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Minutes for To: Members of the Board From: Office of the Secretary January 20, 1958 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 to any of the entries in this set of respect with record of policy actions required to the in minutes 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. Minutes of the Board of Governors of the Federal Reserve System °11 Monday, January 20, 1958. The Board met in the Board Room at 10:00 Etote PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Szymczak Mills Robertson Shepardson Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Leonard, Director, Division of Bank Operations Mr. Young, Director, Division of Research and Statistics Mr. Hackley, General Counsel Mr. Shay, Legislative Counsel Mr. Mr. Mr. Mr. Mr. Mr. Items circulated to the Board. The following items, which had be" circulated to the members of the Board and copies of which are "t4tehed to these minutes under the respective item numbers indicated, \Pere unanimously: Item No. tetter +the : 4 ,AJ the Federal Reserve Bank of Chicago approving its 4-ncreased cost incident to providing improved surgical 1111Ince benefits for the employees of the Bank. tette to Bank of Idaho, Boise, Idaho, approving the (p0211shment of a branch in Lewiston Orchards, Idaho. transmittal through the Federal Reserve Bank of s'" Francisco) 1 2 1/20/58 —2— Letter from Congressman Mills. In a letter addressed to Chairman Martin under date of January 13, 1958, Congressman Mills of Arkansas dlelcussed the problem of appropriate actions in the field of taxation 8.4c1 flexible credit policy and urged that the Board give serious ec)/Isideration to more vigorously expansionary monetary and credit actions 14 the immediate future. tabu), He suggested that if such actions were not Persistent recessionary developments would result in increasing Ill'essure for tax reduction, to vhich the Congress might accede. In this c onnection he referred to a comment by Chairman Martin to the effect that the monetary authorities should be given an opportunity to cope with e'llY recessionary trends before tax reduction was undertaken) and also to certa4-Ln recent comments by members of the banking community to the effect that Pederal Reserve actions had not been sufficiently vigorous to l'estcp. -e conditions under which an expansion of economic activity might be resumed. Copies of this letter had been distributed to the members °t the Board, along with a draft of possible reply which would summArize Is"ent Federal Reserve actions and would express the intent of the to take such further flexible action as in its judgment appeared to b. - called for in the light of economic and financial developments. During a discussion of the proposed reply, in the course of 1141e4 Mr. Thurston, Assistant to the Board, joined the meeting, question /148 whether the nature of Congressman Mills' letter was such as to eqUire a formal reply from the Board. In this connection, reference 1/20/58 /48 -3- made to the language of the letter and to the fact that Chairman Martin vas scheduled to testify before the Joint Economic Committee °4 PebrUary 7, 1958, concerning the Presidentla Economic Report, at vhiCh time it would be possible for him to make such statements as he tight desire. Accordingly, Chairman Martin suggested that, as an alternative t° a formal reply, he could write a personal letter to Congressman Mills ae,kc4vu-sdging receipt of the January 13 letter, expressing appreciation the indication of his thinking, and saying that he (Chairman Martin) 14°Ul4 keep in touch with Mr. Mills. There was unanimous agreement with this suggestion. 114port on S. 2824. Pursuant to the understanding at the meeting °.4 jaw- Y 15, 1958, there had been distributed to the members of the a further revised draft of letter to the Chairman of the Senate Ilattking and Currency Committee concerning S. 2824, a bill vhich vould EtnIellti the Employment Act of 1946. The draft novr before the Board *)11.144 cite as being in the public interest an amendment to the Employment Aet r -946 which would make it clear that national economic policy is 414o concerned with preserving the purchasing power of the dollar. The *1118 also concerned with" 'would be substituted for the words "directed t4514arcip 'Which were contained in the previous draft. The discussion of the latest draft vas devoted principally -"eloping language which 'would avoid any implication that the