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407 A meeting of the Board of Governors of the Federal Reserve SYstem - Was held in Washington on Friday, March 19, 1943, at 11:00 a.m. PRESENT: Mr. Ransom, Vice Chairman Mr. Evans Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary The action stated with respect to each of the matters hereinutter referred to was taken by the Board: Telegrams to Mr. Paddock, President of the Federal Reserve tank of Boston, Messrs. Treiber and McCreedy, Secretaries of the Fed°Ill Reserve Banks of New York and Philadelphia, respectively, Mr. 4eLariny President of the Federal Reserve Bank of Atlanta, and Messrs. tillard, Stewart, and Hale, Secretaries of the Federal Reserve Banks Ot4leago, St. Louis, and San Francisco, respectively, stating that the t°4rd approves the establishment without change by the Federal Re4111Ie Banks of St. Louis and San Francisco on March 16, by the Federal 11141ellre Bank of Atlanta on March 17, by the Federal Reserve Banks of 1414".°rk, Philadelphia, Chicago and San Francisco on March 18, 1 943, 41/ci lly the Federal Reserve Bank of Boston today, of the rates of disNtit and purchase in their existing schedules. Approved unanimously. trt€ Memorandum dated March 17, 1943, from Mr. Morrill, recommend- that ce Ut the Miss Edith Bare be appointed as a page in the Secretary's Of- a temporary basis for an indefinite period, with basic salary rate of $1,260 per annum, effective as of the date upon which 408 3/19/43 -2- he enters upon the performance of her duties after having passed satisfactorily the usual physical examination, with the understandthat if anything derogatory should develop in the investigation t her references her services may be terminated immediately. Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks, tie4ding as follows: "There is enclosed for your information a copy of a letter dated March 9, 1943 addressed to the Board by A. D. Burford, Deputy Commissioner of Internal Revenue, to the effect that adjustments of salaries of the directive and Clerical personnel of the Victory Fund Committees do not x'equire the prior approval of the Commissioner of Internal Revenue and that such adjustments need not therefore be included in the certificate procedure in effect for the regular personnel of Federal Reserve Banks. "Although our letter to which the letter referred to above is a reply dealt only with directive personnel of the Victory Fund Committees, the enclosed letter of March 9 exPreesly relates to clerical personnel as well as directive Personnel and in this connection appears to conform to the 'iews expressed in the Board's telegram of February 8, 1943 Approved unanimously. or st, Letter to Mr. Nardin, Chairman of the Federal Reserve Bank Louis, reading as follows: "Reference is made to your letter of December 30, 1942, egarding the actions taken or contemplated by your direcrre in connection with the resolutions adopted at the Con' - erence of Chairmen on October 5. "With respect to Topic 3, 'Procedure for Reporting Indebtedness of Reserve Bank Officers and Employees', the Procedure described in your letter differs from that suggestin the Chairmen's resolution. Among other things, the euggested procedure contemplated that indebtedness reports would be presented to the Board of Directors, or the approPrlate committee thereof, after such reports are reviewed f 409 3/19/43 -3- "and commented upon by the President. However, under your existing procedure, the indebtedness of an officer or emPloyee holding a responsible position is reported to the Board of Directors only in those instances where in the judgment of the President and the First Vice ?resident it appears justified. In this connection, it is noted that the indebtedness reports are reviewed by your General Auditor at such times as he deems advisable, but you did not indicate whether it is the practice of the Auditor to rePort to the Board of Directors, or the Chairman or a committee thereof, any matters which in his opinion should be brought to their attention with respect to such reports. "Regarding paragraphs (4) and (5) of the indebtedness reports procedure, it is understood that your directors feel that it would hardly seem practicable or aesirable for the Examination Department to review every loan listed in national bank reports on the unlikely chance that a loan to an officer or employee of a Federal Reserve Bank might be found among those criticized. It would seem that rePorting information only on those persons identified in rePorts of examination as officers or employees of a Reserve Bank would not place any additional burden on the Reserve Bank as the information would be picked up in the regular !;elliew of such reports by the Bank Examination Department. finclosed for convenient reference is a mimeographed copy of the suggested procedure entitled 'Reports of Personal Indebtedness, "The Board of Governors approved, among others, the l'esolution adopted at the Conference relative to the procedure Ior reportirn,indebtedness of Reserve Bank officers and emPY)yees and would appreciate being advised as to further acions taken by your directors with respect to the various numbered paragraphs of the suggested procedure. "We appreciate very much the information you have furnished us and wish to assure you of our interest in learning 1f the further developments at your Bank regarding the vari(,, °us natters discussed at the Chairmen's Conference." Approved unanimously. Letter to Mr. Cozzo, Deputy Chairman of the Federal Reserve °f Dallas, reading as follows: "In response to my letter of November 18, 1942 stating that the Board of Governors would like to be kept informed as to the actions taken or contemplated by the diIsectors of the Federal Reserve Banks with respect to the 410 3119/43 -4- "resolutions adopted at the meeting of the Conference of