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176
Minutes of actions taken by the Board of Governors of the
Federal Reserve System on Thursday, January 31, 1952. The Board met
in the Board
Room at 10:30 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Szymczak
Norton
Powell
Carpenter, Secretary
Sherman, Assistant Secretary
Kenyon, Assistant Secretary
Thurston, Assistant to the Board
Thomas, Economic Adviser to the Board
Leonard, Director, Division of Bank
Operations
Mr. Bethea, Director, Division of
Administrative Services
Mr. Vest, General Counsel
Mr. Hackley, Assistant General Counsel
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Secretary stated that the complete answers to the questionSent out by the Patman Subcommittee of the Joint Committee on
the Economic Report were to be printed by the Government Printing Office
ill three
volumes, that they would be available at an estimated price of
about $2.50 per set, and that it would be desirable for the Board to
cleterMine within the next few days what policy it wished to follow in
the distribution of these replies in order that an appropriate order
Illight be placed at the time of the initial printing.
He also said that
4ce°1'ding to available information the Subcommittee intended to make
°IllY a limited distribution but would send copies to those who had re8Pcnded to the questionnaires.
177
1/31/52
-2Mr. Carpenter said that it had been suggested that copies of
the complete answers be sent by the Board to the
Federal Reserve Banks,
their head office and branch directors, member banks, such nonmember
banks as might be determined after consultation with the various State
bank supervisors, and foreign central banks. The suggestion also contemplated that a selected list of college and public libraries and
college teachers of economics would be informed by mail that a copy
would be sent to them on receipt of a request.
Mr. Carpenter said that
such a distribution would involve the purchase of approximately 20,000
sets of the answers and an estimated expenditure, including the cost of
nlailing, of around
60 thousand dollars.
In the course of a discussion which ensued, members of the Board
Present questioned whether the Board should take the initiative in
Illaking a broad distribution of the answers. There was also a discussion
°f the extent to which the replies would be used by those receiving them,
Whether the Reserve
Banks as respondents to the questionnaire should
"
4 themselves determine the distribution policy to be followed in their
respective districts, the desirability of furnishing copies to nonmember
banks
and whether it would be desirable to make a final decision before
411 the replies had been studied.
Chairman Martin stated that he had been unable to reach CongressPatman for a discussion of the question of what distribution might
17/.4
1/31/52
-3-
be undertaken and that he would want to do that before a decision was
made.
To.
In response to a question by Chairman Martin, Mr. Thurston expressed the opinion that, if the Board should decide as a matter of
Nlioy on a liberal distribution, the material was of sufficient imPortance to justify the indicated cost.
He agreed with the Chairman
that a widespread distribution should not be undertaken before discussion of the matter with the Chairman of the Subcommittee.
He also
agreed with the view that it might be desirable to postpone a decision
Pending thorough study of the answers.
He noted that, pursuant to a
Ilecluest by the Board, members of the staff were considering the use of
some of this
material in a Board publication, stating that, if this
were to be done, such a publication might be more suitable for distribution than the complete text of the replies to the questionnaire.
Chairman Martin then suggested that in view of the opinions
expressed at this meeting the Board place an order for 1,000 copies of
the replies, which would be sufficient to meet the needs of the Board
and the Federal Reserve Banks and provide a relatively small reserve
suPPlY, with the understanding that the matter would be reviewed at a
later date and, if a more liberal distribution seemed appropriate at
that time, a separate order could be placed, with a private printer if
•('
179
1/31/52
n
ecessarY.
This suggestion was approved
unanimously.
During the foregoing discussion, Mr. Fauver, Assistant to
A.
Thurston, entered the room, and at its end he and Mr. Bethea with-
drew from the meeting.
Mr. Powell called upon Mr. Leonard, who had been serving as
the
BoardI
representative in discussions with representatives of the
Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation concerning plans for facilitating the continuance
of commercial bank operations in the event of a war disaster, to make
a further report on these discussions. Mr. Leonard had made an earlier
Progress report at the meeting on January 17, 1952.
Mr. Leonard said that at the meeting of the interagency group
laet Friday there was substantial agreement on a plan which would be
referred to the legal staffs for review and then to the heads of the
three
agencies concerned, and that it would be helpful if the Board
at this time would indicate whether it concurred in the general approach
hich Was contemplated by the group.