Board 1/20/58 llould regard an amendment to the Employment Act along the lines of S. 2824 48 representing a change in existing policy. It was also deemed important t° retain in the letter a statement that careful consideration should be giver 'to the wording of any legislative directive. After several suggestions had been made for changes in the la .0-lage of the letter in order to state the Board's position as sPee ifically as possible, Mr. Thurston was requested to submit another draft of letter for consideration at the meeting tomorrow. !!niyaEs to questions raised by Congressman Patman. In connection rith Chairman Martin's appearance at the hearings on the proposed Financial 111 4tutions Act, Congressman Patman handed him on August O que "ions dealing with various subjects. 6, 1957, a list Drafts of answers to questions 28 alld 30-44 had been distributed to the members of the Board with a trEttls mlttal memorandum from Mr. Carpenter dated January 13, 1958, which 15°11.1ted out that the answer to question 29, relating to transactions 14 0._ the,y stem Open Market Account, had already been sent, along with Emlever a to 19 questions concerning the destruction of money 'which were eOri tajfle tn a separate list. The Secretary of the Federal Open Market Comte -ttee vas reported to be distributing to the members of that Committee cll'arta ()f answers to questions 1-27, all of which related to open market 8.tters. Discussion of the proposed answers was directed principally to the re Ply to question 14.I4, having to do with the reasons why the Board 1/20/58 -5- favored, on balance, passage of the Financial Institutions Act. It was llizIttz!0.2ag: that Mr. Hackley wild submit alternative revised drafts of the response to this question, one of which would retain a detailed listing of the provisions of the Act specifically endorsed by the Board /alile the other would handle the matter on more of a summary basis. In ad dition, agreement was reached on a minor change in the answer to IMestion 42 and it was understood that Mr. Hackley would review and 15ezttaPs suggest certain revisions in the answers to questions 30, 32, atd 33. Messrs. Sherman and Shay then vithdrev from the meeting. Proposed kortrait. In a letter addressed to Chairman Martin 114der date of January 9, 1958, Chairman Prall of the Federal Reserve knk of Chicago stated that the Bank's directors were considering a 1311gOsti -on that a portrait of former President Young be commissioned 44d that the Board's views would be appreciated. The letter had been ".relllated to the members of the Board prior to this meeting. In a discussion, reference was made to certain other instances Mier& - Portraits of former Reserve Bank directors or officers had been 44thor i2a4psometimes vithout previous consultation with the Board of Ore, and it was noted that the suggestion at the Chicago Bank 145Pare rt Y arose because of the fact that the Federal Reserve Bank of york recently unveiled a portrait of former President Sproul. While 1141 th5 consensus of the Board that it seemed doubtful whether 1/20/58 -6- "Penditures for portraits of former Federal Reserve Bank directors and °fficers represented an appropri ate outlay of Bank funds, question was raised about the advisabi lity of writing to the Chicago Bank along such lines) particularly in view of the incident at New York. Consider ation ala° vas given to the appropriate sphere of authority of the boards of directors of the Federal Reserve Banks and the relationship of that II-testi-0n to a situation of this kind. The further thought was expressed that it *would be inadvisable to seem to discriminate against Reserve 138 ' 114 'Which sought the Board's advice before going forward with an ex13erlditure of this nature. In the circumstances, the suggestion was 1fl a4e that Chairman Prall might be requested to ask the Chicago directors to de . ' er a decision regarding the proposed portrait of Mr. Young until the s Ystem-wide aspects of the matter had been discussed at a meeting or 11, Conference of Chairmen of the Federal Reserve Banks. In this c°11itlection, it was understood that present plans contemplated a meeting the C onference this spring. Chairman Martin expressed the view that, if it were decided to 48C U88 be the subject with the Reserve Bank Chairmen, the Board should Prepared to make a positive statement. f34:14.0 While the discussion concluded without a definite course of 11 having been decided upon, Chairman Martin was authorized to talk Illrorm„ : ht a7 1Y with Chairman Prall and to make such statements as seemed to PDropriate in the light of this discussion. 