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The attached set of minutes of the meeting of the Board of Governors of the Federal Reserve System on January 17, 1958, which you have previously initialed, has been amended in the interest of accuracy to substitute the vord "bonds" for the word "bills" in the second line of the second full paragraph on page line on page 4, 4, the last and the eighth line on page 5; and to substitute the word "very' for the word "not" at the end of the ninth line on page 5. If you were present at the meeting and approve the minutes as amended, please initial in column A. If you were not present, please initial in column B to indicate that you have seen the amended minutes. Chin. Martin Gov. Szymczak Gov. Mills Gov, Robertson x Gov. Balderston x Gov, Shepardson fi r/C43 x44.0 The attached set of minutes of the meeting of the Board of Governors of the Federal Reserve System on January 17)1958) has been amended at the request of Governor Mills to edit his statement beginning with the first full paragraph on page 7 and continuing through the following paragraph. If you approve these minutes as amended, please initial below. Chairman Martin Governor Szymczak Governor Mille Minutes for To: January 17, 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. 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. A 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. Minutes of the Board of Governors of the Federal Reserve System on Friday, January 17, 1958. The Board met in the Board Room at 10:00 PRESENT: Mr. Mr. Mr. Mr. Mr. a m Martin, Chairman Balderston, Vice Chairman Szymczak Mills Robertson Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Kenyon, Assistant Secretary Thurston, Assistant to the Board Hackley, General Counsel Molony, Special Assistant to the Board Young, Assistant Counsel Items circulated to the Board. The following items, which had been circulated to the members of the Board and copies of which are attached to these minutes under the respective item numbers indicated, %?"e aPproved unanimously: Item No. letter to The Grafton Savings and Banking Company, 1‘a,rtcnly Ohio, approving the establishment of a branch 1, La Grange, Ohio. (For transmittal through the Fed ederal Reserve Bank of Cleveland) 1 1.41etter to the Federal Reserve Bank of San Francisco l31"°ving an investment in bank premises by Commercial 'eUrity Bank, Ogden, Utah. 2 Lett vb er to the Federal Reserve Bank of San Francisco ti;iving the requirement of six months' notice of withal from membership in the Federal Reserve System for -4-4nd Empire Bank, Umatilla, Oregon. 3 Lette Alan. i r to Garfield Commercial & Savings Bank, East Los Et-e'es, California, denying its application to establish tlivl'anch in Monterey Park, California. (For transmittal l'oUgh the Federal Reserve Bank of San Francisco) 14- 4e41c)randum from Mr. Walter Young recommending that no Tonse be made to Budget Bureau Bulletin No. 58-3, 541,:ting to charges to be made for certain Government 5 e W 1/17/58 -2Mr. Young, Assistant Counsel, then withdrew from the meeting and Messrs. Riefler, Assistant to the Chairman, Thomas, Economic Adviser to the Board, and Young, Director, Division of Research and Statistics, entered the room. Discount rates. Telegrams had been received this week from three Federal Reserve Banks (Boston, New York, and Minneapolis) advising that their directors had established without change, subject to the approval Of the Board of Governors, the rates on discounts and advances in the eXisting schedules of the respective Banks. Also, a telegram received Yesterday from the Philadelphia Bank advised that the directors of that Bazik had established, subject to the approval of the Board of Governors, and 4 rate of 2-3/4 per cent (rather than 3 per cent) on discounts 8411811ces under sections13 and 13a of the Federal Reserve Act, along with 10(b). a. rate of 3-1/4 per cent on advances under section Other rates 14 the Philadelphia Bank's existing schedule were established without Chan, --00. The wire indicated that a letter would follow concerning the 4ction taken but such a letter had not yet been received at the time of this meeting. In response to a request by Chairman Martin for comment, Mr. Thoma 8 htm said that Vice President Bopp of the Philadelphia Bank called on the telephone during the course of the directors' meeting in -- 1elphia to make certain inquiries regarding the dates of the forth' QomiTreasury financing, at which time Mt. Bopp stated that the directors %tere . IxaPressed by the