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48ee.; A meeting of the Board of Governors of the Federal Reserve steni was held in Washington on Monday, March 19, 1945, at 2:30 p..11. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Hammond, Assistant Secretary Mr. Thurston, Assistant to the Chairman Mr. Goldenweiser, Economic Adviser, Division of Research and Statistics Mr. Parry, Director of the Division of Security Loans Mr. Leonard, Director of the Division of Personnel Administration Mr. Thomas, Director of the Division of Research and Statistics Mr. Vest, General Attorney Mr. Brawn, Assistant Director of the Division of Security Loans Mr. Wyatt, General Counsel Mr. Szymczak referred to the decision of the executive corn-. tee Of the Chairmen's Conference in January to postpone the Chair- ew e n `scrlference which had been called for March 12 and 13, and stated that a t the time that decision was reached Mr. Creighton, Chairman of thee° tlference, advised the other Chairmen that a meeting of the ex, Ntiv e committee of the Conference would be held in Washington on 6, When the whole situation would be reviewed again and a dev% 4 thtrie reached as to when a meeting of the Chairmen should be held. Traczak also said that Mr. Creighton expressed the opinion that W8.8 no prdnt in the executive committee of the Conference meeting 483 3/19/45 -2- (?11 the date stated if the Board of Governors were still of the opinion that a Conference of Chairmen should not be held because of the reon travel and that he would like to be informed as to what the attitude of the Board was on the matter. There was unanimous agreement that the suggestion should be made to Mr. Creighton that he ascertain from the Chairmen whether they would prefer that a meeting be held in May or early June, in the fall, or at a time later in the year, and that a decision be reached with respect to the meeting in accordance with the wishes of the majority of the Chairmen. It was understood that the Board would accommodate its program to whatever decision was reached by the Chairmen. Before this meeting there were distributed among the members the Board copies of a memorandum dated March 17, 1945, from Mr. .c.rd submitting a letter dated March 15, from Yr. Sproul, Presiet of the Federal Reserve Bank of New York, to which was attached a lie, of salaries for the officers of the Federal Reserve Bank of iork for the salary year beginning April 1, 1945, as fixed by the b °a-rd of directors of the Bank, subject to the approval of the ' 4 of Governors. The memorandum stated that there were 46 officers the head office and Buffalo Branch, one of whom would retire May 1)1n 745, and would be replaced by the promotion of another employee tc) 4 °fficial position, that the proposed salaries reflected inaggregating $12,700 for 17 of the 46 officers, and that all 484 3119/45 -3- 131"131)°8ed increases were for officers below the rank of Vice President. After a discussion of the matter in the light of the information contained in Mr. Sproul's letter and Mr. Leonard's memorandum, during which favorable comment was made regarding the effectiveness with which the New Bank was carrying out an executive development program, upon motion by Mr. Szymczak, unanimous approval was given to the salaries proposed for the officers of the New Bank, beginning April 1, 1945, and to a letter to Mr. Sproul reading as follows: . "The Board of Governors approves the payment of salaries to the officers of the Federal Reserve Bank of New °1'k and the Buffalo Branch, for the year beginning April 1,1 1945, at the following rates, which are the rates fixed u.Y. Your Board of Directors as submitted with your letter of March 15, 1945: Annual Name Salary Title Allan President 45,000 Les,4,.Le_ Sproul R. Rounds First Vice Pres34,000 ident . Wilson Jones Vice President 16,000 L. Werner Knoke 20,000 Vice President 'Walter S. Logan Vice President and 25,000 General Counsel Ar hur t 15,000 Vice President Phelan James M. Rice 17,500 Vice President Rarold V. Roelse 15,000 Vice President l!obert G. Rouse 21,000 Vice President ts ohn H. Williams 22,000* President Vice _ , -;"-ing period of part-time service to the bank, the salary ''ald Mr. Mlliams will be at a rate equal to that proportion (If his regular annual salary which the number of days a week pent by him at the bank bears to 5. It is understood that : I: IIcier this arrangement when Mr. Williams serves on a partl':Ime basis of less than 5 days a week his daily pay will at the rate of one-fifth of his weekly salary at the egUlar annual rate, that when he serves on a full time a ls of five or more days a week he will continue to be ld his weekly salary at the regular annual rate, and that 'vertime will not be paid when he works more than 5 days Week. 1 486 3/19/45 "Name Valentine Willis Reginald B. Wiltse Harold A. Bilby relix T. Davis Edward 0. Douglas Herbert H. Kimball