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1738 A meeting of the Board of Governors of the Federal Reserve r13111,Jus held in Washington on Thursday, November 1, 1945, at 10:30 PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman McKee Draper Evans Mr. Carpenter, Secretary Mr. Connell, General Assistant, Office of the Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman Mr. Leonard, Director of the Division of Personnel Administration Mr. Thomas, Director of the Division of Research and Statistics Mr. Vest, General Attorney Mr. Wyatt, General Counsel Mr. Ransom referred to the appearance of Mr. Snyder, Director ()t the np-p of War Mobilization and Reconversion, before the subcom— mittee or the House Judiciary Committee on October 26, 1945, in connec— ti"ith proposed legislation which would extend for a further period eertain provisions of the Second War Powers' Act, and stated that he (111'• Ran om ) and Mr. Goldenweiser had testified briefly at the hearing IlLne the gl ' reasons for the extension for at least one year of Title IV or the A_, under which the Reserve Banks have authority to purchase (*li,gations directly from the Treasury. Mr. Ransom also said that 0veral of the members of the subcommittee had indicated a feeling th„ , the 4 Should recommend permanent legislation instead of an exten— siO4, out 111313c)rt since he did not know at the time whether the Treasury would --rmanent legislation, he thought it advisable to point out 1739 11/1/45 —2- to the subcommittee that it might not be possible to have permanent legislation enacted before December 31, 1945, and that, therefore, 44 "tension at this time would be more desirable. Following Mr. Snyder's testimony, he asked of Mr. Ransom that the Board furnish him with a memorandum of the reasons supporting the l'squest that Title IV of the Act be extended for another year so that the statement could be incorporated in the report which the subcom,ki-ttee had requested Mr. Snyder to make. A draft of the letter pre— 1:18.1'eci kr Mr. Ransom in response to this request was presented during the rileeting. Chairm Eccles said that Mr. Snyder had asked for the Iriews of the Treasury and the Federal Deposit Insurance Corporation as to the d esirability of extending the exemption of war loan deposit accolints from reserve requirements and Federal Deposit Insurance Cor15c)ration a ssessments as permitted under the Act of April 13, 1943, and that 41r. Bell had read to him over the telephone the letters written 13Y t he Treasury to Mr. Snyder recommending that the exemption and the tho id'Y of the Federal Reserve Banks to purchase up to 5 billion Or Go irel'arnent securities from the Treasury, be continued until the end °t 1946, T-11 connection with the matter of direct purchases from the Trea -8147, Mr. Eccles said that the Treasury would like that provision °r the law to be made permanent and the $5 billion limitation removed, 1311t 0 aiorif r the present considered it advisable to ask only for an exten0f one year. 1740 11/IA5 -3Mr. Goldenweiser entered the meeting at this point. During the discussion which followed, it was suggested that the Board send letters to Mr. Snyder recommending the extension of Title ...V T of the Second War Powers' Act and the exemption of war loan cielp081t accounts from reserve requirements. Upon motion by Mr. McKee, it was voted unanimously to authorize Chairman Eccles to send two letters to Mr. Snyder setting forth the reasons for the extension of the two provisions of law until the end of 1946. The letters sent by Chairman Eccles in accordance with this action were as follows: Letter Regarding Extension of Title IV "I have been advised by Mr. Ransom of the suggestion r,7,4-?h You made after your testimony before the Subcommittee the House Judiciary Committee that we send you a memoof the reasons supporting the request that Title IV °f the Second War Powers Act be extended for at least a Year. While we may at some later date ask that this authorwhich was sponsored by the Board of Governors and is %ministered by the Federal Open Market Committee, be placed to 4 Permanent basis, it may not be appropriate at this time ke Take such a request. The authority should, however, be 1, 0 13 in force at least during the coming year. I am advised an Bell that the Treasury has recommended its extension ,,Period of one year. sell Since Mr. Ransom is preparing to go out of town, I am an ding You herewith a brief memorandum of reasons for such ex tension." LatlIfijitgarding Exemption of War Loan De osits por, "In another letter I am writing you regarding the proextension of Title IV of the Second War Powers Act. I IZerstand from Ronald Ransom's report regarding the hearing a °re the Subcommittee of the House Judiciary Committee that mrstion was raised regarding other war-time legislation 'might be expiring, and therefore I am writing you regardhe Act of April 13 ) 1943. 