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730 A meeting of the Board of Governors of the Federal Reserve SYstem was held in Washington on Tuesday, May 9, 1944, at 3:15 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak McKee Draper Evans Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Dreibelbis, General Attorney Mr. Leonard, Director of the Division of Personnel Administration Mr. Thomas, Assistant Director of the Division of Research and Statistics Mr. Wyatt, General Counsel Mr. Dreibelbis stated that two directors of the Paterson Nation„ ' 4- Bank of Paterson, New Jersey, Messrs. John Agnew and F. 0. FaY-rweather y who were also employees of the firm of Eastman, Dillon &Co a dealer in securities within the meaning of section 32 of the //arlitink Act of 1933, had been informed by the Comptroller of the Cur" that the interlocking relationships were contrary to the laN, 4rici the Board's Regulation R, Relationships with Dealers in Securities 11"er Section 32 of the Banking Act of 1933, but that the two men had to discontinue the relationships. The matter had been dis- 148ed bY Mr. Gidney, Vice President of the Federal Reserve Bank of : I(31‘ky with officers of Eastman, Dillon & Co. end the Paterson NaOfl tal Bank with no satisfactory results, and the Comptroller of the 731 5/9/44 -2- Currency was considering certifying the facts to the Board for a proceeding under section 30 of the Banking Act of 1933 for removal of the till° men as directors of the national bank. Mr. McKee reviewed briefly the efforts that had been made to rind another and more satisfactory solution of the matter and stated that at the present time there appeared to be no course open other than a Proceeding under section 30 of the Banking Act of 1933. He 418° said that, while no action was called for by the Board at the Present time, if the case were certified to the Board, it would be his recommendation that a trial examiner be appointed to determine the acts of the case in the same manner as was done in the case of the Pine Lawn Bank and Trust Company, Pine Lawn, Missouri. There was then presented a memorandum addressed to the Board Ilnder date of may 8, 1 944, by Messrs. Goldenweiser, Thomas, and Gardner Or the Th. -lvision of Research and Statistics, which was in the following t°rIM: "As may be recalled, special research work in in- teTh, .L n.lonal finance was undertaken last summer by the irlsion of Research and Statistics at the request of _ e Departmen t of State. The work has proved to be very ;aluable and has been greatly appreciated by the State DePartment and other Government agencies. The State partment officials particularly concerned with interna°nal financial problems, -- Mr. Hawkins, Director of Ige Office of Economic Affairs under Dean Acheson, and t : ;a Collado, Chief of the Division of Financial and MonetOX' 17 Affairs/ -- have assured us that they have need the work we are doing and expect to make increasing jj 732 5/9/44 —3— use Of it during the next year. The problems covered by the studies will become of increasing importance as the war approaches an end and the need for peacetime adJuetments develops. (A list of reports and memoranda prepared to date is attached). "This memorandum is for the purpose of recommending that the work be continued because of its value to the Government and its bearing on the Board's direct : esponsibilities. A decision by the Board is necessary t this time in order to make arrangements with the personnel, "Specifically, we make the following recommendations: 1. That the Board authorize continuance of this work until June 30, 1945, with the understanding that the Question of further continuance will be considered prior to that time. 2. That the appointment of Mr. Howard Ellis, Which expires in September, be continued until June 30, 1945. Mr. Ellis would be given specific responsibility for this project, under the general direction of the three undersigned. He is very much in demand but is interested in carrying on his present work. He wishes to take off one day a week to teach a course at Columbia University. It is our recommendation that he be permitted to take this time off without deduction from his salary of $8,000 (plus overtime). This would take the place of an advance in salary which would otherwise be recommended. 3. That an arrangement be made with Mr. Haberler, who must return to Harvard University on July 1, to be available for special jobs at a rate of compensation of $30* per day worked, plus traveling expenses and a subsistence allowance of t8.00 per day when in Washington. 4. That the appointment of Mr. Foa, who has proved to be an especially capable and valuable person, be extended for another year at his present salary of $6,500 per annum, plus overtime c *It isompensation contemplated that this will be t30 flat without allowance for 15% additional compensation under the Pr ovisions of the War Overtime Pay Act of 1943." 