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256 A meeting of the Board of Governors of the Federal Reserve air"em with the Presidents of the Federal Reserve Banks was held in the of vIrices of the Board of Governors in Washington on Wednesday, Mar ch 1, 1950, at 2:35 p.m. PRESENT; Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Szymczak Draper Mr. Carpenter, Secretary Mr. Riefler, Assistant to the Chairman Messrs. Erickson, Sproul, Williams, Gidney, Leach, McLarin, Young, Davis, Peyton, Leedy, Gilbert, and Earhart, Presidents of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco, respectively. Mr. Frederick L. Deming, Secretary of the Presidents' Conference. Mr. Davis stated that at the separate meeting of the Presidents' N141. ellee on Monday, February 27, 1950, Mr. Peyton was elected Chairman tizci *4 Year,. Leach Vice Chairman of the Presidents' Conference for the coming Before this meeting the members of the Board had received copies emo the, randum of the topics which the Presidents wished to discuss with toarA The topics and the discussion in connection with each of them re as 1 Prj terhouse & Co. review of functional expense 111̀ accountirreolladebye thalRe-22-1 -11111.2ks to the Board of Governors. The Presidents r 3/1/50 -2discussed the Price, Waterhouse & Co. report "Review Of Reporting Manual", dated December 12, 1949 and the report of the Committee on Accounting, dated January 2?) 1950, presented by the Committee on Operations with respect to it. In general, the Presidents approved, with minor changes, the Committee on Accounting recommendations. On the two points on which there . 11ad been differing views in the Committee on Accountthe Conference took the following action: On suggestion 1, that the functional distribution expense be limited to direct salaries of employees rY, the Presidents approved the majority opinion of ,L,41e Committee on Accounting which agreed with this Price, Waterhouse suggestio n. of , On suggestion 5, that the present requirement that daily time records be maintained by each employee 'whose time is devoted to more than one unit be eliminated from the manual, the Presidents approved the r41141.2tItLtz, opinion of the Committee on Accounting, feelthat this question should be left to the individual Dank managemen t. The Conference recommended that the Board follow 1-1 p with the Treasury the possibility of simplifyi ng the snabursable expense arrangements, concurring in the 'atement of the Committee on Accounting that the suglestiou, if followed through to a successful conclusion, 111d be of great value to the banks and the Treasury in the r eduction of expenses. f the In amplification of the above statement , Mr. Leach said that Presidents agreed that cost accountin g was an efficient tool of tlitl4gerilents but that there were differences of opinion as to ways in which 11111115 1itteation of accounting procedures could be effected without impairhe Usefulness of the functional expense reports. He also said that 3/1/50 —3— neerlY all of the Presidents agreed with the principal proposal of tl"rice, Waterhouse report, which would limit the distribution of —"aes to employees' salaries only on the grounds that distribution c3rother items of expense was not necessary for an effective and reasonb1 sat isfactory control of expenses. He added that the minutes of the 8eParate meeting of the Presidents' Conference would contain the views 01 the Presidents on the other recommendations in the Price, Waterhouse rel)cl ' t and that the Committee on Accounting of the Presidents' Conference *)111d. continue to be available to work with the Board's staff on the cilla8tIons presented. Chairman McCabe stated that the Board would be glad to study the aetiOn of the Presidents' Conference and would advise the Presidents the B °ard ts views as to the action that might be taken. also said that, in recent discussions of budgets, the Board ?edere°11cerned about the continued upward trend in the expenses of the al Reserve Banks and the Board and felt that, in the absence of krore 8esn developments, it might be difficult to justify further increases the ci:Iellses• He added that the Board planned to give this matter further ter 4 botirc-i-4'e study, that it might be well if it were also discussed by the a of d irectors of the Federal Reserve Banks, and that he would alleee Bt that it be placed on the agenda for the next meeting of the Presi- (liktet '°nference for a full discussion by the Presidents and the Board. 141'• Davis stated that the matter would be listed for the agenda 3/1/50 —4— to the next meeting of the Presidents' Conference. 2. 