1741 11/1/45 -4- "This Act provided that deposits in member banks payable to the United States and arising solely as the result of subscriptions for United States Government securities commonly known as war-loan deposits) shaJ1 not be included J-n deposits against which reserve balances must be maintained by member banks with Federal Reserve Banks. The same Act also provided in effect that such war-loan deposits in banks Whose deposits are insured by the Federal Deposit Insurance Corporation should not be subject to the ordinary assessments against deposits. These exempting provisions, however, will expire six months after the cessation of hostilities as determined by proclamation of the President or conCurrent understand that the Fp' corpresolution of the Congress. I oration has advised you of its wishes regarding the ecmtinuance of the exemption as to insurance assessments. "We feel that the exemption of war-loan deposits from reserve requirements should be continued until the end of 1946, and Dan Bell has informed me that the Treasury de_ sires such an extension. If this exemption should be ter-inated suddenly while Treasury balances continue to be large, the imposition of reserve requirements upon them Would 4 cause considerable disturbance to member banks of ' ci"e Federal Reserve System and would likely result in the :Ping on the market of substantial amounts of Government ti curitiss in order to enable member banks to meet the additonal reserve requirements necessitated by their war-loan Consequently, the Board of Governors feels that itP"its. sndwould be desirable to allow a definite period, until the of 1946, within which Treasury balances may return to Ore nearly normal proportions, so that member banks will 4.7 In better position to meet the reserve requirements upon n Prior to this meeting there had been circulated among the bera men— °f the Board a letter dated October 15, 1945, from Mr. Prochnow, ting oecretary of the Federal Advisory Council, requesting a list of topics :hich the Board wished the Council to discuss at its next meet., ilovember 3.8-19, 1945It was agreed unanimously that the Secretary should send a telegram to Mr. 1742 11/1/45 -5Prochnow suggesting the following topic for consideration by the Council: "There is increasing discussion of the cost of Government debt with special reference to the part of the debt held by banks. What is your opinion as to how best to meet the issues that may be raised?" Reference was then made to a memorandum dated October 19, 1945, fr°111Mr. Leonard, Director of the Division of Personnel Administration, to which was attached a letter from Mr. Williams, President of the FedealReserve Bank of Philadelphia, addressed to Mr. Szymczak, under date or October 18, 1945, in which it was stated that the Bank proposed to 44tiate rather promptly a thoroughgoing study of job classifications arid salarY rates at the Bank and for that purpose to employ, in a con- 121-tarit capacity, Mr. C. Canby Balderston, who had prepared the report °II executive development in the Federal Reserve Banks and who was now 4 ClaSs 0 director of the Philadelphia Bank. The memorandum (which discussed the questions raised by the proposal) and letter had been circulated to the members of the Board before this meeting. Mr. Draper questioned the propriety of a director of a Federal Bank being employed on a retainer basis for any purpose. Mr. Leonard stated that Mr. Svmczak, who was unable to be 131'eaent at this meeting because of an engagement in New York City, had 4zIted . nIm to say to the Board that, although he considered it inappro141ate for a director of a Reserve Bank to accept such an assignment, he l'ecognized Mr. Balderston's particular qualifications as a possible 1743 11/1/45 -6- haBie for an exception in this case, but that if it were the decision edb the majori, uy of the