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310 A meeting of the Board of Governors of the Federal Reserve aYsten waS held in Washington on Monday, February 26, 1945, at 10:30 PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Thurston, Assistant to the Chairman The action stated with respect to each of the matters herein— atter„ 'eierred to was taken by the Board: The moinutes of the meeting of the Board of Governors of the ' *14 Reserve kolialy. System held on February 24, 1945, were approved unani— Letter to Mr. Young, President of the Federal Reserve Bank of Chicago ) reading as follows: "In accordance with the request contained in Mr. th:reks' letter of February 21, 1945, the Board approve ; BI c1!signation of the following employees of the Detroit Re " as special assistant examiners for the Federal -,rve Bank of Chicago: F. F. Woodling R. J. Dubois E. M. Nebus E. W. Pleger A. 0. LaFramboise J. J. Srp L. L. Landry C. E. Lutz N. F. Zink" Approved unanimously. 311 2/26/ 45 -2Letter to the board of directors of "The Real Estate Trust e°111ParlY of Philadelphia", Philadelphia, Pennsylvania, stating that, 811biect to conditions of membership numbered 1 to 6 contained in the 1/'3e-rdIR -1Legulation H, the Board approves the bank's application for kember 811110 in the Federal Reserve System and for the appropriate 440iirit of stock letter in the Federal Reserve Bank of Philadelphia. The also contained the following special comment: It appears that the bank possesses certain powers ":nlch are not being exercised and which are not necessarily I. :glared in the conduct of a banking and trust business, slIch as the power to act as surety in certain circum13:n1, a:rice " Attention is invited to the fact that if the - desires to exercise any powers not actually exercised ceq, the time of admission to membership, it will be nect131 3a.rY under condition of membership numbered 1 to obtain ib,e Permission of the Board of Governors before exercislIg them. In this connection, the Board understands that has been no change in the scope of the corporate Pow '-c17_?rs exercised by the bank since the date of its appli,Lion for membership." il Approved unanimously, together with a letter to Mr. Williams, President of the Federal Reserve Bank of Philadelphia, reading as follows: te "The Board of Governors of the Federal Reserve SysaPproves the application of 'The Real Estate Trust kera mtallY of Philadelphia', Philadelphia, Pennsylvania, for 1 shiP in the Federal Reserve System, subject to the : co-171 2 are-"i°ns prescribed in the enclosed letter which you ins41"equested to forward to the Board of Directors of the ' i ution. Two copies of such letter are also enclosed, one are °J- Which is for your files and the other of which you the l'equested to forward to the Secretary of Banking for C°Mmonwealth of Pennsylvania, for his information. reportSince the amount of estimated losses shown in the of examination for membership is reported to have 312 V26/45 -3"1?een charged off or otherwise eliminated, the usual condslti°n of membership requiring the elimination of losses not been prescribed." I Letter to the board of directors of the "Security Savings Bank", Birmin 61181111 Alabama, stating that, subject to conditions of membership 1114ber ed 1 to 3 contained in the Board's Regulation H, the Board apProves the bank's application for membership in the Federal Reserve te for the appropriate amount of stock in the Federal Reserve 4111, Of Atlanta. Approved unanimously, together with a letter to Mr. McLarin, President of the Federal Reserve Bank of Atlanta, reading as follows: m "The Board of Governors of the Federal Reserve 5ysBa te2Ppr0ve3 the application of the 'Security Savings : Birmingham, Alabama, for membership in the Fed Reserve System, subject to the conditions prescribed to !the enclosed letter which you are requested to forward or 'Ile Board of Directors of the institution. Two copies 0 such letter are also enclosed, one of which is for four files and the other of which you are requested to rrd to the Superintendent of Banks for the State of amal for her information. Since the losses estimated in the report of examOn for membership are reported to have been charged he usual condition of membership requiring the elimaticm of losses has not been prescribed." elegram to Mr. Swanson, Vice President of the Federal Reserve Or IL! 4 4-n neapolis, reading as follows: whi„"Reurtel Board extends to April 4, 1945, time within ' ace First State Bank of Chinook, Chinook, Montana, may (3111Plish membership." Approved unanimously. 313 2/26/45 -4Letter to Davies & Davies, Attorneys at Law, Paterson, New Jersey ) reading as follows: "Re: Hearing to Determine Whether John Agnew and F. O. Fayerweather Should Be Removed from Office as Directors of the Paterson National Bank Paterson New Jerse "This letter is directed to you as attorneys of recOrd 4" .L or the above-named respondents. The Transcript of the o Record in the above matter has been filed with the ard by the Hearing Officer in accordance with his comb "The Board has noted that you have filed written wr il efs- There is a suggestion in the record, however, t.lch would indicate that you may wish to argue the mat' a r orally. If you should wish to make an oral argument fnd will so advise the Board, it will set such argument 10:30 a.m., Monday, March 12, 1945, at its offices Washington, D. C. "Kindly advise the Board as promptly as possible." Approved unanimously. Letter to Honorable Robert F. Wagner, Chairman, Committee on a4t1 Currency, United States Senate, reading as follows: to, "This refers to your request of February 13, 1945, 8 Pinion with respect to the merits of the bill a; 'To amend section 13b of the Federal Reserve Act, a.Mendedt, which was introduced by you on February 12. to this bill would authorize the Federal Reserve Banks kaparantee financing institutions against loss on loans piir ,,to business enterprises or to make commitments to pereuase such loans from