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Minutes of actions taken by the Board of Governors of the reaReserve System on Thursday, May 6, 1948. PRESENT: Mr. Mr. Mr. Mr. Mr. Szymczak Draper Evans Vardaman Clayton Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board MillUtes of actions taken by the Board of Governors of the leselslie System on April 30, 1948, were approved unanimously. , , Minutes of actions taken by the Board of Governors of the ze4rea. tli Ileserve e ,5rstem on May 3, 4, and 5, 1948, were approved and tletio, ' s recorded therein were ratified unanimously. I'leill°randura dated April 29, 1948, from Mr. Szymczak recom: 148 (1) that Daniel F. Lane, a messenger in Mr. Szymczak's of'1)e transferred to the Division of Administrative Services be.zi Ei41 411 °::t()I. (Duplicating Devices), with no change in his present c fl.l.ary of $2 thEtt ,168.28 per annum, effective May 16, 1948; (2) : titt tr i:s tiL ve ovsere:Tees Templeton, a stenographer in the Division of Adti qelio to be transerred to Mr. Szymczak's office as :711e1" and that her basic salary be increased from $2,394 t, ' .24 Per annum, effective May 16, 1948; and (3) that ottie Pr°6t be appointed as a messenger in Mr. Szymczak's 'litlibasic salary at the rate of $2,093.04 per annum, 708 V6/48 -2effective as of the date upon which he enters upon the performance Ilisdllties after having passed the usual physical examination. Ilellaelli°ralaclum also stated that Frost was a member of the Civil sele retirement system and would remain in that system. Approved unanimously, with the understanding that, inasmuch as Fredrick L. gsponsibilities would be those t eri t srje F or: Mr. Szymczak's office, should Frost's services be terminated, the Board would not be committed to his transfer to another position on the Board's staff. Matiorandura dated May 4, 1948, from Mr. Thomas, Director of tile b 418104 of Research and Statistics, recommending that the res- -- or S. Florence Guild Nixon, an economist in that Divi- , be tl, accepted to be effective, in accordance with her request, el°se of business May 7/ 1948, with the understanding that stilt 'DELYment would be made lb- annual leave remaining to her as of that date. Approved unanimously. Mez andum dated May 5, 1948, from Mt. Thomas, Director of the ion °I. Research and Statistics, recommending that the res- ti Of Sophia Cooper, a research assistant in that Dibe ace ePted to be effective, in accordance with her re'at t he 01 --ose of business May 9, 1948, with the understand-' hs.t a 14111) sum payment would be made for annual leave remaining 709 5/6/48 -3- tO he credit as of that date. Approved unanimously. Memorandum dated April 28, 1948, from Mt. Smead, Director °r the r , 4"lvision of Bank Operations, recommending an increase in basic salary of Mts. Esther W. Conover, a clerk in that Di)ti8i0 trcla $2,845.44 to $3,021 per annum, effective May 16, unanimously. Approved edl9 Memorandum dated May from Mr. Van Fossen, Assistejlt Director of the Division of Bank Operations, recommending that ,re be tr, slEnotion of Miss Doris Garrison, a clerk in that Division, 'eeVted to be effective, in accordance with her request, at tIle el use of b usiness May 25, 1948. Approved unanimously. laetter to -4. Of mr. Sproul, President of the Federal Reserve ilew York, reading as follows: 1948 ' , las refers to Mr. Wiltse's letter of April : 30, ) &11oZI1L'i°8ing a copy of a letter from Mr. F. Wilder 'eLs bp71 c°ntaining advice that Mr Bernon S. Prentice 4e or his decision to retire as a limited partner t1043 1lick & Dominick in order to comply with secof the Banking Act of 1933. l'ertis "40te that Mr. Bellamy requests the Board's :1_le•ee , 81°I1 to have Mr. Prentice's retirement take 10/1z 4, June 30, 1948. He states that complica€t IDEIrt17 "counting incident to the retirement of -er will be more easily met if the retirement 710 5/6/48 -4" ./. es place on June 30, and that Mr. Prentice is still Rot rd exPects to leave within the next few days for th:t11-Prings where he will remain for six months. In °I* these circumstances, you may advise Mr. Bellamy he Board has no objection to Mr. Prentice's retire' M from Dominick & Dominick taking place on June 30, 1948.” Approved unanimously. Letter to Mr. Hill, Vice President of the Federal Reserve of Phil ladelPhia, reading as follows: te 1.,,s'ae Board of Governors of the Federal Reserve Syslett ' 4QL8 considered the recommendation contained in your Secte i r ()r April 23, and, pursuant to the provisions of to -' 19 of the Federal Reserve Act, grants permission each ser,7 c'r the following banks to maintain the same re.Llagainst deposits as are required to be maintainf e_ fectir . 