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Minutes for May 15, 1957 To: Members of the Board ?rata Office of the Secretary Attached is a copy of the minutes of the Board of rnors of the Federal Reserve System on the above date. 00ve It reTliredis proposed to place in the record of policy actions Pede„, to be kept under the provisions of Section 10 of the alirr,1--L Reserve Act an entry covering the items in this set of re,'"es commencing on the pages and dealing with the subjects ' erred to below. Page 4 Amendment to the Board's 1947 rule relating to the classification of central reserve and reserve cities. Page 7 Increase in the maximum permissible rate of interest on V-loans. it vi,, Should you have any question with regard to the minutes, °the 4--L be appreciated if you will advise the Secretary's Office. coluune, if You were present at the meeting, please initial in below to indicate that you approve the minutes. If you — vere' Yola hil" Present, please initial in column B below to indicate that ave seen the minutes. Ohm. Martin Go SzYmezak Gov. Vardaman Gov t Mills G Robertson Balderston GOv Shepardson 1290 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Wednesday, May 150 1957. The Board met in the 13(lard 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. Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Fauver, Assistant Secretary Leonard, Director, Division of Bank Operations Young, Director, Division of Research and Statistics Sloan, Director, Division of Examinations Boothe, Administrator, Office of Defense Loans Hackley„ General Counsel Horbett, Associate Director, Division of Bank Operations Masters, Associate Director, Division of Examinations Shay, Assistant General Counsel Collier, Technical Assistant, Division of Bank Operations Items circulated to the Board. beet The following items, which had eircuiated to the members of the Board and copies of which are attached to these minutes under the respective item numbers indicated, aPProved unanimously: Item No. Mittj- Northwestern Bank of Commerce, Duluth, 111 tle lna/ aPProving its application for membership thro rederal Reserve System. (For transmittal lIgh the Federal Reserve Bank of Minneapolis.) 1 1291 5/15/57 -2Item No. Letter to the Bureau of the Budget responding to a ' equest for the Board's views on a draft bill "To !1,1thorize adjustments in accounts of outstanding series currency, and for other purposes" subby the Treasury Department. 2 EllObility of funds of Indian tribes as "savings deposits". letter Et the In of April 12, 1957, the Bureau of Indian Affairs, Department of Interior, presented the question whether certain designated Indian trIbes organized under Federal statute would be eligible under Regulation q to hae savings deposits in member banks. There had been circulated to the -111bers of the Board a memorandum from Mr. Shay dated May 2, 1957, , 1°N th supplemental memoranda prepared by Mr. Shay, which discussed the a °Illesti°na involved in the light of legal considerations pertaining to the ization of the Indian tribes and discussions with representatives Of the la_ 4A-zreau of Indian Affairs. On the basis of this study, there was sUbzitted with the memorandum a draft of proposed reply which would e3c'Prest3 the opinion that in view of the Governmental character of the 1"44.11 tribes in question and their broad corporate authority to engage in blasiness activities, such tribes are not organizations of the kind that x45r have "savings deposits" as defined in section 1(e) of Regulation S. The letter would go on to state that a deposit of tribal funds could llot be by one regarded as one in which "the entire beneficial interest is held Qr more individuals" within the meaning of that section, and that Etecordi 4glY deposits of the tribes under consideration, or of any other tribes similarly organized, would not be eligible for classification by itenibe r bank as "savings deposits". The letter would also point out, 1292 5/15/57 -3- however, that such funds would be eligible for classification as "time deposits" and that nothing in Regulation Q would prevent member banks fr°n1 maintaining savings deposits for individual Indians or for Indian °rgan izations operated primarily for charitable or similar purposes and rl°t operated for profit. A discussion of the matter touched upon such aspects as the °rgan izational status of Indian tribes, the terms of Regulation Q reto savings deposits, and the reasons for the restrictions contained iL the Regulation with regard to eligibility to maintain savings deposits. Messrs. Hackley and Shay stated that the question relating to the Indian tribes had been studied exhaustively and that under the present provisions Of R ati°n Q the position taken in the proposed letter was the only allal er that could be given. They made it clear, however, that the study Ilra8 based on legal considerations and did not take into account factors 4111h might be held to justify making some special provision to permit tribes to have savings deposits at member banks. The suggestion then was made that consideration be given to the Pc)ssibil ---Y of an amendment to Regulation Q for this particular purpose. C4eztion 14as raised, however, whether any such amendment would result in benefit to the Indian tribes or whether the inquiry reflected mostly dee., eavi_ on the part of some bank or banks to hold tribal funds as depOGits. To clarify these questions, it was suggested that the 14 gal 10.4 -kviaion enter into further discussion with the Bureau of Indian Affair 8 and check with the Federal Reserve Bank of San Francisco, to which n "inquirY previously had been directed. f)Or, 5/15/57 -4There was unanimous agreement with the suggested procedure, with e understanding that the matter would be brought back to the Board for final decision after additional information had been obtained. Classification of central reserve and reserve cities (Items 3, 4 afl 6' Pursuant to the conclusion reached by the Board on May 8, 195 ) ' l ith regard to the designation of Miami, Florida, as a reserve city, doeU n'Ints had been distributed to the members of the Board which would have the effect of 01 amending the Board's 1947 rule relating to the classification of central reserve and reserve cities, effective March 1, 1957, to Provide that the designation of any additional reserve city shall not become Might effective until after one year, or such longer period as the Board determine, from the date as of which the designation would have beconle effective in the absence of the amendment, and (2) designating the .ty of miami as a reserve city effective March 1, 1958, pursuant to the 441ended rule. In the light of a suggestion subsequently made by Governor Ira", n that it might be preferable to defer the effective date of the reserve citY designation of Miami for 18 months instead of one year, there h" also been sent to the members of the Board copies of a memorandum from Mr. Rackley dated May 13) 1957, submitting a draft of amendment to the 194 7' l ule drawn on that basis. The memorandum suggested that if the effective date under the amendment were deferred for 18 months, the Board ttlie€4t Irish to eliminate from the amendment the provision making possible the deferment of a reserve city designation for such longer period as the Might determine. 