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f Minutes of actions taken by the Board of Governors of the l'ecleral Reserve System on Tuesday, June 14, 1949. The Board met 14 the Board Room at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Szymczak Draper Evans Vardaman Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Vest, General Counsel Leonard, Director, Division of Bank Operations Nelson, Director, Division of Personnel Administration Townsend, Solicitor Young, Associate Director, Division of Research and Statistics Dembitz, Chief of the International DiFinancial Operations Section of the Statistics vision of Research and Mr, Eccles stated that he had asked that the matter of pro13(1sed bank holding company legislation be discussed at this meeting becallse he felt it was necessary to have such legislation introduced 14 the Congress promptly if there were to be hearings held on it c1141-4 the present session. Chairman McCabe stated that he had had numerous conversations °Mptroller of the Currency Delano and Federal Deposit Insurance 00,,„ 'Porai--1---""n Chairman Hanl regarding the request in his letter to them 1_042 6/14/49 -2March 2, 1949, for comments on the draft of the bank holding c0n1Pa 17 bill but that no response had yet been received from either of them other than the comment from Mx. Delano that he saw 4° PurPose in giving time to the bill when it was recognized that C°11gress would not act at this session. Chairman McCabe reviewed his conversations with Senator Robertson of the Senate Banking and ClIrrencY Committee as reported at the meeting with the Federal Ady visor Committee on May 17, 1949, stating that he had informed Mr. Dela, "° of these developments and that when Messrs. Delano and Harl Igel'e at luncheon a few days ago, he told them that if the Board did not hear from them shortly there was nothing that it could do bIlt send the draft of the bill to the Budget Bureau for clearance Elfter which it would be transmitted to Senator Maybank for introin the Senate. Mr. Townsend stated that a number of bankers on the West Coast hA A and that --- Inquired as to the status of the legislation Introduction of the the bill would indicate to the bankers that 33ce-rd as still actively interested in the program. proposed bill and proDuring a further discussion of the cedure that might be followed in having it introduced, question was raiseci as to whether the draft of the bill as discussed and approved e't th. Of meeting on February 24, 1949, should be sent to representatives the various groups with which Chairman McCabe had discussed the 6/14/49 -3- Matter pursuant to the understanding at the meetings on July 6 and '1948, so that they might have an opportunity to see it before it 15 Introduced in Congress. It was the consensus that this should he done a few days before the bill is introduced in the Congress. Mr. Eccles questioned the need for submitting the bill to the 1311dget Bureau inasmuch as an earlier draft of the bill had been introduced in previous sessions of Congress and had been favorably rePorted by the Senate Banking and Currency Committee in the 80th °digress. There was unanimous agreement that the bills should be -ceu as promptly as possible, that Messrs. Delano and Hari had been given every opportunity to comment on the bill, and that 110 Ptirpose would be served in delaying longer for that purpose. At the conclusion of the discussion, it was agreed that Chairman McCabe should discuss the matter with the Director of the Bureau of the Budget this afternoon with the view to getting an immediate clearance so that copies of the bill could be sent this week to the Federal Reserve Banks and representatives of interested groups who had conferred with Chairman McCabe and the bill could be sent next week to Chairman Maybank for introduction in the Senate. Messrs. Nelson and Townsend withdrew from the meeting at th4 Point. Reference was then made to a proposed report prepared in Nons e to a letter from the Bureau of the Budget dated June 8, 1949, 1. egarding proposed legislation authorizing the Export-Import 1i)'4 6114/119 13a4k to offer guaranties to United States private capital newly invested. in enterprises contributing to economic development in n coulatries. Mr. Szymczak stated that the question came up at a recent meeting of the National Advisory Council and that after full discussion) the Council approved the -proposed legislation. In commenting upon the bill, Chairman McCabe stated that it Ige.8 a verY cautious approach to a guaranty program, that no new f14104 would be made available to the Export-Import Bank, that the Ilroposal Would permit the use of existing funds of the Bank for Euaranteeing loans rather than for making direct loans, and that heas Se satisfied that the authority would be used on a careful, con- ative