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1816
Minutes of actions taken by the Board of Governors of the
4ciera1 Reserve System on Wednesday, November 23, 1949.
nlet
i4 the Board Room at 10:40 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board
McCabe, Chairman
Eccles
Szymczak
Draper
Evans
Vardaman
Clayton
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Carpenter, Secretary
Sherman, Assistant Secretary
Morrill, Special Adviser
Thurston, Assistant to the Board
Thomas, Economic Adviser
Leonard, Director, Division of Bank
Operations
Vest, General Counsel
Nelson, Director, Division of Personnel
Administration
Millard, Director, Division of Examinations
Young, Director, Division of Research and
Statistics
Solomon, Assistant General Counsel
Before this meeting there had been sent to each member of
the Boa
I'd8 copy of a memorandum from Mr. Solomon dated November
9' 949
1
'with respect to an informal discussion which he and Mr.
Assistant General Counsel, had with representatives of
the Bure
au of Internal Revenue pursuant to the understanding at
4eeti
11g. on October 18, 1949, regarding a possible arrangement
bet ee
a Pederal Reserve bank and an individual Reserve Bank
111e4t
ellt for an additional retirement payment outside the RetireSr
-... of the Federal Reserve Banks, if the president retired
te
e
'ttEtining age 6) and completing at least ten years service.
1817
11/23/49
The
-2-
memorandum stated that the Bureau's representatives agreed that
4contract could be devised for additional retirement payments to
a Reserve Bank president without raising any problems in connection
11-th the immunity of the Retirement System of the Federal Reserve
from taxation, but they indicated that there was a serious
IllestiOn whether. a Reserve Bank president who retired under such an
Etrrangement would not be taxable in the year he retired on the total
ll'esent value of all the future payments he would be expected to reUnder the agreement.
reclUest a
The memorandum suggested that the Board
definite ruling from the Bureau of Internal Revenue if it
heci =_0
L go forward with plans for such agreements and submitted in
th t
ec)nnection a draft of letter to the Chairmen of the Federal Res*lie banks advising them that the Board proposed to request such a
rilling and furnishing them with a statement of the possible plan and
terft
ve outline of the essential provisions of a contract between a
8.er.\re Bank and a president.
At Chairman McCabe's request Mr.
411eliter read the draft of letter to the Chairmen of the Federal Reserve bealks.
During the ensuing discussion, Mr. Evans raised the question
Illether the
Board should approve an arrangement such as that proposed,
..t4tillg that with
the liberalization in the rules of the Retirement
SYsteit of
the Federal Reserve Banks approved May 6, 1949, he felt
cieqUate
allowances would be paid under the regular provisions of the
4tireMeri4 C,ystem.
11/23/49
-3-
Chairman McCabe stated that he felt an arrangement such
48 that proposed should be considered as a means of bringing
better balance
in retirement allowances that would be paid individllal Reserve Bank presidents, some of whom because of long
s"ce would receive large retirement allowances while others,
•
had been
brought into the System relatively late in life but
11° had given outstanding service to the System, would receive
e°111Paratively modest retirement allowances. He also felt that
(14 Et„
'rangement such as the one proposed would assist in obtaining
• t°
fill vacancies in the presidencies of the Reserve Banks in
the r
uture
where suitable persons were not available from within
tIleSYstem.
There was a full discussion of the allowances that ind1• 41 Presidents who were now in service would receive under the
rItille-r Provisions of the Retirement System of the Federal Reserve
1)4114 if
they retired upon attaining age 65.
In the course of the discussion, Mr. Eccles expressed the
Ille'hr t• hat inducements had been sufficient in the past to obtain,
11
elY late in life, some of the best Presidents which the
Sdht• had/ that in terms of pay and retirement allowances the in-ileellielats to
accept the Presidency of a Reserve Bank compared
'
14% with
inducements for outstanding men to accept membership
c)11Ille Board of Governors, that retirement allowances for the
11/23/49
-4-
4gents were relatively large except in a few instances in
hich 1
ndividuals had short terms of service, and that, for reasons
ch he discussed, he did not feel it would be desirable to est6tIll1eh a plan under which any President who retired after serving
'
a s li'tie as ten
years and attaining age 65 was virtvally assured
retireraent
income
of not less than $10 000 a year.