financing institutions. The spec?ntage of the loan to be guaranteed would vary with certetlfie cases, but in no case could it exceed 90 per In other words, the commercial bank would be reto assume at least 10 per cent of the risk invol -ved in any loan. oilr:It will be recalled that the Baruch-Hancock Report 19/.1 and Postwar Adjustment Policies of February 19, -*9-, recommended that the Federal Reserve System's 314 2/26/45 —5- authority to make industrial loans or commitments be ex— panded and liberalized to provide a permanent source of ?redit for small and medium—sized enterprises, such loans to be made in such a way as to supplement and not to com— pete with private investment. As you know, the Wagner— thee Bill in the last Congress, which was substantially same as S. 511, was strongly recommended by Honorable iral A iles F. Byrnes, Director of War Mobilization and Recon1 rel°n. In his report to the Congress dated January 1, 4./45, it is stated on page 14: 'Small business has been the backbone of American prosperity. Its future requires the establishment of a readily available source Of credit. The Wagner—Spence bill has this Purpose in view. In revoking the present au— thority of the Federal Reserve banks to make loans direct to industry, it substitutes au— thority for them to guarantee the principal and interest of loans by commercial banks to business enterprise. It, or other forms of legislation to this end, deserves the immediate consideration of the Congress.' The Board believes that in many cases the financial needs th of worthy industrial enterprises, particularly during reconversion period, will represent degrees of credit hat banks ordinarily should not be expected to assume. Such I. :" needs may be met either by encouraging the private bank— and credit system of the nation to perform the task or IZg,s y r urther expansion in direct lending by the Government. The 8?ard emphatically favors the former course. taxa, he bill S. 511 would authorize the Federal Reserve 41,1,1 to guarantee, up to 90 per cent, loans made by private raak '-rig institutions to business enterprises, rather than to eel ;direct loans to such enterprises. Thus, the Federal Re— ba,,i!, Banks would not be in competition with the private 111g system. On the contrary, the bill would encourage a; eater -0.stem • flow of funds from the private banking and credit riot Into those marginal credit risks which banks would me without a guarantee. All loans an would originate With Tat;yoanks or other private financing institutions. Conse— (teenQY the operation of this plan of financing would be e0017,11tralized throughout the United States, but with the cooped of the Federal Reserve Banks and under the wi?su 3-15 2/26/45 —6— n, m5 'eneral supervision of the Board of Governors of the rederal Reserve System. A s "No new appropriation would be required by this bill. aPPropriation made by Congress in 1934, amounting to t , 39,000,000 would be adequate to guarantee a total of more "4r1 $500,000,000 of loans outstanding at any one time. B„_ "Because of the experience of the Federal Reserve ,T's in this field, particularly in connection with the of the V—loan program inaugurated under e President's Executive Order No. 9112 and the more re— program authorized by the Contract Settlement Act + °f 1944, the guaranteeing, up to 90 per cent, of loans vo buslness enterprises contemplated by this bill could be : 116 into effect without delay and the credits consummated .Xpe ditiously. sub. "In further explanation of the Board's views on this there is enclosed a copy of a letter dated De18, 1944, which the Board addressed to Senator James 1e,„MurraY, Chairman of the Special Committee to Study Prob— ig of American Small Business, in reply to a circular be 6sr which was sent by Senator Murray to individual mem,0,1'8 of the Board of Governors asking for expressions of on reconversion credit legislation for small busi— ,iess • fall. "For the reasons above stated, the Board of Governors '°r8 S- 511 and hopes that it will be enacted." rthe ceject, Approved, Mr. McKee not voting. Letter to Mr. Creighton, Chairman of the Federal Reserve Bank qt08,t, cn, reading as follows: and "Reference is made to your letters of January 30 4' ebrua,y -- 19, 1945, with regard to the action taken ?;.the board of directors on January 29, 1945, in author— the remodeling of the present building and construc— ,f?fl of an extension thereof on the land purchased last " 8..r on Pearl and Milk Streets. or "The Board has considered the matter in the light yo,11.? building plans and the information submitted with -Letters and will interpose no objection to the ah diture of approximately $21000,000 as outlined in the epro Ximate budget furnished by the architects. It is ex— 316 21124/45 —7— "”sumed that your Bank is satisfied that these plans 11111.furnish the additional floor space and improved w?rkIng conditions which will be needed in order to proNrjde adequately for the performance of the Bank's func41°ns. It is, however, understood that your Bank connolates deferring the execution of this project until tisre appears to be such a change for the better in manIle°17er and material conditions as to justify beginning the nstruction work involved and that you will also follow : e Procedure of obtaining competitive bids from a careri..,, :1-1-1.Y selected list of qualified firms, awarding the conto the lowest bidder. ad . "It will be appreciated if you will keep the Board vlaed of important developments in connection with this Program.ft j Approved unanimously. Memorandum dated February 26, 1945, from Mr. Hooff, Attorney, °ifle that there be published in the March 1945 issue of the Fecierea Reserve Bulletin a statement in the form attached to the memo11144141Nith respect to the following subject: Real Estate Loans Farm and Business Loans to Veterans Approved unanimously. Thereupon the meeting adjourned. areA kY) Secretary. ed: Chairman.
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