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802 A meeting of the Board of Governors of the Federal Reserve System Was held in Washington on Saturday, May 29, 1943, at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Dreibelbis, General Attorney Mr. Hansen, Special Economic Adviser in the Division of Research and Statistics Messrs. Gardner and Knapp, Senior Economist and Associate Economist, respectively, in the Division of Research and Statistics Chairman Eccles stated that Mr. Byrnes, Director of the new ll." or Mobilization, called on the telephone this morning and re- rellred to the offer made by the Board at the time of the creation of the Dice "Economic Stabilization to make space available for Ur. Byrnes °t 14 this building. Mr. Byrnes stated, Chairman Eccles said, that there was 4ot elitticient room available in the executive offices at the White House °X 11t11 new Office of War Mobilization and the Office of Economic Sta111112"10 11 which would be headed by Fred M. Vinson as Director, and that he *kid a ppreciate it very much if the Board could make available for 14"1118°11 rive offices and a conference room in the Board's building. °441 11 Eceles added that he told Mr. Byrnes that the Inter-American 803 5/29/43 -2Detellee Board was still occupying space in the building, end that if that Space could be vacated the Board would be pleased to make it available to Mr. Vinson. Be further stated that, if agreeable to the Board, he Would call Under Secretary of State Welles and suggest that the InterDefense Board release the amount of space desired for Director 71118°11. All of the members of the Board stated that they were in agreeWith this disposition of the matter. During the course of the meeting Chairman Eccles was called tr°171 the room twice, the first time to talk to Mr. Welles and the sec°Ild time to talk to Mr. Byrnes and Mr. Patterson, Under Secretary of 'Pon his return, Chairman Eccles stated that he had talked to Mr. Welles 'who said that the War and Navy Departments had a greater interest 14 the activities of the Inter-American Defense Board than the State Debut that following his (Chairman Eccles') comment that that had 11" been the case when the matter had been discussed with Mr. Welles laet year the latter responded that he would take the matter up with 4111'84" Duggan, Adviser on Political Relations of the State Department, Et" telk to Chairman Eccles again on Monday, May 31. Chairman Eccles inlIcie the further statement that shortly thereafter Mr. Byrnes called and, IlDonbeing advised of the conversation with Mr. Welles, stated that he 11(141'21 talk to Mr. Welles. In a subsequent conversation with Mr. Byrnes, : C11 1114811 celeis said, the former stated that he had talked to Messrs. 'les 6Ild Patterson and that it had been arranged that the Inter-American 11"6486 13° Irci would make five offices and a conference room (No. 1202) 804 5/29/43 -3"allable to Mr. Vinson's organization, with the understanding that the later -American Defense Board would be at liberty to use the conference l'c30D1 twice a month for Defense Board meetings. At the request of Mr. Szymczak, Mr. Knapp reviewed briefly the statils of the material being prepared by the Division of Research and Statistics in accordance with the action taken at the meeting of the 13°krla on February 4, 1943, for inclusion in the Military Government Hand1)00:k *Lich was being written under the direction of the Division of Milit/Government of the War Department. Mr. Knapp stated that the work II" subst antially up to schedule and that with the addition of one more 614447ea it was believed the Board's portion of the work would be ready to meet Ine deadline of September 1, 1943, set by the Military Governn• A memorandum on this subject prepared by Mr. Knapp under clEtte „ 24aY 26, 1943, has been placed in the Board's files. Mr. Knapp 111(1 that C010U01 James H. Shoemaker from the Military Government Division, 1145 in c• ivilian life had been an economist with the Board of Economic Warr(111(3) was l'eviewing currently the work being done by the members of the .11°eLl'cl's staff and was thoroughly familiar with it. In Mr. Knapp's 1'8444411 MBITIO- 41• 14 in his comments, reference was made to a further statement which t0 b• e sUbmitted to the Board and which would recommend certain steps tc)€4e the Board a further role in reoccupation work that would involve, 1 ,14 kIlle/Ilars representation on a State Department committee which was '41tatg with civilian affairs in North Africa. 