Board that such an arrangement should not be ' lade he would concur in that view. In the discussion which ensued, all of the members present cillesti°ned the propriety of the proposed arrangement with Mr. Balderston and Concurred in the suggestion that Mr. Williams be advised that the revie of the personnel classification plans of the Reserve Banks inir°11recl problems that should be considered on a System basis and that the Board would take up with the Banks promptly the question of the Pr ocedure to be followed. In accordance with this decision, Mr. Leonard was requested to prepare a draft of letter to President Williams for con— sideration by the Board and to make a rec— ommendation as to the procedure to be fol— lowed by the Reserve Banks and the Board in reviewing the existing classification plans and developing plans which would be In the direction of greater uniformity at all Federal Reserve Banks. At this point Mr. Leonard left the room, and Messrs. Robinson a4d ard, Economists in the Division of Research and Statistics, Joil , leq the meeting There was then presented a memorandum dated October 22, 1945, trora reacitt • Thomas, Director of the Division of Research and Statistics, e a8 follows: tiar "On March 21, 1944 the Board authorized an expendi— e of between 5,000 and $15,000 for an exploratory 1_744 11/1/45 -7- tI survey of individual ownership of currency, deposits, war bonds and other liquid funds to be undertaken by the Division of Program Surveys of the Department of Agriculture. At that time it was decided 'that when the results of the exPloratory surveys were available the Board would consider the matter further and determine whether it should authorize Payment of costs necessary to complete the surveys on a nationwide basis.' The results of this preliminary survey Were transmit ted to the Board about two months ago and an rticie summarizing then was published in the Federal Re— Serve Bulletin for September 1945. "Notwithstanding the limited scope of the exploratory .11 4.r1reiY, the results obtained have been in great demand; is generally agreed among experts in the field that the methods employed provided dependable results. In view of the great importance of the subject at this time, there is ',Ted for a broader survey. Accordingly, it is recommended 1, ,t the Board authorize a further survey along the lines vutlined below at a cost not to exceed $60,000. ers "During the present transition period between a war : °n0MY and normal peacetime operations, information re: rding assets is of special importance, as the possibilities for inflation are now more real and imminent than m"eY have been heretofore. Other agencies of the Govern-71t$ Particularly the Bureau of the Census and the Bureau r or cs, are planning to seek appropriations om con._Statisti gress for nationwide surveys of income and consumer 7,enditures , but none of these projects can be expected : ri ep forward for at least a year. In this interval, the „21 for better data as to the holders of liquid assets •-.411ta tic,,“zax attitudes towards the assets they hold is par— on e'Zit: ..rE ilitcal... The Interdepartmental Subcommittee Expenditures and Savings, which reports to the Do—_, vea -Ltuget Bureau, has officially recognized the positive re,,us of the survey already sponsored by the Board and has f,'Izmended that it be extended. We have also had a request the staff of the O. W. M. R. that we obtain additional -"I rmation on this subject. locatiWhile the survey gave disappointing results as to fact °11 of currency in circulation, indicating that satis" tain information on this aspect can probably not be obit did yield useful information as to holdings of attiy, assets and unexpectedly significant data on people's pron'ludes toward the use of their liquid assets. A large 4411ti°n, for example, indicate an intention to hold t 1745 11/1/45 -8- "their assets as security against future economic or personal difficulties, even if this involves purchasing consumer durable goods on the instalment plan. Further care1111 questioning along these lines could probably obtain 8°me quantitative information on the extent to which people intend to draw upon their liquid assets in order to make various types of expenditures during the next year, which 1OU1d In turn shed light on a major potential source of By emphasizing questions where results were foound to be