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730 A meeting of the Board of Governors of the Federal Reserve SYstm was held in Washington on Friday, May 17, 1946, at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak Draper Evans Mr. Carpenter, Secretary Mr. Hammond, Assistant Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman Mr. Vest, General Counsel Mr. Thomas, Director of the Division of Research and Statistics Mr. Leonard, Director of the Division of Personnel Administration Mr. Piser, Chief of the Government Securities Section of the Division of Research and Statistics Mr. Kennedy, Assistant Chief of the Government Securities Section of the Division of Research and Statistics As stated in the minutes of the meeting on May 8, 1946, Mr. 7111'118'111811 vas absent on official business. There were presented telegrams to Mr. Treiber, Secre'Lary of the Federal Reserve Bank of New York, Mr. McCreedy, Vice, l'residen, u of the Federal Reserve Bank of Philadelphia, Messr_ Blair, Dillard, and Stewart, Secretaries of the Fed- Re serve Banks of Cleveland, Chicago, and St. Louis, re- ecti Irel4Y, Mr. Caldwell, Chairman of the Federal Reserve Bank Ofit , 48as City, and Mr. Mangels, Vice President of the Federal Ae8erv e /31311k of San Francisco, stating that the Board approves the es t"lishment without change by the Federal Reserve Bank Of sari Pl'anoisco on May 14, by the Federal Reserve Bank of Kansas vi °11 May 15, and by the Federal Reserve Banks of New York, 731 5/17/46 -2Cleveland, Chicago, St. Louis, and San Francisco, on May 16, 1946, of the rates of discount and purchase in their existing schedules. Approved unanimously. Mr. Leonard stated that yesterday afternoon he and Mr. Vest talked with It -r. Reilly, a member of the National Labor Relations Board, about the reports that had come to the Board of Governors that the A. F. of L. 'has attempv__ -Lag to organize the employees of the Federal Reserve Bank of Dallas and that the C. I. 0. might attempt an organization of the emof the Federal Reserve Bank of St. Louis. Mr. Leonard also said that a fter he and Mr. Vest had explained the organization of the rederal R eserve B'anks and their relationship to the Board, and after a discussion Of the Matter, Mr. Reilly suggested that it might be well for the Natiorlaa. Labor Relations Board to communicate with its regional offices T ' 4 and Missouri and state that if any request were made or petition tlied regar ding employees of a Federal Reserve Bank the matter be referred tow 41811ington before any action was taken, which would give the Board of Q°Vern°r8 ample opportunity to consider the matter and, if desirable, to Qe a me morandum of its views on the question whether the National ilab°1‘ Relations Act should apply to the Federal Reserve Banks. All of the members of the Board present were in agreement that the Federal Reserve Banks should be advised of the situation as reported by Mr. Leonard and unanimous approval was given to the following letter to the Presidents of all of the Reserve Banks: to :le to reports reaching us that efforts are being made Pede ganize into a union the employees of at least one of the Reserve Banks, Messrs. Leonard and Vest of the Board's 732 5/17/46 -3- staff on yesterday conferred on an informal basis with a member of the National Labor Relations Board, in order to obtain igiration as might be available and also to explain s h'I about the nature and functions of the Reserve Banks. 1,1, "During the course of the conversation the member of the _L'.°/' Relations Board suggested, in view of the circumstances " a"lch.had been discussed, that it might be well for the Labor el ations Board to wire some or all of its regional offices ask that, if any request were made or petition filed reardlrig the employees of a Federal Reserve Bank, the matter lew l:eferred by the regional office to the National Labor Relietlons Board in Washington before any action is taken. ,rsers. Leonard and Vest endorsed this suggestion and exii.e?sed the hope that it would be carried out very promptly. ls understood that if and when any such question is referred 'i:rthe National Labor Relations Board opportunity will be af°led to the Board of Governors to express its views in the tter g ad "In the circumstances, it will be appreciated if you will ' Ilse us fully and promptly of any developments which may ) t41.11? to your attention in connection with the possible organiJ-on of the employees of your bank." g At this point Messrs. Hammond, Thurston, Vest, Leonard, Piser, arid 4 nnedY withdrew from the meeting. Chai-rMan Eccles stated that Mr. Piser had accepted a position with the first Boston Corporation in New York, that Mr. Musgrave, Econo- in the Division of Research and Statistics, had considered acceptpo . )41%. 