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7 Minutes of actions taken by the Board of Governors of thjaPederal Reserve System on Thursday, November 10, 1949. PRESEM: Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Szymczak Draper Evans Clayton Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Thurston, Assistant to the Board Minutes of actions taken by the Board of Governors of the Peciera, ' 4 Reserve System on November 9, 1949, were approved unaniOttly. Telegrams to the Federal Reserve Banks of Cleveland, 111°141°11d/ Chicago, St. Louis, Minneapolis, Kansas City, Dallas, 1111'S.8.11 Francisco stating that the Board approves the establishment /ithout ci-ge by the Federal Reserve Bank of Kansas City on Nol'el4ber 8, by the Fednral Reserve Banks of Chicago end San Francisco °11 NcveMber .-,, and by the Federal Reserve Banks of Cleveland, Il1chr4(11)41 St. Louis, Minneapolis, and Dallas on November 10, 1949, "the rates of discount and purchase in their existing schedules. Approved unanimously. Letter prepared in accordance with action taken by the 4 September 27, 1949, to Mr. Gerald Alter, Board of Gov- Of the Federal Reserve System, readinq as fellows: p c4,"The Board hereby authorizes you, in your ca'Y as an economist in the Division of Research and 1768 11/10/49 -2- "Statistics, to Proceed to South America to attend the conference of central banks of the western hemisphere in Santiago, Chile, as a member of the ! ederal Reserve System delegation to the conference, In the course of which travel you are to call on the central banks of Brazil, Uruguay, Argentina, Chile, and Peru. During your stay in Chile you ll assist representatives of the International ank for Reconstruction and Development in accordance with arrangements made with the officers of the Bank. It is understood that the travel will be by air and that you will return to Washington the letter part of December. "While absent from Washington, in addition to the customary traveling expenqes allowed by the Board's travel regulations including charges on excess baggage weight up to 10 pounds and charges for ! light insurance, a per diem of $12.00 will be paid rO)Ti funds under the control of the Board. "It is requested that you retain the original ?f this letter, and that the file copy, after being -alitialed by you, be returned to the Board's files." Approved unanimously. Memoranda from the heads of the divisions indicated beecommending for the reasons stated therein, the following inclses in the 1949 budgets of those divisions: bate of Mepao Budget Item ' ; 17C,."41-07 fERATIONS Stationery and Supplies Telephone and Telegraph 44A1-, brvisioti Stationery and Supplies Amount of Increase $350 boo $12J Approved unanimously. Memorandum dated November 2, 1949, from Mr. Leonard, DiNt or 0- the Division of Bank Operations, recommending an extension 1 769 lailo/49 -3- °I' the appointment of A. A. Moore as a night settlement clerk in tkIt Division, to work regularly each Friday night in the Internet Settlement Fund Section, at a rate of $7.50 per night of iij emPloyzent; through December 31, 1950. Approved unanimously. Memorandum dated November 2, 1949, from Mr. Leonard, Ricto f the Division of Bank Operations, recommending an ex114181-Oa of the employment of Willis H. Mitchell as an analyst in tIlat tivision through December 31, 190,0 or such earlier date as 418 Part1cular assignment has been completed, at his present comIlerlsp,+4 --Lon of $12 per day for each day worked. Approved unanimously. Telegram to Mr. KePParg, First Vice President of the Fedeserv e Bank of Kansas City, reading as follows: November 9, 1949, Board has considered total"Reurtel expense to be incurred for improvement and ext herts -Lvn of air conditioning system in Kansas City l ead office building on basis of actual contracts "-et/ low bid on :balance of work, engineering fee, Performance bond premium, and will interpose no n'iection to your making an expenditure of not to ezceed $4001000 to carry out this program. This ::Presents an increase of $25,000 over the previous Penditure authorized in the Board's letter of ebruary 16, 1949. Approved unanimously. Letter to the Honorable aanual Celler, Chairman, Come cal the Judiciary, House of Representatives, reading as 1770 11/1o/49 -4- follows: "This is in response to your letter of October 17/ 1949, enclosing copies of the bill, H.R. 6198, for the relief of the First National Bank in Richmond, California, and requesting a report as to the merits of this bill. "From information contained in the Board's files, lt.ts our understanding that the essential facts of this case are as follows. Acting under the V-loan Pr°gram for financing war production, the War Department in December 1942, entered into a guarantee agreeIllent with the First National Bank in Richmond, California, *Under which the War Department agreed to bear 90 per ent of all losses on a loan made by the Bank to the J. Minton Construction Company Ind also to assume the sallle proportion of all expenses incurred by the Bank after default in the enforcement of such loan. The was secured by an assignment to the Bank of the ',rower's claims under the war contract which it had with the Government. "Upon the default of the borrower in 1943, certain etY companies which had been obliged to pay claims labor and materials brought suit against the Bank :r a State court to recover certain amounts which had then Paid by the Government to the Bank as assignee of .0e borrower's claims under the war contract; and in judgment was entered against the Bank which, 7-4611 interest, amounted to approximately $70,000. It ;e the Bank's position that the loss resulting from en°reemont of this judgment is a loss on the loan and t' at the War Department is liable under the guarantee D ement for 90 per cent of such loss, but the War ePextment has denied such liability. 