Silas A. Miller Horace L. Sanford William F. Sheehan John H. Wurts Todd G. Tiebout Rilfus J. Trimble William F. Abraham Loren B. Allen Dudley H. Barrows Curtis R. Bowman 114rry M. Boyd Wesley W. Burt kmes J. Carroll N(Irman P. Davis 134111 R. Fitchen 144rous A. Harris -4— Title Vice President Vice President Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President Chief Examiner Assistant Vice President Assistant General Counsel Assistant General Counsel Manager, Security Custody Department Manager, Accounting Department Manager, Cash Department Manager, Credit Department Manager, Savings Bond Redemption Dept. Manager, Government Bond Department Manager, Planning Department Manager, Foreign Funds Control Department and Security Loans Department Manager, Cash Custody Department Manager, Securities Department Annual Salary :!15,000 15,000 10,000 10,000 11,000 12,000 12,500 10,000 14,000 9,500 13,000 13,500 6,250 8,000 10,000 7,000 8,000 9,500 7,000 9,000 6,000 8,500 486 3/19/45 -5- Annual Salary T Title Manager, Personnel $ 7,500 Department Daniel J. Liddy Manager, Foreign 7,250 Department /dichael J. McLaughlin Manager, Service De7,000 partment Pranklin E. Peterson RelaManager, Bank 7,200 tions Department Ralph W. Scheffer Manager, Check De7,000 partment Charles N. Van Houten Manager, Safekeeping 9,000 Department Roy E. Lendell Manager, Government 7,000 Check Department Robert H. Brome Assistant Counsel and 8,500 Assistant Secretary klliam F. Treiber Assistant Counsel and 10,500 Secretary !illiam H. Dillistin 15,000 General Auditor uonald J. Cameron Assistant General 10,000 Auditor Buffalo Branch 1 131181ey B. Smith 9,000 Managing Director ;.;41sey W. Snow 7,500 Cashier 80rge J. Doll 6,00 0 Cashier Assistant "tbile approval of salaries is given at the rates ?own above for the salary year beginning April 1, 1945/ e approval is subject in each case to the reappointment 1 the officer upon the expiration of his term, which is ; .bruary 28, 1946 in the case of the President and First ve tIce President, and the first meeting of the directors of he Bank in January 1946, in the case of the other officers. "You have advised that Mr. Frederick Stocker, Manager, Ca lio 8h Custody Department, will retire April 30, 1945. The ' °Itrd approves continuation of salary to Mr. Stocker at the Present rate of $61000 per annum for the month of April." "Name William A. Heinl At this point Mr. Leonard left the meeting. Chairman Eccles stated that it appeared that, as a result of testimony given during the hearings now being held before the House 487 3/19/45 —6- ta nking and Currency Committee on the Bretton Woods Agreements, the C1313"itiOn to the Agreements had been very considerably weakened, and that it had been proposed that unless the witnesses for opposition 414 a strong case when they appeared before the Committee this week it Inight be best to adjourn the hearings at the conclusion of the tes— tim "Y of the opposition, in which event Chairman Eccles or SOMB other l'el3l ' esentative of the Board would not testify but a statement of the kavAt position might be filed with the Committee for inclusion in the record of the hearings. Chairman Eccles also said that in antici— Pation of his appearance before the Committee there had been prepared a.C4Vt of a brief formal statement which he might read as the official 13°8ition of the Board, and that in that event he would expect to make a 4111)131ementary statement of his own which, of course, would be consistent the position taken in the Board's statement. Copies of the state— Were distributed to the members of the Board and it was the con— that in the event Chairman Eccles did not appear before the Nod. , 'tee this week a statement of the Board's position should be "with the Committee before the end of the week. It was agreed that a meeting of the Board should be held on Wednesday, March 21, 1945, for the purpose of taking action on the proposed statement. In taking this action it was pointed out that Mr. Szymczak not be in Washington on Wednesday. Mr. Szymczak said that the 488 3/19/45 —7— atatement in its present form was acceptable to him, that it would be agreeable to take action in his absence, and that he would join &tithe approval by the Board of a statement along the lines of the Present draft. There was then presented a memorandum dated March 10, 1945, trorr, Thomas to which was attached a voucher submitted by Ernest J. R °Pkins, Economic Specialist in the Division of Research and Sta— t4t4 'es, covering travel and per diem expenses incurred in connection With a trip which he made to Chicago and Milwaukee and return during the period from January 28 to February 4, 1945. The memorandum stated that Present conditions were such that ordinary living expenses in ee cities exceeded the amount that would be reimbursable to Mr. 8 on the customary basis of t6 per diem, that in order to avoid PenAi4 . 