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Minutes for February 6, 1958 To: Members of the Board From: Office of the Secretary 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. 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 Gov. Shepardson 1/ In accordance with Governor Shepardson's memorandum of March 8, 1957, these minutes are not being sent to Governor Vardaman for initial. 417=2 Reserve System Minutes of the Board of Governors of the Federal on Thursday, February 6, 1958. The Board met in the Board Room at 10:00 8.0111. PRESENT: Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Szymczak Mills 1/ Robertson Shepardson Carpenter, Secretary Kenyon, Assistant Secretary Fauver, Assistant Secretary tions Leonard) Director) Division of Bank Opera Hackley1 General Counsel ns Masters, Director, Division of Examinatio Bank of ion Divis ) Farrell) Assistant Director Operations Mr. Solomon) Assistant General Counsel Mr. Hexter, Assistant General Counsel of Mr. Hostrup, Assistant Director) Division Examinations Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. Unanimous approval was given to telegrams to the Federal Reserve Banks of Richmond and San Francisco approving the establishment without change by those Banks on February 5) 1958) of the rates on discounts and advances in their existing schedules. Secretary's Note: During the day a telegram was apolis received from the Federal Reserve Bank of Minne lished, estab had Bank that of tors stating that the direc nors, a subject to the approval of the Board of Gover on cent) per 3 than er (rath rate of 2-3/4 per cent sections under banks r membe to discounts for and advances of rate a Act, ve Reser 13 and 13a of the Federal , a rate of 4 per per cent on advances under section 10(b) ps, and corpoershi partn ) s idual cent on advances to indiv paragraph last the under banks rations other than member in the rates other ) e chang of section 13, and, without rity the to autho ant Pursu Bank's existing schedule. 19581 ry 23, Janua on ng meeti given by the Board at the •••••, 1/ Entered meeting at point indicated in minutes. 4 2/6/58 -2the Secretary notified the Bank of approval of the rates established by the directors effective February 7, 1958. al Advice of the action was sent by telegram to all Feder d issue was ment state press a hes, branc Reserve Banks and for the in the usual form, and arrangements were made ter. Regis al Feder the in e publication of a notic the Federal Advice also was received during the day from land, Cleve ia, delph Phila Reserve Banks of New York, the that s Dalla and City, s Chicago, St. Louis, Kansa lished estab today had Banks ctive directors of the respe ces in without change the rates on discounts and advan val of the their existing schedules, subject to the appro the Board Board. Pursuant to the procedure approved by tary sent at the meeting on January 24, 1958, the Secre of them ying notif Banks ctive telegrams to the respe the of e chang ut witho ent lishm approval of the estab existing rates. Program for Directors' Day. date of February In a memorandum distributed under 5, 1958, which had been prepared following consultation With Governor Shepardson and appropriate members of the staff, Mr. Fauver for newly Presented a tentative schedule for the annual program given and branches. appointed or elected directors of the Federal Reserve Banks As outlined in the memorandum, the meeting would begin with a reception and dinner at a local hotel on the evening of February 19, 1958, and the following day. continue with a program at the Federal Reserve Building various parts of the program Governor Shepardson commented on the of which the tentative and a general discussion followed, at the conclusion Program was approved unanimously. Mills returned from an During the foregoing discussion Governor aPPointment outside the building and joined the meeting. -3- 2/6/58 Survey of records procedures (Item No. 1). There had been ittal memorandum distributed to the members of the Board, with a transm letter from Mr. Carpenter dated January 31, 1958, a draft of suggested e, to Mr. Wayne C. Grover, Archivist, National Archives and Records Servic that which would request a survey of the Board's records procedures by organization. in this During a discussion of the considerations involved recent paperwork Proposal, Governor Shepardson pointed out that the include a review management survey by Lester Knight & Associates did not Of records management procedures of the kind now proposed, although the report contained references to the desirability of such a study. to Nationpi Thereupon, unanimous approval was given to the letter Archives of which a copy is attached hereto as Item No. 1. Membership dues and contributions (Item No. 2). Pursuant to the understanding at the meeting on January 29, 1958, there had been disletter to the tributed to the members of the Board a revised draft of concerning expenditures Chairmen and Presidents of all Federal Reserve Banks for membership dues and contributions. The latest draft did not attempt or inappropriate. to specify what types of expenditures would be appropriate ples which