141'' szYmczak then called on Mr. Gardner to make a statement with teal3eet to an inro suggestion made by representatives of the State 805 5/29/43 -4Del'artment that members of the Board's staff undertake the preparation of the financial sections of an economic handbook which was being planned tc3r use by the delegates of the United States to the peace conference to be he following the war. An informal memorandum prepared by Mr. (11 ' (Iner on this matter under date of May 26, 1943, is in the files. Mr- Gardner said that because of the lack of the necessary help the (310,1Y way the Board's staff could undertake the task in the time available would be to do the work on a cooperative basis with the State Depart04 the more important countries or the more important issues. On this basis, he said, it would be necessary to add to the staff on a tern13°11t177 basis a , u least one senior economist and two other oualified econotiste Mr, Gardner made the further statement that the point to be deat this time was whether the Board would be willing to undertake thel"k and to give an informal indication to the representatives of the atate lkartment that the Board would be receptive to a formal request that it Undertake the work, and that if such an indication were given a r°114E0 ,request would be made. Mr. MdKee stated that if the Board were willing to undertake the taek it Should be With the definite understanding that it would be upon °°111iti_ -0/1 that the Board was able to recruit the necessary staff. At the conclusion of a discussion, it waS unanimously agreed (1) that Mr. Gardner Should indicate informally to the representatives of the State Department with wham the matter had been discussed that, on condition that it would be able to recruit the necessary staff, the Board would be willing to cooperate 806 5/29/43 -5in the preparation of the financial sections of the economic handbook and (2) that Mr. Goldenweiser and the Division of Personnel Administration would take the necessary steps to obtain from university faculties or otherwise on a temporary basis the necessary trained men to do the work. Ur. Szymczak then referred to the Board's action on May 19, 19431 elithorizing Mr- Triffin, Associate Economist in the Division of Research azd Sta tistics, to serve as a member of a mission to Honduras and stated that consideration was being given to similar missions to other Latin hterican Would countries and that the question was before the Board whether it wish to have members of its staff serve as members of these missions. kr. Gardner's memorandum of May 25, 1943, which is in the files, lists the important phases of this problem. The members of the Board present indicated that they would be agreeable to such representation, with the understanding that each case would be submitted to the Board for action with respect to its participation in the mission and the personnel of its representation. Mr. Gardner then reviewed for the information of the members of the II°ard the discussions at recent meetings which he had attended, and Which were also attended by representatives of the State and Treasury De134rtzetrts, with respect to the preparation of a draft of an international tebilization Program which would harmonize the differences in the Keynes El" Ilhite plans. During a recent discussion, Mr. Gardner said, Mr. 1141ite, irector of be ittovna for the Monetary Research of the Treasury Department, let it first time that there was to be a meeting on about 807 5/29/43 -68, in which representatives of the British and as many other Allied ec31.11613 as possible would participate and which would last for several daYs9 for a general discussion of the plans Mr. Ozymczak said that, in view of the increased tempo with which Plan8 f°r an international stabilization program were developing, the 130ard should be in a position to express an opinion on the important isellft involved so far as they affect the Federal Reserve System, inel11414g the establishment and functions of a proposed world bank, so that taelliber8 of the Board's staff in attendance at discussions relating to the 1511(31 " 1 would be acquainted with the thinking of the Board on the matter. Mr. Goldenweiser stated that there were two things of immediate 