Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, May 10, 1950, Volume 37, Part 2

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Minutes of actions taken by the Board of Governors of the
Federal Reserve System on Wednesday, May 10, 1950.
PRESENT:

Mr.
Mr.
Mr.
Mr.

McCabe, Chairman
Eccles
Szymczak
Vardaman
Mr. Carpenter, Secretary
Mr. Sherman, Assistant Secretary
Mr. Kenyon, Assistant Secretary

Minutes of actions taken by the Board of Governors of the
Federal Reserve System on May
Memorandum dated May

9, 1950, were approved unanimously.

5, 1950, from Mr. Carpenter, Secretary

to the Board, recommending that Miss Anne Malia, secretary to Mr.
Morrill, be transferred to the Office of the Secretary as secretary
to Mr. Sherman, with an increase in her salary from
per annum, effective May 14, 1950.

$3,825 to

The memorandum also

stated that Mr. Morrill was agreeable to this transfer.
Approved unAnimously.
Memorandum dated May

8, 1950, from Chairman McCabe,

recommending that Clarke L. Fauver, an economist in the Division
Of Research and Statistics, be transferred to Chairman McCabe's
office as Administrative Assistant to the Chairman, a non-official
Position, with an increase in his salary from $7,600 to $8,000
Per annum, effective May 14, 1950.
Approved unanimously.
Letter to Mr. Powell, Secretary of the Board, Federal
Reserve Bank of Minneapolis, reading as follows:




592

-2"Reference is made to your letter of May ),
19)0, advising that your board of directors has
relieved Mr. R. E. Towle of his official title and
duties and placed him on leave of absence for the
remainder of the calendar year, and that Mr. C. W.
Groth was elected Vice President, assigned to the
Helena Branch.
"The Board of Governors approves the payment
of salary to Mr. Towle at his present rate of
810,000 per annum for the period May ), 1950,
through December 31, 1950, during which time he
Will be on leave of absence.
"The Board also approves the payment of salary
to Mr. C. IN. Groth as Vice President, assigned to
the Helena Branch, at the rate of $8,000 per annum
from May ), 1950, through May 31, 19)0. The payment of salary to Mr. Groth after May 31, 1950,
Will be included with those of the other officers
of the Bank now under consideration."
Approved unanimously.
Letter to Mr. Leedy, President of the Federal Reserve
Bank of Kansas City, reading as follows:
"Reference is made to your letter of April 29,
19)0, regarding the payment of salary to a special
employee to be engaged in the making of an economic
survey of the Kansas City area.
"For the reasons outlined in your letter the
Board of Governors approves the payment of salary
to Mr. Philip Neff as a part-time employee at a rate
equal to $12,000 per annum on a full-time basis for
such time as is necessary to complete the eccnomic
survey.
"It is understood that Mr. Neff will be a special
and temporary employee and that approximately sixteen
months will be required to complete the project on
which he will be working."
Approved unanimously.
Letter to The Central National Bank of Topeka, Topeka,
Kansas, reading as follows:




,

-3"The Board of Governors of the Federal
Reserve System has given consideration to your
application for fiduciary powers, and grants
You authority to act, when not in contravention
of State or local law, as trustee, executor,
administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver,
committee of estates of lunatics, or in any
Other fiduciary capacity in which State banks,
trust companies or other corporations which
come into competition with national banks are
permitted to act under the laws of the State
of Kansas, the exercise of all such rights
to be subject to the provisions of the Board
of Governors of the Federal Reserve System.
"This letter will be your authority to
exercise the fiduciary powers granted by the
Board pending the preparation of a formal
certificate covering such authorization, which
will be forwarded to you in due course."
Approved unanimously,
for transmittal through the
Federal Reserve B_ink of Kansas
City.
Letter to Honorable Chet Holifield, Chairman, Executive
and Legislative Reorganization Subcommittee of the Committee on
E xpenditures in the Executive Departments, House of Representatives, Washington, D. C., reading as follows:
"This letter is in response to yours of April
14, 19)0, in which you request copies of any agency
orders or circulars issued by the Board of Governors
to conform its internal organization and procedures
to recommendations made in reports of the Commission
on Organization of the Executive Branch of the
Government, popularly known as the Hoover Commission.
You also ask for such explanatory or supplementary
statements with respect to these matters as the
Board might think appropriate. While the Board has
issued no such orders or circulars your Committee
may be interested in the following comments.