2.Wial&IftgialEtio n A. Capital requirements for member banks. In discussion several of the Presidents stated that they would favor a stronger attempt to get action on this bill. They were of the opinion that support for the bill could be obtained from a number of bankers in the various dieThe Presidents agreed that it would be desirable to explore the basis of such opposition as there was to the bill, particularly from banking groups and from other Federal agencies, and to inform the Board that they are ready to obtain support for it within their respective districts. Mr. Davis stated that the Presidents were very much interested att eniPting to get action on this bill because of its importance from the 8tellciPoint of membership in the Federal Reserve System. Mr. Sproul referred to recent actual or contemplated withdrawals fN11 membership of banks in the Second Federal Reserve District because "the capital requirements for the establishment of branches. He exNesed the opinion that although the bill was of great importance from the standpoint of maintaining good relations with member banks and of tekbership in the Federal Reserve System, it was pushed aside in each 411sion of Congress by other legislation deemed to be more important that a real effort should be made at this session of the Congress to e'tthe bill enacted. Chairman McCabe stated that last week he had luncheon with Ntator Ro bertson at which he had discussed legislation of interest to t4aYetem and that subsequentlY the Senator introduced the bill to in- "60 3/1/50 e4ssa the limitation on the cost of Federal Reserve branch bank buildings) stating that he did not think it would be necessary to hold hearings on the bill. He did feel, Chairman McCabe said, that there 8110tad be hearings on the bill (S. 2494) relating to capital requireor membership in the Federal Reserve System and for the estab- terit of branches by member banks, and that he would try to schedule the hea_in r gs as soon as possible. The Chairman added that he would keep in touch with Senator Robertson and that the Board would do what it e°14141 t° get consideration of the bill at the earliest possible date. There was a discussion of what the Federal Reserve Banks might (I° to get suPport for the legislation in their respective districts and qe0 ' l hat might be done by the Board to see whether agreement could be ' 11 a bill by the interested parties in Washington. Mr. Davis stated that the Presidents had decided that the Cornr1 Legislation of the Presidents' Conference should exercise le"ershiP for the Presidents on any action that should be taken, in e°°Pere:tiOn with the Board, on legislative matters. B. Itgi.slation to provide for the establishment of 9414 4 'alzations to provide equity capital for small business. 1,1.1e Presidents agreed to list this topic for discussion 41..th the Board as they would like as much information as ls available on it. Messrs. McCabe and Riefler reviewed the recent developments in e°114ectin k -4 with proposals to give financial and other assistance to small s and the consideration which was being given to these proposals. -6Reference was made particularly to the OtMahoney bill (S. 2975), tilaNtank bill (S. 2943), and the Lucas bill (S. 2947), on which the 81411 had been requested by the Senate Committee on Banking and Currency to reports. 14) 48 Chairman McCabe stated that the Board had not made mind what its position would be with respect to these and other PI's3P°84118 and that up to the present time no reports had been submitted. Re added that, while the Board had prepared a draft of report on the l*n were bill (S. 2943) for submission in connection with hearings which scheduled to be held yesterday, the hearings had been postponed and the 13_ uard had not sent the report. He also said that it was not possible to b at the present time what the final outcome of the proposals would "It that the Board had not taken the initiative with respect to any Atoposea. C.lialglation to amend the Federal Deposit Ins ---atgace Act. The Presidents would like to know whether the Board would like them to obtain comeril banking support in their respective districts for the System position on the provision for exam-!ation of State member banks by the Federal Deposit Isurance Corporation without written permission of .,4ne Board of Governors, in anticipation of an attempt 143 have this provision reinstated in the bill when it c°131es up for consideration by the Senate (or the House) as a whole. 1 tiltrod Chairman McCabe reviewed developments on this matter since the 1/etion of bill S. 2822 on January 10, 1950. In the ensuing discilasto4 tioor ' _ _ it was the consensus that any effort that might be made on the °r the Senate to restore the prosposal of the Federal Deposit 3/1/50 -7- 148111'a/ice Corporation that it be given authority to examine member 138.5 without the consent of the Board of Governors would not be suc4 '" 8 41, but that, if the matter should come up in the House Banking 44c1 Clirreney Committee, action by the Board and the Federal Reserve ilks illight be necessary in an effort to defeat such an amendment to the . bili the As a related question, Mr. Davis referred to the provision in bill as reported by the Senate Committee which calls for payment by the Federal Deposit Insurance Corporation to the Federal Reserve Banks Of some 38 million of interest on capital which had been supplied to th"sdera.i. Deposit Insurance Corporation by the Federal Reserve Banks 114cI lfhich had been repaid by the Corporation to the Treasury. He said tilt it