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A meeting of the Board of Governors of the Federal Reserve 48tem was held in Washington on Friday, June 13, 1941, at 10:50 a.m. PRESENT: Mr. Eccles, Chairman Mr. Szymczak Mr. McKee Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman The action stated with respect to each of the matters hereineAer referred to was taken by the Board: Telegrams to Mr. Paddock, First Vice President of the Federal 48erve Bank of Boston, Mr. Sanford, Secretary of the Federal Reserve 138Ilk of New York, Mr. Walden, First Vice President of the Federal Ree Bank of Richmond, Messrs. McCravey and Stewart, Secretaries of the ?ederal Reserve Banks of Atlanta and St. Louis, respectively, Mr. Zieflier, Vice President of the Federal Reserve Bank of Minneapolis, 141'' Caldwell, Chairman of the Federal Reserve Bank of Kansas City, 4. Stroud, First Vice President of the Federal Reserve Bank of Dallas, arki • Hale, Secretary of the Federal Reserve Bank of San Francisco, .teLting that the Board approves the establishment without change by the, zederal Reserve Banks of Kansas City and San Francisco on June 10, 13Y the Atlanta, St. Louis, Federal Reserve Banks of New York, Richmond, krin eapolis, and Dallas on June 12, 1941, and by the Federal Reserve of Boston today, of the rates of discount and purchase in their elliSting schedules. Approved unanimously. liemorandum dated June 11, 1941, from Mr. Goldenweiser, Director .722 6/13/41 -2- ° the Division of Research and Statistics, referring to the action taken by the Board on June 4, 1941, in accepting the resignation of George W. Terborgh, a senior economist in that Division, effective 480f the close of business July 15, 1941, and recommending, for the Ile48011 stated in the memorandum, that the acceptance of the resignation be as of the close of business on July 22, 1941. The action of the Board on June 4 was rescinded and the resignation was accepted as of the close of business on July 22, 1941. Memorandum dated June 10, 1941, from Mr. Smead, Chief of the slon of Bank Operations, recommending, with the concurrence of Mr. Pal/lger, Chief of the Division of Examinations, that Gerald M. Conkling, ecleral Reserve Examiner in the Division of Examinations, be transferred to theDivision of Bank Operations as a Technical Assistant, with salat the rate of $4,800 per annum. Approved unanimously, effective as of June 16, 1941. Nelson, Assistant Memorandum dated June 13, 1941, from Mr. Seer , Eccles that Miss e'arY, submitting the recommendation of Chairman Charlotte Secretary, N. Mitchell, a stenographer in the Office of the be tr Members' ansferred to the Office of Chairman Eccles in the Board of 8ecti°1-1, with salary at the rate of $1,800 per annum, effective as 16, 1941. Approved unanimously. 6/13/41 -3Memorandum dated June 9, 1941, from Mr. Goldenweiser, Di- Of the Division of Research and Statistics, submitting and reco ending acceptance of the resignation of Miss Lottie Kriegel, a lerk-stenographer in that Division, to become effective at the end f her accumulated and accrued annual leave, a period of approximately 42days. The memorandum stated that Miss Kriegel's leave began on thltle 9, 1941. The resignation was accepted. Letter to Mr. Knoke, Vice President of the Federal Reserve Bank Of /a "el/ York, reading as follows: 7, "Receipt is acknowledged of your letter of June resigna the of because that, 1?41, in which you advise tlon of one employee and the calling into military service of another employee in your Foreign Research Division, you wl..11 not be able to spare a man from that Division for a visit to the Banco Central de la Republica Argentina under a Plan being worked out with that bank for an exchange of staff members but that you are canvassing some of the other clePartments of your bank for a man who could be sent with benefit to him and to the Federal Reserve Bank of New York. It is noted that, because of the desire of the central bank of Argentina to have an employee from that institution in New York early in July, you propose to advise the bank of the delay in your plans and to suggest that the bank profeed with its arrangements to have its employees begin "heir visit as planned. and "This arrangement is satisfactory to the Board na Argenti to employee When your own plans for sending an to give glad be will !lave taken definite form, the Board them consideration." Approved unanimously. Letter to Mr. Lassiter, Chairman of the Federal Reserve Bank or chmond, reading as follows: -4"Referring to the Board's letter of