He went on
aY that he
would be entirely wailing to consider supplemental
labv
a
ances by the Ied ral Reserve Banks for Presidents who were
41°11ching retirement in any individual case in which the directors
the
Reserve Bank felt that the regular allowance was not appro-
illlate in the light of all the circumstances surrounding the partielliar case; adding that he felt this was the case with Messrs.
'Davis, Williams, and Erickson, President(' of the Federal
ileYto31
of Minneapolis, St. Louis, Philadelphia, and Boston
-ve B
NTectively
.
Mr. Eccles also said that he did not think it desirable to
eqabl
-1-- a Plan such as that proposed since it might give a special
-ezent to
directors of the Reserve Banks to go outside the
SYste,,
t0 fill vacancies in the presidencies of the Banks, whereas
Yo
irectors should attempt in so far as possible to develop
!lien from within the System who would be able to fill such
14
purl
g a
further discussion, it was the consensus that it
TI820
14°11-14 not be desirable to
establish an arrangement which would
irc)iiicle for a President employed in the future and who was retied
after attaining age 6), a minimum retirement income of
$10,0nn
a year after 10 years service, but all of the members
"the Board
indicated they would approve action which might be
t44,
by the
Boston, Philadelphia, St. Louis, and Minneapolis
Reserv
e Banks to supplement the respective allowances of Presidetu p
-riokson, Lilliams, Davis, and Peyton at the time of their
ChaIrman McCabe suggested that Messrs. Carpenter, Vest,
eavt lie,
` 80/1 prepare drafts of letters to the Chairman of the
Chai
en's Conference and to the Chairmen of the Boston, Phila411111
a/ St. Louis,and Minneapolis Barks setting forth the views
c't the,
-°ard as agreed upon at this meeting and submit the drafts
tor
'le consideration of the
Board.
The foregoing suggestion
was approved unanimously.
e.bove
1,
M.1". Evans stated that he would not be present when the
31114IttOr was finally acted on and that he would ltke to be
Le(3. at this
meeting as favoring action along the lines pro-
Mr
Solomon withdrew from the meeting at this point.
There was then presented a draft of letter, a copy of
Qt).,41
JLIC,4,0
11/23/49
-6-
had been sent to each member of the Board before this
illeeting, to Mr. Davis, Chairman of the Presidents' Conference,
Pl
'
ePared in
response to his letter of November 9, 1949, and
l'eallng as follows*
'The Board has had an opportunity to consider
matters to which reference is made in your letter
Of November
9, 1949, and on which actions were taken
the recent meeting of the Presidents' Conference
t4 San Francisco. The views of the Board with respect
each of the topics are set forth below and, where
tile
desirability of such action is indicated, the Board
be glad to discuss the topics at the joint meeting
Of the
Presidents and the Board to be held in December:
Practice of photographing out oing countr checks.
•
Following discussion of the report of the
Committee on Collections regarding the practice
Of Photographing all outgoing country checks, a
Practice followed by three Federal Reserve Banks,
the Presidents agreed that the question was one
that probably should be left with each Reserve
laank to be worked out with the Board in connection with its budget. It was the consensus
of the Conference that pressure from city banks
to adopt a similar practice should not necessarily result in any change in the existing
Practices of the other nine Reserve Banks. The
Presidents concurred in the view that unless the
Reserve Banks were free to experiment in areas
such as the one under consideration, they might
be denied opportunities to improve operating efficiency and decrease costs.
The Board subscribes heartily to the view
that the Federal Reserve Banks should be constantly
(41 the alert to improve operating procedures which
//ill result in increased efficiency, and realizes
that to do so at times naturally entails experion. The Board raised this question some
ago with the thought that there should be
a determination whether, in the light of the exPerience of the banks which were not photographing
all outgoing country checks, the expenditures of
the
=T
11/23/49
-7- -
"the three banks whtch are doing so were justified. The Board cannot escape the feelipe that
there is still a question whether these exPenses
Should be Incurred, and, as sugEested by the
Presidents' action, will discuss the matter with
the three banks concerned n connection with their
budgets.