5/15/57 -5Governor Vardaman said that his suggestion had been offered in the thought that the designation of the city of Miami as a reserve city, effective March 1, 1958, pursuant to the amended rule might be inconsistent Igith the apparent objective of the amendment to afford the banks in the 114'15i- designated reserve city one year in which to make the adjustments requirpA -- LT the designation. In other words, since the rule was being allcied retroactive to March 1, 1957, the banks in Miami would have notice Of a0+ 4 " - °n by the Board on the reserve city designation for a period some1eas than 10 months rather then a full year. the ' ' 18 in —4 In the future, however, any other city which might be designated as a reserve city r°r the first time presumably would have a full year in which to make the required adjustments. With reference to Governor Vardamants comment, it was noted by Govern_ ur Robertson that the Miami banks had been put on notice before March l '1957, that the city fell within the definition of a reserve city 11"er t e -pt h- -oardts 1947 rule; and the city would have been designated as a ret erve city effective the first of March, except for the fact that the toEtrd 1 ready granted a deferment of the reserve city designation. hada„ % I the other hand, the point was made that, according to the notice 141bliahed in the Federal Register, the Board had deferred a decision until tle 1) 1957, on the designation of Miami as a reserve city, so that the desi gnation ac,_ kAually had not yet been made. In the light of this discussion, Mr. Hackley suggested that if the to "d ao desired, it would be possible to use the amendment to the 1947 rIlle which was originally submitted and to take advantage of the 5/15/57 -6- discretion given to the Board therein to defer the effective date of deeignation in the case of the city of Miami for such period as the Board deemed appropriate. In this way, the designation of the city (3f Miami could be made effective one full year from current date, and ir 'A• lture cases involving the designation of new reserve cities, the dellignation would automatically carry an effective date one year after the eitY qualified for reserve city status under the standard prescribed the 1947 rule. It being the consensus of the Board that there was something to be said for giving the member banks in Miami a full year from current date in which to make the adjustments required by designation of the city 118 • a reserve city and that the exact timing of the effective designation it this instance was not an extremely important consideration, it was 11-1&.c1 unanimously to amend the Board's 1947 rule, effective March 1, 1957, to provide that the designation of any additional reserve city sha31 not hcc)rtle effective until after one year, or such longer period as the Board play determine, from the date as of which the designation would have heorae ef fective in the absence of the amendment; and pursuant to the al4e1ded to designate the city of Miami as a reserve city effective 148. 15 '1958. To carry these actions into effect, approval was given to the Publication in the Federal Register of notices in the form attached t° t• he" Minutes as Items 3 and 4, respectively, and to letters to the ?I'816ents of all Federal Reserve Banks and to the Comptroller of the °U1'relleY in the form attached hereto as Items 5 and 6, respectively. *M. letter to the Federal Reserve Banks was approved in a form reflecting The 5/15/57 -7by the Board with a suggestion for rewording of the last 13aragraph made at this meeting by Mr. Horbett. Messrs. Shay and Collier then withdrew from the meeting and Me"'rs. Noyes and Robinson, Advisers, Division of Research and Statistics, entered the room. LIIIZITHELpermissible rate of interest on V-loans (Items 7, 8, 211d 9). At the meeting on May 3, 1957, the Board gave further considera- tion t_ v a possible increase in the maximum permissible rate of interest °11 1°an8 guaranteed pursuant to Regulation V, Loan Guarantees for Derense P roduction. From that discussion, which was based on questions raised i nformally by the Council of Economic Advisers, it developed that the Board would continue to prefer an increase in the maximum permissible rate from 5 per cent to 6 per cent, with no change in the schedule of (11 " l' tee fees, but that if the guaranteeing agencies were to make a 13r°13°8a1 along lines that had been mentioned informally by the Defense N)artment, the Board would go along with such a proposal. In McNeil letter dated May 11, 1957, Assistant Secretary of Defense informed Chairman Martin that the Secretary of Defense now agreed Vith ana -- concurred in the view that the maximum rate should be increased to 6 Pel' Cent, with no change in the guarantee fee schedule. there h ad been rel Accordingly, prepared and distributed to the Board copies of a press e Y a telegram to the Federal Reserve Banks, and a letter to the Ruarant ee--46 agencies other than the Army, Navy, and Air Force that would appear t° he appropriate if the Board wished to increase the maximum Dermics, Ible rate to 6 per cent effective immediately. 1_29 A. 5/15/57 -8With respect to the letters proposed to be sent to the guar- anteeing agencies other than the Army, Navy, and Air Force, question was raised by Governor Mills whether, as required by statute, there had Y been consultation with those agencies or whether such consultation ilaci been limited to the Department of Defense. In response to this question, Mr. Boothe explained that there had been consultation by the Board's staff with those persons in the rear.. 4. 4—eLive guaranteeing agencies who are normally consulted in connection vita at arising under the V-loan program. He considered that this vaa sufficient to comply with the requirements of the statute. With resPect to the Defense Department, he said that the consultation had been Irith the Contract Finance Committee, which represents the Army, Navy, and Air ()Isee, and that the concurrence by the Secretary of Defense was based 111) 11 a re commendation by that committee. It was then noted that the proposed letters would state that the Chairm._ '" of the Council of Economic Advisers (Mr. Saulnier) had expressed COne urrenee in the view of the Board of Governors that the maximum 111144.8sible interest rate should be increased immediately to 6 per cent. °4 this Point) Mr. Boothe stated that advice received from the staff of the cou nen. indicated this to be the position of Mr. Saulnier, but that he (Mr, othe) was awaiting word that the use of this language in the A 01)013 d letters had been cleared with Mr. Saulnier. It was te.ke then brought out that the law requires only that the Board tion after consultation with the guaranteeing agencies and it was 1298 5/15/57 -9- 611"'estedy therefore, that mention of concurrence by the Chairman of the Cuuncil of Economic Advisers was unnecessary. Accordingly, it was agreed that this portion of the proposed letters to the guaranteeing sgencies should be omitted. Discussion then turned to the form of the proposed telegram to the Federal Reserve Banks advising of the Boardts action and the content the Press release which would be issued. It was the view of the Board that, uoth the telegram and the press release should be in a form which 14°111c1 g° no further than to state the essential facts of the action taken by the Board. Thereupon, it