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703 A meeting of the Board of Governors of the Federal Reserve 4stea was held in Washington on Monday, May 13, 1946, at 11:00 a.m. PRESENT: Mr. Eccles, Chairman Mr. Draper Mr. Evans Mr. Carpenter, Secretary Mr. Hammond, Assistant Secretary Mr. Morrill, Special Adviser Mr. Paulger, Director, Division of Examinations Mr. Vest, General Counsel Mr. Cagle, Assistant Director, Division of Examinations Mr. Townsend, Assistant General Counsel A8 stated in the minutes of the meeting on May 8, 1946, Mr. IlkNIELItLan was absent on official business. Mr. Morrill stated that following the meeting of the Board on ' 9 1 - 946, at which consideration was given to official salaries at the Fede ra- Reserve Bank of Boston, Mr. Leonard called Mr. Creighton, Chat Of the Boston Bank, on the telephone and advised him of the action taken by the Board and that Mr. Creighton urged that the action kith reePect to the salary for Mr. Latham, Assistant Vice President, be Ne°t18idersd. The reason for Mr. Creighton's request was that Mr. Latham one II" °f the most promising officers in the Bank, that the salary prosed for him at the rate of $8,000 per annum was entirely justified by t4le 11°/lt that he was doing, that he had an offer of a position with one the ttoston banks at a salary of $15,000 per annum, and that it was hoped that inasmuch as he was interested in the System as a career he 11°11141 be .1"8-11tects to stay with the Reserve Bank if the increase were 704 5/13/46 -2-- Following a discussion of the question whether the Board or a Feder., cu. Reserve Bank would be justified in trying to retain a Federal Reee "e Bank officer when he was offered a position on the outside at 484417 the considerably higher than the Federal Reserve Bank should pay, nlembers of the Board concurred in the opinion that in view of Mr. 4eight 111 Q °- comments the Board would be justified in relying on his 'I' LL and in approving the salaries fixed by the directors for Mr. 141thalla a nd Assistant Cashier Gilbody. Upon motion by Mr. Evans and by unanimous vote, the Secretary was requested to advise Mr. Creighton that the Board approved salaries at the rates of $8,000 and $70250 per annum for Messrs. Latham and GilbodY, respectively, for the period from May 1, 1946, to April 30, 1947. Before this meeting each member of the Board had been furcopy of a telegram dated May 7, 1946, from Mr. Clerk in which tt wa 8 stated ceived vex). a letter dated April 30, 1946, from the Comptroller of the asking for a reconunendation on the approval or disapproval the te be that the Federal Reserve Bank of San Francisco had re- establishment of a new national bank at Alhambra, California, ktis3Wa as the Valley National Bank of Alhambra. The telegram reterre d to the actions previously taken by the Board with respect tv'the application of the First Trust and Savings Bank of Pasadena Perm3 -884.On to 6 establish a branch at Alhambra and to the action I. the u°mPtroller of the Currency in authorizing the establishment bY the 8 of America National Trust and Savings Association 705 5/13/46 —3— of de novo branches at Sherman Oaks, California, San Gabriel, California, arid Lower Uba, California, and suggested that, if the policy stated by the,. Boa„ . in its letter of February 14, 1942, to Transamerica Corpora0 th respect to acquisitions by Transamerica interests of additional banking offices had been abandoned or modified as would seem to be ip, AA '4,cated by the approval of the three de novo branches referred to above ) the Board might desire to reconsider the application still pend14 of the First Trust and Savings Bank of Pasadena to establish an Alhambra branch since the granting of the charter to the new national 114111s: w cnild result in the establishment of a new bank in Alhambra in the tztaediate proximity of the branch sought by the First Trust and Savings 1/411k of Pasadena. lir* Cagle outlined the information available in the office of the C° t riat ml) r° -er of the Currency with respect to the sponsors of the new i°113- bank and there was a discussion of the reply to be made to Mr. "erkt s wire. the Chairman Eccles reviewed the special circumstances surrounding action of the Comptroller of the Currency in authorizing the three 110vo branches mentioned in 1dr. Clerk's wire and stated that that action 174 riot i ntended to change or to constitute abandonment of the agreement c)t the three Federal bank supervisory agencies relating to further aceklqtion of banking offices by Transamerica interests. de 706 5/13/46 _4_ At the conclusion of the discussion, it was agreed unanimously that the staff should prepare, for consideration by the Board, a draft of reply to Mr. Clerkls wire along the lines suggested during the meeting. At this point Messrs. Hammond, Paulger, Vest, Cagle 44d Townsend withdrew from the meeting and the action stated 11,44.t. --144 respect to each of the matters hereinafter set forth W48 then taken by the Board: Memorandmm dated May 7, 1946, from Mr. Thomas, Di- rector of the Division of Research and Statistics, recom, laerlding that Mrs. Mary Jane Roberts an Economist in that be granted leave without pay for such time as may be ns,, ' eseary within the period May 5 through June 1, 1914 g to illness. The memorandum also stated that Mrs. Roberts iS a member of the Board retirement plan with death enerits and recommended that the Board authorizecontinua- tion 0f her death benefits for the period of leave of absence II:4110'qt pay; with the understanding that she would make ap1410 4 Pr ate contributions therefor. Approved unanimously. Memorandum dated March 12, 1946, from Mr. Carpenter, 14g a draft of entries for the policy record cover- taken by the Board during the year 1945. The 707 5/13/46 draft —5— 4, 01 record had been circulated among the members of the Board and in a memorandum dated April 4, 1946, Mr. lians°111 suggested a change in the draft of entry relating t° the action taken at the meeting of the Board on FebrilarY 2) 1945, with respect to the amendment of Regulations T am TT u. Mr. Carpenter's memorandum recommended that, for the reasons stated, the heads of all divisions of the Board's staff be advised that hereafter, whenever an important matter of Policy was submitted to the Board for action it was be accompanied by a memorandum from the Division submitting the matter in which would be set forth the important to questions involved and the reasons which the Board might gi've for taking the action as well as the reasons which might be a dvanced for not taking it. If the proposed action were thea taken by the Board the reasons would form the basis of the 13°1-icY record which would be prepared by the Secretary's °trice promptly following the action. The draft of the record with the change proposed by Mr. Ransom, and Mr. Carpenter's recommendation, were approved unanimously. 708 5113/46 Letter to Mr. Creighton, Chairman of the Federal Reserve Bank ° Boston, reading as follows: The Board of Governors approves the payment of sal4r7 to Mr. Alfred C. Neal, Director of Research, for the P of e T6d 44 13 1946, through April 30, 1947, at the rate v0,000 per annum, which is the rate fixed by the Board v4 D irectors as reported in your letter of May 6, 1946." Approved unanimously. Letter to Mr. Hilkert, Assistant Vice President of the Federal Re8erve Bank of Philadelphia, reading as follows: Bo "In your letter of May 21 1946, you request the ofal:d to approve a payment by the Federal Reserve Bank r„,Philadelphia to the Retirement System sufficient to 7-tristate the retirement rights of eight former employees tlio have lost such rights because of misinformation they eeived from the Bank. by 42 4 is understood that the proposal has been approved ti,ftle Retirement Committee and the Executive Committee of 4L2e Retirement System and that the maximum amount involved 441 nht. one case will be approximately $225. provenBecause of the unusual circumstances, the Board ape payment to the Retirement System under Section 9 ue Rules and Regulations as submitted." 7 Approved unanimously. aerve 8 Letter to the Chairmen and Presidents of all of the Federal Re- ank8, Prepared in accordance with the action taken at the meeting the to ard on January 18, 1946, and reading as follows: tO the— a letter dated January 16, 1945, (3-826), addressed the 15, Chairmen and Presidents of the Federal Reserve Banks, reviewed the basic considerations involved in deterWhat expenditures would be regarded as sufficiently reProb,.t° the conduct of the affairs of a Reserve Bank to be apitpp;'late for the exercise of its discretion without advance oval by the the Board. In the memorandum attached to that letter co,' °ard stated that it continued to be of the belief that it 4-4c1 not authorize expenditures of Reserve Bank funds by may of 709 5/13/46 -7"donations to further purposes, no matter how worthy, which re not directly related to the conduct of the affairs of the B nk_. a6 It was further stated that this position applied to Mich cases as contributions in response to appeals for nati°nal and community welfare and charitable funds. 