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649 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Monday, May 22, 1950. PRESENT: Mr. Draper, Chairman pro tem. Mr. Vardaman Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Letter to Mr. Creighton, Chairman of the Federal Reserve Bank of Boston, reading as follows: "The Board of Governors approves the payment of to Mr. Joseph A. Erickson as President at the atrY of $25,000 per annum and to Mr. William Willett aS First Vice President at the rate of 0_8,000 per the rates reported in Mr. Erickson's being th 1; of April 27, 1950, and your letter of May 15, 1950, as having been fixed by the directors, for the period May 1, 1950, through February 28, 1951, the date of expiration of their terms of office. "The Board of Governors also approves the payment of salary to the following officers at the rates indicated, which, according to :Ir. Erickson's letter of April 27, 1950, and your letter of May 15, 1950, are the rates which were fixed by the board of directors, for the period May 1, 1950, through April 30, 1951. Name Annual Salary Title Ellis G. Hult 416,000 Vice President Earle 0. Latham Vice President 13,000 Alfred C. Neal Vice President & Di13,000 rector of Research Carl B. Pitman 16,000 Vice President Oscar A. Schlaikjer Vice President & Gen16,000 eral Counsel RoY A. Van Amringe 12,000 Vice President John J. Fogg 13,000 Vice President Robert B. Harvey 11,000 Cashier Ansgar R. Berge Assistant Secretary, Counsel & Assistant 11,000 Federal Reserve Agent Edward A. Davis, Jr. Assistant Vice Presi9,500 dent Dana D. Sawyer PresiAssistant Vice 9,000 dent r = 650 5/22/50 -2- Annual Salary Title Assistant Vice ,591000 President Elmo O. Adams 7,250 Assistant Cashier Frank C. Gilbody 8,500 Assistant Cashier Edward W. O'Neil 8,000 Assistant Cashier John J. Rock 7,750 Assistant Cashier Elliot S. Boardman Assistant Cashier 7,750 David L. Strong Auditor 7,500 "It is understood that Assistant Cashier Adams will retire effective November 301 1950, and the payment of his salary is accordingly approved only until the date of r etirement." Louis A. Zehner Approved unanimously. Letter to Mr. Brainard, Chairman of the Federal Reserve Bank of Cleveland, reading as follows: "Reference is made to your letter of March 141 1950, advising of the action of your. Board of Directors recommending an adjustment in the salaries of the President and First Vice President of the Federal Reserve Bank of Cleveland. A reply to your letter has been deferred pending consideration of the salaries of all officers of the Cleveland Bank and because we knew You were on an extended business trip. "The Board has advised Mr. Gidney by letter of its aPProval of salaries of officers for the year beginning MaY l, 1950, including the approval of the payment of salaries to the President and First Vice President at their present rates for the period May 1, 1950, to February 28, 1951, the expiration of their present terms. "The comments in your letter with respect to the salaries of the President and First Vice President have been :,siven careful consideration by the Board, but for reasons which have been discussed on several occasions ?..t, feels that it would not be justified in approving an increase in the level of these salaries at this time. "The Board appreciates the reasons which prompted Your letter and the interest of the directors in the management of the Bank. The Board's decision in no way reflects upon the competence of the present incumbents of the top positions at the Cleveland Bank." Approved unanimously. 1;5 i. 512V50 _3 Letter to Mr. Gidney, President of the Federal Reserve Bank of Cleveland, reading as follows: "The Board of Governors approves the payment of Salary to you as President at the rate of ,25,000 per annum and to Mr. William H. Fletcher as First Vice President at the rate of W.81000 per annum, these being the rates reported in your telegram of May 11, 1950, as having been fixed by the directors, for the period May 1) 1950, through February 28, 1951, the date of .expiration of your terms of office. "The Board of Governors also approves the payment of salary to the following officers of the Federal Reserve Bank of Cleveland and its Branches at the rates indicated, which, according to your letter of April 12, 1950, and your telegram of May 11, 1950, are the rates Which were fixed by the board of directors, for the Period May 1, 1950, through April 30, 1951: Name Annual Salitxy Title R. R. Clouse $11,000 Vice President 1. H. Laning Vice President 12,500 & Cashier M. Morrison 11,500 Vice President P- C. Stetzelberger 10,500 Vice President 1)- S. Thompson 14,000 Vice President H. E. J. Smith Assistant Vice 9,500 President C- J. Bolthouse Assistant Cashier P. B. Didham 7,000 Assistant Cashier G. H. Emde ::4 500 Assistant Cashier J. R. Lowe 8,000 Assistant Cashier J. m. 8,000 Assistant Cashier Miller G. R. Ross 7,500 Assistant Cashier W. T. Blair 10,000 Counsel & Secretary 8,500 Chief Examiner 11 'M. Boyd C. F. Ehninger 10,000 Auditor H. B. Fliers 6,500 Assistant Secretary L. M. Hostetler Manager, Research 9,000 Department Branch Cincinnati W. D. Fulton 