was agreed unanimously to raise the maximum perMiss -e rate of interest on loans guaranteed pursuant to Regulation V from c )Per cent to 6 per cent, effective immediately, with no change in the t resent n1axim ' commitment fee of 1/2 of 1 per cent or in the schedule gu rantee fees now in effect. In this connection, approval was given t° a Press statement and to a telegram to the Presidents of all Federal Reeerve tanks in the form attached to these minutes as Items 7 and 8, resPectively. Approval also was given to a letter to the Secretary of C°11141erce in the form attached hereto as Item No. 9, with the understanding that similar letters would be sent to the Secretary of Agriculture, the Che.irraarl Of the Atomic Energy Commission, and the Administrator of Gelleral Meears Services Administration. Messrs. Boothe and Horbett then withdrew from the meeting and s S°1°1110n and Hexter, Assistant General Counsel, entered the 1299 5/15/57 -10- along with Mr. Molony, Special Assistant to the Board, and Mr. °I1e8) Ch* ief, Consumer Credit and Finances Section, Division of Research slid Statistics. Request for information on distribution research (Item No. 10). --------- In a letter dated April 24, 1957, information on distribution research within the I, -ederal Reserve System was requested by the President's Conference on Techni_ k:al and Distribution Research for the Benefit of Small Business. It vaa stated that this material was desired in connection with a meeting of the Conference to be held in Washington in September 1957. A draft of suggested reply had been distributed to the members of the . Bo -rd with a memorandum from Mr. Fauver dated May 10, 1957. Following a brief discussion, the letter was approved unanimously. ccYPY 18 attached to these minutes as Item No. 10. ....12,f.a.z..a.11 consumer instalment credit. With reference to the eOnsum er instalment credit study which was conducted by the Board at the °f the President and which was released in published form on MEtreh 15) 1957, Chairman Martin said that the matter had now reached the P°111t where the Chairman of the Council of Economic Advisers would have to brief the President and the Cabinet within the next weeks and that it a ppropriate to give the Council some indication of the Board's views so that the position of the Board would not be misrepresented. Also, Ue bY 15 a period of three months would have elapsed from the date of Iselesse of the report and the Chairman suggested that the Board should be toward some disposition of the study. He therefore felt that it '4().tlIci be aPPropriate to have a preliminary expression of view at this time. 13 0 5/15/57 -11At the request of the Board, the members of the staff commented on the report beginning with Mr. Young, who said that the documents had been, Prepared and set forth in such a way that the Board was entirely tree to express whatever opinion it desired on the subject of consumer c"dit r egulation. With respect to conclusions which might be reached fro m the study, Mr. Young said that personally his present disposition 14as against the regulation of consumer credit or authority to regulate such credit. On the other hand, experience in certain periods in the 1)11" - including 1954-55 - made it stand out clearly in retrospect that dalliPening down of consumer credit would have been to the advantage of 8118tailling a high level of activity in the economy. The full price of the 1954-55 experience had not yet been paid, and he was inclined to think that it would still have to be paid. In favor of authority to IsegUlate consumer instalment credit, it might be said that consumer credit 4 a bile inebis which has been extraordinarily profitable, at least up to this point, because of the expansion of consumer demand and the willingness of consumers to increase their debt. Also, the return on consumer credit is very high and lenders have a relatively small cost of getting r4QheY in relation to their total costs, so that changes in the cost of 351c)tleY are to them not an important restrictive influence. Ise4°11, it takes For this some time for general monetary controls to work through t° the c911811mer credit area. As to the 1954-55 experience, a case could be 414de to the effect that it was a "one time" sort of thing and that it (1111c1 hot happen again, at least to the same extent. However, to say that 5/15/57 -12it could never happen would probably be going too far. The industry n° doubt would be under pressure again at a later stage to relax terns even further and, while the margin of possible relaxation is now much rover vaY of than it was previously, there is still some margin and also a cutting down gross charges. The main usefulness of a standby "tY to control consumer credit would be as a "shotgun behind the " As such, it might serve as a useful restraining influence on the elDmIcletitive differences forces in the industry. However, there could be many of opinion on the subject - and in fact there were differences Within the Board's staff - on the desirability of a statutory standby 4Uthority. Mr. Noyes commented concerning the administrative difficulties that had Confronted the Board and its staff during the periods when clpiUrll l r credit controls were in effect. He also expressed concern about the ecInftlsion he had noted among observant persons as to exactly what an0111d be made of such an authority if it was available. In other ) should there be selectiNe control among the various uses of Consumer credit or shoul the authority be regarded more as a broad suppletent to monetary policy related to the growth of consumer credit? Perhaps it Would be possible to clarify these questions in the course of study by the Council of Economic Advisers, the Council's recommendations to the President, and Congressional hearings. But if they were not clarified, those entrusted with the administration of consumer credit controls would be in a very difficult position, and for the Board to accept responsibility 1302 5/15/57 -13- kr administering such an authority without some mandate indicating the illtention of Congress would be rather unfortunate. Mr. Noyes said he was 141-vim-ressed by the arguments summarized by Mr. Young in favor of standby regtilatory authority. The existence on the statute books of such authority 15°88i1017 would constitute a healthy restraint under certain circumstances, eve if the authority was not actually used. However, if there should be "casion to use such authority, the problems to which he had referred would become very important. Mr. Robinson said he did not think that any member of the research tell' had changed his opinions significantly during the course of the con411111ne1 'i nstalment credit study. As to the timing of the study he pointed out that the work was undertaken after a period of unusual consumer credit expan81°4 had tapered off. ab"0. li - Use Therefore, while the study might show a period of exces- of credit, it might also suggest that the consumer credit industry d learned something of the value of restraint, and it might be said that a tsetse the study had come too late. Turning to a point of economic phi441)115r, he said that consumer credit certainly is a factor that can contribilte 4'4) i nstability in the economy, but that the real question was how much 1441tAbility could be tolerated without the