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128C Minutes of actions taken by the Board of Governors of the Pederal Reserve System on Tuesday, July 26, 1949. The Board met ill the Board Room at 10:30 a.m. PRESENT: Mr. McCabe, Chairman Mr. Szymczak Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Hammond, Assistant Secretary Morrill, Special Adviser Riefler, Assistant to the Chairman Thomas, Director, Division of Research and Statistics Vest, General Counsel Leonard, Director, Division of Bank Operations Bethea, Director, Division of Administrative Services Nelson, Director, Division of Personnel Administration Millard, Director, Division of Examinations Young, Associate Director, Division of Research and Statistics Horbett, Assistant Director, Division of Bank Operations Myrick, Assistant Director, Division of Bank Operations Sloan, Assistant Director, Division of Examinations Hostrup, Assistant Director, Division of Examinations Solomon, Assistant General Counsel Bampnn, Assistant General Counsel Mr. Coleman, Administrative Assistant to the Chairman Mr. Corkhum, Minutes Clerk, Office of the Secretary Miss Burr, Messrs. Alter, Fauver, Furth, Gehman, Hersey, Hinshaw, Hirschman, Miller, Noyes, Schmidt, Tamagna, Thorne, Williams, and Youngdahl, Division of Research and Statistics 7/26/49 -2Mr. Woodlief Thomas, Director of the Division of Research 8411 Statistics, reported at length upon his recent trip to Europe 411d at the end of his presentation there followed a discussion of Parti-cular subjects of interest to the members of the Board. A Memorandum of Mr. Thomas' report is being prepared for the files. At this time all members of the staff except Messrs. Car/)ellter) Hammond, Morrill, Riefler, Thomas, Vest, Leonard, and Iolta gwithdrew. Mr. Szymczak referred to the Board's letter of July 11, 1949, 0 the Korean Minister of Finance, Mr. Kim Do Yun, to the Board's letter of July 111 1949, to Dr. Edward Johnson, Director, Korean 1)11/104 -'°7 : 1) Economic Cooperation Administration, to Dr. Johnson's reJulY 20, and to the memorandum from Mr. Tamagna dated July 141 25, r egarding arrangements being made to comply with the request of the u. ' 43rean Minister of Finance for assistance in the drafting of eezttrAi bank legislation and the preparation of a currency reform. kr. s zYmczak explained that the Economic Cooperation Administration /141 co 4 -olp --Lrmed, in principle, an arrangement under which two specialists the Federal Reserve System would be sent to Korea, their ettletri es to be paid by the Federal Reserve System, and the Economic Coo,— ."'ration Administration to meet their traveling and other necessEtry e ''xPenses. He further reported that informal arrangements had beet. Illade to have Mr. Arthur Bloomfield, Chief of the Bill and Fi14441ce 4J-1:vision, and Mr. John P. Jensen, Assistant Chief of the Audit- 114(1.N_ ' ePartment of the Federal Reserve Bank of New York, go to Korea 12S8 7/26/49 -3- each for a period of about six months, Mr. Bloomfield to leave about the middle of August and return about February 19)0 and Mr. Jensen to leave about October and return about April 19)0. This ' errangement, Mr. Szymczak explained, would permit Mr. Bloomfield to initiate the basic work on banking and currency reform in ad118.11ce Of Mr. Jensen's work on banking reorganization and would also he've the advantage of extending Federal Reserve assistance over a 411gsr period of time. In view of the action of the Board in approving the letter or JulY 11, 1949, to the Economic Cooperation Administration, the Itiellibers present felt that they would be justified in informing the -ederal Reserve Bank of New York by letter that the designation of Mee8,, ".• Bloomfield and Jensen had been informally approved by the 110E11.0 and that if formal action were taken by the directors of the New YO1,1„ sank authorizing them to make the trip, that action would 14)Proved by the Board. Accordingly, the following letter to the Federal Reserve Bank of New York was approved unanimously, with the understanding that the action would be brought to the attention of the absent members of the Board so that if they had any comment to make with respect to the arrangement they would be in a position to do so: "As you are aware, there has been informal discus: 1°4 of arrangements for sending Federal Reserve represen,"ives to Korea in response to a request from the Korean ' Iovernment, seconded by the Economic Cooperation Adminietration, for assistance in the drafting of central bank 7/26/49 -4- "legislation and the preparation of currency reform. Governor Szymczak has participated in these discussions and has reported them to the Board, including in his report the particular fact that it was planned that Messrs. Arthur Bloomfield and John P. Jensen of your Bank's staff would be the members of the mission. The proposal has been informally approved by members of the Board, and if formal action is taken by your directors authorizing Messrs. Bloomfield and Jensen to go to Korea on the mission, the action will be formally approved by the Board of Governors. "Copies of our correspondence with the Korean Minister of Finance and with Dr. Edgar A. J. Johnson, Director, Korean Division, Economic Cooperation Administration, were sent Mr. Moore in our letter of July 2). From this corresPondence