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) Minutes of actions taken by the Board of Governors of the Federal Reserve System on Tuesday, July 17, 1951. The Board met in the Board Rooluat 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Evans Norton Carpenter, Secretary Sherman, Assistant Secretary Thurston, Assistant to the Board Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Vest, General Counsel Young, Director, Division of Research and Statistics Mr. Noyes, Director, Division of Selective Credit Regulation Mr. Youngdahl, Chief, Government Finance Section, Division of Research and Statistics Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Thomas presented a report on developments in the Government 8"itY market. Mr. Vardaman joined the meeting at this point. Mr. Evans referred to the administrative hearing ordered by the 804„ -q at the meeting on May 10, 1951, in the case of H. Bartels, furniture a. J afle 4terrni„ dealer in Philadelphia, Pennsylvania, for the purpose of whether the license of the registrant under Regulation WI Colas 'Credit, should be suspended. 51 1411' He stated that the hearing was ))Eti held beginning today by Mr. Teegarden, a hearing examiner obtained 11 rrcol the Securities and Exchange Commission pursuant to provisions of the Akial iatrative Procedures Act. He went on to say that Mr. Townsend, Solicitor, 7/17/51 -2- had informed him yesterday that, on the basis of information obtained in Philadelphia, attorneys for H. Bartels might wish to have a public hearing alla that he had this morning authorized Mr. Townsend to state to the trial eX.Eminer that,if such a request was made, the Board would have no objection to granting the request for a public hearing. After a discussion of what the procedure might be with respect to 1314111C hearings in cases of this kind, Mr. Evans suggested that, while thel'e need be no change in the Board's Rules of Practice for Formal Bearings 13b3viding that such hearings ordinarily would be private, he felt that in 4/rease where a registrant under Regulation W requested a public hearing, the 11. 4ard should grant the request, as contemplated by the Board's rules, ' a41 that) unless there was some objection to this procedure, it be under" c'od that it would be followed in the future. Mr. Evans' suggestion was approved unanimously. In connection with the foregoing, Mr. Evans referred to earlier diecu "ions of the enforcement program for Regulation W and particularly t0 the A - -dscussion which he had with the Presidents of the Federal Reserve 134114 when they were in Washington on May 18, 1951, stating that the Dro„ '4111711 being pursued was in accordance with that which he had outlined 1.11141tiMe to time to the Board but that he would be glad to have any 812€0 stions for modification of the program if any member of the Board NA a change was needed. I 7/17/51 -3No suggestion for change was indicated by any members of the Board present. Mr. Szymczak withdrew from the meeting at this point. Mr. Evans then referred. topending:,legislative proposals, contained 14,the bill to extend the Defense Production Act of 19,0, for placing littitations on consumer credit terms that could be prescribed by the 13°41/ ia Regulation 41, Consumer Credit. He stated that 'while it could 11°t n°11 be ascertained what the final provisions of the law mould be, t74'H '%entative thinking was that, if limitations were placed on only, 'eetteln Parts of the regulation (such as providing for minimum maturity 't°111.8-1-on3 for new automobile credits), It would be necessary before :814"cling the regulation to consider what other changes might 'be desirable (711'' 14 Order to have a properly balanced regulation which would provide substan- t1514'equitable treatment for the various classes of registrants. Tho natrxe 'Of 8"11'ChangeS, he said, could not be ,determined at this time but would hbr°ught to the attention of theloard . when the type of legislation to 13e 1)assed by Congress was determined.. The other members of the Board concurred in Mr. Evans' comments as ci"Ir8:ble approach. the midwest he had III% Evans also said that on his recent visit to t e Vith a number of registrants concerning Regulation W and that, in gerier IL) Particularly among smaller banks and business concerns, their 7/17/51 -4- attitude toward the regulation was friendly and that most of the active 4130sition to it was led by associations of small loan companies. Mr. Youngdahl withOrew from the meeting at this point. i'dr the results Norton called upon Messrs. Young and Noyes who reported on of the studies being made by an interdepartmental committee "Government agencies, participated in also by representatives of major tl'ade associations in the construction industry, concerning developments 112 th real estate and construction field. A summary of pertinent portions o. their report is being prepared for the confidential use of the Board mid its staff. Mr. Vardaman referred to a memorandum from the Division of Personnel Adtusi stration dated June 26, 1951, recommending appointments to the Board's Board for the next year, and he commented that the list of members arba_, 0,Lternate members recommended by the Personnel Committee did not contain the t anle of any Board member or division head. He suggested that at least clae *vision head or Board member be on the Loyalty Board at all times. Mr. Carpenter stated that appointments to the Loyalty Board had bees w41141ed in accordance with the procedure outlined under the Employee's toy 1t rogram but that it had not at all times included a