8 outside central reserve and reserve cities,.e Aeri h the first semi-monthly reserve computation i egliuling after the date of this letter: -b 01m liati° ;tank of Germantown and Trust Company, Philadelphia 1\1Ettion . Zletf-4" tank of Olney at Philadelphia liortl,orth Broad National Bank of Philadelphia krthicPhiladelphia Trust CompRnY secondestern National Bank in Philadelphia 8ecilzitNational Bank of Philadelphia i.,,tank and Trust Company of Philadelphia xtie lliadelphia National Bank of Philadelphia '1°ga National Bank and Trust Company of Philadelphia tiot, le fact acadvise each of the banks of the Board's is matter, calling its attention to the 40Etra—en. Permission is subject to revocation by the Governors of the Federal Reserve System." e Approved unanimously. tiEltItEt, "zr t Mr• ° McLarin, President of the Federal Reserve Bank l'eeding as follows: 711 5/6/48 -5191, "Reference is made to your letter of April 27, Ba:T, submitting the request of The Commerce Union tX") Nashville, Tennessee, for approval of the esj'i-ishment of a branch in Donelson, Tennessee, in 0(1 11,rcti n with the proposed absorption of the Bank 0 Imnelson, Donelson, Tennessee. Go "In view of your recommendation, the Board of cprnors approves the establishment and operation branch in Donelson, Tennessee, by The Commerce sol. Bank, Nashville, Tennessee, provided the abpos;;'°11 of the Bank of Donelson is effected as proaia.0 7 and the formal approval of the appropriate State th:rities is obtained, and with the understanding sat. cOunsel for the Reserve Bank will review and 1‘ himself as to the legality of all steps taken to : 1. i - lect the absorption and establish the branch. thea The proposed transaction appears to contemplate ala s1)11rsement of the capital of the Bank of Donelson Nzi;:e assumption of its deposit liabilities by The the -; ' .,ce Union. Bank with no increase in the capital of asset : a sorbing bank which is low in relation to total the' B and to risk assets. Except in cases of emergency, IO °ard does not, as a general policy, favor absorpabsoVnvolving disbursement of the capital of the bank d, unless the capital position of the absorbing s altogether adequate. "wh,, . c°1=diti Ile improvement has been effected in the asset acco t°4 of The Commerce Union Bank and its capita have been increased substantially through reearnings since admission to membership, it corlsid reit that its present capital position can be c3r theefed satisfactory. The Board is keenly aware Et;1.0 , ' ank's long record of delay and deferment of vith regard to increase of capital and disposiille'r st°ck of the Broadway National Bank of Nashthr°ugh sale or liquidation and operation as a Ch wasromised at the time The Commerce was admitted to membership. In the circum13°ara Zr°u are requested to advise the bank that the + 131le 11 not be disposed to approve any further ay): et1 isli .involving expansion unless the bank's capi, , Llsfactorily increased. ' thro appe ars that the absorption is to be effected Ugh chase of assets and assumption of deposit be.Wr "71.2 5/6/48 -6ities If such is the case, the absorbing bank only such assets as it may purchase lefor its own account. xela "In his letter dated April 23, 1948, Vice President states that The Commerce Union Bank has acquired the 8a _entire 300 shares of the outstanding stock of the Donelson. From this it would appear that the secrjsions of Section 9 of the Federal Reserve Act and 5136 U.S.R.S., have been violated." (itio ad acquire Approved unanimously. Letter to the Honorable Maple T. Han, Chairman, Federal n surance Corporation, reading as follows: h13°sitI accordance with the request contained in 3your r letter the ,of April 28, 1948, the Board of Governors of zent-e ' 4eral Reserve System hereby grants written conOr s2.11r3Ua1t to the provisions of subsection (k) (2) itier;:ion 128 of the Federal Reserve Act, for examto nl:,°r the Federal Deposit Insurance Corporation 