He said that the committee had now
eed upon a modified approach calling for a permissive rather than a
'
agl
Inandatory suspension of banking activities, that no reference would be
niade in the initial regulation to a limitation on deposit withdrawals
180
1/31/52
-5-
Other than cash payments, and that the plan of issuing negotiable
drafts or checks secured by Government obligations in payment of
Withdrawals would be deferred.
Mr. Leonard also said it had been agreed that the proposed
executive order to be issued by the President in the event of an enemy
attack should place the regulation of the operations of the Federal Rerye Banks in the Board of Governors rather than the Secretary of the
"
Treasury, and that it was proposed that, in the event of such an attack,
the
System
would issue a brief statement that the Reserve Banks would
stand ready to assure the availability of necessary credit. The contemPlated regulations governing the Reserve Banks would authorize them to
illiPoeo such limitations on currency transactions as might be necessary,
t° PaY out notes of other Reserve Banks, to curtail or suspend any bank
activitY for a temporary period, to use temporary quarters, to perform
as agont or in their own right any operation of another Reserve Bank,
t° °Pen temporary offices in disaster areas, to make discounts and adIralicee authorized by law to any bank with reliance on the borrower Ts
tatoment of ownership of the collateral, even though the securities or
'
l ecords of their ownership were not available, and in exceptional circumStances to make advances to both member and nonmember banks within their
I'eePective districts on unsecured promissory notes.
"r.
181
1/31/52
-6Mr. Powell stated that, while the last two provisions regard,
ing extension of credit would involve more than the ordinary degree of
risk, they would seem warranted under emergency conditions and the Reserve Banks, by exercising care and calling upon their knowledge of
banks and bankers in their districts, should be able to minimize the
risk. He also pointed out that the proposed authorization, if granted
after
an enemy attack, would be permissive rather than mandatory.
Mr. Hackley stated that members of the legal staffs of the
three
supervisory agencies had held two meetings to discuss the pro-
posals and that it was recognized that some of the provisions were of
doubtful legality.
the
t
He said that legislation could be drafted to provide
necessary authority, but that it was the feeling of the group that
might
be preferable not to request such legislAion at this time,
with the
thought that, as was the case following the banking holiday of
1933, if an enemy attack occurred Congress would be asked promptly to
c°11firm any actions taken under the proposed executive order.
Chairman Martin expressed agreement with the position stated
tY 34r. Hackley saying that, although there would be no objection to
hair;
--Lig plans in readiness, it was difficult to define precisely the
e°11ditions under which it would be necessary to put them into effect,
ancl in the circumstances Congress might be reluctant to approve legislati
on delegating to Federal agencies such fax-reaching powers.
He
.1.82
1/31/52
_7_
also suggested that Mr. Leonard make it clear in his further discussions
with the other agencies that the question of the action that would be
taken by the Board under the proposed authority would be a matter of
judgment and that the Board would be entirely free to determine the
form of the conditions under which it would be made effective.
After further discussion, it was
agreed unanimously that Mr. Leonard should
proceed with the discussions according
to the general plan outlined and in the
light of the views expressed at this
meeting.
At the request of Mr. Norton, Mr. Leonard described plans approved by the directors of the Federal Reserve Bank of Dallas and its
Sah Antonio
Branch whereby the Bank would exercise an option to purchase
°ertain property in San Antonio at a price of 311OQ,000 on part of which
Property it would build, at a later date, a new branch bank building.
lie
eaid that, if present plans materialized, the remaining portion of
the Property would be sold to an individial who would erect a building
f" lease to the Post Office Department as a postal substation, but that
ir any
event the Dallas Bank felt that it could dispose readily of the
Porti
on of the property which it did not wish to use for its own purposes.
In the course of discussion Mr. Norton stated that he had inthe property and that he considered its purchase desirable.
Thereupon, upon motion by
Mr. Norton, unanimous approval
,06
1/31/52
-8was given to a letter to Mr.