Acceptence of checks of ?A.0.00 or less drawn on
nonPar banks in south Dakota for
The Eoerd notes the action of the Presidents'
Conference in approving a recommendation cf the
Committee on Collections that Federal Reserve
Banks should decline to accept for collection
Checks of $10.00 or less drawn on nonpar banks
in South Dakota. The Board has no objection to
this procedure.
propcsed by Post Offtce Department for the
Issuance end collection of postal money orders.
It is also noted that the Presidents agreed
principle to the interim report on the above
subject submitted by the Chairman of the Committee
on Collections under date of October 14, 1949,
with the understanding that the Committee would,
at a later date, submit recommendations as to
the details of contemplated procedure.
Restrtctions on money shipments over Star Routes.
The Presidents approved the recommendation
Of the Insurance Committee that a representative
of the Conference and of the Board, in conjunction
141-th a committee appointed by the American Bankers
Association to investigate the same subject, formal-Y discuss with the Post Office Department the urgent
need for a modification of the Department's present
restrictions on money shipments. The Board has
clesiSmated Mr. Leonard, Director of the Division
Of Bank Operations, as its representative to serve
With the group.
Possible inclusion of Federal Reserve Bank employees
1111der Social Security Program.
The Conference also approved recommendations
to the effect that no steps should be taken by the
Pederal Reserve Panks to resist the inclusion of
their employees in the Federal Social Security System
a8 proposed in H.R. 6oco and that the Retirement
1S23
11/23/49
-8-
"Comm5ttee of the Retirement System be requested
to develop a plan for Integrating the benefits under
the Federal Reserve Retirement System with those
under the Federal Social Security System. Since
Other Government employees who are covered by the
Civil Service Retirement System and comparable retirement systens will nct be taken into the Federal
Social Security System, it is the Board's view that
its employees should not be included in that System
and the Board expects to take steps at an early date
to seek an amendment to H.R. 6000 to exempt its emPloyees. In so far as Federal Reserve Bank employees
are concerned, the Board agrees that it is desirable
lor the Retirement Committee of the Retirement System
to undertake to develop a Plan for integration of the
benefits under the Federal Reserve Retirement System
and the Social Security System for consideration by
the Presidents and the Board. It is the Board's
feeling that the completion of the study of the
Problems of integration and the development of a
definite plan are needed in considering the desirability of including Federal Reserve Bank employees
in the Social Security System. Therefore, the Board
believes that, in view of the legislative situation,
it is important that this study be made without delay.
Group insurance and Retirement System active service
death benefits.
The Board will interpose no objection to a
continuation of the present group life insurance
Plans of the Federal Reserve Banks under present
arrangements pending completion of studies with respect to active service death benefits under the Retirement System and possible inclusion of the Federal
Reserve Bank employees under the Social Security
program.
Meeting of bank and ublic relations personnel.
The Presidents have approved the holding of a
m eeting of the officers and others directly responsi?le for bank and public relations work at each of
tne Reserve Banks to work out plans and procedures
with respect to future operations by the Committee
on Bank and Public Relations and report any suggestions
recaramendations to the Committee. In view of the
importance of this subject, the Board would suggest
that Mr. Thurston attend this meeting. It would also
-1824
11/23/49
-9-
"suu.est that, inasmuch as the Presidents' Conference Committee on Bank and Public Relations
will be considering a number of matters in the
months to come which will be of interest from
the standpoint of the public relations of the
System as a whole, Mr. Thurston be made an associate of that Committee and participate in
its discussions.
Increase in fees for copies of national bank
examination reports.
The Board approves the action recommended
by the Committee on Bank Supervision regarding
the proposed increase in fees for copies of
national bank examination reports which was approved and adopted by the Conference. Accordingly, the Comptroller of the Currency will be
advised that the payment for copies of examination retorts of national banks will be increased
from $5 to $10 for each report and, at the same
time, an agreement will be reached for suitable
standardization of the charge to be made for additional copies of such reports and reports of
separate examinations of trust departments. All
Presidents will be advised of the date upon which
the $10 fee will become effective and of the agreement reached as to fees for additional copies and
separate trust reports.