you will see that the Economic Cooperation Administration has approved an arrangement whereby it will meet the traveling and other expenses incurred by the missicm. Assuming that you will wish to make arrangements directly with the Economic Cooperation Administration and that you will wish to know of the similar arrangement made when Mr. TamAgna of the Board's staff went to Korea last spring, we enclose copies of our correspondence with the Economic Cooperation Administration at that time and °f our letter to Mr. Tamagna authorizing his travel. These arrangements were, in brief, that the Board continued Mr. amagna on its pay roll, paid all of his travel expenses, -Including its standard per diem of $8 (which would now be ), and upon the completion of the mission, billed the 4'conomic Cooperation Administration for all the expenses, not including Mr. Tamagna's salary. Any modifications °f this arrangement that suit your convenience can doubte5 be worked out directly with the Economic Cooperation Adm inistration." T P Mr. Szymczak then referred to a memorandum dated July 2'), 1949, frotamr. Hersey, Chief of the Far Eastern Section of the Division of ile8eEtl'eh and Statistics, regarding a request from the Government c)r CeYlon for an extension of the assignment to Ceylon of Mr. John 4ter, an economist in the Board's Division of Research and Statietics The memorandum stated that the Government of Ceylon had 290 7/26/49 ' l equested an extension to December 28, 1949, of Mr. Exter's ser'Tic "as adviser on matters relating to the proposed establishment Of a reserve bank and that the American Ambassador had added his °1411 earnest request that Mr. Exter's stay be extended for this Peri°d on the grounds that it was important to Ceylon and to the interests of the United States in this area that Mr. Exter remain a't least until the legislation had passed the Parliament. The niertl°randura added that because of the absence of the Finance Ministel 'in London the legislation could not be introduced before early October. Mr Szymczak stated that in an effort to find some satis- 17Y solution of the problem thus presented, it had been disells8ed with the Federal Reserve Bank of New York, that the Department of the A had requested the services of an expert to go to Japan "rmY Period of six weeks to develop important procedures covering " 114 licensing, exchange control, and banking operations in the %old' of foreign trade, and that Mr. Davis, Assistant Vice President °r the Federal Reserve Bank of New York, was being considered for this fission. According to present tentative plans, Mr. Szymczak 4Qd, Mr. Davis would go to Japan as soon as possible and upon cornof his work there could proceed to Ceylon in order to reMr, Exter which would make it necessary for the latter to r(kLe.i 4 in Ceylon only long enough to provide the necessary overlap 1291 7/26/49 of *. -6- Davis' arrival and Mr. Exter's departure. If the Board were willing to approve such an arrangement, Mr. Szymczak said, he w°111d recommend approval of a letter to the State Department read14 as follows: "The Board has received a copy of a despatch of June '), to the Secretary of State from Ambassador Cole 24, 194,, in Colombo, Ceylon, transmitting and supporting a request made by the Government of Ceylon, for a six months' extenl°n of Mr. Exter's stay in Colombo as adviser to the minister of Finance on matters relating to the proposed establishment of a Reserve Bank. "The Board has already indicated informally its willingness to extend Mr. Exter's stay for three months, namely to September 28, 1949; and it is highly sensible of the earnestness of the Ambassador's dupport of the request that Mr. Exter's stay be extended instead to December. "We regret, however, that demands on its staff from °ther quarters make It impossible for the Board to accede to this request. "Baying in mind the offer made by the Board in October 1948 to undertake, if possible, to obtain from within the Federal Reserve System the services of an adviser on ?perations when the time approaches to set up the new bank, .=-1e Board will undertake, if requested, to make available 1c-).0 the Government of Ceylon the services of Mr. Norman P. ! t vis, an Assistant Vice-President of the Federal Reserve JudIlk of New York, for a period of approximately six months coMmencing about the latter part of September. "The exact time of Mr. Davis' arrival in Ceylon would ic ePend upon the completion of other assignments. The ! u°ard would wish to be sure that his arrival would precede ij, Exter's departure by an interval long enough to permit consultation between Mr. Davis and Mr. Exter. The 15°ard would therefore be prepared to extend Mr. Exter's signment, if necessary, for a brief period of not over " c)rle month from September 28, in order to assure a suitable Overlap:? The letter was approved unanimously, with the understanding that if approved by Mr. Clayton upon his return to the office on July 28 and by telephone by Mr. Evans whose assignments include research matters, the letter would be sent. I 2f.