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A meeting of the Board of Governors of the Federal Reserve aYstem With • the Presidents of the Federal Reserve Banks was held in the Offices of the Board in Washington on Tuesday, February 29, 19/111, at 4:15 p.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman (last part of meeting) Szymezak McKee Draper Mr. Evans Mr. Morrill, Secretary Messrs. Paddock, Sproul, Williams, Fleming, Leach, HcLarin, Young, Davis, Peyton, Leedy, and Gilbert, Presidents of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, and DaJlas, respectively Mr. Clerk, First Vice President of the Fed— eral Reserve Bank of San Francisco Mr. Sienkiewicz, Secretary of the Presidents' Conference Chairman Eccles suggested that Mr. Sproul, as Vice Chairman of the Presidents' Conference in the absence of Chairman Day, might to Present any communications that the Presidents' Conference u to bring to the attention of the Board of Governors. Itr. Sproul stated that the Presidents' Conference had met Illeleveland on Saturday and Sunday, February 26 and 27, and had NlellIcled the 28. consideration of its agenda in Washington on Monday, He said that there were some matters upon which recom— tlititIciEtti°11s had been formulated for the consideration of the Board of 321 21229/44 —2— Gove,.„ some actions taken or matters considered of which it was de— red that the Board of Governors be advised, and some other matters which would be referred to merely for purposes of discussion. He also 444 that it was understood that any matter mentioned might be dis— ells ,sA,4 -- at this Conference or might be reserved for more mature consid— eratio 4 by the Board of Governors and for discussion at some future tiale if the Board preferred. Ur. Sproul then read the following statement entitled "Modifi— cation ln benefits to improve personnel at the Federal Reserve Banks": "As a means of improving the personnel at the Re— Banks throughout the Retirement System, the Confer7,"agreed that the recommendations of the Retirement , kdronunittee to the Executive Committee of the Board of i'3_11stees of the Retirement System of the Federal Reserve +7:Lnks be approved. These recommendations as stated in ;le i report of the Retirement Committee dated February 18, J-V44, are as follows: 1. That some provision be made to enable ex— ecutives of Federal Reserve Banks employed relatively late in life to receive larger retirement allowances than those available under the regular retirement provisions of the Retirement System. 2. That the benefits be increased for higher salaried officers and employees, as part of the System's program of obtaining and retain— ing exe&utive officers of greatest compe— tence (Mr. Fleming asked to be recorded as not voting on this recommendation). 3. That the proposal set forth on page 25 of the Presidents' Conference Committee report of June 25, 1943, re special retirement benefits for members involuntarily sepa— rated from service after age 55, be ap— proved. "The Conference agreed to request the Board of Gover— Ilors to approve these recommendations." 11ve Ser 322 2k9/44 -3With respect to the procedure by which this matter came be- fore the Presidents' Conference and now was presented to the joint 8e8si°n of the Governors and the Presidents, Mr. Sproul pointed out that, he unusual conditions connected with the adoption of the Presidellt8t Conference report last fall on the Retirement System and the 11138equent reorganization of the governing bodies of the Retirement 4.3tem led to this particular procedure which he did not expect would be f,.v"-„ lowed in the future. He anticipated that in the future any 131"oPosed changes in the rules and regulations of the Retirement Syscome to the Board of Governors through the Board of Trustees (It the Retirement System. McKee inquired whether the elimination of the $3,750 limi- tef. -1.on 'Ton the pension portion of the normal retirement allowance Was c°nsidered to be more important than raising the basic salary urn!tat -"Al to 20 0or t25,030. Mr. Sproul pointed out that the recom- lenclat,' 1c)ns were in the alternative, either to eliminate the 3,750 or to it proportionately in accordance with such raise in the salary 4111it atlon as might be approved. Sproul then read a statement on the subject of "Insurance hare, el lAail ail and Express Losses", as follows: an "The Conference discussed the report of the Insurtece Committee and the outline of the plan to share registhred mail and express losses. This plan provides that e Present agreement should be amended or revised to 32,4„3 2/29/44 -4- "include the sharing of losses incident to shipments of registered mail and express of paper currency, coin, and securities that are the property of the Federal Reserve Banks or for which they ordinarily assume the expenses of transportation. "Various possible alternatives were considered as a basis for compromise. Among these were: (a) To accept the suggested plan, but put it into effect at some future date after the termination of hostilities; (b) To accept the plan on condition that effective machinery for investigating and salvaging of losses will be worked out before putting the plan into operation; and (c) To modify the proposed plan to provide that the Reserve Banks assume risk for shipments of new currency from Washington to the Reserve Banks but not for shipments between Reserve Banks and member banks. ter a prolonged discussion, it was voted that the proplan to share registered mail and express losses be 2cepted and approved, and that it is to become operative :?en the necessary administrative and salvaging