P,175C assessments and coverage and relations with
the American Bankers Association.
In accordance with the suggestion of the
Presidents, the Board will be glad to discuss these
,!°Pics at the forthcoming joint meeting of the
eresidents and the Board of Governors.
Increase in Reserve Bank capital accounts.
The Board is sending a telegram today to the
Presidents of all of the Federal Reserve Banks
suggesting that this matter be discussed at the
forthcoming joint meeting of the Presidents and
the Board and asking, in that connection, for their
Irielis on the question whether all or any part of the
64
Y 0 million set aside so far this year for transfer
t° reserves for contingencies should be restored to
e
arnings.
19_-nge by Federal Reserve Banks of copies of
glaarterly reports.
!2r
EZZ1
1825
11/23/49
-10-
"Eight of the Presidents (one being temporarily absent) did not favor the proposal that
each of the Federal Reserve Banks distribute
copies of its quarterly reports (S-9)3; FRLS
#3949) to the other Federal Reserve Banks. The
further discussion of the Presidents relating
to the scope and character of the reports is
noted and the Board will be glad to give further
consideration to the matter at the time of the
next joint meeting of the Board and the Presidents.
"The reports were undertaken as an experiment
and in their development there has been a considerable departure from the original concept.
They have been valuable for the Board's purposes
and a study of the matter will be made before the
joint conference. It is suggested that the Presidents also consider the purposes described in the
Board's letter of January 27, 1947 (S-9)3) and
the practical means of developing the desired information as well as the limitations on scope and
Character that may be desirable.
"Frequently reports of committees of the Presidents'
Con
ference and other material are sent to the Presidents
all of the Federal Reserve Banks for consideration at
o e Presidents, Conference and the Board is not informed
the documents until the minutes of the Presidents' Conm rence are received. In some cases the reports and other
,
aterial involve matters which call for action by the
ard and it would be of considerable assistance to the
e.rd and its staff if these documents could be sent to
tr Board at the time they are sent by the Chairmen of
committees or by the Banks to the other Federal ReBanks. With a view to getting the suggestions of
the
Br
Presidents as to how this problem might be met, the
coe d would like to discuss it at the time of the forthlaing conference."
j
Upon motion by Mr. Evans,
the letter was approved unanimously.
Mr. Clayton stated that when he was in San Francisco recently
ar
he
directors of the Federal Reserve Bank of San Francisco
A(
it)isf
COx
11/23/49
-11-
8148asted that, because of their value in public relations work
atId a8 branch directors, the Board consider reappointing Mr. Y.
44111 Freeman, Director of the Los Angeles branch, and Mr. Henry
4.DIX°n, Director of the Salt Lake City branch, whose terms will
(114/11'e at the end of this year. Pa% Clayton said that such action
11°111d-require an
exception to the Board's regulations relating
toPza
''4era1 Reserve Bank branches which provide that branch diNtors
shall not be reappointed if such reappointment is to beeffective
within a period of two years immediately following
Six
Or more years of continuous service at any branch having five
directors or within a period of three years at a branch having seven
He went on to say that the Personnel Committee discussed
the
tatter at a meeting on November 16, 1949, and that, in view of
the teeling of the Board that it was highly desirable that the
151‘111e1Ple of rotation be applied to head office directors, branch
lireetors,
and members of the Federal Advisory Council, the Committee
Nched the conclusion that it would not be desirable to depart
rr°ra the
present rule relating to terms of branch directors and
that for this
reason Messrs. Freeman and Dixon should not be reQl01/Ited.
Mr. Szymczak added that the Personnel Committee recommended
tbat the .1)1..
sent rule relating to branch directors not be changed
4114 that
exception be made to it.
11/23/49
-12The recommendation of the
Personnel Committee was approved
unanimously.