should be Instead, it outlined in general terms the princi 13c)rne in mind in considering outlays of Reserve Bank funds. Like the budget Previous drafts, however, it provided for inclusion with future membership material of a list of the number and amount of expenditures for a9 2/6/58 -4- dues and contributions, and the justifications therefor, so that such proposed expenditures might be reviewed by the directors of the respective Banks and by the Board of Governors. Governor Shepardson said he had come to the conclusion that the revised draft of letter represented a satisfactory approach to the Problem, particularly because it would leave room for the exercise of responsibility at the local level. From conversations with certain Reserve Bank Presidents, he gathered that steps already were being taken to eliminate or reduce expenditures which might be considered questionable in the light of the discussions during the past year with the Chairmen's Conference and the Presidents' Conference. The other members of the Board also commented favorably regarding the letter and Governor Balderston then raised a question with respect to an attachment illustrating how expenditures for membership dues and contributions should be listed for inclusion with Reserve Bank budget material. It was understood that an appropriate adjustment would be made to meet the point mentioned by Governor Balderston and unanimous 2P12T2yal then was given to the proposed letter, a copy of which is attached hereto as Item No. 2. Messrs. Leonard and Farrell then withdrew from the meeting. Policy with respect to disclosing information about the registration of bank holding companies. In view of certain inquiries received recently, question had been raised with respect to the policy that should be followed in regard to publishing lists of registered 2/6/58 -5- bank holding companies and disclosing whether a particular company is or is not registered pursuant to the Bank Holding Company Act of 1956. There had been sent to the members of the Board copies of a memorandum from the Division of Examinations dated February 3, 1958, recommending for reasons stated (1) that the Board refrain from publishing lists of refrain from registered bank holding companies, (2) that the Board also a bank holding disclosing whether a particular organization is or is not to inquiries comPany registered under the Act, and (3) that the response about the status of particular companies be to the effect that the Board the regisdoes not disclose information coming to it in connection with with tration and reporting requirements of the Bank Holding Company Act respect to the status of individual companies under that Act. endation, After Mr. Hostrup had spoken in support of the recomm thereafter Governor Shepardson raised a series of questions and indicated that he was not convinced of the validity of the reasons given for not y has registered making public information as to whether a particular compan Wider the Bank Holding Company Act. izes nor Mr. Hackley pointed out that the law neither author g companies or Prohibits publishing a list of registered bank holdin 8UPP1ying information in response to inquiries about the status of a Particular company. On policy grounds, however, he thought there was quite a good deal to be said for publishing a list of registered bank 2/6/58 -6- holding companies periodically. This contemplated, of course, a dis- tinction between publication of the name and address of a company and Providing information concerning a company's affairs. On balance, since bank holding companies are required to register with the Board, he saw nO harm and perhaps some benefit as an enforcement measure in a practice of publishing the names of registered bank holding companies and answering individual inquiries. In making this comment, he did not envisage that a published list would divulge the names of the banks controlled by a bank holding company. Governor Robertson stated that, like Governor Shepardson, he Igas not persuaded by the arguments advanced by the Division of Examinations in support of a restrictive policy. He did not see justification, Where a public law requires registration, for the regulatory agency to withhold from the public information concerning the fact of registration. T herefore, he would not only furnish such information in response to specific inquiries but he would publish periodically a list of the companies that had registered. close one, Governor Mills said that although the question was a he found the arguments of the Division of Examinations convincing. Many inquiries, he suggested, are in the nature of "witch hunting expeditions", 4nd furthermore it would be difficult to reverse a policy of publication even if such a practice produced embarrassing incidents. Therefore, he would be inclined to follow the recommendation of the Division of 2/6/58 -7- Examinations for the time being, with the understanding that a change in policy could be made later if cogent reasons appeared. Governor Szymczak agreed with Governor Mills, particularly because a decision now in favor of disclosure would mean in effect committing the