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7 '•1 e r`. Minutes of actions taken by the Board of Governors of the Federal Reserve System on 'V4ednesday, July 8, 1953. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Vardaman Mills Robertson Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Thurston, Assistant to the Board Leonard, Director, Division of Bank Operations Mr. Sloan, Director, Division of Examinations Mr. Masters, Assistant Director, Division of Examinations Mr. Mr. Mr. Mr. Mr. Governor Robertson stated that following the meeting of the executive committee of the Federal Open Market Committee yesterday he had a discussion with Mr. Sproul, President of the Federal Reserve Bank of New York, and Mr. Johns, President of the Federal Reserve Bank of St. Louis, other members of the special committee which was named pursuant to the suggestion of the Presidents' Conference on March 5, 1953, and the subsequent action of the Board on March 31, 1953, to undertake a study of consumer credit and its relation to monetary policy. The discussion, he said, concerned what steps might be taken to carry forward the study of the subject, on which the special committee rendered a report to the Presidents' Conference and the Board under date of June 11) and as a result the committee decided to send letters to all Of the Federal Reserve Banks requesting them to study and submit views on 2 7/8/2 -2- the possibilities of alternative forms of consumer credit regulation in the event authority for such regulation should again be enacted. Governor Robertson went on to say that as a means of emphasizing the significance of consumer credit in relation to the economy, the committee also suggested the publication, if possible, in the July issue of the Federal Reserve Bulletin of one of the staff papers which was prepared in connection with the committee's study, including therein the latest available statistics on the growth of consumer instalment credit. There was presented a request that Mr. Tamagna, Chief of the Financial Operations and Policy Section, Division of International Finance, be authorized to travel to Mexico City during the period July 18 - August 2, 1953, for the purpose of participating in seminars and conferences related to the course of lectures on central banking and monetary policy to be given at the Center for Latin American Monetary Studies, this being in accord with the Board's statement in its letter of January 16, 1953, to Mr. Javier Marquez, Director of the Center. Approved unanimously, with the understanding that Mr. Tanagna's per diem in lieu of subsistence while in Mexico would be at the rate of $11, the same rate to which he would be entitled under the Board's travel regulations in connection with travel within the United States. Chairman Martin suggested that Governor Mills be appointed formally to succeed former Governor Norton as the member of the Board to serve on 7/8/53 -3- the special committee originally selected in 1950 to consider problems involved in effective budgetary control of expenses of the Federal Reserve Banks, the other members of the Committee being Mr. Coleman, Chairman of the Federal Reserve Bank of Chicago and Chairman of the Committee, and Mr. Leach, President of the Federal Reserve Bank of Richmond. Chairman Martin's suggestion was approved unanimously. Prior to this meeting there had been circulated among the members of the Board a draft of letter to Mr. Bryan, President of the Federal Reserve Benk of Atlanta, reading as follows: "The Board authorizes the preparation of final plans and Specifications for the proposed construction of the east and the west additions to the head office Benk building, described as Stage I, on the basis of preliminary plans submitted with your letter of March 26. It is noted from Mr. Patterson's letter of June 8 that the Executive Committee of your Bank is of the opinion that all points, except that of the scope of the program, raised in the memorandum from Mr. Persina, the Board's consulting architect, and discussed by him with Mr. Toombs, your architect, could easily be resolved in the preparation of the final plans. "It is understood that Mr. Toombs agreed that a sketch showing the entire ultimate design for Stage II, including the existing Bank building and the east and west additions, would be submitted before proceeding into the final working drawing stage. "The memorandum submitted regarding vault facilities proposes 24 inch doors for the new vault. In accordance with the Position taken in connection with the construction of vaults at Jacksonville and other Federal Reserve buildings in recent Years, the Board feels that there is no occasion for a vault door thicker than 20 inches. It is understood that you are in agreement with this position. Approved unanimously. 