basis. Following statements by Mr. Dembitz regarding the limitations °4 the given Proposed authority and by Chairman McCabe on the consideration to the matter by the National Advisory Council, Mr. Eccles 8teted that he would be opposed to giving additional funds to the 41)°rt-i ---zPort Bank for making loans or guaranteeing credits abroad becalis e ,he did not believe that such loans or guaranties provided the re ELL solution to the problem of foreign investment or of pro't a better balance of international trade, but that inasmuch cis t his 14a5 simply an authority to make limited guaranties of 114eric all investments with funds which would otherwise be available or di lieet loans, he felt that the Board should approve the proposed 6/14/49 -7legislation. state He suggested, however, that the Board should not its broad approval of the proposed bill but should merely itdicate it was in favor of the specific proposal to authorize the 12 Port-Import Bank to guarantee American investments abroad /1-th funds presently available to the Bank. Following a further discussion of the matter, the draft of letter to Mr. Roger W. Jones, Assistant Director, Legislative Reference, Bureau of the Budget, was read and changed and upon motion by Mr. Szymczak, approved in the following form with the understanding that if a request were received from Congress for a report on the bill the Board might wish in its reply to discuss the matter in some detail: "This refers to your letter of June 8 requesting comments on a bill which has been distributed by the State Department and which would amend section 2(a) of the IxDort-Import Bank Act of 1945, as amended, to authorize the Export-Import Bank of Washington 'to guarantee United States private capital invested in enterprises ontributing to economic development in foreign countries gainst risks peculiar to those investments.' "This subject has received consideration by the National Advisory Council on International Monetary and Iji:lancial Problems of which, as you know, the Chairman of "1 Board is a member, and on June 8 the Council agreed Ett such powers should be requested for the Bank. "The Board of Governors is in accord with the purposes °f the bill." our : J Mr. Dembitz withdrew from the meeting at this point. X. Vardaman referred to the discussion of construction of el Reserve branch bank buildings at the meeting on May 6, 1949, qa.ti tig that he felt further consideration should be given to the 6/14/49 -6- question whether the Board should now request Congress to increase the amount that might be expended for buildings at branches of Federal Reserve Banks. At his request Mr. Leonard outlined the c°111raitments that had been made against the $10,000,000 authorize'ti°n granted by Congress on July 30, 1947, stating that purchase f the Cincinnati branch building and allocations for construction °f the Seattle and Portland branch buildings, plus a tentative ellocation for the Detroit branch building, totaled approximately 4°°/°00, leaving some $3,600,000 available for additional con' $6 strIleti°n. Mr. Leonard also said that the greatest need existed at the Jac ksonville branch of the Federal Reserve Bank of Atlanta, that there 14as also a possibility that plans for alterations at the Los kagele s branch of the San Francisco Reserve Bank would be ready bethe end of this year, and that the remaining sum of $3,600,000 Drobab, -LY would be sufficient to cover the costs of such construction. e"cided. that no plans for alterations at the Pittsburgh branch of and it was althe Cleveland Federal Reserve Bank had been prepared available until someIlic)st certain that such plans would not be made tizae after the close of 1949. In the course of the discussion, question was raised as to whether the plans for the Jacksonville branch building were going tc)reird along the lines of the Board's letter of April 19, 1949, to 141'* Neely, Chai n of the Federal Reserve Bank of Atlanta. Chairman 1047 6/14/49 -7- McCabe stated that while he was at the recent Chairmen's Conference at White Sulphur Springs, Mr. Neely spoke to him about the project 81'4 handed him a personal letter indicating that the Directors of the Atlanta Bank were not favorable to the modified plans for the jacks°nville branch as outlined in the Board's letter of April 19, 1949, He also said that he had asked Mr. Leonard to prepare a teniorandum with respect to the matter and that he would like to discuss it at a later meeting of the Board. With respect to the question raised by Mr. Vardaman as to whether additional authority for construction of branch buildings should be sought at this session of Congress, Mr. Eccles said he did not feel there was any chance of action by Congress before the end Of the Year, that funds were already available for the Jacksonville 111c1 L08 Angeles