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Minutes for To: Members of the Board From: Office of the Secretary July 24, 1957 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. A Chm. Martin Gov. Szymczak Gov. Vardaman Gov. Mills Gov, Robertson Gov, Balderston Gov. Shepardson Minutes of actions taken by the Board of Governors of the Pederal Reserve System on Wednesday, July 24, 1957. The Board met in the Board Room at 10:00 a.m. PRESENT: Mt. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Szymczak Vardaman Mills Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mt. Mr. Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Thomas, Economic Adviser to the Board Leonard, Director, Division of Bank Operations Masters, Director, Division of Examinations Solomon, Assistant General Counsel Shay, Assistant General Counsel Items circulated to the Board. The following items, which haa been circulated to the members of the Board and copies of which al'e attached to these minutes under the respective item numbers 14dieated, were approved unanimously: Item No. Letter to Paoli Bank, Paoli, Pennsylvania, Provi „ ng the establishment of a branch, 'Qe location of the present main office, Rational to a proposed merger with Berwyn tr ional Bank, Berwyn, Pennsylvania. (For ' 0;ansmittal through the Federal Reserve Bank Phi ladelphia) 1 eXtLetter to the Federal Reserve Bank of Cleveland c ell(ling the time within which The Lorain Banking lajv Lorain, Ohio, may establish a branch on ' Road, Brownhelm Township, Ohio. 2 Z 2k1,- 7/24/57 -2Item No. Letter to the Comptroller of the Currency submitting a favorable recommend ation with resPect to an application to organize a national bank at Roseburg, Oregon. (With 4 Copy to the Federal Reserve Bank of San Prancisco) 3 Memorandum from the Division of International Pinance submitting a suggested travel program ! ' bl ipm Mr. Irvine, Economist in that Division, iiincluding a visit of about four weeks at the ank of Japan in response to the Bank's request. Activities of Beacon Finance Company. 4 In view of questions NIllich had been raised by certain sources regarding the stock market loan Iletivity of Beacon Finance Company, Boston, Massachusetts, the Board /111°te to the Federal Reserve Bank of Boston under date of May 29, 1957, requ eating information which might be available concerning expansion Of "-eh activity. a 134818 The making of collateral loans by this company on not permissible to banks under Regulation U or to brokers under Re8Illation T had been the subject of a similar request to the Reserve 1144k in 1955. On the basis of the information received at that time, clItestion was raised with the Federal Reserve Banks regarding the delity of an amendment which would make lenders such as Beacon Pitiexice Company subject to Regulation U. However, none of the Banks 41113red an amendment, either then or in 1956, since it appeared that ilateral loans by presently exempt lenders were not of significant ,( a_ 7/24/57 -3- volume and any such expansion of the Regulation would create adadministrative and enforcement problems. The report of the Boston Reserve Bank in response to the Board's current request was summarized in a memorandum from Mr. Shay dated June 18, 1957, which had been circulated to the members Of the Board. This report indicated that Beacon Finance Company's aggregate collateral loans outstanding had grown from approximately *275,000 to about 000,000 since 1955 and that the source of funds Ilas now bank loans in addition to "family" money. It also appeared that in addition to making stock purchase loans the company had (Iffered to handle and finance short sales of securities. However, the solicitation of short-sale business was said to have been un814ccessful and the company stated that it was being discontinued. Mr. Shay's memorandum raised the question whether consideration of broadening the coverage of Regulation U to bring in collateral loans by exempt lenders should be reopened. Unless it 1r4C felt by the Board that this should be done, no action on the l'e15°rt of the Boston Reserve Bank concerning Beacon Finance Company '4°111d aPPear to be required. Following a discussion based on comments by Mr. Shay, during .7111ell reference was made to the effects of a broadening of the provisions °I' Regulation Ul including the additional administrative burden that 20 7/24/57 -4- 'would be imposed upon the Securities and Exchange Commission, it was the unanimous opinion that the report on the Beacon Finance Company should be filed without further action on the part of the Board at the present time. In this connection Governor Mills pointed out that any substantial extension of the activities of exempt lenders