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839 A meeting of the Board of Governors of the Federal Reserve &Mem was held in Washington on Monday, May 29, 1944, at 12:30 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Ransom, Vice Chairman Szymczak McKee Draper Evans 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. Dreibelbis, General Attorney Mr. Pollard, Assistant Director of the Division of Examinations Mr McKee stated that on Saturday, May 27, 1944, Mr. Clerk, Pi R+ Vice President of the Federal Reserve Bank of San Francisco, e4laed him on the le tephone and reported that Mr. A. P. Giannini, C11841111an of the Board of Transamerica Corporation, was very much distilthed bY reports which had COMB to him from branch managers and others 411c1t7 the d iscussions of shareholders of banks affiliated with the G184141-rli interests regarding an antitrust investigation being con(IlletedbY the United States Department of Justice. Mr. McKee said th4 4Parently Mr. Giannini was very critical because of a feeling h4 -4-s Part that the Board and particularly the Chairman was responsible . ‘01' the the, investigation. He also said that the record was clear that toard kr, el knew nothing about the investigation until sometime ago when erk called on the telephone to say that a representative of the %artment of Justice had called at the Federal Reserve Bank for certain 840 5/29/44 information desired in the investigation, at which time, upon check— ingwith the Department of Justice, the Board learned that the investie,ation had been authorized. Mr. McKee went on to say that it ives then suggested to Mr. Clerk that he inform the representative °Irthe Department of Justice that the best way to proceed would be N' him to refer his requests for information to the Department of J14tice in Washington so that the desired information could be ob— tied from the Board's offices. Mr. Dreibelbis stated that in accordance with that procedure th° el3artment of Justice asked to see certain information contained illthe Board's files, which, with the approval of the Board, had been tade available to the Department. McKee stated that Mr. Clerk was going to talk to Mr. Giannini this etternoon and assure him that the Board had nothing whatsoever to with the institution of the antitrust investigation being conducted bY the e partment of Justice. 4ped lir* McKee went on to say that the Board had received through cIlieva : ral Reserve Bank of San Francisco an application of the Bank as Las Vegas, Nevada, for membership in the Federal Reserve retejoa. 'and that the Federal Reserve Bank had made no recommendation 040 h 4G1 not c onducted the examination usually made in connection with elleh a 1)1311-cati0n8 but had submitted an inquiry whether, as provided 1k4e eti°ll 4 of 2 the Regulation P, Holding Company Affiliates—Voting Per- 80erd would first require Transamerica Corporation, which 841 5/29/44 -3/i°1-11d become a holding company affiliate upon the admi ssion of the 13ank of Nevada to membership in the Federal Reserve System, to file aPPlication for a voting permit to vote the stock of the State bank. itr• McKee added that, notwithstanding the agreement that had been ' l eached by the Federal Deposit Insurance Corporation, the Comptroller Qf the Currency,and the Board, the Federal Deposit Insurance Corpora— had insured the deposits of the Bank of Nevada, and that presum4b151. 'if the Board were to withhold membership, Transamerica Corpora— tion would make an issue of the matter. The second question before the Board, Mr. McKee said, was a lettel* received from Mr. Clerk under date of May 23, 1944, stating that the Bank of America National Trust & Savings Association was demanding the right to cast a vote in the nomination and election of a Class B (14ector of the Federal Reserve Bank of San Francisco to succeed Mr. haat the iklicalanny deceased, and the circumstances were substantially ea"nle ae existed in connection with the question which arose with reePect to the election of a Class A director of the Reserve Bank last hal'l At that time, in a telegram dated November 4, 1943, the Board took the position that, since Transamerica Corporation had designated the Pir8t Trust and Savings Bank of Pasadena to participate in the : 444/1 and since such information as the Board had did not indicate '14't the control of Bank of America N. T. & S. A. had changed by reason ot the reduction in the number of shares of the bank held by Trans— klex'ic4 C°rPoration nor that control was exercised in any different 842 5/29/44 —4— 411111er than was the case when the application for a voting permit was granted to the corporation, it would violate the spirit as well as the letter of the law for both Bank of America N. T. & S. A. and 41"st Trust and Savings Bank of Pasadena to participate in the elec11, and accordingly the Federal Reserve Bank of San Francisco was leqUeeted, ' 'do advise the Bank of America N. T. & S. A. that the Board 44 led the bank ineligible to participate in the election. Mr. Dreibelbis stated that the application of the Bank of Nevada for membership raised directly the question whether the Board /10144. be willing to grant a permit to Transamerica Corporation to vote stock of the Bank of Nevada when it was considering the issuance r̀'I t an order to show cause why the existing permit held by Trans4IeIlea Corporation should not be canceled, and that it might weaken the Board's position if it should admit the Nevada bank to membership the Nillire the filing of an application to vote the stock of the Bank Nevada while the other matter was pending. The whole matter was considered in the light of the action that the Board should take in the circumstances to best serve the Public interest, and it was agreed that no decision should be reached at this time with respect to the application of the Bank of Nevada for membership in the System but that a wire should be sent to Mr. Clerk stating that, for the reasons set forth in the Board's telegram of November 4, 1943, the Bank of America National Trust and Savings Association was not authorized to cast a vote in the election of a Class B director to succeed Mr. Volkmann. 