The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes of actions taken by the Board of Governors of the Peclel'ea Reserve System on Friday, May 26, 1950. The Board met in theBoard Room at 10:35 a.m. PRESENT: Mr. Mr. Mr. Mr. McCabe, Chairman Szymczak Draper Vardaman Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Leonard, Director,. Division of Bank Operations Vest, General Counsel Nelson, Director, Division of Personnel Administration Sloan, Assistant Director, Division of Examinations Youngdahl, Chief, Government Finance Section, Division of Research and Statistics There were presented telegrams to the Federal Reserve Banks of Cie A v--anu, Richmond, Chicago, St. Louis, Minneapolis, Kansas City, 138-11a.s 'and San Francisco stating that the Board approves the 4 slimeatb ent without change by the Federal Reserve Bank of San CO on May 23, by the Federal Reserve Bank of St. Louis on 114 24/ and by the Federal Reserve Banks of Cleveland, Richmond, Zwp, as City, Chicago, Minneapolis, and Dallas on May 25, 1950, of the rates of discount and purchase in their existing schedules. Approved unanimously. 5/26/5o -2Mr. Thomas then reported on recent activity in the money kets, commenting particularly on demand for the various maturities (Dr Treasury securities. Dllring Mr. Thomas' report, Mr. Young, Director of the Diviei°14 Of Research and Statistics joined the meeting and at the end Of the report Mr. Youngdahl withdrew. There was an informal discussion of proposed officers' sal- at the Federal Reserve Bank of Kansas City for the year be111-10,g June 1, 1950. Mr. Vardaman stated that he had received a letter from Mr. Cook, 41 '11 Director of the Federal Deposit Insurance Corporation, dated 4, 1920, with respect to fidelity insurance coverage at banks, tha:t he had referred the letter to the Division of Examinations, 44a that if there was no objection he would like to reply to Mr. e°°1] to the effect that the Board was in full accord with the idea that there should be adequate fidelity coverage at banks, that in llovelZber 1933 it had requested all Federal Reserve Banks to give 1)41‘ticular attention to the matter of such coverage at member banks 41114 banks applying for membership, that in recent years more active eclIsideration had been given to the matter in connection with bank 111)elsvi8ion, and that where coverage was not adequate efforts were rile‘ci to obtain correction of the situation, having the banks secure C°N'el'age at least in the amount set as a minimum standard by the 678 5/26/5o -3Bankers Association. The members of the Board present illdacated they would approve Mr. Vardaman's sending a letter along the lines suggested. Mr. Sloan withdrew from the meeting at this point. Chairman McCabe stated that his office had received an 1121*()rmal inquiry from the Council of Economic Advisers whether the 33°8-11 Would like to make any suggestions, for inclusion in the l'Ilesicient's mid-year economic report, relating to the restoration or the Board's authority over consumer instalment credit or a change 14 its authority with respect to bank reserves. He referred to the ellnlents included in the economic report of the President issued JA,, "uarY 1950 which recommended that additional authority over bkrik reserves be given to the Board, that such authority be extended to al, 4- banks insured by the Federal Deposit Insurance Corporation, ellrl that the Board's authority to regulate consumer credit be restored. Chairman McC,tbe also said that, for reasons which he Stated, he did not feel that any recommendation to extend the Board's allthor4, "- ,,Y along these lines should be made at this time, but that the council of Economic Advisers might feel it essential to include 8°Ze comment on the matter. Mr. Szymczak expressed the view that, since the recommendareferred to were included in the January 1950 report, failure "the mid -year report to comment upon the matter might be taken 6`7,4(1 5/26/50 4884 -4- indication that the situation had changed so that there was 11° longer a need for such authority. Mr. Vardaman stated that he would prefer that the mid-year 11)(:)rt make no reference to the recommendations which were conin the January 1950 report with respect to these matters. During a further discussion, Chairman McCabe suggested that the 1-t of the discussion at this meeting, Messrs. Riefler and Youbn. PrePare a draft of statement which might be used if it should be decided by the President that his mid-year report should include 8°4Le rec ommendations along this line. Chairman McCabe's suggestion was approved unanimously, with the understanding that he was authorized to submit the statement to the Council of Economic Advisers if in his judgment that seemed advisable. Messrs. Marget, Adviser on International