division head. Chairman Martin stated that he did not believe it would be aproll 4 'ate for a member of the Board to serve on the Loyalty Board. t31 %.estsa He however, that Mr. V,trdaman's suggestion be referred to the 7/17/51 -5- Perscrinel Committee for consideration with the understanding that the matter would be submitted to the Board again at a later time. This suggestion was approved unanimously. At this point Mr. Szymczak returned to the meeting and all of the Members Of the staff with the exception of Mr. Carpenter withdrew. Before this meeting there.were distributed among the members of the oard copies of a memorandum dated July 16, 1951, from the Personnel CoMmittee reading as follows: For the past two years consideration has been given to providing additional active service death benefits to members of the Federal Reserve Retirement System. The of this matter grew out of the suggestion that steps ce taken to reduce the difference in the amounts that would be Payable in the event of death shortly before retirement 18 compared. with the amounts payable If the same person ! died shortly after retirement. The present proposal to Provide such benefit in the form of group life insurance an amount equal to one year's salary -- and the considere'ions which led to it are outlined in the attached memorun, glzpi dated June 1 from Mr. Wurts of the Federal Reserve Bank Of New York. In. January, 1951, the Board requested the firm of Towers, Per 11-4, Forster and Crosby, Inc., to undertake a study to etermine the best methods of providing active service death efits for members of the Retirement System. The Towers recommended that these benefits be provided in the '"Drm of group life insurance (with a maximum of two years' salary) rather than through the Retirement System. The uggestion was made that the present active service death ; benefit of one year's salary in the Retirement System be 4-eft undisturbed and that an additional benefit up to one ee'lr's salary be provided through group life insurance. A Y ..,°17)Y of the final report of the Towers firm, together with Memorandum summarizing the plan for group life insurance equal to one year's salary, is also attached. r T117/31 -6- The cost of the present active service death benefit has been 1.18 per cent of total payroll of the Federal Reserve Banks. The Actuary has just completed a recorlputa'scion of the actuarial cost of this benefit and is prepared to approve a reduction to .55 per cent of payroll as being actuari-tlly sufficient to provide this benefit for the eeTleyees or the Federal Reserve Banks. This will leave a net or .63 per cent or total salary cost available to cover the cost of the group life insurance policy contemPlated In the nttached proposal. On the basis of the exPerlence of the System for the past five years, this will be more thin sufficient to cover such cost. Since most of the employees of the Board of Governors are not entitled to an active service death benefit equal a Year's salary (because they are members of the Board rlan or of the Civil Service plan), the reduction in cost of this benefit as a result of the Actuary's recomputation 'will not apply. The Actuary has not yet had time to recompute the cost of the active service death benefit to th DF.,rticipants in the Board Plan. However, he expects that the decrease in the cost to the Board will be in the ! elle proportion as the decrease in the cost to the Reserve ' 4 anks. Tf the Actuary's expectations are realized, this 111 mean that, except for those few employees under Civil ' l rvice Retirement, extending the benefits of the group Ire insurance plan to Board employees will not entail anY additional outlay of funds. It is the feel4ng of the Personnel Committee that the Plan as proposed is in accordance with accepted personnel 1,4. 11 eies as followed by progressive employers throughout ,re United States and would not place the Federal Reserve and the Board in substantially any different posi.Pllics / Z!-°fl from the standpoint of accepted personnel policy than e System was In when it adopted the present active service csath benefit in 1934 as a part of the Retirement System. Accordingly, it is the recommendation of the Personnel Co mmittee that the Board approve the execution of a group fe insurance contract with the Connecticut General Life lIsUrance Company (or one of the other seven companies with 111°m negotiations were held, in case some problem develops working out the contract with the above company) to , °yer , L the employees of the Federal Reserve Banks and the .soard. t (C ) 7/17/51 -7Mr. Norton outlined in greater detail the d3veiopments In coraiction with the proposed plan for group life insurance. The cost cr the plan as referred to in the above memorandum and in the July 21 1951) report of Towers, Perrin, Forster ,and Crosby-, Inc. was .discussed. Mr. Vardaman stated that he would'be,opposed to the recommendation °ttlie Personnel Committee for the reason that he did not 'believe the loard lad the right to authorize an expenditure ,of this Rind and that it Vas la 8.view that the maximum amount of insurance for any one employee 811°.tild'be reduced from *25,000 to415,000, or perhaps $10,000) as a means "reducing the cost. ) reasons for the proposed 'Mee r - Szymczak and Norton reviewed th, Itrattation of that one year's salary and Mr. Norton expressed the opinion the '6 ' 3Ystem should keep abreast of accepted personnel -practices in the °DrOirition. as a means of retaining coraneof retirement and. other benefits terth (Dtficers and employees in responsiblc management positions In the 'SYs,-Lf.Th tj.