114Portsnoe, I N% tll who would operate the plan and (2) the amount of member boa* reserves that could be created in this country through the operation Or the Plan. On the first question it was his opinion that central banks "r3111d be re presented in the operation of the program, and on the second Illesti°4 he inquired whether the Board was in general agreement with the 1)8iti°11 that there should be limitations on the amount of the commit141" °4 the part 411 that the Goi of the United States to extend credit or purchase gold commitment should be understood to include both. la this connection, reference was made to the letter addressed by denweiser to Mr. thite of the Treasury on December 16, 1942, in it vi -as stated that Chairman Eccles saw no reason why the draft plan tot ea, i tor aie "ernotional stabilization fund should not be accepted as a basis eassion with foreign technicians, provided it was understood that 808 5/29/43 -7- the aincAlrit of dollars foreign countries would be able to demand under the Plan would not exceed 2 or 2-1/2 billion dollars. For reasons which he outlined, Mr. Hansen questioned the need for l ixitati -ons on the commitment of the United States except for the purpose °t getting approval of the plan. P°110wing a discussion of this point, the members of the Board indicated derinit agreement with the position that at least at this stage any on , a commitment by the United States to furnish dollars under the a 44 should include both credit and gold. Thereupon the meeting recessed and reconvened at 2:45 p.m. with the eeme a ttendance as at the morning session except that Mr. Dreibelbis 14 no " Present. There was a general informal discussion of the background of the isad int ernational stabilization plans and the purposes sought to be "11.1"ed by the Plans. The members present were in agreement that the 4E" 811°111d be given whatever authority might be necessary to offset the etteet8 of the operation of the plan as finally adopted on the dorile8tte creait situation, that Mr. Goldenweiser's letter of December 16, 1942, toMr. White "kept the door open" so far as the Board was concerned "to the amount of the United States commitment to furnish dollars, and t4" the Board on this Question ti l be prepared to offer suggestions shoud 1,/hela the A4_ 'i-scussions of the plan reached a point where that was desirable. It 1148 also agreed that there should be a further discussion on Tuesday, 114 e 1) 1943) of specific questions presented by the Keynes and White 809 5/29/43 -8P41183 including the possible effects of such plans on the domestic credit situation. At this point Messrs. Thurston, Goldenweiser, Hansen, Gardner, and Zs, app withdrew from the meeting, and the action stated with respect tO cr the matters hereinafter referred to was then taken by the BOar.c l : The minutes of the meeting of the Board of Governors of the Federa1 liT. esarve System held on May 28, 1943, were approved unanimously. Of the salars, M emorandum dated May 25, 1943, from Mr. Goldenweiser, Director 114 —vision of Research and Statistics, recommending that the basic Of Mrs• Louise A. Frederick, a clerk in that Division, be infrom $1,440 to $1,620 per annum, effective Tune 1, 1943. Approved unanimously. 741011 Memorandum dated May 25, 1943, from Mr. Smead, Chief of the DiOf Bank Operations, recommending .(1) that Miss Charlotte M. p f-er, a clerk in that Division, be permitted to take the balance of h" "ell-Masted annual leave and her current accrued annual leave during the period Xune 3 to 15, 1943, and that, in addition, she be granted six rticlithet leave without pay beginning June 16, 1943, through December 15) 194 3'" 6 (2) that the Board continue its contributions to the retirekent alrst on Miss Shaffer's behalf during her leave without pay pro1'141 8116 continues her own contributions for the same period. Approved unanimously. MeMorandum dated May 26, 1943, from Mr. Van Fossen, Assistant °D the Division of Bank Operations, submitting the resignation of 810 5/29/43 -9- 14188 Sybil E. Heiner as a secretary in that Division, to become effective 48 c't the close of business on June 11, 1943, and recommending that the r"ignation be accepted as of that date. The resignation was accepted. Letter to Mr. Paddock, President of the Federal Reserve Bank of 1308ton, reading as follows: n "Referring to your letter of May 24, the Board of Gover2rs