branch buildings when those projects were ready to Ro ah„,„ --e.d'and that it would be preferable to defer raising the question /gith Congress until the next session when need would be ele8.1'er for removal of the existing limitations or an increase in the $ 10 nnr, 000 limitation. Upon motion by Mr. Vardaman, it was agreed unanimously that no action toward introducing such legislation into Congress would be taken at the present time. Mr. Leonard then withdrew from the meeting. . Vardaman referred to the draft of letter to Mr. Dearmont, 1048 6/14/49 -8- Chairman of the Federal Reserve Bank of St. Louis, prepared in acc°1%dance with the discussion at the meeting on June 7, 1949, with tesPect to appointment of a committee from among the Class C Directors Of the Federal Reserve Banks to study margin requirements, Ilte ing that he felt the letter should specifically indicate that the stuay vas to be made on a confidential basis and that the results e not to be communicated to anyone other than the Chairmen's Con' Irel telietice and the Board. There followed a discussion of the letter which was changed and approved unanimously to be forwarded under date of June 16, 1949, in the following form: "As you know, the suggestion has been made that a coMmittee of the Chairmen's Conference be formed to make 4 analysis of the factors to be considered in approach' 411.8 a change in margin requirements and to study the Method or formula used in regulating margins, as distingill-shed from the determination of the actual level of "gine. Since that time, the Board has reduced margin :equirements from 75 per cent to 50 per cent and has heralized substantially the requirements with respect ri the purchase of securities through the exercise of presently —ghts. Certain other technical amendments are LuderI consideration by the Board. It of the changes which are occurring in the s, future 4-°4QMY and the questions that might arise in the 11 the field of security credit, the Board has given ; ecial consideration to steps that might be taken to ,eure that the responsibility of the System for the proexercise of its authority will be adequately met. At request of the Board, Mr. Parry, formerly Director of ;Te Board's Division of Security Loans, has prepared a history of Regulations T and Ur, a copy of which is 4closed. Dr. Parry has emphasized that at this stage the etucly IS not what he would regard as a finished job and j: 1049 6/14/49 that it should not be circulated outside the Board and the Federal Reserve Banks. "In addition to the continuing study given the subject by the Board and its staff, it is believed that it would be helpful to have the benefit of the viewpoint of the Chairmen of the Federal Reserve Banks. Accordingly, it is the feeling of the Board that it would be helpful if there could be appointed a special committee of the Chairmen's Conference, consisting of two or three members Who would be selected from among the 36 Class C directors of the Federal Reserve Banks, for the purpose of conducting a study as outlined in the first paragraph hereof. The conduct of the study would be strictly confidential and the findings of the committee would be for the confidential and exclusive use of the Chairmen's Conference nd the Board of Governors. It was the thought of the Board that if the committee, using the history prepared by lir. Parry and such other background material as is available, could get its study underway promptly, its report ,ould be formulated and presented as an item on the agenda °I' the next Chairmen's Conference. to Board would appreciate your comments with respect „ the appointment of such a committee and if you feel that "would be desirable, you may wish to discuss the memberip of the committee with Mr. Clayton who is the member of he Board having the assignment of margin requirements for initial consideration." n Before this meeting a memorandum from Mr. Carpenter dated May 17, 1949, had been sent to all members of the Board transmitting a n• sed draft of policy record of Board actions for inclusion in ' the A__ '.4nual Report covering the year 1948, incorporating changes e4!eed. upon at the meeting on May 2, 1949. Mr. Draper had attached illerl°1'aildum under date of June 9, 1949, stating that,for reasons tateci in. the memorandum, he could not agree with the proposed proof showing votes of members of the Board when they were not preet f t the meeting. In commenting on the memorandum, Mr. Draper 6/14/4, -10- stated that he would not wish to be recorded as favoring any policy Iletion taken at any meeting when he was not present. There followed a discussion of Mr. Draper's memorandum and cq" the action taken at the meeting on May 2, during which Mr. Carread samples of some of the policy actions proposed for inlusion in the 1948 Annual Report as revised in