'zing Mr. Hopkins financially because of the nature of his special -8 which involved a considerable amount of travel it was recom, 11114410_ that the Board approve an increase in the per diem allowance N., lir • Hopkins from $6 to $8 during the period of his present tern— Dora,— appointment which expires August 16, 1945, and that the Board 4PPro Ire the voucher submitted with the memorandum which was computed "the basis of a per diem of U. tt When the memorandum was circulated among the members of the 411(1itwas pointed out that the Board's present regulations permit 4 Per cliem allowance for employees other than heads and assistant 489 3119/45 —8— heads of divisions of $6, that specific exceptions to these regula tiAsp. -us had been allowed in the case of examiners and certain members q the Division of Bank Operations who visited the Federal Reserve -,ks and who were aJlowed $7 per diem, and that the standardized °(317ernment regulations allow only $6 per diem for official travel 44 do not allow reimbursement on an actual expense basis. Mr. McKee, as a member of the Personnel Committee, had at— tach„ vu a memorandum to the file suggesting that the voucher raised OX%ittant he questions that should be considered by the Board and that ould recommend that, if the Board approved the voucher, immediate 'ueration be given to the per diem allowance to the road force of the 4a11ining Division. Upon motion by Mr. McKee, it was agreed unanimously (1) to approve a per diem allowance of ,7 for Mr. Hopkins whenever he was absent from Washington on official business of the Board, this arrangement to continue during the period of his present temporary appointment which expires on August 16, 1945, and (2) to approve the voucher referred to above when adjusted on that basis. Chairman Eccles referred to the letter that had been received br the Board under date of March 14, 1945, from Mr. Hernandez, Secre— t;kz, of Finance of the Philippine Government, requesting that the tioard Make the services of Glenn Goodman, an Examiner in the Division o . 41flihations, available to the Philippine Government for a period 490 3/19/45 -9(4from three to six months for the purpose of making a survey of the flking situation in the Philippines. Chairman Eccles stated that he had received a personal letter dated March 16, 1945, from "eldon Jones, of the Bureau of the Budget, urging that the tioar.-3 q grant the request. There ensued a discussion of the basis upon which the arrati gement with respect to Mr. Goodman might be made, having in the position as to policy taken by the Board in the case of Triffinl s mission to South America; that is, whether the Board Pay his salary and n11 or part of his other expenses. In this connection Mr. McKee pointed out that it was necessary to -"'io consideration Mr. Goodman's rights in the retirement %%tez. At the conclusion of the discussion unanimous approval was given to Mr. McKee's recommendation that the services of Mr. Goodman be loaned to the Philippine Government for a period, if necessary, of approximately six months. The arrangement to be made with the Philippine Government with respect to Mr. Goodman's expenses was referred to the Personnel Committee with power to act. toarcl In accordance with the request made at the meeting of the cn March 9, 1945, Mr. Vest, under date of March 15, 1945, 'kktt, ecl an opinion Ath respect to the po7,er of the Board to eribe 100 tttA per cent margin requirements under Regulation T, 4%,141, en and Maintenance of Credit by Brokers, Dealers, and 8 C)fs National Securities Exchanges, and PLegulation I- 3/19/45 -10- Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange. It was Mr. Vest's opini°11that the Board was authorized to prescribe 100 per cent margins, either for the initial extension or for the maintenance of credit, or both, and and that it might do so with respect to credit extended by brokers dealers or by banks or by both if it deemed it necessary or appro- Priate to do so to prevent excessive use of credit to finance transaetictls in securities. The memorandum of opinion also stated that it 11111et be recognized, however, that this conclusion was debatable and a 'ulldable argument to the contrary might be made especially on the a8ja of the legislative history of the law, and that for this reason the Board would be in a stronger legal position if, instead of prescrib. lng 100 per cent margin requirements, it prescribed a somewhat Iser - Percentage, such as 90 or 95 per cent. A copy of the opinion ha sent to each member of the Board before this meeting and all of the tlienlbers of the Board stated that they had read it. At Mr. Draper's request there was read the following memoran4-'ePared by him for presentation at this meeting: "In the fall of 1916--29 years ago--402 selected reached86 on the basis of the 1935-1939 level being to 100. ' "In the fall of 1925, 20 years ago, the same 402 stocks reached 109. m,. "On March 7th, 1945, the same 402 stocks reached ' Elle is a rise, over a 20 year period of 6 points, or stocks equal 115. 