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Minutes for To: February 5, 1958 Members of the Board From: Office of the Secretary Attached is a copy of the minutes of the s of the Federal Reserve System on Governor of Board 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. Othervisel if you were present at the meeting, please initial in column AL 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. Chm. Martin Gov. Szymczak Gov. Vardaman 1/ Gov. Mills Gov. Robertson Gov. Balderston x C410/3 G. Shepardson zepa.6 1/ In accordance with Governor Shepardson's memorandum of March 8, 1957, these minutes are not being sent to Governor Vardaman for initial. :39:3 Minutes of the Board of Governors of the Federal Reserve System on Wednesday, February 5, 1958. 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. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Kenyon, Assistant Secretary Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Leonard, Director, Division of Bank Operations Young, Director, Division of Research and Statistics Hackley, General Counsel Masters, Director, Division of Examinations Horbett, Associate Director, Division of Bank Operations Conkling, Assistant Director, Division of Bank Operations Noyes, Adviser, Division of Research and Statistics Dembitz, Research Associate, Division of Research and Statistics Solomon, Assistant General Counsel Hexter, Assistant General Counsel Hostrup, Assistant Director, Division of Examinations Davis, Assistant Counsel Request of First Bank Stock Corporation for additional time to submit proposed findings and conclusions and supporting brief (Item No. 1). In a letter dated January 30, 1958, Counsel for First Bank Stock Corporation, Minneapolis, Minnesota, requested for reasons stated an extension from February 7 to February 20, 1958, of the time for submission to the Hearing Examiner of proposed findings and conclusions and supporting brief in connection with the applications of that Corporation for 394 2/5/58 -2- determinations pursuant to section 4(c)(6) of the Bank Holding Company Act with respect to First Bancredit Corporation and First Service Agencies, Inc. A memorandum from Mr. Solomon dated February 3, 1958, copies of which had been sent to the members of the Board, recommended granting the request. Pursuant to this recommendation, unanimous approval was given to the order of which a copy is attached hereto as Item No. 1, with the understanding that copies would be sent to the applicant, the Hearing Examiner, and other appropriate parties. Request of Citizens and Southern National Bank for an interpretation of section 4(c)(4) of the Bank Holding Company Act (Item No. 2 A memorandum from Mr. Davis dated February 31 19581 copies of which had been distributed to the members of the Board, discussed a request by Counsel for the Citizens and Southern National Bank, Atlanta, Georgia, for an interpretation that the last clause of section 4(c)(4) of the Bank Holding Company Act would permit the bank's subsidiary, Citizens and Southern Holding Company, to retain ownership of shares of the American Southern Insurance Company. Section 4(c)(4) provides for the exemption from the divestment requirements of the Act of "shares lawfully acquired and owned prior to the date of enactment of this Act by a bank which is a bank holding company, or by any of its wholly owned subsidiaries." It being clear that Citizens and Southern National Bank was a bank holding company, that Citizens and Southern Holding Company was a 2/5/58 _3_ subsidiary of the bank within the meaning of section 2(d)(3) of the Act, and that shares of American Southern Insurance Company were acquired by Citizens and Southern Holding Company before the date of the Act, the question was whether Citizens and Southern Holding Company might properly be regarded as a "wholly owned" subsidiary of Citizens and Southern National Bank for the purposes of section 4(c)(4) in view of the fact that its shares are not directly owned by the bank itself but are held by trustees for the bank's shareholders. The Legal Division was of the opinion that, although the question was not free from doubt, it should be answered affirmatively, The memorandum, therefore, recommended expressing the opinion that Citizens and Southern Holding Company could retain its ownership of over 90 per cent of the shares of American Southern Insurance Company. Following comments by Mr. Davis, Mr. Hackley brought out that the last clause of section 4(c)(4) was included in the Bank Holding Company Act for the specific purpose of accommodating the Trust Company of Georgia. However, since the factual situation underlying the question Presented by Citizens and Southern National Bank was similar, it appeared that the exemption should likewise be considered applicable to that situation, Governor Robertson expressed agreement with the Legal Division's interpretation but suggested that this was a provision of the Bank Holding Company Act to which the Board should call attention in its report to the Congress concerning the Act. 2/5/58 After Mr. Hackley replied that this item was included among those which would be submitted by the Legal Division for the Board's consideration in formulating its report to the Congress, unanimous aalayal was given to the letter to the