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733 A meeting of the Board of Governors of the Federal Reserve Erstem was held in Washington on Wednesday, May 19, 1943, at 11:30 Et.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak Draper Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters herein- referre _ d to was taken by the Board: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on May Meorandum dated May 18, 1943, were approved unanimously. 15, 1943, from Mr. Leonard, Director of the 1)4181°11 of Personnel Administration, recommending that Herbert A. .(31/ 8°11 be appointed Administrative Assistant in that Division on a temt P1317 b"is for an indefinite period, with basic salary at the rate of "4'6°C) 1°e1* allnum, effective as of the date upon which he enters upon th Pert°rIllellee of his duties after having passed satisfactorily the physical examination. Approved unanimously. 141: 4 1 410randa of this date from Ir. Morrill, recommending (1) that 14 the s an M. ti Holley and John R. Snnms be appointed as cafeteria helpers -eeretarY's Office on a temporary basis for a period of not to 734 5/19/43 -2- exceed 60 days, each with salary at the rate of $1,080 per annum, effeetive May 19, 1943/ and (2) that the resignation of Dorothy Oliver as 4 cafeteria helper, which was attached to the memoranda, be accepted effettive as of the close of business on May 27, 1943. Approved unanimously. Memorandum of this date from Mr. Goldenweiser, Director of the Divi i (311 of Research and Statistics, reading as follows: on "The Treasury wishes to appoint a Federal Reserve man b„,L. a,nlission which it is sending to Honduras to review the i7LLng situation and help establish a central bank if one needed. The Honduran request for assistance was re, the State Departrent to the Treasury some months ;r ! e but it has only now come suddenly to a head. The Gov : surY is under the necessity of letting the Honduran whi;fnraent know immediately the make-up of the mission fro " it proposes to send. The problem of freeing a man pecIt ihe Board's staff for this purpose at this time is conv arlY difficult, but it can be solved. If no more needenient solution can be found, Mr. Triffin, who is B0arV for the central bank job in Paraguay in which the availais ,,staff is playing the leading role, could be made for a limited period on the Honduran mission. The Tre to H, -surY is sending Mx. Bernstein, assistant director ri?7Y White. and Mr. de Beers, a Latin American man in Mr dui__ ate's division. It would like to inform the Honsio:n, G overnment today of the make-up of the impending misusing Mr. Triffints name for the third man, but with the thatunderstanding that we can substitute another man if eems better to us. Beforp 41:uPY of the proposed Treasury statement is attached. "can be sent, however, it is necessary to ascertain Whether 04 a the Board is prepared to send a member of its staff voliZiTeion of this character to Honduras. The period inexpected to be about five weeks; and each agency travel;! exPected to Day the salaries, subsistence, and ' Lig expenses of its own men." Unanimous approval was given by the members of the Board present to Mr. Triffin ' : 11aicing the trip as a member of the mission, With the understanding that he would be reimbursed for expenses incurred by him on the trip accordance with the current travel regulations of the Board. 735 5/19/43 -3In taking this action, the Board authorized Mr. Leonard, as Director of the Division of Personnel Administration, to address a letter to Mr. Triffin's draft board requesting that he be permitted to leave the country as a member of the mission. Letter to Mr. Brainard, Chairman of the Federal Reserve Bank Of cieveland, reading as follows: ter "In accordance with the request contained in your letof May 10, the Board of Governors approves the appoint112ent of Mr. R. B. Hays as First Vice President of the Fed1.heal Reserve Bank of Cleveland, effective July 1, 1943, for e 28xPired portion of the five-year term ending February oam -L946. The Board understands that Mr. 2,urlinden, who be1_ ? a retired member of the Retirement System on January h s-1943, but has : continued to serve as First Vice President, exPressed his intention to retire from active service Bank on y l_The other June 30, 1943. Ma promotions referred to in your letter of ommenu d have been noted and it is understood that the recshort °ne with respect to salaries will be submitted Z Approved unanimously. Letter to the board of directors of "The Farmers Bank of SIDI/41'111e, Erie County, N. Y.", Soringville, New York, stating that, 111)Ject to conditions of membership numbered 1 to 6 contained in the 8°"di8 Regulation H and the following special condition, the Board ap:::dth f:rbatahkel p:::::::::on for membership in the Federal Reserve Sys: ' c t% New york: amount of stock in the Federal Reserve Bank 11-(3r to admission to membership, such bank,if it has 1:1ot already done so, shall charge off or otherwise r'--inn-nate estimated losses of 46,764, as shown in the report of examination of such bank as of April 3, 1943, N pr-v-Y an examiner for the Federal Reserve Bank of York Ii 736 5119/43 -4Approved unanimously, together with a letter to Mr. Sproul, President of the Federal Reserve