necessity for regulation. Variations within the industry must be expected over the course of time and it could be 811°1ln from one episode (1954-1955) that a large growth of consumer credit 114 tolerated by the rest of the economy. To put it another way, it did not clleate 14,1 4 -" instability that could not be tolerated. In summary, based on eviclee to date he did not feel that the case for standby authority in an adminlatilltive agency had been proven but as a matter of principle he would not be 03 5/15/57 °P1/c'sed to authority to regulate consumer credit to the extent that he vould be unwilling to reconsider his position. Mr. Jones said that the study had resulted in gathering some 1/8eD41 material about fluctuations of consumer instalment credit in the ' ast) and in a sense the contribution of consumer credit fluctuations to P instability. However, this is a relative matter and the study did not demonstrate that consumer credit had contributed more to instability than other factors in the economy. Along these lines, there might be for further research and investigation into how consumer credit as behalf" an unstabilizing factor relative to real estate or various ories of business credit. It should be thought of in a setting of in general, and in that sense it could not be said that a case of esPecially radical instability had been established. (311 the His general opinion matter ran in the direction that consumer credit regulation was the killd of thing that should be avoided if at all possible, for it would be the beginning of an attempt to allocate credit within the economic 8Ystem. For this reason, among others, he felt that this was something °Ile should not rush into rapidly without giving thought to the ultimate issue field Mn. Young commented that Mr. Jones had touched upon a basic - the future role of Governmental and monetary authorities in the of h a credit - and that the regulation of consumer credit might well p ste in a certain direction and not merely a supplement to existing 1304 5/15/57 -15Mr. Leonard supported Mr. Noyes' comments concerning the dIblinistrative difficulties involved in consumer credit regulation and %lent on to say that what had disturbed him most during the previous Peri°ds of regulation was that he could never determine exactly the biectives Of administering the regulation or the measure of success. Re P°inted out that effective administration of a regulation is almost imPossible unless the objectives are clear. Mr. Solomon commented further concerning the administrative diffi_ Qulties, but said he did not consider those difficulties to be quite as -r'aus a matter as some other persons because they are related to the clegre - of restraint contained in the prevailing regulation. Regarding the ice between a very selective set of controls and a general supplemonetary controls, he felt that it would be almost untenable to try to apply an extremely selective instrument except in times of em . ergencY In other words, he felt that if consumer credit regulation had a• ny Place at all in a peacetime economy, it would have to be in terns Of a BuPPlement to general credit controls that did not attempt to do t00 In• uch- Even at best, he found it rather difficult to conclude that a cEtse had been made at this stage for consumer credit regulation. The 15erlerice in 1954 and 1955 might have represented a stretching out of c°11811mer aPPear instalment credit terms to the practical limit and it did not that anything approaching that experience would occur again soon, fc* %l• hen terms are stretched beyond a certain point there is no longer EtE3 millch fl exibility to go further. 5/15/57 The Chairman then requested the informal views of the members (If the Board and Governor Vardaman began the discussion with a stateinent vh. leh he prefaced by complimenting the staff on its analysis of the subi.ct He said he had been quite impressed by the administrative 1-frictlities which were cited in connection with a consumer credit Igillation but that in his opinion they were the least of the reasons 'uuld be advanced against the imposition of such a regulation. a em could be made for its effectiveness and desirability, he would -8e too4 If such a regulation despite the administrative difficulties, but he e°111d not i _magine non-emergency conditions under which he would favor the 11_ of such a regulation by the Board or by any other permanently e tAv,, 8--J-Lished part of the Government. It would be such a radical departure tl.°M th-e concept of free enterprise that, if adopted, the regulation sheAlici be passed by special act of Congress and its administration given t3 a sPecial agency set up for the emergency which had warranted the "11°11 instituting the regulation. Enforcement of the regulation should be vested in an agency primarily engaged in enforcement of the law and riot 14 an agency primarily concerned with general credit control. He 1148 4°t certain that if a standby authority had been available in the 1954-55 Period it would have been used or that,if used, it would have "ted effectiv.qy as a brake on consumer credit expansion. In response to a question by Governor Vardaman regarding the tieat ed ef fectiveness of consumer credit regulation in a non-emergency Period, Mr. Young said that this was indeed one of the problems since, 5/15/57 -17- Peacetime conditions, it would be hard to visualize use of the NIllation with the degree of restrictiveness that might be justified (luring an emergency situation. It seemed likely that in peacetime the NIalation would have to be set up on the basis of terms prevailing in the trade when a credit expansion movement started with the objective linlited to prevention of further expansion. Governor Vardaman then stated that in essence the consumer illateament credit study had only tended to strengthen his view that he 1.(3/11c1 not favor a standby authority. He did not like the idea of having cic)tnt weapons in the hands of any nonelective body of the Federal Gc3\rerrirtleirty and he could not imagine any peacetime use for this type of regulation. In time of war or in some other emergency he might be per- 8114ded to favor it along with a complete strait jacket of controls, all embraced _ n 1 a body of laws passed by the Congress and with enforcement Placed a is" special board or group and not tied in with the regular Patter , -- of GovPrnmental regulations. Governor Mills said that he believed any report by the Board on thia subJect should recommend against legislation that would establish st"Y authority, but that if the Congress should see fit to provide sUch authority, the power to put the controls into effect and the choice or the adzinistering agency should be vested in the Executive Branch of the G" rtiment. Governor Robertson then made a statement which he began by 311rill that/ although the consumer credit study was an excellent piece of 5115/57 -18- research work, it added nothing of great significance to what the Board hEtd already known • As to his own views, he would be opposed to any tbrm of selective control on a standby basis. The study, he said, had heightened his conviction that it is not possible to have just a pieceselective control mechanism, for it would soon be found that selective controls had become substitutasfor general credit controls. Under EtrlY conditions that he could foresee, general