fruitful and eliminating questions found to n.7 less important, I feel that the proposed survey could give 118 not only more accurate national estimates of liquid asset ownership but also improved and extended information n people's intentions regarding such assets. "It is agreed among the technicians that the survey TIZ:di be extended to cover approximately 3,000 persons in about 30 to 40 different urban, village and 1211r41 areas, spread over the whole country. The cost of :overage at this level would be in the range of $50,000 tt') $60,000. Actual interviewing would start not later at2. next January and preliminary results could be expected early in March. The results of this survey, tote'a r with the shape of economic developments, would deWhether there should be a recommendation for furdert:rveYs of this sort and whether they should be unen by the Reserve System or by some other agency Of Government." 0 4e k•obe During the discussion, reference was made to a letter dated biliza : i23, 1945, from Mr. Snyder, Director of the Office of War Molined . on and Reconversion, urging that the expanded survey as out- ln *. Thomas memorandum be made. It was pointed out that when this matter was discussed by the °41'cl on Mar th 21, 1944, an expenditure of between $5,000 and $15,000 authoriz ed for the pilot or exploratory surveys, upon the under4t4Ilding that when the results of the preliminary surveys were avail4ble, the Board would consider the matter further and determine whether 1746 11/1/45 it -9- should authorize the payment of the costs necessary to pursue the 8111.1reys on a nation-wide basis. Upon motion by Mr. Evans, it was voted unanimously to authorize Mr. Thomas to work out the necessary details for the proposed survey with the Department of Agriculture With the understanding that when the plans were completed they would be submitted to the Board for final approval. At this point Messrs. Thomas, Vest, Wyatt, Goldenweiser, Robi nscm. and Villard withdrew from the meeting. after The actions stated with respect to each of the matters hereinreferred to was then taken by the Board: The minutes of the meeting of the Board of Governors of the Peciet'al Reserve System held on October 31, 1945/ were approved unani111°1181,Y. Memorandum dated October 26, 1945, from Mr. Bethea, Director °I' the n4 --Lvision of Administrative Services, submitting the resignation "°11ald A. Hurst (who was ordered to report for duty in the Armed 814"41eee on October 25, 1945) as a clerk in that Division, and recomniellcliAg that the resignation be accepted effective as of the close of C)et(lber 24 '1945, and that payment be made to Mr. Hurst of one month's salarY (one-twelfth of his annual salary) in accordance with -Le 11°11cY adopted by the Board on June 16, 1943, with respect to the 1)111tellt °I' military benefits to temporary indefinite employees who ellter tullitarY service. Approved unanimously. 1747 11/1/45 —10— Memorandum dated October 29, 1945, from Mr. Paulger, Director °f the Division of Examinations, recommending that Louis t. Zidek, who hasbeen on military leave, be reinstated in his position as Assistant ectel'al Reserve Examiner in that Division, with salary at the rate of 42 ' 98o Per annum, effective as of the date upon which he enters upon the Per formance of his duties after having passed the usual physical exam lnation. Approved unanimously. Memorandum dated October 31, 1945, from Mr. Bethea, Director t)f the n 'Avision of Adn,jnistratjve Services, recommending that Mrs. 48ePhirie Boswell be appointed as a charwoman in that Division on a teith, " rarY basis for a period of not to exceed two months, with salary at the rate of $1,440 per annum, effective as of the date upon which 6he enters upon the performance of her duties after having passed the Pkrsical examination. The memorandum stated that it was not contemplated that Mrs. Boswell would become a member of the Board's Isetitternent system. Approved unanimously. 1/6411t or Letter to Mr. Evans, Vice President of the Federal Reserve Dallas, reading as follows: yo_ "In accordance with the recommendation contained in 'letter of October 25, 1945 the Board of Governors Avl'.4 de to et stateJanuary 15, 1946, the time within which the Bank of Corpus Christi, Corpus Christi, Texas, tr- accomplish membership." :1! Approved unanimously. 