1/20/58 -7Messrs. Thurston, Thomas, Leonard, and Young then withdrew from the meeting. Discount rates. Chairman Martin referred to the discussion at tile meeting of the Board on January 17, 1958, concerning the action taken bY the directors of the Philadelphia Reserve Bank to establish a discount l'ate of 2-3/4 per cent, subject to the Board's approval, and to the te/egram vhich was sent to the Reserve Bank Presidents informing them that aUch a rate had been established by the Philadelphia directors. ae said that he had since received a telephone call from the Chairman the Cleveland Bank, who was going to call a special meeting of that 1141kill Board of Directors this Thursday, that he told Chairman Van keitirk he did not want to influence him in any way, and that he also t45:141** Van Buskirk that he did not knovs how the Board of Governors v31114 act on the rate established at Philadelphia. He had also received k elphone call from the President of the St. Louis Reserve Bank, who °3qJzieefled the intention of recommending a rate reduction to his directors, 44c1fItft the President of the Atlanta Bank, vho favored a reduction of e 4teco1.nt rate and was inclined to feel that it should be accompanied 1),, 1 4 l'eduction in reserve requirements against both demand and time Chairman Martin vent on to say that he thought he should inform se the eretary of the Treasury of the action taken by the Philadelphia and state to him that the Board vas going to discuss the 1/20/58 —8— matter this week. The purpose of this 'would be simply to receive any comments that the Secretary might care to make. Chairman Martin also stated that President Hayes of the New 1c)rk Reserve Bank, who had been informed by the Philadelphia Bank of The action taken by that Bank's directors, caJled on the telephone last Friday, at 'which time he vas disposed to feel that a reduction in the discount rate should be deferred until immediately after the t'easurlY financing. It vas Mr. Hayes' opinion that at such time it 4ight be appropriate also to reduce reserve requirements for central rellerve city banks to the level prevailing for banks in reserve cities. In further comments, Chairman Martin referred to the fact that e°114ittees representing the commercial banks, investment banking, and Other financial organizations 'would arrive in Washington at the 1)4404114., -44g of next 'week for the usual conferences at the Treasury about the fo rthcoming Treasury financing. In view of the envisaged schedule rel4titg to the Treasury financing, it appeared that if action vere llot ken to reduce the discount rate this week, or at least by next Moro . --4r, such action might not be feasible until after the first of March. In ticrie this connection, Chairman Martin added that in his converse- 'pith the Secretary of the Treasury he had not thus far made any rer ererift5 to the action taken by the Philadelphia directors. The particular question 'which he wished to raise at this time, Ilsat Martin said, was whether there vas any feeling on the part 1/20/58 °f the other members of the Board that it would be desirable to call 8Pecia1 meeting of the Federal Open Market Committee later this week °r to hold a telephone meeting of the Committee in order to explore the Course which open market policy should take in the present circumstances. None of the other members of the Board were of the opinion that the circumstances were such as to require a special meeting of the Open 44trket Committee or a telephone conference. There followed a further general discussion of reasons which Ilalght be given for and against favorable action on the rate established the Philadelphia directors, following which the meeting adjourned. Secretary's Notes: Pursuant to recommendations contained in memoranda from appropriate individuals, Governor Shepardson today approved on behalf of the Board the following items affecting the Board's staff: allr j enrY B. Hummel as Clerk in the Office of the Secretary, with basic a QtjesrY at the rate of $4,485, effective the date he assumes his Sea increases, effective January 26, 1958 from J. Swindler, Economist, Division of Research and Statistics, ' 115 to $61250 per annum. Cortland G. Peret, Economist, Division of Research and Statistics, 05 to $61820 per annum. ll o ence A. Norman, Relief Cook, Division of Administrative Services, ,125 to $3,210 per annum. 