Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, May 10, 1957, Volume 44, Part 4

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Minutes for

To:

May 10 1957

Members of the Board

From: Office of the Secretary
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 pursvant 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.

Chin. Martin
Gov. Szymczak
Gov. VardemAn
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson




122
Minutes of actions taken by the Board of Governors of the
Pederal Reserve System on Friday, May 10, 1957.

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 1/
Robertson
Shepardson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Carpenter, Secretary
Kenyon, Assistant Secretary
Riefler, Assistant to the Chairman
Bethea, Director, Division of
Administrative Services
Young, Director, Division of Research
and Statistics
Sloan, Director, Division of Examinations
Johnson, Controller, and Director,
Division of Personnel Administration
Hackley, General Counsel
Cherry, Legislative Counsel
Molony, Special Assistant to the Board
Noyes, Adviser, Division of Research
and Statistics
Koch, Assistant Director, Division of
Research and Statistics
Masters, Associate Director, Division
of Examinations
Solomon, Assistant General Counsel

Request for approval of proposed rate of salary (Item No. I).
There

had been circulated to the members of the Board a file relating

to a
request from the Federal Reserve Bank of Chicago for approval of
the
Payment of salary to Vice President Turner at a rate which had been
ri4ted by the Bank's Board of Directors. The recommendation of the Divieioh
- of Personnel Administration was favorable and a draft of suggested
letter to the Chicago Reserve Bank was submitted with the file.
W
ithdrew from meeting at point indicated in minutes.




1.225
5/10/57

-2Pursuant to the recommendation of the Division of Personnel

Aciministration, unanimous approval was given to the letter to the Federal
Reserve Bank of Chicago of which a copy is attached to these minutes as
item No. 1.
Discount rates.

There were presented telegrams proposed to be

sent to
the following Federal Reserve Banks which would approve the
esta
blishment without change by the respective Banks on the dates indicated
C)r

the

rates of discount and purchase contained in their existing schedules:
Boston
San Francisco
New York
Cleveland
Richmond
Atlanta
St. Louis
Minneapolis
Kansas City
Dallas

May
May
May
May
May
May
May
May
May
May

6
8
9
9
9
9
9
9
9
9

The telegrams were approved unanimously.
Purchase of Xerox unit (Item No. 2).

In a letter dated April 22,

1957
the Chairman of the Congressional Joint Committee on Printing stated
that the Committee
had been advised of the recent purchase by the Board
e.
Xerox unit and that, in accordance with the provisions of the GovernPrinting and Binding Regulations, the purchase and operation of this
item
- aPpeared to rewire the prior approval of the Committee.

The letter

'eq4ested that the Committee be advised regarding the proposed use of the
Xer'" unit and what justification supported its acquisition.

It also

l'ested a complete inventory of printing, binding, and related or
11X11,4

‘
- 4r5r equipment currently being operated by the Board.




5/10/57

-3There had been distributed to the members of the Board copies

of a proposed reply which would state that the Board's printing equip4ent

is purchased pursuant to provisions of the Federal Reserve Act and

that) in the light of such provisions, it was the Boardts view that the
Government Printing and Binding Regulations and the law upon which they
al'e based are not applicable to such purchases.

The letter would

set forth uses to be made of the Xerox unit as well as the Multilith Offset Press
recently purchased by the Board, and would enclose a list o
the
Printing, binding and related or auxiliary equipment currently being
oPerated.
Governor Balderston suggested a rearrangement of the reply
80 that it
would refer first to the proposed uses of the Xerox unit and
the enclosed listing of printing and auxiliary equipment.
Governor Robertson agreed with the proposed rearrangement and
taade a
further suggestion for changes in the portion of the letter exPrA
ing the Board's view with regard to the effect of the pertineat pro1-81°ns of the Federal Reserve Act.
There being agreement with these suggestions, unanimous approval
given to a letter to the Chairman of the Joint Committee on Printing
it the
form attached to these minutes as Item No. 2.
Messrs. Bethea and Johnson then withdrew from the meeting.
Availability of credit to small business (Items 3 and 4).