843 5/29/44 —5— The telegram sent in accordance with this action read as follows: "The addressed Board has considered the letter dated May 23, 1944 by With respect Bank of America, N. T. & S. A. to Chairman Grady to the election of a Class B director to serve uring the unexpired term of William G. Volkmann, deceased, and demanding that it be furnished the required forms in °rder that it may vote in the election of such a director !s a bank in Group One. For the purpose of electing Class A and Class B directors, the Board of Governors, as required ; 117_ the Federal Reserve Act, has classified member banks of he Twelfth District into three general groups. Under the es1fication thus made by the Board, Bank of America N. T. th.' A. is included in Group One, subject to the proviso at Re- end of the 16th paragraph of section 4 of the Federal wil :!/:ve Act: 'That whenev er any two or more member banks thethe same Federa reserv distri l ct are affiliated with e me ,same holding compan affili ate, participation by such y villper banks in any such nomina tion or election shall be con— to one of such banks, which may be designated for the corP°se bY such holding company affiliate'. Transamerica. a_ p?ration continues to hold a voting permit grante d on Its si:P+ication to vote the stock Americ Bank of N. of a, T. & , 1 21-, and it has design Trust ated First and Saving Bank, s dena, to 19413espar ticipate in the election. The Board con— hold the views expressed in its wire of November 5, to N Ts the contents of which were conveyed to Bank of America, Bank '84 S. A. Please convey the contents of this wire also to of America, N. T. & S. A." Z tilr Nera lir. McKee stated that Chairman Eccles was having lunch at the Reserve Bank of San Francisco today and that he proposed to —41'he Chairman of the developments that had taken place in con— tieetion With this whole matter so that he would be in a position to clieeu "it 1• f he 0„ Should find it necessary to do so. The other members the °4rd present were in agreement that that should be done. At thi tirevitr point Messrs. Thurston, Dreibelbis, and Pollard with— th °m the meeting, and the action stated with respect to each of e tatters hereinafter referred to was then taken by the Board: 844 5/29/44 -6The minutes of the meeting of the Board of Governors of the Federal Reserve System held on May 27, 1944, were approved unani111011sly. Memorandum dated May 27, 1944, from Mr. Morrill submitting there 81gnation of Mrs. Edith Stem as a baker in the cafeteria, ' of the Secretary, to become effective as of the close of busiliese on May 29, 1944, and recommending that the resignation be accelted as of that date. The resignation was accepted as recommended. Letter to the Joint Committee on Salaries and Wages reading tollows• N., "Under the procedure established by General Order b's 19 of the War Labor Board and the authority granted h3r e the Comwissioner of Internal Revenue, transmitted 4,1:,with are the original and four copies of three cer41cates of the Federal Reserve Bank of Richmond, with 'ItiQo increases in annual salaries of four officers ,,ank and its Branches in Baltimore and Charlotte. 011._ 'These increases have been approved by the Board of rnors of the Federal Reserve System effective June 1, 1944.n orst; Approved unanimously. Letter to Mr. Day, President of the Federal Reserve Bank of l'ancisco, reading as follows: otu,"In accordance with the request contained in your letter 20 advising of the program recommended by the Execut&v sea- L'ommittee, the Board of Governors approves payment of areariee to the following officers at the rates shown, which rep the rates recommended by the Executive Committee as c)rted in your letter. This approval is for the period 845 542W44 -7- "ending April 30, 1945, and is effective as of the dates the ( 2111-cers assume their new duties, subject, of course, to forT.J..action of the directors in making the appointments and 11x1ng the salaries. Annual Salary H. N. Mangels Vice President 0,500 :I. U. Leisner 7,500 A. E. Everson Cashier 6,000 Asst. Manager, Salt Lake City Branch R. H. Morrill 5,000 Asst. Manager, Seattle Branch _ "Please advise the Board as to the dates the appointments tmci the increased salaries become effective. "The Board also approves the designation of Mr. Mangels as nri?er in charge of the Bank Examination Department and his nacintment Rrancisco. as an examiner for the Federal Reserve Bank of San "Following your recent visit here, Governor McKee reported t oc th: Board the present and proposed program for the supervision 04 11 the 14 nation Department as you presented it, and it is i _the s of such report that the Board earlier indicated its iZiExami rormal approval, and now formally approves the designation of men stMarigels as officer in charge of the Bank Examination DepartWhieci T° complete the record, reference is made to the letter , . McKee has sent you today regarding his report to the oardMrft '. Z Approved unanimously, together with the following additional letter to Mr. Day Prepared for the signature of