Finance, and Dembitz, Nef / Financial Operations and Policy Section, Division of Research 44cl St atistics, joined the meeting at this point. Before this meeting there had been sent to each member of the Boar a copy of a memorandum from Messrs. Thomas and Marget tated MaY 5, 1950, recommending that the Board consider the question or fo Ilia' representation of the Federal Reserve System on the Board 10_ or the- .uank for International Settlements. The memorandum stated that it - Was believed such representation would strengthen the ties 680 512%0 between the System and European central banking authorities by " 131 -cling regular occasions for informal but informative discussions QIIImatters of mutual concern, that under the charter of the Bank for illterloational Settlements representatives of the Federal Reserve SYst,era were the only United States authorities that could serve as 111°1413"s of its Board, and that it was not believed that such membership lic411(1 result in deviations from existing institutional arrangements f°' 1 th -e official presentation of United States policy or the transteretce to the Bank for International Settlements of functions now e:"Ireised by other international agencies in which the United States is J-tidally represented. The memorandum also suggested procedural "6138 that might be taken if the Board felt it would be desirable to ex , D-Lore further the possibility of Federal Reserve representation Or the Bank for Interna tional Settlements. Mr. Szymczak stated that he had discussed the matter inWith Assistant Secretary of State Willard Thorp and with Assi„ °Eint Secretary of the Treasury Martin, that neither had indicated 814Y °PPosition to representation of the Federal Reserve System on the 13°0•11 of the Bank, but that both of them felt the present was not an °Pktline time to raise the question. It was recognized, he said, thelt before the Marshall Plan is completed it may be highly desirable to be represented on the Board of the Bank. He added that a further 111'4°133-eta would be the form the representation should take. /X: .' Q6 1 5/26/50 -6There followed a discussion of the function of the Bank fc)r Ilat ernational Settlements and of the reasons for and against he ' vilig the Federal Reserve System become associated with it, ' 4K which Mr. Szymczak suggested that further exploratory con7eree+4 "J-ons with representatives of the State and Treasury Departllt5 m4 , 41e --Lgat be desirable before any action was taken, having in r41.11(1 that -- any decision by the Board on the matter would have to be el J-eared with the National Advisory Council before it was made effective. It was understood that Mr. Szymczak and members of the staff would give further consideration to the matter and that, if it seemed desirable, it would be presented to the Board again at a later date. Mr. Vardaman withdrew from the meeting at this point. Mr. Marget reported briefly on steps taken in connection with the, vcssible formation of a European Clearing Union, at the close of 1 Messrs. Marget and Dembitz withdrew from the meeting. Mr. Carpenter stated that a letter had been received from lilt' McMurray, Staff Director of the Senate Banking and Currency Notattee, dated May 24, 1950, asking for a report on bill S. : 4* small ilairmat Business Act of 1950". 3625, He suggested that, inasmuch as McCabe expected to testify before the Banking and Currency NItaittee shortly in connection with the bill, no formal reply be 1114cle t0 Mr. McMurray's letter at this time. 5/26/50 -7This suggestion was approved unanimously. At this point all of the members of the staff with the ecePtion of Messrs. Carpenter, Sherman, and Kenyon withdrew, and the action stated with respect to each of the matters hereinafter l'ererred to was taken by the Board: Memoranda from Mr. Young, Director of the Division of Reearch and Statistics, recommending increases in the basic annual ealaries of the following employees in that Division, effective MaY 28, 1950: Ikte of memo May 0 1950 aY , 148.y o.df 19)0 ), 1950 Salary Increase To From Title .