4117'e an examination of the E. G. Young & Company tlon f2 °.81 and, Oregon, in connection with its applicatetbe;-„r continuance of insurance after withdrawal from ,V in the Federal Reserve System. ;'.1fte13 ti' re have been no corrective programs urged upon d or agreed to, which have not been fully con'lad in connection with which the Board would slIggeRt e-48 %II-- _inc orporation of conditions for continuing its 8 4/8 an insured bank." Approved unanimously. Letter , to the Honorable Charles W. Tobey, Chairman, Bank1.44 elar. 1Nz: rencY Committee, United States Senate, reading as fol- ge.rdln!Ilis refers to your letter of April 29, 1948, reluM1 : -7; 2564. The bill would exempt securities is" International Bank for Reconstruction and T. 71.3 5/6/ 8 -7 sIlevelopment from the Securities Act of 1933, from the ties Exchange Act of 1934 and, with certain limiZ vi 'ns) from the provisions of Section 5136 of the Ret's'iStatutes which relate to dealings in securities liational banks and State member banks of the Federal serve SYstem. rae.dp. :The provisions of the bill follow a recommendation 4e-1,L0 the President Pro Tempore of the Senate and the as 6 eZersr of the House by the Secretary of the Treasury, : irman of the National Advisory Council on Intertatior t}1 -1I:1111 Monetary d Financial Problems. The Chairman Board is, as you know, a member of the Council. The b COUr Clexpressed the view that the Acts which would tiati--Ixted were not enacted with an international instit]lei n such as the Bank in mind and that compliance with ri .13rovi6i0n5 would tend to hinder the raising of illeas 0Y the Bank in the United States markets. AccordOZ' these reasons and in view of the interest the ' 13EllikStates has in the continued effectiveness of the rtn, 1,e 1 Council recommended that the Acts be amended. Or-ti : ll4j ? Board is in entire accord with the conclusion Board-1,."e•tional Advisory Council on this matter. The ealci it:Vdeves that the proposed changes are desirable, ,-,1Zavors the enactment of S. 2564 for that purpose. 1)1.01)0 '4' 1e Board has given special consideration to the vhichsed. exemption from the provisions of Section 5136 or therelate to dealings in securities by member banks ese Reserve System. Section 5136 in its orm prohibits such banks from acting as dealers LY-Pes of securities. That Section, however, now te/lt, es exemPtions for securities of the U. S. Govern(over °t" States and municipalities, and of a number of at instrumentalities. Because of the participath-Rtirr U. S. Government in the International Bank theBL,x0 vernment's special interest in the institution, seciari;:4 feels that the proposed exemption for the Bank's es 1ti is a logical and desirable addition to the ex138-rtiar.e-emPtions and that it does not represent any defrom existing principles." f r a Approved unanimously, together with 4 elmilar letter to the Honorable Charles lc) Wolverton, Chairman, Interstate and . Committee, House of pL %!I ZTTNeZe Ber 714 5/6/48 -8Letter Of t to Mr. Sproul, President of the Federal Reserve Bank reading as follows: or "Following the receipt by Mr. Eccles of your letter ell 9 and the accompanying copy of your letter of *qif the ge-mle date to Mr. Gilbert Perkins, Vice President of 4014 1eW-cal Bank and Trust Company of New York, GoverL4Ymczak asked Mr. Julian Baird, President of the Assc)ciation of Reserve City Bankers for a copy of the r.rt 0-f. the Committee on Correspondent Bank Relations to vh, Mr. You referred as having been left with you by clit4rkins with a request for your comments. SubseMr. Aishton, Chairman of the Committee of hih e0hjce.Perkins was a member, handed Governor Szymczak -11 , POrt zDo a copy of the report and we have readconsid.. the Well as your letter to Mr. Perkins with nterest 'The ellee conference referred to resulted from correspondbeeli 4-nitiated by Mr. Baird following protests that had trarZ! against the absorption by the Reserve Banks of . : e. ration charges on direct sendings of member banks, of which Mr. Baird expressed a desire that 7' AT:Zit °e €0. .;'011'3 Committee on Correspondent Bank Relations start:: 11 11 oPportunity to meet with members of the Board's Iflaieh „ - egarding other matters that might be developing l'espo ; °111d be of interest to the Association. The Board's 8.coll-ge of course was that it would be agreeable to such *)111c 1 brence at any convenient time and suggested that it ' ! 