7/8/53 Mr. Leonard then withdrew from the meeting. There was presented a draft of letter to Mr. Christian C. Luhnow, Editor and Publisher, Trusts and Estates, 50 fast 42nd Etreet, New York, New York, reading as follows: "During a recent visit to the Beard's offices, you discussed with Mr. Masters various questions pertaining both to the advertising of common trust funds and to pullicity or various kinds relating to operating results of such fi,nds. You stated it to be your observation that the restrictions on advertising and publicity contained in section 17 or the Board's Regulation F were not uniformly understood or interpreted by banks operating common Trust funds, resulting in an apparent wide divergence in form and content of bank adliertising and publicity in this field. In view of these circumstances, you contemplate an exploration of this subject through the medium of your magazine TRa= ND 7,712;:TI , looking toward an interchange of views on the various (juestions concerned and the development or suggestions which may prove helpful to banks operating common trust funds. "There will, of course, 1,e no objection from the Board's Point of view to a discussion of this general subject on the part of your magazine, based on the pro-vision.; of Regulation F. However, the Board does not Peel that it would be a-peropriate for it to undertake to approve an article prepared for private Publication and designed for discussion cyr the Board's regulations or policies, notwithstanding its active interest in matters relating to common trust fund advertising and publicity. Nevertheless, the Board wishes to extend any assistance it can in connection with this matter and to this end the Board's staff will be prepared to comment on the proposed article solely with respect to its factual content if you care to submit an advance draft for such purpose." The draft of letter had been in circulation among the members of the Board, and Governor Vardaman had requested that it be placed on the agenda for consideration at a meeting. 7/8/53 -5At Governor Vardaman's request members of the staff discussed the reasons underlying Mr. Luhnow's proposed investigation of the subject in question. Governor Verdaman pointed out that there had been correspondence between the Board and Mr. Luhnow over several years on various matters relating to the operation of trust departments, in the course of which Mr. Luhnow had made a number of requests for assistance. In the circumstances, and from the standpoint of the principle involved, he questioned the advisability of the Board's offering to have its staff review and comment uPon a draft of the proposed article in advance of publication. Chairman Martin and other members of the Board expressed the view that it would not be desirable from the standpoint of public relations for the Board to refuse to comment on the factual content of an article covering a subject within the Board's field of special interest, and that in the circumstances they felt the draft of letter properly stated the extent to which assistance might be given to Mr. Luhnow. Following further discussion the letter to Mr. Luhnow was approved in the form submitted, Governor Vardaman voting "no" for the reasons which he had stated. Reference was made to a memorandum dated July 2, 1953, from Mr. Allen, Director of the Division of Personnel Administration, copies of vhich had been sent to the members of the Board, submitting, with a recommendation for approval, a list of 42 proposed salary increases for 7/8/53 -6- members of the Board's staff aggregating *5,810 on an annual basis. The memorandum was submitted in accordance with the provisions of the statement Of budgetary and salary procedure approved by the Board on June 12, 1951, for review of the work of the members of the nonofficial staff for consideration of merit increases in January and July of each year. Reference also was made to a subsequent me orandum dated July 7, 1953, from Mr. Boothe, Administrator of the Office of Defense Loans, recommending one additional merit increase. Copies of Mr. Bocthe's memorandum also had been sent to the members of the Board. Unanimous approval was given to the recommended salary increases, as follows, effective July 19, 19')3: Name Title Salary Increase To From Board Members' Offices Doris Inez Abell Virginia J. Ogilvie Stenographer, Governor Vardaman's office Stenographer, Governor Szymczak's office (,;3,535 4 3,535 3,660 6,000 6,125 3,66o 3,415 3,030 31110 3,o3o 3,785 3,495 3,110 3,190 3,110 8,760 8,960 Office of the Secretary John C. Brennan Ruth W. Franta Frances B. Smith Beverly M. Murphy Hannah W. Nielsen Gladys I. Trithble General Assistant Supervisor, Dank and Miscellaneous Records Records Clerk