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Minutes for
To:
Members of the Board
From:
Office of the Secretary
February
3, 1956
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.
B
If you were not present, please initial in column
s.
minute
the
below to indicate that you have seen
Chin. Martin
Gov. Szymczak
Gov. Vardaman
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
238
Minutes of actions taken by the Board of Governors of the
Federal Reserve System on Friday, February 3, 1956.
The Board met
in the Board Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Szymczak
Vardaman
Mills
Robertson
Shepardson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr:
Mr.
Mr.
Carpenter, Secretary
Kenyon, Assistant Secretary
Fauver, Assistant Secretary
Thurston, Assistant to the Board
Riefler, Assistant to the Chairman
Thomas, Economic Adviser to the
Board
Vest, General Counsel
Young, Director, Division of Research
and Statistics
Sloan, Director, Division of ExRminations
Johnson, Controller, and Director,
Division of Personnel Administration
Hackley, Assistant General Counsel
Hostrup, Assistant Director, Division
of Examinations
The following matters, which had been circulated to the members
Of the Board, were presented for consideration and the action taken in
each instance was as stated:
Memorandum dated January 25, 1956, from Mr. Young, Director, Diyision of Research and Statistics, recommending the appointment of Frank
ge Leeuw as Economist in that Division, with basic salary at the rate of
rf,c
'0)040 per annum, effective as of the date on which he assumes his duties.
Approved unanimously.
2/3/56
-2-
Memorandum dated January 24, 1956, from Mr. Sloan, Director, Division of Examinations, recommending the appointment of Jerry B. Riley as
Assistant Federal Reserve Examiner in that Division, with basic salary at
the rate of *5,440 per annum, effective as of the date on which he assumes
his duties.
Approved unanimously, together
with the recommendation contained in
a second memorandum from Mr. Sloan,
also dated January 24, 1956, that the
total number of positions on the field
examining staff of the Division of
Examinations be increased from 37 to
4o by increasing the total number of
Senior Federal Reserve Examiner, Federal Reserve Examiner, and Assistant
Federal Reserve Examiner positions
from 34 to 37.
Memoranda recommending that the basic annual salaries of the following employees be increased in the amounts indicated:
Effective February 12, 1956
Name and title
Division
Basic annual salary
To
From
Research and Statistics
,r';,9,635
Arthur L. Broida,
Economist
Lorman C. Trueblood,
Economist
Charles A. Yager,
Economist
10,535
10,750
6,390
6,605
3,670
3,755
4,345
4,48o
3,170
3,255
3,170
3,255
Bank Operations
Dorothy L. Duvall,
Statistical Clerk
Administrative Services
Ethelyn M. Palmer,
Secretary
James E. Love,
Laborer
William R. Smith,
Laborer
2/3/56
-3-
Effective February 26, 1956
Name and title
Division
Basic annual salary
From
To
Office of the Secretary
E. Betz Poeppel,
Chief, Records Section
w,465
7,68o
Approved unanimously.
Memorandum dated January 25, 1956, from Mr. Leonard, Director, Division of Bank Operations, recommending that Grace Warren be transferred
from the position of Stenographer in the Division of Administrative Services to the position of Clerk-Stenographer in the Division of Bank Operations, with no change in her present basic salary at the rate of ,7,3,175
Per annum, effective as of the date on which she assumes her new duties.
Approved unanimously.
Memorandum dated January 26, 1956, from Mr. Young, Director, Division of Research and Statistics, recommending the continuance during 1956
Of the appointments on a temporary contractual basis of Messrs. Alexander
Sachs, independent business consultant, Jacob Viner, of Princeton University, and Edward S. Shaw, of Stanford University, as consultants for purPoses of the Exploratory Committee on Longer-term Financial Problems,
with compensation at the rate of *50 per day for each day worked for the
Board, either in Washington, D. C., or outside the city, plus a per diem
in lieu of subsistence for the amount of time spent in a travel status in
connection with their assignments and transportation in accordance with
the Board's travel regulations, and with the understanding that for purPoses of travel the headquarters of each consultant would be either his
home or place of business.