would be apt to provoke complaints from banks and brokers. In the absence of such e°41Plaints, it would appear that only scattered instances of such lending activities were involved, and it seemed doubtful whether those instances would warrant a broadening of the Board's Regulation. In response to a question by Chairman Martin whether the report f the Boston Reserve Bank should be made available to the Securities 414 Elcchange Commission, Mr. Shay said that the Commission had made Its wn investigation of the Beacon Finance Company and doubtless I/411 full information in its possession. The Chairman then commented that if . at any time in the future the Board should give further consideration to amendment of Regulation U to cover presently exempt ler4era, the matter should be discussed with the Securities and Exchange C°111131ission before action was taken in view of the additional responsibilities which would devolve upon that agency. During the foregoing discussion Messrs. Riefler, Assistant to the Chairman, Noyes, Adviser, Division of Research and Statistics, and --‘41., Assistant Director of that Division, entered the room. At the c °Ilelusion of the discussion Mr. Shay withdrew from the meeting. 2073 7/24/57 -5Report on H.R. 845 (Item No. 5). In a letter dated June 28, 1957, Chairman Spence of the House Banking and Currency Committee requested a report by the Board with respect to Bill H.R. 845, introaticed by Congressman Multer, which mould amend the provisions of secti°n 19 of the Federal Reserve Act relating to reserve balances Of meMber banks. A draft of reply prepared by Mr. Thomas, representing a revision of an earlier draft, had been distributed to the members c't the Board prior to this meeting. In commenting on the proposed reply, Mr. Thomas said that it fc'llowed generally the lines of a memorandum sent to Congressman Multer 14 1955 in response to his request at that time about possible legis- lati°11 in the area of member bank reserve requirements. The earlier Pr°130sed legislation would have been related directly to capital and 81111)1118, and in a reply to the memorandum sent to him Mr. Multer in-. a. that he had in mind relating any such legislation to deposits ell. This had been done in H.R. 845. Only two changes of substance vith were suggested by the Board respect to the proposed letter to Mr. Spence. The first suggestion — wed in the deletion of a paragraph which might have been under- stood t° indicate that the Board favored the extension of reserve rec11111‘eraents to nonmember banks. It was the view of the Board that this snould not be raised at the present time. The second suggestion reatat d e- agreement to delete from the final paragraph of the letter 7/24/57 -6- a statement that the Board hoped to be able to present definite recommendations for legislation to the Congress in the course of the next year. While it was the opinion of the Board that it would not be Prudent to indicate to the Congress that definite legislative recomnlendations would be forthcoming within any specified period, at the sellle time there was general agreement that work should go forward /githin the System looking toward the presentation of staff recomMendations to the Board for consideration as expeditiously as /3°88ible. In this connection Governor Vardaman suggested that the first of October be kept in mind as a goal toward which the staff 811°Uld be working in the preparation of material for the Board's cons ideration. Thereupon, the letter to Chairman Spence, changed to the et ent agreed upon at this meeting, was approved unanimously) with the Understanding that a copy would be sent to the Bureau of the skid ets A copy of the letter sent pursuant to this action is atte 'ehe to these minutes as Item No. 5. Interest ayment on Federal Reserve notes (Item No. 6). In Illenlorandum dated July 23, 1957, copies of which had been sent to the members of the Board) the Division of Bank Operations advised that net earnings after dividends of the Federal Reserve Banks for the secclud quarter of 1957 amounted to $140,509,545. In order that 7/24/57 -7- the Reserve Banks might pay the Treasury approximately 90 per cent c)f such net earnings as interest on Federal Reserve notes, it was recommended that the Board establish the rates of interest indicated 14 a proposed telegram attached to the memorandum. Following a brief discussion, the recommendation of the Division Of Bank Operations was approved unanimously. Accordingly, there was Seat today to the President of each Federal Reserve Bank a telegram in the form indicated in Item No. 6 attached to these minutes. Proposal to establish branch bank in Augusta, Georgia. Governor Vardellian referred to correspondence