indications of decline in various lines of economic 1/17/58 -3- activity and felt that some action ought to be taken on the discount rate. If that were to be done, they concluded that the action should be taken well in advance of the Treasury financing. Mr. Thomas added that he was in agreement with the proposed change because he thought the situation was one which justified a reduction of the discount rate. Mr. Young reported that there had been no significant developnlents in the economy not previously reported to the Board and that the current period might be characterized as a kind of interlude. About all that could be said was that a movement had started which had a good bit 014 momentum and that this momentum might be expected to continue for a While. Employment figures were showing the full impact of the usual 8easonal trend on top of the cyclical movement and, as he had informed the Board at a recent meeting, the index of industrial production for t'acember developed to be 136 rather than the anticipated 137. From all 14dications, the index could be expected to move a point or two further (lawa in January and, in essence, there was no sign yet of a levelling °Ilt of the downward trend. Considering that the System would be locked 14 tor a period by the Treasury financing later this month, he felt that Etct1 °11 now on the discount rate might be more timely than to await the ectraetion of the finPacing. The discount rate problem seemed to him tO Involve mostly the question of timing. Chairman Martin then referred to the rather sharp decline in 14tereat rates which had taken place over the past several weeks and v17/58 -4- d that, with net borrowed reserves standing at zero recently, it °ecurred to him that a change in the discount rate might have little "tact other than in terms of the psychological reaction. Mr. Thomas pointed out that the bill rate was nov down to around s515, almost half a point below the discount rate, and that, as the Challlan had said, net borrowed reserves were in the neighborhood of 411°I, This was a situation, he recalled, that had not been paralleled some time. Net borrowed reserves of zero meant that banks must still 15°11*(47 around $500 or $600 million, but in the circumstances most of them r4441t sell bills rather than borrow. This might result in an erratic 451tellient in the bill rate according to temporary fluctuations in reserve needs* The psychology of the market, he said, was adjusted to the asthat the discount rate was likely to be reduced and that more eserves were likely to be put into the market. If these actions were 40t taken, he felt that the bill rate might rise. Perhaps the movement °t the bill rate had gone a little too fast, but he was not sure of that. Mrs Thomas also commented that evidence of speculative positions tbo vas not too clear and that some of the speculation might have been ,wvrked out in the readjustments of the last fey days. He concluded 44 a ummary by repeating that if the discount rate was not lowered and It the s -ystem continued to keep net borrowed reserves around the zero -To 4., a rise in the interest rate level seemed likely. Governor Balderston asked whether there was any evidence that v'etaation in bonds had receded, to which Mr. Thomas replied that 186 1/17/58 -5- the only evidence was the weakness in the market in the last few days. Mr. Riefler said that in the light of the general level of rates aai 14 business prospects, he would expect the discount rate to be reduced the not distant future to 2-3/4 per cent. He had interpreted the discussion at the last Open Market Committee meeting as indicating a 131 ' eference for deferring such action until after the Treasury financing, 846. Personally he would not object to that. He did not know how one €°t evidence of speculation in Treasury bonds except from what people and people were saying that the extent of speculative activity was irerY great. He would have preferred that any such speculation be shaken out before a move was made on the discount rate. In general, he said, 6g1 indications pointed toward a reduction of the discount rate within the next six weeks, for there was no sign of the business situation tlIrniag around. On bank credit trends, Mr. Thomas said that the big increase had been in loans to dealers, and these loans declined during the past 1?e1 " Loans to others for purchasing and carrying Government securities 11M e°ntinued at a negligible level during this period. New York City 44 reduced their holdings of notes last week but increased their 8 ' 