controls would -work on the *1°1-e better than selective controls and he would be opposed on that basia to selective controls, whether on a standby basis or otherwise. .1113/, ever) there might be emergency situations when every possible type ' Of c°11trol would be needed. At that time the Board would have sufficient , uation in this particular area to be able to go to the Congress and ask for authority if it wished. If, on the other hand, standby authority 0r1 the statute books, the pressure would be great to put the controls ilit° effect or to remove them at times that were inappropriate. He would 110 tIftht to make a decision at this time whether, in an emergency, the lectjve controls should be administered by the Board or some other 4Retc , This, he suggested, should be left for determination in the light Of he kind of emergency that developed. Governor Shepardson said that he had not yet had an opportunity to --v-L.ew the complete study thoroughly, but that he was very much in agreeti ent With the views expressed thus far at this meeting. He expressed himsel f as concerned about any move that would bring more regulation into the ee °n°mY, for he believed that the success and stability of the 5/15/57 -19form of government must in the long run depend primarily on the discipline of the individual citizen. tO In case of dire emergency, sure, a lot of controls *would be needed, and promptly, and it 4)111d be said that it was advisable to have weapons prepared beforehand Etther than encounter delay when an emergency occurred. However, the 421ger of having "the gun behind the door" appeared to him to be greater than the possible loss of time in an emergency because of the risk that "ftne might be tempted to use the authority improperly. In the event "ell e mergency, his thoughts as to procedure would be similar to those Of Go vernor Robertson. In principle, he would hope that the controls I'l°111(1 not be placed with the Board, but circumstances at the time might °4811ge his opinion. the ad• The Board now had the benefit of experience with lninistration of selective credit controls and of the recent study, 411c1 i• t could conduct further research into the formulation of preparedness Plane 8° as to be ready to act promptly in an emergency. Governor Szymczak said that at one time he had favored the a\railabilitY of standby authority to regulate consumer credit as a supplelaent t° general credit controls, though not with the thought of application °4 a very selective basis. At present, however, he did not think any Ilecoramendations should be made to the Congress on the basis of the recent StUdy ' If and when the subject should come up in the Congress and the Co4r e88 should feel inclined to take some action, he would prefer that Me other agency have the authority because of the difficulty in distingqish4 '411-g between control for credit purposes and the trade regulation 5/15/57 -20- Governor Balderston characterized the staff study as an outng example of excellent research work, and then said that he thought the Board should reach conclusions from that study rather soon, so that if the Congress or the Chief Executive should ask for the Board's views, the Board would not have to ask for time in which to prepare them. He alested that these views probably could be formulated just as well now aa in another month or a year. Governor Balderston said that the principal problem before the Board this morning seemed to be whether controls should be designed now foruse in peacetime, the crux of the matter being whether it was worth Ithile to interfere in the workings of the free markets in order to ni°clifY unstabilizing fluctuations in consumer credit that lead to a waste eir resources. the ti rSt This issue led him to ask several subordinate questions, being whether there was evidence that consumer credit had actu- ali been an unstabilizing force in the economy. On the basis of the 195k- 5e erience, his answer would have to be in the affirmative. ' His second Cities ticln vas whether consumer instalment financing proved susceptible to the re straint of general controls, and here the answer would seem to be 14 the negative. Large credit corporations have ready access to the racirleY market and consumer credit is favored because of its profitability. third question was whether the 1955 experience was likely to be l'aPeated. Since the incentive to liberalize terms further was much smaller 11144 in 1955, the chance of repetition was therefore much less. For this l'eaac)n, it was his conclusion that the adoption of standby controls would 5/15/57 -21- not be worth while in peacetime. The likelihood of further liberaliza- tionof terms, except perhaps in automobile paper, would not seem to %Iarrant the burden of administration. If selective credit regulation should prove imperative because of yar or other crisis, Governor Balderston felt that the Congress should adopt the necessary regulations itself and place the enforcement of the regulations in some agency of the Government other than the Federal Reser— ye oystem. In such a crisis, he would favor recourse first to " .8e taxes, but if selective credit regulations should be considered liecessarY by the Congress in addition to the excise taxes, they should be im„ -1Jcsed only with means of effective enforcement provided. The erifo„. ' cement of the regulation should be separated from the setting up of starld ards and their interpretation, the penalties for violation should be sub stantial, and the coverage of the types of consumer credit should 13F omPlete, but every effort consistent with effective administration Should be made to limit the number of registrants and the volume of illdividual transactions subject to the regulations. In summary, he would be op Pcsed to standby controls in peacetime but felt that some thought Should b given to devising simple, yet effective, controls for use in ti.) of crisis if necessary. Chairman Martin noted that there appeared to be a considerable 1411°Utt of agreement in the views expressed at this meeting. He then said that he had been impressed by the differences between credit controla" tIllde regulations, but that after reviewing the consumer instalment L:311 5/15/57 -22- Study he found himself, rather surprisingly, less convinced thall previously that this would be an entirely undesirable regulation. While he continued to feel that the Board shoud not seek standby authority, he S concerned about the matter in the context of the battle against inflation generally. He recognized the administrative difficulties that had been mentioned but considered them the weakest argument against Sea.e tive credit regulations. He also appreciated the points raised IV Mr. Jones as to the problems that would be created by having standby allthority in the Federal Reserve Act. The next step could easily be the extension of controls into the field of real estate credit, then to Inventories, and then to specific types of business credit. While he therefore wits not prepared to say that the Federal Reserve ought to be given standby selective credit authority, the place of the System in the right against inflation raised a question whether the Board should insist that such authority, if granted, should be placed elsewhere within the C°1rernment. In essence, his review of the study had not convinced him