4etinsltion on the staff of Carnegie Institute of Technology, that edY had just been offered an excellent position with the Con--e4ta‘i nois Bank and Trust Company in Chicago, and that if all thl'ee ah °--d leave the Board would have no one to handle the work in fise al and taxation fields and in connection with Government securi'41CI the responsibilities of the Federal Open Market Committee that 733 5/17/46 -4- they had Performed. To meet the situation it was Chairman Eccles' sug- gesti°11) after having consulted with Mr. Thomas, that in accordance with the understanding when Mr. Knapp was employed as a Special Assistant tes the Chajammn he be transferred to the Division of Research and Statistic 8 a8 an Assistant Director of the Division, that the work in tkxation -id fiscal policy now under Mr. Musgrave and the work in the Gove rftent securities market now under Mr. Piser be merged in a new Gove ent Finance Section in charge of Mr. Musgrave, and that Mr. Kentletr be transferred to the Chairman's office as Special Assistant to the Chai Under this arrangement, Chairman Eccles said, Mr. Kentle.§. would continue to do the work that he had done in the past in contleetion With the Government securities market and the Federal Open Market Nttittee, that he would use the members of the staff of the new secticq in connection with his work in substantially the same manner as 41's l'iser and he had used the staff of the old Government securities ecti°112 and that a new man would be brought in who would be an assist44t t°141-'• Musgrave and who would assist Mr. Kennedy much as the latter Ilaci assisted Mr. Piser in the past, so that there would be someone to liceeed to Ur. Kennedy's responsibilities if he should decide to leave a Period of six months or a year. . After a discussion, unanimous approval was given to Chairman Eccles' suggestion and to the following annual salaries, all to become effective June 12 1946: 5/17/46 _5_ Name je Burke Knapp David M. Kennedy Richard A. Musgrave Title Proposed Salary Assistant Director, Division of Research and Statistics t10,000 Special Assistant to the Chairman 9,000 Chief of the Government Finance Section, Division of Research and Statistics 8,225 At this point Mr. Thomas withdrew from the meeting, and the action stated it respect to each of the matters hereinafter referred to was thcql telt c4 by the Board: Pederal The minutes of the meeting of the Board of Governors of the Reserve System held on May 9, 19462 were approved unanimously. The minutes of the meetings of the Board of Governors of the Peder n 41 Resel've System held on May 10, 132 14, 15, and 16, 1946, were -13131'°Ireci azid the actions recorded therein were ratified unanimously. Letter to Ur. Guthrie, Vice President and Cashier of the Federal Rese ve rflk of Richmond, reading as follows: pers_7h! Board of Governors approves the change in the or Rrnel classification plan of the Federal Reserve Bank kditnnlorld, involving the changing of the title of Manager, 'flg Department to Assistant Auditor, as submitted with Yollr lette r of May 6, 1946." Approved unanimously. Letter to Mr. Walden, First Vice President of the Federal Reserve ot D4 '14.chmond, reading as follows: 736 5/17/46 —6— "The Per annum Board approves payment of a salary of $7,200 and expenses to Dr. K. Brantley Watson as Per— _scnnel Consultant for the Federal Reserve Bank of Rich,111°nd.for a period of one year, under the arrangement as outlaned in your letter of May 15." Approved unanimously. Letter to Mr. Clark, Vice President of the Federal Reserve Irac . v-L Atlanta, reading as follows: le.