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Minutes for To: Members of the Board From: Office of the Secretary May 2], 1956 Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. A Chm. Martin Gov. Szymczak Gov. Vardaman Gov, Mills Gov. Robertson Gov. Balderston Gov. Shepardson 1033 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Monday, May 21, 1956. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Szymczak Mills Robertson Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Kenyon, Assistant Secretary Vest, General Counsel Boothe, Administrator, Office of Defense Loans Johnson, Controller, and Director, Division of Personnel Administration Noyes, Adviser, Division of Research and Statistics Sprecher, Assistant Director, Division of Personnel Administration Van Devanter, Administrative Assistant, Division of Personnel Administration The following matters, which had been circulated to the members of the Board, were presented for consideration and the action taken in each instance was as stated: Letter to the Board of Directors, Pan American Bank of Miami, Miami, Florida, reading as follows: This refers to your request for permission, under applicable provisions of your condition of membership numbered 1, to exercise statutory fiduciary powers. Following consideration of the information submitted, the Board of Governors of the Federal Reserve System grants permission to the Pan American Bank of Miami to exercise the fiduciary powers now or hereafter authorized under the terms of its charter and the laws of the State Of Florida. Approved unanimously, for transmittal through the Federal Reserve Bank of Atlanta. 1 f'o • ° 5/21/56 -2- Letter to the Board of Directors, California Bank, Los Angeles, California, reading as follows: Pursuant to your request submitted through the Federal Reserve Bank of San Francisco, the Board of Governors approves the establishment of a branch to be located in the Wood Shopping Square at the southwest corner of California Avenue and Garvey Boulevard, West Covina, California, provided (a) the branch is established within one year from the date of this letter, and (b) approval of the Superintendent of Banks of the State of California is effective as of the date the branch is established. In connection with the foregoing, it is understood that a branch which had been approved by the Board of Governors as of January 9, 1956, to be located at the intersection of Sunset and Service Avenues, West Covina, will not be established, the branch which you now operate in West Covina will be abandoned and its activities will be transferred to the new location when quarters are available for occupancy. Approved unanimously, for transmittal through the Federal Reserve Bank of San Francisco. Letter to Mr. Millard, Vice President, Federal Reserve Bank of aan Francisco, reading as follows: Reference is made to your letter of May 3, 1956, and its enclosures concerning a proposal by California Bank, Los Angeles, California, to open a branch in temporary quarters approximately 500 feet west of San Vicente Boulevard at Montana Avenue in the Brentwood section of Los Angeles, where the establishment of a branch was approved by the Board on March 8, 1956. Inasmuch as it is understood the temporary location will be abandoned as soon as quarters can be erected at the permanent location, the Board will interpose no objection to the proposal. Approved unanimously. 1035 5/21/56 -3In accordance with the understanding at the meeting on May 14, 1956, Ns. Boothe had prepared under date of May 16 a memorandum summarizing the reasons in support of his recommendation that the maximum permissible interest rate on loans guaranteed pursuant to Regulation V, Loan Guarantees for Defense Production, be increased from to 5 per cent 6 per cent. The memorandum, copies of which had been sent to the mem- bers of the Board, stated that the proposal had the approval of all of the guaranteeing agencies and that the Presidents' Conference had expressed general approval of an upward adjustment in the rate along the lines recommended. Emphasis was placed on the increase in the general structure of interest rates since the V-loan program was reinstituted U1 September 1950 and the maximum rate of Board. 5 per cent was fixed by the The memorandum also stated that consideration of the matter at this time was prompted by a recommendation from the Contract Finance Committee of the Department of Defense. Although it was not anticipated that there would be any rapid expansion of the V-loan program, the Defense Department was understood to be anxious to avoid any increase in Progress and partial payments in connection with its procurement program fld to feel that an increase in the maximum rate for V-loans would be of assistance in minimizing the number of cases in which progress and parpayments would be necessary. Some of the guaranteeing agencies were reported to believe that the increased rate would prove helpful to small business. 0-3C, 5/21/56 -4Mr. Boothe reported having been advised that at a recent meet- ing attended by representatives of the Council of Economic Advisers, the Department of Commerce, the Defense Department, the Bureau of the Budget, and General Services Administration, Mr. Wendell B. Barnes, Administrator of the Small Business Administration, stated that there were indications that small business concerns were having difficulty in obtaining financing in some cases where they had defense contracts, and that in other cases such concerns were unable to bid because of inability to arrange financing. Mr. Boothe understood that although no specific cases were mentioned, Mr. Barnes indicated that he would recommend to the Congress that all defense contractors be given authority to apply for advance payments, as well as progress and partial payments. He reported the Defense Department to be quite concerned about this development. Mr. Boothe also said that within the last few days he had received advice from officers of two Federal Reserve Banks concerning cases in which firms reportedly had experienced difficulty in obtaining credit because the commercial banks that they approached were not int erested in extending guaranteed loans due to other demands for funds. Governor Robertson referred to the statement in Mr. Boothe's memorandum that the Presidents' Conference had expressed general ap13r°va1 of an upward adjustment in the maximum rate. He suggested that ‘. 