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68 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Thursday, January 19, 1950. The Board 'net in the Board Room at 10:40 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Szymczak Draper Vardaman Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Thomas, Economic Adviser Leonard, Director, Division of Bank Operations Bethea, Director, Division of Administrative Services Vest, General Counsel Nelson, Director, Division of Personnel Administration Myrick, Assistant Director, Division of Bank Operations Farrell, Technical Assistant, Division of Bank Operations Johnson, Technical Assistant, Division of Bank Operations Before this meeting there had been sent to each member of the Board t abulations showing the annual expenses by functions of each Federal Reserve Bank and for all Federal Reserve Banks combined by Years sinc e 1936, and percentage comparisons of changes in such costs bY five-Year intervals. Mr. Vardaman stated that since the meeting on December 15, 1940a, at which it was agreed to hold this meeting for the purpose of disellssing the 19x) budgets of the Board and of the Federal Reserve Bank,. ., he had had a series of meetings with Mr. Leonard and members 69 1/19b0 -2- of the Division of Bank Operations to consider the 1950 budgets of the Federal Reserve Banks and trends of expenses in recent years. , Re then called upon Mr. Leonard who presented the tabulations referred to and discussed their content by functions. There followed an extensive discussion of the material presented 4:4 the tabulations. In connection with a discussion of the currency and coin function, question was raised as to why only nine of the twelye Federal Reserve banks were providing wrapped coin service and why such service was not rendered free of charge by all Federal Reserve I3anks to their member banks which were not in position to do the work themselves. Following the discussion, it was agreed unanimously that the matter should be placed upon the agenda for consideration at the next Presidents' Conference. Reference was made to the discussions during the past few years the desirability of giving immediate credit for checks collected by the Federal Reserve Banks, and to changes in the situation within the past year or two which would suggest that further consideration be c..4 -ven at this time to additional steps in the direction of granting iMMediate credit. Following a discussion, upon motion by Mr. Vardaman, it was agreed unanimously that this matter should also be placed upon the agenda for consideration at the next Presidents' Conference. 70 1/19/)0 -3In connection with a discussion of the growth in costs of the accounting function at the Federal Reserve Banks, Chairman McCabe raised a question concerning the results of the survey of Federal Reserve Bank accounting procedures made by Mr. Grady of Price) Naterhouse & Co. pursuant to the authorization of the Board 04 S eptember 30, 1949. Mr. Leonard stated that the report submitted by Price, Waterhouse & Co. under date of December 12, 1949, had been sent to Mr. Davis, Chairman of the Presidents' Conference, and that it was to be discussed at a meeting of the Presidents' Conference Subcommittee on Accounting to be held in New York on Tuesday, January 240 190. Following a discussion, upon motion by Mr. Vardaman, Mr. Leonard was authorized unanimously to request the services of Mr. Grady for consultation in connection with the report submitted by Price, Waterhouse & Co. including, if It seemed desirable, a request that Mr. Grady meet with the Accounting Committee of the Presidents' Conference and with the Presidents' Conference for the purpose of discussing the report. In taking this action, it was understood that compensation to Price, Waterhouse & Co. for further services requested by Mr. Leonard would be paid on the same basis as approved for the original survey, and that the appropriate item of the budget of the Division of Bank Operations would be increased by the amount necessary to cover these payments. 71 1/19/50 The meeting then recessed and reconvened at 2:45 p.m. with the same attendance as at the end of the morning session except that Mr. Young, Director of the Division of Research and Statistics, was present and Mr. Thomas was not. There was a further discussion of the accounting function and or the planning activities carried on at some of the Federal Reserve Banks. Eccles suggested that if planning was worth while at eollle of the Banks it would seem desirable that it be part of the 131 ' °gram at each Reserve Bank and that there be a System committee on 410, each Federal Reserve Bank was represented for the purpose of helPing the Banks to exchange ideas as to ways and means of improving °Pelsations. This suggestion was discussed but no action was taken. During the consideration of the 1950 budgets of the Reserve Bauks for the examination function, Mr. Sloan, Assistant Director, rAvision of Examinations, and Mr. Goodman, Federal Reserve Examiner, Division of Examinations, entered the meeting. Comparisons were made between the salaries of the officers irj c barge of examinations in the Federal Reserve Banks and the chief Ilationa 1 bank examiners in the various Federal Reserve districts, and the -P-Lnion was expressed that because of the duties of these officers