that consumer credit control as a supplement to general controls, whether eXel'cised by the Board or by some other agency, would be completely fldesj And there would appear to be certain dangers in taking the ri1/1 tion that the administration of such an authority should be in 43°r11 agencY other than the Board. In response to a question by Governor Vardaman, Chairman Martin aatd th-at 4 his remarks he was not referring just to consumer credit, and that n+ Present his emphasis would be more on real estate credit. Governor 1312 5/15/57 -23- Vardaman commented that he would be inclined to agree and that he felt e°118urrter credit should not be singled out particularly. At the conclusion of the Board members' comments, Chairman " 14 411 raised the question whether it would be appropriate to extend 841 111VitatiOn to the Council of Economic Advisers to meet with the Board tclr an informal discussion of tentative views based on the study. One cfths-, purposes of such an invitation would be to avoid the possible iticism at a later date that the Board had crystallized its own thinking Irith°11t consideration of the views of the Council. This led to the question whether any expression of tentative Pc'aiti0115 should be made available to the Council for study prior to 811ch a meeting, and it was decided that this would not be advisable. It ve.,8 u nderstood, however, that eventually the Board might be expected to °rter formal recommendations regarding the problem of standby authority t°1' c°nsumer credit regulation. There being unanimous agreement that the Chairman should extend ihvita4 + '-lon to the Council to meet informally with the Board for an %elattrit,„ °e of tentative views, the suggestion was made that, for use by the Bo 4rd subsequent to this meeting, the staff be requested to begin prepar in -g a document which would summarize the principal questions that thp, Board should have in mind in reaching its final conclusions tro the study, along with the positions that might be developed on those 13°Ints -n the light of the discussion at this meeting. '316eStA This, it was would be a helpful step in enabling the Board to move forward 1_313 —24— 545/57 Pl'°InPtly after the meeting with the Council. There was unanimous flt with this suggestion and Governor Mills was designated as the raeMber of the Board to supervise the staff work on such a document. The meeting then adjourned. Secretary's Note: Acting in the absence of Governor Shepardson, Governor Balderston approved on behalf of the Board on May 14, 1957, the following items, copies of which are attached to these minutes under the respective item numbers indicated: Item No. Lett to the Federal Reserve Bank of Boston approving atd :signation of Lenora Dimitri, Harry R. Mitiguy, 41.1via E. Vitale as special assistant examiners. ' Letter 4._ mJ the Federal Reserve Bank of San Francisco app ass41'3ving the appointment of Howard A. Jalving as an .Lstant examiner. 11 12 Governor Shepardson today approved on behalf of the Board the following items: Arl._ Memorandum dated May 14, 1957, from Mr. Bethea, Director, Division tro1 7inistrative Services, recommending the appointment of Charles P. Or $2 as Messenger in that Division, with basic annual salary at the rate 690, effective the date he assumes his duties. ' Eitellogr Telegram to Mr. Powell, Special Counsel for the Board, regarding a€eiin„aPhic reporting service in connection with the current proceeding is The Continental Bank and Trust Company. A copy of this telegram 'tached to these minutes as Item No. 13. 1314 BOARD OF GOVERNORS Item No. 1 5/15/57 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 15, 1957 'loam of Directors, Northwestern Bank of Commerce, bilItth, Minnesota. Oent1Fzien : mproves th The Board of Governors of the Federal Reserve System ap“innes ,-e application of Northwestern Bank of Commerce, Duluth, (3 a., for stock in the Federal Reserve Bank of Minneapolis, dect to the numbered conditions hereinafter set forth: 1, Such bank at all times shall conduct its business and exercise its powers with due regard to the safety of its depositors, and, except with the permission of the Board of Governors of the Federal Reserve System, such bank shall not cause or permit any change to be made in the general character of its business or in the scope of the corporate powers exercised by it at the time of admission to membership. 2. The net capital and surplus funds of such bank shall be adequate in relation to the character and condition of its assets and to its deposit liabilities and other corporate responsibilities. paild,„ In connection with the foregoing conditions of membership, /legto.--lar attention is called to the provisions of the Board's bersha. i ,`Amn 11, as amended effective September 1, 1952) regarding memZi of State banking institutions in the Federal Reserve System, tionisPecial reference to Section 7 thereof. A copy of the regula8 "closed. made any time a change in or amendment to the bank's charter tIlif -e at hank should advise the Federal Reserve Bank, furnishing BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Northwestern Bank of Gomlerce -9- ,!°14.es of any documen ts involved, in order that it may be determined ther such change affects in any way the bank's status as a member r the Federal Reserve System. 7 Acceptance of the conditions of membership contained in letter should be evidenced by a resolution adopted by the Board e!?irectors and spread upon its minutes, and a certified copy of Ar," resolution should be filed with the Federal Reserve Bank. pr'oarlements will thereupon be made to accept payment for an apde„Prlate amount of Federal Reserve Bank stock, to accept the a1,4;°sit of the required reserve balance, and to issue the appropriate lint of Federal Bank stock to the bank. this Zp The time within which admission to membership in the Federal Resetir to 30:System in the manner described may be accomplished is limited the B "aYs from the date of this letter, unless the bank applies to ze:oztalobtains an extension of time. When the Board is adof the requirements have been complied with and that to thPPr°Priate amount of Federal Reserve Bank stock has been issued ipee m bank, the Board will forward to the bank a formal certificate bership in the Federal Reserve System. member h The Board of Governo rs sincerely hopes that you will find tat* 4 in the System beneficial and your relations with the Reserve to asP-Leasant. The officers of the Federal Reserve Bank will be glad 44'2,', You in establishing your relationships with the Federal b °Ymea118stem and at any time to discuss with representatives of your for making the services of the System most useful to you. Very truly yours, (Signed) Merritt Sherman r401.0 e* Merritt Sherman, Assistant Secretary. 