7 03 5/21/56 -5- this statement was not complete, for the Presidents had also referred to the possibility of an adjustment in the schedule of guarantee and commitment fees as an alternative, and furthermore had indicated that the present maximum rate was not, so far as they knew, a deterrent to the V-loan program at the present time. He was inclined, however, to go along if the Board favored an increase in the maximum rate, despite some feeling that the case for an increase had not been made in as strong a way as possible. Governor Szymczak stated that he would favor the increase on the general grounds of the recent change in the interest rate structure. Governor Mills then suggested that action on the matter be deferred for two weeks, at which time the question could be reviewed in the light of developments resulting from whatever proposals the Small BlIsiness Administration might make. It would also be possible to ascer- tain the views of the Treasury Department and to appraise interest rate developments. He felt that an increase in any interest rate at this time was apt to cause discussion beyond what the change itself merited. In response to a question, he said that he believed some decision would be reached within two weeks on whatever the Small Business Administrati°11 might propose, and that in the light of that decision the Board 17light wish to act on the V-loan maximum rate or, on the other hand, Inight decide that it would be well to postpone action. 1.03S 5/21/56 -6Following a further discussion, it was agreed unanimously, in line with Governor Mills' suggestion, to defer action on increasing the maximum permissible rate of interest on V-loans and to review the matter again at the end of two weeks. Messrs. Vest, Boothe, and Noyes then withdrew from the meeting. Governor Balderston called upon Mr. Johnson for a statement with respect to a suggestion which had been made that it might be desirable to review the salary administration plans covering officers of Federal Reserve Banks other than the presidents and first vice presidents. Mr. Johnson recalled that the present structure was approved in 1953 and that since that date there had been a number of upward rein the employee salary structures for the respective Federal Reserve Banks, the increases having been in two more or less general movements averaging about 6 per cent each. He pointed out that the of- ficers' salary structures were pegged at the top to the salary of the first vice president and at the bottom to the midpoint of Grade 15 of the salary structure for employees. This, he said, was beginning to give some of the Reserve Banks concern. The salaries of certain offi- cers were reaching a level where the Banks might like to give some consideration to increases above the current Inaximums and the minimums Were now low in relation to the salary structure for employees. He re- Ported that at the recent conference of personnel officers of the Federal Reserve Banks the representative of one of the Banks made the 5/21/56 -7- suggestion that it might be appropriate for the various Banks to submit to the Board requests for adjustments in the structure applicable to officers, and that subsequently there were indications that this same Bank planned to present a proposal to the Board next month. It waS Mr. Johnson's opinion that in the light of these developments it would be well for the Board to initiate a general review of the officers' salary structures at all of the Reserve Banks. Under such a plan, he contemplated that the Board might ask the Presidents' Conference to have a committee review the structures and make recommendations. He felt that this would be desirable because it would tend toward more uniformity in the structures throughout the System, and because it would permit the Board to deal with the situation at all of the Banks at one time. It Igas not entirely clear, he said, that the Reserve Banks needed increases in the officers' salary structures despite the overlapping at the lower end of the scale. In a discussion of the matter, Governor Mills suggested that sufficient information was available within the Board's offices to reach at least a preliminary judgment on whether the problem was such that the rnatter should be referred to the Presidents' Conference for study and recommendation. Along the same lines, it was suggested that it would be ad visable for the Board to study the situation as fully as possible on the basis of the available information before it took any action which Inight be regarded as being in the nature of a commitment. 1:040 5/21/56 -8In the light of these comments, which were concurred in by the Other members of the Board, it was suggested that as a first step the Division of Personnel Administration submit a memorandum to the Board describing the situation as fully as possible on the basis of available information, with the thought that if, upon review of such data, the Board concluded that elements of inconsistency or unfairness might be Present or that the present structures no longer reflected the principles according to which the structures originally were established, consideration would be given to the possibility of referring the matter to the Presidents' Conference for further study or taking such other action as appeared appropriate. There was unanimous agreement with this suggestion. Governor Balderston then requested that Mr. Johnson present recommendations developed by the Division of Personnel Administration with regard to the classification of the Board's secretarial and steno-. graPhical positions. He stated that this discussion would not relate t° secretarial and stenographic positions in the Board Members' Section 1)ecause those positions would be discussed later at a time when all of the members of the Board were present. Mr. Johnson referred to the current program for the recruitment of stenographic personnel which was approved by the Board on April 24, 1956, and stated that as that program went forward there were appearances 1041 5/21/56 -9- that the starting salaries offered by the Board were not competitive. In the circumstances, a survey was made at various Government agencies of the "board" or "commission" type to determine the salaries offered in the hiring of stenographers and typists and also the level of grades in the secretarial and stenographic field. This survey indicated rather Clearly that to obtain desirable personnel it would be necessary to establish