organiza0.0n is set up. "The votes were divided, eight Presidents being for " 13 resolution while four Presidents were against it." Ikr* St11. ' -'°u1 stated with reference to the division of 8 to 4 in the vote or the Presidents that, so far as the 4 Presidents were concerned, they the have to go back to their boards of directors and advise them of Con eideration of the subject at the Presidents' Conference and as- terta. In what position their respective boards of directors would take the light of the action of the Presidents' Conference. Mr. McKee inquired whether there was any reason for considera- tiOn f the matter by the Board of Governors until the Board had been 324 2/.29/44 —5— informed as to the position of these 4 Banks. Mr. Sproul stated that n the ,, anks in question were Boston, New York, Chicago and San Francisco; that they had tried to find a compromise solution of the problem, but that there was no compromise Ithich would be as acceptable to the maitlIbitY of the Presidents as the adoption of the plan. Mr. Eccles stated that it seemed to him that the first step 17°111d be for the boards of directors to consider the report and to 0e" t line their course of action. He thought that the Board, feeling its responsibility for general supervision of the System and for the very large eXPenditures involved in the continuation of the present practice as Compared with very substantial savings to the System if the plan Ifer'e adopted, might take the responsibility of requesting the Banks to adopt the program that had been accepted by the majority; but that if 4 CilleStiOn were then raised by the Banks as to the authority of the 11°41'd to take that step the only recourse might be to ask Congress for a clarification of the matter. Mr. Sproul stated that he did not believe that the boards of clil'ect°rs of the Banks would want to press the matter to such a point aa , that -" out that possibly the Board would wish to consider whether there was further information that might be given to them. He added that was One matter that particularly concerned the Presidents who voted a gainst the plan and that was the determination of the time when there Moja., become effective in view of war and possible postwar conditions. 325 2iV44 -6Mr. Ransom entered the meeting at this point, having been nec- easa ilY absent on other pressing official business. The next matter which Mr. Sproul referred to was the proposed disclaimer with respect to the property of the Board of Governors in Ilashington. He read the following statement: "Various aspects and implications of disclaiming the title of ownership in the Reserve Board Building and lot in Washington were considered. "The general consensus was that there was no objecon to giving such a disclaimer, although the question "las raised as to a certain phrase in the form of the disclaimer. , "The subject is to be reviewed and considered at the %Mint meeting with the Board of Governors." Thereupon Mr. Dreibelbis was called into the meeting and a Maither of questions were asked. The first question was whether the cellbtient Went far enough to clear up any claim for back taxes. Mr. 'ei 1)1be1 bis stated that he felt that it did everything that could be (1Q11Le in that direction and that it was considered by the Board of Com1448411ers and the Corporation Counsel of the District of Columbia that their acceptance of this document would eliminate any such claim. 415°111ted out that the document was in effect a disclaimer that the ?edel'al Reserve Banks ever had any right, title or interest in or to the property. The second question was whether only one document might be3tecuted instead of 12, and Mr. Dreibelbis stated that it was in- ttided that only one document should be executed by the 12 Banks. The thil'd question related to the phraseology of the disclaimer. The sugttoll was made that the disclaimer should run to the Board of Governors 326 212W44 -7- or the Federal Reserve System instead of to the United States of America. Mr. Dreibelbis said that such a change in phraseology would not be s atisfactory to the District of Columbia authorities and there followed a discussion of the language used. At the conclusion of the discussion it appeared that all questions had been disposed of to the satisfaction of the members of the Presidents' Conference, and the st atement was made that the document would be promptly executed bY the 12 Banks. Mr- Sproul then took up the question of legislative proposals for financial aid to business and read the following statement: "Consideration was given to various legislative proj P sals to provide lending facilities to business, paralcularly during reconversion, whenever such facilities not available through the existing credit channels. opecial attention was given to (a) The provisions contained in the so-called Mead proposals, and (b) Suggestions made to War Mobilization Director Byrnes by the Chairman of the Board of Governors. The was that the question of providing additional 0ac4 4 si -1-Lities for financial aid to business during reconverBacT and afterward is of direct concern to the Reserve w rit's) and that the Presidents of these Banks, as prini?als, should have the opportunity to express their views th there are any views to be expressed in the interest of b,se SYstem. It was agreed that this subject should again i ;reviewed with the Board of Governors at the joint meet.n accordance with the action of the Presidents' Conrence in June 1943." Co 4tter, wh. ctlon with the foregoing statement Yr. Sproul referred to a .Ch the Secretary of the Presidents' Conference had addressed t ° the 11, uard of Governors on August 21, 1943, quoting the action taken 327 2I'W44 at the meeting at Chicago on June 27, 1943. Chairman Eccles reviewed the recent history of the consideration of various proposals. He stated that the Board had not participated in the drafting of the lea'cl Proposals and that he had merely expressed a willingness to prePare and submit a bill in conformity with the ideas he had expressed if he --were called upon to do so. He thought that because of the political intere ,„.4. , Qt, ln financial aid to small business enterprises something would be clone legislatively. 