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Minutes for
To:
Members of the Board
From:
Office of the Secretary
March 24, 1958
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard
to the minutes, it will be appreciated if you will
advise the Secretary's Office. Otherwise, if you
were present at the meeting, please initial in column A below to indicate that you approve the minutes.
If you were not present, please initial in column B
below to indicate that you have seen the minutes.
Chm. Martin
Gov. Szymczak
Gov. Vardaman
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
y ezer/3
951
Minutes of the Board of Governors of the Federal Reserve System
on Monday, March 24, 1958. The Board met in the Board Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr*
Mr.
Martin) Chairman
Balderston, Vice Chairman
Szymczak
Vardaman
Mills
Robertson
Shepardson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr*
Mr.
Mr.
Mr.
Mr.
Mr.
Carpenter) Secretary
Kenyon, Assistant Secretary
Thurston, Assistant to the Board
Riefler, Assistant to the Chairman
Thomas, Economic Adviser to the Board
Leonard, Director, Division of Bank Operations
Young, Director, Division of Research and
Statistics
Johnson, Director, Division of Personnel
Administration
Hackley, General Counsel
Shay, Legislative Counsel
Noyes, Adviser, Division of Research and
Statistics
Hexter, Assistant General Counsel
Nelson, Assistant Director, Division of
Examinations
Young, Assistant Counsel
Wood, Economist, Division of Research and
Statistics
Items circulated to the Board.
The following items, which had
been circulated to the members of the Board and copies of which are
attached to these minutes under the respective item numbers indicated,
'ere approved unanimously:
Item No.
Letter to the Security Trust Company of Rochester,
Rochester, New York, approving the establishment of
Et branch in Monroe County. (For transmittal through
the Federal Reserve Bank of New York)
1
rk)
3/24/58
-2Item No.
Letter to the Peoples Union Bank and Trust Company,
McKeesport, Pennsylvania, approving the establishment
Of a branch in Vandergrift, Pennsylvania, incident to
its absorption of the Vandergrift Savings and Trust
Company. (For transmittal through the Federal Reserve
Bank of Cleveland)
2
Letter to Wyandotte Savings Bank, Wyandotte, Michigan,
approving the establishment of a branch in Dearborn
Township. (For transmittal through the Federal Reserve
Bank of Chicago)
3
Letter to the Federal Reserve Bank of Chicago granting
an extension of time to the Fidelity Bank & Trust Company,
Indianapolis, Indiana, to establish a branch in Marion
County, Indiana.
4
5&6
Letters to the Federal Reserve Banks of Dallas and San
Francisco expressing the opinion that national banks in
Texas and Oregon may not operate mortgage investment funds
Pursuant to section 17(d) of Regulation F.
Letter to the Federal Reserve Bank of Dallas waiving six
7
months' notice of withdrawal from membership in the Federal
Reserve System for The First State Bank, Gladewater, Texas.
Letter to the Federal Reserve Bank of Kansas City approving
adjusted employees' salary structures for that Bank and its
branches.
Telegram to the Federal Reserve Bank of Dallas authorizing
:21- call for bids for an addition to, and alterations of, the
head, office building.
9
Messrs. Leonard and Johnson then withdrew from the meeting.
Report on S. 3447 and S. 3497 (Item No. 10).
Pursuant to the
Understanding at the meeting on Friday, March 21, there had been distributed to the members of the Board a revised draft of letter to the
Chairman of the Senate Banking and Currency Committee reporting on bill
3/24/58
-.3-
S. 3447, known as the Area Economic Redevelopment Act, and bill S. 3497,
known as the Community Facilities Act of 1958.
Certain suggestions for minor changes in the revised draft were
made following which unanimous approval was given to a letter in the
form attached as Item No. 10
with the understanding that a copy would
be sent to the Bureau of the Budget.
During the foregoing discussion Mr. Molony, Special Assistant
to the Board) entered the room and at its conclusion Messrs. Nelson,
Walter Young, and Wood withdrew.
