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ft' T.413 1 A meeting of the Board of Governors of the Federal Reserve %1Stera was held in Washington on Tuesday, May 72 1946, at 10:30 a. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak Draper Evans Vardaman Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Hammond, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Chairman Paulger, Director of the Division of Examinations Smead, Director of the Division of Bank Operations Vest, General Counsel Thomas, Director of the Division of Research and Statistics Horbett, Assistant Director of the Division of Bank Operations Wilkes, Federal Reserve Examiner Before this meeting there had been circulated among the members c3r th Tob eoard a draft of letter to Mr. Volberg, Vice President of the Nter al Reserve Bank of San Francisco, which would state that the to 41‘(1 h d a- aPProved applications received from Bank of America National 171itt a•nd • savings Association, San Francisco, California, for permistclri to e stablish branches at Manila, Philippine Islands, and Shanghai, 1946, Attached to the draft of letter was a memorandum dated April 192 rQuI the Division of Examinations submitting pertinent informa- to. n c°nnection with the applications of the national bank and rea'Jr the recommendations of the Federal Reserve Bank of San Franand the Board's Division of ExAminations that the applications be Anweg 10 I 5/7/46 —2- 131P1 ' cv"d. There was also attached a letter dated April 12, 19460 from then vcxliPtroller of the Currency in which it was stated that, in the absence of an affi tive and convincing showing that the foreign tacle in the area served by the national bank would suffer without elleh branch facilities, it was the opinion of the Comptroller that the j, version of capital funds to newly undertaken foreign activities . kght be unwise in view of the capital position of the bank. Mr. Vara, stated that he did not feel that the information Mraitted with the applications was adequate to establish satisfactorily the need or desirability for the proposed branch facilities, and 8ince the Office of the Comptroller of the Currency was opposed to el'41ting the requested permission he (Mr. Vardaman) did not want to vote on the matter until full, information had been developed and the e had 1, -een an opportunity to discuss the matter further with Mr. belezo. He made it clear that he was not opposing the granting of the 4uthority requested but that it was his feeling that action should 4"e t aken by the Board until it had full information with respect to the Irari0U8 aspects of the matter. During a discussion of the position of the Comptroller of the ellrrency and the information contained in the file with respect to the e4Dital Poaition of Bank of America National Trust and Savings Associa— ticli 'Chairman Eccles stated that before Mr. Paul V. McNutt, United tte Righ Cornitijssjoner to the Philippines, left for the Philippines (riti 5/7/146 -3recently he expressed the hope that the Board would see fit to authorize the e stablishment by the Bank of America of the branch in Manila becauo .e of the urgent need of additional banking facilities in the Nal . PP'-nes as a basic part of the entire rehabilitation program for the islands, that it was expected that the 'west coast would have a \rerY large volume of business mith the Philippine Islands and that the„ Present facilities would not be large enough to handle that volume. 0 .i1 --41 Eccles also said that, in view of the strong financial posi01 the Bank of America, it would be difficult to refuse permission t that institution to establish branches in the Far East when -"I°11a1 City Bank and The Chase National Bank, both of New York, had r acilities in that territory; that the policies of the Transamerica Corpor atlon to which the Federal bank supervisory agencies had obiected , 4ere not involved in the consideration of the applications for Perti , sel°n to establish two foreign branches, and that therefore if here gliested permission was refused because of the expansion policies Of Tr allSaMeriCa Corporation in the United States the Board might be glierable to the accusation that Transamerica Corporation had already 414 that the Federal bank supervisory agencies had discriminated eeinet -.ansamerica interests. Vardaman expressed the thought that in considering the al3Plicat•10ns the Board was in somewhat the same position as the CompNa. °f the Currency in considering an application for the issuance 677 7/46 ' —4— °Ira Charter to a new national bank or a State Superintendent of Banks illeonBidering an application for a charter for a State bank and that 6Icti0 m should not be taken until the Board had full information as to the ileed for the new facilities and the advisability of their establ isIttent. There was a discussion of the additional information that might be obtained by the Board and it was agreed unanimously that (1) a letter should be addressed to Commissioner McNutt asking him to make an investigation in Manila for the