Approved unanimously.
Memorandum dated January 24, 1956, from Mr. Young, Director, Division of Research and Statistics, recommending continuance during 1956 of
the appointment on a temporary contractual basis of Dr. Ruth P. Mack,
economist and member of the staff of the National Bureau of Economic Research, as a consultant for work on the department store trade statistics
studies being conducted by the System Subcommittee on Department Store
Statistics, with compensation at the rate of *50 per day for each day
worked for the Board, either in Washington, D. C., or outside the city,
Plus a per diem in lieu of subsistence for the amount of time spent in a
travel status in connection with her assignments and transportation in
241
2/3/56
-4-
accordance with the Board's travel regulations, and with the understanding that for purposes of travel Dr. Mack's headquarters would be either
New York, New York, or Thetford, Vermont.
Approved unanimously.
Memorandum dated January 27, 1956, from Mr. Bethea, Director,
Division of Administrative Services, recommending that an attached letter
be sent to Grace E. Cormany setting forth the terms and conditions under
Which she would be permitted to operate the beauty shop in the Federal
Reserve Building.
Approved unanimously.
Letter to Mr. Stetzelberger, Vice President, Federal Reserve Bank
of Cleveland, reading as follows:
In accordance with the request contained in your
letter of January 24, 1956, the Board approves the reemployment of Donald Claar Hoenstine as an assistant examiner for the Federal Reserve Bank of Cleveland. Please
advise as to the date upon which the appointment is made
effective.
Approved unanimously.
Letter to Mr. Koppang, First Vice President, Federal Reserve Bank
Of Kansas City, reading as follows:
In view of the circumstances described in your letter of January 24, 1956, the Board of Governors approves
the payment of salary to Mr. Wilbur T. Billington, Industrial Economist, for the period ending December 31,
1956, at the rate of 9,300 per annum which is )66o below
the minimum established for the grade in which his position is classified.
Approved unanimously.
Letters to the Board of Directors, Wachovia Bank and Trust Company,
Winston-Salem, North Carolina, reading as follows:
Pursuant to your request submitted through the Federal Reserve Bank of Richmond, the Board of Governors of
the Federal Reserve System approves the establishment of
2/3/56
-5-
a branch on the north side of U. S. Highway No. 1, about
three-fourths of a mile north of Raleigh, North Carolina,
at the intersection of a road leading to Raleigh's Farmers
Market, by Wachovia Bank and Trust Company, Winston-Salem,
North Carolina, provided the branch is established within
one year from the date of this letter and the approval of
the State authorities is in effect as of the date the
branch is established.
Pursuant to your request submitted through the Federal Reserve Bank of Richmond, the Board of Governors of
the Federal Reserve System gives its written consent, under the provisions of Section 18(c) of the Federal Deposit
Insurance Act, to the merger of Wachovia Bank and Trust
Company, Winston-Salem, North Carolina, with City Indusand aptrial and Savings Bank, Greensboro, North Carolina,
es
proves the establishment by the continuing bank of branch
Bank
s
Saving
and
rial
at the present location of City Indust
at Gaston and Greene Streets, and at the corner of Greene
and West Sycamore Streets, Greensboro, North Carolina, proacvided (a) the merger is carried out substantially in
, a
parties
cordance with the merger agreement between the
the
(b)
Bank;
copy of which was submitted to the Reserve
t
merger and the establishment of the branch at the presen
ed
effect
is
location of City Industrial and Savings Bank
the
within six months of the date of this letter; and (c)
s
Street
e
Sycamor
branch at the corner of Greene and West
.
letter
this
of
is established within one year from the date
Approved unanimously, for
transmittal through the Federal
Reserve Bank of Richmond.
Bank, Lubbock,
Letter to the Board of Directors, American State
Texas, reading as follows:
to
With respect to your letter of January 3, 1956,
ors
the Federal Reserve Bank of Drillas, the Board of Govern
the
across
approves the establishment of a branch directly
n State
America
by
rs
quarte
street from the main banking
Bank, Lubbock, Texas.
