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V013 A meeting of the Board of Governors of the Federal Reserve 8Y8tem with the Presidents of the Federal Reserve Banks was held in lIashington on tednesday, June 11, 1941, at 2:35 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Wyatt, General Counsel Mr. Dreibelbis, Assistant General Counsel Messrs. Roy A. Young, Sproul, Sinclair, Fleming, Leach, McLarin, C. S. Young, Davis, Peyton, Gilbert, and Day, Presidents of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco, respectively Mr. Leedy, First Vice President of the Federal Reserve Bank of Kansas City Mr. Williams, Vice President of the Federal Reserve Bank of New York Mr. Sienkiewicz, Secretary of the Presidents' Conference Upon inquiry from Chairman Eccles as to whether the Presidents had arWthing to report in connection with the discussions at the Presidents, r, uonference which met this morning, Mr. Sinclair, as Chairman of the c onference, stated that a report of the actions taken by the Presidents no —2— be submitted to the Board in due course in the Conference min— Iltee, but that he wished to state at this time that consideration had been . given to the question of assistance by the System in the savings boncl campaign, and that a resolution had been adopted contemplating the Offer to the Treasury of such assistance and authorizing the ClIelrlaan of the Conference to appoint a committee to consult with _ the 8°arot of Governors on the matter. He also said that the Confer— ence discussed the question of installment credit controls, that it recognized that the question involved some very serious adminis— tILtive problems which the Presidents agreed should be given careful Consideration by them, and that it was the hope that before any action 11a3 -taken by the Board the Presidents would be given an opportunity for rilrther discussion with the Board for the purpose of exploring the 131tical problems and the extent to which the controls might go. At this point Mr. Parry, Chief of the Division of Security Loans entered the room. Chairman Eccles outlined for the confidential information of the p residents the status of the Board's plans for the construction ()t the addition to its present building and the circumstances which 1/1f1 Ilenced the decision of the Board to proceed with the preparation ot Contract plans and specifications for the addition. During the 4431,4 "ng discussion architect's sketches of the elevations of the addi— tion were brought into the room and exhibited to the Presidents. In Ner, vcilse to an inquiry from Mr. Sinclair as to whether, if other banking int 6/11/41 -3- agencies should occupy space in the addition they would pay rent as tenants, Chairman Eccles replied that that was a matter which would have to be worked out, that there was more likelihood of such agencies °ccuPying the space than anyone else, and that if it were so occupied it would facilitate the working out of a satisfactory program of Federal banking supervision. In connection with e discussion of the prob- able cost of the building, it was stated that the Architect estimated bout a year ago a cost of 70 cents per cubic foot, that it was not P"sible to say at this time what the cost would be, and that, on the basis of 90 cents per cubic foot, the total cost would be approximately 3)250,000, but that because of uncertainties in materials and labor it nlight cost more than that. In a further discussion reference was made by members of the Board to certain matters which raised some question ae to the desirability of proceeding with the construction at this time, etld it was made clear that the final decision to erect the addition had ' "t Yet been made. Mr. McKee left the meeting at this point and Mr. Smead, Chief • or the Division of Bank Operations, Mr. Thomas, Assistant Director of the Division of Research and Statistics, and Mr. Cherry, Assistant C°11nsel, entered the room. The first page of a memorandum dated May 23, 1941, and all of illemorandum dated June 5, 1941 on the subject of currency hoarding, both the P '34- Which had been prepared by Mr. Cherry, were read. Copies of latter, which presented reasons upon which action could be predi- e4ted to prohibit the hoarding of currency or its use in a manner 6Ava -4.- td.cal to the interests of the United States and certain steps that egad be taken to accomplish such purposes, were handed to the Presi— dents during the meeting. Chairman Eccles displayed a chart showing the increases in curl—ency in circulation by denominations since 1930, and there was "acussion of the reasons for such increases and their possible ef— fects on the monetary system. Et There were also distributed copies of rAllorandum and chart prepared in the Division of Research and Sta— tistics under date of June 10, relating to estimates of active and etive currency, from which it appeared that inactive currency out— etarv414_ 'A-Lug at the present time amounted to somewhere in the neighborhood Of $2,500,000,000. Chairman Eccles stated that steps should be taken to prevent he hoarding of currency, that the System should be prepared to take the matter up with the Treasury or the President, and that the question °I' the use of currency for subversive purposes should probably be dis— °Ussed with the Treasury, the State Department, and the Federal Bureau or Investigation. In connection with the latter point some of the Presidents in— dicated that, at the request of the Federal Bureau of Investigation, the oanks were reporting to that bureau large currency withdrawals. Mr. Szymczak inquired whether there was a committee of the Sidents, Conference that could give further