Federal Reserve Bank of Atlanta of which a copy is attached as Item No. 2. Messrs. Hostrup and Davis then withdrew from the meeting and Messrs. Koch, Associate Adviser, and Hald, Economist, Division of Research and Statistics, entered the room. Toyics for discussion with Federal Advisory Council (Item No. 3). There had been distributed to the members of the Board copies of a proposed letter to the Secretary of the Federal Advisory Council suggesting topics for discussion at the forthcoming meeting of the Council and at the joint meeting of the Board and the Council on February 18, 1958. At the instance of Governor Balderston, consideration was given to the possibility of suggesting also a discussion of reserve requirements, including possible changes in the reserve requirement structure. While it was agreed not to suggest such a topic for the agenda, it was understood that the subject might be brought up for discussion at the Joint meeting if interim developments should make it seem desirable to do so. Governor Balderston then expressed some concern about the scope of the suggested topics, since it occurred to him that they tended not to give full recognition to the complexity of current and prospective 2/5/58 .5.. problems in the area of monetary policy. He felt that it might be advisable as a matter of record, and also of benefit to both the Council and the Board, to cause the Council to consider and express its views on these matters of fundamental importance. In making these comments, Governor Balderston recognized the difficulty of phrasing appropriate topics for the agenda in such a way as to convey the intended meaning. As a possible alternative, Chairman Martin suggested that Governor Balderston might meet with the Council informally prior to the Joint meeting and express views along the lines of those he had just stated. Governor Shepardson then referred to the suggested topic which would request the views of the Council regarding appropriate credit Policies over the next three months and, with Governor Balderston's comments in mind, proposed that this topic be expanded to ask for the Council's opinion on how monetary policy might best be adapted to meet longer-run problems. It being agreed that an additional topic should be included for this purpose, unanimous approval was given to a letter to the Secretary of the Federal Advisory Council in the form attached hereto as Item No. 3. During the foregoing discussion Mr. Riefler withdrew from the meeting, Reserve requirements. The discussion of reserve requirements continued with a statement by Governor Balderston that in the light of 2/5/58 -6- views expressed at yesterday's meeting, he had drafted, with the assistance of members of the staff, certain observations concerning the American Bankers Association's proposed program relating to the structure of reserve requirements which the Board might want to consider stating if and when it should be decided to invite representatives of the Association to meet with the Board for discussion. The document, which was read by the Secretary, took up in order the five basic points of the ABA proposal and stated views with respect to each. It was understood that copies of the document would be dis- tributed to the Board following the meeting. In further comments, Governor Balderston emphasized that the Purpose of preparing the paper was to expedite consideration of the sUbject and that the positions taken therein with respect to the ABA Proposal should be regarded as tentative. Messrs. Thomas and Leonard expressed agreement with the approach taken by Governor Balderston. The former said that it seemed particularly imPortant to avoid committing the Board to reduce reserve requirements to any particular level by a certain date and also to avoid indicating that the Board was going to do away with reserve classifications on a geographical basis. For practical reasons, he said, and in the interest of sound monetary policy, it would appear desirable to retain the present classifications under any plan that might be adopted, at least during the period of transition. 399 2/5/58 -7Mr. Horbett likewise favored in general the approach taken in Governor Balderston's draft but he called attention to administrative difficulties that might be involved in differentiating between savings and other time deposits for reserve requirement purposes. In an ensuing discussion, Governor Mills expressed some concern about the direction which the Board's consideration of the broad subject seemed to be taking. First, he doubted the desirability of sitting down With representatives of the American BankPrs Association and in any way making a statement which might be taken as an indication of a commitment With respect to any reserve requirement proposal. When the Board met With representatives of the banking industry, he hoped it would be ready to advance concrete proposals that would stand on their own feet and would be in a form suitable for submission as recommended legislation. Governor Mills went on to say that, as he saw it, there were really only two objectives of major concern to the banking profession at this time. The first was elimination of the reserve requirement differential applicable to banks in central reserve cities while the second was legislation which