was the consensus or the Presidents that it would be more satistory f the bill could provide that this payment of interest be made to the uge T reasurY rather than to the Federal Reserve Banks. Chairman McCabe stated that this suggestion had not been pre411ted 11 connection with the Senate consideration of the bill. The rilatter /faS to tt. discussed briefly but no conclusions were reached with respect 3. a.g.pation of members of Executive Departments and Ltig..ej'Icies. Several of the Presidents reZnc-c)rtsd that the Boards of Directors of their Banks had ' Passed resolutions with respect to the question of cornfor members of the Board of Governors and the Presidents would like to discuss this question with he Board to determine what assistance they could render the Board in this field. r -8Davis stated that two Federal Reserve Banks had adopted r"olu • ticns which had been given some circulation and that another Bank he'd adoPted a resolution but had not sent it to members of Congress or Dthervise Chairman McCabe stated that the Board appreciated the interest directors in passing resolutions of the kind referred to. He also sllid that there was some question as to the best course to pursue and 14bkothe r there should be any action which might be regarded as an organz ""zPaign, It was his suggestion that at this stage the resolutions acl°13ted by the directors be not sent to members of the Senate or House. e ttcici ed that the Executive Committee of the Chairmen's Conference were %/alittri g on the matter and were arranging to call on Senator Maybank, and th-at if the Presidents desired to work with the Chairmen they might deslie or two of their number to work with the Executive Committee of t4le chat raleal s Conference so that there could be coordination of whatever eff °It tS lil being made. 4.L of officers in charge of branches at meetings ' 91:-Illtaf.erence of Presidents. The Presidents are in getleral accord with suggestions to further develop the executive abilities of branch managers, but believe means Other than attendance at the Conference of Presidents shod be employed to this end. If attendance at the Conference of officers other than the Presidents were ;I:lodged desirable it probably would be more feasible to officers at the head offices of the certain other senior 15 Federal Reserve Banks attend the meetings before tfanch managers were invited to the Conferences. It is "e feeling of the Presidents that regular attendance of 4"114-1.t.1.1C1'Ince v1/50 -9s-fly officers other than the Presidents would change tne character of the Conference and might cause it to lose some of its greatest benefits. Mr. Davis said that the Presidents were in complete accord with the 811ggest10n that the Federal Reserve Banks do whatever they could to 4.7el°13 the officers in charge of branches but, for the reasons stated they questioned whether attendance at the Presidents' Conference 114 the best way to accomplish that objective. C hairman McCabe stated that he was impressed with the need for leing the branch managers into closer contact with the important actIll.ties and °Tticers in be help Problems of the System, that he had been impressed with the Charge at some of the branches, and that he believed it would if Collrerenee as one or two of them could be invited to attend a Presidents' a special recognition and perhaps as an experiment to see 11°v? it orked. the branch He felt that the Federal Reserve Banks were relying on managers to do a very important job from the standpoint of re lations of the Federal Reserve System and that it would be help1'111 and that, an invitation to one of their number to attend a Presidents' Corlfereiaee eibility. keNales Would be one way of recognizing the importance of their respon- • Davis stated that the branch officers were being brought into or elo the boards of directors and in other ways were being given aer conta et pith the System's problems. that he 1.1" Chairman McCabe responded groPing for some way to give greater recognition to branch -10— ZallagellS which would develop their potentialities for greater respon- eibili+ -Y. and that he felt the matter should be given careful consideration. In a further discussion, it was suggested that arrangements might be Iliad_ in connection with a Presidents' Conference to devote one day to nieeting of the Presidents and the managing officers from the branches or al, of the Federal Reserve Banks. At the conclusion of the discussion, Chairaian McCabe suggested that the Presidents give the matter further "ration to see what could be worked out to enable the branch manilbrs more adequately to represent the System and to be in closer touch ProbleMs. 