1315 BOARD OF GOVERNORS 4'""411 o tok : 444 44'r tV.:= (It Item No. 2 5/15/57 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ti 4ta, 44;, ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 15, 1957 R0g0 W. Jones, '1.tant Director for islative Reference, au of "ashingto the Budget, n 25, D. C. betti„ Mr, Jones l Itlerao Thi5 is in response to your recent Legislative Referral . aii71,1141, requesting the views of the Board regarding a draft bill ellrrene iZe adjustments in accounts of outstanding old series -Y, and for other purposes", submitted by the Treasury Department. kett or ,The Board of Governors would interpose no objection to enactthe 0 line proposed legislation, sections 4 and 8 of which would affect 1)11rsuPerati°ne of the Federal Reserve System in relatively minor respects. T4asallt to section 4, the Federal Reserve Banks would deposit ine thetclrY gold certificates in an amount equal to the total amount of ab °1-11;211-cling "old series" Federal Reserve notes, which presently ° million. Thereafter, when old series Federal Reserve notes in the bill) were presented they would be redeemed from the cash in the Treasury and retired. D'alts Theee ofSection 8 of the bill would amend the fifth and seventh parasection 16 of the Federal Reserve Act (12 U.S.C. 415, 416). liTc'Prover°1 :,"ed amendments are appropriate, in the opinion of the Board. pointed out that in S. 1451 (the proposed Financial "Ilbjeoi"4-°11.8 Act of 1957) which passed the Senate March 21, 1957, the 4 't Federal Reserve notes is covered in section 43 of Title II ,,LatIgun:ttactment of the Federal Reserve Act). Section 43 omits the ‘ths leaer' e °f veAc ,the present fifth paragraph of section 16 of the Federal u, so that if S. 1451 were enacted before enactment of this 141teee 4-L1-, the 4' irs amendment in section 8 of the latter would be 4-;, : rilellizttas e8 h+14-7 ,• In the event of such prior enactment of S. 1451, the second "etion-it'31-11 section 8 would properly come after the fourth sentence of (d) of the nemr Federal Reserve Act. hsect 81, appears that the letter "(a)" FM inadvertently omitted after 44. the draft bill. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. Amendment to Rule for _Classification of Central Reserve and Reserve Cities Item No. 3 5/15/57 The Board of Governors has amended its rule for the classification of central reserve and reserve cities (1948 Federal Reserve Bulletin, PP. 41 and LK). Under the amendment, the designation of any city as an &q(litio reserve city because it qualifies for designation as such under tileav erage-aggregate-deposit standard set forth in paragraph (2) of sube ctioirl (1-N "") of the rule, shall not become effective until after one year, or Such 1°Ilger period as the Board may determine, from the date as of 11111-ch suoh designation would be effective under paragraph (4) of subsectict (,\ ")) of the rule in the absence of the amendment. The text of the amendment is as follows: Effective as of March 1, 1957, paragraph (4) of subsection (b) Of the rule of the Board of Governors of the Federal Reserve System ettitled it Classification of Central Reserve and Reserve Cities" published at pa. ge8 41 and 42 of the 1948 Federal Reserve Bulletin, is hereby amended. 4544. ' er by changing the period at the end thereof to a colon and adding the colon the following new language: that the designation of any city as an additional reserve city under this paragraph (4) because it meets the standard prescribed in paragraph (2) above, shall not become effective until after one year, or such longer period as the Board of Governors may determine, from the date as of which alleh designation would be effective in the absence of this 13roviso. 1318 Item No. 4 5/15/57 Classification of an Additional Reserve City Acting in accordance with the rule regarding classification of certral reserve and reserve cities as adopted by the Board on December 19, effective March 1, 1948, and as amended effective March 1, 1957 (herearter referred to as the Board's rule), and pursuant to authority eQnferr ed upon it by section 11(e) of the Federal Reserve Act and other ' Pr"siclls of that Act, the Board of Governors has taken the following ction: The city of Miami, Florida, falls within the scope of paragrqb (21 '-' of subsection (b) of the Board's rule based upon official call rePorts of condition in the two-year period ending June 30, 1956, and, therer °re) such city is hereby designated and classified as a reserve ctty ef,„ J.ec+. 'lye May 15, 1958. BOARD OF GOVERNORS Item No. 5 OF THE 5/15/57 FEDERAL RESERVE SYSTEM WASHINGTON 25, O. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD s-1628 May 15, 1957 Dear Sir: This is to supplement the Board's letter of February 21, f ‘S-1621), in which you were advised of the Board's action s eit Zetive March 1, 1957, for the continuance of reserve city clasre4-1eati0n3 of certain reserve cities and the termination of the n serve city classifications of two such cities. (1957 Federal aeserve Bulletin, p. 276) 1957 The Board has amended its rule adopted on December 19, 1947 r $ with respect to the classification of central reserve and serve cities. A copy of the amendment, which will be published Ra ?arlY issues of the Federal Reserve Bulletin and the Federal tjleter, is enclosed. It will be appreciated if you will bring amendment to the attention of member banks in your District. 4 Under the rule as amended, the Board has designated the Florida, as an additional reserve city effective each 's 458. The Federal Reserve Bank of Atlanta will 80 advise in member bank in Miami. You may give out the same information a c::s13°Ilse to inquiries from member banks or others. Enclosed is alsovY of the Board's action with respect to Miami, Florida, which Buil 11111 be published in early issues of the Federal Reserve etin and the Federal Register. city may of The Board has decided to have a study Provisi made of the consicl " (3 of its 1947 rule and, in that connection, will of course B 8 er sucu l, suggestions as have been made by the Federal Reserve einee the adoption of the original rule. It will be glad to "neide r anY other changes that you may wish to offer. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 41e108 ures 2 71° T" PRESIDENTS OF ALL YEDERAL RESERVE BANKS 1320 BOARD OF GOVERNORS 450*A t;4. *4%914 44*4 OF THE Item No. 6 FEDERAL RESERVE SYSTEM A4. 5/15/57 WASHINGTON 25, D. C. ry 4 #4 ADDREss orriciAL c,7,k CORRESPONDENCE TO THE BOARD '440* May 15) 1957 The Honorable Ray M. Gidney, The Comptroller of the Currency, washin— gT, n 25, D. C. MY dear Mr. Comptroller: Supplementing the Board's letter of February 21, 1957, enclosed the Classificationa copy of an amendment to the Board's rule for of central reserve and reserve cities and also ' copy of an action taken by the Board under the rule as so amended. there4-0 You will note that the effect of the amendment to the to defer the effective date of the designation of any. city one ad • onal reserve city (based on any triennial review) for as n., Year, or for such longer period as the Board may determine, Ler the effective date which would be applicable in the absence it the amendment. From the copy of the Board's action pursuant to amended rule, you will note that the Board has designated the ctst 11.4j,?! Miami, Florida, as an additional reserve city, effective ', 1958k rule 4 4-8 Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 41e4eurea 2 1221 Item No. 7 5/15/57 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Statement for the Press POI, 4 — e release -kmediat May 15, 1957. After consultation with the guaranteeing agencies, the 80ard from -as raised the maximum permissible rate of interest on V-loans 5 to 4 per cent, effective immediately. No change has been Made 1,,, present maximum commitment fee of 1/2 of 1 per cent or the so. tiedule of guarantee fees now in effect. 