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1661 Minutes of actions of the Board of Governors of the Federal Re erl'e system TuesdEy, November 19, 1946. 8oarel Room at 10:40 a.m. 014 PRESFAT: Mr. Mr. Mr. Ur. Eccles, Chairman Ransom, Vice Chairman Draper Evens Mr. Ur. 1.1r. Mr. Mr. As Was absent The Board met in the Carpenter, Secretary Eheriaan, Assistant Secretary Morrill, SpeeLE-1 Adviser Thurston, Assistant to the Chairman Thomas, Director of the Division of i'.esearch and Statistics Vest, General Counsel Tomsend, Assistant General Counsel stated in the minutes of October 30, 1946, Mr. Vardaman on official business. •Ransom referred to a letter dated November 14, 1946, from ,..teelioan, Director of the Office of War Mobilization and Recon'iel'8i°11 askine for report by December 1, 1946, concerning statutory PoWerhs effecting the Board's operations which were dependent upon Q°11titlatee of hostilities' the emergencies, or the war, showing p011i( sould be repealed or allowed to lease and those for 1141)2e or rereal would not be s(7Lisfactory. The letter also hecl that a second report be submitted by December 1 shoving the e114*etei' of ' r 4tht wish bills and legislation lalich the Board anticipated it to have considercd by the Congress. 4. IT Nlee, vest sLated that, under the anergency powers, the Board th (1) the authority of the Federal Reserve Banks to 1662 11/19/46 —2— PIIre/lase ut, to billion of Government securities directly from the United States, which authority was added to Section 14 of the Pecierai Act il 01114arellReserve 31, 47, 19 the Second Po-i,ers Act and would expire an (2) the exemption of war loan deposits from ve re quirements which will terndnate six months after the ee&""011 of the war as determined by the President or the Congress. As to the second roP ort asked for by Mr. SteeLmin, Mr. Vest N'ested co nsideretion of (1) an amendment of Sections 13 and 13b or the pe(ieria Reserve Act relating to loans for industrial purposes, (2)-Ing company legislation, (3) legislation giving the Board Pe1-14€'11ent a uthority to regulate consumer credit, (4) eliminatien of the lizitat:on on the cost of Federal Reserve branch bank pres ntbuild crid (5) possible legislation concerning the holding of 4\rerkent s ecurities the Qlnual by member banks along the lines discussed in report of the Board of Governors for 1945. Chairman Eccles suggested that legislation on the matter ' l eferi‘ed to by Mr. Vest need not be presented by the Board as the c11106tion C ess otle z in eLher legislation should be enacted was nleced before the annual report and the decision on the question was C°11gre55 to mLke. hq-te or The -' was a discusFion of the provision authorizing the pur— rt,() the G°vcilaiae'nt securities by the Federal Reserve Banks directly U°11errIlent, and Chairmen Eccles said there would be no 1663 11/19/46 —3141*'" in asking for this authority unless the Treasury wanted it, that he u nderstood the Treasury would like to have the provision made Perillanent, amd that before replying to Yr. Steelman, the Board should 141te to the Secretary of the Treasury, with a copy of the letter to 13artelt, Fiscal Assistant Secretary, saying it planned to recom— irtenci that Congress make this provision permanent and asking that the inform the Board as to whether it concurred in ths position. It was agreed unanimously that Counsel should Prepare a letter to the Secretary of the Treasury in accordance with the foregoing suggestion. The other matters mentioned by Mr. Vest for possible legislative action were dis— cussed and it was unanimously agreed that Counsel should prepare a draft of reply to the letter from Mr. Steelman, which would state that the Board expected at the proper time to present to Congress proposals (1) to make permanent the authority for direct Purchases of Government securities; (2) to terminate the exemption of tar loan deposits from reserve miuirements; (3) to eliminate the statutory limitation on the cost of Fed— eral Reserve branch bank buildings; (4) to amend the provisions not contained in the Federal Reserve Act pertaining to loans for industrial purposes; and (5) to regu— late bank holding companies. The letter would also state that the Board would be prepared to submit arguments for and aU'insh permanent authority to regulate consumer credit. In a 114 —, -scussion of the legislation to continue the authority direc t purches as of securities from the Treasury, it was agreed thq t he. 440st desirable procedure would be to introduce a bill which 1_664 "/19/46 -LPenent the existing provision, rather than to request e°ntinuEllee of the ai,Llicable provision of the Second ,Ftr PoTers Act. It was 180 Suggested that there should be combined into a single 1314 the authority to purchase Government securities direct from the Tr'easurY) the reped of the exemption from reserve re,uirements of denosits, and the removal of the limitation on the cost of bIlildings of Federal Reserve branch banks. It 1;:as agreed that 4Para'te bills 1,ou1d be required for industri. 