received by individual members of the Board from Mr. Mills B. Lane, Jr., President of The Citizens and South ern National Bank, Savannah, Georgia, protesting an application by Ge°rgia Railroad Bank & Trust Company to establish a branch in Allalletay Georgia. Yet been It was understood that this application had not received in the Board's offices. In particular, Governor Vardaman called attention to an ellel°8ure with Mr. Lane's communication, consisting of a letter in Inlich President Bryan of the Federal Reserve Bank of Atlanta commented c)11 pederea supervisory responsibil ities in connection with applications by State member banks to establish branches. It was Governor Vardaman's that Mr. Bryan's letter failed to disclose adequately the duties 44°1 l'esPonsibilities of the Reserve Bank in a case of this kind. Mr. Masters stated that Governor Robertson had received similar e°rreePondence from Mr. Lane, including a copy of the letter from 20( 7/24/57 President Bryan. It was his understanding that Governor Robertson hadmade a reply to Mr. Lane and had also written to Mt. Bryan. Proposed seminars for economists. Governor Balderston developed reasons which led him to suggest the desirability of arranging another seminar for labor economists in order that the Board might be informed concerning their current thinking on credit 4nd monetary problems, including the causes of inflationary pressures. In an ensuing discussion the possibility was mentioned of arranging a seminar in which economists representing various types °r. organizations would be invited to participate, so that the Board lqight have the benefit of exchanges of opinion. An alternative -166estion contemplated the possibility of seminars for particular classes of economists, with perhaps one seminar at which divergent Points of view would be represented. After preliminary consideration of the problems which might be suggested as a framework of reference for seminar discussion, the staff was requested to present plans for the Board's further e°11aideration„ bearing in mind the demands upon the time of the Members of the Board. The meeting then adjourned. 20 7/24/57 -9Secretary's Notes: Pursuant to the recommendation contained in a memorandum dated July 3, 1957, from Mr. Masters, Director, Division of Examinations, Governor Shepardson approved on behalf of the Board on July 22, 19571 the transfer of Oda R. Johnson from the position of Secretary in the Division of Administrative Services to the position of Secretary in the Division of Examinations, with an increase in her basic salary from $4,210 to $4,350 per annum, effective July 28, 1957. Governor Shepardson approved on behalf of the Board on July 231 19571 the following letters, copies of which are attached hereto under the respective item numbers indicated: Item No. Letter to the Federal Reserve Bank of New York 41313rWing the appointment of James 0. Aston and Abram V. Honan as assistant examiners. 7 Letter to the Federal Reserve Bank of Philadelphia 41/1"°ving the appointment of James P. Greer as essistant examiner. 8 PursnAnt to the recommendation contained in a memorandum dated July 221 19571 from Mt. Marget, Director, Division of International Finance, Governor Shepardson today approved on behalf of the Board, an increase in the basic annilal salary of john E. Reynolds, Economist in that Division, from $8,000 to $8,990, effective July 281 1957. BOARD OF GOVERNORS 011(4,,,44 OF THE Ae% tt= FEDERAL RESERVE SYSTEM Item No. 1 7/24/57 WASHINGTON 25. D. C. ADDRESS OFrICIAL CORRESPONDENCE TO THE BOARD July 241 1957 Board of Directors, Paoli Bank, Paoli, Pennsylvania. Gentlemen: Pursuant to your request submitted through the P:deral Reserve Bank of Philadelphia, the Board of Governors !I the Federal Reserve System approves the establishment of branch on Lancaster Avenue in Paoli, Pennsylvania, the lion of the present main office of Paoli Bank, incident to 41A03 merger of Berwyn National Bank, Berwyn, Pennsylvania, with 4nd into Paoli Bank under the title of Upper Main Line Bank, 4nd the removal of the main office of the resulting bank to the pl:eeent quarters of the National Bank in Berwyn, provided (1) T_ATa merger is effected substantially in accordance with the plan 54,1merger submitted to the Federal Reserve Bank of Philadelphia, the establishment of the branch is effected within six months haom the date of this letter, and (3) shares of dissenting stockof the constituent corporations which may. be acquired 44the corporation are sold within six months of the °11 of such acquisition. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 2 7/24/57 WASHINGTON 25. D. C. ACIORESS OFFICIAL CORFIVEIPONOENCIE TO THIC BOARD July 24, 1957 ,11r. Paul C. Stetzelberger, Vice President, Federal Reserve Bank of Cleveland, Cleveland 1, Ohio. Dear Mr. Stetzelberger: In view of the circumstances outlined in your letter of July 15, 1957, the Board of Governors extends until Beptember 160 1957, the time within which The Lorain Banking ,,°121Pari,Y, Lorain, Ohio, may establish a branch on Lake Road, : 1'row44elm Township, Ohio, under the authorization contained 111 its letter of August 15, 1956. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 2080 BOARD OF GOVERNORS to**, 44,4 OF THE Item No. 3 7/24/57 FEDERAL RESERVE SYSTEM 11\ 1 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD Int 4444**" July 24, 1957 Comptroller of the Currency, Treasury Department, Washington 251 D. C. Attention: Mr. W. M. Taylor, Deputy Comptroller of the Currency. Dear Mr. Comptroller: Reference is made to a letter from your office dated Y3, 1957, enclosing copies of an application to organize a 7.,ional bank at Roseburg, Oregon, and requesting a recommendablon as to whether or not the application should be approved. A report of investigation of the application made 1?Y an examiner for the Federal Reserve Bank of San Francisco Indicates that a capital structure of g5001000 would be pronded for the bank instead of $3751000 shown in the application. report discloses satisfactory findings with respect to all of the factors usually considered in connection with such pro!!osals, except that the identity and qualifications of the pro3ed executive officer were not available. The Board of Governors .cscommends approval of the application provided arrangements are lIcle for executive management satisfactory to your office. Our ..'n'te'rrriant is of the opinion that a reasonable time should elapse ‘e'sfore establishment of the proposed bank in order to permit the xisting State bank to work out its present difficulty. T The Board's Division of Examinations will be glad to CU8 any aspects of this case with representatives of your 4ice if you so desire. ' 0 Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. BOARD OF GOVERNORS Item No. OF THE ()Face Correspondence Date Subject: Acting for the Director 1.1 208 7/2h/57 FEDERAL RESERVE SYSTEM July 16, 1957 Proposed Consultation Mission to the Bank of Japan In a letter dated July 9 to Chairman Martin, Mr. Yamagiwal Govern of the Bank of Japan, has requested services of Mr. Reed J. Irvine, Eeohoynoir, ' 8 ,Far Eastern Section, for consultation on monetary and technical Probi: in Japan, At its meeting on June 21, the Board indicated that it would 10 atadavorauiy be0k on a formal request from the Bank of Japan that Mr. Irvine , V ,43.1. ailable to the Bank for a period of consultations. Mr. Margot Wag al( ot th;'uorized to enter into discussions with the New York representative formai Bank of Japan, with a view to arranging for the transmission of a request. Governor Yamagiwa's letter grew out of these discussions. It is proposed that Mr. Irvine be authorized to spend about four at the Bank of Japan in Tokyo, beginning around the middle of August. travellarY and expenses will be paid by the Board of Governors. For this 111% it is recommended that a per diem of $12.00 per day be authorized. ' vine also wishes to take a week's annual leave in Japan. Ive_eks e rae4ts i, In view of Mr. Irvine's responsibilities for advising on develop— visit +1. 1adiace1t countries, it is proposed that he also be authorized to Korea, and Taiwan for approximately one week each, to'Philippines, 84 4 111144 spend approximately one day in Okinawa, and approximately three days Nao g K°ng, before returning to Washington. It is recommended that the c164ing per diems, in line with U. S. Government allowances, be authorized: t6.00 fl Manila, $20.00 in Seoul, $13.00 in Hong Kong, $9.00 in Taipei, and Okinawa. On his return, Mr. Irvine wishes to take a couple of days —44181 leaVe leave en route to Washington. Including official business and +4nine to ten 4'441e, Mr. Irvine expects to be absent for approximately letter It is recommended that the Board of Governors approve the draft to Governor Yamagiwa, which authorizes the proposed consultation. Attachment 2082 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN .Lovic ,V Ot.torP)- July 24, 1957 AIR MILIL The Honorable Massmichi Ismagiwa, Governors Bank of Japan, 7b1cyos Japan. Dear Governor Yamagiwas Thank you for your kind wishes in your letter of JlAy 9. I am glad to inform you that the Board of Governors has acted favorably on your request that Mr. Reed J. Irvine, Economist, Division of International Finance, be made available for consultation with your Bank on technical monetary questions. Mr. Irvine has been authorized to spend approximately four weeks with your