1748 11/1/45 -11Letter to the Presidents of 831 the Federal Reserve Banks read- ing as follows: "At the joint meeting on October 18, 1945, of the Presidents' Conference with the Board of Governors, as YOU will recall, some questions arose regarding the present margin rules in Regulations T and U, and the Board ! ...geed at that time to send to all the Presidents a claritYlng statement concerning these rules. Such a statement 18 enclosed." Approved unanimously. Letter to Mr. L. M. Sales, Sales Furniture Company, Louisville, ICentucky, reading as follows: 19, Me very much appreciate your letter of October 18, 45, giving your thoughts about the future of consumer credit regulation. "A number of people feel, like you, that the Government should have power to regulate consumer credit, as a 14,rmanent part of a program to promote economic stability. thhers 'as you know, take a different view, frequently on i_e general ground that economic controls are likely to ' " 1 1!'erfere with the attainment of full production under a Private enterprise system. "The Board has taken no position on the question of Permanent authority. Its present authority continues during ma th -s national emergency declared by the President on , 1941. This emergency period has no specific tendate but will end upon a declaration by the Presim4!6. Congress, of course, can take action either to terthe authority or to adopt permanent legislation. 'In order to carry out the purposes which Regulation N wa, signed to accomplish, the Board is of the opinion the; de - the regulation, modified from time to time as required 4changing conditions, should remain in effect until the g0 '0f inflation has diminished, that is, until consumers' come on the market in sufficient supply to meet deView of the low production during the war of m0 , ! 4 for which credit is used, this time should be some -'118 in the future." r 4 Approved unanimously. sv 2uTpuaa gssaa2uo0 Jo uuTavaqTri gSUVAH Ifl' o1..1941a1 us4 nompreun paAoadav 8T1.11.J 2uTuuT29 so ,u awl oq aoTad 2uTpTTnq agq Jo uoTqTTomap agq oq uoTqoacqo ou svg pavoga Tan 11I 66 qv 2UTpItt4 amq aquouA oq squeuaq oq uaAT2 U09(1 SpvaaTu axeq sa01 ,0 aouTs '5176T 'ez aaqopo Jo aaqqaT anoS oq 2uTaaaJauu ' ** 11 :smoTToJ su Nuug 2uTpvaa cuolsoa So aAaasau Tvaapaa am_ Jo uumarego g uoqq2Ta10 *an oq ja4lal •STsTIOTUTuuUn p9A0JddV ti.Ze UOTI.3Gs Jo 2uTuvawm. uTgqTm ssauTsnq a soT4Tan oes agq UT 1)92E2 —Ua STTavm-Tad sT uoTquaodao0 atiq aaqqagm uoTqsanb 91 /1 To uoTquaapTsuoo aaqqanJ Saussaoau aNvw TIThi 3looqs s41 JO 2uTaaJJo aanqnJ Suv quqq u0Tquaoda00 911'4.o. aua13 pTnogs qT qnq ze uoTqoas Jo maTAand agq uT144Ta uorIpaodap5 egg_ 2uTaq pInom aAoqu paquqs se uoTquao dao0 1.uaultvlsalt ; 0 qaaaqs aquqg Jo uoTqov papuaquT atiq qvgq aapTsuoo 4ou I oe paqTwTT pavog O. *GAP act -Mu 21.1T-IeJJ0 914 qmil. fPuTpuuqsqno MOU SOJEW aavoJetfl.4v44 fstsv sTgq uo SOJULIS 0004en vioqv anssT TITm 4T 4v1 41. fsimac pi Svc' -ETTA qT qunoure agq —TATP uTe2 Tv4Tdvo su magq. irmin 9JOM qou anTuA qassu qv qsaAuTaa oq sq1.12Ta aTcreaajsu cugliezeT Svp—oe saapTogaaugs sqT oq anssT tIqTaaaagq uoTqoauu03 puu puapTATp suTv2 TuqTdvo v saapTogaavgs sqT oq —sip oq sagsTm uoTquaodao0 puvqsaapun osTv TeM4 uT paqTaosap saTI.TAT40-e qoy 2uppreg Jo ç uoTpos 9144 Jo Sue uT pa2v2ua MOU qT sT IOU 9TES JOJ 31004s svc Jo Suv 2UTJOJJO JO 2UTTISST UT pa2v2ua mou qou qsnal. wacil —qsaAuT pua—uado uu sT uoTquaodao0 quamqsaAui qaaaqs 9.1v4s 4'8144 puvqsaapun se 04 6z aagoloo aaqqaT anoS auu :smoTToJ sv 2uTpuea 'uoqsog Jo Nuug 91,14 Jo Tasuno0 quvqsTssv. pus Savqaaoas 'a2aag aAaasau reaaNa oq mva2aTa/ —T— GIZT —13— "This will acknowledge receipt of your letter of Oc— tober 23 in regard to excess stocks of printed and process ed ?ports and other documents of which distribution has hltherto been restricted for reasons of security. . wKe do not have any excess copies of such material for distribut ion. Accordingly, there appears to be no need for the designation of an officer in this organization for the Poiurpose outlined in your letter. However, if you should esire any further information, please communi cate with us again.n Approved unanimously. Memorandum dated October 30, 1945, from Mr. Paulger, Director the Division of inations, recommending that $100 be added to the 1945 bud --get for that Division to cover postage and expressage. Approved unanimously. Thereupon the meeting adjourned.
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