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i064 A meeting of the Board of Governors of the Federal Reserve SYstem was held in Washington on Wednesday, May 27, 1942, at 2:30 PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Morrill, Secretary Mr. Clayton, Assistant to the Chairman Mr. Smead, Chief of the Division of Bank Operations Mr. Leonard, Assistant Chief of the Division of Examinations at Chairman Eccles stated that in accordance with the action taken the meeting of the Board yesterday afternoon a draft of letter had been Prepared to Frank J. Lewis, Chairman and Federal Reserve Agent at the Pederal Reserve Bank of Chicago, requesting his immediate resignati°11 as Class C director and Chairman and Federal Reserve Agent at the Pederal Reserve Bank of Chicago, but that the letter had not been sent tbt' the reason that Mr. Lewis had agreed to come to Washington on Monday, 11 1942. " Reference vras then made to the informal discussions which the 141413"8 or the Board had had regarding the selection of an individual to 8erite Notlnei the head of a new division of the Board's staff to handle tters at 4irei the Board and to further the plan for executive (*tient (career system) 01141 at the Board and the Federal Reserve Banks. Recles stated that, as authorized by the Personnel Committee, 1065 5/27/42 he had r44 'LLscussed the matter with Mr. Leonard who had expressed his llingness to undertake the work, if the Board so desired, but wished before the appointment became definite to meet with the Board in order that there might be an understanding of what was desired by the Board e8e. whole and by the members of the Board. He then asked Mr. Leonard to open the di scussion. After expressing appreciation of the offer, Mr. Leonard said that he had sought the meeting for the following three reasons which he considered essential: 1. 2. To obtain at the outset an understanding and clear dlrections as to the nature of the general objective!, the genera responsibilities, and the general authorizatlons of the new division. To obtain, in particular, a clear understanding as O the allocation of functions and responsibilities between the new division and other divisions of the Board's staff. 3. To be assured of the Board's support in the work. 4 Propoaed discussion ensued of a tentative draft of the duties of the itlethe new division which had been prepared by Mr. Leonard, and durdiecussion reference was also made to memoranda on the same ect hi w --ch had been prepared independently by Messrs. Morrill and 11:ceati3 Ohm. wtth e°Pies of which have been placed in the Board's personnel files. -ccles stated that the three memoranda were not inconsistent each other. At the conclusion of the discussion, it was voted unanimously: I 0613 5/27/42 -3(1) To create, effective July 1, 1942, a new division of the Board's staff to be known as the "Division of Personnel Administration". (2) To approve the following statement Of general instructio ns for the new division: "Organization The new Division will be an independent Division responsible directly to the Board and operating under the immediate supervision of designated members or committees of the Board. It will have the same general status in relation to the Board as any existing major Division and be subject to the same general rules and regulations. "2. The head of the new Division should work in close cooperation with the heads of the other Divisions but will have administrative responsibilities only Over the personnel of the new Division and not Over that of the other Divisions. "Functions Relating to work with the Board's staff 1. To centralize the personnel work including a. Recruitment of personnel and the investigation and study of the qualifications of applicants. b. Transmission with recommendation of the new Division of all requests for appointments to the staff, salary adjustments, transfers, separations,retirements, leave, and other recommendations for actions relating to Board employees. Appointments to the staff will be made upon the recommendation of the head of the Division concerned, but before making its recommendation the new Division will be expected to inquire into the need for filling or creating the position, as well as into the qualifications of the proposed appointee. I067 5127/42 —411 c. 11}3 . Absorption of the Personnel Section and First Aid Unit of the Secretary's Office and assumption of the functions of the Personnel Officer and of the Chairman of the staff Committee on Personnel Classification. 