Board to such a policy for the future. Following additional discussion it was agreed, in view of the difference of opinion, to give further consideration to the matter at tomorrow's meeting, when Chairman Martin would be present. For use in connection with further discussion of the matter, the Legal Division W5 8 .relted ' to set forth its views in the form of a memorandum. Mr. Fauver then withdrew from the meeting. General Contract Corporation matter. In accordance with the decision reached at the meeting on January 221 19581 there had been distributed to the members of the Board, with a memorandum from Mr. Rackley dated February 4, 1958, (1) a draft of an order of the Board denYing requests by General Contract Corporation, St. Louis, Missouri, for determinations under section 4(c)(6) of the Bank Holding Company Act that certain nonbanking subsidiaries are such as to be exempt from the divestment requirements of the Act, (2) a draft of statement setting forth the grounds for the Board's decision, and (3) a draft of a dissenting statement reflecting the views of Governor Mills. After comments by Mr. Hackley relating to procedures contemplated if the Board approved the proposed statements and order, Governor Mills 425 2/6/58 -8- said he was at first inclined to feel that the statements were both very long. However, after reading them completely in the light of the legal points involved and the desirability of giving as much guidance as possible to interested parties, he was fully satisfied. Along these lines, Mr. Hackley remarked that in preparing the statements the Legal Division had borne in mind the likelihood of judicial review. Ensuing discussion participated in. by Governors Balderston and Mills resulted in expressions of agreement that the Legal Division had been judicious in not citing as a basis for the dissent the physical relationship of certain of General Contract Corporation's nonbanking sUbsidiaries to subsidiary banks. After statements by the other members of the Board to the effect that they were satisfied with the documents prepared by the Legal Division, it was agreed to defer formal action until Chairman Martin was present, since he was present at the meeting on January 22, 1958. Reference then was made to a memorandum from Mr. Solomon dated February 5, 19580 submitting a draft of letter to the President of Pirst Bank Stock Corporation in response to his suggestion that the Board give consideration to that Corporation's applications under section 4(c)(6) Of the Bank Holding Company Act in connection with its consideration of the General Contract Corporation applications. 2/6/58 -9It was agreed unanimously that a letter such as suggested by M. Solomon should be sent when the Board announced its decision in the General Contract matter. The meeting then adjourned. Secretary's Notes: Governor Shepardson today approved on behalf of the Board the following items: Memorandum dated January 30, 1958, from Mr. Johnson, Director, Division of Personnel Administration, recommending that a work simplification training program be arranged for selected members of the Board's staff. Letter to the Manager of the System Open Market Account suggesting that Mr. Solomon, Economist in the Division of Research and Statistics, be included among those to receive training at the policy group level in this year's System Open Market Account Training Program. Pursuant to the recommendation contained in a memorandum from Mr. Leonard, Director, Division of Bank Operations, an increase in the basic salary of Robert L. Hill from *5,710 to $6,390 per annum, effective zebruary n, 1958, with a change in title from Annlyst-t Technical Assistant. cretary BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 2/6/58 WASHINGTON 25, D. C. ADDRESS OFFICIAL. CORRESPONDENCe TO THE HOARD February 6 1958 Mr. Wayne C. Grover, trchivist, ta. National Archives and Records Service, Washington, D. C. Dear Mr. Grover: From a preliminary discussion with Mr. Herbert E. Angel, is understood that the services of the Office of Records Records Services, m anagement, Division of National Archives and 141(3uld be available to the Board of Governors for the purpose of s. Ewing a survey made of the Board's records procedure It has been the policy of the Board to maintain a high atandard for the physical condition of its records and for protime which will insure their prompt availability. At this records its the Board is interested in having a survey made of 1?lanagement procedures to aid it in determining what changes might 00 desirable as a means of improving what is believed to be a high atandard of service. a It is understood that Mr. Angel and his staff are in ed appreciat be would it icsition to undertake such a survey, and P the and made be would f You could advise the terms on which it aPpraximate dates on which it could be started and completed. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 428 BOARD OF GOVERNORS Item No. 2 2/6/58 OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN February 6, 1958. Dear Sir: As you know, the question of expenditures by the Federal Reserve Banks for membership dues and contributions has been con!idered and has been the subject of discussion during the past year !Y. the Conference of Chairmen, the Conference of Presidents, and the uoard, both severAlly and jointly. As a result of these discussions, the Board believes that there is a mutual understanding of the problem of handling such ??q10eriditures with due regard to the public-interest aspect of the rederal Reserve System, the general supervisory responsibilities of he Board, the regional character of the Federal Reserve Banks, and 1,e responsibilities conferred upon the Bank Directors by Section 4 Of th Federal Reserve Act. It is recognized that certain expendite 2res might be very appropriate in a purely private business but ;Tad be inappropriate in the case of a Federal Reserve Bank in view 4 the public nature of its funds and operations. The Board feels that there is also mutual and general tulderstanding throughout the System that expenditures for membership tles and contributions should conform to the general policy on Di n scretionary Expenditures, ' as set forth in Item #3187 of the Federal :serve Loose-Leaf Service, and that memberships at Bank expense 40111d be limited to those which can be justified either by the activities of the organization or by the benefits received by the ,teserve Bank. In view of these understandings, the Board believes that ther„ .Is no need at this time for it to make a further delineation inween appropriate and inappropriate expenditures, and that the 341 erests of the System will be properly served if the Officers and ectors of the individual Reserve Banks exercise their discretion b‘,011dete mine whether expenditures for membership dues and contrions are appropriate and "necessary expenses" within the meaning 'Section 7 of the Federal Reserve Act. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM -2- The Board also believes that it will be helpful, both to the Directors and to the Board, in reviewing proposed expenditures for membership dues and contributions to have future budget material include a list of the number and amount of such expenditures, and the .letifications therefor. Accordingly, the Board's Accounting Manual il 14111 be revised as indicated in the attachment hereto. Again, I would like to express the Board's appreciation for he interest that has been taken in this matter by the Directors and ',Ifficers of the Federal Reserve Banks. The progress that has already "en made in eliminating doubtful items has been noted with particular gratification. This letter is being sent to both the Chairman and the Presideat of each Federal Reserve Bank. Sincerely, (Signed) Wm. McC. Martin, Jr. A ttachment Wm. McC. Martin, Jr. TO THE CHAIRMEN AND PRESIDENTS OF ALL FEDERAL RESERVE BMOCS 42 4 BUDGET GENERAL IMTRUCTIONS Suonlementlrv Statements The budget should be accompanied by a list of all expenditures during the current year and the budget year for membership dues except Clearing House) and for contributions to organizations or Individuals outside of the Reserve Bank. The list should be prepared tn the form illustrated on the following page; and, where the nature ot the expenditure is not self-evident, the list should show, or be i ecompanied by, and appropriate explanation. Descriptions are given °Glow of the various columns shown on the illustration: "Memberships and contributions" This column is to identify all memberships and contributions reflected in either the current year or the budget Year. Memberships should be shown first, arranged in alphabetical order by organizations, with an asterisk indicating those cases where the membership is in the Bank's name. Contributions should be shown in a separate section following the list of memberships. Contributions for closely related purposes may be grouped. "Justification" These columns provide for indicating (by an "x") the basis on which the membership or contribution is considered to be justifiable; namely, (1) "Activities" directly related to the work of the Reserve Bank; (2) "Representation" in the organization being desirable; and (3) "Benefits" received by the Reserve Bank. It should be noted that the "Justification" categories are not necessarily mutually exclusive; for example, a contribution to the American Institute of Banking may be justified on the basis of being made to an organigAti.on whose activiti.0 are directly related to the work of the tlaerve Banks, as well as on the basis of benefits received, "Number and Amount" The number reported on each line shoad repreent the number of memberships or individual contributtona4 abd the amount should represent the total expenditure Illvolved. ILLUSTRATION .P•MM. +=NM . .YONM .MOOM List of Expenditures For Membership Dues and Contributions 1958 Budget of Federal Reserve Bank (or Branch) Memberships and contributions Justification ActivRepreseatation ities .................10 Memberships* Total membership dues contributions Total contributions Total membership dues and contributions *Indic es membership in Bank's name. Bensfits Number and amount of memberships and contributions Budget year Current year No. Total Amount No. Total Amount .••••••••••••
@FedFRASER