Gilbert, President of the
Federal Reserve Bank of Dallas,
in the following form:
"Vice President Austin has reported to the Board of
Governors the action of the boards of directors of the
San Antonio Branch and the head office of your Bank in
recommending the purchase at a price of $400,000 of the
City block in San Antonio bounded by Main Avenue, Nueva
Street, Dwyer Avenue, and Stumberg Street as a site for
a future building for the branch. It is understood that
negotiations are under way whereby approximately 43,000
square feet of the total of 72,000 square-foot area of
the property (considered to have the less valuable frontages) would be sold as a site for a building to be erected
and leased to the Post Office Department as a substation
at a price of $200,000.
"The Board will interpose no objection to the purchase of the property at a cost of approximately $400,000
and the resale of a portion thereof in accordance with the
Proposed program."
Noting that the President had accepted
Mr. Norton's resignation as of February 1,
1952, and that this was the last meeting which
Mr. Norton would attend, Mr. Szymczak moved
that the Secretary be asked to record in the
minutes that the members of the Board had a
high regard for Mr. Norton's service as a
member of the Board and regretted very much
that his personal program was such that he
had felt it necessary to resign.
Mr. Szymczak's motion was
put by the Chair and carried,
Messrs. Martin, Szymczak, and
Powell voting "aye".
1.84.
1/31/52
-9At this point all of the members of the staff with the excep-
tion of Messrs. Carpenter, Sherman, and Kenyon withdrew,
and the action
stated with respect to each of the matters hereinafter referred
to
l'fas taken by the
Board:
Minutes of actions taken by the Board of Governors of the
Federal Reserve System on January 301 1952, were approved
unanimously.
Letter to the Board of Directors, The County Trust Company,
White Plains,
NEW York, reading as follows:
"Pursuant to your request submitted through the
Federal Reserve Bank of New York, the Board of Governors approves the establishment and operation of two
additional branches, one in The Mount Vernon Trust
Company's present banking quarters, and one in premises
on South Fulton Avenue in Mount Vernon, New York, by
The County Trust Company and hereby gives its written
.consent under the provisions of Section 18(c) of the
r.ederal Deposit Insurance Act to the merger of your
institution with The
Mount Vernon Trust Company, Mount
Vernon, New York, without increasing the capital (common
and preferred stocks)
and the surplus of your company
to an amount which will equal the aggregate capital and
surplus of the two banks involved in the merger upon
?endition that: the merger is effected substantially
in accordance with the merger agreement as submitted to
the Reserve Banks; formal approval of the appropriate
SAtate authorities is obtained; and the South Fulton
2,1:enue
1
Branch is established within six months after
110 date of this letter."
Approved unanimously, for transmittal
through the Federal Reserve Bank of New York,
with the understanding that Counsel for the
Reserve Bank would review and satisfy himself
1/31/52
-10as to the legality of all steps taken in
effecting the merger and in establishing
the branches.
Letter to the Continental Illinois National Bank and Trust
Company of Chicago, Illinois, reading as follows:
"The Board of Governors of the Federal Reserve System
authorizes your bank, pursuant to the provisions of section 13 of the Federal Reserve Act, to accept drafts or
bills of exchange for the purpose of furnishing dollar
exchange as required by the usages of trade in such countries,
dependencies, or insular possessions of the United States
as may have been designated by the Board of Governors, subject to the provisions of the Federal Reserve Act and the
Board's Regulation C issued pursuant thereto. Section 13
of the Federal Reserve Act provides that no member bank
Shall accept such drafts or bil]n in an amount exceeding
at any one time the aggregate of one-half of its paid-up
and unimpaired capital and surplus. In determining such
aggregate, the amount shall include any such drafts and
bills of exchange accepted by other banks for the account
of Your institution.
"The right is reserved to terminate this authorization
Upon 90 days' notice to your bank as provided in the Regulation.
"Enclosed is a list of the countries with respect to
Which the Board of Governors has found that the usages of
trade require the furnishing of dollar exchange. The Board
Of Governors may at any time, after 90 days' published
n°tioe, remove from such list the name of any country,
de
pendency, or insular possession contained therein."
Approved unanimously, together with
an identical letter to The First National
Bank of Chicago, Chicago, Illinois, for
transmittal through the Federal Reserv
of Chicago.
-41Atlytet.
/.12.‘
Secretary.
@FedFRASER