a minimum hiring rate of Group I for typists and Group K for stenographers. This in turn created a problem with respect to the sala- ries paid to present employees in secretarial and stenographic positions. In this respect the survey showed that the classifications established by the other agencies tended to be somewhat higher than those in effect at the Board for positions involving comparable duties and responsibilities. In order to continue the Board's policy of paying at least com- parable salaries, it was proposed by the Division of Personnel Administration that certain upward adjustments in classifications be made. Mr. J64ns0n then outlined the nature of the proposal. There followed a discussion based on a comment by Governor Mills that an upgrading of the secretarial and stenographic positions would seem to have the effect of producing distortions between the classifications established for such positions and the classifications applicable to other employees performing work of comparable difficulty and responsibility. 1O2 5/21/56 -10It was the view of the Board that a proper internal alignment of salaries was important from the point of view of sound personnel administration and that the problem mentioned by Governor Mills should be studied thoroughly with a view to deciding what might be done to eliminate any inequities created by approval of the proposal submitted by the Division of Personnel Administration. While it was recognized that the proposal took into account a special situation growing out of the scarcity of personnel in a particular field and that there would be some difficulty in making adjustments in other areas, where the classifications have customarily been related to Civil Service standards, it was felt that the situation warranted careful consideration. At the conclusion of the discussion, unanimous approval was given to the proposal of the Division of Personnel Administration as follows, with the understanding that the changes would not be effected automatically but only upon individlinl review and determination by the Division of Personnel Administration after consultation with the division in which the positions are located, and with the further understanding that the Division of Personnel Administration would prepare and submit to the Board as soon as possible information regarding the classifications for other positions on the Board's staff involving comparable duties and responsibilities so that the Board might consider what, if any, action would be appropriate for those positions in the light of the action taken in respect to secretarial and stenographic positions: 1043 5/21/56 -111. That the minimum rate for hiring typists be established at Group I and for stenographers at Group K. 2. That Clerk-Stenographer positions assigned to the Head of a Section be selectively occupied at the Group M level, with the understanding that this be restricted to individuals having at least three years of applicable experience or four years of training above the high school level, or an equivalent; and that the title of these positions be changed to "Secretary". 3. That positions of Secretaries assigned to officials at the Assistant Division Head level be at Group P. 1+. That positions of Secretaries assigned to an official at the Division Head level be at Group Q. 5. That adjustments be effected in other stenographic and secretarial positions not specifically covered above to prevent inequitable situations. In connection with the foregoing discussion, consideration was given to methods of providing more adequate stenographic assistance for the various divisions of the Board, including "on-the-job" training Programs. Reference also was made to the possibility of introducing dietaphone equipment to relieve to a certain extent the need for personal stenographic assistance and it was understood that this possibility would be explored further by the Division of Personnel Administration. Governor Robertson stated that he had requested Governor Mills tO --ia-L-Le any matters such as defense planning, holding company, and 1044 5/21/56 -12- bank examination problems, which would normally come within his purview, during the period of his forthcoming trip to Europe. The meeting then adjourned. Secretary's Note: Governor Balderston today approved the following letters on behalf of the Board: Letter to Mr. Denmark, Vice President, Federal Reserve Bank of Atlanta, reading as follows: In accordance with the request contained in your letter of May 16, 1956, the Board approves the designations of Messrs. Clarence D. Duncan and Jeffrey J. Wells as Special assistant examiners for the Federal Reserve Bank of Atlanta for the purpose of participating in the examinations of State member banks only. of Letter to Mr. Stetzelberger, Vice President, Federal Reserve Bank Cleveland, reading as follows: In accordance with the request contained in your letter of May 15, 1956, the Board approves the appointment of George Herbert Ferguson as an assistant examiner for the Federal Reserve Bank of Cleveland. Please advise as to the date upon which the appointment is made effective. Letter to Mr. Diercks, Vice President, Federal Reserve Bank of Chicago, reading as follows: This will acknowledge receipt of your letter of May 15, 195a, requesting that the Board approve the designation of James M. Currie as a special assistant examiner for the Federal Reserve Bank of Chicago. It is noted that Mr. Currie owns a nominal amount Of stock of the State Bank of Schaller, Schaller, Iowa, a non-member bank, and this being a family holding, 5/21/56 -13-- disposition at this time may work some hardship. It is also noted that the proposed designee is the son of the President of the State Bank of Schaller. Accordingly, the Board's approval of the designation of Mr. Currie as a special assistant examiner for the Federal Reserve Bank of Chicago is given with the understanding that he will not be allowed to participate in any examination of the State Bank of Schaller, Schaller, Iowa, while continuing to be a stockholder in that bank. In order to avoid any question being raised, care should be exercised in his assignment to examine any member or non-member bank which, by reason of location or otherwise, might be considered in competition with the State Bank of Schaller. Please advise the Board as to the date upon which the designation is made effective.
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