would permit vault cash to be counted as part of a bank's required reserves. If and when those two issues were taken care of, he felt that most of the pressure from the banking profession would disappear and that steps could then be taken to devise a more logical structure of reserve requirements. On the question of a possible differentiation between savings and other time deposits for reserve requirement purposes, Governor Mills 400 2/5/58 said, that he had very grave doubts. Competition among banks for time deposits would tend to settle the applicable rates and, with the larger part of such deposits in New York City banks, he felt that the problem did not loom as important enough to require special treatment. In further comments, he noted a tendency for central reserve city banks at the present time to reduce the rate on time deposits with maturities Of six months or longer below the 3 per cent permissible maximum rate and went on to say that whenever the opportunities of banks to employ their funds are such that the yield drops below the permissible rate of interest on time deposits, one can always expect adjustments to be made Promptly. From a legal standpoint, he observed that the distinction between savings and other time deposits is based on a difference in the type of contract between the bank and the depositor and that the type Of contract is in a sense dictated by the provisions of the Board's Regulation Q. As to withdrawal provisions, he pointed out that in practice savings accounts may be withdrawn much more freely than funds on time deposit. In summary, he would have substantial doubts about a reserve requirement distinction between savings and other time deposits in the absence of a thorough study of the matter. Chairman Martin then commented that one possibility would be for the Board to go to the Congress with a legislative recommendation extending only to vault cash and a permissive modification of the geographical basis for reserve requirements, without any commitment as to when the 2/5/58 -9- modification would be accomplished. That would put the Board in a position to say that it did not wish to go any further on the ABA proposal at the moment and it would not be necessary to argue the merits and demerits of that plan. The Secretary then read a draft of possible letter to the American Bankers Association which would call attention to the necessity for fitting changes in reserve requirements into the needs of monetary policy, cite the authority to reduce reserve requirements and terminate central reserve and reserve city designations available to the Board under existing legislation, state that the Board intended to submit vault cash legislation to the Congress, and also state that the Board Planned to recommend changes in the provisions of the fourth and fifth Paragraphs of section 19 of the Federal Reserve Act which would allow it to classify banks on the basis of the nature and size of their business rather than on the basis of location. The letter would call attention to the fact that, with these two amendments to the law, the Board would be in a position, should monetary policy permit, to move almost the entire distance recommended by the American Bankers Association. Accordingly, the letter would state, the Board did not believe that any further flexibility or further amendments to the law were called for at the present time. Governor Balderston stated that he had a great deal of sympathy With a minimal program of legislation and that agreement on legislation 2/5/58 -10- which merely would deal with vault cash and broaden the Board's exemptive powers in some manner seemed to him to afford a basis for a simple and understandable reply to the American Bankers Association. He wondered, however, whether the Association might not then arrange to have its entire proposal introduced in the Congress, with the result that a rivalry would spring up between that proposal and the more elemental Program submitted by the Board. This suggested to him that it might be desirable to have some discussion with the Association, at which time the Board could state what it appeared possible to obtain by way of legislation at this session of the Congress and indicate what it would be possible for the Board to accomplish under existing statutory authority. In response to a question raised by Governor Balderston about the effect of publicity given to the ABA proposal, Chairman Martin said he did not think this had to be weighed too heavily in terms of effect at the legislative level. Like Governor Mills, he was inclined to feel that if it were made clear to the Congress that the Board already had the power to do various things, a large part of the pressure behind the ABA proposal would disappear. Governor Robertson then made a statement in which he developed the thought that shifting banks from the reserve city to the country bank classification would involve unduly large changes in reserve requirements. He said that the Board should not forget the point made over the years that there is a substantial difference between banks in terms of the 2/5/58 -11- velocity of their deposits and that there is a general corollation between turnover of deposits and the size of the bank. These circum- stances suggested to him the need for legislation