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Minutes of actions taken by the Board of Governors of the Federal Reserve System on Wednesday, November 18, 1953. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Martin, Chairman Mr. Szymczak Mr. Evans Mr. Vardaman Mr. Mills Mr. Robertson Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Mr. Thurston, Assistant to the Board Mr. Riefler, Assistant to the Chairman Mr. Thomas, Economic Adviser to the Board Mr. Leonard, Director, Division of Bank Operations Mr. Vest, General Counsel Mr. Young, Director, Division of Research and Statistics Mr. Youngdahl, Assistant Director, Division of Research and Statistics There was presented a request that Mr. Allen, Director, Dito Boston, vision of Personnel Administration, be authorized to travel November 22Massachusetts, and New York, New York, during the period 25, 1953, to review the personnel programs of the Federal Reserve Banks tion study with of Boston and New York and to discuss a proposed correla the Personnel Department at the Boston Bank. Approved unanimously. There followed a general discussion, at the request of the replacement members of the Board, regarding problems incident to the -2- 11/18/53 of maturing securities in the System Open Market Account. Following this discussion, there was presented a memorandum from Mr. Vest dated November 16, 1953, recommending that the Board pay the cost (not to exceed $8 per person) of a dinner to be given on November 30, 1953, in connection with the conference of Counsel of the Federal Reserve Banks to be held in Washington on November 30 and December 1. The memorandum stated that the total attendance was estimated at approximately 40, including the visiting Reserve Bank Counsel, the lawyers in the Legal Division, and as many as might accept from among the members of the Board and a limited group of the senior staff. The memorandum also stated that the expense of the proposed dinner had not been provided for in the 1953 budget of the Legal Division. Approved unanimously. Mr. Vest summarized telephone conversations which he had had with Mr. Leedy, President of the Federal Reserve Bank of Kansas City, concerning a question that had arisen in connection with the election of a Class B director of the Bank for the three-year term beginning January 1, 1954. The polls opened several days ago with three candidates for the directorship, but one of the candidates, Mr. L. C. Hutson, Director of the Chickasha Cotton Oil Company, Chickasha, Oklahoma, died after the balloting had started. The question raised by President Leedy was whether the election should be allowed to proceed or whether it should be called 1980 -3- 11/18/53 off and steps taken to hold a new election. to find Mr. Vest said that the Legal Division had been unable be found seemed to a precedent, but that such points of law as could the election to prosupport the view that the Reserve Bank should allow a majority of the votes ceed, with the thought that if Mr. Hutson obtained Reserve Bank would be in cast, the election would have no effect and the other hand, one of the a position to hold another election. If, on the it would appear that other candidates received a majority of the votes, he would be entitled to hold office as Class B director. view, but Mr. Vest said that President Leedy agreed with this of the Board. asked that the matter be brought to the attention The matter was discussed, and there was unanimous agreement with the view expressed by Mr. Vest that the Federal Reserve Bank of Kansas City should do nothing at this time and should let the election proceed. It was understood that Mr. Vest would advise President Leedy accordingly. the subject Mr. Leonard, who had last reported to the Board on r developments in at the meeting on November 13, 1953, summarized furthe e Banks, as fiscal connection with the proposal that the Federal Reserv United States postmasters agents, handle deposits of surplus funds made by by President Mr. Leonard said that in response to telegrams sent tee on Fiscal Agency Young, Chairman of the Presidents' Conference Commit sed agreement Operations, eight Federal Reserve Bank Presidents expres 19S'71 11/18/53 -4- with President Young's suggestion that he be authorized to tell Mr. Bartelt, Fiscal Assistant Secretary of the Treasury, that the Reserve Banks would prefer a deferment of pilot operations until January 1, 1954. Three Presidents, however, including Mr. Sproul, President of the Federal Reserve Bank of New York, expressed the feeling that there should be no commitment to the Post Office and Treasury Departments until the proposed operation had been discussed at the meetPresident ing of the Presidents' Conference in December. Subsequently, ed Young obtained clearance from two of the Presidents to make the suggest statement to Mr. Bartelt and, after discussing the matter by telephone ne with President Sproul, President Young called Yr. Bartelt on the telepho and expressed the personal view that the proposal to institute pilot operaConference. tions on January 1, 1954, would be approved by the Presidents' Mr. Bartelt accepted the statement although indicating that he was not Office altogether satisfied because he felt it was possible that the Post Department would want to make some announcement of its plans. Mr. Leonard went on to say that yesterday he received a teleConference, phone call from President Leach, Chairman of the Presidents' who stated that he did not want the Treasury Department to have the impointed pression that the Federal Reserve Banks were not cooperating and the out that under the law the Treasury Department might well require Federal Reserve Banks to undertake the proposed fiscal agency operation. 