aPProves payment of salaries to the officers of the Bank i the year or beginning May 1, 1943, at the following rates as led bY your board of directors. Annual niq!iplIt Salary Title W. W. Paddock $25,000 President William Willett 16,500 First Vice President 4ickel K. Carrick Vice President, Secretary 15,000 and General Counsel Ellis G. Hult 10,500 Vice President 2arl B. 10,500 Vice President ‘Lo ohn. C. Pitman Hunter 6,500 Cashier Van Amringe 5,500 Assistant Cashier 5,000 Murphy Cashier Assistant i I 73:; ( ti 113: Cashier Assistant Ann X. Pogg Auditor Kennel, Jr. 5iE Assistant Counsel 16' "The Board also approves payment of annual salary to Mr. Oscar A. Schlaikjer, Counsel, at the rate of $9,000 per annum for , e period beginning with his reporting for duty and ending wlth April 30, 1944. ; pitm_7As requested, the Board approves the salaries of Messrs. alt7a, Hunter, and Harvey for the period beginning May 1, 1943, tilu°ugh the changes in their titles do not become effective unXune 1) 1943." Approved unanimously. Letters to "The Farmers Savings Bank Company", Stony Ridge, Ohio, the Piret State Bank in Temple", Temple, Oklahoma, reading as follows: arr "The Board is glad to learn that you have completed all ' eagements for the admission of your bank to the Federal 811 5/29/43 -10"Reserve System and takes pleasure in transmitting herewith a formal certificate of your membership. "It will be appreciated if you will acknowledge receipt Of this certificate." Approved unanimously. Letter to Mr. Gidney, Vice President of the Federal Reserve Bank Or New y ork, reading as follows: m. "Reference is made to your letter of May 20, 1943, subWitting the recuest of The Bank of Westchester, Yonkers, New T °rk s for permission to establish an additional branch in ,-archmont, New York. -, "In view of your recommendation and the information submutted 2 the Board approves the establishment and operation of ;ain additional branch in Larchmont, New York, by The Bank of sestchester2 Yonkers, New York, provided counsel for the Reerve Bank is to be satisfied as to the legal aspects involved e ft Approved unanimously. Letter to Mr. W. T. Daniel, Vice President and Cashier of The "averly, Waverly, Virginia, reading as follows: tai "The Board has given consideration to the request conin your letter of May 22, 1943, for permission to acorq'Isa deposit of $6,000 which was left by will to the trustees 811„:"e Dendron be paid to trustees Methodist Church, and which is to at the rate of $150 and interest each six months '4"1111rithe fund is exhausted. which view of the nature of the account and the manner in Boa„ 't is to be handled, as set forth in your letter, the by will raise no objection to the acceptance of this account Your blast , bank, nk, with the understanding that no other fiduciary ei, -e88 will be acquired without first obtaining the permisv4 Of the Board." Approved unanimously, together with the following letter to Mr. Mercer, Vice President of the Federal Reserve Bank of Richmond: "There is kay 2n enclosed the Board's reply to a letter dated ,s 1943, from The Bank of Waverly, Waverly, Virginia, 812 5/29/43 -11mre questing permission the acceptance of a deposit of 46,000for Which was left by will to the trustees of the Dendron Methodist Church. Unless you know of some reason why such reply should not be made, please forward the letter to the bank. "There are enclosed for your files a copy of the bank's letter and the Board's reply." Letter to Colonel John C. Mechem, Chief of the Special Financial Servi— "e8 es Division, Office of the Fiscal Director, Tar Department, reading follows: -p "We have your mm 25, 1943, with refereorandum oMay ehce to the letter addressed by Mr. Mark A. Brown, Vice Presiof the Harris Trust and Savings Bank, Chicago, Illinois, " e )3° Mr- Olson, Assistant Vice President of the Federal Reserve rar of Chicago, under date of May 5, 1943. For your inforra this connection there is enclosed a copy of a memoren'4ula received from Mr. Coolidge, of the Navy Department, with gard to this matter. _art "The positions taken by the War Department and Navy Do(p)rd ment 1 °t i re are not fully in accord, and, in memoranda toder to l'IT confusion in the matter, it seems to us desirable to Mr. Brown's inquiry with a letter which is acceptable both Services. Accordingly, we suggest that we dispose of .0 047 matter at this time by sending, the