Reference was made to the suggestion offered at the meet°f the Federal Advisory Council with the Board on November
'1949, that when the Board undertook to formulate its views
15
lth
respect to changes in the law relating to reserve requireil1
Ikt8
the Council be afforded an opportunity for full discussion
or the matter with the Board. Consideration was given to the exteat,
which it was desirable to discuss legislative matters with
the,
/federal Advisory Council in advance of preparation of the
ip
lUelA44
and it was the consensus that no general rule could
be
oPted but that in the present instance it would be desirable
to
ai
8°Use the matter with the Council and possibly with the Executive c
°uncil of the American Bankers Association. It was suggested
t114t t
he staff, in conjunction with the Presidents' Conference Comkttee
°la Banking and Credit Policy, prepare a current memorandum
the uniform reserve plan and information on how the plan would
ettrec
t individual banks and that the material be completed so that
coi)ie
8
Could be made available to members of the Board for consider-
"1°4 llot later
than January 23, 1950.
The foregoing suggestion was
approved unanimously with the understanding that a letter prepared for
Chairman McCabe's signature would
be sent to the President of the
4,.., ;if )
4/23/49
-13Federal Advisory Council
in the following form:
"You will recall that at the meeting of the Federal Advisory Council and the Board on November 1), 1949,
14r. Congdon suggested that when the Board undertook to
formulate its final views with respect to changes in
the law relating to reserve requirements, the Council be
afforded an opportunity for a full discussion of the
Matter with the Board. Some of the members of the
Council thought that it would be desirable to devote
the entire time of a meeting to such a discussion.
"Since the meeting with the Council, the Board of
Governors has given the matter further consideration
and would suggest that, if agreeable to the members of
the
Council, changes in the law with respect to reserve
1 equirements be made the first item on the agenda for
;
he joint meeting of the Council and the Board on Feb1.11arY 21, 1950. It would be understood that the whole
1°171ing would be devoted to the discussion of that
4°Pic and that, if the members of the Council desired
''jc) discuss other matters, an afternoon session of the
'Joint meeting would be held for that purpose.
"A committee of the staff of the Board of Governors and the Federal Reserve Banks has been requested
3 Prepare a memorandum setting forth the proposals
that
might be made with respect to changes in reserve
'-cequirements and to develop information from which it
in be determined how the proposals would affect in;,
vidual banks. Copies of the memorandum would be
sent to the members of the Council as much in advance
s Possible of the joint meeting.
"The Board will appreciate it very much if you
Ui let me know whether this arrangement meets with
r'31.1r approval."
1
Secretary's Note: The foregoing
letter was mailed under date of
November 30, 1949.
14bm,,
csrs. Sloan, Assistant Director, Division of Examinations,
Assistant Gneral Counsel, joined the meeting at this
1829
11/23/49
-14-
Before this meeting there had been circulated among the
tile*ers of the Board a memorandum from Mr. Vest, dated November
14) 1949,
reading as follows:
"For some time, the Board's staff has been
considering the question whether a deposit of uninvested trust funds made by the trust department
of a member bank in the same bank's banking departMent may properly be classified as a time deposit
under Regulations D and Q where the deposit consists of co-mingled funds of various trust estates.
The
practice has developed principally among the
trust companies in New York City where it
has been followed primarily for the purpose of
'las
°111PlYing with requirements of State law that in!
terest be paid on certain trust funds. However,
.the Practice
has also been adopted by some member
other parts of the country, apparently
tor the
'or
sole purpose of avoiding higher reserve
/'equirements.
"In general, but with some variations, the
New
York trust companies determine the portion of
total
trust funds which they place on a time basis
;Y- consideration of the aggregate amount of trust
blinds which will probably be required to be disbursed
within the next thirty or forty-five days;
no record is maintained of the dollar amount
each trust estate which is included in such time
f2°sit. In practice, this means that all of the
11,,"as of any particular trust are available for dis'
rsement at any time.