Pur-

-, the understanding at the meeting of the Board yesterday, there
had 1,
veen distributed to the members of the Board prior to this meeting




5/10/57

-4-

revised drafts of letters on the subject of credit availability to
small business which would be sent to Representative Wright Patman,
Chairman of the Congressional Joint Economic Committee, and Mr. Carl
M * Flora, Chairman of the Small Business Credit Commission of the
American Bankers Association.

The revised drafts were intended to re-

flect the Board's views as expressed at the conclusion of yesterday's
nleeting.
Agreement having been expressed with certain changes which
were suggested in the revised draft of letter to Representative Patman,
illianimous approval was given to letters to Messrs. Patman and Flora in
the form attached to these minutes as Items 3 and 4, respectively, with
the understanding that the letter to Mr. Patman would be delivered per8clhe11Y by Mr. Young.
Messrs. Cherry and Koch then withdrew from the meeting.
Hearing under section 4(0(6) of the Bank Holding Company Act
(Item No.

5).

There had been sent to the members of the Board copies of

a in

-emorandum from Mr. Solomon dated May 8, 1957, relating to a request

Or

General Contract Corporation, St. Louis, Missouri, in connection with

the hearing being held on applications of that Corporation under section
4(c)(6) of the Bank Holding Company Act, that the time for submitting
t° the Hearing Examiner proposed findings and conclusions, and supporting
brief, be extended from May 17, 1957, to July 1, 1957.

Mr. Solomon's

tlieln°randum concurred in the recommendation of the Hearing Examiner that

the extension of time be granted, and there was submitted a draft of
°1'der which
might be used for the purpose.




O2
4r..?4,t

5/10/57

-5Pursuant to the recommendations of Mr. Solomon and the

!leering Examiner, unanimous approval was given to an order approving

the request for an extension of time, with the understanding that
copies thereof would be transmitted to General Contract Corporation,

the Hearing Examiner, and other appropriate parties. A copy of the
order is attached hereto as Item No. 5.
Proposed consolidation of banks in Flint, Michigan (Item No.

6).

At the meeting on April 3, 1957, the Board gave preliminary consideration
to the proposed consolidation of Genesee County Savings Bank and Merchants
"
a
Mechanics

Bank,both of Flint, Michigan, and decided to refer the

'natter back to the Federal Reserve Bank of Chicago in order to obtain

the Reserve Bank's views on the competitive aspects of the proposal. In
the light of comments subsequently received from the Reserve Bank, the
„
--Lon

of Examinations prepared a memorandum under date of April 30,

1957, analyzing the situation and reaffirming its favorable recommendation.
Theeile, including the new memorandum from the Division of Examinations,

"
h been recirculated to the members of the Board prior to this meeting.
With regard to a comment that the data submitted by the Federal
Reserve Bank of Chicago did not add a great deal of significant informati0
4 to the record, Governor Robertson remarked that the file would reflect that the Board had explored fully the competitive aspects of the
111\IP°8a1 and that no information had been received as a result of this
-ploration to indicate that the Board should not take favorable action.
Thereupon, unanimous approval was given to the letter to Genesee




090

5/10/57

-6-

County Savings Bank of which a copy is attached hereto as Item No. 6,
for transmittal through the Federal Reserve
Bank of Chicago.
Space requirements of the Board.

With reference to the dis-

cUasion at the meeting on May 8, 1957, concerning the matter of leasing
space in the Potomac Plaza Office Building to satisfy the Board's space
Isequirements on an interim basis, Governor Shepardson said that upon
AIrther reflection in the light of questions raised during the Board's
cc)nsideration of the matter, including the length of the proposed
rerital contract, it occurred to him that it might be advisable to check
vith

General Services Administration - not for the purpose of obtaining

consent but to outline what was being planned and ask for any suggestions
l'egarding methods of procedure.

This would avoid the possibility of

Illestions being raised at a later date and might result in obtaining
certain helpful advice.

Therefore, in the absence of objection on the

Palt of the Board, he proposed to arrange a meeting with representatives
of General Services Administration, taking with him a member of the
12°111
'
08 legal staff.
There was unanimous agreement that the procedure suggested by
Gov
,
rinor Shepardson would be appropriate.
Letter from the President (Item No. 7).

The Chairman read for

the eonfidential information of the members of the Board a letter which
he had received under date of May 9, 1957, from the President of the
Uhlted States. It was agreed that the letter, of which a copy is attached
here
'du as Item No.
should be kept confidential and not discussed out131
(
1e

the Board's
organization.