consideration to the flatter in consultation with representatives of the Board, and Mr. Silaro ''air stated that the committee to be appointed to confer with Ina 6/3.3./41 _5_ the Board in connection with the savings bond campaign could also conon the question of currency hoarding. There was a discussion of this suggestion at the conclusion of which Mr. Draper moved that a committee consisting of two Presidents and a member of the Board be appointed to study the question of currency hoarding and the use of currency for subversive purposes, and to submit definite recommendations at the next meeting of the Presidents with the Board, it being understood, however, that in the interim the committee would have authority to consult with the Treasury or any other agency to the extent that such consultation might seem necessary or desirable. This motion was put by the Chair and carried by the unanimous vote of the members of the Board and the Presidents. Mr. Sinclair stated that he would appoint Messrs. Sproul and each open. who would be in Washington from time to time in connection with market matters, as representatives of the Presidents' Conference 11 the committee. Mr. Sinclair also suggested that the Presidents quietly and th014t Publicity obtain such information as they could in their re13ect1ve districts with respect to hoarding and the use of currency tor auby - ersive purposes and send that information to the new committee. All of the Presidents indicated that they would comply with this Further reference was made to the question of installment credit s, and Mr. Sinclair stated that the Presidents did not know how 714 6/11/41 —6— tar it was contemplated that these controls would be extended and that t some memorandum on the matter could be made available to the President8 it would be helpful to them as a basis for their thinking on the SUbject Chairman Eccles reviewed the consideration which had been given by the Board and members of its staff to this matter, and to 8°Ille of the questions that had been studied in connection with it. He n1 "4-so stated that it appeared from the studies that had been made that the controls could be made effective at least to an extent that isf°111ct make them worth while, and that the problem of policing was not 48 difficult as had been reported in some quarters. 4latter Was He added that the still in the discussion stage, that a draft of program was in Process of formulation by staff representatives of the Board of IIYIrernors C Eincl that, and the Office of Price Administration and Civilian Supply, therefore, there were no memoranda or other documents avail- able Which could be given to the Presidents. He made the further eta:teraent that it might not be possible to consult with the Federal rye Banks before an executive order was issued by the President, ' bit t -at if such an order were issued and authority were given to the 804,, no action would be taken by it without affording the Federal 4ee rite Banks an opportunity to confer with the Board, and for the Iteee rite Banks and outside interested parties to submit their comments 441 eliggestions. He added that the Board was fully aware that in order ue successful the controls would have to have the cooperation of 115 -7*Lancing concerns and the complete understanding of the Federal Reserve Banks and their branches as it would be largely their responsibilitYto administer the controls in the field. Mr. Ransom stated that he was convinced that some action was go ing to be taken in this field in the near future to authorize the leral Reserve System or some other agency to administer these con()I'S, that if the controls were to be applied the authority should ' tIt be Placed in the hands of the System, and that the System should undertake the task, notwithstanding the fact that it would not be an easy one. Mr. Parry stated that a situation might arise in which an execiltive order would be issued suddenly and a regulation would have to be f' -ormulated and issued in a relatively short time, and that, there' it might be well for each of the Presidents to designate someone 4t his Bank to study the situation and be familiar with it. Mr. Day inquired whether a draft of regulation could not be 1711tten at this time and made available to the Federal Reserve Banks to, * Study, and Mr. Parry responded with the statement that although he hope A to have available within a short time for presentation to the ,13()al'd the language of an executive order that would be satisfactory to the Staff of the Board and of the Office of Price Administration and lan Supply, the discussions had not reached a point where the draft' a regulation would be advisable. He added that at the proper he would like to have a conference in Washington of staff repre- .4 716 6/11/41 —8— Wtatives of the Federal Reserve Banks, which he believed would be the rac)st expeditious way of informing the Banks fully of developments. Mr. Young of Boston suggested it would be helpful if Mr. Parry e°111cimake a statement as to the principal features of the program a at present contemplated, and Chairman Eccles suggested that those /7414shed to hear such a statement might remain and that the others could be excused. Thereupon Messrs. Eccles, Szymczak, Draper, Davis, Day, Golden— Weis er and Cherry withdrew from the meeting, and Mr. Parry made an in- 1 statement relating to the scope of the contemplated installment Ir'e°11-t controls, the institutions and commodities to which they might be a PPlied, and the manner of their application and enforcement. Thereupon the meeting adjourned. QJexi2hi Secretary. Chairman.
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