2. To work toward uniformity of treatment of the personnel, particularly as between divisions, in such matters as salary, promotion, leave, etc. 3. To maintain continuing review of working conditions and other personnel problems and to further the maintenance of good employee relations. 4. To serve as the first point of contact of such committee or committees as the employees may designate from time to time for consultation with the Board's personnel committee in regard to personnel policies in which the employees may be concerned. 5. To work for the crystallization and establishment of personnel policies. 6. To work towards making the development of the career system effective within the Board's organization, in accordance with the System program. Rela+,. 1ng to the Federal Reserve Banks le To further the development among the Reserve Banks of the Executive Development Plan (career system). 2. To encourage sound personnel policies among the Reserve Banks. 3. To maintain a continuing review of compensation of officers and employees of the Federal Reserve Banks from the standpoint of the Board's responsibility for their approval, assuming in this connection the functions heretofore performed in the Division of Bank Operations. 4. To work for the crystallization and establishment of personnel policies relating to the 'flatters referred to in paragraph 3 above. 5. To develop, and report on, possibilities for appointments of Class C directors and of directors at the branches of the Federal Reserve Banks. 1068 5/27/42 —5— Relating to the Retirement System 1. To review and prepare for consideration matters and questions coming before the Board of Governors pertaining to the Retirement System." (3) To appoint Robert F. Leonard as Director of the new division, effective July 1, 1942, to relieve him of his duties as Assistant Chief of the Division of Examinations as soon as possible to enable him to work on the establishment of the new division, and to increase his salary to the rate of $12,OOO per annum, effective as of the date upon which he iS relieved of his present duties. (4) To have prepared and submitted to the Board for approval a budget covering the expenses of the new division.. At this point Messrs. Smead and Leonard left the meeting, arld 88rs. Bethea and Carpenter, Assistant Secretaries, entered the rtieetin ' g and the action stated with respect to each of the matters hereiriar. 'ter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the .4-1- Rept.. --rye System held on May 26, 1942, were approved unanimously. tivist:emorandum dated May 26, 1942, from Mr. Smead, Chief of the of Bank Operations, submitting the resignation of Mrs. Ellen Thorila8 as a clerk in that Division, to become effective as of the Lc'8e Of business on May 31, 1942, and recommending that the resigna- ti°11 be accepted as of that date. The resignation was accepted. or Let ter to Mr. Sproul, President of the Federal Reserve Bank reading as follows: 1069 5/27/42 —6— "Referring to your letter of May 21, 1942, the Board of Governors approves the payment of a salary at the rate ! i 4/000 per annum to Mr. John J. Clarke, an employee in e Legal Department assigned to the Foreign Property Con01 Department. . "It is noted in your letter that, in the light of 7, Clarke's performance since his employment, it is probable that he will be retained as a member of the Bank's Permanent staff. In this connection, it will be appreeAlated -X you will submit for the Board's approval a Form inPage covering the position occupied by Mr. Clarke, since, acc the o ordance with the Board's instructions relating to peration of personnel classification plans (B-315), the nkPersonnel classification plan of each Federal Reserve should cover all nonofficial positions in the Bank." Z Approved unanimously. 04v -I Let ter to Mr. Fleming President of the Federal Reserve Bank of e-4and) reading as follows: let "In accordance with the request contained in your ch !r of May 22, the Board approves the appointment of ern 7 1 4, e ,re L. Davies as an assistant examiner for the FedReserve Bank of Cleveland. Please advise us of the as!uPon which the appointment becomes effective and also 140 the salary rate." Approved unanimously. Telegram to the Presidents of all the Federal Reserve Banks, gas follows* cha "Until further notice interest, fees, and other O"es derived by War Department from loans and guar : to) referred to in Section 6, page 7, of instructions be: " - 1- Federal Reserve Banks, dated April 8, 1942, should coldited to General Account of U. S. Treasurer for acZhe,°f Colonel W. M. Dixon, Finance Officer, U. S. Army, sell.