8 1.111Gertrude H. Price, Cafeteria Helper, Division of Administrative cee, from $21675 to $2,750 per annum. 205 1/20/58 Ch e in e -10loyment status a Susan O. Hoffman, Statistical Clerk-Typist, Division of Research jnd S tatistics, from a full-time basis to a half-time basis, effective alltlarY 20, 1958. Governor Shepardson also approved on behalf of the Board today a letter to The Brookings Institution nominating Mr. Farrell, Assistant Director, Division of Bank Operations, to participate in the second conference for executives to be held at Williamsburg, Virginia, March 16-28, 1958. Pursuant to the action taken by the Board on December 20, 1957, a letter, of which a copy is attached as Item No. 3, concerning extension of the detail to the Board of Mr. Arthur Leff, Hearing Examiner, vas sent today to the National Labor Relations Board. Secretary 2, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 1/20/58 WASHINGTON 25, D. C. AOORESS OFFICIAL CORRESPONDENCE TO THE BOARD 7 0 , , 41W111 , January 201 1958 Mr. Carl E. Allen, President, Federal Reserve Bank of Chicago, Chicago 90, Illinois. Dear Yr. Allen: In accordance with the request contained in your letter of December 26, 1957, the Board of Governors approves the additional annual exnenditure of approximately S12,000 Involved in providing improved surgical insurance benefits for the employees of your Bank. It is noted from your letter that the additional cost to the Bank for the period March 1 to December 31, 195S, is approximately ':10,000 for which provision was made in the 1958 budget. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. e BOARD OF GOVERNORS OF THE Item No. 2 1/20/58 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADORILOS OrrICiAL. CORRIESPONOENCIE TO THE e0ARO January 201 1958 Board of Directors, Batik of Idaho, Boise, Idaho. Gentlemen: Pursuant to your reouest submitted through the Pe deral Reserve Bank of an Francisco, the Board of Governors ?-43)roves the establishment of a branch in the vicinity of the 0 11 11„t ersection of Thain Road and Burrell Avenue, Lewiston brehards, Idaho, by Bank of Idaho, Boise, Idaho, provided the Itneh is established within one year from the date of this 0.7,4ter and that formal annroval of the Commissioner of Finance _J-s the State of Idaho is etZective at the time the branch is teblished. Very truly yours, (Signed) Merritt Sherman herritt Sherman, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 3 1/20/58 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE To THE BOARD January 20, 1958 Rational Labor Rulotions Board, Wa shington 25, D. C. Attention Mr. Arthur H. Lang elen:taelnen: Reference is made to the detail to the Board of Governors • Arthur Leff, Hearing Examiner, GS-151 previously agreed to 322tu under letter dated January 22, 1957, and extended by your ,vtex. Of July 81 1957. Under the terms of Mr. Leff's detail, he was made available t0 this Board for a 6-month period beginning February 1, 1957, to ,14 ' 1 eside at one or more hearings ordered to be held under the Bank 1101.13 Rei'ng Company Act of 1956. It was agreed that the National Labor rOI°ns Board would be reimbursed for Mr. Leff's salary at the 8E0: °I' $121690 per annum, and for any travel expenses involved, 1,44;°4-1"Ir reimbursement to be made only for the time in which Mr. Leff tteaetually engaged in connection with the said hearings. Under the tor nsion of Mr. Leff's detail he was made available to this Board an additional six-month period beginning August 1, 1957. It now appears that Mr. Leff's services will be required an.,additional period of time. It is difficult at this time to is bAle,`' the precise additional time which will be required, but it -"eved that an additional period of six months would reasonably eo, " ,r such need. tQl. l 4,bor Therefore, the Board of Governors requests that the National ot si Relations Board extend Mr. Leff's detail for an additional period ori, . 4 months beginning February 1, 1958, on the same basis as the aarVial detail as set forth in a letter from this office, dated 8 '17 22, 1957. thA It will be appreciated if you will confirm this extension of rakie Illibursable detail in order that the necessary arrangements can be tl : . 41-th the Civil Service Commission in connection with confirmation ' e extension of Mr. Leff's services. Very truly yours: (Signed) S. R. Carpenter S. R. Carpenter, Secretary.
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