enclosed letter addressed : th Ir• Olson. It will be appreciated if you will advise whether a transmittal of the letter to Mr. Olson in this form is Creeable to you." Approved unanimously, together with a similar letter to Mr. William A. Coolidge, Assistant Chief of Finance Section, Navy Department, and the following letter to MT. Olson, Assistant Vice President of the Federal Reserve Bank of Chicago, which it was proposed to transmit upon approval by the War and Navy Departments: "This refers to your letter of May 6, 1943, with which enclosed a copy of a letter from Mr. Mark A. Brown, Vice Silent of the Harris Trust and Savings Bank, Chicago, Illinois. W reprea e have discussed the questions raised by Mr. Brown with A co entetives of the War Department and the Navy Department. PY of Mr. Brown's letter was also furnished to the Maritime 813 5/29/43 -12"Commission, but we have not as yet had the benefit of its views with respect to the matter. "With respect to the first question presented by Mr. Brown, it is the view of representatives of both the War Navy Departments that applications containing a graduated scale of percentages of guarantee depending upon the portion Of the commitment advanced to the Borrower will no longer be favorably considered. "With respect to Mr. Brown's second question, it can only be said that the Services have not determined upon any definite P?liqY which would be followed in the event a case such as that stated by Mr. Brown should arise. Executive Order No. 112 contemplates the guarantee of loans which are necessary en Order to obtain war production, and accordingly it will trtinne to be the policy of the Services as it has been in r e Past not to guarantee a loan if it appears that the Borrower has adequate working capital to finance his war proexetion contracts. As regards guarantee agreements already the Services feel that it would be inadvisable to attempt to make a definite statement at this time as to their Pro ocedure cedure in the event a case such as Mr. Brown described should ii2f) and prefer to be free to consider any such case in the Of all its facts and the provisions of the particular gnarall+ -'ee agreement and loan agreement. In many cases, of L„'4!") restrictions in the guarantee agreement or loan agreen6 Prohibit the use of the proceeds of the loan except for thie,PurPose of performing war production contracts, and where ,e11;,is true, the situation supposed by Mr. Brown's question not be likely to arise, as the Borrower would be entitled to curobtain funds only for the purpose of meeting obligations inred in connection with the fulfillment of such war contracts. mr. :We regret that we cannot give a more specific answer to ice, -, r ,"nl e inquiry at this time but, as indicated, the Serv"aye formulated no policy with respect to such cases. You 4 if you desire, give a copy of this letter to Mr. Brown." 1 Z Letter to Mr. waiter B. wrench, Deputy Manager of The American 131111kers . l'-ssociation, New 'York, New York, reading as follows: refers to your letter of May 20, 1943, enclosing ti nel galley proof of the new war loans book about to be 11111 114eh -4-L ed 1.uy the American BAnkers Association. We have not ceen e e. ttme ,rlier drafts of the proposed book and, in view of the sari,J.imit stated in your letter, our consideration has neceseen somewhat hurried. collta;" have not undertaken to proofread the various documents ned in the proof and our review has been limited in general V 814 5/29/43 -13"to those portions of the proof which relate directly to guarantees under the Board's Regulation V and to the guarantee agreement. A. memorandum of our comments with respect to these portions of the proof is enclosed. It is understood that you will also receive comments from the War and Navy Departments. "It is noted that your committee has drafted forms of loan agreements containing provisions most commonly found Regulation V loan agreements. These forms do not appear to be be included in the proof, and it will be appreciated if YOU rnish us with copies of them if you have them 13;11-eftlit" Approved unanimously, together with letters to the Tar and Navy Departments transmittinc copies of the Board's memorandum of comments. Letter to the Presidents of all the Federal Reserve Banks, reading 48 follows: the B"A number of inquiries have recently been received by oard with respect to charges which