4 If the Board were requested to prepare and sub- bill or if the situation should develop to the point where it 645Peared that the Board should offer a bill, he would be glad to send e°11/ee of the proposed bill to the Presidents and to ask them for theil' suggestions, their views and their criticisms. He said that he tholIght that if a situation should develop where the System would prefer-to have nothing to do with such proposals, it would be a mistake 1411se certainly, in his opinion, a program would be developed and 4the System were opposed its execution would be placed elsewhere. At this point Mr. Ransom said that Chairman Spence, of the ktlatin • g and Currency Committee of the House of Representatives, had ed Mr. Ransom that he was very much interested in, and impressed this Portion of the Baruch Report and that if the Board should -4at411. 12e its ideas he would like to have an opportunity to sponsor Pro, y°sal, feeling that it would have a cordial reception by the eon,-e- Chairman Eccles said that he would feel that it would be 328 2/29/44 -9first to communicate with Messrs. Hancock and Baruch before tlkng such action. Mr. Sproul said that he felt that there had been nothing in the discussions which indicated a tendency on the part of the Presicient8 to oPpose such proposals or to take the position that the Federal D. "eserve System should have nothing to do with them. The next subject upon which Mr. Sproul reported was that of rstem research organization and function. He read the following etatement: ti zzatem dizisory Biaaaarsa_Cmagjttaat G,s, "The Conference discussed the request made by Dr. A nlenweiser with respect to the desirability of creatVg an advisory committee to work with him in considerj-ng research matters at the national level. tee "After consideration of the report of the Commitc11 and Statistics, the Conference approved ( 7:n; ), the ;II. proposal as a workable program: (a) That the functions of the executive committee of the Presidents' Conference Subcommittee be broadened to include serving under Dr. Goldenweiser's chairmanship on a System Research Advisory Committee, with one representative of the Reserve Banks to act as Vice Chairman; (b) That the Subcommittee on Research and Statistics of the Presidents' Conference and its executive committee continue to function as at present, under the Presidents' Committee on Research and Statistics; and (c) That provision be made for rotation of membership on the executive committee and that its officers be selected annually." 329 2/29/44 —10— Ur. Sproul reported that Dr. Goldenweiser had been called itlto the Presidents' Conference yesterday afternoon to discuss the research program. Chairman Eccles then outlined his conception of the Proposal with respect to the formation of a System committee. He sEqd that in his view of the matter there should be a committee which 1'4)111d serve in an advisory capacity both to Dr. Goldenweiser and to the Federal Reserve Banks, with Dr. Goldenweiser acting as its chair— He said that the principal objective which he had in mind related t0 the research work falling under the direction of the Board of Gov— Upon which he felt that it was desirable to have the advice of celnikittee of System economists. He added that this was not intended tOtake the place of any research committee that the Presidents might 111`th to h in connection with such work as they might consider de1r4ble froM the standpoint of the Federal Reserve Banks. He pointed (311t that ny a research projects that the Banks might wish to adopt would be ilipiect to the conditions laid down in the Board's letter addressed to each Federal Reserve Bank in 1936 on the subject of the research or— at the Federal Reserve Banks. Mr. Davis expressed the opin- 1 that there should be no difficulty in formulating a plan to carry °Ift the Chairman's suggestions within the present framework. Following a further discussion it was informally understood greed that the matter should be referred back to Mr. Williams, ae eh klq e.11'111all of the Presidents' Conference Committee on Research, to 330 21129/44 -11- 143lit the matter out in cooperation with Dr. Goldenweiser, with broad latdtude to provide for a method of rotating the membership of the committee. Chairman Eccles inquired of Mr. Evans and the other mem- bers of the Board whether they had any suggestions. Yr. Evans re- that he thought the matter could be worked out along the lines auggested and no suggestions were made by the other members of the Board. At this point it was decided to take a recess until the fol44ing day. Before taking the recess Mr. McKee suggested that the Pr'esidents give some consideration to the oroposal contained in the Pendillg bill H. R. 1818, upon which the Board had been asked for a N , which would amend existing law so that the expense of one ex" 444at1 °1 of National banks by the Comptroller of the Currency would be b0rrle by the Federal Deposit Insurance Corporation. Thereupon the meeting adjourned. Chairman.
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