$ .4700 $4,32) Economist 3,115 3,035 ClerkStenographer 2,530 2,4)0 Clerk-Typist Katherine Radicevic 3,115 Clerk Miss Loretta Freedman 3,03) 3,225 Mrs. Lucile R. MacLean Librarian 3,350 Name Wilellyn Morelle Doris Bruderer Approved unanimously. Memorandum dated May 25, 19)0, from Mr. Draper, recommending 841 iterease in the basic salary of Mrs. Gertrude E. Booth, stenog41)11e ' in his office, from $2,955 to $3,035 per annum, effective 1148 28, 1950, Approved unanimously. Memoranda dated May 24, 1950, from Mr. Young, Director of the bivis, ' c'n of Research and Statistics, recommending increases in the bast,. annual salaries of the following employees in that Division, effe e'Ave May 28, 1950: 5/26/50 -8- , Name "arleis R. Pawley Mrs. Evelyn L. Hempstead Title Economist Secretary to Mr. Garfield Salary Increase To From $7,000 6700 T3,35) 3,475 Approved unanimously. Letter to the Organization Committee of the "Bank of Ilaitois Valley, cave Junction, Oregon", Cave Junction, Oregon, tating that, subject to conditions of membership numbered 1 and 2 coatained In the Board's Regulation H, and the following special coa ditions, the Board approves the Bank's application for member*4 14 the Federal Reserve System and for the appropriate amount or stock in the Federal Reserve Bank of San Francisco, effective It alid when the bank is authorized to commence business by the saaPr opriate State authorities. "3. At the time of admission to membership, such bwr -- shall be entitled to the benefits of deposit in!urance under the provisions of Section 12B of the Federal Reserve Act." The 1 letter also contained the following special comment: "In connection with the granting of deposit in!Urance, it is noted that the Federal Deposit Insurance orPoration prescribed conditions requiring a paid-in caPital structure of $60,000, consisting of $40,000 , 115ital stock, $.),000 surplus and a guaranty fund of ,40400; that your bank obtain fidelity insurance in ufle amount of $40,000; and that subsequent to organi,!ation the board of directors pass a resolution that the uank Will not exercise trust powers without permission .cpbr the Federal Deposit Insurance Corporation. Under he terms of condition of membership numbered 3, the ! onditions imposed by the Federal Deposit Insurance L:orporation must be met prior to admission to membership. 684 5/26/D0 -9“If at any time a change in or amendment to l'he bank's charter is made, the bank should advise the Federal Reserve Bank, furnishing copies of any documents involved, in order that it may be dewhether such change affects in any way the °311.k's status as a member of the Federal Reserve oYstem.” Approved unanimously, together with a letter to Mr. Earhart, President of the Federal Reserve Bank of San Francisco, reading as follows: 'The Board of Governors of the Federal Reserve ystem approves the application made on behalf of the ?ank of Illinois Valley, Cave Junction, Oregon', Cave sunction, Oregon, for membership in the Federal Reserve effective if and when the bank is authorized tYstr) „,_ c-mmenoe business by the appropriate State authorities, :',Auject to the conditions prescribed in the enclosed Letter which you are requested to forward to the °rganization Committee of the institution. Two copies such letter are also enclosed, one of which is for 37_,(311r files and the other of which you are requested to ,orward to the Superintendent of Banks for the State of uregon, for his information. , "Before issuing stock of the Federal Reserve Bank to the new State institution, you are requested to .„ 8atisfY yourself that the conditions imposed by the 4:ederal Deposit Insurance Corporation have been met and, therefore, the bank is entitled to insurance under the Provisions of Section 12B of the Federal Reserve Act. It will not be necessary to obtain amended pages the application for membership as proposed in Mr. ,tade's letter of March 15, 19)0. However, the board of 34.-1-rectors, after the bank has been authorized to commence usiness, should adopt a resolution ratifying the ion taken in the bank's behalf in making application ' c)r membership. We should, of course, receive certified c°Dies of all organization papers, together with counsel's ! ertification on Form 83E, all of which should be 'ecuted before the Federal Reserve Bank stock is issued:, 685 )/26/50 -10Letter to Mr. Walden, Jr., First Vice President of the Federal Reserve Bank of Richmond, reading as follows : "Reference is made to your letter of May 16, 1950, submitting the request of The Washington Loan and Trust Company, Washington, D. C., for approval, under the provisi ons of Section 24A of the Federal Reserve Act, of an additional invest!Tit of $33,000 in bank premises, for the purpose installing new electric wiring in a section of its main office building. "In view of your recommendation, the Board of Governors approves the investment of $33,000, as Proposed, provided that if any portion of the exPenditure is capitalized, provision will be made for the elimination of the entire amount of the additional investment by the end of the current ?.ear. This charge-off should be in addition to the regular program of depreciation." Approved unanimously. Letter to Mr. McLarin, Jr., President of the Federal i eserv, Bank of Atlanta, reading as follows: 1 "Reference is made to your letter of May 17, 9)0) enclosing a copy of a letter from CongressMan Stephen Pace relativ e to the assignment, effective May 17, of Mr. John Liles, an economist employed by the Federal Reserve Bank of Atlanta, 0 assist the Committ ee on Agriculture for a Period of approximately 60 days. This matter has been brought to the attention of the members of the Board. "In this connection, the Board's letter of Jun.. -LD, 1949 (S-1113), regarding requests for Services of personnel in the international field as well as assignments to other Government departagencies, indicated that the Board would ke to be advised in advance of such assignments. It is believed desirable to follow that procedure, so that should any questions arise regarding an as signment of personnel, they could be discussed Prior to making a commitment." 