Comments on S. 3083 (Item No. 11).
There had been circulated
to the members of the Board a draft of letter to the Bureau of the Budget
in response to its request for the Board's views with respect to S. 3083,
a bill which would amend section 24 of the Federal Reserve Act in respect
to loans made by national banks when the collateral offered represents
liens on grazing lands.
Following a brief discussion, the letter was approved unanimously
in the form submitted. A copy of the approved letter is attached as
Item No. 11.
In this connection it was noted that a request had been received
several weeks ago from the Senate Banking and Currency Committee for a
report on this bill but that Mr. Shay had been advised informally by the
Clerk of the Committee that the request might be regarded as routine and
4
report not made in the absence of further developments.
Accordingly,
.14..
3/24/58
it was understood that if a further request should be received from the
Committee, a letter similar to that being sent to the Budget Bureau
would be transmitted to the Committee.
Messrs. Shay, Noyes, and Hexter then withdrew from the meeting.
Record of Board policy actions for 1957. There had been submitted
to the Board, with a memorandum from Mr. Carpenter dated March 190 1958,
copies of a draft of the record covering policy actions taken by the
Board in 1957, with the understanding that when in a form approved by
the Board, the record would be incorporated in the Annual Report for
1957 pursupnt to the requirement contained in the last paragraph of section 10 of the Federal Reserve Act.
The Secretary reported certain editorial and technical changes
in the respective entries which had been suggested by members of the
Board and the staff following distribution of the memorandum, after
which other suggestions of a similar character were made.
Certain questions were raised regarding the content of the policy
record in the light of the statutory requirement and the practices followed
by the Board
in the past under that requirement.
It was suggested that
the record might be expanded to include an appropriately phrased prefatory
Paragraph to indicate that during the year the Board had taken numerous
actions constituting reaffirmation of existing policy, interpretations
°f statutes or the Board's regulations, and System operating procedures.
This suggestion contemplated that certain illustrations of these types
-5-
3/24/58
of actions might be set forth in such a prefatory note including, for
example, the designation of Puerto Rico and the Virgin Islands during
1957 as being in or of the Second Federal Reserve District for purposes
Of the Board's Regulations G and J. However, the comment was made that
at this time it might be desirable to follow the procedures agreed upon
by the Board in past years with regard to the form and content of the
Policy record.
Question was also raised by Governor Vardaman regarding the
procedures followed with respect to the explanation of the reasons for
dissenting votes on policy actions taken by the Board. There was a
discussion of this point but no change was made in the understanding
that explanations of a negative vote would be put in the policy record
in the form desired by the member of the Board casting such vote.
Governor Vardaman also suggested that it would be desirable to
have the entries for the policy record submitted to the Board for consideration promptly after the respective policy actions are taken,.
He
expressed the view that such a procedure would tend to eliminate the
element of hindsight from inadvertently creeping into the preparation
or the policy record and that the entries, therefore, would tend to
reflect more precisely the reasons for which the Board took any
Particular policy action.
There being agreement with the procedural suggestion made by
Governor Vardaman, it was understood that, effective immediately, a
956
-6-
3/24/58
draft of entry covering each policy action would be prepared and samitted to the Board for consideration as soon as possible after the
date on which the policy action is taken.
Thereupon, the record of policy actions for 1957, revised to
comply with the suggestions for textual changes agreed upon at this
meeting, was approved unanimously for inclusion in the Board's Annual
Reportfbr 1957.
Memorandum on reserve requirements submitted on behalf of New
York Clearing House Association.
Chairman Martin referred to a letter
from the President of the Federal Reserve Bank of New York dated March
20, 1958, with which Mr. Hayes transmitted a letter from Mr. Howard
Sheperd, President of the New York Clearing House Association, dated
March 191 19581 submitting a memorandum entitled "Memorandum on Reserve
Requirements Submitted on Behalf of the New York Clearing House Association to the Federal Reserve Bank of New York - March 191 1958".
Copies
Of the letter from Mr. Hayes and its enclosures had been distributed to
the members of the Board.