1=Vp ;74 helPful if there could be indicated in advance °tel—j-cular line of thought which the Committee wished ti P or project the Committee had in mind so that Ilere !''t be better prepared, but were advised that there disc: Particular lines of thought that they wished to /14-rd ts ,nth our staff - in fact, they were looking forellaLraci '4e meeting being more or less exploratory in tort, er. Because of the fact that there was no agenda Drn -Posed conference, there was no satisfactory eXtending an invitation to anyone from the Reto come to Washington to participate. l'ece4 stat .a eu in the last paragraph of the report you 4t4leabe i' cel the *whole discussion was quite informal and Mr. Aishton stated that there had been rumors 715 5/6/48 -9" t iblp t the Board was contemplating making very substanRe;-'- changes in the check collection procedures at the m4 serve Banks and that it would be helpful if his ComoTtee could have a frank discussion with representatives the Board of the whole problem. He referred specif0% ' 4,1; : 1 3 to the granting by the Reserve Banks of immediate sl (73; 1" - for cash items and a reduction in the number of rei; ;sk' Re also referred to the decision last year to arv;— ' urse member banks for postage on direct sendings te stated ' that while that had turned out to be a matet: minor importance it would have avoided misunder--i g if it could have been discussed in advance. "44 response it was explicitly stated that no one undertake to speak for either the Board e'r the Rd kteserve Banks and that whatever might be said erli'-Ld be taken as purely personal expressions. GovgiZ Vardaman, who attended the conference, empha-not sAeaii , the't in anything he might have to say he was ; 6 for anyone except himself. Arecii"-`21 the course of Governor Vardaman's remarks he crediced tha.. 6 action on the question of immediate the tIml'iould take place within a period of a year. In Ile4;11ing discussion it was made clear that a decision 1ees —, been reached as there were undoubtedly differlithila°:thennion which would have to be explored first, eral ip, Board's own organization and among the Fedto ID --serve Banks, and that if a decision were reached 4blelltimelich a Plan into effect, it would take consider: -,for the Reserve Banks to make the necessary slike e- -L11 organization and procedure, which would conloressZt least a year or two. In connection with exthe 11 °Ils of feeling that such action would mean that illth:serve Banks were competing with commercial banks th respondent banking field, it was pointed out oth:;-.1 4 step would not mean any financial benefit operati.aeserve Banks, as it would cause additional Ileighed4g expenses, and that it would have to be ! ervieR.,°n its merits as a further improvement in the b rendered by the Reserve System, not only to ti4 ge4 41L1 / 45 but to agriculture, commerce and industry 1 1.t Some of the past substantial progress .as 11— ueen made in that direction was reviewed. le however that it would not seem dehowever, the existing inflationary circumstances 716 5/6/48 -10available the substantial additional reserves be created in this way. That would be a step should, if adopted, become effective under deflaeZ rY conditions. It was in that connection that the was made that consideration might well be given 0 4t should be the reserve requirements if immediate ,uit were allowed. ite "With respect to the Recordaking of outgoing cash the:Ts',it was not the intention to give the impression oed all Reserve Banks planned to institute this prostep although some of them propose to do so. As Peri ed in the last paragraph of the circular of the 1.91Wal Reserve Bank of Chicago, No. 1331 of April 10, t ,even after the requirements of the Reserve Banks beri ; the description of cash items are eliminated, memcolas,a11.14 depositing items with the Reserve Banks for tailat-e'ion should, in the interest of sound banking, t114b,ain adequate records to enable them to identify the,: depositors and charge back items in the event 'are lost or destroyed. that " .While Other subjects were discussed at more length sliffilladicated in Mr. Aishton's report, it does not seem to elltlY important to go further than above stated from 