"The problem has proven to be one of considerable
difficulty and a solution acceptable to all
Parties
appears impossible. The Federal Reserve
are sharply divided in their attitude toward
the
problem
"In
n November, 1943, the Board transmitted to
Federal Reserve Banks for their comments, a
°
I
)°sed
Ii:
3111
ruling on the question which would have
effect permitted the practice being followed
bY the New York trust companies. Under that proPosed
ruling, a deposit of trust funds could be
11/23/49
considered as constituting a time deposit if the determination
of the aggregate amount of trust funds
Placed in the time deposit were based on a current
analysis of anticipated requirements for the disbursement of trust funds within the ensuing thirty to fortyfive days. The ruling would not have required an identification of the dollar amount of each trust estate
included in the account. In its letter, the Board
stated that it seemed questionable whether a strict
Position requiring such identification was necessary
or desirable from the standpoint of practical administration of large trust departments.
This proposal met the approval of several of
the Reserve Banks, including Boston and New York,
?Ut some of the other Reserve Banks felt strongly
that the proposed ruling would have the effect of
countenancing unsound trust practices.
the .
:After further consideration of the problems,
Board in April 1949, submitted to the Reserve
Bianks for comment a different approach to the problem
1,1
,
11 the form of a proposed amendment to Regulation D
ti'ich would in effect permit the deposit of co-mingled
,!Ilst funds in a single time account only if the records
the bank show the dollar interest of each trust in
sTtt account. In making this proposal the Board
Elted that the previously proposed liberal ruling
°lad seem to permit funds to be treated as time det6 which are in part, at least, in the nature of
,f'
1
14-111and deposits, and that the practice in question
}d aPPear to violate principles of proper trust
a,
(11
3 1_
inistration.
the
re v "Comments by the Federal Reserve Banks on
proposal were again diverse. Boston and New York
D°8ed the proposed amendment and Cleveland and Chicago
'
fil t that the amendment would be undesirable and that
otther study should be given the problem. On the
em,er hand, eight of the Reserve Banks indicated their
,"
1.0val or raised no objection to the proposed amend,uerit
Z
t_
"It is believed that as a practical matter only
,,,;(3 alternative solutions of the problem are possible.
lie Board might issue a ruling somewhat along the
Iles of the so-called liberal position suggested in
I
11/23/49
1911.8; or it might adopt a strict position
November 1948;
as contemplated by the proposed amendment to Regulation D which was suggested in April 1949. The
essential difference between the two positions is
that an identification of the dollar interest of
each trust estate in the time deposit would not be
l'equired under the liberal position but would be required under the strict position.
"If the so-called liberal position should be
adopted, the practice now followed by the New York
trust companies and by some other banks in other secon of the country would be permitted to continue.
If the strict position were adopted, it appears that
!
a a practical matter that practice would have to be
scontinued since the larger trust companies maintain
tliat it would be practically impossible for them to
iceeP an exact record of the interests of all trust
estates
in such a time deposit.
"Whatever position is taken, it appears that the
allloUnt of deposits involved is not sufficient to have
:
4Y very substantial effect upon total member bank reIt has been estimated that the maximum amount
I`J:11 reserves affected one way or the other would pro4131Y not exceed some $75,000,000.
"Members of the staff of the Federal Reserve Bank
Of
New York recently discussed this matter with us,
• 1.°11(g1Y opposing the strict position, i.e., the amendXt to the Regulation, and we have requests from repreteatatives of banks in New York and Chicago for an oppor4114itY to express their views orally to us in opposition
the strict position. It is understood that reprentatives of the Trust Division of the American Bankers
,!eociation will also wish to discuss the proposal be'
ore steps
are taken to publish it in the Federal Register.
1
bilt
t.
'
,
,
1,
1e
-1317
"The question is affected by legal considerations
it is essentially one of policy. The members of
Board's staff who have considered this matter are
altogether in agreement as to the best course of
The proposal presently under consideration is
otZ'aher the suggested amendment to the Regulation -- in
44',1er words, the strict position -- should be adopted,
in the circumstances, before taking any further steps
it this direction through discussions with outside parties,
th,„,seems desirable to have some tentative indication of
- views of the Board in the matter."