11(116'Ings of one to five-year bonds. In reply to a question by Governor Robertson, Mr. Thomas said that -c)ans in the two weeks following Christmas at all reporting member 114/11, Went down, although total loans declined less than during the tWO weeks a year ago. Commercial loans, however, went down more V17/58 -6- thall last year. Christmas The liquidation of bank credit in the two weeks after was much less than a year ago, and in general the credit aittlation seemed to be holding up, there being no evidence of any liell°118 liquidation of credit. It appeared that the banks were finding 48e8 for their money; if they were not making business loans, they were 1)11tting their funds into securities. In summary, the decline in bank " Lit since Christmas appeared, if anything, to be less than seasonal. In response to a question by Chairman Martin about the price elttlati_on, Mr. Young said that there had been somewhat more of a price (Jet lite recently in industrial materials. Copper prices, of course, 44gone down, crude oil prices had declined, and some of the chemicals vere lover* The textile markets continued to be weak* On the assumption that the Board did not wish to act today on the bi—. " 411adelphia rate, Chairman Martin raised the question whether it vouldt. ve appropriate to inform the other Reserve Banks of the action taken by the Philadelphia directors. He had learned informally, he 4844/ that the New. York Bank was already aware of the matter, having been' advised by the Philadelphia Bank. A related question, Chairman 1, 11411 Pointed out, was whether the Board wished to approve today the bilahment of existing discount rates by the three Banks which 44 41. 41riaed the Board in the usual routine manner. Governor Szymczak said that he was inclined to agree with Mr. 4e,r1 et and that he thought the Treasury financing posed a particular 4441e114 After the financing was out of the way, that would be a 188 1/17/58 different thing. He felt that the Board could very well refrain from taking any action on the Philadelphia rate at this time and simply advise the other Banks of receipt of the Philadelphia wire. This advice, he said, sh°uld be phrased in such a way as not to be suggestive of the course which Should be taken by the other Banks. Governor Mills expressed the view that there was a good statistical ba815 for reducing the discount rate as there had been relative stability 14 the volume of reserves available to the banks for the past three weeks 411d in the bill rate for the past week or ten days. Also, the System Open Martet Account had sold securities in the last two days, thereby indicating to analysts familiar with System operations that there was no intention to ric'od the milrket with reserves. Personally, Governor Mills said, he would be inclined to agree with the reasoning of Mr. Thomas that a reduction of 1/4 per cent in the di8count rate at this time was advisable. He also said that he had in- te -vgeted the down trend in bank loans as being more basic than seasonni, 4fla in this connection he noted that the New York figures yesterday showed baro, , Qeposits in that city below a year ago. He felt that it was fortunate the't statistical and securities market circumstances had combined to lUstifi„ -.7 a reduction in the discount rate with the resulting support to the „, '"°neY supply that should follow such action to the extent that the betwts took the occasion to increase their investments. In his belief, the mc'neY supply required active support against the possibility that it shrink substantially if there were a rapid liquidation of bank loans cltIlling the rest of January without any offsetting influence. 1/17/58 -8The discussion then reverted to the question of immediate Procedure. There was unanimous agreement that the usual telegrams should be sent to the Federal Reserve Banks of Boston, Nev York, and Minneapolis adlasing that the Board approved the establishment vithout change by those liallks on the dates indicated in their wires (Boston on January 13 and Neu York and Minneapolis on January 16) of the rates on discounts and ad'rances in their existing schedules. A reason influencing this decision v11.8 that deferment of action might be interpreted to mean that the Board had reached a decision in favor of approving the 2-3/4 per cent rate. It was also agreed that it would be advisable as a matter of ilit°rIzation to send a telegram to the Presidents of all Federal Reserve /knits advising them of receipt of the Philadelphia wire. Careful e"sideration vas given to the wording of the proposed telegram in order that it might contain no implication that the Board had yet taken any P°Bition. At the conclusion of the discussion, unanimous approval was 811fen to s confidential telegram to the Presidents of all Federal Reserve 13841k8 would be sent in code and would read as follows: "For your ihr"tation, Federal Reserve Bank of Philadelphia fixed discount rate per cent, subject to approval Board of Governors of the Federal SYstem. Board will consider next week whether to approve or 40to The meeting then adjourned. 