Chairmen on October 5, you advised under date of January 29 that all of the matters had been discussed in a general way with your Board of Directors and that action had been taken with respect to the enlargement of the functions of Your branches. In a letter dated February 261 Mr. Gilbert has been good enough to comment upon and furnish additional information as to developments with respect to each of the matters made the subject of resolutions at the Conference. "Although Mr. Gilbert's comments with respect to Topic 2, 'Relationship of Reserve Bank Auditors', did not specifically cover each of the eight points in the Statement of Principles, he stated that the resolution adopted by the Conference virtually outlined the program in effect at the Dallas Bank for several years. "With regard to Topic 31 'Procedure for Reporting Indebtedness of Reserve Bank Officers and Employees', the Procedure described in Mr. Gilbert's letter differs somewhat from that suggested in the Chairmen's resolution. In this connection, it is understood that under the procedure recently adopted at your Bank, the Chairman or the President, as the case may be, will be responsible for keeping the Auditor advised of situations where he feels the information would be helpful to the Auditor in carrying on s work. You are familiar, of course, with the discus: ha sions on this point at the Conference, but it is our thought that the reasons advanced in those discussions clearly Showed the desirability of having the Auditor review all indebtedness reports as a matter of regular procedure and reqUiring that he report to the Board of Directors, or the which in his Chairman or a committee thereof, any °Pinion should be brought to their attention. "With respect to paragraphs (4) and (5), of the indebtedness reports procedure, it is understood that your directors feel that the chances of obtaining the desired information regarding indebtedness of Reserve Bank officers ,nd employees are so remote that the work involved in checkexamination reports of member banks would hardly be jusified. It would seem that reporting information only on those persons identified in reports of examination as officers or employees of a Reserve Bank would not place any additional burden on the Reserve Banks as the information uld be picked up in the regular review of such reports by he 6 Bank Examination Department. Enclosed for convenient reference is a mimeographed copy of the suggested procedure entitled 'Reports of Personal Indebtedness, etc.'. n 411 _5_ 3443 "The Board of Governors approved, among others, the resolution adopted at the Conference relative to the procedure for reporting indebtedness of Reserve Bank officers and employees and would appreciate being advised as to the further actions taken by your directors with respect to the various numbered paragraphs of the suggested procedure. "We appreciate very much the information you and Mr. . Gilbert have furnished us and wish to assure you of our interest in learning of the further developments at your Bank regarding the various matters discussed at the Chairmen's Conference." Approved unanimously. Letter to Mr. Fletcher, Vice President of the Federal Res ive Bank of Cleveland, reading as follows: "This refers to your letter of February 25, 1943, transmitting a letter dated February 20, 1943, from Mr. I. P. Freiberger, Chairman of the Board, The Cleveland Trust Company, Cleveland, Ohio, relating to the holding !°mPany affiliate relationship between his bank and The rirestone Park Trust and Savings Bank, Akron, Ohio. "There is enclosed, for transmittal, the Board's letter of this date to Mr. Freiberger advising him that the Board has determined that The Cleveland Trust Company not engaged, directly or indirectly, as a business in 01ding the stock of, or managing or controlling, banks, panking associations, savings banks, or trust companies, ithin the meaning of section 2(c) of the Banking Act of t933. Two copies of the letter also are enclosed, one to "furnished to The Firestone Park Trust and Savings Bank and the other for your files. "It has been noted that in the last sentence of his letter Mr. Freiberger requested, among other things, that t(,.he Board determine 'that The Firestone Park Trust and rvings Bank is not an affiliate of The Cleveland Trust 11°14.13any'. The Board's action referred to above, of course, a8 no effect upon the affiliate relationship existing um, Section 2(h) of the Banking Act of 1933 and the Board .1 take no action which would terminate that relationship. is doubtful, however, whether the existence of the re-Lationship is of much concern to The Cleveland Trust Com3. tlY since, in view of the manner in which it arises and ! fact that the affiliate is a member bank, it appears unat the only effect is to require that The Cleveland Trust 1 412 31(1.9/43 -6- "Company list The Firestone Park Trust and Savings Bank as an affiliate in Schedule 0 of its report of condition. It is suggested that in advising Mr. Freiberger concern'rig the Board's action with respect to the holding comPany affiliate relationship, you may wish to discuss this Phase of the matter." Approved unanimously, together with the following letter, referred to above, to r. I. F. Freiberger, Chairman of the Board of The Cleveland Trust Company, Cleveland, Ohio: "This refers to your letter of February 20, 1943/ transmitted through the Federal Reserve Bank of Cleveland, relating to the holding company affiliate relationship beThe Cleveland Trust Company, Cleveland, Ohio, and The Firestone Park Trust and Savings Bank, Akron, Ohio. "The Board understands that The Cleveland Trust Cornis engaged in the general banking and trust business; that it is a holding company affiliate of The Firestone Park Trust and Savings Bank by reason of the fact that it controls Illors than 50 per cent of the number of shares