Bank of New York, reading as follows: "The Board of Governors of the Federal Reserve System ;Pproves the application of 'The Farmers Bank of Springville, 11la County, N. Y.', Springville, New York, for membership the Federal Reserve System, subject to the conditions prescribed in the enclosed letter which you are requested to (1rward to the Board of Directors of the institution. Two ias of such letter are also enclosed, one of which is for :"1111 'files and the other of which you are requested to forward to the Superintendent of Banks for the State of New York lor his information. pr "Standard condition of membership numbered 6 has been ti : serloed in order that its provisions may be invoked at any aj a in the future if necessary, but as in other cases and in cordance with the general authorization previously granted keI the.A.f. you are authorized to waive compliance with the Nt"lon until further notice insofar as the condition api. oV :h a Stats o; r; re given statutory preference in the e t j r Letter to the "Austin State Bank", Chicago, Illinois, reading as rOliows: all "The Board is glad to learn that you have completed eraiT'angements for the admission of your bank to the FedWith erve System and takes pleasure in transmitting here;rfc)rmal certificate of your membership. Or 41. "Lt will be appreciated if you will acknowledge receipt vilis certificate." Approved unanimously. Letter to "The First National Bank of Mount Vernon", Mount Vernon, 1111elliagton, reading as follows: "T 1943, 4is refers to the resolution adopted on March 23, bliiiikts the board ig the of directors of your bank, signifying r its right to exercise fiduciary P°Ilare Ore heeErUerteofto%sgleirti 737 5119/43 -5- "The Board, understanding that your bank has been discharged or otherwise properly relieved in accordance with lihe law of all of its duties as fiduciary, has issued a ,°rmal certificate to your bank certifying that it is no ""Iner authorized to exercise any of the fiduciary powers covered by the provisions of section 11(k) of the Federal Reserve Act, as amended. This certificate is enclosed herewith, "In this connection, your attention is called to the fact that, under the provisions of section 11(k) of the Federal Reserve Act, as amended, when such a certificate has rell. issued by the Board of Governors of the Federal Reserve :Yetem to a national bank, such bank (1) shall no longer be RUbject to the provisions of section 11(k) of the Federal 18e7e Act or the regulations of the Board of Governors of , ee Federal Reserve System made pursuant thereto, (2) shall :p_a e ntitled to have returned to it any securities which it !0Y have deposited with the State or similar authorities Protection of private or court trusts, and (3) shall the the exercise any of the powers conferred by section 11(k) of toe, Federal Reserve Act except with the permission of the rd of Governors of the Federal Reserve System." 4 Approved unanimously. Letter to Mr. Neely, Chairman of the Federal Reserve Bank of Atiezt la, reading as follows: Reserve"At the completion of the examination of the Federal Bo Bank of Atlanta, made as of March 19, 1943, by the eXaminers, a copy of the report of examinations was left copy, for your information and that of the directors. A also furnished President McLarin. - le Board will appreciate advice that the report has bee7, " may- c°nsidered by the board of directors. Any comments you ex to offer regarding discussions with respect to the or t ion or as to action taken or to be taken as a result he examination will also be appreciated." Approved unanimously. Letter to the Presidents of the Federal Reserve Banks of Boston, °1`k, . Pladelphia, hi and Richmond, reading as follows: 738 5/19/43 -6- "In accordance with a request received from 1i. B. B. Griffith, Assistant to Director of Finance, United States Maritime Commission, it will be appreciated if in the future progress reports and periodic financial statente of borrowers having Regulation V loans guaranteed by he Maritime Commission are forwarded to Washington through the Co mmission's Regional Office at Philadelphia. A copy Of each such statement should be mailed to the Board for itd records." T Approved unanimously, together with a similar letter to the Presidents of the Federal Reserve Banks of Atlanta, Kansas City, and Dallas and to Mr. Hale, Vice President and Secretary of the Federal Reserve Bank of San Francisco, except that the Atlanta, Kansas City, and Dallas Banks were requested to forward the reports and statements through the Maritime Commission's Regional Office at New Orleans and the San Francisco Bank through the Office at Oakland. Letters to Lieutenant Colonel Paul Cleveland, Chief of the Loan Secti()Ils Special Financial Services Branch, Fiscal Division, War DepartIrle/rt; mr. sidney A. Mitchell, Chief of Finance Section of the Office of l'roctirement and TAaterial s Navy Department; and Lieutenant B. B. Griffith, lissistatt to Director of Finance, United States Maritime Commission, es follows: 'here is Boar enclosed a copy of a letter received by the Peder, r 1 r°11 Mr• R. B. Hays, Vice President and Secretary of the lette; -4 l'eserve Bank of Cleveland, together with a copy of a Be received by the Federal Reserve Bank from Mr. Francis , regal„.1 Vice President of The National City Bank of Cleveland, 'ing the interpretation of the provisions of the guarantee "Merit forms of May 14, 1942, and April 6, 1943, with resPeet to a.uilistments based on the cancellation of war production ecAt rects• ttr7to ' medc Will be glad to have any comments that you may care ePect!with respect to the above question and also with relia7et ' 1 0 the point mentioned in the last paragraph of Mr. ill co letter regardinp the practice of contracting officers nnection with contract cancellations." Approved unanimously. 