594

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-4-

"The formal recommendations of the Hoover
Commission include none which deal with the Board
of Governors specifically. However, the task force
report on the regulatory agencies states that the
Federal Reserve System performs its important and
varied service functions with apparent efficiency
and dispatch. It is the belief of the Board that
it is now following procedures which accomplish
the objectives of many of the applicable recommendations of the Commission with respect to
economies and improvements that might be effected
in connection with the Board's 'housekeeping'
functions.
"As you know, the expenses of the Board of
Governors are not paid from appropriated funds but
from the proceeds of assessments levied by the
Board against the Federal Reserve Banks pursuant
to the provisions of section 10 of the.Federal
Reserve Act. Under this authority it has been
possible to relate the policies of the Board with
respect to publications, procurement, budgeting
and accounting, personnel management, and other
internal operations, to the specialized purposes
for which the Board was created and to integrate
them where desirable with the operations of the
Federal Reserve Banks which are subject to the
Board's supervision. If the Board were made
subject to the procedures proposed in the Hoover
Commission reports with respect to these activities, many of the benefits and savings resulting
from the present specialized procedures would
be lost and the work of the Board would be seriously
hampered without any of the compensating benefits
contemplated from the application of general procedures to large departments of the Government
which do operate under appropriated funds. The
expenses of the Board are primarily for salaries
and the annual amount expended for supplies and
nonpersonal services is relatively very small.
"The funds from which the Federal Reserve
building was constructed were also derived from
assessments levied against the Federal Reserve
Banks and not from appropriated funds, and Congress
has provided in section 10 of the Federal Reserve
Act that the Board should have full control of the




595

-)"building and the space therein. A high standard
of maintenance and utilization has been possible
With a minimum of building personnel and other
expenses under the direct control of the Board.
"The Board prepares an operating budget annually
to insure complete control of its expenditures.
This budget is given final consideration by the
Board each December for the succeeding calendar
year. The Board maintains its books and accounts
and disburses its funds in accordance with an
accounting system designed to meet the needs of
the Board and a statement of the Board's income
and expenses is submitted to the Congress each
year in its annual report. The Board's books are
also audited twice each year by an auditor from
one of the Federal Reserve Banks.
"The Board is in accord with the recommendations
of the Commission with respect to the statistical
activities of the Federal Government and has
cooperated actively through the Division of
Statistical Standards of the Budget Bureau and in
other ways effectively to coordinate its statistical work with the other research and statistical
activities of the Government.
"Notwithstanding the fact that the total volume
of the Board's records is small it has had in effect
for a number of years, under a staff member with wide
experience, an active policy of records administration
including the microfilming and destruction of old
records so that the problem of storage has been held
to a minimum.
"The report on personnel management outlines
desirable objectives and changes in present procedures designed to decentralize personnel administration. Under the provisions of the Federal Reserve
Act, our employees are not under the classified Civil
Service, and the small staff of the Board, consisting
of )
60 employees, has been carefully selected through
the choice of persons best qualified by training and
experience for the work that the Board has been
called upon to perform. The Board believes that it
is preferable to make selections of employees on the
basis of standards prescribed in the light of the
specialized skills required rather than on the basis
of general specifications prescribed for employees
in the large departmental services.




596

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)

-6-

"In the discharge of its responsibilities for
supervision of the Federal Reserve Banks, the Board
Is following with satisfactory results a plan of
job evaluation and salary administration with
respect to personnel similar to that proposed in
the report. It has been the policy of the Federal
Reserve Banks for a number of years to promote a
career system which contemplates the interchange
Of employees between the Federal Reserve Banks and
the Board.
"The recommendations of the Commission on the
regulatory agencies, in which the Board was grouped,
includes one that in each regulatory commission all
administrative responsibility be vested in the Chairman. In a letter to the Chairman of the Senate Banking and Currency Committee under date of September
23, 1949, the Board outlined reasons why it felt
that rather than Place greater administrative
responsibility on the Chairman of the Board, he and
other members should be relieved of that responsibility
which should be carried by the staff, and if as a
practical matter it should be necessary or desirable
for the purposes of more effective internal operation
to assign to the staff more of the administrative
work of the Board that could be done without legislation.
"It is the hope of the Board that the above
comments will be of assistance to your Committee in
making the further report mentioned in your letter."
Approved unanimously, Mr.
Vardaman stating, "I will not
object to this letter if the
majority of the Board wants to
send it, but I think it is
potentially dangerous and would
rather see a short letter confining itself solely to the
questions raised by Representa,,,
tive Holifield."

,




Secreta