'However, several cases involving contributions to 100,41:anninity projects have cone to the attention of the Board .4:--Lch have caused the Board to feel that it was desirable 141 attempt a further clarification of its statement of policy. L "In one instance, a Reserve Bank was solicited for a CriLl'ibution toward the cost of a park in a city in which a rIZeh of the Reserve Bank was located to be dedicated as a ' Th c)rial to residents of the city who had served in the war. pie contribution would be at the rate of $40 for each em111.°Yee of the branch in the military service. It was obre°1131 however, that the branch of the Reserve Bank would , ceive no peculiar benefit, although the park might be of Z-'eat l use and benefit to the people of the community genoti114- Moreover, it was observed, there might be numerous e., rI civic projects throughout the district which might be basA re-v..7 1. ..11pm similar considerations. The Reserve Bank, upon 714g the questions involved, came to the conclusion the :J. 130a,..,-`t was not advisable to make the contribution and the -uutiof Governors concurred. but. In another case, a Reserve Bank was asked for a contrico 3..on a fund being raised locPlly to finance a national whiltest for the best plan and design for a large memorial colicla had been authorized by Congress. The project would Reser several blocks of a blighted area in the city and the ovra . erve Bank was located one block from that area. Property ute-i. ra in the vicinity of the area were being asked to contribt,the fund. Banking institutions, in particular, were cont,:°1 laricil 'utixig, and the Reserve Bank, as a property owner and raexii:"°rci, felt that it also should participate. The improveane of the area, it was felt, -would benefit the employees peo,,(1)ther occupants of the Reserve Bank building and the nottjte with whom they dealt. These benefits, however, would 4'? different from those accruing to others in the general ' 4411tY. a co "In a third case, a request was made of a Reserve Bank for whienhtribution to a fund for the construction of a hospital bilsta would serve principally the day-time employees in the ess area in which the Bank was located and which would repia, 14edi-se two other hospitals. One of the hospitals had been that LT the Reserve Bank for medical services for its employees e°1-11d not readily be performed by the Bank's medical departzt.. Such as X-ray work, emergency services, and compensation Ig 710 5/13/46 -8- "Cases, and it was felt that the value of the hospital fa-u to the Bank's employees would be greatly enhanced by13ST the new building. Substantial contributions were being 1uflade by in the general area served by the .pj commercial banks L-4144.. The proposed contribution, however, would not entitle the Bank or its employees to any special benefits or " rileges different from those that would be available to 4' °Ile else. It was also understood that none of the GovrnMent_Al agencies in the vicinity could make, or had made, anY contribution. , "The latter two cases especially presented difficult ' ctl estions in view of the discretion with respect to expendiEll a!'" which has been left to the Board and the Federal Reserve the terms of the Federal Reserve Act and the fact that pr t the law places the Federal Reserve Banks in a different siticm from that of Governmental offices in the cities in cittur:ch Federal Reserve Banks and branches are located. This ma;cL f€Tence is recognized by the provisions of the Act which inticr!urederal Reserve Bank buildings subject to taxation and aiii ; " 1 , as stated in the Board's letter of January 16, 1945, erIce an intention on the part of Congress that there should ha: ratrnie roam for latitude on the part of the Banks as corpoita:ns in determining what is a reasonable and proper expendparticular cases. The Board has also recognized the u1_' -81erence in approving expenditures by the Reserve Banks for no 7italization and surgical benefits for employees which are t !vailable to employees in the field offices of the Governmen t ; can "Notwithstanding these considerations, however, the Board lat."t escape the conclusion that, because of the special rebetween the Federal Reserve Banks and the Governthalid e the Government's residualinterest in the assets of to Federalh, Reserve Banks, careful consideration must be given tiori !,'" should be regarded as 'necessary expenses' under Seeof the Federal Reserve Act, and that in determining the 10Z1Y to be followed in these matters, the limitations on Governmental offices should be borne in mind. ContriplIrp-ne °f the types referred to above would be primarily for Fede°!?s of local community welfare, and local offices of the The 4„.