Bank, beginning around August 17. With all good wishes, Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. licC. Martin, Jr. 2083 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 5 7/24/57 WASHINGTON OFFICE OF THE CHAIRMAN July 24, 1957 The Honorable Brent Spence, Chairman, Committee on Banking and Currency, House of Representatives, Washington 25, D. C. Bear Mr. Spence: This is in response to your letter of June 28, 1957, request— ;14g8a report from the Board of Governors of the Federal Reserve System 111 H. R. 845, to amend the provisions of Section 19 of the Federal srve Act relating to reserve balances of member banks. ' proposed bill, while continuing the authority of the Board sha7Yernors to fix the amount of reserve balances that each member bank ctir l establish and maintain with its Federal Reserve Bank, would further 86,?ct that "The reserve requirements so fixed by such Board of Governors 07,L1 be based upon the capital, surplus, undivided profits, and deposits so tille member banks, shall be so fixed as to equalize such requirements, practicable, between the various member banks on the basis of Protar-Eas 4 c-ing stockholders and depositors, and shall be so fixed as to avoid ere ? r'ing unfair competitive positions between member banks because of difa ctifferentials in reserve requirements." It would further state that uponefences in such requirements shall not be based in whole or in part he location of member banks. OfThe This authority would supplant the existing provisions of Seotio pres n 19 of the Federal Reserve Act relating to reserve balances, which kerriberibe the minimum percentages of demand and time deposits that each Hani,er bank must hold in the form of a reserve balance with the Reserve °f its district and which authorize the Board to change such require8 within prescribed limits. In the case of demand deposits, these 1linit bank s differ for three classes of banks, which are based on location of 8 in certain cities specified by the Board. anc, able Before commenting specifically on the proposed legislation, the would like to point out that for effectuation of general monetary edit policies, the existing system of reserve requirements is work— For this purpose, it is essential that the Federal Reserve have ^I The Honorable Brent Spence -2- a uthority and ability to adjust the counted as reserves to the existing ever computed. The Federal Reserve 13rPose. Question has been raised, differentials in requirements among supply of assets that can be level of required reserves, hownow has adequate powers for this however, as to whether the existing banks are fair and equitable. The Board recognizes that the present system of reserve requirements has Some definite disadvantages and believes that a change i„ "g. desirable. There are three principal disadvantages, in our opinion, r„InelY, (1) the inability of banks to count vault cash as required ‘j1servee; (2) the inequities as between individual banks, entailed in !existing system of classification, which is based upon standards no 10 eizg:er appropriate, and (3) the administrative difficulty in classifying in_les for reserve requirement purposes without creating further 11Zps. What is needed is either a system of requirements that is " prm for all banks or new rational guides for the classification of walks. In effect, the proposed bill H. R. 845 would give the Board of Govern te„ ors broad discretionary authority to establish requirements for is"er banks upon whatever formula may seem suitable, provided the formula of ) 1., 4_sed upon the guides set forth in the Act. A distinctive new feature re,'nis bill is the provision that, in addition to the amount of deposits, mIllerve requirements should be based upon bank capital. The specific forbe left which these various elements would be taken into account would be pre ' to Board discretion. Although not specifically provided in the bill, tizsumably the Board would also have authority to change the formula from e to time if deemed advisable to meet changing situations. The proposed bill might be interpreted as granting the Board 'surf; etrtrient authority to make any changes in the reserve requirement frol ture that may be considered desirable. This proposal, however, suffers se4the difficulty that it combines two subjects--capital adequacy and rebeloe requirements—which are not closely related. For reasons given stall the capital position of individual banks is not an appropriate ' lard or guide for the fixing of reserve requirements. the Although not specifically stated, it may be assumed that under speci'll.