May 29, 1941, it is not practicable for the Board to consider the proPosed increase in the salary for President Leach prior to June 15, 1941. Accordingly, the payment of salary to 1/11". Leach at the rate of $21,000 per annum, pending consideration by the Board of the salary suggested by your Directors, will be satisfactory to the Board of Governors. Approved unanimously. Letter to Mr. Young, President of the Federal Reserve Bank Of Chicago, reading as follows: . "Referring to your letter of May 17, 1941, the salaries for certain officers of the Federal Reserve Bank of Chicago are approved by the Board of Governors for the Period June 1, 1941 to March 31, 1942 at the rates fixed bY your board of directors, as follows: Ea= W. C. C. B. P. C. W. A. L. G. O. j. A. L. Bachdan Dunn Hodge Hopkins Meyer Netterstrom Olson P. L. Purrington C. m. Saltnes A. T. Sihler J. H. Dillard J. G. Roberts F. A. Lindsten J. J. Endres Title Assistant Vice President General Counsel Assistant Counsel Assistant Cashier Assistant Cashier Assistant Vice President Assistant Vice President and Assistant Secretary Assistant Cashier Assistant Cashier Assistant Vice President Vice President and Secretary Assistant Cashier Assistant Cashier Auditor Annual Salary $ 9,500 13,000 4,600 6,500 7,000 9,500 8,500 7,500 Ell000 10,500 14,500 6,750 6,300 7,000 Detroit Branch H. J. Chalfont u. L. Diehl Managing Director Assistant Cashier Approved unanimously. 10,000 5,000" 6/13/41 -5Letter to Mr. McLarin, President of the Federal Reserve Bank °f* Atlanta, reading as follows: "Reference is made to your letter of May 23 submitting, for the Board's consideration under applicable conditions of membership, a request of the Bank of Canton, Canton, Georgia, for permission to reduce its capital. "It is understood that the bank wishes to reduce its capital from $150,000 to $1000000 and to reduce the surPlus likewise from $150,000 to $100,000, making a total reduction of $100,000 in the two accounts, and that in connection with the reduction the bank agreed to write down the other real estate account $10,000 and to write down the carrying value of its holdings of Canton Cotton Mills stock $4,500. "The Board recognizes that the bank has an unusually large capital account for the volume of its business and that the examiners have reported the bank to be in generally satisfactory condition and under capable management. Some reduction in the capital or surplus for distribution to the shareholders therefore would not be out of order; however, the amount involved in the bank's proposal represents one-third of the capital and surplus. There is also to be considered, as you point out, the fact that an unUsually large percentage of the bank's total loans is predicated on the stocks of two local concerns which are not readily marketable, and the fact that the latest report of , examination available is that of November 30, 1940. The Board, therefore, does not approve at this time a program w.hich contemplates a retirement of such a large portion of the bank's total capital account. "The Board will not object, however, to a distribution at this time to stockholders from capital and surplus of 11?t more than $50,000 and to that end it approves a reduclon in capital in an amount up to and including $50,000 on he condition, (1) that the total reduction in capital and II-T*1plus not exceed $50,000, and (2) that the bank's other ! real estate be written down $10,000 and its holdings of sock in the Canton Cotton Mills written down $4,500 in accordance with the suggestion contained in your letter of ' 4aY 23. "The approval has been given in this manner in order to Provide flexibility and to permit the bank to make the aist •rlbuti .on from the capital stock or surplus account, or both, d according to its own wishes, so long as the total reIletion does not exceed $50,000. Should the bank desire to 6113/41 -6- "submit for consideration a request for further distribution of capital or surplus to stockholders, you should advise the officers in charge to defer such presentation until after the next examination. Also, please explain to the bank that, if it so desires, the entire matter can be held in abeyance and considered after the next examination." Approved unanimously. Letter to Honorable Henry B. Steagall, Chairman of the Bank1g and Currency Committee of the House of Representatives, reading a8 fOiloWS: "This is in response to your letter of May 22, 1941, requesting an expression of the Board's views with regard to H.R. 2839, a bill 'To establish a permanent industrial loan corporation to assist financing institutions in making credit available to commercial and industrial enterPrises'. "This bill would terminate the present limited authority of the Federal Reserve Banks to make industrial loans a d would transfer this authority in broadened and more effective form to an Industrial Loan Corporation, which would be set up by the bill as an integral part of the Federal Reserve System and would be authorized to extend financial asV-stance to commercial or industrial businesses. The -d0rp0rat10n would have as its directors the members of the , 'i ?