1 loan legislation fc'r the Ce regulation of bank holdinz comoanies, and that the pro- c°11eerning the regulation of consumer credit should be to eoUet t1,,,t privilege of presenting arguments for and against making Peaallent such a measure of credit control. In the discusson of the proposed bill relating to industrial 1°E41'irr Eccles said it appeared the general objectives of the 141'4.11c1 the Presidents of the Reserve Banks aere about the same, 41c1 that in a recent telephone conw-rsrtion 1,Ir. Sproul, Chairman of thel)t.esIderits t Conference, sup.ested that since the form of amendm 7„hat from th e one proposed by the Pl‘°13(3ced by the Board differed soe , Pl'e''ident3, iegtsiation the miEh:oa t :p .resent both proposals as alternative forms 1111 the b41 sugestion was considered and there was . ( .reement that should subralt a definite legislative proposal, and that a Nge, b e prepLred alonL* the lines the Board previously had ted 'but taking account. of the changes suggested by the Presi- 1665 11/19/46 -5There was also agreement with Chairman Eccles' statement that the 8°8-rd should request the elimin.Aien of Section 13(b), and that Illielleclisideration was being given by Congress to the bill proposed bYth e Peder41 Deposit Insurance Corporation for the retirement of the n4 -" )ek of the Comoration, the Board should propose that the ,aylerltf c'r the stock of the Corportion held by the Reserve Banks be tad to the Tresury. A comparison of differences between the Board's bill and Pr°Posed by the Presidents resulted in agreement on changes in the 8c)ex(118 bill, ich would (1) limit maturities on guarantees to rear8)(2) authorize loans only when there was "reasonable assurkeeq repayment", (3) limit to 90 per cent the aount of any loan that 4 Federal Reserve Bank could guarantee, (4) limit to the combined ellr111118 of all Reserve Banks the aggregate amount of guarantees, and (5)414 to one-half the combined surplus of the Reserve Banks the 4€ eregate allIOUrrt of loans in excess of $100,000 that could be guar- It w as also agreed that it would not be possible to get a *Itch a uthorized direct loans, that such a provision would raise the °N.estion Of colTmetit;en by the Federal Reserve Banks 7:ith comerbatiks for loans, and that the support of bankers for a guarantee bill W°1-11d be much more likely. 1666 4/19/46 —6— At the conclusion of the discussion, it was agreed that Counsel would prepare drafts of bills in accordance with the agreements reached during the meeting, and a draft of letter to the Presidents of the Reserve Banks enclosing a copy of the proposed industrial loan bill and stating that it had been prepared after full consideration of all of the suggestions of the Presidents, and that some of the proposals of the Presidents, especially that the bill provide for direct loans, had not been adopted because in the judgment of the Board they would not receive favorable consideration by Congress. 14r, T Chairman l‘ecles reviewed briefly the discussion which he and °1748end had with the representatives of The Independent Bankers hzoc., ' lltlQn Yesterday on the subject of holding company legislation, otd util. that the representatives had decided to support the Board's At Chairman Eccles' suggestion, it was agreed that the holding company bill Should be placed on the docket for discussion at the meeting of the Board on November 26, 1946. At this point Messrs. Thomas, V.ct, and Townsend withdrew the IllePting and the action stated with respect to each of the Itters hereinafter set forth was then taken by the Board: Utes of actions taken by the Board of Governors of the Reserve System on November 18, 1946, were approved unani- or the Merriorndum dated November 19, 1946, froLi hr. Bethea, Director Divieien of Administrative Services, recommending that the 