The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
919 A meeting of the Board of Governors of the Federal Reserve SYstent was held in Washington on Tuesday, June 18, 1946, at 10:30 a. m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak Draper Evans Carpenter, Secretary Hammond, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Chairman amead, Director of the Division of Bank Operations Mr. Vest, General Counsel Mr. Mr. Mr. Mr. Mr. As stated in the minutes of the meeting of the Board on June 12, 946Mr. Vardaman was absent on official business. Mr. Szymczak referred to a memorandum prepared by Mr. amead 1111der date of May 8, 1946, in accordance with the action taken by the 'lot at its meeting on March 5, 1946, with respect to the elimination 4°111 circulation of Federal Reserve notes of the $500 denomination and 4bc've. The memoranchun reviewed the consideration given to this matter 11 the Board and the Federal Reserve Banks and recommended that the /144 either (a) instruct the Federal Reserve Banks to discontinue Parj 'e out Federal Reserve notes in denominations of $500 and above and retir e those received from circulation, or, (b) advise the Federal Re4117. e Banks that the Board adheres to the position heretofore taken that It would request no further printings of notes in these denominatic 48 but would offer no objection to the Federal Reserve Banks paying ellch notes as long as the present stocks of the individual Reserve 11E414 last. The memorandum also recommended that the Treasury be advised 920 644/46 -2- ° the Board's decision to discontinue further printings of Federal Reserve notes in denominations of $500 and above and of any further 40n looking toward the elimination of such notes from circulation. " In the ensuing discussion question was raised as to the attitilde of the Treasury toward the proposed action and Mr. Smead referred to the comment in his memorandum to the effect that in a letter dated 1114‘ch 18, 1946, Mr. Bartelt, Fiscal Assistant Secretary of the Treasury, 31113111i-tted, without comment, a memorandum prepared at his request by Mr. las) Director of the Division of Research and Statistics of the Treall'Y, in Which it was stated that while the objectives which the propos4"as designed to obtain were desirable it was doubtful that it would achi -'17e them, that the amount of money in circulation was not likely to be decreased, that black market transactions and efforts to evade taxes Would continue and fear of currency might result, and that in view of thea e considerations it was his recommendation that the proposal be postuntil conditions were much more stable or until it could be inauk,4 ted as a minor part of a larger program of currency alteration. Mr. kead also said that the Treasury had taken no official position on the el*. It was pointed out that the Treasury program of requiring banks oth her financial institutions to submit monthly reports of currency t4.48 actions in unusual amounts was still in effect and it was suggested that 4a long as that program continued the Board would be justified in klth„. -41-zing the issuance of existing stocks of the higher denomination 40tea. 921 6118/46 -3At the conclusion of the discussion, upon motion by Mr. Szymczak, it was voted unanimously to request Mr. Smead to prepare a draft of letter to the Federal Reserve Banks advising that the Board would re— quest no further printings of the higher denomination notes but would offer no ob— jection to the Reserve Banks paying out such notes as long as the present stocks of the individual banks last. In taking this action it was under— stood (1) that, if the Treasury should dis— continue the program of requiring reports of currency transactions in unusual amounts, the Board should consider the matter again, and, (2) that when the letter to the Federal Reserve Banks was sent, the Treasury would be advised of the Board's action. At the joint meeting of the Board and the Presidents of the ral Reserve Banks on June 11, 1946, it was understood that the Pre-, 'Idents would send to the Board a statement of their views regard— the program of the Reconstruction Finance Corporation with respect to 4 4. 4.68 blanket participation agreement and that when the statement was tiec„. <Ored, Chairman Eccles would take it, with such endorsement or sup— Ilerliental statement as the Board might wish to make, to the Treasury, cell attention of the Treasury to the unsound and inflationary effects q +1, ""e Corporation's program. The statement referred to was received hrthe Board in a letter dated June 13, 1946, from. Mr. Sproul, as Ilran of the Presidents' Conference, which was read and discussed 4t tu, g.is meeting of the Board. Reference was made particularly during the discussion to the ion whether the Board should take the position that a guarantee by 922 6/18/46 -4- agency of the Government should be available only when the bank and its correspondent were not willing to extend the credit and not in cases where a bank could not make or did not feel justified in Illaking the loan itself. It was pointed out that if such a position were taken it would amount to forcing banks to make loans in particiPation with one or more correspondent banks even though the iniating bank would prefer to make the loan itself with a guarantee from a Federal agency. 