1230
5/10/57

-7The meeting then recessed and reconvened at 11:30 a.m., with

all of the members of the Board except Governor Mills present.

Mr.

Carpenter was also present.
Chairman Martin stated that since the earlier session of the
BoEtrd he had given thought to a possible reply to the letter from the
"'resident and had prepared a draft of such a reply.

The draft was read

by each member of the Board present, after which it was approved unan1ill011e1Y in the form attached hereto as Item No. 8, with the understanding
that neither the incoming letter nor the reply would be discussed outside

the

Board's organization in the absence of public reference thereto by

the P
resident. Chairman Martin stated that Governor Mills was out of
the

building and that he would clear the reply with him before it was sent.
The meeting then adjourned.
Secretary's Note: Pursuant to requests
from Mr. Young, Director, Division of
Research and Statistics, Governor Shepardson today approved on behalf of the Board
(1) an extension of the itinerary for Mr.
Young's trip to Europe, approved by the
Board on March 14, 1957, to include Madrid,
Spain; and (2) an advance of funds in the
amount of $3,000 for use to assist in meeting
expenses of official travel.
On May 9,
on behalf
copies of
under the

1957, Governor Shepardson approved
of the Board the following items,
which are attached to these minutes
respective item numbers indicated:
Item No.

Tele
Ito, !ram to the Federal Reserve Bank of Richmond approvie6fle designation of Leonard A. Ross, Jr., as special
6ant examiner..




9

1231
5/10/57

-8Item No.

Letter to the Federal Reserve Bank of Chicago
a
pproving the designation of Richard J. Pettit
and Chris J. Pappas as special assistant examiners.




10

1232
Item No. 1
5/10/57

May 10, 1957

2911.2
1 IIILL_LEL
Mr. Neil B. Dawes,
Vice President and Secretary,
Federal Reserve Bank of Chicago,
Chicago 90, Illinois.
Dear Mr. Dawes:
The Board of Governors approves the payment of
salary to Mr. William W. Turner, Vice President, for the
Period May 1, 1957, through December 31, 1957, at the rate
of $22,000 per annum, which is the rate fixed by the Board
of Directors as indicated in your letter of April 22, 1957.




Very truly yours,
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.

21"
t,‘I

Item No. 2
5/10/57

May 10, 1957.
The Honorable
Carl Hayden, Chairman,
Joint Committee on Printing,
United States Senate,
Washington
25, D. C.
Dear Senator Hayden:
the

This refers to your letter of April 22, 1957, regarding
recent purchase by the Board of a Xerox unit.

The Xerox unit referred to in your letter was acquired
bY the
Board to supplement its present printing and mimeographing
facilities, which are necessary for its internal needs, including
Preparation of the Board's minutes and communications with the
Federal Reserve Banks. For the same purposes, a No. 1250 Multilth Offset Press was also recently purchased by the Board.
For your information in this connection, there is enclosed
a
of the printing, binding and related or auxiliary equipment
which is currently being operated by the Board.
As was indicated in a letter from the Board to your ComIlrl,ittee dated March 31, 1937, the Board's printing equipment is
Leerchased pursuant to provisions of the Federal Reserve Act.
ction 10 of that Act (12 U.S.C. §244) provides that the Board
shalles
determine the manner in which its obligations shall be ine'rred and its expenses allowed and paid and states that the Board's
;2enses shall be governed solely by this Act and that the Board's
871.s which
are derived from assessments on the 12 Federal Reserve
/non's, shall not be construed to be Government funds or appropriated
itn.?Ys. These provisions of the law were enacted by the Congress
oi,..4-933 as a part of the Federal Reserve Act and were designed to
Is'
tle the Board
discretion in the management of its internal adminw.rative
h
affairs. Since that time there have been certain statutes
inle-ch the
Board has considered as being inapplicable to it. These
111ds the statute upon which the Government Printing and Binding
tjillations are based and for that reason it has been the view of
„7 Board that the regulations are not applicable to the Board's
ehase of printing equipment.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
41el°sUre



Wm. McC. Martin, Jr.