At the request of the Chairman there was a brief informal
discussion of the points of view expressed in the memorandum from the
Clearing House Association and it was understood that the document would
be studied further by the members of the Board in relation to the decision
reached by the Board on March 181 19581 with respect to reserve requirezent legislation, as well as from the standpoint of the question of
95'
-7-
3/24/58
equalizing reserve requirements for banks in central reserve cities
and those in reserve cities.
Salaries for officers of Dallas Reserve Bank (Item No, 12).
As recommended in a memorandum from the Division of Personnel Administration dated March 18, 1958, which had been circulated to the members
Of the Board, unanimous approval was given to a letter to the Federal
Reserve Bank of Dallas approving the payment of salaries to Mr. Murff
as Vice President and Mr. Lang as General Auditor, effective July 1,
1958, at the respective rates fixed by the Board of Directors.
Of the letter is attached as Item No. 12.
The meeting then adjourned.
Secretary's Note: Pursuant to a recommendation contained in a memorandum from Mr.
Young, Director, Division of Research and
Statistics, dated March 18, 1958, Governor
Shepardson today approved on behalf of
the Board acceptance of the resignation
of Alfred P. Johnson, Economist in that
Division, effective March 27, 1958.
A copy
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 3.
3/214-158
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 214., 1958
Board of Directors,
Security Tryst Company of Rochester,
Rochester, New York.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of New York, the Board of Governors
of the Federal Reserve System approves the establishment
of a branch in the Westgate Plaza Shopping Center, Town
of Gates, Monroe County, New York, by the Security Trust
Company of Rochester, provided the branch is established
within one year from the date of this letter, and approval
of the State authorities is effective as of the date the
branch is established.
Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 2
3/24/58
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 24, 1958
Board of Directors,
Peoples Union Bank and Trust Company,
McKeesport, Pennsylvania.
Gentlemen:
Pursuant to your request submitted through the Federal Reserve
Bank of Cleveland, the Board of Governors of the Federal Reserve System
approves the establishment of a branch at 100 Grant Avenue, Vandergrift„
Pennsylvania, by Peoples Union Bank and Trust Company, McKeesport, Pennanvania, incident to its absorption by purchase of assets of Vandergrift
Savings and Trust Company, Vandergrift, Pennsylvania, provided (1) the
Proposed absorption is effected substantially in accordance with the
agreement between the parties dated February 21, 1958, (2) no securities
O1 stocks are acquired from Vandergrift Savings and Trust Company which
are ineligible for purchase by a member bank, (3) investment sacurities
and banking house acquired from the Vandergrift Savings and Trust Company
are not placed upon the books of the Peoples Union Bank and Trust Company
ln amounts in excess of the market value and the depreciated value for
Federal income tax purposes, respectively, and (4) the branch is established within six months from the date cf this letter.
It is understood that the capital structure of the Peoples
Union Bank and Trust Company will be increased by not less than 11,200,000
''
.!Iroligh the sale of additional common stock at the time of absorption of
he Vandergrift Savings and Trust Company.
Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
3
3/24/58
WASHINGTON 25. D. C.
ADDRLSS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 24, 1958
Board of Directors,
Wyandotte Savings Bank,
Wyandotte, Michigan.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Chicago, the Board of Governors
of the Federal Reserve System approves the establishment
of a branch by the Wyandotte Savings Bank adjoining 22840
Van Born Road, Dearborn Township) Wayne County, Michigan,
provided the branch is established within six months from
the date of this letter, and approval of the State authorities is effective as of the date the branch is established.
Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 4
FEDERAL RESERVE SYSTEM
)
3/24/58
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
Uktip:0).'
March 24, 1958
Mr. W. R. Diercks, Vice President,
Federal Reserve Bank of Chicago,
Chicago 901 Illinois.
Dear Mr. Diercks:
Reference is made to your letter of March 121 19581
submitting the request of the Fidelity Bank & Trust Company,
Indianapolis, Indiana, for an extension of time within which
to establish a branch on Shelby Street at Hanna Avenue, Perry
Township, Marion County, Indiana, owing to delays enccuntered
in completing construction of the branch building, attributable
Principally to unfavorable weather conditions.