13,500 Vice President 10,000 R. N. Ott Cashier P. J. Geers 8,400 Cashier Assistant C. Harrell 8,400 Cashier Assistant ll 652 5/2:150 -4- "Name R. G. Johnson J. A. W. J. J. R. W. G. H. R. A. J. Kossin Foster Nolte Price Schmidt Steinbrink Title Cincinnati Branch Assistant Cashier Pittsburgh Branch Vice President Cashier Assistant Cashier Assistant Cashier Assistant Cashier Assistant Cashier Annual Salary 8,500 15,250 11,200 7,500 6,900 8,500 8,000" Approved unanimously. Letter to Mr. McCormick, Chairman of the Federal Reserve Bank ehmond, readind as follows: "The Board of Governors approves the payment of salarY to Mr. Hugh Leach as President at the rate of d(,),000 per annum and to Mr. J. S. Walden, Jr. as First Vice President at the rate of $18,000 per annuli for the period June 1, 1950, through February 281 1951, the date their terms of office will expire. These rates, a?cording to the list attached to your letter of March 1950, and Mr. Leach's telegram of May 12, 1950, are the rates which were fixed by the board of directors. "The Board of Governors also approves the payment ,0! salary to the following officers at the rates inuicated, which, according to the list attached to your letter of March 22, 1950, and Mr. Leach's telegram of MaY 12, 1950, are the rates which were fixed by your 0Erd of directors for the period June 1, 1950, through Y 31, 1951: ,Aarne Annual SalaTy Title wayne, Edward A. 0.6,000 Vice President viercer, Roger W. Vice President 12,000 and Cashier Strathy, Clair B. Vice President 11,000 and Secretary Watson, K. Brantley 12,000 Vice President 12,000 'oalliams, Charles Vice President Armistead, 11,000 N. L. Vice President Martin, Upton S. Assistant Vice 9,000 President Waller, Edward, Jr. 8,400 Assistant Cashier ! G53 5/22/50 "Name Nowlan, Joseph M. Wakeham, Wythe B. Brock, R. S., Jr. Heflin, Aubrey N. Snead, G. Harold Annual Salary Title Assistant Cashier c; 8,500 Assistant Cashier 7,500 10,000 Auditor Counsel 9,000 Chief Examiner 8,500 BALTIMORE BRANCH Milford, W. R. Vice President 15,000 Hagner, Donald F. 10,000 Cashier Johnston, John A. Assistant Cashier 8,200 Wienert, Adolph C. Assistant Cashier 7,500 Armstrong, Bernard F. Assistant Cashier 7,200 CHARLOTTE BRANCH Cherry, Robert L. Vice President 12,000 Ligon, Stanhope A. Cashier 9,000 Honeycutt, Robert L. Assistant Cashier 7,200 MondY, E. Clinton Assistant Cashier. 6,600 ,.. "The Board of Governors also approves the designaulon of Vice President Armistead as the officer in churge of the Examining Department effective June 1, 1950." Approved unanimously. Letter to Mr. Slade, Vice President of the Federal Reserve Bank Of q Lan F rancisco, reading as follows: "This refers to your letter of May 6, 1950, encosing a copy of a letter from Mr. Merl McHenry, Vice President and Trust Officer, Bank of America ilational Trust and Savings Association, San Francisco, Callfornia, relating to the fees which his bank may Charge for the administration of trusts which hold Participations in a common trust fund operated by the bank. "It appears that the bank has a schedule of trust fees es based on principal and that a higher rate is ?hared for a trust's investments in real estate loans t , r: 11an for its investments in other personal property. Since there is this difference in rates when the funds of a trust are invested separately, the bank inquires whether, upon the investment of funds of a trust in a Participation in the bank's common trust fund which holds some real estate loans, the fee charged for the administration of the participating trust may be based (;5(t 5/22/50 -6- in part upon the rate for real estate loan investments. For example, if 15 per cent of the assets of the common trust fund consist of real estate loans, can the bank charge the real estate loan rate on 15 Per cent of a trust's participation in the common trust fund? "The bank's inquiry was prompted by the following provision of section 17(c)(8) of Regulation F: IA national bank * * * shall not * * * receive, either from the Common Trust Fund or from any trusts the funds of which are invested in participations therein, any additional fees, commissions, or compensations of any kind by reason of such participation.' . "In the Board's opinion, this provision of Reguati lon F does not prohibit the bank from basing its fee in part on the real estate loan rate as suggested above. It is the Board's view that the bank would not be receiving any additional fee by reason of the trust's Participation in the common trust fund if it received n° greaterfee than would be charged if the funds of he trust were separately invesbed in the same classes of investments as are held by the common trust fund. "The Board is not undertaking to rule on any aspect of this matter other than the application of the above-quoted provision of Regulation F. The fees which a national bank may charge for the administration of trusts depend, of course, on the facts of particular cases, including the terms of the trust instruments, court orders, and State laws; and, in this connection, c?nsideration should be given to the provisions of sec°n 14(a) of Regulation F dealing generally with trust ' ee8 of national banks." Approved unanimously. Letter to Mr. Peyton Ford, The Assistant to the Attorney , Department of Justice, Washington 25, D. C., reading as follows: "This is in response to your letter of May 10, 1950, enclosing a copy of the bill S. 2569, for the relief of the First National Bank in Richmond, Callf°Pnia, and requesting the Board's views with respect 655 5/22/50 -7- "to that bilL. It is understood that it is desired tnat the Board's report on this bill be transmitted directly to your Department which will transmit its own report and the Board's report to the Bureau of the Budget for advice as to the relation of the bill to.the pro6ram of the President, and that, upon receipt of such advice, your Department will then forWard the reports to the Senate Committee on the Judiciary. . "From information contained in the Board's files, it.is our understanding that the essential facts of this case are as follows. Acting under the V-loan Program for financing war production, the War Department in December, 1942, entered into a guarantee agreement with the First National Bank in Richmond, California, under which the War Department agreed to bear 90 per cent of all losses on a loan made by the Bank to the R. J. Minton Construction Company and also to assume the same proportion of all expenses incurred bY the Bank after default in the enforcement of such 1°an. The loan was secured by an assignment to the BE,ak of the borrower's claims under the war contract which it had with the Government. . "Upon the default of the borrower in 1943, cerain surety companies which had been obliged to pay claims for labor and materials brought suit against the Bank in a State court to recover certain amounts which had been paid by the Government to the Bank as !eslgnee of the borrower's claims under the war coniract; and in 1948 a judgment was entered against the bank which, with interest, amounted to approximately iv/0,000. It is the Bank's position that the loss resulting from enforcement of this judgment is a loss °n the loan and that the War Department is liable linder the guarantee agreement for 90 per cent of such but the War Department has denied such liability. "It is further understood that some months ago, under the terms of a compromise agreement approved by the Department of Justice, the surety companies accepted 50,000 in full satisfaction of their judgment and that of this amount $23,000 was paid by the Bank and '27,0O0 was paid by the War Department. ConsequentV, since the Bank has incurred legal fees of 656 5/22/50 "approximately $10,000 in connection with the locn, total losses and expenses on the loan have been about Z60,000, of which the Bank has in effect received from the Government approximately 45 per cent. Although the Bank deemed it advisable to accept the compromise settlement on this basis, it is believed that, in view Of all the circumstances of the case, the Bank is equitably entitled to receive from the Government 90 per ent of all losses and expenses incurred, that is, about 54,000. The bill, S. 2569, would accomplish this result by providing for payment to the Bank of the difference between this amount and the amount which it has in effect already received from the Government. "The Board of Governors has been interested in this case, not only because of the Bank's membership in the Federal Reserve System, but because the V-loan program was administered through the Federal Reserve Banks and in accordance with the Board's Regulation V. The agreement with the First National Bank in Richmond was executed by the Federal Reserve Bank of Iiichmond San Francisco as agent for the War Department. Because of its interest in the matter, the Board addressed a letter to •the Secretary of the Army on April 18, 1949, Urging that further consideration be given to the merits of this case; and a copy of that letter is enclosed for your information. As indicated in the Board's letter, it is the view of the Board's Counsel that the G .overnment is obligated to share the loss on the loan In this case. Moreover, the case involves an important Principle because of its possible effect upon any future Program in which the Government might desire to enlist the services and facilities of the commercial banking eYstem in the financing of Government contractors. "For the reasons indicated, the Board believes that the claim of the Bank against the Government is a meritorious one and that enactment of the bill S. 2569 is entirely justified. The First National Bank in . 11 :nd has recently been succeeded by the Central Bank or California in Richmond, California, also a member of the Federal Reserve System; but this would not seem to affect the equities of the case." t7 Approved unanimously. 657 5/22/50 -9Te egr of to Mr. Peyton, President of the Federal Reserve Minneapolis, reading as follows: "Board will interpose no objection to the construction of a coin vault Euad the expenditure for t,hat purpose of approximately ‘S•62,000, as outlined ,ftn Your letter of May 10 and Mr. Mills' letter of My 17, 1950." Approved unanimou Secre a App red;
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