which would give the Board authority to establish intermediate levels of reserve classification. In substance, he felt that vault cash legislation was desirable, provided it allowed for the use of discretion by the Board, and he saw no validity in geographical distinctions as a basis for reserve requirements. Instead, he believed that the distinctions should be made on the basis of size, With power to exempt a bank from the reserve requirements applicable to its size category depending on the nature of its business. At Governor Balderston's suggestion, Mr. Thomas then explained the extent to which adjustments in reserve requirements could be effected by moving within the current statutory limitations and changing the classification of cities, provided supplemental authority was obtained to exempt individual banks from the reserve classification into which they would otherwise fall. Such a plan, it was noted, would comprehend the classification of cities for reserve purposes according to some basis other than the Board's 1947 rule. Consideration also was given to the problems, including P°ssible withdrawals from System membership, that might arise in the event of upward classification of a large banking institution located in a relatively small city. Governor Shepardson noted that the trend of the discussion thus far seemed to indicate basicslly a desire on the part of the Board to move 2/5158 -12- toward a different (nongeographical) basis of classification of banks for reserve purposes. He raised the question, therefore, whether it Would not be desirable to seek legislation to classify banks, rather than cities, under regulations promulgated by the Board, in addition, of course, to vault cash legislation and authority providing latitude during the period of transition. The point which he raised was whether such an approach would not be preferable to attempting to move essentially toward the same Objective by using alternatives not clearly intended for the Purpose. The tenor of the ensuing discussion was to the effect that such an approach, although it might be preferable in principle, would be likely to create practical difficulties such as to prevent obtaining anY legislation. Governor Shepardson then said that, if this seemed clearly to be the case, he would be willing to go along with an alternative Procedure along the lines mentioned at this meeting. At this point Chairman Martin suggested that it would appear desirable for the Legal Division to prepare for the Board's consideration On Friday of this week a draft of legislation which would authorize carrYing into effect such a reserve requirement program. Mr. Hackley commented in this connection that, in order to accommodate partially the points made by Governor Shepardson, it might be possible to develop an introductory statement which would recognize that there are anachronisms in the present law and that the ideal 405 2/5/58 -13- arrangement would be a complete revision of the reserve requirement structure. Such a statement would go on to point out, however, that the proposed amendments to the law would permit approximating the ideal arrangement. While the reaction to this suggestion was mixed, it was agreed that Mr. Thomas would prepare for the Board an analysis and explanation of the legislation to be drafted by the Legal Division. In addition, it was understood that copies of the proposed letter to the American Bankers Association which had been suggested by the Secretary would be distributed. It was agreed also that it would be appropriate to discuss the sUbject of reserve requirements and possible legislation pertaining thereto with the Presidents of the Federal Reserve Banks at the joint meeting of the Board and the Presidents next Tuesday, February 11. This contemplated that it would not be necessary to ask the Presidents for their views at this time and that such views could be submitted sUbsequent to the joint meeting. Testimony before the Joint Economic Committee. Pursuant to the understanding at yesterday's meeting, there had been distributed to the members of the Board copies of a further revised draft of statement to be made by Chairman Martin on behalf of the Board in testifying tomorrow before the Joint Economic Committee. 2/5/58 It was agreed that any suggestions for additional changes would be sent to the staff this afternoon and that the statement would then be presented in a final form satisfactory to Chairman Martin. Voting permit for Transamerica Corporation. Governor Balderston referred to the discussion at the meeting on January 31, 1958, concerning the question raised by President Belgrano of Transamerica Corporation as to whether it would be possible for the Board to act by the 23d of this month on the application of Transamerica for a general permit to vote its stock of the Southern Arizona Bank and Trust Company, Tucson, Arizona. At that time it was decided that a negative response should be made, but Governor Balderston now stated that the Legal Division had suggested a Possible alternative course of action under which there would be issued to Transamerica a general voting permit containing a stipulation that it was not to be used for the purpose of voting the stock owned or controlled by Transamerica in favor of any merger of Southern Arizona Bank