1,:r. Draper stated that he would not interpret an endorsemont of the statement received from the Presidents as an agreement with that position. After consideration of this point, Mr. Draper moved that the Board concur in the position taken in the letter from Mr. Sproul and that Chairmen Eccles be requested (1) to present the letter to Mr. Snyder., Director of the Office of War Mobilization and Reconversion and Secretary of the Treasury designate, with the statement that the letter expressed the views of the Presidents of the Federal Reserve Banks in thich the Board concurred, and (2) in the conference with Mr. Snyder to amplify the letter as he saw fit in the light of the discussion at this meeting. 1,1r. Draper's motion was put by the Chair and carried unanimously. Mr. Evans raised the question as to the timing of any action the Board to increase reserve requirements of central reserve city banke and Chairman Eccles expressed the opinion that if the market conti nued to maintain its present stability no action should be taken in that connection until after the current program of debt retirement of the Treasury was completed but that if conditions should change at any time . It might be desirable to consider action at an earlier date. 923 6/18/46 -5Mr. Carpenter stated that just before this meeting Mr. Creigh- t°11, Chairman of the Federal Reserve Bank of Boston, called to say that Mr. Flanders, former President of the Bank, who, effective March 1, 1946, was retained by the Bank as a consultant to the board of director's) was running for election as United States Senator from Vermont 41c1 Mr. Creighton inquired whether the situation thus created would e04I1 etithin the scope of the Board's resolution of December 23, 1915, th respect to officers and directors of the Federal Reserve Banks 11014i-11g political and public office. It as agreed unanimously that Mr. Carpenter should advise Mr. Creighton informally that when the arrangement with Mr. Flanders was made, active participation by him in party politics was not contemplated, and that while he was not an officer or employee of the Bank in the usual sense, it was felt that the continuation of the arrangement would be contrary to the purpose of the Board's resolution and, therefore should be discontinued. Mr. Vest outlined briefly for the information of the members t the Board some of the changes in Board procedures that would be reby the Administrative Procedure Act which was signed by the Presi411t °n June 11, 1946, and the principal provisions of which will become eft_ etive on September 11, 1946. Chairman Eccles stated that Mr. Leland, Chairman of the Federal I've Bank of Chicago had returned from Panama and would be in the toaral s offices today, that it was assumed there was no change in the 924 642/46 -6- Position taken by the Board in connection with the letter sent to Mr. Leland on February 1, 1946, and that, in the absence of objection, he tel4111-rman Eccles) proposed to say to Mr. Leland that the Board felt that, in view of sll the circumstances, he should terminate his conWith the Federal Reserve Bank of Chicago at such time as he wish between now and the expiration at the end of this year of his Present designation as Chairman and Federal Reserve Agent at the tat*. All of the members of the Board present concurred in Chairman Eccles' statement and agreed that Mr. Leland should be advised accordingly. At this point Messrs. Smead and Vest withdrew from the meeting atici the action stated with respect to each of the matters hereinafter referred to was then taken by the Board: The minutes of the meeting of the Board of Governors of the Pecieral Reserve System held on June 172 1946, were approved unanimously. Memorandum dated June 13, 1946, from Mr. Thomas, Director of the I-vision of Research and Statistics, submitting the resignation of kr I,D. Domar, an Economist in that Division, and recommending ' that the resignation be accepted effective, at Mr. Domar's request, at the Close of business June 14, 19460 and that proper lump sum payment .. bede to him for any annual leave remaining to his credit at that time. The resignation was accepted as recommended. 925 6/18/46 —7— Memorandum dated June 13, 1946, from Mr. Thomas, Director of the n4 —.vision absence of Research and Statistics, recommending that a leave of without pay be granted to Mrs. Maria L. Nikonenko, a Clerk in that T., Lavision, for a 2i — month period, from July 15 to September 30, 1946, inclusive. The memorandum also stated that Mrs. Nikonenko was a Pariticipant in the Board of Governors Plan without death benefits, aid that t herefor3she would not make any contributions to the retirement "em during the period of leave without pay. Approved unanimously. Memorandum dated June 17, 1946, from Mr. Bethea, Director of the Division of Administrative Services, recommending that for the l'e43°Ils stated therein, and effective immediately, Miss Ruth M. Small— , a stenographer in Mr. Szymczak's office, be re—transferred to the klri, 4 8J-on of Administrative Services as a stenographer without change her basic annual salary at the rate of $2,166 per annum. Approved unanimously. Thereupon the meeting adjo 44110 / V1A 44L4 Secretary. 4PPIsoved.: ( Chairman.
@FedFRASER