114 "It is further understood that some months ago, thc( l Ir th terms of a compromise agreement approved by coe DePartment of Justice, the surety companies actd $50,000 in full satisfaction of their judgment ; 4-u that of this amount $21,000 was paid by the Bank 27,000 was paid by the War Department. Conseuerltly, since the Bank has incurred legal fees of apl imately $10,000 in connection with the loan, total and expenses on the loan have been about $60,000, to 14111oh the Bank has in effect received from the Govern-" aPproximately 45 per cent. Although the Bank 1771 11/10/49 "deemed it advisable to accept the compromise settlement on this basis, it is believed that, in view of all the circumstances of the case, the Bank is equitably entitled to receive from the Government 90 per cent of all losses and expenses incurred, that is, about $'4,000. The bill, H.R. 6198 would accomplish this result by providing for payment to the Bank of the dife_retce between this amount and the amount which it " 48 in effect already received from the Government. "The Board of Governors has been interested in his case, not only because of the Bank's membership lt the Federal Reserve System, but because the V-loan Program was administered through the Federal Reserve 13atks and in accordance with the Board's Regulation V. The Guarantee agreement with the First National Bank it Richmond was executed by the Federal Reserve Bank 21 'San Francisco as agent for the War Department. loecauce of its interest in the matter, the Board ,..„(11'essed a letter to the Secretary of the Army on ' 11)171.1 18, 1949, urging that further consideration be V.yen to the merits of this case; and a copy of that etter is enclosed for your information. As indicated the Board's letter, it is the view of the Board's tolansel that the Government is obligated to share the ' lcss on the loan in this case. Moreover, the case inan important principle because of its possible m:feet upon any future program in which the Government sght desire to enlist the services and facilities of ,"e commerci31 banking system in the financing of ‘lovernment contractors. "For the reasons indicated, the Board believes t114t the claim of the Bank against the Government is rIle ritorious one and that enactment of the bill, H.R. i J8) in entirely justified. The First National Bank v4 Richmond has recently been succeeded by the Central ley Bank of California in Richmond, California, also e. member of the Federal Reserve System; but this would 11°.t seem to affect the equities of the case." L j 4 Approved unanimously. Letter. to Mr. harhal-t, President of the Federal Reserve Of San Francisco, reading as follows: 1772 11/10/49 -6- "The Board approves the preparation of final plans and specifications for the proposed addition to the Los Angeles Branch building along the lines outlined in.Your letter of September 6, 1949, and the accompa4Ylng data. This is with the usual understanding, of that the final plans will be submitted to the urs-) Board for consideration before bids are requested. "It is highly doubtful, however, whether authorization to proceed with the construction of the addition C3n be given under the existing limitation of $10,000,000 for all branch building programs. The most urgent needs of the San Francisco District have been taken ;are of through the authorization of the new buildings or the Portalnd and Seattle branches, and it is believed that in the light of operating conditions, the need for other programs now pending before the Board Is greater than that at Los Angeles. The Board intends e'rlY in the next session of Congress to seek legis, tion repealing the limitation on branch building cons jruction, or, if repeal appears doubtful, increasing he amount now authorized for such construction. "Mx. Persina, the Board's consulting architect, has reviewed the preliminary plans and outline specifications for the Los Angeles building program and his 21nMents and suggestions are being forwarded to you un;r7er separate cover for your consideration in the developnt of the program and the preparation of the detailed r l Approved unanimously. Memorandum dated November 8, 1949, from the Personnel 4°41Mittee recommending that the action of the Board at the keetitig on lard February 4, 1947, be modified to the extent that the adopt a policy whereby it will pay the costs of a dinner 11°1: More f requently than once each year for representatives t'ellcling the Auditors' Conference, Examiners' Conference, and te 2/1.8te'm Resectrch Advisory Committee meeting in Washington, i77 11/10/49 _7_ P1.0 ided that the costs of such dinners shall not ex eed $10 1)151* Person and that the list of those invited to attend will be sublalittFga in advance to the Personnel Committee for approval. The memorandum further recommended that on the basis of this 1)°110Y the Board pay the costs of the dinner to be given in c°1111Lect10n with the meeting of the System Research Advisory e°rInlittee on Uovember IA) 1949, with the understanding that the 11)1'°1riate budget classification of the Division of Adminastrativ Servicec be increased accord.iniy.
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