purpose of ascertaining the views of the banking and industrial concerns in the Philippines as to the need for additional banking facilities there, (2) a formal request should be submitted to the State Department for a statement of the need for the requested facilities and any other comment that the Department might wish to make, (3) Mr. Goodman, a Federal Reserve Examiner of the Board's pivision of Examinations, who went to Manila In 1945 as Chief Examiner in connection with the rehabilitation of the Philippine banking aystem, should be asked for a memorandum on conditions in the Philippines which might have a bearing on the Board's decision, (4) the Federal Reserve Bank of San Francisco should be asked to obtain more complete information from the Bank of American National Trust and Savings Association as to the extent and character of the trade between the west coast and the Far East and the business of the Bank's customers Which it was felt would be fostered by the additional facilities, and (5) a request should be made of the Export-Import Bank for any comments that it might have to make with respect to the matter. In taking this action it was understood that after the additional information referred to above was in the hands of the Board there would be further discussion with the Comptroller 5/7/46 —5— of the Currency and the Treasury of the luestion whether, on the basis of all the information available and the policy of the Federal bank supervisory agencies with respect to further domestic expansion of Transamerica interests, the applications filed by Bank of America National Trust and Savings Association should be granted. During the discussion, question was raised Whether the views of American banking institutions which now have branches in the Far East Should be requested and it was agreed that no decision should be made in that connection until after the information requested from Mr. McNutt and the State Department had been received as it was possible that all of the information the Board -would need to reach a decision would be supplied from those sources. At this point MT. Evans left the meeting to keep another appointand 14 r- vIlkes also withdrew. In accordance with the action taken by the Board on April 30, 19461 there were presented for consideration at this meeting drafts ot l etters to tt_ Prochnow, Acting Secretary of the Federal Advisory Co -eside 41'. Sproul, Chairman of the Presidents' Conference; and the nts of all the Federal Reserve Banks relating to the pending pret --rminate the reserve city designations of the 24 cities in the thlit ect States which there are no Federal Reserve Banks or branches. The letters were discussed and approved unanimously in the following form: Letter to Mr. Prochnow: wila ."The Board has received your letter of April 22, 1946, ng that the next meeting of the Federal Advisory Council ue held on may 19-20, 1946, and requesting a list of the 5/7/46 -6- "subjects which the Board wishes the Council to discuss at that meeting. "When the executive committee of the Council met with the BOard pro-4 on April 24, 1946, there was a discussion of the pending eil.P°sal to terminate the reserve city designations of the 24 T--17, uies in which there are no Federal Reserve Banks or branches. 2. 4. 1e Board had hoped that the member banks concerned, in expres4 1 g their reasons for their position upon the proposal, would er suggestions which might serve as a basis for arriving at a, i,l-ralala or set of principles which could be used hereafter s4; e uetermining what cities should be designated as reserve Itiee if the pending proposal proved to be unsatisfactory. "In the course of the discussion during the meeting ge'T the executive committee of the Council, Mr. Brown sug' tie ed Possible tests for determining reserve city designaer°'2s, and the Board will be glad if the Council will considth ',his matter more fully at its next meeting and suggest to e 1,1 ' 1.rot of Governors a formula or set of principles which tb' d be used under the existing provisions of section 19 of 4 24 e Pederal Reserve Act as a satisfactory basis for determin:g what cities should be classified as central reserve cities rerrve cities, respectively. eery. The Board is asking the Presidents of the Federal Rerec e Banks to consider this question and to submit their b-,°4111endations at an early date. A copy of this letter is -1-116 sent to them. or "The comment was made during the course of the meeting thethe executive committee with the Board that many banks in 24 e cities were disturbed by the possibility that the B reserv rve reee °ard already had reached a decision to discontinue the the; ! v citY designations of cities other than those in which Boa,eueral Reserve Banks or branches are located. ladle the is has felt for a long time that the present classification Whatnconsiste nt and illogical, it has not made a decision on deoi ?hould be done to meet the problem. Before reaching a elon the Board will make a study of the whole matter, give c°nsideration to the views which are being received from th: and the comments and suggestions to be submitte ed era). ' ederal Advisory Council and the Presidents of the Federal arici ,fleserve Banks. In the meantime, the Federal Reserve Banks raeltbre members of the Council are at liberty to advise any the Br banks as to the present status of the matter and that above°,: a rd will not take any action until the study referred to 'las been comDleted." 