voted in the Rreceding election of directors of the latter bank; that The -ileveland Trust Company, in the regular course of its trust pusiness, holds such shares as fiduciary under various trust agreements which permit it to vote the stock; that additional shares of The Firestone Park Trust and Savings Bank are ass_ets of trusts administered by The Cleveland Trust Company , b 8the trustors presently are the record holders of such .?hares and possess the voting rights thereof; that The CleveJ-and Trust Company holds as fiduciary lesser portions of the !hares of a number of other banks; and that The Cleveland I:rust Company does not own or control any stock of, or manor! control, any bank, except as fiduciary acting in the regular course of its trust business. "In view of these facts, the Board has determined that .le Cleveland Trust Company is not engaged, directly or iny 'lrectly, as a business in holding the stock of, or managing °r controlling, banks, banking associations, savings banks, 1 trust companies, within the meaning of section 2(c) of the 7 l allking Act of 1933, as amended, and, accordingly, The Cleve'‘and Trust Company is not a holding company affiliate for any PUITose other than those of section 23A of the Federal Reserve Act• "If, however, the facts should at any time differ from th °es set out above to an extent which would indicate that The 413 3/19/43 —7— "Cleveland Trust Company might be deemed to be so engaged, this matter should again be submitted to the Board. The Board reserves the right to make a further determination at any time on the basis of the then existing facts." Letter prepared in accordance with the action taken at the teeti 4g of the Board on March 17, 1943, to Mr. West, Vice President of the Federal Reserve Bank of San Francisco, reading as follows: "Reference is made to your letter of February 8, 1943/ , submitting information in connection with the request of the xt-teloPles Bank, Lakewood Village, California, for approval of Plan presented for increasing capital, purchasing assets ; 111 aseu1fling the liabilities of The First National Bank of 1.14 lower, Bellflower, California, and The First National ;,ellk of Garden Grove, Garden Grave, California, removing the ', e4c1 office to Bellflower and establishing and maintaining uranches at Lakewood Village and Garden Grove. "The Board has carefully considered the proposed plan in the tf,!e light of all the information before it and is not satisfied Ir"at it would be warranted in the exercise of the functions se e!!'ed in it by applicable laws in approving the plan as preD_Inded. You are accordingly requested to advise the Peoples -qnk that the Board has declined to approve the plan." i7 Approved unanimously. Telegram to the Presidents of all the Federal Reserve Banks, Ncit_ rig as follows: 44Iective April 1, 1943, telegrams dispatched to your Bank, bue r°1-I 1t Regulation V loans, will be marked collect. Reimpe sement for these telegrams should be requested from War Itatrtment, Navy Department, or Maritime Commission as case 1.412,pe, in regular vouchers submitted by your Bank. In furlea"-Lag Board monthly with number of words sent over main line ahased wires by your Bank for purpose of arriving at pro rata 440 : 16 of leased wire expense, please include in your word count uer of words contained in these collect messages." Approved unanimously. Letter to the Chairmen of all the Federal Reserve Banks, readt0alows: 414 3/19/43 "As you know, the Board from time to time has referred to the directors of the Federal Reserve Banks for comment and suggestion important topics of immediate interest to the Federal Reserve System. At the meeting with the Presidents of the Federal Reserve Banks on March 2, Chairman Eccles stated that the Board and the Federal Reserve Banks should adopt a program designed to inform at least the leaders of Public thought of the causes and dangers of inflation and to 1IIn the public support that will be necessary for the success of effective measures to counteract inflationary developments . "The Board of Governors realizes that any work that it might undertake in this field would be of a character substantially different from anything that it has done in the Past and that it should be undertaken only after careful cona?.deration of all of the suggestions that can be obtained ylthin the time available. It will be very much appreciated, T,herefore, if you will discuss the matter in confidence with Lie President and directors of your Bank and forward to the !d?ard as promptly as possible your suggestions as to the outoft a program and how such a program might be most expe'ltiously and effectively carried out in your district. "It was our hope that the handbook prepared by the Office iyar Information, a copy of which was sent to you with ftnalrman Eccles' letter of March 10, 1943, would be available lor the use of your directors in this connection. However, as u were informed in the Board's telegram of March 11, the bookis now being revised and, so far as we know, the revision 'al not be available for several weeks." r Approved unanimously. Memorandum dated March 18, 1943, from Mr. Wingfield, Assist41t General Attorney, recommending that there be published in the April i4Ile Of the Federal Reserve Bulletin, or in the May Bulletin if not 4a11ab1e in time for publication in the April issue, the revised form or etlarantee agreement under Regulation V, War Financing, as agreed to blt r ePre sentatives of the Board and the Services, together with the opin1°11which has been requested of the Comptroller of the Currency as to Ichether or not the agreement complies with the requirements of exception 415 3/19 4 lo tO —9— Section 5200 of the United States Revised Statutes. Approved unanimously. Thereupon the meeting adjourned. Ao, Vice Chairman.
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