Mr. McKee: YOU will receive a letter from the Board formally approvin t4 the designation of Herman Mangels as officer in charge of sala!!nk Examination Department, as well as the increases in '4trl recommended in your letter of May 20. basi Since the designation was approved by the Board on the rea;j2f mY report of the discussions which you and I had ' ora-to ng the whole program, I wt an you to know, and the recshow, the substance of my report to the Board and the rnanding upon which the Board's action was taken. vati rirst, however, I want to repeat that the Board's reseradvaen in approving the designation when the proposal was first mr. need was due to the fact that, according to our information, 811poliangels had had no experience in bank examination and bank vis°rY work, or experience, such as Dick West had had, in ; deall was -krig with bankers regarding their banking problems. There °frill° question about Mr. Mangels' abilities as an operating eer of your Bank. In fact, his abilities in this field are 846 5/29/44 -8:!well known. There was, however, the question as to how ?le training and experience had fitted him for the specialized and important responsibilities of bank examination and supervision. You will recall I also raised the question with ,Y,ou as to the effect on the morale of the Bank Examination Department if an officer without experience related to the work of the department were placed in charge. p "As I told you, neither the Board nor any member of the r°ard had any candidate or any suggestion as to an individual 4_0 8 be ti charge of the Department. The Board's sole concern In thatn important responsibilities of the Reserve Bank handhe field of bank examination and supervision be in capable %and properly discharged. All this I reported to the Board. , 4- also reported that you had advised me definitely: "1. attention That Mr. Clerk would continue his special to the examination work, and Mr. Mangels would have the benefit of that advice and counsel, which we here have always respected, in the superof the Department. "2. That the designation of Mr. Mangels as officer in charge of the Bank Examination Department was proposed with the idea that it would be a temporary arrangement until your retirement. , That in the meantime every opportunity would ue given to develop someone within the Bank with Proper background to assume the responsibilities as officer in charge of the Department when the adjustflients are made following your retirement and that you had indicated that Mr. Volberg, Chief Examiner, would be the logical man. "4. That the situation would be so handled so as not a :47 morale problem in the Bank Examinaa rT tiontoee) D l "5. That the proposed promotion of Mr. Mangels and d tion esignation as officer in charge of the Bank ExaminaDepartment was part of a program of promotion and velopment and involved a number of other promotions ae well. wow. "6. That the proposed assignment of Mr. Mangels e:ound out his experience and development and proan level of supervision and control b.de etw : intermediate Mr. Clerk and the present Chief Examiner, which would be helpful during the period of preparation and ing of the latter. de8ign ,was with this understanding that the Board approved the '"dlon of Mr. Mangels as an integral part of the program for 847 51'9/44 -9- "executive development and of the present and future program for supervision of the Bank Examination Department. „, "When the program was presented in detail, as outlined above, the Board was pleased to cooperate with your sugge"..ons as indicated, and to approve the program in its entirety as submitted." Letter to Mr. Hitt, First Vice President of the Federal Reserve ikrk of st. Louis, reading as follows: , 1,„he or "This refers to your letter of May 19, 1944, regarding e ligibility of notes of the Commodity Credit Corporation re discount by Federal Reserve Banks. "The Board has not had occasion to rule on the question Whether such notes are eligible for discount under the second 12aragraph of section 13 of the Federal Reserve Act or as '°11atera1 for graph of that notes of member banks under the eighth parasection. "It is understood that, to a large extent, the proceeds notes of the Commodity Credit Corporation are used by the I.)oration for the purpose of making loans to farmers on r all°118 agricultural commodities; but that such proceeds are Used for other purposes. As you know, prior to 1937 the ihfdts Regulation A contained a provision expressly prohibits the discount of paper the proceeds of which have been or Ree to be advanced or loaned to some other borrower. However, Sliept s.c , m7s revised effective October 1, 1937 : omitted and in rulings published in the 1937 Federal Bulletin, page 1190, and the 1938 Federal Reserve Page 86 (F. R. L. S. #4791, 4792) the Board tirssed the opinion that notes given to a member bank tor Proceeds of which are to be loaned to other borrowers sliramercial, industrial, or agricultural purposes are zent7le for discount if they meet the applicable require%of the regulation as to maturity and in other respects. rsciu 141? do not understand from your letter that you are sh( ;untlhg a ruling on the question at this time, but if you tio1:-1 -;k feel, either now or later, that a ruling on the.ques1? needed, we will be glad to give it prompt considerhelpi_.1,-f you will so advise us. In doing so, it will be in : t1 ' 4 1. if You will let us have the views of your Counsel matter." Z Approved unanimously. 84S 5/29/44 —10— Thereupon the zneetin adjourned. adrg,d;G-A, 4PProved. Vice Chairman.
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