% 28-418. CD Form 6599, should contain brief deeoltlXi°I1 of item Credited. Original of CD should acnY t ranscript to Treasury and carbon should be 1070 5/27/42 -7- mailed to Colonel V. M. Dixon, Finance Officer, U. S. !rrAY, 801 Channing Place, Northeast, Washington, D. C. YOU will be advised later with respect to accounts to be credited for interest and fees collected on behalf °f Navy Department and Maritime Commission." Approved unanimously. Telegram to Mr. Swanson, Vice President of the Federal Reserve of Minneapolis, reading as follows: "Your wire May 7. Mere fact that all or portion of „'rge account is considered bad debt and charged off or ;Trbed in reserve would not relax prohibition of section 8\ ) of Regulation W if charge account is in default under m.,.°fl 5(c) and default has not been cured by one of 8;'"°ds in section 5(d). Charge off or absorption in reeZiould not abolish 'indebtedness' referred to in sec4 However 'indebtedness' under 2(g) does not "ude indebtedness which is legally unenforceable." C Approved unanimously. Telegram to Mr. Swanson, Vice President of the Federal Reserve of PC is, reading as follows: mpt "Y°ur wire May 22. Loan to American Legion not exunder section 8(1) Regulation W." Approved unanimously. Telegram to Mr. Stroud, First Vice President of the Federal Re"e 13nro. - 4 of Dallas, reading as follows: ' not e te1 May 18. Section 8(k) of Regulation W does eecli empt a new loan made by a bank after May 6 on the lifc'ttY of the loan value or cash surrender value of abl; Insurance policy if loan is not for purpose of enborrower to pay off a policy loan made by the 8111'er Prior to May 6." Approved unanimously. 1071 5/27/42 -8Telegram to Mr. Clerk, First Vice President of the Federal Re-. e1 ' 7 Dank ' of San Francisco, reading as follows: i "Your wire May 20. Section 10(b) (of Regulation 11) 1.8 applicable to consolidations of instalment obligations ie ,819-ting from conversions of charge accounts, and new , 7 1 84alment sales may be consolidated with such obligations. aPPreciates that in Some cases payment on new pur' t4 8a is postponed, but requirement in clause (i) of Opbl':?11 2 that payments be as large as on the old obligations '1-tig consolidated is intended to prevent serious avoid*" by this means." Approved unanimously. Letter to Messrs. Walter Womack and Paul A. Mason, Long Beach, altO1111a, reading as follows: of v "The President has referred to the Board your letter th:LaY ,19/42 inasmuch as the Board is responsible for - a 'nistration of the controls over consumer credit. 8 , "You suggest that the Federal goverment lend its 1:4PPort to a plan by which a central bureau would beset to act as a coordinating agent between employees in deIlael industries and their creditors. 'It would seem, however, that the problems to which ceg Plan is addressed would be a matter of community contin the areas where it exists and that therefore the 4. be ci..,°n what solution would be most desirable could best or r,:ermined by the local legal aid offices, credit bureaus, 'Ter similar organizations. YOur interest in this matter is very much appreciated." 4 Approved unanimously. Letter theto Mr. Carter B. Cordner, Executive Vice President of 5.1'st Thrift NI - of Los Angeles, Los Angeles, California, reading as wv_ 1942, "e wish to thank you for your letter of May 19, Which reports criticisms of Regulation W that have 1.072 5ft42 —9— "Come to your attention and expresses the feeling that the regulation should be liberalized. d "In view of the purposes for which, under the Presient's Executive Order of August 9, 1941, control of coner credit has been undertaken, it was inevitable from oeginning that the regulation would have to be broadened i;'..tightened from time to time. Whenever that is done, ,j 1s quite natural that there should be some additional 1-1;(?tests, but the Board has hoped that in times like those ich have ,o11oed . Pearl Harbor people generally would understand support the actions taken. Notwithstanding eePti such as your letter mentions, this seems to have been r R the case. "You will have noticed that there are exemptions in ,egul.ation Wwhich are designed to take care of the most ritorious instances of necessitous loans. On the other d, 2 the need to conserve every resource which can be Utilized for war purposes is increasing so rapidly that 7. general liberalization of the regulation could not be JU stified at this time." 4 Approved unanimously. Thereupon the meeting adjourned. ino-vb-q) Secretary. Chairman.
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