733 W44 -4In response to an inquiry by Mr. McKee, Mr. Goldenweiser stated that the System was performing an excellent service through the medium of the studies referred to in the memorandum, that, while the studies were helping officials of the State Department with their Work) they were sent to various interdepartmental committees of the Q°1Ternment having to do with the problems involved, and that, since it/las known they were prepared by the Board's staff, they served to maintain contacts and to keep the System in a position to contribute to the solution of postwar problems to an extent that might not otherwise be the case. Upon further inquiry by Mr. McKee, Mr. Goldenweiser stated that copies of the studies had been sent to the members of the BOard only to the extent that they had indicated that they would be i''terested in seeing them. Upon motion by Mr. Szymczak, the recommendation contained in paragraph numbered 1 of Mr. Goldenweiser's memorandum was approved, Mr. McKee not voting. Upon motion by Mr. Evans, the remaining recommendations contained in the memorandum were approved, Mr. McKee not voting on the recommendation contained in paragraph numbered 2 and voting "no" on the recommendations contained in paragraphs numbered 3 and 4. What At this point Mr. Leonard left the meeting. Mr• SzTmczak stated that he and Chairman Eccles had discussed " Position of the Board should be in the event an international 734 5/V44 —5— conference were called to consider the plans for the international stabilization fund and the bank for reconstruction and development and the 8oai ' d were invited to be represented on the American delegation to the cc/tiference. Mr. Szymczak said that, because of the Chairman's expected 413"n "in Utah for two or three weeks, it was felt that the matter 8113111d be considered by the Board before he left. There was a general discussion of various aspects of the problem an d) although no formal action was taken, all of the members of the B tion °ard with the exception of Mr. McKee felt that if such an invita- wsre received the Board could not decline to designate such a l'IPresentative even though such action might result in the Board being °/111)11-tted to some extent to the plan that would be worked out by the cc)nfererice• the the Mr. McKee felt that no conclusion should be reached by Board on the matter until the conference was actually called and question was presented to the Board for decision. At this point Messrs. Goldenweiser, Dreibelbis, Thomas, and Ilnqt Withdrew from the meeting, and the action stated with respect to each of the matters hereinaf ter referred to was then taken by the toard: The minutes of the meeting of the Board of Governors of the Fe(lett_ .. 6 ' 1 Reserve System held on May 8, 1944, were approved unanimously. Memorandum dated May 5, 1944, from Chairman Eccles, recomt that the basic salary of Miss Mabel Goepfert, secretary to 735 Vs044 -6- elarton, be increased from $2,400 to $2,600 per annum, effective May 16, 1944. Approved unanimously. Memorandum dated May 6, 1944, from Mr. Goldenweiser, Director q the Division of Research and Statistics, recommending that the ba C Salary of Miss Pauline Marcou, a clerk in that Division, be inereased from $1,560 to $1,680 per annum, effective May 16, 1944. Approved unanimously. Letter prepared for the signature of Chairman Eccles to ii°40rable Daniel W. Bell, Under Secretary of the Treasury, reading as follows: "Following up our telephone conversation about the l riciatter and in rely to your letter of April 10, I am enr ng herewith a brief memorandum of the more important ae ! 8°n8 Why it appears inadvisable to the Board that any deuion be taken at this time to permit immediate withtfawal, with interest, of time and savings deposits for e Purchase of Government securities. A number of other eis?ns could be advanced, but the enclosed memorandum, c" is ample justification for our conclusions in thee matter." 4 Approved unanimously. Letter to Mr. Hays, First Vice President of the Federal Rerve Bank of Cleveland, reading as follows: of co7h15 refers to your letter of May 1 enclosing copies ,respondence between your bank and MT. Rude of the r_ cleve -Lend office of the Universal CIT Credit Corporation garding section 8(a) of Regulation W. 736 5/9/44 -7- "The advice which you have given Mr. Rude appears t° be entirely correct. The only possible question regarding it would be whether he has used the term 'MeLien' in its technical sense. He speaks of a Ileohanic's Lien executed by the customer pursuant to an agreement between the customer and the dealer, and an ! Issignment of the lien to the Credit Corporation. Is lt possible that he may be talking about a short-form mortga-e s rather than a statutory Mechanic's Lien? A rt-form mortgage, of course, would be covered by sec,c) , 20n 8(a) if it met the other requirements of that see- Z Approved unanimously. Thereupon the meeting adjourned. Chairman.
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