1.8:4
12
11h3/49
-17-
In commenting on the memorandum Mr. Vest stated that
beeetuse of questions being presented to the Federal Reserve Banks
441 the
Board as to whether the practice being followed by some
trtist c
ompanies, especially in New York, was permissible, he felt
the time
had come when the Board should take a position either
14/ re.vor of a
o-called "liberal" rule or of making it clear
til
"a strict rule would be applied in connection with deposits
or trinst funds.
He added that if the decision were for the
4(41Pti°n of some form of liberal rule such as that transmitted
the
''eeerve Banks for comment in November 1948 but to which
81:541e °t the Reserve Banks objected, it would not be necessary to
ticaa
e°4-ferences with representatives of banks in New York and
Chic
Twho had requested an opportunity to express their views
oral
,
y. I
n oPPosition to a restrictive ruling. Mr. Vest also
r414ented that one of the principal questions was whether the way
rat
iort
he opened by adoption of the liberal ruling, for classificaot some demand deposits as time deposits in order to reduce
reser
requirements and that there was also involved the principle
hethe
,
- earnings from funds in individual trusts should be strictly
ell for and allocated to the beneficiaries of the trust.
it
141% Clayton stated that, for reasons which he set forth,
not Practicable to require large trust companies to maintain
let ac
counting for earnings from deposits consisting of co-mingled
oil
111'23/49
-18-
Or various trust estates so that such earnings could be
P1418sd back to
the beneficiaries of the trusts, that if a strict
1114 Vere applied it would in effect prohibit the present practice,
4.114 that
he had come to the conclusion that the adoption of a
rule which would permit the practice now followed by
s()Ze trust
companies would be desirable, provided some safeguards
ce1114 be
worked out to prevent abuse through the shifting of
B
ial amounts of demand deposits into the time deposit
sib
e4teg„
--'Y for the purpose of avoiding or reducing reserve requireXt
of obtaining interest on funds which would not fully
lee.t the usual
definition of time deposits as provided in RegulEttiot D.
During the discussion Chairman McCabe suggested that Mr.
lazt
With the assistance of Messrs. Vest, Leonard, and Millard,
tlkly
1-4e matter with a view to adopting the so-called "liberal"
NIA
it
aPPropriate safeguards could be devised to prevent abuse.
Upon motion by Mr. Vardaman,
Chairman McCabe's suggestion was
approved unanimously.
Reference was then made to the discussion at the meeting
)11
1,
(kt°-er 18, 1949, at which time the Board accepted a recommendat104
°t the executive committee of the Chairmen's Conference that
trleet
1111€ be held in Washington on January 16 and 17, 19)0, at
14 addition to the Chairmen of all Federal Reserve Banks,
4‘414
11/23/49
the
-19-
would be present the directors of the New York and Minne-
ePolis
Federal Reserve Banks and their branches.
There was pre-
sented in
this connection a tentative agenda for the meeting which
4dbeen
prepared on the basis of suggestions submitted by the men-
or the
Board, the Chairmen of the Federal Reserve Banks, and
°141ers, the
general scope of which had been approved by the executl" coMmittee of
the Chairmen's Conference.
The tentative agenda was
discussed, and certain changes
were suggested for the consideration of the executive committee
of the Chairmen's Conference.
Consideration was then given a draft of letter to Mr.
It'44L1 Pace,
Director, Bureau of the Budget, prepared in response
to
that
Portion of the President's letter to the Board dated
8ellteruber 26,
1.949, requesting that the Board submit through the
et Bureau
a report on the legislative program of the Federal
tie8er
"SYstem.
b4Ill
Before this meeting each member of the Board had
aished with a copy of the draft reply reading as follows:
de
"This is in response to that portion of the Presi01,4t's letter to the Board of September 26, 1949, re;Zing that the Board submit through your Office a
seZrt on the legislative program of the Federal Reth've System. As requested in the President's letter,
lie following report includes a restatement of the preIX
.IlarY legislative program set forth in the Board's
to you of September 22, 1949, in response to
Bulletin No. 50-5, as well as some additional
slative proposals which the Board has in mind as
.vves
ibilities for recommendation.
11/23/49
- 20-
"Berk Holding Company Regulation. - The Board has
heretofore recommended the desirability of enacting
leeislatton to provide more effective regulation of
bank holding companies and to curb abuses in that field.