680 5/7/46 -7Letter to Ur. Sproul: "There is enclosed a copy of a letter which the Board has sent today to the Federal Advisory Council with respect t of o the proPosal to terminate the reserve city designation c the 24 reserve cities in which there are no Federal Reserve Banks or branches. in "The Board will appreciate it if at their next meet., .F which is scheduled to be held in Washington during the early part of June, the Presidents will discuss this Whole subject in the light of the views at the respective Federal Reserve Banks and of the letters received from me ber„ banks in their districts in response to the Board's '-oertter of March 19, 1946, and suggest to the Board a formula se, is.?t of principles, within the existing provisions of '10 ,' n 19 of the Federal Reserve Act, which in the opinde of the Presidents would be a satisfactory basis for c:OTaihing what cities should be designated as reserve ped-e” A copy of any recommendations received from the taidvis eral A ory Council in response to the request conin the attached letter will be sent to you before e next meeting of the Presidents' Conference." I-1. 9 1_to_Eresidents of all Federal ReservqjlanIcs: Which"There is enclosed a copy of a self-explanatory letter ci the Board has sent today to the Federal Advisory Councitvoll the subject of the proposal to terminate the reserve are",'esignation of the 24 reservecities in which there Feder Reserve Banks or branches. ma , -A letter has also been sent to Mr. Sproul, as Chairof the Presidents' Conference, stating that the Board sch .,11)Preciate it if at their next meeting, which is of V--ed to be held in Washington during the early part the . 11111e, the Presidents will discuss this whole subject in tank:lght of the views at the respective Federal Reserve dist ; and of the letters received from member banks in their 1946-lets in response to the Board's letter of March 19, l t4 and aUggesi, to the Board a formula or set of printhe within the existing provisions of Section 19 of derit ederal Reserve Act, which in the opinion of the Presiitt8 would be a satisfactory basis for determining what es should be designated as reserve cities." In connection with the above matter, unanimous approval was also given to the following It- 681 5/7/46 letter to Mr. Young, President of the Federal Reserve Bonk of Chicago, and it was understood that In view of Chairman Eccles' conversation with Congressman Crawford of Michigan, as reported by Chairman Eccles at the meeting of the Board on March 19, 1946, he would be at liberty to advise Mr. Crawford of the steps being taken by the Board in connection with the problem of reserve city designations: 0 As you know, the Board recently afforded to member ba Ilks located in reserve cities in which there are no Fedel Reserve Banks or branches an opportunity to submit 4-r views as to whether or not the designation of their respect.1ve cities as reserve cities should be terminated. esPonse a large number of these banks have submitted thj r comments on the proposal and most of them are opposed to' 0 :uch termination. In view of the wide diversity of j otilicn in this matter, the Board feels that it should in reach a decision without full consideration. Accord• the Board has asked the Federal Advisory Council the matter and at its next meeting with the Board, to be held May 20, to suggest a formula or set of which could be used under the existing provicic t s of law as a satisfactory basis for determining what resles should be classified as central reserve cities and to, erve cities, respectively. In addition, the Board is Re;av addressing a letter to the Presidents of the Federal neZve Banks with respect to the matter and is asking the in:;_ Conference of Presidents, which is to be held in Washhi early discuss this whole subto June, part of Je46°11the e-nd also to suggest a formula or set of principles which could be used as a satisfactory basis for this purpose. 