In view of the circumstances, the Board concurs in
Your favorable recommendation and ext,c.mds to September 191 19581
the time within which the bank nay establish tho branch, as
originally approved in the Boardts letter of September 19, 1957,
Provided approval of the State authorities is effective as of
the date the branch is established.
Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.
902
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
5
3/24/58
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
To
THE BOARD
March 241 1958
lir. L. G. Pondrom, Vice President,
Federal Reserve Bank of Dallas,
Dallas 21 Texas.
Dear Mr. Pondroma
161
This is in further reference to your letter of December
to
as
opinion
Board's
1957, addressed to Mr. Masters, requesting the
funds
trust
invest
may
Whether a national bank in the State of Texas
in a so-called "mortgage investment fund" established pursuant to
section 17(d) of Regulation F.
Section 17(a) of the regulation provides that trust funds
Of a national bank may be invested collectively in a common trust fund
nts
Nhenever the laws of the State authorize or permit such investme
inbe
not
shall
bY State banks or trust companies, but trust funds
vested in a mortgage investment fund "unless such investments are
statute
?Pecifically authorized by the State statutes". The Texas
or trust
bank
a
es
authoriz
Vernon's Civil Statutes, Art. 7425b--48)
funds in
trust
invest
to
and
company to establish a common trust fund
nt,
instrume
the
by
ed
prohibit
Such fund if the investment is not
This
ship.
relation
y
fiduciar
Pdgment, decree or order creating the
of
nt
investme
the
ng
permitti
le a law of the State authorizing or
trust funds in a common trust fund, but it is not a State statute
a mortgage
.2Pecifically authorizing the investment of trust funds in
of your
opinion
the
in
concurs
Board
investment fund. Therefore, the
h
establis
not
may
Texas
of
State
the
counsel that a national bank in
nt
investme
e
"mortgag
a
in)
funds
trust
(and therefore may not invest
tundo.
letter
There is enclosed for your information a copy of a
o
irancisc
San
of
Bank
Reserve
Federal
the
which the Board has sent to
1,h respect to the operation of mortgage investment funds by national
°alike in Oregon.
Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.
14nolosure
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Itemlio. 6
3/24/58
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 24, 1958
Mr. E. R. Hillard, Vice President,
Federal Reserve Bank of San Francisco,
San Francisco 20, California.
Dear Mr. Millard:
With further reference to the question of whether a national
bank in Texas may operate a "mortgage investment fund" pursuant to.
section 17(d) of Regulation F, there is enclosed a copy of the Board's
letter of this date, addressed to the Federal Reserve Bank of Dallas,
containing the Board's answer to this question.
As the statutes of Oregon and Texas are quite similar, the
Board is also of the opinion that national banks in Oregon may not
Operate mortgage investment funds. It is requested that you communicate the Board's views on this subject to Pioneer Trust Company, Salem,
Oregon, and suggest to the trust company the advisability of re-examining
the Federal tax status of its mortgage investment fund.
Enclosure
964
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 7
3/24/58
WASHINGTON 25, O. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARO
March 24, 1958
Mr. L. G. Pondrom, Vice President,
Federal Reserve Bank of Dallas,
Dallas 2, Texas.
Dear Mr. Pondrom:
Reference is made to your letter of March 13, 1958,
enclosing a copy, of a resolution adopted by the board of directors
of The First State Bank, Gladewater, Texas, signifying its intention to withdraw from membership in the Federal Reserve System and
requesting a waiver of the six months' notice of such withdrawal.
In accordance with the bank's request, the Board of
Governors waives the requirement of six months' notice of withdrawal. Accordingly, upon surrender of the Federal Reserve Bank
stock issued to the bank, you are authorized to cancel such stock
and make appropriate refund thereon. Under the provision of
Section 10(c) of Regulation H, as amended effective September 1,
1952, the bank may accomplish termination of its membership at
any time within eight months after notice of intention to withdraw
Is given. Please advise when cancellation is effected and refund
Is made.
