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Minutes for To: Members of the Board From: Office of the Secretary June 27, 1956 Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B . below to indicate that you have seen the minutes A Chin. Martin Gov. Szymczak Gov. Vardaman Gov. Mills X Gov. Robertson Gov. Balderston x Gov. Shepardson x t'v(44 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Wednesday, June 27, 1956. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Szymczak Vardaman Mills Shepardson Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Leonard, Director, Division of Bank Operations Mr. Vest, General Counsel Mr. Young, Director, Division of Research and Statistics Mr. Noyes, Adviser, Division of Research and Statistics Mr. Mr. Mr. Mr. ted to the members The following matters, which had been circula of the Board, were presented for consideration and the action taken each instance was as stated: Reserve Bank of Dallas, Telegram to Mr. Irons, President, Federal I'eading as follows: nce of s Reurlet June 14, 1956, Board approve accepta Branch Houston for g buildin low bid for construction of new ents adjustm after which rs, as recommended by your Directo Board 602. *1,910, to amounts referred to in your letter mately $2,276,000 for authorizes expenditures of approxi program as outlined in your letter. Approved unanimously. of the Currency, Treasury Letter to The Honorable, The Comptroller be : follows Partment, Washington, D. C., reading as place an order It is respectfully requested that you printing for g Printin and With the Bureau of Engraving -2- 6/27/56 576,480,000 Federal Reserve notes (single units) of the 1950 Series during the fiscal year ending June 30, 1957, in the amounts and denominations shown below for the various Federal Reserve Banks: Boston New York Philadelphia Cleveland Richmond Denominations Number of notes 435 10 100 9,720,000 14,760,000 144,000 ($48,600,000 147,600,000 14,14.00,000 5 lo 20 50 100 46,440,000 74,800,000 20,880,000 2,0161 000 1,440,000 232,200,000 748,000,000 417,600,000 100,800,000 144,000,000 5 lo 50 loo 10,080,000 12,24ol000 432l000 144,000 50,14.00,000 122,14.00,000 21,600,000 14,400l000 5 lo 41 320,000 11,520,000 20 50 18,64o,000 864,000 21,600,000 115,200,000 372,8001000 43,200,000 5 i8,000,000 19,800,000 20,160,000 11.32,000 720,000 90,000,000 198,000,000 4031200,000 21,600,000 72,000,000 24,84o,000 27,360,000 mool000 124,200,000 273,6000000 180,000,000 31,600,000 49,680,000 10,0843,000 1,152,000 158,000,000 4961800l000 2011600,000 5716040,000 17,640,000 8,280,000 21880,000 .4,000 111 1 000 1141., 88,200,000 82,800,000 571600,000 7,200,000 000 14, 10 20 50 100 Atlanta 5 10 20 Chicago 5 lo 20 50 St. Louis Amount 5 10 20 50 100 1.293 6/27/56 -3Denominations Number of notes Amount Minneapolis *5 1,800,000 Kansas City 5 lo 20 2,520,000 2,160,000 360,000 121600,000 21,600,000 71 200,000 5 360,000 11800,000 5 10 26,64ol000 32,760,000 39,240,00o 238,000 133,200,000 327,600,000 784,800low 28,800,000 193,9602000 253,360,00o 121,240,000 5,040,000 2,880,000 $969,80o,000 2,5331600,000 21424,800,0w 252,000,000 288,000,000 Dallas San Francisco 20 100 Totals 5 10 20 50 100 576,480,000 $6,4681 20o,000 Approved unanimously. and Messrs. Thomas, Mr. Leonard then withdrew from the meeting Economic Adviser to the Board, and Eckert, Chief, Banking Section, Division of Research and Statistics, entered the room. meeting of the Board on Pursuant to the understanding at the allne 22, 1956, further consideration was given to a proposal submitted by certain New York City banks that the Board increase the maximum rates Of interest payable on time deposits having maturity dates of less than six months. _L... 6/27/56 At the request of the Board, members of the staff stated reasons Which might be given for and against the proposal, along with arguments for and against changes in the maximum rates of interest payable on Other time deposits and on savings deposits. Reference also was made to the provisions of the Federal Reserve Act covering the authority of the Board to limit by regulation the rate of interest which may be paid by member banks on time and savings deposits. Mr. Eckert reported having been advised by a member of the Staff of the Federal Deposit Insurance Corporation that it was not possible to say at this time whether the Board of Directors of that Corporation would be favorably disposed to changing the Corporation's regulations in line with the current proposal. a great deal of thought Chairman Martin stated that he had given to the points made by Governor Mills at the meeting last Friday and that he felt those points deserved serious consideration. As he saw the Problem, the basic question was whether the Board should adopt a more interest on time and flexible policy in regulating the payment of savings deposits. been out that there had In this connection, he pointed no change in the established maxima since 1936. At the Chairman's request, Governor Mills reviewed the considera ti°11s which he had mentioned at the meeting