„ "In view of the recommendation contained in your cf May 11, 1946, the Board of Governors will inter— Pose u-t'er nc objection, under the provisions of condition of ' shiP numbered 8 to which the member bank is subject, toill.Ler can Truinvestment of approydmately $67,200 by the Amen— st and Banking Company, Chattanooga, Tennessee, fo,, . the --tiurpose of securing a site and providing a build— Brid or its branch at the north end of the Market Street ge on Cherokee Boulevard in Chattanooga." Approved unanimously. krik ot Letter to Mr. Gentry, First Vice President of the Federal Reserve reading as follows: iS is in reply to your letter of May 14, 1946, With re o4 spect to the Board's telegram of May 9, approving 0ther:Zs ie . er cent in the salaries of all employees ogilc'erps. al.so You are correct in the assumption that this approval aerveaPAPlies to the salaries of the Assistant Federal Re— eQlcip — gent, Alternate Assistant Federal Reserve Agents, ederal Reserve Agent's Representatives." Approved unanimously. Lette_ to Banco de Mexico, S. A., Mexico, D. F., Mexico, reading J.01 41r0 "We . acknowledge with appreciation your letter of May 8 ng us that you have sold all the shares held by you 73t; 5/17/46 —7— the Pan American Trust Company of New York. Ire "Your success in disposing of these shares must be ry gratifying, and we have no doubt that equal success mark the resale by the Nacional Financiera and the al c° Nacional de Camercio Exterior of the 13,200 shares stall held by them." Approved unanimously. Letter to the Organizers of "The Grant County State Bank", Bayard, NewIleico, stating that, subject to conditions of membership rklbered 1 to 3 contained in the Board's Regulation H and the followsPecial condition the Board approves the Bank's application for raellibership in the Federal Reserve System and for the appropriate amount of R -4)eic in the Federal Reserve Bank of Dallas: "4. the tine of admission to membership, such bank shall have a paid-up and unimpaired capital stock of not less than d ti2,5, 0 Z40 00 and other capital funds of not less than letter 4180 Contained the following special comments: of T ce cha he Grantthe application for membership was made on behalf County State Bank prior to the issuance of its arier , eter ,: . it is requested that, in connection with the acceptthe-04 the conditions of membership prescribed by the Board, ch oard of directors of the State bank ratify, after the at . r eris actually issued, the action which has been taken el.; behalf in making application for membership in the Fed,serve System. this 1 A?oeptance of the conditions of membership contained in board'etter should be evidenced by a resolution adopted by the ilport-4°f directors after the charter has been issued and spread ahotasts minutes, and a certified copy of such resolution e filed with the Federal Reserve Bank. Arrangements reupon be made to accept payment for an appropriate artioun or the of Federal Reserve Bank stock, to accept the deposit required reserve balance, and to issue the appropriate a.140, Of Federal Reserve Bank stock to the bank. 937 5117/46 —8— "The time within which admission to membership in the eral Reserve System in the manner described may be accom— Plished is limited to 6 months from the date of this letter, (1) 3T-ess the bank applies to the Board and obtains an extension m tinle. When the Board is advised that all of the require— of:nts have been complied with and that the appropriate amount I Federal Reserve Bank stock has been issued to the bank, the sit'rd will forward to the bank a formal certificate of member— "443 in the Federal Reserve System." Approved unanimously, together with a letter to Mr. Gilbert, President of the Fed— eral Reserve Bank of Dallas, reading as follows: then"Ae You were advised in a telegram dated May 17, 1946 a ,' l °ard of Governors of the Federal Reserve System has Proved the application made on behalf of 'The Grant the Y,State Bank', Bayard, New Mexico, for membership in eueral Reserve System, effective if and when the bank .4.8 ' duly authorized to commence business by the appropriate State authorities, subject to the conditions prescribed in the th :enclosed letter which you are requested to forward to slich13°ard of Directors of the institution. Two copies of III -Letter are also enclosed, one of which is for your thee3 and the other of which you requested to forward to Is, State Bank cam1ner for the State of New Mexico, for u-Ls information. Dai : l Before issuing stock in the Federal Reserve Bank of isf ' 8 to the new State institution, you are requested to sat— in,Y4Yourself that its capital stock of $50,000 has been paid of ' hat a charter has been issued, and not less than q2,500 ITLitZther capital funds provided as set forth in the plan sub— take, eci : At such time your Counsel should review all steps or e:114-n the organization of the bank and certified copies topetls °rganization papers should be forwarded to the Board, er a copy of Counsel's opinion. In this connec— t&ofl,"attwith icats attention is called to the fact that the amended Certif— raemb :0,f_Incorporation which accompanied the application for reclii:IssnlP was not certified by the State authorities. It is , also, that the Board be furnished with a copy of the adon'tesolution of the board of directors of the State bank in ited after the charter is issued ratifying the action taken era] . behalf in making application for membership in the Fed— ' eserve System. 