1667 4/19/46 -7rezignation of Mrs. Corrie Holliday, a cafeteria helper in that 4\14°4, be accepted, in accordance with her request, as of the c48e of business November 20, 1946, with the underste-ding that a 411113 Slina PaYillerit v.ould be made for any annual leave remaining to I* credit on that date. Approved unanimously. Letter to Mr. lallia,ns, President of the Federal aeserve Bank Of Phaade1phi3, reading as follows: It Reference is made to your letter of November 7, 1946 the 3 advising that the Bord of Directors had approved all gr;Ilting of a general increase of 10 per cent on 8a-LarieS 1.1i2 to and including 0,500, retroactive to No to nber ls 1946, and re,luesting the Board's approval elecl maximum annual salaries under the personnel -Leese.ication plan in order to effect the general in11 91, _ _ Reaer.,'" ' Board of Governors authorizes the Federal I ; Bank of Philadelphia, effective as of November 1.946 °4ito exceed maximum annual salaries under its classificatLon plan by 30 per cent, in conor 10 1 with the program of granting e general increase Per cent on all salaries up to and including ),00 3, or s ”The Board of Governors also approves the payment : ialaries, effective November 1, 1946, to the followemployees at the rates indicates: A 14'- 'Me -41aa S choenly Peterson eXceed lett ,4 Annud Salary Title Cashier, a,887.60 Cafeteria Department Gen. Clerk-A, Transit Department authorization supersedes the authorization to msmaxium annual salaries contained in the Board's 4.2 0f November 16, 1945, and April 26, 1946, and is Pen;',' as a temporary measure for post war adjustments --g revlsion of your personnel classification plan. 1668 11/19/46 -8"The Board of Governors also approves the payment 4 salaries for the period November 1, 1946, through 113/11 30, 1947, to the following officers at the rates dicated, in accordance with the action taken by the 40ard of Directors as indicated in your letter: Ila,Lne R. R. Viiilliams James V. Vergari ! °rman G. Dash r;allace M. Catanach Title Annual S;D:lry Assistant Vice President and Assistant Secretary 0,250.00 Assistant Vice President and Assistant Secretary 7,700.00 General Auditor 7,700.00 Assistant Cashier 7,700.00" Approved unanimously. Letter to Ur. Laning, Vice President and Cashier of the Fed- eraa. 115 41LeiSe 1.17 bi,dik of Cleveland, reading as follows: vie;, of the circumstances described in your ap„-r °f November 16, 1946, the Board of Governors valres the payment of salary to Mr. tilliam J. Young nor em°ccuPYing the position of Noncash Collection Run'"011cash Collection Department, based upon the maxIAqt. 4'nnua1 salary established for the position of the Position which he formerly occupied." Approved unanimously. Letter to Mr. e.rici Viaymack, Vice President of The Des 7Joines Tribune, Des Moines 4, Iowa, reeding as follows: Gove„ havo brought to the attention of the Board of terld : °r8 your letter of November 4, 1946, in which you Man 0 .; -1 T.°ur resignation as a Director and Deputy Che.irw'he Federal Reserve Bank of Chicago. k tour comments with and respect to the Federal Reserve the are very gratifying to the members of the Board etjoyn Pleased that you have found your association an th ?nee The fine service that you have rendered .704 hel,:a4 and to the System during the five years that a"- been a Director has been most helpful, and the 1669 11/19/46 -9"Board is accepting your resignation with regret but with the r ealization that you have been called to a much more ortant job--perhaps the most important task th-:-,t a "." could have in the new era of atomic energy. Everyone mere wishes you all possible success in your new assign't and hopes that your interest in the welfare of the eal will continue even though you will no longer be -Lloially connected with it. mucb "Your auggestions regarding a successor are very "a 63. en ppreciated and you c:tn be sure that they will be consideration." 