-1 required reserves would, as at present, be expressed as some for tfle percentage of outstanding deposits (perhaps with differentials fere YPes of deposit) but that different percentages would apply to dift banks depending on the bank's capital position. Since a reserve reqj to dlrement which varied directly with the amount of capital would tend it o1rage capital accumulation and to weaken depositor protection, 1,44i-,Iurther assumed that such percentages would need to vary inversely capit'he amount of capital—e.g., as measured by the ratio of a bank's etheral to its total resources or to certain classes of assets or some aPPropriate measure of capital adequacy. A 20S5 The Honorable Brent Spence. —3— It would be possible, for reserve requirement purposes, to cla, • ssifY banks on the basis of capital accounts instead of, as at Present, on the basis of location. Banks having low capital ratios tLIIld be required to maintain larger reserves against deposits than ,fse with high ratios. Such a method of classification, however, .7 ould present difficult problems from the standpoints of credit and f!1 netary policy, pratical operation, and fairness as among different inst itutions. A basic difficulty would arise from the fact that there is no e relationship between the main function performed by bank capital :rald that performed by reserve requirements. The main function of bank lo ital is to provide a cushion for the protection of depositors against ses in the event of asset shrinkage or adverse operating circumstances. The istmain function of reserve requirements, under present circumstances, the 0 provide a medium through which the Federal Reserve can influence as amount of bank credit and the money supply, mainly bank deposits, needed to promote economic stability and growth in the economy. elos Movements in required reserves, under a reserve structure relating requirements to both amount of capital as well as deposits, anr at times conflict with the changes needed for economic stability gen growth. In periods of strong credit demand, when profits would ke,!rallY be rising, capital could easily be raised and reserve require— reduced just when restraint on credit expansion is most needed. a45. recession, capital might tend to decline because of losses in exr 1t8) causing reserve requirements to rise when an incentive to 143:114 credit is most needed. Over relatively short periods, individual 1re8 Might alter substantially their capital position and their re— be mo,l'eserves, while for the system as a whole, such movements would 1,1010,"rate. Basing reserve requirements even in part on bank capital introduce an additional variable into the reserve structure for poi allowance would need to be made in setting credit and monetary ilssZeY and would make the already complex task now facing the Federal rve Board even more difficult. If the purpose of 'die proposal is to provide the Federal Ress„.. for Board with a means for requiring banks to have adequate capital acco,„"e protection of depositors, this purpose could be more effectively ea Plished by dealing directly with the capital adequacy problem. Pit.(,)1. bank supervisory experience have shown that the problem of et .84- adequacy is extremely complex and could not be satisfactorily n any formula sufficiently simple to be integrated with the reserve in p;rements structure. Any such formula would almost certainly result °blems and inequities at least as great as those under the present recij 2086 The Honorable Brent Spence -4- The proposed bill, though granting broad discretionary 111*ority to the Board in fixing reserve requirements, apparently 1°'118 not correct one provision of existing Law, relative to member .1.11k reserves, which the Board believes should be revised. At present required reserves must be carried as balances with the Reserve opnics; in the Board's opinion it would be desirable from the standpoint adMinistrative convenience and equity among banks and would not be be conflict with the functions of reserve requirements, for banks to th Permitted to count their cash in vault as required reserves. While he proposed bill might be interpreted to give the Board authority to reserve balances so as to include any assets that it deemed s.v sable, a more specific authorization in law would be preferable. InillarlY, specific authority to change requirements should be provided. In general, the proposal raises a basic question of legislative because of the broad discretion it would delegate to the Board of P°40Y enve ilisarnors to determine the specific form of member bank reserve requires as well as the level. Although the Board should have power to cha, or ir requirements within limits, the Board questions the advisability ass ving a broad, vaguely-defined, delegation of authority to designate ets eligible to be included as reserves. In conclusion, it may be said that the problem of reserve recAlirem Thips ent differentials is principally one of the competitive relationamong banks, rather than an important concern of banking supervision or res'ven of credit and monetary policy, as long as the total level of o04. 