„7-1. Government are not authorized to make such expenditu res. krp ' 00ard feels that contributions of this kind are not for a the Dse so directly related to the conduct of the affairs of n aa t'ederal Reserve Banks as to justify their being regarded be ecessarY expenses' and accordingly that they should not ade by the Reserve Banks." 711 5113/46 -9Approved unanimously, together with the following letter to Mr. Davis, President of the Federal Reserve Bank of St. Louis: j You will recall that in a telephone conversation on iarY 18, 1946, Mr. Morrill advised you that, in view of the circumstances which you presented, the Board i"td not object to a contribution which you had recommended ; 01/000 by the Federal Reserve Bank of St. Louis to the fnd to finance a contest for the best design for the JefMemorial project, but that the Board felt that it a:1114 send a letter to all of the Federal Reserve Banks cr rlfYing its position with respect to contributions of -his kind. "The attached letter which states the general policy the Board in this connection is being sent to the Presiend7. Zts 0-, all of the Federal Reserve Banks today. It is not ed/ however, to affect the above-mentioned contribution Y°11r Bank to the Memorial contest fund." tr i7 or Ne Letter to Mr. Wiltse, Vice President of the Federal Reserve Bank york / reading as follows: This refers to your letter of April 30, 1946, enclosing a : 4leeuter dated April 29, 1946, from Messrs. Hardin, Hess, & yorirt, Counsel to Pan American Trust Company, New York, New itregarding the holding company affiliate situation as th l'e-Lates to that bank. It is noted that as the result of the sale by Banco de Mexico of its holdings of stock of Pan -uteri the Lean Trust Company pursuant to the understanding between the B°ard of Governors and Banco de Mexico as set forth in rab...°ardi s letter of August 22, 1945, to Banco de Mexico, a tha4., r of holding company affiliates may have been created and hoid.L.'uounsel to Pan American Trust Company suggest that these by 1;:.1.! company affiliates might be eliminated at this time 8 of a special election of directors. letter requests the Board for its opinion whether a ' -4-al election of directors of the Trust Company at this time eecticonstitute an election of directors within the meaning of clete , °11 2 (0)(1) of the Banking Act of 1933, as amended, and be Of(6.71-native of 'the number of shares voted for the election 41!ctors of ***(the) bank at the preceding election'. the is not apparent from the information submitted that '4.rectors elected at the annual stockholders' meeting on 71_2 5113/46 —10— " v uarY 16, 1946, are not now duly qualified to serve during .;:a period for which they were elected. In these circumstances, .4eik: does not appear that there is any occasion for another meet— g for the purpose of electing directors and the effect of any tlIch election would seem to be open to question. Moreover, on he basis of your letter of April 30, 1946, and its enclosure, n the letter addressed to the Board by Banco de Mexico, S. A., '.0krilaer the date of February 25, 1946, and its enclosure, a copy ':thich is attached, it does not appear that there is at this exi,„+,y holding company affiliate of Pan American Trust Company ,"'" bY virtue of ownership ma;ig hi of its shares. Whether there 041 ue a holding company affiliate for reasons other than stock ershiP, we are not in a position to indicate any viewpoint." V Approved unanimously. New Ir _r Letter to Mr. Sproul, President of the Federal Reserve Bank of 4.° kl reading as follows: 70 "Receipt is acknowledged of your letter of May 3 in which toll...!ay that you plan to send both Mr. Roelse and Mr. WaJllch cii„!"e e- of central bank representatives in Mexico vl.which is the subject of our letter of April 30. we 4We should have made clear in our original letter that be are anxious to limit the American representation lest there weis°14e feeling that we are endeavoring to carry too much hacigiLt: in the conference as compared to other countries. We thd,:',"ought that a delegation of five, including three from ab;g3 Juoard and one each from New York and Dallas, would be appropriate size. We trust that you will agree a8 'Ills Judgment and name either Mr. Roelse or Mr. Wallich Your representative." Approved unanimously. Thereupon the meeting adjourned. Secretary. Chairman.
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