File Clerk File Clerk File Clerk Legal Division Wilson L. Hooff Assistant Counsel 7/8/53 -7- Name Title Salary Increase To From Division of Research and Statistics Clayton Gehman Irving Schweiger Stanley J. Sigel Alvern H. Sutherland John M. Culbertson Bernard N. Freedman Robert R. Moss Murray Altmann Helen R. Grunwell Philip M. Webster Evelyn M. Hurley C. T. Breckenridge Mary R. Lynch Chief, Business Conditions Section Economist Economist Chief Librarian Economist Economist Economist Economist Chief Draftsman Economist Statistical Assistant Clerk Clerk $10,800 ,$11,050 7,240 7,240 7,240 6,140 7/440 7/440 7,440 5,940 5,940 5,310 5,435 5,185 3,410 3,175 3,335 6,340 6,140 6,140 5,435 5,560 5,310 3,535 3,255 3,415 Division of International Finance J. Herbert Furth Arthur B. Hersey Robert Solomon Thomas E. Summers Dorothy L. Helprin Chief, Western European and British Commonwealth Section Chief, Special Studies Section Economist Economist Economist 10,200 10,400 10,200 7,040 5,060 4,330 10,400 7,240 5,185 4,455 3,175 3,175 3,335 3,255 3,255 3,415 6,140 6,34o 4,745 3,335 4,870 Division of Bank Operations Helen A. Bennett Dorothy F. Burton Eleanor I. Klein Clerk-Stenographer Clerk-Stenographer Statistical Clerk Division of Examinations L. M. Schaeffer J. M. Poundstone M. Patricia McShane Federal Reserve Examiner Assistant Federal Reserve Examiner Clerk-Typist 3,415 7/6/53 -8- Name Title Salary Increase To From Division of Personnel Administration June E. Ayers Margaret H. Wolverton Gloria R. Grant Administrative Assistant Personnel Clerk Clerk-Typist $6,31+0 4,830 3,110 .,!6,5413 4,955 3,190 6,740 5,675 6,940 6,00o 5,120 4080 4,295 2,712 5,245 4,705 4,420 2,792 4,295 4,420 Division of Administrative Services Wayne A. Pollard Elizabeth L. Carmichael Stanley J. Bloch Franklin Taylor J. Robert Surguy James T. Stewart Assistant Chief, Fiscal Section Chief, Publications Section Assistant Supervisor, Duplicating and Mail Section Clerk, Composition Printing Clerk Mimeograph Operator Office of Defense Loans Margaret L. Wolfe Secretary Unanimous approval was given to travel by Mr. Allen, Director, Division of Personnel Administration, to Dallas, Texas, to review the Personnel Department of the Federal Reserve Bank of Dallas, with the understanding that while in Texas Mr. Allen would also take annual leave. The meeting then adjourned. During the day the following additional actions were taken by the Board with all of the members except Governor Evans Present: Minutes of actions taken by the Board of Governors of the Federal Reserve System on July 3, 1953, were approved unanimously. Minutes of actions taken by the Board of Governors of the Federal Reserve System on July 6, 1953, were approved and the actions recorded therein were ratified unanimously. 7/8/53 -9Memorandum dated July 1, 1953, from Mr. Young, Director, Division of Research and Statistics, recemmending that the resignation of Marian E. Fadeley, Clerk in that Division, be accepted effective July 10, 1953. Approved unanimously. Letter to Mr. Hill, Vice President, Federal Reserve Bank of Philadelphia, reading as follows: "In view of the recommendation contained in your letter of June 30, 1953, the Board of Governors gives its prior consent to the Camden Trust Company, Camden, New Jersey, to retire $50,000 of its preferred stock held by the Reconstruction Finance Corporation on or immediately prior to August 1, 1953. Please advise the Camden Trust Company accordingly." Approved unanimously. Letter to the Comptroller of the Currency, Treasury Department, W ashington, D. C. (Attention: Mr. W. M. Taylor, Deputy Comptroller of the Currency), reading as follows: "Reference is made to a letter dated May 22, 1953, from Your office enclosing photostatic copies of an application to organize a national bank at Fast Lansing, Michigan, under the title of First National Bank of East Lansing, and requesting a recommendation as to whether or not the application should be approved. "We have received a report of investigation of the application made by the Federal Reserve Bank of Chicago setting forth information with respect to factors usually considered in connection with such-applications. It appears that the proposed capital structure of the bank would be satisfactory and that its future earnings may be adequate. However, it does not appear that satisfactory arrangements have been made for management of the 12 7/8/53 -10- "bank or that there is a definite need for an additional hank in the community. In view of these unfavorable factors the Board recommends disap)roval of the application. "The Board's Division of Examinations will be glad to discuss any aspects of this case with representatives of your office, if you so desire." Approved unanimously. Letter to the Federal Deposit