their salaries should be somewhat higher than the chief national bank eaMiners. At this point Mr. Szymczak left the meeting to attend a 72 1/191)0 Meetivm. ,,66 of the National Advisory Council. Mr. Eccles called attention to the very substantial increase it the overall expenses of the Federal Reserve Banks (after reimburse/le "for fiscal agency expenses) since 1942 from $4) million to Oo Million or approximately 77 per cent, and Mr. Leonard outlined the reasons for this increase. It was also pointed out that during the s4 "Period the Board's expenses had increased approximately 72 per cent. Chairman McCabe suggested that, while the Federal Reserve 8anks were efficiently operated, it would be helpful if a formula e°uld be devised to which the budgets for the different functions at the Federal Reserve Banks would be related. There was a discussion of the consideration that had been given to this point in recent year and Mr. Vardaman stated that "noncontrollable" expenses, such "check collection, currency and coin, and other activities which are largelY determined by the volume of work received by the Federal Re8erve Banks, were being carefully checked through the functional ell)ellse studies that were being made but that it had not been possible t° clevise a satisfactory formula for the "controllable" functions, sUch 4s research and statistics, bank examination, bank and public relationS, and personnel. Mr. Eccles stated that because of the very substantial inl'ectse in prices and salaries since the war there were reasons for the 73 1/19/50 -6- inca.eased budgets at the Federal Reserve Banks but since it was not 44ticiPated that there would be further general increases in either salaries or prices there should be little if any further increases the Reserve Bank budgets unless new functions were undertaken or the services rendered to member banks were increased. Although he th°11ght the budgets proposed by the Reserve Banks for 19)0 were satisfactory and should be accepted by the Board, he also felt that the attention of the Banks should be called to the large increases that had taken place since 194) and that in the absence of an exOf activities it was the feeling of the Board that further increases in overall budget expenses would not be justified. Chairman McCabe suggested the desirability of sending a letter to the Chairmen of the Reserve Banks calling attention to the increases i4 the budgets and proposing that a System committee be appointed, Which would take the place of the committee appointed by the Chairten's C onference, and which might include in its membership the ChaiMa4 of two Federal Reserve Banks and the Presidents of two "her Banks, to make recommendations on the problems being confronted bY the Federal Reserve Banks and the Board in the administration of the 8anks' budgets. The further suggestion was made that if such a c°111M1ttee were appointed it might be given the services of an outside s3tPert on a temporary full time basis to do the necessary background vork °n which the committee's studies and recommendations would be based. 74 1/19/A -7There was unanimous agreement with these suggestions and Mr. Leonard was requested to prepare a draft of letter to the Chairmen of the Federal Reserve Banks for consideration by the Board along the lines of the suggestions. There followed an informal discussion of the legislation now before Congress to amend the Federal deposit insurance law and to Pr°71-de housing for middle income groups and Chairman McCabe outlined for the information of the Board his current views as to how he statement that he had been requested to make to the Senate Banking. and Currency Committee with respect to the legislation on deposit insurance should be handled. At this point Messrs. Leonard, Bethea, Vest, Nelson, Young, Sloan,) " Myrick, Goodman, Farrell, and Johnson withdrew, and the action stated with respect to each of the matters hereinafter referred to vaS taken by the Board: Minutes of actions taken by the Board of Governors of the Federal Reserve System on January 18, 19)0, were approved unanimously. Letter to the Citizens National Bank of Boone, Boone, Iowa, Iseading as follows: , "The Board of Governors of the Federal Reserve System fslas given consideration to your supplemental application for fiduciary powers, and grants you authority to act, when not in contravention of State or local law, as registrar of stocks and bonds, guardian of estates, as!nee, receiver, or in any other fiduciary capacity in wna:ch State banks, trust companies, or other corporations Which come into competition with national banks are per- 75 -8"mated to act under the laws of the State of Iowa. The exercise of these powers, in addition to those heretofore granted to act as trustee, executor, administrator, and committee of estates of lunatics, shall be subject to the Provisions of the Federal Reserve Act and the regulations Of the Board of Governors of the Federal Reserve System. "This letter will be your authority to exercise the fiduciary powers granted by the Board pending the preparation of a formal certificate covering such authorization, which will be forwarded to you in due course. Approved unanimously, for transmission through the Federal Reserve Bank of Chicago. Approved.: c /1) Chairman.
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