last Friday. that He also said an increase in the maximum rate of interest payable on shorter- terra time deposits might create a further inducement to transfer to the 6/27/56 -5- status of time deposits certain funds which are in effect demand dePosits. Such a procedure, he pointed out, would enable the banks to extend additional credit because of the lower reserve requirement apPlicable to time deposits. In summary, it was Governor Mills' view h that any change in the present maximum rates should be given thoroug should include obtaining the consideration by the Board and that this the Federal Advisory Council. views of the Presidents' Conference and h the current proposal Governor Szymczak stated that althoug would be of greatest Practical benefit to the larger banks, particularly interest to banks in New York City, the Principles involved were of throughout the country. Therefore, he concurred in the view that it nts' Conwould be appropriate to obtain the comments of the Preside ference and the Federal Advisory Council. point raised during the disGovernor Shepardson referred to the t payable on time and savings cussion that the maximum rates of interes he was not sure how clePosits had not been changed since 1936 and said most of the intervening period significant that fact was, since during on such deposits were bethe rates of interest actually paid by banks low the permissible maxima. such circumstances He observed that in make adjustments in the there had been no real reason for the Board to ing situation focused attention on nlaxilnum rates and that the prevail 4 recently. Problem which did not appear until 6/2y/56 -6Chairman Martin commented that the point made by Governor Shepardson was a good one. However, if the Board should decide to increase the maximum rates at the present time, he felt that it must bear in mind the possibility of having to make changes more frequently in the future if its statutory authority was to be used as an effective regulation of interest rates. For example, he felt that if the Board should increase the maximum rate on savings deposits to 3 per cent, it would have to give the matter further consideration from time to time in the light of money market developments. The preliminary views expressed by Governor Vardaman were along the lines that there was a great deal to be said for a generous maximum limitation on the rates of interest permitted to be paid on time and savings deposits. The decision on rates actually paid on such deposits would then be left to the discretion of the individua3 banks on the basis of competitive and other factors. At the same time, he felt that the points raised by Governor Mills were deserving of consideration. He inquired whether Governor Mills would put his views in memorandum f°rm for further study, and it was understood that this would be done. After further discussion, Chairman Martin suggested that the Board request that the subject be placed on the agenda for the next ineetings of the Federal Advisory Council and the Conference of Presidellts so that the Board might have the benefit of their views. He also I 297 6/27/56 -7- suggested that in the meantime it would seem desirable for Mr. Thomas and other members of the staff to give additional thought to the various use in the Board's aspects of the matter and submit a memorandum for fizther study of the subject. There was unanimous agreement with the procedure suggested by Chairman Martin. staff except Mr. At this point all of the members of the CA,penter withdrew from the meeting. Leonard, Director of the Governor Balderston stated that Mr. to the Board Division of Bank Operations, had addressed a memorandum had advanced 26 days Under date of June 22) 1956 which stated that he sick leave to Mr. Myrick, Assistant Director of the Division, which the maximum permissible carried him to Monday) June 25, and which was Under the Board's leave regulations. The memorandum also stated that to apply for disability re*. Myrick had been advised by his doctor tirement but that Mr. Leonard would recommend instead that the Board in the amount °T Governors grant Mr. Myrick an advance of sick leave and annual and sick which, together with annual leave to his credit through January 31, leave accruing during the interval, would carry him 1957. statement that Mr. Myrick The memorandum contained the further had been in the Division of Bank Operations for 341 years. favored the recommendation Governor Balderston stated that he granted by the Board, and) in accordance with the authority previously MM. 129S 6/27/56 -8- he had approved the recommendation on June 25 subject to concurrence by the Board at this meeting. That action was taken, he said, with the thought that if the Board did not favor the proposed extension of sick leave, the approval could be reversed. It was pointed out that a slight the principal reason for the recommendation was that there was to such an extent that he Possibility that Mr. Myrick would recover ued on the Board's could assume his duties and