1322 TELEGRAM LEASED WIRE SERVICE SYSTEM BOARD OF GOVERNORS OF THE FEDERAL RESERVE WASHINGTON Item No. 5/15/57 May 15, 1957 Pr"idents, all Federal Reserve Banks After consultation with the guaranteeing agencies, the has raised the maximum permissible rate of interest on V-loans fre'r4 5 tA - per cent, effective immediately. No change was made in th esent maximum commitment fee of 1/2 of 1 per cent or the schedule Ilantee fees now in effect. It is suggested that you advise the interest --em financing institutions in your district of the Board's action. $1dNED) S. a. CARPENTER Carpenter 8 1323 BOARD OF GOVERNORS Item No. 9 5/15/57 OF THE FEDERAL RESERVE SYSTEM WAS HI N GTO N OFFICE OF THE CHAIRMAN May 15, 1957 The Honorable Sinclair Weeks, Secretary, tepartment Of Commerce, 1 ,4th a_ ci Constitution Avenue, N. W., 1\as hington 2g," D. v. n n p(iar lir. Secretary: eorlle ti The Board of Governors has had under consideration for tate me the advisability of increasing the maximum permissible cl interest that may be charged by commercial banks on V—loans. In numerous conferences between members of the Board, 48enci4 And °facials of the Defense Department and other guaranteeing deren..-°• it has been decided that in view of the difficulties some V...1.06:e Producers are facing in obtaining or continuing necessary L:ction should be taken to alleviate the financing prob— lerns tdie e suppliers. ; Nord& A ssistant Secretary of Defense McNeil has written me concur 'IR this matter and advises that Secretary Wilson agrees and reti ! 0 with the views of the Board that the maximum permissible 4 interest on V—loans should be increased to 6 per cent. ,1!?ordingly, the Board of Governors has increased the chaqe 11'"ussible rate to 6 per cent, effective immediately. No ,t;....haltal..1)(3en made in the maximum permissible commitment fee of '11043 1 Per cent or in the guarantee fees now charged by the gua ranteeing agencies. Sincerely yours, (Signed) Wm. McC. Martin, Jr. WM. McC. Martin, Jr. 1324 BOARD OF GOVERNORS Item No. 10 5/15/57 OF THE FEDERAL RESERVE SYSTEM WASHINOTON OFFICE OF THE CHAIRMAN '4004** May 15, 1957 Mr. C. Lincoln Jewett, Executive Director, President's Conference on Technical and Distribution Research for the Benefit ,of Small Business, ft°°m 4805, Main Commerce Department Building, 4ashington 25, D. C. Dear Mr. Jewett: This is in reply to Mr. Arthur Motley's letter of 4ril 214 in which he requested that information be sent to you z t"elating directly to distribution research within the Federal 4serve System. This material was requested in connection with s e "President's Conference on Technical and Distribution Reearch for the Benefit of Small Business" to be held in Washington on S eptember 214-26, 1957. There are attached several exhibits presenting the information requested about certain specific research programs the Federal Reserve System in this area. It should be noted Iliat most of these are programs which are carried out on a nationde has basis. In addition, each of the twelve Federal Reserve Banks pro an excellent economic research division which often conducts Re grams of a regional or local nature. For example, the Federal /14!rve Bank of Boston has for several years cooperated extensively a ,sl.the New England Council in the development of data particularly to that area. Also, the Federal Reserve Banks of Chicago yl St. Louis have carried on community and regional analyses which e a definite relationship to market research. Z The product of economic research carried on by the Federal Reserve bust, PYstem is generally of such character that it is useful to the ; : ,ess groups of all sizes. Contrary to the general impression, fiab ai°ritY of commercial banks in the United States are classithe Ze as small business inasmuch as more than half the banks in in tnited States have resources of 0 million or less. Similarly, rirsZe department store field, although the tendency is to think 2 in eic'if the largest retail outlets of this type, in 1954 nearly erY 5 department stores had an annual sales volume of less Na million. "A t11 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. C. Lincoln Jewett -2 There are enclosed sample copies of a number of System Publications containing examples of the kinds of research carried Out both at the Federal Reserve Board and at the individual Federal Reserve Banks. It may be that after you have had an opportunity to review them and the other material provided with this reply, Y t.cm will think of some other ways in which the System might be "elpful in connection with the President's Conference. If there should be, please let us know. Sincerely yours, (Signed) Wm. MCC. Martin, Jr. WM. McC. Martin, Jr. E nclosures cel Mr. Arthur H. Motley BOARD OF GOVERNORS OF THE wool, Item No.11 5/15/57 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD tt4ttt 4***' May 114, 1957 „11's E. 0. Latham, First Vice President, Federal Reserve Bank of Boston, 130aton 6, Massachusetts. Dear Mr. Latham: In accordance with the request contained in Mr. Grootis let of May 8, 1957, the Board approves the designation of Lenora Dimitri, Harry R. Mitiguy, and Silvia E. Vitale, as ?Icial assistant examiners for the Federal Reserve Bank of : B ston for the purpose of participating in the examinations of 00P°sitors Trust Company, Augusta, Maine, The Merrill Trust ,2a„.nY, Bangor, Maine, The Connecticut Bank and Trust Company, /414 Connecticut, and Rhode Island Hospital Trust Company, ovidence, Rhode Island. Appropriate notations have been made on our records cir the names to be deleted from the list of special assistant eXaminars. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1327 BOARD OF GOVERNORS ofid4t44%,*4 Item No. 12 5/15/57 OF THE 0' 1 s* FEDERAL RESERVE SYSTEM 4* a WASHINGTON 25, O. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 15, 1957 14r. Eliot J. Swan, First Vice President, Federal Reserve Bank of San Francisco, San Francisco 20$ California. Dear Mr. Swan: In accordance with the request contained in Your letter of May 9, 1957, the Board approves the appointment of Howard A. Jalving as an assistant examiner for the Federal Reserve Bank of San Francisco. Please advise as to the date upon which the appointment is made effective. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 32S TELEGRAM Item No. 13 5/15/57 LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON May 15, 1957 P°14LL c/0 BARGLEBAUGH - SALT LAKE CITY Retel May 13, 1957 re stenographic reporting service in C°rItinental case. Board does not look favorably on request for Panent of reporter's traveling expenses from Salt Lake City to Inie thlington for further proceedings commencing May 22. In previous hearings held in Washington in this case, reporting has been done 11 Washington firm under instructions from Clair Johnson. Can see 11° reason for departure from this practice for May 22 or later hearings. If Johnson is not agreeable to continuing that arrangement, ik/ard will arrange for reporting by Washington firm holding contract tor Le hearings. Please wire. As to Johnson's services, it is entirely appropriate to atIbnlit bills periodically for stated number of pages of transcript and Per diem. However, such bills can not be paid until transcript is a /ailable to Board's Fiscal Section for customary verification of °hallos. (Signed) Carpenter CARPENTER
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