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439 A meeting of the Board of Governors of the Federal Reserve aYstem was held in Washington on Monday, March 20, 1944, at 11:00 PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters herein4'Iter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the ral Reserve System held on March 18, 1944, were approved unani— 0101414T. Memorandum dated March 17, 1944, from Mr. Goldenweiser, Di— tor of the Division of Research and Statistics, referring to his talkor.„ °I1cl1).m of February 29, 1944, as approved by the Board on March 7, 1944 With regard to the return of Mr. Triffin, an Associate Economist that JAViZiOn, to Paraguay as soon as possible to complete the work beguri 1 ast fall on that country's banking problems, and recommending, -ew of the reasons stated in the memorandum, that Mr. Triffin be Elikthor. lzed to spend the necessary time in Costa Rica on his way to N'keu4Y to acquaint himself with the situation there and to consult Julio Pena, General Manager of the Banco Nacional de Costa 440 3120/44 -2- Rica. The memorandum stated that this would probably take only two We 1.- eu '‘. but that, if a definite limit were to be set, it should be for till'ae weeks in order to allow for the possibility that more time might be needed. Approved unanimously. Letter to Mr. P. E. Murphy, Vice President and Cashier of the tate Bank, Junction City, Arkansas, reading as follows: "This is in response to your letter of February 29, 1944, regarding the Board's letter of February 18, 1944, which enclosed a facsimile of the report of the Committee on Banking and Currency of the House of Representatives on the bill H. R. 3956. "There is being sent you under separate cover a copy of the printed transcript of the Hearings on H. R. 3956, t1 , 11ch, it is believed, you will find interesting reading. 'Ile Board's official statement upon H. R. 3956, made in : 1 esPonse to a request by the Chairman of the House Bank.3,-ng and Currency Committee, appears at pages 166-172 of the copy of the Hearings. "Your letter indicates that you feel that the Board's !ction was intended to 'eliminate' small banks by depriving them of a source of revenue. We regret that such a mis: PPrehension of the purposes of the Board of Governors °11141 exist. Certainly it is not the Board's intention to Injure your institution. On the contrary, it is the Board's 4 sincere belief that its position with respect to the absorption of exchange charges is directed toward the best interests of all banks, large or small. th "In this connection, it should be pointed out that che ruling of the Board with respect to absorption ofext ange charges which was made in September 1943, applied a° a member bank which was absorbing exchange and not to of,4°nPar bank which was charging it. The ruling grew out r;a provision of existing law which prohibits member banks °T.Paying interest on demand deposits; and, in the Board's tfi-Laion, the absorption of exchange by the bank to which e ruling applied constituted, under the facts of the case, 441 3/20/44 -3- " e a Payment of interest within the meaning of the term 'interest' as it has been construed by the courts in decided cases. While the Board's ruling, therefore, was not directed at the charging of exchange, the Board's Position upon the question of par clearance in its relation to the question of absorbing exchange is stated on Pages 171-172 of the copy of the Hearings. "With respect to your charge that it has taken the Board 'eleven years to find this clause', your attention 1.8 directed to the explanation which was given at the Hearings on H. R. 3956 as printed in the copy of the Hearings at the too of page 7. In addition, you may be interested to read the long history of this subject since 1933 as related by Mr. Dreibelbis, the Board's General Attorney, Ifg.inning at page 497 of the Hearings and resumed at pages 315/ 565, and 591. "It is regretted that you have interpreted the Board's action as an attack upon small business and small banks. "a matter of fact, it would be impossible to recount the numerous instances in the past in which the Board has acted to assist small banks. In this connection, attention is called to the statement made by Governor Ransom on this oint, as printed on page 19 of the Hearings. It is to _e borne in mind also that a great majority of the banks Which are members of the Federal Reserve System are small Or 'country' banks. "As an illustration of the views entertained by many ban). 'ers throughout the country who are opposed to the pending bills legalizing the absorption of exchange charges, may be interested in reading the enclosed copy of a let ert which was sent by the Minnesota Bankers Association all 1 `,) nonpar State banks in Minnesota under date of March .4.u) 1944. 4_ "In conclusion, the Board believes that the enactment .to law of H. R. 3956 and its companion bill in the Senate, 8 1642, would seriously impair the existing par clearance ,Cern which, as Senator Glass expresses it, 'has saved the °n'5 industry, commerce, and agriculture millions upon -,-L-Lions of dollars.'" t r Approved unanimously, together with similar letters to Mr. J. C. Hallett, Ex, ecutive Vice President of the Sherwood State Bank, Sherwood, Wisconsin, and to Mr. M. W. Swartz, President of the Peoples 442 —4-Bank of Indianola, Indianola, Mississippi, with respect to their letters of February 28 and 29, 1944, respectively. Letter to the Presidents of all the Federal Reserve Banks, read14 as follows: "There is enclosed for your information a copy of a letter received from the Los Angeles Branch of the Fedfral Reserve Bank of San Francisco regarding the acceptance y borrowers of materials, supplies, or other things as 11111 or partial payment or settlement on contracts or pur&se orders the proceeds of which may be assigned to the 111ancing institution, and copies of the War Department, "avY Department, and Maritime Commission replies thereto. "We have been advised that the War Department conin the opinion expressed in the second sentence of 6ne second paragraph of Mr. Coolidge's memorandum to the effect that if a borrower receives a credit for inventory _IiInder cancelled contracts such credit is a 'payment' within I'he meaning of Section 6(B) of the Guarantee Agreement." Approved unanimously. Letter to Mr. Willett, First Vice President of the Federal Re4/11e Bank of Boston, reading as follows: "In response to your letter of February 28, 1944, you advised that the Board approves the payment of a fee nd disbursements in a total sum of $1,208.80 to Rackemann, nYer & Brewster, being the amount of a bill submitted by t2?"11 for professional services and disbursements in the ex' 41-nation of title to the two pieces of real estate located ; t 99-111 Milk Street and 6-12 Pearl Street, Boston, and conveyancing work in connection with the recent purchase such real estate by your Bank." are Z Approved unanimously. Letter prepared in accordance with the action taken at the meetof the Board on February 26, 1944, to Mr. Fleming, President of the 443 31.4/44 —5— Federal Reserve Bank of Cleveland, and reading as follows: "Following receipt of your letter of February 16, 1944, in which you request approval of an arrangement under which the officers of your Bank would be authorized 4) purchase an appropriate gift at a cost of not to exceed $75 to be given to each employee who has had 25 years or more of service at the Bank, the Board of Governors reconsidered its existing policies in this connection and has come to the conclusion that in view of the public Character of the Federal Reserve Banks their funds should 110t be expended for this purpose. The number of employees in the Federal Reserve Banks with 25 years or more of servl'es is substantial and if the arrangement were approved for all the Banks the resulting expenditure of Federal lunds would be a large and continuing one. "As stated in the Board's letter to you of December 4, 1936, it is felt that gifts for long or meritorious service (as distinguished from service certificates, pins, ;r emblems which, as you know, are awarded at some of the Federal Reserve Banks) lose their real significance when they are given under a policy which is uniform for all ern:1:30yees, without regard to quality of service. Voluntary lfts coming from the employees' associates, whether after 4,:c41g service or upon retirement, have a real significance yea though the cost is small and in institutions like the Federal Reserve Banks are more appropriate than are gifts Purchased with Bank funds under a plan which is uniform 'or all employees." I f Approved unanimously. Thereupon the meeting adjourned. 4151:it'oyea: Chairman.
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