11
243
2/3/56
-6Approved unanimously, for
transmittal through the Federal
Reserve Bank of Dallas.
Messrs. Johnson and Hostrup then withdrew from the meeting.
There were presented telegrams to the following Federal Reserve
Banks approving the establishment without change on the dates indicated
Of the rates of discount and purchase in their existing schedules:
Boston
Atlanta
St. Louis
San Francisco
New York
Philadelphia
January 30
January 30
January 30
February 1
February 2
February 2
Approved unanimously.
Reference was made to a draft of letter to Mr. William J. Korsvik,
Acting Secretary of the Federal Advisory Council, which had been circulated
to the members of the Board, requesting that the members of the Council
express their views at the next meeting of the Council with the Board concerning the proposal to submit to the Congress an amendment to section 25
Of the Federal Reserve Act which would permit the Board to issue regulations expanding the powers of foreign branches of American banks beyond
those permitted by present law.
Governor Robertson suggested that the draft of letter be revised
to delete the portion concerning discussion of the matter with the Presidents of the Federal Reserve Banks at the joint meeting of the Board and
the Presidents on January 251 1956.
There being agreement with
this suggestion, unanimous
244
2/3/56
-7approval was given to a letter
to Mr. Korsvik in the following
form:
For a number of months the Board of Governors has been
studying changes that might be made in its regulations relating to the operations of corporations organized pursuant
to sections 25 and 25(a) of the Federal Reserve Act. A report of a special System committee appointed to study this
matter has suggested, among other things, that section 25
of the Federal Reserve Act be amended to permit the Board
of Governors to issue regulations which may authorize foreign
branches of American banks to exercise such further powers
beyond those permitted by present law as may be usual in connection with the transaction of the business of banking in
the places where foreign branches are located.
At a recent meeting of the Board the staff was requested
to draft a memorandum which could be used to submit such an
amendment to the Congress and which would discuss the proposal
and the reasons therefor. Attached are 15 copies of the draft
of statement prepared in response to the Board's request.
It will be appreciated very much by the Board if the members of the Council will consider this matter in the light of
the information contained in the draft of statement and be
prepared to express their views with respect to it at the
meeting of the Council with the Board in February.
There had been circulated to the members of the Board a draft of
letter for the signature of Chairman Martin to Mr. Reese H. Taylor, President of the Union Oil Company of California, Los Angeles, California, and
a Class B director of the Federal Reserve Bank of San Francisco, concerning certain conditions imposed in connection with a Regulation V loan by
Bank of America National Trust and Savings Association, San Francisco,
California, to pacific Airmotive Corporation, a substantial stock interest
("b1
0
-u-
2/3/56
in which is owned by Union Oil Company of California. In a letter addressed to Chairman Martin under date of January 13, 1956, Mr. Taylor
commented adversely on a recommendation made by the Reserve Bank's Los
Angeles Branch regarding subordination to the V-loan of a term loan made
to Pacific Airmotive Corporation by the Union Oil Company.
The proposed
reply would review the history of the case and point out that the recommendation of the Los Angeles Branch was in accord with the views of the
guaranteeing agency.
Governor Vardaman stated that he regarded the proposed letter as
a satisfactory response.
In view, however, of Mr. Taylor's service as a
Federal Reserve Bank director, he suggested that it might be desirable
for Chairman Martin to discuss the matter with Mr. Taylor by telephone
before the letter was sent.
In an ensuing discussion, during which other members of the Board
indicated that they also considered the proposed letter satisfactory,
Chairman Martin commented that he was going to make a trip to the West
Coast for another purpose later this month and that this might afford him
an opportunity, to talk to Mr. Taylor personally concerning the V-loan.
He
suggested, therefore, that the letter not be sent at this time.
There was unanimous agreement
with Chairman Martin's suggestion.