Insurance Corporation reading as follows: "Pursuant to the provisions of section 4(T,) of the Federal Deposit Insurance Act, the Board of Governors of the Federal Reserve System hereby certifies that The Southwest Bank, Inglewood, Cplifornia, became a member of the Federal Reserve System on July 3, 1953, and is now a member of the System. The Board of Governors of the Federal Reserve System further hereby certifies that, in connection with the admission of such bank to membership in the Federal Reserve System, consideration was given to the following factors enumerated in section 6 of the Federal Deposit Insurance Act: 1. The financial history and condition of the bank, P. The adequacy of its capital structure, 3. Its future earnings prospects, 4. The general character of its management, 5. The convenience and needs of the community to be served by the bank, and 6. Whether or not its corporate powers are consistent with the purposes of the Federal Deposit Insurance Act." Approved unanimously. Letter to Mr. Roger W. Jones, Assistant Director, Legislative Reference, Bureau of the Budget, Washington, D. C., reading as follows: "This is in response to your letter of June 25, 1953 requesting an expression of the Board's views with respect to the bill S-1973 'Providing for insurance of membership share balances in Federal credit unions by the Federal Deposit Insurance Corporation.' 1 2`-'•-/;. 7/8/53 -11- "With your letter you enclosed a copy of the report submitted by the Federal Deposit Insurance Corporation with respect to the bill. The Corporation indicated that it believed that the bill should not be enacted. "The Board of Governors is in general agreement with the views expressed in the report of the Federal Deposit Insurance Corporation." Approved unanimously. Letter to Mr. Roger W. Jones, Assistant Director, Legislative Reference, Bureau of the Budget, Washington, D. C., reading as follows: "This refers to your letter of July 2, 1953, addressed to the Chairman of the Board of Governors, requesting an expression of views with respect to an enclosed draft of a proposed Executive Order entitled 'Further Providing for the Administration of the Defense Production Act of 1950, as Amended'. "The only provisions of the proposed Executive Order which are of direct interest to the Federal Reserve System are those of sections 301 and 302, which relate to the guaranteeing of loans to finance defense production pursuant to the V-loan program. These provisions would follow the corresponding provisions on this subject which were contained in Executive Order No. 10161. It is noted, however, that in paraphrasing the language of section 301 of the Defense Production Act of 1950, as amended, subsection (a) of section 302 of the proposed Executive Order omits certain language added to the law by section 4 of the Defense Production Act Amendments of 1953; and it is suggested that appropriate changes be made in the language of the Executive Order to conform to the language of the amended law. "Under the current V-loan program, the standard form of guarantee agreement adopted in 1950, as well as other documents outstanding under the program, are based upon and refer to Executive Order No. 10161. These references would, of course, be inaccurate if that Executive Order should now be revoked and superseded by the proposed new Order. In order to avoid confusion and the necessity of revising outstanding documents, which would require consultation with all of the guaranteeing agencies, it is suggested that consideration be given to the issuance of the 7/8/53 -12- T'proposed Pxecutive Order in the form of an amendment to or revision of Executive Order No. 10161." Approved unanimously. Memorandum dated July 2, 1953, from Mr. Carpenter, Secretary of the Board, reading as follows: "Attached is a copy of the staff draft of a history of the regulation of consumer credit under the Defense Production Act of 1950. This draft has been prepared pursuant to a request contained in a letter from the Director of the Bureau of the Budget dated March 17, 1952. "It will be recalled that a memorandum on the history of the regulation of real estate credit use -:. rovcd 1-y the Board in March of this year and transmitted to the Director of the Bureau of the Budget later that month. Memoranda on three other activities (general credit policy, the voluntary credit restraint program, and the V-loan program) are in the ceurse of preparation and will be submitted to the Board when staff drafts have been completed. "It is contemplated that if approved by the Board, the attached history of the regulation on consumer credit will be transmitted to the Director of the Bureau of the Budget." Approved unanimously.
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