that if he were contin would be entitled to any Payroll until after the first of the year he additional retirement benefits provided by legislation now pending before the Congress. the Board had legal authorGovernor Vardaman inquired whether was stated that the action ItY to take the recommended action and it of the Federal Reserve could be taken under the authority of section 10 Act. asked to pass on the He suggested that the Legal Division be containing (1) a statement of matter and that a memorandum be prepared the retirement benefits that Mr. Myrick would be entitled to in the r actions taken event of his retirement and (2) a reference to simila by the Board in the past. such a memorandum should It was agreed that be prepared. matter, there was general agreeIn a further discussion of the Ment that a better procedure might be to extend sick leave to Mr. Myrick matter could be considered again fc)r a period of 90 days after which the 411CI a extension should be granted. decision ncIe whether a further .299 6/27/56 -9Chairman Martin stated that while Mr. Treiber, First Vice President of the Federal Reserve Bank of New York, was in Washington Yesterday in connection with the meeting of the Federal Open Market Committee, he inquired whether the Board would be interested in having Mr. Exter, Vice President in charge of the Foreign Department of the New York Bank, come to Washington for the purpose of reporting to the Board on his recent trip to Europe. It was agreed unanimously that arrangements for such a report should be made on a date in the near future that would be convenient. l discussions by Chairman Martin referred to earlier informa the Board of the Possible appointment by the Board of Directors of the Jr., Class C Federal Reserve Bank of Chicago of Mr. Carl E. Allen, director and Deputy Chairman, as President of the Bank for the unexPired portion of the 5-year term ending February 28, 1961. He said that he had been informed that Mr. Allen had agreed to accept the apPointment and tAiat it was the intention of the directors of the Bank at of Governors, their next meeting, subject to approval by the Board salary at the rate of to aPPoint Mr. Allen as President and to fix his $50/n---nn per annum. d they were preAll of the members present indicate Pa-red to approve the appointment. Upon the recommendation of Chairman Martin and in view of the absences of 6/27/56 -10members of the Board later in the week, it was voted unanimously, subject to the action being taken by the directors of the Federal Reserve Bank of Chicago, to approve (1) the appointment of Mr. Allen as President of the Federal Reserve Bank of Chicago for the unexpired portion of the 5-year term ending February 28, 1961, and (2) the salary fixed by the directors for Mr. Allen at the rate of $501000 per ning annum, effective for the period begin upon as of the date upon which he enters endthe performance of his new duties and acthis ing December 31, 1956. In taking e advic tion, it was understood that when n actio ed was received that the contemplat tors, direc had been taken by the Chicago be advice of the Board's approval would acer sent to Chairman Frail without furth tion by the Board. man Martin stated that it In connection with this matter, Chair 's appointment be had been requested that the announcement of Mr. Allen own company resulting held for a few days until the situation in his accordingly, it might fram his leaving could be worked out and that, by the Chicago directors be a week or 10 days after the action was taken made by the Chicago Bank. before any announcement of the appointment was with Chairman Martin's sugThe members of the Board were in agreement deferring the announcement gestion that there would be no objection to the appointment for as long as 10 days. that Mr. Allen's appointChairman Martin referred to the fact Merit would result in a vacancy in the position of Class C director and there was a brief informal dis13ePlItY Chairman at the Chicago Bank and cussion of possible appointments to fill the vacancy. 13 11 6/27/56 -11The meeting then adjourned. Secretary's Note: On June 26, 1956, Governor Balderston approved on behalf of the Board the recommendation contained in a memorandum dated June 20, 1956, from Mr. Bethea, Director, Division of Administrative Services, that the resignation of Anna Mary Riden, Clerk in that Division, be accepted effective June 30, 1956. Governor Balderston today approved on behalf of the Board the following letter to Mr. Phelan, Vice President of the Federal Reserve Bank of New York: In accordance with the request contained in your letter of June 21, 1956, the Board approves the appointment of the ant examiners following named employees of your bank as assist York: New for the Federal Reserve Bank of Joseph P. Abromitis David W. Bouton John G. Russell Charles B. Zaloom John S. McNierney Jay W. Woods Please advise as to the dates upon which the appointments are made effective and as to the salary rates.
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