11/18/53 President Leach added, hoaever, that when there was any disagreement among the Presidents, it was customary to bring the matter up for discussion at a meeting of the Presidents' Conference and act on the basis of the vote taken at that time. Nevertheless, President Leach thought that it would be desirable to have a subcommittee work on the details Conof the proposal so that, following the meeting of the Presidents' ference, it would be possible to institute pilot operations without undue delay. Therefore, President Leach sent a telegram to the Presidents consultaof the other Federal Reserve Banks yesterday saying that after ions tion with President Erickson, Chairman of the Committee on Collect Mr. Hodge, and Accounting, he was appointing a special subcommittee, with n, so General Counsel of the Federal Reserve Bank of Chicago, as Chairma were that pilot operations might be begun on January l, 1954, if that agreed upon by the Presidents. In his telegram, President Leach also stated that this procedure had been agreed to by Mr. Bartelt. that, purAt the request of Governor Evans, Mr. Leonard stated 1953, he told suant to the understanding at the meeting on November 161 , that the Mr. Young, President of the Federal Reserve Bank of Chicago ntatives Board would like to meet with Chairman Coleman and other represe discuss the of the Chicago Bank at 2:30 p.m. on December 7, 1953, to building program at the head office of the Chicago Bank. Mr. Leonard include said he also informed President Young that the discussion would -6- 11/18/53 reference to the possible establishment of additional branches or facilities within the Seventh Federal Reserve District, and that President Young indicated that the representatives of the Reserve Bank would be prepared to discuss that aspect of the matter. All of the members of the staff except Messrs. Thurston and Vest then withdrew from the meeting. Thereafter, the Secretary was informed that during the meeting consideration was given to a memorandum dated October 29, 1953, from Mr. Shay, Assistant Counsel, Legal Division, recommending that the Board amend its regulation adopted on May 27, 1953, relating to employment security, by adding as a new paragraph (8) of section 3(h) of the regulation an additional standard by which eligibility for employment or retention in employment is to be tested and thus bringing the security standards enumerated in the Board's regulation in line with an amendment of October 13, 19530 to the Executive Order of the President issued in April 1953 which established requirements for Government employment based on security as well as loyalty. The proposed new paragraph was as follows: Refusal by the individual, upon the ground of constitutional privilege against self-incrimination, to testify before a congressional committee regarding charges of his alleged disloyalty or other misconduct. Approved unanimously. The Secretary also was informed that pursuant to the understanding at the meeting on November 4, 1953, consideration was given to a questionnaire 191RI -7- 11/18/53 with respect to subversive activities which was sent to all members of the Board's staff under that date by Allen, as Personnel Security Officer, and that it was agreed unanimously that the replies to the questionnaire which had been received should be turned over to Mr. Chase, as Legal Officer in connection with the Board's security regulations, with the understanding that they would be handled jointly by Messrs. Chase and Allen, who would make a joint report to the Chairman in the event a report was needed. The meeting then adjourned. During the day the following addi- tional actions were taken by the Board with all of the members present: Minutes of actions taken by the Board of Governors of the Federal Reserve System on November 17, 1953, were approved unanimously. Minutes of the meeting of the Board of Governors of the Federal Reserve System with the Federal Advisory Council held on November 17, 1953, were approved unanimously. Letter to the Board of Directors, The Northern New York Trust Company, Watertown, New York, reading as follows: As requested in your letter of November 5, 1953, submitted through the Federal Reserve Bank of New York, the Board of Governors extends to February 15, 1954, the time within which The Northern New York Trust Company may establish a branch at 556 State Street, Watertown, New York, under the approval given by the Board in its letter dated December 17, 1952. Approved unanimously, for transmittal through the Federal Reserve Bank of New York. 414/1414014/ • cretary
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