--) Particularly since it was mot pOssible to compete with commercial 1414k B 0.-td other institutions in the salaries that could be paid such optic and employees. the Szymczak stated that when this matter was referred to 1%40 44°1'Committee for recommendation. in October 1950, at which time II 'Et he " additional member of the Committee, it was contemplated that any 7/17/ 1 -8determined upon might be provided throuh the retirement sYstem or by replacing the present active service death benefit in the retirement system by group life insurance in an amount up to two years' snaarY for each eraloYee' For that reason, he said, as the representa- retire*re 0f the Board of Governors on the board of trustees of the nent 2ystem, he had continued to vor with the group who had been stdy- ille;the Problem but that when it was agreed by the group that no er),IDEe shFstad be made iii the present active serv ice death benefit and that aa -ditJonal benefit should be provided through the medium of group life insurance, the matter ceased to be a retirement system problem and ecartle 3. raa.tter for recommendation to the Board by the present Personnel C°NM ttee In the discussion of the matter all of the members of the Board )1'eserat except Mr. Vardam concurred in the recommendation of the 3-iersonnel 'eckraitt --e0 and expressed the view that the provision of a benefit of the Itito _ qontemplAed was entirely justified as a part of the System's personnel Dolicy. Personnel f-:;zymczak suggested that, If the recommendation of the Cortut a tee is approved, it be understood that a committee consisting of reDrestch+ -..ua-Live of the Board appointed by the Personnel Committee and one r°:Pre,Ra„ --. ,kiative each from the Chairmen's and Presidents' Conferences, with negotiate the et4if assistance as the committee might select, would 1)1i(c)sed, contract wtth the insurance company. 7/17/51 -9-At the conclusion of the discussion the recommendation of the Personnel Committee was approved, Mr. Vardaman voting "no" for the reason that he felt strongly that Federal Reserve funds should not be used for this purpose. In taking the above action it was understood that Mr. Sumczak's suggestion would be carried out and that the negotiation of the contract with the insurance company would not be undertaken until advices had been received from the boards of directors of the Federal Reserve Banks that they had approved the execution of such a contract on behalf of their respective Banks. Mr. Vardaman again inquired as to the status of the study of the °I'°11124tien and policy for the investment of the funds of the Retirement SYsteM and expressed the opinion that there should be no further delay t} Presentation of this matter to the Board for decision. Mr. Norton responded that the matter was in the hands of the Pers °111.1e1 Committee and would be submitted in due course. The action stated with respect to each of the matters hereinafter to was taken by the Board: Minutes of actions taken by the Board of Governors of the Federal Rep^ System on July 16, 1951, were approved unanimously. Memorandum dated July 16, 19)1, from Mr. Bethea, Director, Division Ax'4ulnistrative Services, recommending the appointment of Miss Thelma Ne I rot as an Elevator Operator in that Division, on a temporary basis 4 Period of three months, with basic salary at the rate of $2,120 811411°1, effective as of the date upon which she enters upon the per- 7117/51 -10- rc)rlaance of her duties after having passed the usual physical examination anislibject to the completion of a satisfactory employment investigation. Approved unanimously. Letter to The First National Bank of Negaunee, Negaunee, Michigan, Iseading as follows: "The Board of Governors of the Federal Reserve SYstem has given consideration to your supplemental apPlication for fiduciary powers, and grants you authority mo act, when not in contravention of State or local law, as trustee, registrar of stocks and bonds, assignee, reor in any other fiduciary capacity in which State nnks, trust companies or other corporations which cone Into competition with national banks are permitted to act under the laws of the State of Michigan. The exercise of these in addition to those heretofore granted to powers' act as executor, administrator, guardian of estates, and e mtinittee of estates of lunatics, shall be subject to the Provisions of the Federal Reserve Act and the regulations °r the Board of Governors of the Federal Reserve System. "This letter will be your authority to exercise the j l duciary powers granted by the Board pending the prepara°n of a formal certificate covering such authorization, clich will be forwarded to you in due course." ' Approved unanimously, for transmittal through the Federal Reserve Bank of Minneapolis. Letter to the Presidents of all Federal Reserve Banks, reading fouov 1, "The question has been raised whether Regulation X ap14 to extensions of credit in connection with sales . ,-ces c --4that are commonly known as 'dining cars' to be used as restaurants. "It is the view of the Board that when a 'dining cur' Is :Placed on a foundation constructed on real property, and .11 7111/51 -ii- "the utility connections necessary for its operation as a restauromt are installed, it becomes a 'nonresidential structure' within the meaning of section 2(r) of Regulatim X; accordingly, in such cases, an extension of credit in connection with the sale of the dining car is subject to Regulation X." Approved une.nimously.
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