111e requirements is adequate for these purposes. The problem deserves needluing study and analysis, but there does not appear to be any urgent or change from the point of view of credit and monetary regulation. The Board recognizes the desirability of reviewing the existing syn+ e..11,,.--em of the reserve requirements with a view to revisions that would er7nate any possible inequities among individual banks and also remove clasec.luce the difficult administrative problems imposed on the Board in 410113,11fYing banks and cities for reserve purposes. Any such revision be so designed as not to interfere with essential functions of req administration for the broad purposes of monetary policy. The Board has made frequent studies of this problem and has at times Mae Co re d recommendations for revisions, which have not been adopted by as. The nature of the problem changes in the course of time owing to' the ' 141"fts in the availability of reserves, in banking practices, and in stik stribution of bank resources. The Board now has in process a further a °f this problem and hopes to be able to present definite recommendat10n4 to the Congress for legislation. Sincerely yours, (Signed) Wm. McC. Martin, Wm. McC. Martin, Jr. 2087 Item No. 6 TELEGRAM 7/24/57 LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON July 24, 1957 TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS. P4BA (1) 1 (2) 1(4) July 26, 1957. / (3) (Signed) S. R. Carpenter CARPENTER. (1) (2) (3) 2.54137 $10030,359,352 $6,528,375.77 lie'v York 4.05475 3,302,424,937 33,384,552.98 Philadelphia 2.66653 1,142,638,859 7,596,332.95 Cl eveland 3.01406 1,410,640,600 10,855,760.10 Richmond 2.47300 1,233,605,713 7,605,872.07 2.76488 898,270,769 6,192,016.18 3.22541 2,889,936,575 23,239,231.78 8t. Louis 2.40691 775,865,629 4,655,806.18 14inheaPolia 2.49259 405,309,044 2,518,753.52 44848 , City 2.74636 783,866,299 5,367,202.56 4.10649 448,580,876 4,592,615.13 4.47623 1,247,504,469 13,922,044.95 Atlanta Chicaao tealas 84/1 Francisco Board establishes under authority of fourth paragraph of Section 16 of Federal Reserve Act rate of (1) per cent per annum interest for preceding three calendar months on $ (2) daily average of outstanding Federal Reserve notes of your Bank in excess of gold certificates pledged with Agent as collateral security. Interest payment of $ (3) should be credited to Treasurer's General Account as Miscellaneous Receipts, account symbol and title 11 201520 Deposits of earnings, Federal Reserve System (collection under Section 16 of Federal Reserve Act, as amended)" on (4). 20, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 7 7/24/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 23, 1957 Mr. A. Phelan, Vice President, Federal Reserve Bank of New York, New York 45, New York. Dear Mr. Phelan: In accordance with the request contained in your letter of July 19/ the Board approves the appointment 1957, : )f James 0. Aston and Abram V. Ronan as Assistant Examiners 'the Federal Reserve Bank of New York. Please advise us to the dates upon which these appointments are made effec- T It is noted that Mr. Honan is indebted to the .."strial National Bank of Providence, Providence, Rhode a member bank, located in the First, Federal Reserve :lastrict, in the amount of $101800. Accordingly, the Board's ,PProval is given with the understanding that, should examiners z?r the Federal Reserve Bank of New York be requested to parPate in examinations of member banks in the First District, Honan will not participate in any examination of the ustrial National Bank of Providence until his indebtedness -"been liquidated or otherwise eliminated. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 2089 BOARD OF GOVERNORS otioio**4 e‘100/001:*4 OF THE Item No. 8 7/24/57 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. 4'11 4 ADDRESS OFFICIAL CORRESPONDENCE 4 WO TO THE HOARD %17:IL rtt° -44:40* July 23, 1957 itc. E. C. nal, Vice President, Federal Reserve Bank of Philadelphia, Philadelphia 1, Pennsylvania. Dear Hill: In accordance with the request contained in your l!tter of July 180 1957, the Board approves the appointment 24 James P. Greer as an assistant examiner for the Federal ierve Bank of Philadelphia. Please advise us as to the te 111:10n which his appointment is made effective. Z Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary.
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