The certificate of membership issued to the bank should
be obtained, if possible, and forwarded to the Board. The State
banking authorities should be advised of the bank's proposed withdrawal from membership and the date such withdrawal becomes effective.
It is our understanding that the bank has filed a formal
application with the Federal Deposit Insurance Corporation for continuance of deposit insurance after withdrawal from membership.
Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 8
3/24/58
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
•ari%
"Aa.
titt
March 24, 1958
CONFIDENTIAL (FR)
Mr. Henry 0. Koppang, First Vice President,
Federal Reserve Bank of Kansas City,
Kansas City 6, Missouri.
Dear Mr. Koppangt
In accordance with your letter of March 7, 1958, the
Board of Governors approves the following minimum and maximum
salaries for the respective grades at the Federal Reserve Bank
of Kansas City, including branches, effective March 1, 1958:
Head Office and Denver Branch
Grade
Minimum Salary
1
421100
2
3
4
5
6
7
8
9
10
11
2,340
2,580
2,830
3,180
3,540
3,900
4,320
4180o
5,340
5,940
6,540
7,260
8,o40
8,940
9,960
12
13
14
15
16
Maximum Salary
2,820
3,120
31480
31840
4,260
4,740
5,280
5,820
61460
7,200
7,950
8,820
9,780
io,86o
12,060
13,1440
Zi04.:"•
-2-
Mr. Koppang.
Oklahoma City and Omaha Branches
Grade
Minimum Salary
Maximum Salary
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
42,100
2,280
2,520
2,820
3,120
3,420
3,780
4,200
4,620
5,100
5,64o
6,2440
6,900
7,680
8,52o
9,420
42,820
3,060
3,420
3,780
4,200
4,620
5,100
51640
6,240
6,900
7,620
8,400
9,300
10,320
11,460
12,720
The Board understands that these adjustments in structure
d
will not result in salary expenditures in excess of funds provide
for in the Reserve Bank's 1958 budget.
The Board approves the payment of salaries to employees,
other than officers, within the limits specified for the grades in
which the positions of the respective employees are classified. It
is understood that all employees whose salaries are below the minimum
brought
of their grades as a result of the structure increase will be
later
not
and
able
practic
as
within the appropriate range as soon
than June 1, 1958*
Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.
Item No. 9
TELEGRAM
3/24/58
LEASED. WIRE SERVICE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
March 24, 1958
Irons - Dallas
Re your letter of /larch 14, 1958, the Board authorizes the Bank to
call for bids
construction of an addition to
and alterations of,
your Head Office building on the basis of final plans and specifications referred to in your letter of July 25, 1957.
In accordance with customary procedure, a summary report of bids
should be forwarded to Board, together with recommendations of
Bank as to acceptance,
(Signed) So R. Carpenter
Carpenter.
968
BOARD OF GOVERNORS
OF THE
Item No. 10
3/24/58
FEDERAL RESERVE SYSTEM
WAS
OFFICE OF THE CHAIRMAN
March 24, 1958.
The Honorable J. W. Fulbright,
Chairman, Banking and Currency Committee,
United States Senate,
Washington 25, D. C.
Dear Senator Fulbright:
In accordance with your requests of March 13 and March 19,
the Board of Governors of the Federal Reserve System is submitting
this report on two bills with which your Committee is presently concerned.
Under S. 3447--The Area hconomic Redeveloprient Act--public
and nrivate or,anizations in "industrial redevelopment areas" and
rural redevelopment areas" would be eligible for several types of
Federal assistance administered by the Secretary of Commerce. Major
among these are: loans and narticipations to private and public
agencies to the extent of :150 million; loans to public agencies to
the extent of a00 million; grants to public agencies to the extent
of ,4;50 million; technical assistance and inforwation to the areas;
help to businesses in the areas in obtaining contracts for Federal
Procurement; special eligibility of municipalities in the areas for
urban renewal; and vocational training and subsistence payments durin(' industrial retrainim to workers in the areas.