accordance with the discussion at that meeting. At the close of the discussion, it 14" the consensus that the form of policy record agreed upon at the illeetillg on May 2 should be followed. Thereupon, the policy record was approved unanimously in the form attached to Mr. Carpenter's memorandum dated May 17, 1949, for inclusion in the Annual Report, Messrs. McCabe, Eccles, Szymczak, Evans, and Vardaman voting "Ayd'and Mr. 0 Draper voting "No". In taking this action, it was understood that the form of the record of policy actions taken by the Federal Open Market Committee during 1948, approved by the Board on March 22, 1949, would be changed to conform to the form of the policy record of the Board as approved at this meeting. At this point all of the members of the staff withdrew with the e 3ception of Mr. Carpenter. There was a further informal discussion of the memorandum te May o, 1949, from Mr. Young stating that if there were no ob- eQtio- , 11 Ile would like to accept the invitation of the London Institute or talik ers to attend the forthcoming summer school of the Institute 1 Ss 6/14/49 -11- September 3 to September 17 at Oxford, England. The memoran- c1/41 also stated that in addition to spending two weeks at Oxford he would plan to spend from five to seven days in London visiting With various bankers and economists. Mr. Vardaman stated that he was opposed in principle to triP8 by members of the staff abroad but that he would favor a 11°11cY of having members of the Board go abroad in connection with the 14 °rk of the Board and of having them accompanied by such members Of the staff as was appropriate, and that in view of the cire4nistan ---ces in connection with the invitation of the London Institute he /iota, Q favor acceptance of the invitation by Mr. Young. At the conclusion of the discussion, upon motion by Mr. Szymczak, it was voted unanimously to authorize Mr. Young to go to England for the purpose indicated, it being understood (1) that the expenses of his trip would be paid by the Board and (2) that at a future meeting there would be a discussion of policy with respect to travel abroad by members of the Board's staff. The action stated with respect to each of the matters herein"ter re ferred to was taken by the Board: Minutes of actions taken by the Board of Governors of the ?ecier_ 4-L Reserve System on June 13, 1949, were approved unanimously. Memorandum dated June 13, 1949 from Mr. Young, Associate r of the Division of Research and Statistics, recommending the irrttaf, -rIt of Richard C, Pickering as a research assistant in that 1052 6/14/49 -12with basic salary at the rate of $2,974.80 per annum, effective as of the date upon which he enters upon the perform- "of his duties after having passed the usual physical examiall rietion. Approved unanimously. Memorandum dated June 10, 1949, from Mr. Young, Associate Director of the Division of Research and Statistics, recommending that t• he resignation of Miss Georgiana B. GriMball, a clerk in that•Division, be accepted, to be effective, in accordance with her. 'equest, at the close of business June 15, 1949. Approved unanimously. Memorandum dated June 10) 1949, from Mr. Leonard, Director "the Division of Bank Operations, recommending that Mrs. CharlOtt A 6 Kelly be appointed on a permanent basis as a clerk in that bivi aion with no change in her present basic salary of $2,498.28 14* 11441411, effective as of the expiration of her temporary appointa• t the close of business on June 14, 1949. Approved unanimously. Letter to Mr. Meyer, Assistant Vice President of the Federal ileeerve Bank of Chicago, reading as follows: In accordance with the request contained in your letter of June 10, 1949, the Board of Governors apt 15r°ves, effective July 1, 1949, the payment of salaries the following members of the Federal Reserve Agent's 6/14/49 -13- "staff at the rates indicated: Name Charles J. Scanlon Carl Schelling Title Alternate Assistant Federal Reserve Agent Assistant Federal Reserve Agent Annual Salary $7,000 6,300 Approved unanimously. Letter to Mr. Earhart, President of the Federal Reserve 1384t 0 f San Francisco, reading as follows: , "Reference is made to your Bank's letter of May 31, 1949, in which you advised that it appears expenses at Your head office and branches for the Consumer Credit function will approximate the amounts shown below. It 18 noted that the total of these amounts exceeds the 2 1949 budget estimates, which in the case of this func°-011 cover the first six months only, in the amount of $26,276. Head Office Los Angeles Portland Salt Lake City Seattle $41,300 2,000 10,200 20,300 11,000 "The Board accepts the revised figures as submitted appropriate notations are being made in the Board's cords." tie Approved unanimously. Chairman.
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