5/26/50 -11Approved unanimously. Letter to Mr. Diercks, Vice President of the Federal Reserye Bof Chicago, reading as follows: "Reference is made to your letter of May 19, with enclosures, submitting the request of United Savings Bank of Detroit, Detroit, 141chigan, for permission, under the provisions C)f condition of membership numbered 1 to which the bank is subject, to change the general character of its business and make available to its customers and the public small personal checking accounts. "In view of your recommendation, the Board of Governors will interpose no objecticn to the :tecePtanoe of such checking accounts by The united Savings Bank of Detroit." Approved unanimously. Letter to Honorable Burnet R. Maybank, Chairman, Committee Bellking and Currency, United States Senate, 14ashington 25, *, reading as follows: "This is in response to Mr. McMurray's letter to C hairman McCabe dated April 17, 1950, requesting all °Pinion as to the merits of the bill S. 2829 'To !!Psal certain legislation relating to the purchase Of Silver, and for other purposes'. "This bill would repeal the Silver Purchase Act ?I ' 1934, Section 4 of the Act of July 6, 1939, the .k„Lct of T tally 31, 1946, and certain sections of the 44ternal Revenue Code. It would provide for the I.s.intenance by the Treasury Department of certain l'eserves in silver bullion or silver dollars against outstanding silver certificates and for the exchange cr silver certificates on demand for silver dollars; Ild it would authorize the Secretary of the Treasury o coin silver dollars and to provide for subsidiary Z silver coinage. 687 5/26/50 -12- "The principal effect of the bill would be to eliminate from the law provisions fixing the price at 'which silver is purchased by the Secretary of the Treasury. Under present law, the price is fixed at 90.5 cents per fine ounce. Since the free market Price of silver is approximately 73 cents an ounce, all domestic productio n of silver is sold to the easurY; and the Treasury, by virtue of the Act 'hay 31, 1946, may not sell silver at less than 70.5 cents an ounce. "To the extent that silver purchased by the f!asury may be monetized through coinage or `41rough the issue of silver certificates, such PUrchases have the effect of increasing the country's 111°11eY supply with a resulting increase in bank l'eserves and in the base for credit expansion. Although additions to bank reserves through T°Iletization of silver have been relatively small ln amount, and can be offset, such arbitrary additions have no relation to the need for such reserves and, from a credit point of view, are nnecessary as long as the supply of gold and ederel Reserve credit continues to be ample. For the reasons indicated, the Board believes that enactment of S. 2829 would be in the public i nterest. We are advised by the Bureau of the Budget that there would be no objection to the submission of this report to your Committee." T Approved unanimously. Letter to Honorable Preston Delano, Comptroller of the allt.relleY, Washington, D. C., reading as follows: 1,. "Enclosed is a copy of a letter dated May 18, together with a copy of its enclosure, from 'uacik of America, a corporation organized under section 25(a) of the Federal Reserve Act, requestthe tentative approval of the Board of Governors an increase in its capital stock from $2,000,000 4.0 $6,000,000, and the addition of $1,500,000 to the capital funds of the corporation through a contribution to surplus. As you know, Bank of )126/DO -13- America is a wholly owned subsidiary of Bank of America N. T. & S. A. 'Your attention is particularly invited to the fact that the increase in capital stock is to be Made through the sale of 40,000 shares of stock ;to the Present shareholders (Bank of America N. T. S. A.) at par value, and also that Bank of merica ". T. & S. A. would contribute 4,1,)00,000 to the surPlus of the corporation. "Before taking any action with respect to this matter, the Board will apnreciate receiving any comments which you may wish to make concerning the Pr°Posal," Approved unanimously. Secretary. 4.0Ved: r Chairman.
@FedFRASER