738 5117/46 -9-.. "It is assumed, ofthat the bank will be given course, 411 possible assistance in obtaining the services of an experienced operating officer and that, at the time of admisTon to membership, its management will be satisfactory to he Reserve Bank." Letter to the Presidents of all Federal Reserve Banks reading as 'lows: to "It has became evident that there is little likelihood of e nactment by the Congress of the Wagner-Spence Bill 511 and H. R. 591), and the Board therefore has been fling consideration to a different and much simpler apqach. There is enclosed herewith a copy of a proposed se and of a proposed letter and statement which might be the Banking and Currency Committees of the Senate .*141(1 of Representatives. Briefly "Briefly stated the substitute would have the followin g Tects: ped kl) It would repeal altogether section 13b of the sutra Reserve Act containing the present industrial loan °I;it,,Y of the Federal Reserve Banks. The Reserve Banks would repay to the Treasury the aftunts which they have received from the Treasury 'ler section 13b and would be relieved of any further obligation ot , L or liability to the United States or to the Secretary wie Treasury under that section. esei_1(3) The existing authority in the last paragraph of ciivi e 13 of the Federal Reserve Act to make loans to in(a) 14182 Partnerships or corporations would be amended by eliminating the requirement that such loans be seNith bY direct obligations of the United States together the subsequent language and (b) by adding authority to to 18L gUaaintee fcing inan institutions against loss on loans f1 „--ess enterprises and to purchase such loans from -"Ilg institutions. it wiTor the Board's assistance in considering this proposal, ot s,,11 be appreciated if you will give the Board the benefit Praj'T4 views or suggestions which you may have, as soon as be k"eable. At this stage the Board desires that this matter otriePt strictly confidential between yourself and the other eere of your bank. Approved unanimously. 739 5/17/46 —10— Letter to Mr. Sienkiewicz, Vice President of the Federal Reserve Bank of Ph iladelphia, reading as follows: "This refers to your letter of May 8, 1946, enclosing eoPY of a letter from the Deputy Administrator of the Veterans Loan Authority of the State of New Jersey and a . 01),Y of a bill which is now known as Chapter 121 of the et Laws of the State of New Jersey, which amends 46 It9he Uew Jersey Act for guaranteeing and in insuring loans to by adding a section making it applicable to loans to ter:::13111 I_Illance the purchase of household furnishings and household 93Pl1ances. The Question is whether such loans are exempted from the requirements of Regulation V;by the provisions of section 8(0 ) . is "Although, with this amendment, the New Jersey statute less 'similar' to the Federal Servicemen's Readjustment Act te of - -,744 than it was prior to the amendment, the Board is of the opinion that loans of the type referred ti‘(2174111reel,ess as well as the other loans guaranteed or insured gnaer the New Jersey statute are exempted by section 8(o)." Approved unanimously. Letter to Mr. Gilbert, President of the Federal Reserve Bank of as) reading as follows: • "Receipt is acknowledged of your letter of May 10, response to the Board's letter of April 30 (3-909). of "It is observed that you plan to enlarge the scope ex Your enforcement activities so as to obtain coverage in hair eess of the minimum prescribed by the Board, and that you fo,! taken some action and intend to take more in your ef— eu"'s to obtain close cooperation of Federal and State bank reP eervlsorY agencies in your district. By now you will have eu elNed the Board's letter of May 13, concerning its dis— berlon with Chairman Hanl of the F. D. I. C. and with Mr. all°, Comptroller of the Currency. in 4. "With regard to the regional conferences referred to Board's letter of May 14, the Federal Reserve Bank Of ve'tlanta will be in touch with you to arrange details of Participation.,, Approved unanimously. 740 5/17/46 -11- Thereupon the meeting adjourned. Chairman.
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