1PM 1/17/58 -9Secretary's Note: Acting in the absence of Governor Shepardson, Governor Balderston approved on bebtlif of the Board on the dates indicated the following items: January 16 Memorandum dated January 13, 1958, from Mr. Young, Director, ision of Research and Statistics, recommending that Beverly A. 2cusel1, Clerk-Stenographer in that Division, be granted permission seek outside employment, other than Government, while on a leaveout-.pay status in connection with maternity leave. the Memoranda from appropriate individiuds concerned presenting following items affecting the Board's staff: Rest erf Jacquelyn Haas, Senior Clerk, Division of International Finance, ..ective January 31, 1958. 1\1°tice of retirement eft Rita S. Boyer, Statistical Assistant, Division of Bank Operations, fective January 1, 1958. bivisi Memorandum dated January 17, 1958, from Mr. Young, Director, con_ (41 of Research and Statistics, recommending that Frank M. Tamagna, 3:41tant on Savings Statistics in that Division, be granted per diem comiieu of subsistence at the rate of $12 in connection with his forthber, rig trip to Mexico City, Mexico, which was approved by the Board on ember 4, 1957. ' Pursuant to the recommendation contained in a memorandum from Governor Szymczak dated January 16, 1958, Governor Mills, acting in the absence of Governor Shepardson, a roved on behalf of the Board on January 16, 1958, the transfer of Bernice T. Mann from the position of Secretary in the Division of Research and Statistics to the position of Secretary in Governor Szymczak's Office, with from an increase in her basic annual s 1958. $4,075 to $4,350, effective (40. 1041 40, / Secretary 19i BOARD OF GOVERNORS ep(40111., OF THE 4"P' ‘ 44PW t "‘""'Nts'Oi?';‘• FEDERAL RESERVE SYSTEM 4f. 17. 0 WASHINGTON 25. D. C. 44 Item No. 1 1/17/58 AUDRESS OFFICIAL CORRESPONDENCE TO THE BOARD 44440** January 17, 1958 Board of Directors, The Grafton Savinv.,s and Banking Company, Grafton, Ohio. Gentlemen: Pursuant to your request submitted through the P (=cteral Reserve Bank of Cleveland tlie Doard of Governors the Federal Reserve System ao.)roves the establiLihment °I a branch in La Grange, Ohio, by The Grafton Savings Banking Company, Grafton, Ohio, provided (1) caoital ,s increased to not less than y100,000 to comoly with the era staliutory requirements, (2) the branch is established 4-"hin one year from the date of this letter, and (3) the dPProval of the State authorities is in efZect as of the ate the branch is established. Very truly yours, (Signed) Merritt Sherman 14erritt Sherman, Assistant Secretary. O BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 2 1/17/58 Akoomcas orriciAL CORRESPONDENCE TO THE BOARD January 17, 1958 Mr. E0 R. Millard, Vice President, Federal Reserve Bank of San Francisco, SPI1 Francisco 20, California. Dear Mr, Millard: Reference is made to your letter of December 27, ;957, submitting the request of the Commercial Security Bank, vgden, Utah, for approval, under the provisions of Section 24A of the Federal Reserve Act, of an excess investment in banking Premises arising from construction of a new bank building. 3 After considering the information submitted, the Board Of Governors concurs in the Reserve Bank's recommendation and approves a total investment, direct and indirect, of not to exceed .1,550,000 in bank premises by Commercial Security Bank, Ogden, utah. It is assumed that the member bank will reduce this i nvestment on a planned and regular basis. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 3 1/17/58 Ar)DREsS OFFICIAL CORRESPONDENCE TO THE BOARD January 17, 1958 R. Millard, Vice President, sderal Reserve Bank of San Francisco, °an Francisco 20, California. Ipear Mr, Millard: Reference is made to your letter of January 8, 1958, a copy of a resolution adopted by the board of directors to nland Empire Bank, Umatilla, Oregon, signifying its intention re withdraw from membership in the Federal Reserve System and clueeting a waiver of the six months' notice of such withdrawal. encir-4 of In accordance with the bank's request, the Board of _ Goiter Ace llors waives the requirement of six months' notice of withdrawal. issued to ZdinglY, upon surrender of the Federal Reserve Bank stock ap make and stock such pro 8 bank, you are authorized to cancel of Rriate refund thereon. Under the provision of Section 10(c) ma rtsgulation H, as amended effective September 1, 1952, the bank ej, 0mplish termination of its membership at any time within a4,u, months after notice of intention to withdraw is given. Please lse when cancellation is effected and refund is made. The certificate of membership issued to the bank should be °btain The State bank.. ed, if possible, and forwarded to the Board. authorities should be advised of the bank's proposed withdrawal "A membership and the date such withdrawal becomes effective. It is our understanding that the bank has filed a formal 4PPlicat, -L on with the Federal Deposit Insurance Corporation for continlia nee of deposit insurance after withdrawal from membership. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. ; BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 4 1/17/58 AODRES5 OFFICIAL COPREtiPONOENCE TO THE BOAP40 January 17, 1958 Board of Directors, Garfield Commercial & Savings Bank, East Los Angeles, California. Gentlemen: Reference is made to your application, submitted through 14„,- tgueral Reserve Bank of San Francisco, for permission to estabG,n! a branch in the vicinity of the intersection of Garvey and eld Avenues, Monterey Park, California. the D„, to the infoy„,, The Board of Governors has given consideration of view unresolved in that -ation concluded available and has probie_ gaa respecting managerial succession and the fact that the 74: has not been in existence sufficiently long to assure satist; nit °rY earnings ability or to solidify its position in the commupre'l exPansion into the field of branch banking would be inapproap .te at this time. The Board would be willing to reconsider the arP el-l.cation for a branch after a reasonable time if these matters resolved satisfactorily.. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. SOAR() OF GOVERNORS OF THE 1fice FEDERAL RESERVE SYSTEM Correspondence 13oard of Governors Walter H. Young Date Item No. 5 1/17/58 January 9, 1958 Subject: Fees Charged by Federal Agencies for Licensing, Registration, and Related Activities. The Board is in receipt of a communication from the Bureau of the Budget, Bulletin No. 58-3, dated November 13, 1957, relating to Charges to be made for certain Government services. The Bulletin is rudressed "To the Heads of Executive Departments and Establishments" and _equests the preparation of legislative proposals essential for the develuement of an equitable and uniform Government-wide policy on charges for certain Government services or property. Requested legislation would be ,2igned to remove all "present limitations or restrictions on the agency's authority to (a) recover full cost for Government services which provide s pecial benefit; and (b) obtain a fair market value for Government-owned 'i_e_sources or properties sold or leased." These legislative proposals are ° be submitted to the Bureau of the Budget not later than February 1, 1958. Bulletin No. 58-3 supersedes the Bureau of the Budget's Circular Ro. 4 25 dated November 5, 1953. Circular No. A-25 was issued by the pBureau of the Budget pursuant to Title V of the Independent Offices Approt,i .ati°ns Act of 1952 (5 u.s.c. 140), enacted August 31, 1951, which cone a-ned provisions designed to make the providing of services, publications, Au7sing, etc., by Federal Government agencies "self-sustaining to the -Lest extent possible." fl In his memorandum of January 18, 1954, Mr. Solomon considered what Res effect if any Title V and Circular No. A-25 have on the Federal System. He came to the conclusion that while the question is not Ah A relY free from doubt, Title V was not intended to apply to the Board, ; I:4at.the same time mentioned a letter which the Bureau of the Budget als e in a somewhat different connection indicating that the Bureau is the° inclined toward this view. (See letter dated January 8, 1954, from Director of the Bureau of the Budget to Congressman Patman.) entre Beam no The Board's records indicate that no action was taken by the pursuant to Circular A-25, and, accordingly, it is recommended that serles esponse be made with respect to Bulletin No. 58-3, which merely superCircular No. A-25.
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