'tfect certain erroneous impressions that might arise report in its present form. It :Lmight be added that Governor Szymczak was told the r 'Ilshton that the next to the last paragraph of 131aceeP i 01-t would be eliminated. No such discussion took 11 the conference with the staff. Also, while the ee.Ptio; U 0 the report refers to a 'two-day session, Jan, 1113-rY w)ara .; -c.u, with the staff members of the Federal Reserve ea.tlee -11 Washington', this apparently was inadvertent be"SUb sequently indicated in the report, there was ",; 1 neeting between Mr. Aishton's Committee and memuatIllar-y .ge . Board's staff. This was on the morning of .671, would 11'1.1.1:We are sending copies of this letter to Mr. Aishton 3laird for their information." Approved unanimously. A t'etter ttiaLeter Ge to the Honorable Joseph J. Lawler, Third Assistant lieral, Post Office Department, reading as follows: 717 5I6/ 8 -11" ber Reference is made to Mr. Black's letter of Octo5 1943, in which the Board was advised that tentErq ' 1.1 e arrangements had been made with the Texas Highp atrol whereby convoy service would be provided he needed for valuable registered mail handled over e.star route from Big Spring to Lamesa and O'Donnell De 14 the cotton picking season of 1943. It now apsoujthat the large increase in activity in the Texas Iligh u1remePla ins Area has created unusual currency re1114. during the cotton season and that the banks beet-the area have been put to considerable inconvenience eAlse of inadequate registered mail service. 14 ).,"The Present complaints arise from the reestablishPostal authorities of the restrictions as to the be of valuable registered mail shipments that may Ported via star routes. Five of these star route the hare reported to operate out of Lubbock, Texas, opera7.art of the cotton growing area, and the sixth rest-i ' es Out of Sweetwater. It is understood that the -eti°ns were reestablished as a result of a sudden (ir %lithr Or Mt/al of convoy service in November 1947 because eakelltvY demands being made on the Texas State Depart01a4lf Public Safety to maintain peace and order, into the thousands of itinerant workers then coming the area. .B.,(4.1renl' : s entY-one banks, all members of the Federal Re'Ielive-1, -Jetem, advise that the restrictions as to day of rlot pe2 as well as to the amount they may receive did them to have on hand sufficient currency to 0rker5',1PaYroll requirements for these same itinerant :,'4uring the latter part of the 1947 cotton picksea e° 1 --°11. These banks are located in the following -41erst O'Donnell Levelland trolt Littlefield Cr eld °sbyto ( 1-1 1111 13 Lorenzo Rotan Morton Seminole Muleshoe IF Sudan Tahoka 134°Etrci The Federal Reserve Bank of Dallas has asked the smc) „ bring this matter to your attention in the hope : s rDief - ie improvement can be made in the registered mail %1,41-31t e0 the area affected, and has submitted a conOf data in support of its position which e 718 5/6/48 -12i• 1•1 • __e ll be glad to bring over and discuss with repre6e/ viAati ves of the Department if desired." Approved unanimously. Letter to Mr. R. P. Briggs, Vice President, The Regents of %live rsitY of Michigan, Ann Arbor, Michigan, reading as follows: tive This will confirm your letter of March 30 relaer to the letter agreement between the Board of Govof7s of the Federal Reserve System and the University Eqz1;ligan covering a Third National Survey of Coneddeiti7,inances. It is understood that the cost of the —drial interviews, tabulation and analysis, as retw citio,sted. bY the Board, through direct negotiation beLieC" i . Ralph A. Young of our office and Mr. Rensis °f Your office, will not exceed the $8,000 lzrld[e,Ze ' ' - in your letter of March 30. It is further this-00d ' that if the additional cost is less than aiiilt,nunt, the bills rendered to the Board will be ac cordingly. 4,ree"I am returning herewith a copy of your letter Bo merit of March 30, duly accepted on behalf of the Approved unanimously. Tel st , Lotus am to Mr. Davis, President of the Federal Reserve Bank / read ing as follows: able ur wire May 3. Members of Board who are avail11 be glad to meet with your Building Committee 2:30 on Tuesday, May 18." Approved unanimous P 4LtdiAmAllitii ! 111 4460 Secretary
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