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Minutes for January 7, 1957 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. Chin. Martin Gov. Szymczak 1/ Gov. Vardaman Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Z6g4 1/ The attached set of minutes was sent to Governor Vardaman's offic e in accordance with the procedure approved at the meeting of the Board on November 29, 1955. The set was returned by Governor Vardaman's office with the statement (see Mr. Kenyon's memorandum of February 12, 1957) t:hat herea fter Governor Vardaman would not initial any minutes of meet, 3ilgs of the Board at which he was not present. Therefore, with Governor onepards s inapproval, these minutes are being filed without Governor Vardaman's 28 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Monday, January 7, 1957. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Szymczak Mills Robertson Shepardson Mr. Mr. Mr. Mr. Carpenter, Secretary Kenyon, Assistant Secretary Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Messrs. Young, Garfield, Brill, Eckert, Gehman, Jones, Miller, Weiner, Altmann, Trueblood, Wernick, and Wood of the Division of Research and Statistics Messrs. Marget, Bangs, Furth, Katz, Sammons, Wood, Reynolds, and Westebbe of the Division of International Finance The representatives of the Divisi on of International Finance presented a review of international economic and financial developments following which the members of the Research Division reviewed the domestic business and financial situation. The members of these two Divisions then withdrew from the meeting along with Messrs. Riefler and Thomas and the following members of the staff entered the room: Messrs. Vest, General Counsel; Sloan, Director, Division of Examinations; Johnson, Controller and Director, Division of Person nel Administration; Horbett, Associate Director, 29 1/7/57 -2- Division of Bank Operatio ns; Hackley, Associate General Counsel; Solomon, Assistant Gene ral Counsel; and Masters, Associate Director, Division of Examinat ions. The following matters, whic h had been circulated to the members of the Board, were presented for consideration and the action taken in each instance was as stated: Letter to Mr. Dawes, Vice President and Secretary, Federal Reserve Bank of Chicago, reading as follows: The Board of Governors approves the payment of salaries to the followin offi cers of the Federal Reg serve Bank of Chicago effective today for the period ending December 31, 1957 , at the rates indicated, which are the rate s fixed by the Board of Directors as reported in your letter of December 27, 1956. Name Title Wm. C. Gallaghe r Victor A. Hansen Robert E. Sorg Robert C. Holland Assistant Assistant Assistant Assistant dent Annual Salary Counsel Cashier Cashier Vice Presi- $ 9,700 8,000 10,500 12,500 Approved unanimously. Memoranda dated December 31, 1956 from Mr. Johnson, Controll , er, .submitting, with a recommendation for approval, requests from the follOwing Divisions for estimated 1956 budget overexpenditures: Division Offices of Memb ers of the Boar d Account Classification Salaries Traveling Expenses Printing and Binding Stationery and Supplies Furniture and Equipment Excess Amount Per Cent $15,600 4,500 175 100 108 14 45 10 10 17 30 1/7/57 -3- Division Legal Account Classification Salaries Traveling Expenses Telephone and Telegraph Printing and Binding Stationery and Supplies All Other Excess Amount Per Cent $ 7,615 L. 400 90 loo 210 5 44o 24 13 13 420 Research and Sta tistics: Regular Budget Traveling Expenses Telephone and Telegraph Rentals All Other 41350 1,300 16o 31,795 46 15 No budget 17 Telephone and Telegraph Printing and Binding 13 8 No budget No budget Evaluation of Consumer Finances Survey Telephone and Telegraph Printing and Binding 2 16 No budget No budget Consumer Instalment Credit Study Grand Total 321,097 No budget Special Projects: Savings Statistics Personnel Administration A dministrative Services Secretary Salaries Medical Service and Supplies Stationery and Supplies 7,375 225 250 8 15 31 Stationery and Supplies Furniture and Equipment Rentals Heat, Light, and Power Repairs and Alterations (Building and Grounds) All Other 1,300 8,503 519 2,827 8 1,012 2 7 11,076 4,146 75 8 130 7 25 21+0 9 160 Telephone and Telegraph Repairs and Maintenance (Furniture and Equipment) All Other 31 1/7/57 -4- Division Examinations Defense Loans Emergency Relocation Employee Retirement and Insurance Benefits Account Classification Excess Amount Per Cent $13,349 6,853 1480 26 3 224 66 Salaries 200 1 Salaries Telephone and Telegraph Printing and Binding Stationery and Supplies 425 801 43 18 Salaries Traveling Expenses Telephone and Telegraph Rentals Retirement Contributions 5,000 No budget 263 No budget lb 2 Approved unanimously. Letter to the Board of Director s, California Bank, Los Angeles, California, reading as follows: Pursuant to your request submitted through the Federal Reserve Bank of San Francisco, the Board of Governors approves the establis hment of a branch at 665 West Lanc aster Boulevard in the unincorporated town of Lancaster, Los Angeles County, California, by California Bank, provided the proposed merger with the Antelope Valley Bank Lanc , aster, California, is effected substantiall y in accordance with the plan of merger dated Dece mber 10, 1956, and the branch is established within six mont hs from the date of this letter. Approved unanimously, for transmittal through the Federal Reserve Bank of San Francisco. Reference was made to a memorandum from Governor Shepards on dated January 3, 1957, copies of which had been sent to the other members of the Board, setting forth the number and categories of official guests served in the Board's dining rooms during the period January 1 to 32 1/7/57 -5- September 30, 1956. The memorandum indicated that a total of 1,872 guests had been served at a cost of $2,866.40, and stated that these expenditures involved a modest amount and appeared to be justified. It was recom mended that there be no change in current policy with regard to this subje ct. Governor Shepardson stated that in view of a question raised at a recent Board meeting the Controller's Office, at his request, compiled information, as summarized in the memorandum, on meals served to official guests. He expressed the view that the amount spent was modest, both