There had been sent to the members of the Board copies of a draft
Or proposed letter for the signature of Chairman Martin to The Honorable
246
2/3/56
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L. H. Fountain, Chairman of the Intergovernmental Relations Subcommittee
Of the House Committee on Government Operations, reading as follows:
This is in reply to your letter of January 7 asking
the Board's cooperation in a study your Subcommittee is
making of intergovernmental relations between the United
States and the States and municipalities.
The activities of the Federal Reserve System involving direct intergovernmental relationships are presently
confined to bank supervision and examination. Such activities do not involve the use of appropriated funds. The
questionnaire forwarded with your letter, therefore, does
not seem to apply. For the purpose of informing your Subcommittee in respect to these supervisory and examination
relationships, a summary of them is attached.
One other area of the Report of the Commission on Intergovernmental Relations which directly related to the
activities of the Federal Reserve System is one in which
primary responsibility at the Federal level seems clearcut. On page 63 of the Commission's report it states,
"The National Government is the natural manager of the
monetary and credit system." This is the principal task
of the Board of Governors in administering the operations
of the Federal Reserve System. In its efforts to facilitate a flow of credit and money that will foster orderly
economic growth and a stable dollar, the System is acutely
conscious that it affects every level of governmental organization and private enterprise.
In commenting on the Commission's report in another
connection the Board stated:
"The fact that the supervision of banks in the
United States is divided between the Federal and
State Governments is the principal point of functional relationship of interest to the Board. However, the Commission makes no recommendations as to
changes in this relationship. It is clear from
statements contained in the report that its recommendations contemplate that (1) the organization of
the Federal Government having to do with monetary
and credit and banking problems would remain
2/3/56
-10substantially unchanged, and (2) the Federal Government can contribute most to the solution of the
fiscal problems raised in the report by promoting
economic stability.
"It would appear, therefore, that while the
recommendations of the Commission, if carried out,
might affect the fiscal problems of the Federal
Government and kinds and amounts of securities offered in the securities markets, they would not
affect in any material way the functioning of the
monetary system. The policy questions raised by
the report and manner in which they should be decided are outside the field of the Board's responsibilities. Accordingly, the Board does not have
any comments or suggestions to make with respect
to the Commission's recommendations."
The letter was approved
unanimously.
Messrs. Sloan and Hackley then withdrew from the meeting.
Prior to this meeting, there had been sent to the members of the
Board, pursuant to the understanding at the meeting on January 31, 1956,
a revised draft of testimony to be given by Chairman Martin before the
Joint Committee on the Economic Report next Tuesday, February 7.
In ad-
dition to the suggested principal statement, the material included drafts
Of statements which might be made by the Chairman in the event of questions concerning (1) authority for the regulation of consumer credit, and
(2) a recommendation in the President's Economic Report regarding amendment of certain current provisions of law relating to operations of the
Federal National Mortgage Association.
Mr. Thurston stated that Governor Vardaman had furnished a number
Of suggestions for changes in the main statement which would be taken into
2/3/56
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consideration in preparing another revised draft.
At the conclusion of a further discussion, which was concerned
Principally with the language of the provisional statement on consumer
credit controls, it was understood that a revised draft of this statement also would be prepared for distribution to the members of the Board
Prior to consideration at the meeting on Monday, February
6.
Messrs. Thurston, Riefler, Thomas, and Young then withdrew from
the meeting.
The following draft of letter for the signature of Chairman
Martin to The Honorable Brent Spence, Chairman of the House Committee
on Banking and Currency, had been circulated to the members of the Board
Prior to this meeting:
This is in response to your telephone request for the
Board's views on the bills S. 1188, to amend Section 5240
of the Revised Statutes, relating to the examination of
national banks by the Comptroller of the Currency, and
S. 1736, to amend section 5146 of the Revised Statutes
with respect to the place of residence of directors of
national banks.
Enclosed are copies of the Board's reports made last
year on these bills to the Senate Banking and Currency
Committee.. The Board has not changed its views with respect to these bills.
Governor Robertson noted that the Board's letter of April 25,
1955, to the Chairman of the Senate Banking and Currency Committee stated
that the Board favored the enactment of S. 1183.