may be made by bilks j f 17 their services in cashing and collecting checks. SOMB of rese inquiries have been sent to us directly while others he been addressed to members of Congress and by them transtil etted to us. The ouestion is asked with respect to Governll cheeks as well as other checks and with respect to checks cashedhordeP°sitors as well as nondepositors. question whether and in what amounts such charges be made by banks depends upon the interpretation of the 1810n8 of the first paragraph of section 13 of the Federal : Res par-rve Act as amended June 21, 1917, and of the fourteenth sweagraPh of section 16 of the Federal Reserve Act. In anthel"!ne certain inauiries previously received on this subject, be„ Board has taken the position that the charge made by a memch ' e °r nonmember clearing bank for cashing and collecting a thsc: (1reun on another bank is subject to the limitations of lirst paragraph of section 13. In the light of the numerol revinpiries recently received on this question, the Board is 11-Lng its position in the matter but has reached no con: clus rl with resoect either to the legal or practical questions volited. g "The Board feels matter to ari quesZ with respect to icm- It will be that it will be helpful in its considerahave the views of the Federal Reserve the legal and practical aspects of the appreciated, therefore, if you will 815 5129V43 -14- submit as soon as practicable a statement of the views of your Counsel on the question whether charges made by banks for their ! ervices in collecting for depositors or nondepositors checks urawn on other banks are subject to the provisions of the first regraph of section 13 of the Federal Reserve Act or the fourbothi eelth paragraph of section 16 of the Federal Reserve Act, or and as to whether the Board is authorized or reauired to ,I),Fescribe rules or regulations with respect to such charges. f lie Board will also appreciate an expression of your views, in the light of the position taken by your Counsel and of the 1?1 act1ces of the banks in your district, as to what may or 6ilould be done from a practical standpoint with respect to the 't letter and, if your Counsel feels that the Board has a regu: °rY authority, as to whether it would be possible to devise Y regulations on the subject which would be practical and Wo rkable." r Approved unanimously, together with the following letter to Honorable W. Lee O'Daniel, United States Senate, similar letters also being sent to Honorable Lister Hill, United States Senate; Honorable K. M. LeCompte and Dewey Short, House of Representatives; Mrs. Oscar B. Tacobson, Norman, Oklahoma; Mr. Samuel Resnic, Attorney, Holyoke, Massachusetts; Mr. Tohn F. Hedrick, De Land, Florida; and Mr. C. L. Marlin, Mobile, Alabama: add "This is in response to your 'letter of January 26, 1943, wrin!ssed to Chairmbm Eccles, with which you enclosed a letter to you by Mr. A. A. McMillan of Hermleigh, Texas, regardinp we service fees charged by bfinks on out-of-town checks. efret very much the delay which has occurred in replying to ,*..,, pr `Illr letter. This has been due to the complexity of the vi : ulem presented and to the fact that the matter is under re! in the light of Mr. McMillan's inquiry and a number of ctal liT*Z inquiries recently received by the Board. milni.:The answer to Mr. McMillan's inquiry depends upon the deterOf certain questions as to the interpretation of the proOf the first paragraph of section 13 and of the fourteenth raph of section 16 of the Federal Reserve Act. Both of these per " whi-FaPhs of the law relate to the general subject of charges IllaY be made by banks in connection with checks, but their me the,:ng in relation to one another is not clear. In addition to s- legal questions, the subject involves some perplexing problextwa,„" a Practical character. All of these are now being carec°nsidered by the Board of Governors, and the Federal Res erlre 101_ 'Ilks have been asked for their views with respect to the 816 5/29/43 -15"Practical aspects of the matter. When the replies have been received from the banks, the Board will endeavor to reach a conclusion in the matter as soon as possible. "We are retaining a copy of Mr. MdMillants letter and are returning the original herewith." Thereupon the meeting adjourned. IONZ4A1- 7.14L FflOJLQP Secretary. Chairman.
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