and Trust . Company The discussion which followed revealed no strong reasons for or against proposing the alternative procedure in further discussion with Transamerica. Neither was it fully apparent whether failure to obtain a general voting permit would in fact seriously inconvenience Transamerica or whether the suggested alternative would prove acceptable to that . Caarpany Accordingly, the matter was referred back to Governor Balderston 407 2/5/58 -15- with the understanding that he would make such statements as he deemed aPpropriate in further discussion with President Belgrano. At this point Mr. Fauver, Assistant Secretary, entered the room. Repurchase agreements. With reference to his comments at the meeting on August 271 19571 concerning changes in the Comptroller of the Currency's investment securities regulation, as of August 16, 1957, which gave effect to the position that repurchase agreements entered into by member banks covering Government securities are loan transactions subject to section 5200 of the Revised Statutes rather than transactions subject to the investment securities regulation, Governor Robertson reported that the protest lodged with members of the Congress and with the Comptroller by Aubrey Lanston, a Government securities dealer, had now resulted in Proposals to take certain actions. First, it was proposed to amend the legislative history of the Financial Institutions Act at the House level in such a manner as to indicate that deletion of the word "in the form of notes" from paragraph 8 of section 5200 was not intended to be determinative of whether any Particular transaction is a loan or an investment transaction. Although this might be cited later as an indication of doubt concerning the status of repurchase transactions, Governor Robertson suggested advising the Comptroller that the Board would not Object to amending the legislative history in the manner proposed, although it felt that caution should be exercised, because it regarded this as a matter within the Comptroller's discretion. D8 2/5/58 -16In the second place, although the Comptroller would propose to continue to regard repurchase agreements as loans, consideration was being given to removing entirely the current limitation of 100 per cent of capital arta surplus with respect to obligations collateraled by or covering Government securities with a maturity of less than two years. Governor Robertson said that at his suggestion the Comptroller's Office was postponing a decision on this point pending consideration of an alternative under which the limitation would be removed for all Obligations fully secured by Government securities, irrespective of the maturity of such securities, provided the obligation itself had a maturity not longer than 15 days. For obligations having a longer maturity, a limitation of 25 per cent of capital and surplus would be applicable. As a third point, the Comptroller was giving consideration to amending his instructions for the preparation of call reports of condition s° as to permit a reporting bank either to show as a footnote the amount of such obligations or to show them as a special item outside the loan category. With respect to the proposal to change the legislative history, Mr. Hexter said that it seemed questionable, with the bank supervisory agencies in agreement that repurchase agreements on Government securities are in fact loan transactions, whether it would be desirable to make a change in the legislative history which would tend to cast doubt on the view which was actually held with respect to the status of such transactions. Mr. Hackley added that such an amendment at the House level 409 2/5/58 .7_ Would result in conflicting evidence, for the Senate Committee Report already seemed to suggest that repurchase agreements are in fact loan transactions. It was then agreed, at Governor Robertson's suggestion, that he would advise the Comptroller's Office informally of the view that the question of what should be done with respect to the legislative history waS one for decision by that Office. As to the other points mentioned by Governor Robertson, it was understood that a memorandum would be prepared for the Board's consideration suggesting recommendations which might be made to the Comptroller's Office. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: Memoranda from appropriate individuals concerned recommending increases In the basic annual salaries of the following employees, effective February 9) 1958: Nancy B. Kelly, Secretary to Mr. Thurston, Board Members' Offices, from $5,105 to $51240. Robert B. Bangs, Chief, Far Eastern Section, Division of International Finance, from $11,610 to $11,880. Winifred J. Black, Secretary, Division of International Finance, from $4,210 to $4,350. Dorothy L. Helprin, Economist, Division of International Finance, from $5,845 to $5,980. Dorothy L. Duvall, Statistical Clerk, Division of Bank Operations, from $3,840 to $3,925. John A. Lovejoy, Assistant Federal Reserve Examiner, Division of Examinations, from $5,440 to *5,575. Nathan B. Hughes, Jr., Personnel Technician, Division of Personnel Administration, from $4,660 to *4,795. Richard Shaker, Sergeant, Guard Force, Division of Administrative Services, from $3,585 to $3,670. 