739 5119/43 Letter to Honorable Tames M. Mead, Chairman of the Senate Subecftlittee on Small Business Loans, prepared in accordance with the action tah„ u at the meeting of the Board on May 12, 1943, for Chairman Eccles' 81ellatIl ras and reading as follows: "I have brought to the attention of the other members Of the Board, and we have considered carefully in accordance with, Your request, the outline enclosed with your letter of 19 of suggested legislation to provide intermediate ax 0ne term credit for American small business enterprises. ls noted that the outline was prepared by Mr. William k,).illeperdson, Chief, Small Business Unit of the Department of '' t°111111erce, on the basis of ideas originally agreed upon by lie Advisory Drafting Committee of your subcommittee. ob "The proposal does not state specifically the particular ol61!ctives which your committee has in view and it is diffith: t° express an opinion or make suggestions without having a -se o bjectives defined. The basis and the extent of the IT : I istance that should be provided needs to be considered. vill.',4,!irst question to be determined by your committee is cr-""ar the purpose is simply to furnish more credit or o ani:nger terms to small enterprises that are now being :See private institutions; or whether it is to assist obteliprises, injured or shut-down by the war and unable to ducZtla adequate credit otherwise, to resume civilian prowher.1°11 or to reconvert from war to civilian production; or Rejh.er it 1:3 to assist newly organized small enterprises to hevestart...Au - In civilian production following the war. We reg no doubt that additional aid for small business will be e sle1, 1 ,:?d at or before the end of the war, but it seems to us Of that the special need to be served and the extent from :1,financial assistance considered desirable be defined int of legislative policy before the mechanism can standlx i, b;'le devised which will be most appropriate for the purpose View the lr : Aaide from this basic question of policy we agree with wora y:aw that it would be preferable if an existing authority tor an°wared to provide the mechanism for such further aid thnt all business enterprises as may be desired but we feel - the colt vi-oposal attached to your letter is unnecessarily P icated. corpo It appears to contemplate the establishment of a finance Ntd, ;"1°fl, and in addition the creation of a loan insurance u°Rather with 'management advisory service divisions' and 740 5/19/43 -8ni councils'. The proposed finance corporation would be owned by the private banking system of the country through compulsory stock subscriptions. It is certain that enforced subscription vmuld meet with objections from practically all bankers and even without such objection it is felt that the fund should be o btained in some other way. In that case the provision that three of the board of nine directors should be elected and be rePresentat ive of the member banks would be a violation of the Principle that governmental bodies should be independent of control by private interests. "The provisions for the establishment of a separate loan insur -ance fund and for its operation are complicated and superfluous. There would seem to be no necessity for having a contract i of indemnity between the lending agency and a separate ensurence fund as proposed. There is no reason why the insurance feature should not be handled by the lending agency. ffle contract of insurance or guaranty could follow the general Pattern Of a guaranty under Eegulation V, namely a contract ri,:ng from the lending agency to the commercial bank or other —Tieing institution. ,r_ "There are other provisions of less importance in the uPosal with which we do not agree, but for the most part euiLy.deal with details and refinements which might well be ei1J-315121nated by a provision that the agency charged with responthellitY for the administration of the proposal should have zete"er to make regulations governing its operations. This Of tr' allong other things, would make minecessary the creation ccun,„!,Proposed management advisory service divisions and 'i-Le and the attendant complications of such an organization. zitte"Ifs as we have understood, it is the thought of the cone that it is desirable to proceed at the time on the basis the peaer es tablishment of a corporation to be set up within the pebruel Reserve System, the Bill S. 939 introduced by you on your "Y 22, 1941, would provide the means for accomplishing to v2urP°ee in a much simpler way than the proposal attached ' ' - r letter.” Approved unanimously. Thereupon the meeting adjourned. SecretarY. APprove Chairmni.
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