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365
Minutes of actions taken by the Board of Governors of the
1.•al. Reserve System on Tuesday, March 21,
19)0.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Szymczak, Chairman pro tem.
Draper
Evans
Vardaman
Mr. Carpenter, Secretary
Mr. Sherman, Assistant Secretary
Mr. Kenyon, Assistant Secretary
Minutes of actions taken by the Board of Governors of the
Feder
al Reserve System on March 20, 1950, were approved unanimously.
14emorandum dated March 16, 1950, from Mr. Young, Director
or the
111481
Division of Research and Statistics, recommending the appoint-
°f John A. Frechtling as an economist in that Division, with
e 8alarY at the rate of $4,600 per annum, effective as of the
°late „
which he enters upon the performance of his duties after
4,
1 14
Passed the usual physical examination.
Approved unanimously.
Letter prepared pursuant to the action on March 17, 1950, to
11°11°41)le Camille Gutt, Managing Director, International Monetary
lashington,
D. C., reading as follows:
ad
"This will acknowledge your letter of March 14,
tidressed to Governor zymczak, relative to an invitath°,.'1 received by the International Monetary Fund from
1,2- Government of Chile to send a mission to study the
.t
ation Problem in that country and the credit policies
Will be necessary to deal with this problem. Your
betr
e indicated that it would be helpful if you could
'
°14 a member of the staff of the Federal Reserve Board
8.13
J1
a tainted with Latin American banking problems to be
of the mission, which will involve a period of
°111 four to six weeks, beginning on or about March 23.
n
366
-2"I am pleased to inform you at this time that the
Board has acceded to your request and is prepared to
tke available the services of Mr. David L. Grove for
4e Purpose mentioned. Pursuant to arrangements dis?Ilesed informally with your administrative staff, it
68
2 understood that the Board will continue to pay Mr.
,rove's salary for the period involved but that the
i
a nt
ernational Monetary Fund will assume responsibility
all travel expenses and other costs incident to
Ole
mission.
.
"The Board is gratified that It is able to be of
'
Bsistance to your organization upon this occasion."
T
Approved unanimously.
Letter to Mr. Hill, Vice President of the Federal
eE4Ire
""Ilk of Philadelphia, reading as follows:
In accordance with the request contained in
tl°
11ar letter of March 16, 1950, the Board approves
eze designation of Hugh Barrie as a special assistant
altliner for the Federal Reserve Bank of Philadelphia."
Approved unanimously.
Letter to Mr. Denmark, Vice President of the Federal
rite 10
'aalk of Atlanta, reading as follows:
"In accordance with the request contained in
Your ,
de_ -Letter of March 17, 1950, the Board approves the
4„ngnation of James L. Jones, Jr. as a special
A
stant examiner for the Federal Reserve Bank of
'
'
11 lanta,”
Approved unanimously.
114
Telegram to Mr. John M. Gullalee, University of Alabama,
Cfxl.0
osa,
Alabama, reading as follows:
"Board of Governors of the Federal Reserve System
a.PPointed you director of Birmingham Branch of the
el'al Reserve Bank of Atlanta for unexpired portion
4
48
3/21/50
-3-
term ending December 31, 1950, and will be pleased
to have your acceptance by collect telegram. It is
Understood that
you are not a director of a bank and do
Aot hold any public or political office. Should your
situation in
these respects change during the tenure
:
,
311 Your appointment, it would be appreciated if you
7°111(1 advise the Chairman of the Board of Directors of
The
Federal Reserve Bank of Atlanta."
Approved unanimously.
Letter to Mr. Caldwell, Chairman of the Federal Reserve
41* Of
Kansas City, reading as follows:
"At the completion of the examination of the
cleral Reserve Bank of Kansas City, made as of
u8"1111817 4, 1950, by the Board's examiners, a copy
;
1' the report of examination was left for your ine31.nle.tion and that of the directors. A copy was
80 left for President Leedy.
"The Board will appreciate advice that the
report
has been considered by the Board of Directors.
mia "It is understood from Chief Field Examiner
c,
srff that meetings of the Auditor with the Executive
11`:Israittee at stated intervals have been initiated.
Board is pleased to learn that this regular
contact with a committee of directors has
been
Provided for the Auditor.
It is understood also that Mr. Murff discussed
Ah:" You plans for strengthening the staff of the
ha
7
v1
i ting Department. The Board would appreciate
anY comments you may care to offer regarding
8 or other discussions with respect to the exam1,11
:
1.;:! °D,/ or as to action taken or to be taken as a
14-IA of the examination."
Approved unanimously.
Letter to Mr. Kimball, Vice President of the Federal
e Ea-,
414 of New York, reading as follows:
geference is made to your Bank's letter of
'^ch 16, 1950, in which you advise that it appears
368
v21/50
-4
tt
ezPenses for the Bank and public relations function
at Your head office will exceed the 19)0 budget estimates
14 the amount of $40,427.
24.
"The Board accepts the revised figures as subitted, and appropriate notations are being made in
the Board's records."
Approved unanimously.