1234
Item No.

5/10/57
may 10, 1957

The Honorable Hright Patman,
!"1°Ilee of depresentatives,
'
lashington 25, D. C.
Dear nr. Patman:
This is in reply to your letter of April 30 expressing
erect In certain data relative to small business financing
• °/Ig the line of material included in the Board's survey of bank
'
cialle to business as of October 1955.
There is a very real need for solid information on the
fiha
bnclal
•
position and problems of small business that goes far
_jond the type of data obtainable by surveying bank loans. That
me
alcl is for the best and most comprehensive factual and analytical
,.'erial it is possible to develop on this matter of wide and
vital interest.
This is a ouestion with which the Board has been conned for some time. However, it is not a
matter of concern to
maZ Board alone, nor one exclusively in the Board's domain. The
er is of equal concern to a numbcr of committees of the Con"se and several departments and aF-encies of the executive
tflch

Z

The problems of small business, in respect to credit and
QaPital and related matters,
tio
have, for example, drawn the attenou 11 for some years of the Small Business and the Banking and
col
'
l enoY Committees of the House and Senate, the Joint Economic
'
lirrelmittee, the Council of Economic Advisers, the Commerce and
pedasurY Departments, the Small Business Administration, the
alicieral Trade Commission, the Securities and Exchange Commission,
others. Also, the subject will doubtless be of interest in
pi'2hection with the study of financial matters that the Senate
u. Committee is planning at this time.
If the true needs for information relative to the
finan .
°Ing problems of small business are to be met, it would
01'
.4 ear to us hio'hly desirable that an effort be made on the part
thaa+:11 these groups to formulate means of arriving at material
illf u will at once be comprehensive and broad enough to
cover the
°rmational requirements of these groups and be of a scope and




3

123F
The Honorable Wright Patman

-2-

quality satisfactory to all. The Board would cooperate to the full
in efforts to formulate and carry out such a study. The Board
recognizes that such an undertaking would involve a considerable
expenditure of time and money. To be worthwhile, such an undertaking
would have to be comparable in breadth of coverage to the study of
?onsumer instalment credit undertaken by the Board at the request of
'the President. As you know, this study required about 12 months'
intensive efforts of part
of the Board's comparatively small staff,
1plus the use of several outside survey and research organizations.
You further know, that study entailed direct costs approximating
'e380,000.
The necessity for s;ch a comprehensive undertaking has been
highligifted by efforts in the past, both on our part and on the part
of
others, to obtain certain limited information by means readily at
hand.
R- cently, for example, we developed what we believed to be rer
.!aling data on the trends in bank lending to businesses of various
'
i,Izes from a quarterly survey on interest rates charF,ed by banks on
business loans. The information has been given to members of your
s ,"!!!. This material, while informative as far as it goes, is not
'Ilicient to meet the basic needs which you, as well as we, have in
1111nd.
info
The same inadequacy is true, unfortunately, for the type of
rmation obtainable in a bank loan survey. Such a survey would be
fciremely complicated and time consuming, yet would add little to the
on bank financing of small business available from the existing
quarterly
survey and the regular call reports.
In view of the above, the Board has requested our Director
Research, Mr. Ralph A. Young, to deliver this letter to you
P"ecnally and to discuss the matter with you.




Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. Mc C. Martin, Jr.

1236
Item No. 4
5/10/57

May 13, 1957

Carl M. Flora, Vice President,
Irst Wisconsin National Bank,
-lawaukee 1, Wisconsin.
Dear Carl:
Thank you for your thoughtful letter of April 29, attach—
a.coPy of the report of the ABA Small Business Credit Commission,
which you are Chairman.
Your Commission's suggestion for a special survey of the
em
Probl
of credit availability to small business under Federal
Res
Go erve auspices has been brought to the attention of the Board of
tivel'n°rs. The Board is aware of the importance of obtaining addi—
sjnal information on this subject and has now directed a System
"
to
group to explore alternative means of obtaining more adequate
111, 1.1a1 information on trends in credit availability to smaller
'
-- nesses.
seek the I trust that members of this task group can feel free to
arid
advice and help of your Commission. It may be that you
Your
associates already have in mind a specific proposal as to
the
tirl
most fruitful approach to this problem. Please be assured that
suggestions you may care to communicate to us will be appreciated.




Yours sincerely,
(Signed) Ralph A. Young
Ralph A. Young, Director,
Division of Research and Statistics.