on a per meal basis and from the standpoint of total expenditure, and that the policy followed was in accord with good public relations. Therefore, he saw no reaso n to make any change in the current policy. Following a discussion of the subject, Chairman Martin suggested that Governor Shepardson's recommendation be approved. There was unanimous agreement with this suggestion. Mr. Johnson then withd rew from the meeting. The following lette r to Mr. Diercks, Vice President of the Federal Reser ve Bank of Chicago, of which copies had been sent to the memhers of the Board, was presented for consideration: The Board of Governors of the Federal Reserve System has considered the recommendation of the Board of Directors of your Bank contained in your letter of December 31, 1956, and, pursuant to the provisions of Section 19 of the Federal Reserve Act, grants permission to the City National Bank of Cedar Rapids, Cedar Rapids, Iowa, to maintain the same reserves against deposits as are required to be maintained by 33 1/7/57 -6- banks outside of central reserve and reserve cities, effective as of the date of commencement of business by the subject bank. Please advise the bank of the Board's action in this matter, calling its attention to the fact that such permission is subject to revocation by the Board of Governors of the Federal Reserve System. Approved unanimously. At the request of Governor Mills, Mr. Horbett reported on a telephone conversation with President Bryan of the Federal Reserve Bank of Atlanta concerning the proposed designation of Miami, Florida, as a reserve city, effecti ve March 1, 1957, in accordance with the current formula for the triennial designation of reserve cities, and as set forth in the Board's letter of December Reserve Banks. 18, 1956, to all of the Federal He said that although Mr. Bryan was not protesting the rule, he had not yet contacted the Miami member banks, was mindful of certain problems that might develop, and desired an opportunity to discuss the matter with members of the Board following the meeting of the Federal Open Market Committee tomorrow. Mr. Horbett said Mr. Bryan inquired whether consideration had been given to including Miami Beach, to which he replied that for reserve city designation a separate municipality such as Miami Beach must meet by itself the standards provided in the Board's formula. Governor Mills commented that any change in the current formula would be apt to work injustices one way or another. In the event of a Protest by the Miami banks, he suggested that perhaps the date for reclassification could he delayed to allow the banks to adjust to the new reserve requirements. 34 1/7/57 -7Mr. Horbett commented that one possibility would be to waive penalties for reserve defic iencies for a certain period. In response to a question by Governor Robertson as to whether the Board could not defer the date of designation, he said the Board's rule provides that March 1 shall be the effective date of all reserve city designations and terminatio ns. If action was not taken or was postponed from March 1, he felt that banks in cities previously designated as reserve cities under the formula, might protest. He also felt that banks in cities scheduled for termination as reserve cities effective March 1, 1957, might protest if the action was not taken. Mr. Vest said that the designation of Miami as a reserve city would require affirmative action by the Board but that the current rule states definitely that the Board will act every three years in accordance with the prescribed formula. Mr. Horbett comme nted that, as he read the rule, Miami would have to be designated as a reserve city effective March 1 unless the Board changed the rule. At the conclusion of the discussion, it was understood that members of the Board would be available tomorrow for discussion of the matter with President Bryan. Mr. Horbett then withd rew from the meeting. Pursuant to the understanding at the meeti ng on January 4, 1957, there had been sent to the members of the Board copies of a draft of 35 1/7/57 -8- letter to the Bureau of the Budget with regard to a draft bill "To establish a National Mone tary and Financial Commission". In a discussion certain chan ges in the language of the letter were proposed by Governors Balderston and Robertson. Governor Mills stated that although it would be his personal preference to go no further than simply to express concurrence in the purposes of the bill, he saw no real objection to a letter of the type proposed to be sent pursuant to the sugg estions made at this meeting. Thereupon, it was agreed unanimously that the letter would be redrafted in accordance with the suggestions agreed upon at this meeting, that it would be sent when in a form approved by Governor Balderston, and that copies of the letter and the draft bill would be sent to the Presidents of the Federal Reserve Banks for their information. Secretary's Note: Pursuant to this action, the following letter was sent to Mr. Roger W. Jones, Assistant Director, Legislative Reference, Bureau of the Budget, on January 7, 1957: This letter is in response to your request of January 3, 1957 for the view of the Board of Governors with respect to a draft bill "To establis h a national monetary and financial commission." The Board of Governor conc s urs in the stated objectives of the bill. While the language of section 3(d) of the bill may be broad enou gh to achieve the desired objectives, consideration might be give n to including a reference to the relative powers, adva ntages, privileges, and limitations of the various classes of financial institutions with a view to making it entirely clear that all aspects of their comparative fit; 1/7/57 -9- positions are to be reviewed. The Boar expresses no view d with respect to the comp osition of the proposed national monetary and financial commission. Governor Robertson stated that certain Board and Federal Reserve Bank representati ves were meeting at the Federal Reserve Building currently to consider the emergency planning program and that he felt it would be desirabl e for the members of this group to meet with the Board before they disp ersed to explain the results of their work. It was agreed that such meeting would be arranged. The meeting then adjo urned.
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