This bill is directed to an important social and economic
Problem, and its coverage is broad. The Secretary is given considerable
discretion to designate industrial and rural redevelopment areas; but he
ls required to designate areas in which stipulated percentages of unemPloyrdent have continued for specified periods. The projects for which
loans and grants may be made are described very generally, and appear to
Include any improveent to real estate that l'ould ordinarily be thought
Of as public works or construction for business purposes.
The Board of Governors is aware that there is a multitude of
factors that :,ay contribute to the economic decline of particular areas,
to the obsolescence of particular personal skills, or to shifts in the
relative advantages of location for specific industries. Prescription
Of remedies for particular situations developing from these causes is
extremely complex, and one of the difficult administrative problems will
The Honorable
J. W. Fulbricht
-2-
be to judge what kinds of assistance to depressed areas are likely to
improve the national economy at large and which are likely merely to
shift the burden to other areas--a distinction the bill wisely recognizes.
Such problems and the difficulty of assembling the technical skills required for administration dictate that any new program of this sort should
be held initially to modest proportions until experience in administration
of the Act has been gained.
While this bill is directed to providing assistance for areas
distressed because of broad structural changes in the economy, during a
recession the criteria of distress could also conceivably make the assistance of this measure available to a large number of communities
not contemplated in the basic purposes of this bill. As we understand
this measure, it is not designed to deal with general recession, which
should be handled in other ways. Scme modification of the criteria of
distress would therefore appear to be called for.
S. 3497--the "Community Facilities ,,ct of 1958"--would con-
siderably enlarge the scope of the program now carried on by the Community Facilities Administration under authority of the Housing AmendMents of 1955. The existing program is confined to providing loans to
communities of under 10,000 population for planning and executing the
Provision of "basic public works"--principally water, sewage, and vas
Systems, The bill would make loans available to any community and appears to extend the scope to include financing of anything ordinarily
thought of as local public works. Loans would continue to be available
only to public bodies and agencies. The revolving fund available for
loans would be increased from 1.p100 million to ;,2 billion, advanced by
the Secretary of the Treasury.
To the extent that a bill along these lines would direct
economic resources now unemployed or underemployed to the provision of
needed public facilities that would not otherwise be built, enactment
might be constructive. On the question whether such additional projects
are ready to be built, or can quickly be brought to that stage, the Board
would have no judgment.
To avoid creating commitments running far into the future, the
Board feels that the loan fund should not be a revolvirg fund, but should
be limited to financing useful public facilities that promise to provide
employment in the immediate future, i.e., during the present recession.
The bill as drafted provides for a lending rate low enough to
"encourage and promote essential public works and public facilities."
The Board appreciates that the purpose of these provisions is to f_.,et
needed public works going quickly. It doubts, however, whether a subsidized interest rate is an appropriate vehicle to this end. The obligations of States and municipalities enjoy tax exemptions. The great bulk
of these, as a consequence, benefit in any case from relatively low
970
The Honorable
J. W. Fulbright
-3-
interest rates. Under these circumstances, one effect of the bill as
now drawn might be merely to divert State and municipal borrowing from
the direct private market to the Community Facilities Administration.
This would apply even t() cities that presently have no difficulty
financing themselves on reasonable terms. Direct municipal borrowing
- ry heavy for some time and seems likely
to finance publjc works has been v :
in the absence of this legislation to continue heavy. Federal lending to
municipalities at the rate of interest set under the proposed formula and
for as long as 50 years, however, would mean that a large proportion of
this municipal borrowing would be transferred from the private market to
the Federal Government. Thus, without some additional safeguards, the bill
might add considerably less to economic activity than to Federal liabilities.
Furthermore, the interest rate formula, together with the revolving fund
feature, would tend to make the Federal Government a permanent source of
municipal financing. The Board doubts whether it would be sound for the
Federal Government to assume such a major role in the financing of muni—
cipalities as a permanent practice.