Letter to Mr. Brainard, Chairman of the Board of the
?eaeu_,
44J-
Reserve Bank of Cleveland, reading as follows:
"This refers to your letter of January 12, 1920,
*which you state that your Directors urge that the
of Governors authorize the retention of a
'
Ilbstantial part of 1920 earnings
on a basis someSimilar to that which was used in 1948 and 1949.
th "It is noted that it seems to the Directors that
e amount retained in 1948 and 1949 to build up the
'raPital position of the Bank was very moderate in
.natien to the amount turned over to the Treasury
Of that there would be no valid grounds for criticism
c the System if in 1920 a similar addition to
v!Pital funds is made. You state that no one knows
':at future obligations and duties will come upon the
irldellal Reserve Banks through supporting operations
be the Government securities market, lending to member
e.r5
in times of trouble, and engaging in interit i°nal banking operations, or in other ways, but
"ems certain that they will be substantial.
ac, "As you know, the matter of increasing the capital
ille;
4.1111ts of the Reserve Banks was reviewed at the joint
°
7illg of the Board and the Presidents of the Reserve
}azoii.
s.C4.8 on December 14, 1949, at which time it was undertic°6- that in the absence of some change in the situa11
ea°!!
which would make a resumption of deductions from
rae;"tilgs desirable, no further deductions should be
th;
e. At the recent conference of the Presidents of
Pederal Reserve Banks this matter was again disIZT-, and it was the sense of the conference that
(Ieri'
41e present there was insufficient basis for
ellj
llite recommendations as to method or amount of
.0.„" deductions. The Board is likewise of the opinion
Z
131
the situation has not changed sufficiently ;4:)
e a resumption of these deductions desirable.
b
369
3/21/50
Approved unanimously.
Letter to Honorable Brent Spence, Chairman of the Banking
814
,kcrericY
Committee, House of Representatives, reading as follows:
"As you know, the bill S. 2822, 'To amend the
E'e(leral Deposit Insurance Act (U.S.C., Title 12,
section 2610' has been passed by the Senate and refer
-red to your Committee in the House of Represen4.tives.
"The Board would like to say that it favors the
:
b jectives of this legislation relating to the in.
111‘aace coverage, the payment of dividends, the
-ssessment base, the simplification of the assessment
c(IniPutation, and the liberalization of the loan and
asset purchase powers of the Federal Deposit Insurance
;
°rPoration. These matters have an important bearing
"
i
Only on the operations of the banks of the country,
,
ncluding
the member banks of the Federal Reserve
"stem which
hold 82 per cent of the deposits of the
'
ioMMercial
banking system and support to a corresponddegree the deposit insurance program, but also on
he
Primary responsibility for monetary and credit
1-1cY which
has been placed upon the Federal Reserve
in the national interest. Responsibility for
reM
t
Q,Z..ts.rY and credit policy in our American tradition
7ot be discharged effectively without a strong and
,
1 1,"
;(31'i-table private banking system, and the efficient
tni°ning of deposit insurance is closely related
A'
4e strength and stability of our banking mechanism.
Gj,opy of the statement on behalf of the Board of
ilivernors sent by Chairman McCabe to the Senate Bank4nd Currency Committee on the bill is attached.
tio "We would also like to mention for your considerav0
,
,
11 a relatively minor change which we believe it
be desirable to make in the bill if it could
in 14e.de conveniently and without raising problems
811 c°11nection with the bill. The change we wish to
bilgest relates to a feature of section 13(f) of the
corl which provides that the Federal Deposit Insurance
aale°,1:ation shall pay to the Secretary of the Treasury
eciAla."e Federal Reserve Banks, respectively, an amount
410 4- to 2 per centum simple interest per annum on
by ,1 Tts advanced to the Corporation on stock subscriptions
'Ile Secretary of the Treasury and the Reserve Banks.
370
3/21/50
"It may be recalled that the stock in question
!as retired by the Federal Deposit Insurance CorporaOn pursuant to the Act of August 5, 1947 (Public No.
0°
80th Congress), and that under this Act the
Co
retired the stock 'by paying the amount
received therefor
(whether received from the Secretary
the Treasury or the Federal Reserve Banks) to the
'
ecretary of the Treasury.' The direction for the
°unts representing the stock owned by the Federal
Teserlde Banks to be paid to the Secretary of the
,,reasury rather than to the Reserve Banks was ino ted in the 1)111 after the Board had suggested
t
chie procedure in a letter to the Senete B.Inking and
ri:
!!;
e1 encY Committee on April 18, 1947. That letter
-141- in part as follows:
'The stock of the Federal Deposit
Insurance Corporation held by the several
Federal Reserve Banks was subscribed by
such banks in the amount of one-half of
their surplus as of January 1, 1933.
In recent years, however, the earnings
Of the Federal Reserve Banks have been
such that the amount of funds taken from
their surplus for this purpose in 1933
has been restored. Accordingly, the
Board feels that, if the stock held by
the Reserve Banks is cancelled, the
%mounts received by the Corporation on
account of such stock should be paid to
the Secretary of the Treasury rather
than to the Federal Reserve Banks
, "Similar considerations apply to the further payments
114oviA
8er,'-u-ed for in S. 2822 with respect to the stock sub/30 J-bed by the Federal Reserve Banks. Accordingly, the
par,:c1 feels that any such payments to be made should be
ilesq to the Secretary of the Treasury rather than to the
eteerve Banks. The change might be accomplished by an
taeb,t161nent along the lines indicated in the attached
'
to °randum. The Board believes that it would be desirable
pr.21a-ke the change if an appropriate opportunity should
ient itself although, as indicated above, the question
of sufficient moment to justify any steps that
"(' interfere with prompt enactment of the bill."
r
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