-14-3 ' 7/26/49 -7Secretary's note: Following Mr. Clayton's approval of the letter upon his return to the office and approval by Mr. Evans by telephone, the letter was sent on July .29, 1949. Chairman McCabe stated that Mr. Winthrop Aldrich, Chairman °f The Chase Bank, had called on the telephone yesterday to exess his appreciation of the full consideration given by the Board ' Ill t° the request of the Bank for permission to purchase the stock of the American Express Company. Mr. Aldrich reported, Chairman McCabe sElicl, that the Bank had decided not to proceed with the purchase 811C1 that if he had been a member of the Board he could not have taken 8. aifferent position from that taken by the Board on the questions - the Bank in connection with the proposed purchase. 1)1seselatedby Chairman McCabe then called attention to the statements made O the --Loor of the Senate by Senators Maybank and Robertson of the 2etiat e Reco.1 and Currency Committee as reported in the Congressional for July 22, 1949, that no hearings were contemplated on the holding company bill until the next session of Congress. 8tkted He . that Senator Robertson had expected to hold a hearing during the lD1'esent session at least to afford the Board an opportunity to it'ssellt its views on the bill and that it would appear from the 'e'teMents in the Congressional Record that the two Senators had t° the conclusion that it would not be desirable to start the 11.1111gs until an opportunity could be afforded to hear all interested 1293 7/26/49 -8- Parties. In these circumstances, the Chairman inquired whether the members of the Board wished to press for an opportunity to present its. Position at this time or whether the matter should go over un- ttl after the first of the year. The members present were in agreement that no action should be taken to press for a hearing at this time and that it would be preferable if the Board's views were presented as part of a complete hearing on the bill. At this point Messrs. Riefler, Vest, Thomas, Young, and 'withdrew and the action stated with respect to each of the 411.tis hereinafter referred to was taken by the Board: Memorandum dated July 2, 1949. from Mr. Bethea, Director f the Division of Administrative Services, recommending that the ELI)0 111tment of Miss Lulu A. Sinclair, a cafeteria helper in that Divie4 4-c)n) be extended on a temporary basis for a period of one month, effe ctllre August 4, 1949, without change in her present basic salary °t $2)0-Pn per annum. Approved unanimously. Memorandum dated July 25, 1949, from Mr. Bethea, Director of the tivi sion of Administrative Services, recommending increases in the basic annual salaries of the following employees in that Division, "fective August 7, 1949: Lime R"I°13T-7ff, 411 "L. Moffett TwomeyN L. Thorne Title Supervisor, Dup. & Mail Operator (Dup. Dev's.) Charwoman Salary Increase To From $4,22E%80 $4,r54.20 2,874.48 2,949.72 2,284.00 2,30.00 4 CV' I, 4,1 7/26/49 -9Approved unanimously. Memorandum dated July 25, 1949, from Mr. Bethea, Director cr the Division of Administrative Services, recommending that the r'esignation of Mrs. Ethelyn B. Nelson, a stenographer in that Di\riel°11, be accepted to be effective, in accordance with her request, the close of business August ), 1949. Approved unanimously. Letter to the Office of the Assessor, Sales and Use Tax Divisi°11) Government of the District of Columbia, 14th and h atIseets, N. , . " , Washington 4, D. C., reading as follows: This will refer to our letter to your office dated Ju-L l Y 21, 1949, in which it was stated that, although it believed that the requirements of the District of Colum' jie. Sales Tax Act are not applicable to the Board of Gov;rnors since it is an independent establishment of the . (3vernment, nevertheless in those instances in which sales fe made by the Board which otherwise would be subject to he sales tax, the Board planned to collect an amount (111a1 to the tax and pay the same over to the Collector of , ' a xes. There would be few such sales, but in order to i:oPerate fully with your office the Board planned to colw_ct and remit an amount equal to the tax even though it 'lad require substantial clerical work. As a result of informal conversations it is under,''wc1 that your office is now inclined to agree that sales by thi -s Board would not be subject to the tax. In view Of this fact, and the further fact that the amount in, p nved would be very small in any event and its collection remon would impose disproportionate administrative f.:dens on this Board and your office, it would seem pretjable in the circumstances that the Board not attempt i4 c°11ect and remit an amount equal to the tax. Accordthe Board will not collect or remit such amount. L. w we are writing to you at the suggestion of Mr. Harry alker, Assistant Corporation Counsel, and it would be ; St i/26/ 9 -10- alopreciated if you would confirm our understanding that You agree with the view that sales made by this Board are not subject to the tax." Approved unanimously. Memorandum dated July 26, 1949, from Mr. Hooff, Assistant el, recommending that there be published in the law depart- Of the August issue of the Federal Reserve Bulletin statements tlj f -orm attached to the memorandum with respect to the follow- Banks Dealing In Obligations Of International Bank for Reconstruction and Development. Housing Act of 1949 Bank Loans and Investments Margin Requirements Amendments to Regulations T and U Approved unanimously. Secretary. Lt a k ITirman.
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