7 V Approved unanimously. klik of Lett::r to Mr. liviltse, Vice President of the Federal Reserve Wew York, reading as follows: 19 "Reference is made to your letter of November 1, of4161., submitting the request of The Marine Trust Company eet:Valo, Buffalo, New York, for approval of the liecishment of a branch in Attica, New York, in conThe'!;°n with the proposed absorption through merger of of Attica, Attica, New York. "The Board of Governors concurs in your opinion ' ir;'t the proposed transaction will not result in a change the general character of the assets of The M- rine b• C°1111Jany or broadening in the functions exercised nurai;' vdthin the meaning of condition of membership ef'ed 4 to which it is subject. the iln viel, of your recomnendation, the Board approves New esta blishment and operation of a branch in Attica, '°1*!!, by The Marine Trust Company of Buffalo, Buffalo, .Ork Atti ,,Provided the proposed merger with The Bank of is effected substantially in accordance with the prietealent submitted and the prior approval of the approetEtnA? State authorities is obtained; and with the under44d s ming that Counsel for the Reserve Bank will review to atisfY himself as to the legality of all steps taken effect the merger and establish the branch." Approved unanimously. 16ri0 ' 1/19/4s -10- Lett(_r to :.1r. Hill, Vice President of the Federal Reerve Ballk of Philadelphia, reading as follows: 19 "Reference is made to your letter of Novemb-r 6, n 46) regarding the proposed plan of The Pennsylvania 1;nallY for Insurances on Lives and Granting Annuities, as4adelPhia, Pennsylvania, to purchase the assets and slime the deposits of The Erie National Bank of Phila"The Board of Governors concurs in your opinion that the proposed transaction will not result in a peVe in the general character of the assets of the ex"s?lvania Comop.ny or broadening in the functions ercised by it within the meaning of condition of ellibershiP numbered 2 to which it is subject. ma, It is understood that the Pennsylvania Comrany le -4 Purchase only such assets as a member bank my iteTlY acquire and that the fixed assets and eLyipacquired will be carried at book values aprroved v Your Bank." Approved unanimously. or 841 tett-Jr to :Lr. Earha.rt, President of the Federza lieserve Bank F rancisco, reading as folio:7s: ask. "This refers to your letter of November 4, 1946, yoialrle Maether the Board would have any objection to archr endealrOring at this time to make arrangements ihith bUil ecte to prepare Plans for proposed branch bank arrp:-ligs at Seattle and Portland. You state that the coements would be for preparation of plans on a the Plus basis not to exceed a specified amount, \ith arkw;f°viso that, if the buildings are constructed, the 11/1CL Paid will be applied to the architects' fees ialto-r, Ell agreement similar to that which was entered tos th the architect on a proposed addition to the 4141geles building. Of G "If aPproved by your board of directors, the Board ken,0\rernors will interpose no objection to the employ°r architects to prepare preliminary plans on the 1101a:2 , 11t1ined in your letter for proposed buildings to - 'le Seattle and Portland branches of your 13,Ink. 11/19/46 -11- a is asumed that any agreement with the erchitects also Provide that the Bank is not obligated to ' e ualn than for any y-ork beyond the preparation of reliminarY plans. No commitment should be entered Po -1?t for Preparation of detailed plans and specificalor:Is until legislation is obtained elinineting or bnfYing the present limitation on the cost of branch 11 : 14-clings and until the preliminary plans have been releed by the Bo-, rd." Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks as follows: or fro 'or Your information, in replying to imluiries f 111 a Federal Reserve B2nk concerning the preparation 1%,Pre1 nary plans for contemplated head office and to(-4ch building construction, as referred to in the tbard i s letter of September 14, 19L5 (S-871; FRLS L7,053), obie 130ard recently stated that it v:ould interpose no stgetion to the employment of architects to prepare be PL-lns. It also stated that no commitment should aro-riLered into for the preparation of detailed plans s been PecificatLons until the preliminary plans have ea. . reviewed by the Board of Governors and, in the of tamed. the branch building, until legislation is oboll eliminating or modifying the )resent limitation the cost of such buildings. The Board reluested that ineri be advised concerning the details of the agreehl1de -Aith the architects and stated that it as13ank—%that any such agreement would provide that the wolit -Ls not obligated to retain the architect for any but . i il eYond the preparation of the preliminary plans, Wial3 if he is retained, the payment for such -eork -4 be taken into account in the final fee." Approved unanimously. Thereun n the meeting Secretary.
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