51%, 3/1.9/45 -11- "and a rise, over a 29 year period, of 29 points, or "When we consider the enormous increase in bank deposits and currency since we entered this war, the surPrising fact about present day stock market prices is not that they are so high but that they are so relatively low, When compared with the same prices in 1916 and 1925. "About the same situation holds true in stock market credit. It is a fact that stock market credit has doubled in the last 3 years--and this is a most unfavorable factor, in my opinion--but it is also true that the total--about 1 billion 50 million--is a relatively modest amount, when compared with the situation in 1916 and in 1925. "Unfortunately we have no figures on customers' debit balances in 1916 and 1925, but we do have figures .for those years on brokers' loans. In the fall of 1916 brokers loans were about 1 billion 200 million. In the fall of 1925 they were about 3 billions. In March, 1945/ they are about 1 billion 50 million. "All this evidence points to the fact that while presnt inflationary forces possess great potential danger, 'his danger has not yet appeared actively in the stock illarket, nor has it affected directly and unduly the course of stock market prices as a whole. "In spite of this evidence of an apparently healthy situation, I do not believe this evidence can be construed an argument in favor of a do-nothing policy indefinitely. 'in the contrary, I believe conditions in the near future ”Y favor a restrictive policy of rather severe proportions. However, there is no conclusive evidence that an Over-drastic policy which would probably bring about a e nsiderable impairment of liquidity is necessary at this j Inle. So much for the immediate and near future situation. "If we base our action upon an administration policy 2f tightening up controls all around, the course to pursue, • believe, is to recognize that fact and proceed accord11, 1.7, in case conditions become more inflationary in the sLock market. We did that in 1938, but in reverse, when reduced reserve requirements about 13%. If we followed similar, co-operative course, in case the market resumes Its rise and becomes feverishly active, a raise of margin ' I equirements to the 65% or 702L level would be much more 3/19/45 —12— "than a gesture. It would probably be about as effective as a raise to 100% and it would have the added advantage Of not being so extremely drastic as to jolt severely the normal processes of stock market operation. "If events should prove these conclusions to be wrong, we would then be on solid ground in proceeding to the 100% level without undue delay. "In my opinion, the wisest way to steer our course in this difficult situation is to move deliberately and coolly. We have a great public responsibility in this matter and we cannot afford to act hastily, no matter What action we finally decide to take. "Finally, I believe that our first raise in margin requirements, if necessary, to the 70% level rather than to the 100% level would meet with approval of the majority of Congress because it would show them that we were using the power they gave us to control credit in an orderly way and not primarily to knock down stock market prices re— gardless of the effect upon credit or the frame—work of Present stock market machinery." There was a discussion of a question raised by Chairman Eccles or the use of any credit for the purpose of purchasing or carrying ltles during the war should not be regarded as excessive. There 17 a180 further discussion of the conditions under which action would be JlIstified to increase margin requirements to 100 per cent, or to 131cr5 bc maintenance margins and "bring up" margins. In the course of the discussion, during which there was read 14e111s3randum prepared by Mr. Parry under date of March 19, 1945, in WhIch h -e presented briefly the extent of the authority of the Board Proht the extension of credit by brokers and dealers and by betit it became apparent that there was a difference of opinion 'Lg the members of the Board as to the action that would be justi— t this time. 494 3119/45 —13— Toward the end of the discussion, Chairman Eccles stated that there would be another meeting of the Economic Stabilization BOarci on Thursday of this week and that undoubtedly the question of Iletion by the Board with respect to margin requirements would be 1113ed again at that time. It was unanimously agreed that fur— ther consideration should be given to the matter at the meeting of the Board to be held on Wednesday, March 21, 1945. The minutes of the meeting of the Board of Governors of the Peci"al Reserve System held on March 17, 1945, were approved unani— raousiy. Thereupon the meeting adjourned.
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