action taken at the meeting on February 18, 1949, reading as tqlows: "I have your letter of February 19, 1949, enclosing copies of S. 80, s. 949, and S. J. Res. 9, which !!avs been referred to your subcommittee, indicating l'hat you will be glad for us to be giving them atten(4.on. "S. J. flee. 9 would provide for the establishment °D a National Monetary Commission to study the fiscal of the Government and possible changes in the . 1)c)lioY relating to banking and credit. Since we underthat the Commission on Organization of the Exacutivs Branch of the Government is expected to make li,rePort on matters closely related to the subjects would be studied by the proposed Monetary Comot,ssi°n, we would prefer waiting until we have had an O 0rtunity to consider the report of the Commission urganization before expressing any views on S. J. .les. 9 • 8. 949 is a bill arising out of a controversy betee t een the FDIC and a private individual and, accordingly, tZlls primarily within the jurisdiction of that Corpora.. However, for your information I enclose a copy " or amthe letter which I addressed to the Senate Banking CurrencY Committee last year in which we expressed O opposition to an identical bill. S. 8o would increase the amount of an insured sil'usit in an insured bank from $5,000 to $15,000. this also is a matter which primarily concerns the DIC, I would like to have an opportunity to conai () r their views concerning it before expressing any Pi/lion on it. 371 2/24/49 -15- "I appreciate your writing me regarding these bills and I can assure you that I shall be only too glad to see that they are studied and to write you our views on them at a later date." Approved unanimously. APPrOyed: ?is 6? " Chairman.
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