2/5/58 -18- Memorandum from the Division of Personnel Administration dated February 31 19581 proposing a policy for reimbursement of expenses Incurred in connection with personnel transfers from a Federal Reserve Bank or branch to the Board. A copy of the memorandum is attached hereto as Item No. 4. Memorandum from Mr. Masters, Director, Division of Examinations, dated February 5, 1958, recommending approval of an application by John M. Poundstone, Federal Reserve Examiner, for an advance in the amount of $1,000 to assist in meeting expenses of forthcoming official travel. Memorandum from Mr. Masters, Director, Division of Examinations, dated January 301 1958, recommending that John A. Lovejoy, Assistant Federal Reserve Examiner, be granted permission to engage in certain outside activities. A copy of the memorandum is attached as Item No. 5. Letter to the Federal Reserve Bank of Dallas approving the designation Of William V. Gerlich, James F. Lucky, and Charles J. Carlisle as special assistant examiners. A copy of the letter is attac.'eretp as Item No. 6. Sere ary 411 Item No. 1 2/5/58 UNITED STATES OF AMEALCA 1.3EORE THE BOARD OF GOERNORS OF THE FEDEAAL tES' JE SYSTEM WASHINGTON, D. C. IN "'HE MATTER OF THE APPLICATIONS OF FIRST BANK STOCK CORPORATION DOCKET NUMBERS BHC 36, 37 ORDER EXTEDING TIME WITHIN WHICH APPLICANT MAY SUBMIT TO HEARING EXAMINER PROPOSED FINDINGS AND CONCLUSIONS, AND SUPPORTING BRIEF Additional time having been requested by the Applicant, First Bank Stock Corporation, within which to submit to the Hearing Examiner proposed findings and conclusions, and supporting brief) and it appearing to the Board that such request should be granted, it is hereby ORDERED that the time within which the Applicant may file such proposed findings and conclusions, and 11Pporting brief, be, and the same hereby is, extended to and including February 20, 1958. This 5th day of February 1958. By order of the Board of Governors. (Signed) S. R. Carpenter (rz:A.L) S. R. Carpenter, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 2 2/5/58 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 5, 1958 Mr. Malcolm Bryan, President, Federal Reserve Bank of Atlanta, Atlanta 3, Georgia. Dear Mr. Bryan: This refers to Mr. Patterson's letter of January 15, 1958, With enclosures, presenting the question whether the exemption in section 4(c)(4) of the Bank Holding Company Act, applying to "shares lawfully acquired and owned prior to the date of enactment of this Act bY a bank which is a bank holding company, or by any of its wholly owned subsidiaries", permits Citizens and Southern Holding Company the "Company"), a subsidiary of Citizens and Southern National Bank lthe "Bank"), to retain ownership of shares of American Southern Insurance Company. c The Board has given consideration to the facts of this matter 48 presented by the letter and its enclosures, in the light of the intent of the statute and its legislative history. The Bank is a bank elding Company because more than 25 per centum of the stock of the trPanY, itself a bank holding company, is trusteed for the benefit of Banks shareholders. Furthermore, the Company is a "subsidiary" Of the Bank within the meaning of section 2(d)(3) of the Act, and of American Southern Insurance Company were acquired by the Company 'Jompany before the date of the Act. While the shares of the Company are not directly owned by the Bank, all of the shares of the Company e held by trustees for the benefit of the shareholders of the Bank. Accordingly it is the Board's view that the Company may properly be egarded as a "wholly owned" subsidiary of the Bank within the meaning nd intent of section 4(o)(4) of the Act and that, therefore, shares American Southern Insurance Company owned by the Company are exempted 'rom the divestment requirements of section 4(a). r It will be appreciated if you will transmit the substance of this letter to Mr. Henry J. Miller, Counsel for Citizens and Southern National Bank. Very truly yours, (3iLned) S. R. Carpenter S. R. Carpenter, Secretary. 4"1 410, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 3 2/5/58 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 5, 1958 Mr. Herbert 1T. Prochnow, Secretary, Federal Advisory Council, c/o The First National Bark, 38 S. Dearborn Street, Chicago 90, Illinois. Dear Mr. Prochnow: The Board would suggest that the following topics be placed on the agenda of the Federal Advisory Council for discussion at its forthcoming meeting on February 16-18 and at the joint meeting of the Council and the Board on February 18. 1. What are the views of the Council regarding the current business situation and the prospects for business activity during the next six months? 2. How does the demand for credit at the present time comPere with demands at this season a year ago? If an increase in demand is anticipated during the next three months, in what fields of activity is this most likely to arise? What is the credit demand outlook for the last half of the year? 3. The Board would appreciate the views of the Council as to t would be an appropriate credit policy over the next three . MonItt How should monetary policy be adapted to make its maxiTuM contribution to the solution of the longer-range problems of the foreseeable future? L. 5. Does the Council have any comments on the bill, H. R. 10316P introduced by Congressman Patman on January 29, and the companion bill by Senator Johnson, S. 3191, to create a Small Business Capital Banking System? Thirteen copies of each of these bills are enclosed. 