Item No. 5
5/10/57

UNITED STATES OF AMERICA
BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
IN THE MATTER OF
TRE APPLICATIONS OF
GEUERAL CONTRACT CORPORATION

DOCKET NO.
BHC-4-27

ORDER EXTENDING TIME WITHIN WHICH APPLICANT
MAY SUBMIT TO HEARING EXAMINER PROPOSED FINDINGS
AND CONCLUSIONS, AND SUPPORTING BRIEF

Additional time having been requested by the applicant,
General Contract Corporation, within which to submit to the Hearin, t--

t,

miner proposed findings and conclusions, and supporting

brie,
4, and it appearing to the Board that such request should be
'greInted

it is hereby ORDERED that the time within which the

4
PPlicant may file such proposed findings and conclusions, and
elIPPorting brief, be, and the same hereby is, extended to and
14cluding July 1, 1957.
This 10th day of May 1957
By order of the Board of Governors.
(Signed) S. R. Carpenter
S. R. Carpenter,
Secretary.

(S
tAL)




238

Item No. 6

5/10/57
May 10, 1957.

Board of Directors,
Genesee County Savings Bank,
Flint, Michigan.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Chicago, the Board of Governors hereby
gives its written consent, under the provisions of Section 18(c)
(a
)
,f the Federal Deposit Insurance Act, to the consolidation of
Benesee County Savings Bank and the Merchants and Mechanics
aank, both of Flint, Michigan, under the charter of the former,
:
I 1cl approves the establishment of branches by the consolidated
Zk at the following locations, all within the city limits of
r-Llnt, Michigan:
120 West First Street
5010 Clio Road
3201 South Dort Highway
3701-05 Fenton Road
1911 Franklin Avenue
6923-25 North Saginaw Street,
121'cvided (a) the consolidation is effected substantially in
ecordance with the consolidation agreement submitted, (b) formal
4Proval is given by the appropriate State authority, and (c) the
wi(,)Posed consolidation and establishment of branches are effected
"41111 six months from the date of this letter.

:




Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Assistant Secretary.

_ 39
Item No. 7
5/10/57

THE WHITE HOUSE
Washington

May 9, 1957

Dear Bill:
h,,rday in my Press Conference I inadvertently used the word
kz0
vernment" when I meant "Administration" in connection with an
saiswer on financial matters.
The
i
statement I made was, "The monetary policy of this Government
;41.4:!ine, and no one underneath me is going to change my policy."
oi
.ur.ally, I did not mean to
imply that I was usurping the powers
ue Pederal Reserve System -- I was simply talking about the
-veUtive Department itself.
Sincerely,
(Signed) Dwight D. Eisenhower

The y,
h nonorable William McC. Martin, Jr.
i.,-,111an, Board of Governors
Reserve System
48hington, D. C.

9




Item No. 8

5/10/57

May 10) 1957.

Mv
0 dear Mr.
President:
It was most thoughtful of you to send me your note of
May 0,
0
,
with regard to your reply to a press conference question
-unancial matters.
the 4
You have been at pains on several occasions to stress
gov_ 4-ndependent status of the Federal Reserve System within the
tii„.,trnment so that no one here at the Board had any misgivings
—441tever on this score.
It is indeed a pleasure to be associated with your A.
'lot under such favorable and understanding auspices.
Faithfully yours
(Signed) Bill
Wm. McC. Martin, Jr.
•

The
The President
ite House.




nis

1241
TELEGRAM

Item No. 9

5/10/57

May 9, 1957

aistead — Richmond

Reurlet May- 80 19570 Board approves designation of Leonard A.
R°88, Jr., as a special assistant examiner for the Federal
Reserve Bank of Richmond.




(Signed) Merritt Sherman
Sherman

1242
Item No. 10
5/10/57

Nay 9, 1957

C J. Scanlon, Chief Examiner,
PederiaReserve Bank of Chicago,
Chicago 90, Illinois.
Dear Mr. Scanlon:
In accordance with the request contained in
r1T letters of May 60 1957, the Board approves the
aesIgnation of Richard J. Pettit and Chris J. Pappas
Special assistant examiners for the Federal Reserve
=* of Chicago. Please advise as to the dates upon
ch the designations are made effective.




Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Assistant Secretary.