14icl,, "In order that Mr. H. J. Stoddard, President of the foZgan National Bank, Lansing, Michigan, may be kept inrd- with respect to this matter, it will be appreciated telephone him of the developments vi 1.1101Znilbr hone to him and advise r ' 'rithdre, Of At this point, Messrs. Paulger, Smead, Vest, Thomas, and Horbett 4' from the the meeting and the action stated with respect to each illatters hereinafter referred to was then taken by the Board: 682 —9— The minutes of the meeting of the Board of Governors of the 'cLLReserve System held on May 61 19461 were approved unanimously. Memorandum dated May 6, 19461 from Mr. Carpenter, recommend— ingtha+ M88 Adaline R. Beeson be appointed as a File Clerk in the Secre4., ''411t rs Office on a temporary basis for a period of not to ex— eeed 6 months, with basic annual salary at the rate of l',11968 per k1411111.' effective as of the date upon which she enters upon the per— Ntlance of her duties after having passed the usual physical exsmi— 4ation. The memorandum also stated (1) it is expected that, if ItieS Bees0,-.1 " 3 services prove satisfactory, a recommendation will be rtlacie that her appointment be made permanent, (2) that, due to the need t°1' assistance in the Files Section, this recommendation was sub— inittedwithout awaiting a full check of the applicant's references kcillith the understanding that, should anything derogatory develop the °ardt s investigation, Miss Beeson's employment would be ter— at im mediately, and, (3) it is contemplated that Miss Beeson 1141 b efle a member of the Board's retirement system. Approved unanimously. Memorandum dated May 3, 19461 from Mr. Thomas, Director of 41rision of Research and Statistics, recommending that Mr. Richard t 114t't be appointed as a Research Assistant in that Division on a zi his rarr indefinite basis, with a salary at the rate of krkk, 21320 per effective as of the date upon which he enters upon the perform-. 683 5/7/46 -10-- kee of his duties after having passed the usual physical examination. The Di eraorandum also stated that Mr. Hart would become a member of the Nkleral Reserve retirement system. Approved unanimously. Memorandum. dated May 6, 19b6, from Mr. Bethea, Director of the Division of Administrative Services, submitting the resignation or 4r. Jaz.. L. Zimmerman, a Guard in that Division, and recommend- &Ile that, the resignation be accepted, effective at the close of busi4e88 tialr 10, 1 946, and that proper payment be made for any accrued 841114e1 leave remaining to his credit at that time. The resignation was accepted as recommended. Me morandum dated May 6, 1946, from Mr. Bethea, Director of the NAriaion of Admijstrative Services, stating that Governor Varda44144c1 requested that one of the Board's chauffeurs drive his auto14041e to St. Louis, Missouri, so as to reach there not later than the evelling of Thursday, May 9, in order that it may be available for 111 .7"clanlan'3 use on an official trip through the southeastern states : 4'elt4' a Period of two or three weeks. The memorandum also stated 441141'' J. Prank Bell is available for this assignment and submitted r°11aPPrwal a letter to Mr. Bell containing the necessary travel authorlzAtion. Approved unanimously. 684 5/7/46 —11— Letter to "Elmer Trust Company", Elmer, New Jersey, reading 48 follows: "The Board is glad to learn that you have completed csit!- arrangements for the admission of your bank to member— -13 ln the Federal Reserve System and takes pleasure in transmitting herewith a formal certificate of your member— ship. j ceipt "It will be appreciated if you will acknowledge re— of this certificate." Approved unanimously. Memorandum dated May 3, 1946, from Mr. Parry, Director of the lon of Security Loans, reading as follows: h , The Board has previously approved an arrangement ii%which Dale M. Lewis has been borrowed from the Federal erve rye Bank of St. 4,7 Louis to assist for several months in theu -e administration of Regulation W. in co As now planned, Mr. Lewis will make several trips Re_ nnection with the regional conferences of Federal of erve Banks which are to be arranged for the discussion roenforcement procedure. I recommend that the Board ap— : co e PaYment of amounts spent by him while traveling in hcuection with these conferences for transportation and zz aitT : encamt i l t0 5,ns and for such other incidentals as the Board's travel regulations not azo2ding the per diem in lieu of subsistence.* These would be charged to the 'Miscellaneous' item in the 1946 be 'uts budget of the Division of Security Loans which Idould "eased in the required amounts as expended. "During the last two weeks of June, Mr. Lewis will be attending the Graduate School of Banking, Rutgers Uni— liersitv Low.,c It was originally contemplated that the St. ank would not be reimbursed for any expenses dur— ing hi vuls period. However, Mr. Lewis will have to retain a 0M in a private home in Washington in order to have ace to stay when he returns. I recommend that the Board 4110 Itle,4 1°Ivance is made for meals because the Board is a.PaYment of $240 per month to cover the extra /14.ricre Incurred by Mr. Lewis while on duty with the 685 5/7/46 -12- .rove payment of the room rental for this period which ! ;1 11 be $40.00, that the amount be charged to the IMiscellaL;2s1 item in the 1946 budget of the Division of Security -Lis, and that the authorized budget be increased accordingly. mr. The above items will be handled in the same way as Re Lewis' other expenses: he will collect from the Federal B,s-erve Bank of St. Louis which will be reimbursed by the Boar on the submission of vouchers." Approved unanimously Thereupon the meeting adjourned.
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