6. The report required by section 5(b) of the Bank Holding Company Act to be made by the Board will have to be submitted before 4_ Mr. Herbert V. Prochnow .2.. May 92 1958, which will be prior to the May meeting of the Council. Accordingly, if the Council has further comments with respect to the Act which it wishes to discuss with the Board prior to the submission of this report, they should be presented at the February meeting. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. Enclosures 415 BOARD OF GOVERNORS Of THE °Mee Correspondence TOB of Governors 401102.ivision L. 2/5/58 February 3 : 1958. Item No, FEDERAL RESERVE SYSTEM Dee Subject: of Personnel Administration There have been several recent cases of appointments of Federal Reserve Bank employees to positions at the Board of Governors. In all of bese cases where the original recruitment of the employee has been initiated the Board, the expenses of moving the household goods and personal effects °r the employee have been reimbursed by the Board. However, the practice of Paqing for the transportation of the employee and his family from the Reserve Bank area to the Washington area has varied depending upon the circumstarres :fano particular case, including considerations of distance, marital status, It would appear that this should be uniform in all such cases of iLrenatents of employees and their families from Federal Reserve P, -s to the 'rct and that a policy to that effect be instituted. The institutpicn of a cl* would also provide the basis for a definite cormilacnt to prospective e'usfers, which cannot be given under the present procedure of transpoi2e the time of being approved in each instance on behalf of the Board at -44PlayMent approval. T t Reeeitmendation It is recommended that thn following policy be approved with respect to. t:_,40 annursement of expenses incurred in connection with transfers from a cLeral Reserve Bank or Branch to the Board where the Board initiates tl 4lanai recruitment. (1) The movement of household goods and personal effects of employees and their families from residence in the Federal Reserve area to a residence established in this area. (2) Transportation for the employee and a per diem allowance in lieu of subsistence while in a travel status. (3) Transportation of the employeets immediate family. Reimbursement for transportation and per diem would be in accordance With toil the Board's travel regulations. This policy is consistent with that believed by the Government in cases of transfers between agencies. It is goarred that transfers of employees from the Federal Reserve Banks to the t`L of Governors is somewhat analogous to transfers within Govornment and 474 the greatest consideration should be given to all employees recruited Reserve Banks to make the transition as convenient and economical as °GARD OF GOVERNORS 4[16 or THE Item No. FEDERAL RESERVE SYSTEM Or"UC Corresp mience To_ oard of Governors 5 2/5/58 Mae Janilary 30, 1958. Subject: It_Masters Assistant Federal Reserve Examiner John A. Lovejoy, a member of the Board's field staff of examiners, has requested Permission to engage in outside activities for compensation as follows: (1) Furnishing technical advice to friends regard.. ing tax returns, other tax matters, accounting procedures, and the use of accounting machines, such work to be carried on within such limits that it would not interfere in any way with the performance of his work as an Assistant Federal Reserve Examiner; and (2) Writing articles on accounting matters, in his spare time, for the "Journal of Accountancy" and "The Accounting Review" to be submitted in his own name and not as an employee of the Federal Reserve System. Regarding the activity described in paragraph numbered (1)0 it is understood that Mr. Lovejoy accommodated his friends in this manner prior to his employment by the Board, and that this spare time work resulted in earnings of about $500 per year. It is recommended that Mr. Lovejoy be permitted to engage in activities within the stated restrictions, and with the additional understandings with respect to paragraph numbered (1) that: (a) no such /Trk will be done for any bank or other financial institution, (b) he snail not be identified with the Federal Reserve System in doing such nrks and (c) the work will not be actively solicited and will be limited to the accommodation of friends. th ese BOARD OF GOVERNORS OF THE Item No. 6 2/5/58 FEDERAL RESERVE SYSTEM WASHINGTON 25. 0. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD st February 5, 1958 Mr. L. G. Pondrom, Vice President, Federal Reserve Bank of Dallas, Dallas 2, Texas. Dear Mr. Pondxwm In accordance with the request contained in your letter of January 28, 1958, the Board approves the designation of William V. Gerlich„ James F. Lucky, and Charles J. Carlisle as special assistant examiners for the Federal Reserve Bank of Dallas for the purpose of Participating in examination of State member banks only. Very truly yours, (Signed) Merritt Shernan Merritt Sherman, Assistant Secretary.
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