5, iitUpted. coin service charsgo This topic, listed for Board's information on Conference action, rather Ihala for discussion, was discussed at some length by ;Pe Presidents, and then referred to the Committee on nank and Public Relations for study and report to a sul?sequent Conference. There is a wide difference of °Pinion among the Presidents on the advisability of "Irrlishing wrapped coin free of charge. It was evident from a discussion of the extent to which the Fed- eral eserve * Banks now provide wrapped coin service, that there was a Arence - of opinion among the Presidents as to a desirable course Paralle. Mr. Peyton suggested that, inasmuch as the matter had been reCotter to 41,— s".1 Committee on Bank and Public Relations of the Presidents' ellee, further discussion of the subject be deferred until receipt or the etamittee's report. 3/1/50 -11- 6. C-211.tetion of checks - possibilities for expediting .callpstion and reducing time of deferment. This topic waS the subject of considerable discussion. Several of the Presidents felt that as a result of actions taken in the past two years to extend the areas in liich two-day deferment schedules obtained, pressure to make two-day deferment the maximum schedule throughout the country for all of the Reserve Banks was very great and action to that end should be Immediate. Others agreed that pressure was great but preferred to await (as a matter of organization procedure) the forth"ming report of the Special Collection Committee, which report will deal in part with deferment schedules. A majority of the Presidents approved a motion that the Conference inform the Board that the individual Reserve Banks are disposed to go Immediately to a maximum of twc) days deferment time for the entire country. It was stated that the Board concurred in the action of the Preeia ents ' Conference on this matter with the understanding that the action te44m , i4 ated that maximum deferment of two days would be made effective alI ui . stricts at the same time. it was agreed that the Committee on Operations and the Board's state sh°111d work out the necessary details to have the change effective 111 di stricts as of the same date. 7. L)onds eligibilit as collateral for loans. The °Aference discussed the report of the Ad Hoc Committee ?Pointed to study this question. The Presidents voted go on record as opposed to making savings bonds as collateral for loans. "t th 14)' 'Davis stated that this matter was discussed at the meeting e ?ederal Open Market Committee this morning and that no further 3i°11 was called for at this time. I) f 3/1/50 —12— 8. ZZALta_qhligation to the public and to the Administration to record its views on fiscal and monetary policies. The Presidents discussed this topic at some length and expressed their concern about a number of recent developments which will influence the economic situation. The Presidents would like to discuss this subject further With the Board. Mr. Sproul stated that this topic had been presented because the Were developments in the economy which might call for decisions on 14°IletarY and credit policies which either run counter to the general polici of the Administration or to the demands of the general public. 14 that s ituation, he said, it might be necessary for the System as the ition's central bank to take a position which it regarded as consistent l't118°111514 monetary and credit policy and stability in the economy and a/ly risks that might be inherent in that action rather than to tell:e 110 action or say nothing and thereby appear to concur in an economic 13°14e /gith which the System could not agree. 1114°11) he said, 1:110,11 An example of such a sit- was the testimony of the Board on the proposed legisla- °4 co operative housing for middle income groups which the Presidents Was entirely justified, well done, and effective. the During a discussion of this matter, Chairman McCabe stated that Board had not gone out of its way to express opinions on bills or leeislation IkIll.ess such which were not strictly within the province of the System, opinions were requested, as was the case on the pending middle housiag bill. He reviewed the procedure followed in the preparati414 of the statement submitted by the Board on that bill, as well as 3/1/50 the -13- statement made by him at the hearings before the Senate Banking 414Currency Committee today on the bank holding company bill. He 414 that he had sent copies of the drafts of statements to represent".4e8 of all of the interested agencies and had asked for their comerits and that, while that procedure generally was not followed by other agencies, he was satisfied that it was having good results. He Nores sed the view that the opinions of the Board would be highly resPected lf it stated its position with force when that was necessary bilt 4-'41 restraint particularly when the Board's views were requested Or contr oversial matters Mr. Eccles said he concurred fully in Chairman McCabe's state- lent, except that in connection with legislation which would affect the e(44111Y and with which the Board was not in agreement, it should, as an "e4t of the Congress, express its views to the appropriate committees C011gress without waiting for a request for those views. At the conclusion of the discussion, Mt. Davis stated that the rI4tter "ad been listed for discussion with the Board and that no action e cal led for at this time. Thereupon the meeting, . / eel Chairman. Secretary.
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