°ard of Governors of the Federal Reserve System and would °e authorized to utilize the Federal Reserve Banks as its agents. "Section 13b of the Federal Reserve Act now authorizes the Federal Reserve Banks to make loans and advances with Taturities not exceeding five years to established indus'rial and commercial businesses in order to supply them with working capital. It also authorizes the Federal Reserve Banks to participate with financing institutions in 11;_aking such loans and to make commitments in connection : Herewith. ' "The requirements of the present law that such loans be made only to provide working capital, only to esa lished ' businesses, and only with maturities up to five t ars have made it impossible for the Federal Reserve Banks ? grant credit to many worthy business enterprises, pare cularly in cases where additional funds are needed for tl xPansion or improvement. Similar restrictions originally 6113/41 "Contained in the law under which the Reconstruction Finance Corporation makes advances to business enterprises have been eliminated. "The Federal Reserve System is cooperating with the Office of Production Management for the purpose of enabling business enterprises throughout the country to participate more frilly in the national defense program. The Federal Reserve Banks serve as a conduit for information between small business concerns and the Office of Production Management and the War and Navy Departments, and are endeavoring to assist in the arranging of needed credit for primary contractors and subcontractors who are participating in the defense effort. There is an especial need for credit facilities for subcontractors, who, of course, have no contracts with the Government with resulting Government claims that can be assigned to the banks as security. Where possible, of course, commercial bank credit is provided, but there are some credit demands in amounts that the banks are unable to supply or of such a character that they do not feel justified in supplying them. "This situation has emphasized the fact that the ex-sting authority of the Reserve Banks to make industrial -Loans does not permit them to utilize their facilities in m,11y cases where they are urgently needed to expedite the financing of defense activities. If the Federal Reserve . ystem is to do effective work in the field of industrial toans, and especially in connection with the financing of Qsfense activities, its present authority to make such ans should be liberalized and the unnecessary restric) ..c. 'ions of the present law eliminated. "In the opinion of the Board of Governors, the best way of accomplishing this is through the enactment of 582 (introduced by Representative Thomas F. Ford) or 877 (introduced by Senator Mead), which are identical Oills now pending in Congress. These bills would broaden l'he existing authority of the Federal Reserve Banks in makingindustrial loans by eliminating the unnecessary re!trictions now contained in section 13b of the Federal f_Xeserve Act. In a letter addressed to the Chairman of the enate Committee on Banking and Currency under date of ,•k1:1ril 12, 1941, the Board of Governors expressed the opinia:?n that the law should be amended along the lines of the 5111 S. 877 and, for the reasons there stated, the Board , : "°Pss that your committee will give favorable consideration 1 6/13/la -8- "to the bill H.R. 582. For your convenient reference there 13 enclosed herewith a copy of the Board's letter of April 12, 1941, in which its views on this subject are set forth." Approved unanimously. Mr. Parry, Chief of the Division of Security Loans, suggestthe Board authorize the payment of the cost of luncheons " -ed in the Board's dining room today to Messrs. Rolf Nugent, Rlabe„4. 'y H. Nexon, and Henry S. Reuss, all of the Office of Price Ad111411stration and Civilian Supply. Approved unanimously. Thereupon the meeting adjourned. Chairman.
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