While it was his origi-
nal. preference that that letter be phrased in terms that the Board would
04
2/3/56
-12--
have no objection to the enactment of the legislation, he said that he
would take no exception to the proposed letter to Chairman Spence in view
Of the wording of the previous letter.
Thereupon, the letter to
Chairman Spence was approved
unanimously.
Governor Robertson stated that yesterday he received a telephone
call from Mr. Joseph H. Coleman, President of First Bank Stock Corporation, St. Paul, Minnesota, who said he wished to advise that early next
week the Corporation would take over six banks on an exchange of stock
basis.
The banks to be taken over included the Northern Minnesota Na-
tional Bank of Duluth, the Duluth National Bank, The First National Bank
Of Virginia, The First Nationn3 Bank of Hibbing, and The Worthington National Bank, all in Minnesota, and The Batavian National Bank of La Crosse,
Wisconsin•
He said that the holding company apparently was expanding in
view of the possible passage of bank holding company legislation, that
the intent of the call was to make a record that the Board had been given
advance information, that there seemed to be no action which the Board
should take, and that he had requested the Division of Examinations to
PUt in the files a memorandum of the telephone conversation and the circumstances involved.
The members of the staff then withdrew and the Board went into
executive session.
td
250
2/3/56
—13—
The Secretary later was informed
that during the executive session
unanimous approval was given to the
following:
1. A letter for the signature of
Mr. Sprecher, Assistant Director, Division of Personnel Administration,
to Mr. Robert L. Sammons, 55 Washington Street, Santurce, Puerto Rico,
reading as follows:
In connection with your application for employment with
the Board of Governors as Chief of the Latin American Section
of the Division of International Finance, we would like to
have you come to Washington for a day or two at our expense
for further interviews with Members of the Board and its staff.
,
The date you would like to make the trip could, of course
suit your own convenience.
The Board of Governors will, of course, pay your transsubsistence
portation and a per diem allowance in lieu of
regulations
travel
equal to (1;12. For your information, the
Pullman
with
er
togeth
provide for first class rail passage,
by
travel
for
or
accommodations not in excess of a roomette,
and
trains
fare
air. Additional fare for travel on extra
advantage of any
planes is not allowable, and you should take
trip tickets.
roundsaving available through the purchase of
space should
ne
airpla
Receipts for Pullman accommodations or
rsement
reimbu
your
be retained and submitted in support of
plane.
by
travel
claim. We assume that you would probably
a conWe would appreciate it if you will let us know
you
time
imate
approx
venient time for you, giving us the
ure for
depart
your
would arrive in Washington and the time of
ements
arrang
le
your return trip, so that we may make suitab
.
for interviews and also for hotel reservations if you desire
We are looking forward to meeting and talking with you.
2. The request contained in a memorandum dated January 27, 1956, from
Mr. Johnson, Personnel Security Officer,
2/3/56
-14that a full-field investigation be
authorized for Mr. Benner, Assistant Director, Division of Examinations, in order to clear him for
access to classified security information.
3. A letter for the signature of
the Chairman to Mr. Harold W. Dodds,
President, Princeton University,
Princeton, New Jersey, reading as
follows:
The Board of Governors is gratified to learn from your
letter of January 19, 1956, that Arthur B. Hersey, a member
of the Board's staff, has been provisionally recommended
for a Rockefeller Public Service Award.
In reply to your question concerning our retention of
Mr. Hersey on a salary basis for the duration of his proposed project, I have taken up the matter with the Board of
Governors, and they are prepared to carry Mr. Hersey's
salary during the period of the award.
The meeting then adjourned.
Secretary's Note: Pursuant to the
recommendation contained in a memorandum dated January 24, 1956, from
Mr. Sloan, Director, Division of
Examinations, Governor Balderston
today approved on behalf of the
Board the appointment of Cynthia C.
Jester as Clerk-Typist in that Division, with basic salary at the
rate of 43,260 per annum, effective
as of the date on which she assumes
her duties.
@FedFRASER