In short, the Board would therefore suggest that the bill be
directed primarily to stimulating activity during the current recession,
that the loan fund not be a revolving fund, and that loans be available
only to applicants who cannot otherwise obtain funds on reasonable terms.
Sincerely yours,
)f
1W'
Wm. McC. Martin, Jr.
e
BOARD OF GOVERNORS
OF THE
C'4<1.t0
4 vit:
h
st
(Z1
Item No. 11
3/24/58
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
a,
TO THE BOARD
— tio4**
March 241 1958
Mr. Roger W. Jones,
Assistant Director for
Legislative Reference,
Bureau of the Budget,
Washington 25, D. C.
Dear Mr. Jones:
This is in response to your Legislative Referral Memorandum
of February 21, 1958, requesting the Board's views with respect to
the bill S. 3083, "To amend section 24 of the Federal Reserve Act to
clarify, the requirements of such section in the case of loans made by
national banks when the collateral offered represents liens on grazing lands."
Under section 24 in its present form, grazing or range land
ordinarily is not "improved real estate" and therefore national banks
may not make loans primarily secured by such land. S. 3083 would
amend section 24 to permit national banks to make loans on the security
of grazing land
ft .. on which the owner or lessee has expended money in
carrying out range management or soil conservation
practices recognized and approved by a county Agricultural
Stabilization and Conservation Committee, the local representative of the Soil Conservation Service, or the county
agriculture extension agent."
The Board understands that approved range management and soil conservation practices include such improvements as water installations, brush
control, drift fences, and reseeding. Although a complete program may
involve several of these, it seems probable that adoption of any of
them would be "recognized and approved" by the agencies named, which
is the test prescribed by the proposed amendment. In that event, under
a literal interpretation of said amendment, a relatively nominal
expenditure that would not substantially change the "unimproved" nature
of grazing land might be held to bring loans on such land within the
Purview of section 24.
Mr. Roger H. Jones
-2-
In other words, the Board raises the question whether,
in view of the language of S. 3083, that bill might be enacted under
the impression, and with the intention, that grazing land would
continue to be ineligible security for national bank loans unless
it had been substantially improved through approved range management
and soil conservation practices, whereas the actual effect of the
bill might be to make grazing lands eligible security on the basis
of relatively insignificant improvements. Of course, Congress may
conclude that unimproved grazing land is suitable security for loans
by national banks. In that event, however, it would seem preferable
to so provide explicitly in section 2)4.
In lieu of the slight restrictions prescribed by S. 3083,
consideration might be given to amending section 24 to permit national
banks to lend on the security of grazing lands only if the owner or
lessee had carried out a program of range improvements approved by
the Agricultural Conservation Program Service or the Soil Conservation
Service of the United States Department of Agriculture. On the other
hand, it may be that the relatively mild requirements embodied in
S. 3083 would serve a useful purpose as a safeguard against loans
being made on the security of arid land that could not properly be
Classed as grazing land.
As you are aware, section 24 of the Federal Reserve Act
applies exclusively to real estate loans by national banks. The
Comptroller of the Currency is the primary supervisor of the national
banking system, and accordingly the views of the Treasury Department
Presumably would be accorded particular weight in passing on the
advisability of the proposal embodied in S. 3083.
Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.
Srlf
BOARD OF GOVERNORS
OF THE
Item No. 12
1 8
0
3/2
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 240 1958
Confidential (FR)
Mr. Watrous H. Irons, President,
Federal Reserve Bank of Dallas,
Dallas 2, Texas.
Dear Mr. Irons:
The Board of Governors approves the payment
of salaries to the following officers of the Federal
Reserve Bank of Dallas for the period July 1, 1958
through December 31, 1958, at the rates indicated,
which are the rates fixed by your Board of Directors
as reported in your letter of March 14, 1958:
Name
G. R. Murff
Arthur H. Lang
Title
Annual Salary
$15,700
Vice President
15,000
General Auditor
Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.
@FedFRASER