Bills for this purpose (S. 829 and H.R. 3351) were introduced during the 80th Congress and the Senate Bill
Was favorably reported by the Senate Banking and Curf?ncY Committee (Report Bo. 300, June 19, 1947). Since
wlat time, the details of the proposed legislation have
I'lla-ergone an intensive review, as the result of which
01-11s similar in objectives but with some changes
(S. 2318 and H.R. 5744) have Leen introduced in the
Ipresent Congress. Legislation along the lines of the
Introduced in the 80th Congress was favored by
Lhe Federal Advisory Council, the Association of Reserve City Bankers, and the two independent bankers
l,
associations, as well as by the majority of the larger
:
ank holding companies. This matter has been discussed
;
Isom time to time with the Treasury Department and the
ecieral Deposit Insurance Corporation.
"Capital Requirements of State Member Banks of the
zederal—leSstem. - In its recent Annual Reports
Congress, the Board has called attention to the suband unnecessery obstacle to membership in the
ederal Reserve System resulting from certain statutory
,
V-ta1 requirements for admission of State bank:: to
Ill)ership and for the establishment of out-of-town
l'anches of State member banks. The Board has recomZ?rided that these requirements be eliminated or substan61.11Y modi2led and bills to accomplish this purpose
"
aye been introduced in the present Congress as S. 2494
ci ld R-11. 5749. The subject matter of this legislation
417 or interest to the Comptroller of the Currency and
'
-ue Federal Deposit Insurance Corporation.
'Purcliae of Government Securities Direel from
Tre,c.77By the Act of April 28, 191.7, the temporary
G-6-ierity of the Federal Reserve Banks to purchase
c°Zernment securities directly from the United States,
0
- 7Ject to an aggregate limitation of $5,000,00C,000 on
t'4e amount which may be held at any one time, was exaenclea until June 30, 1950. This authority has proved
thIlseful means of effecting temporary adjustments in
44
:InoneY market and of facilitating Treasury operations;
the Board will wish to recommend legislation further
:
t
u extend this authority. This matter is one which is
r
-
.t.
11/23/49
-21-
"of interest to the Treasury Department.
"Limitation on Federal Reserve Branch Buildings.
The present law limits the aggregate amount of expenditures for Federal Reserve branch bank buildings to
$10,000,000 (with certain exclusions). Many of the
branches of the Federal Reserve Banks need larger or
inProved quarters for the effective performance of their
functions, and this need cannot be adequately met within
the Present statutory limitation. Accordingly, the Board
/1
0, 4izlei to propose that this limitation be removed or
1
"Consumer Instalment Credit. - The authority to
14segulate consumer instalment credit, which was enacted
;:.!! August 1948, expired on June 30, 1949. This authorty
has proved to be a useful tool, supplementary to
:eserve requirements and other available instruments, to
-Lnfluence credit conditions in the interest of economic
st
ability. The Board has previously recommended continu4tion of this authority and it may wish to renew the
recommendation.
Financing of Business Enterprises.- The Board has
heretofore recommended legislation to enable the Fedel'al Reserve Banks to assist in the financing of business
21terprises, particularly small businesses, on a more
effective basis than now permitted under section 13b of
the
Federal Reserve Act. A bill to accomplish this
:1°se (s. 408) was reported favorably by the Senate
1B3111
a7ing and Currency Committee in the 80th Congress and
c°mPanion bill (H.R. 3268) was introduced in the House.
No
bills on this subject are pending in the present Congress,
but the Board may desire to offer a specific
'
1.°Posa1 at a later date.
or "Bank Reserve Requirements. - The general subject
Bo bank reserve requirements is being studied by the
vi4rd with a view to a possible recommendation of a reof existing law on this subject to provide a system
0,, bank reserves which would apply to all commercial banks,
p;at least to all banks having the benefits of Federal deBosit insurance, and which in addition to authorizing the
— reserve requirements within specified limits
voard to vary
tullid base differences in reserve requirements on the nadeposits rather than on the location of banks.
4,-L.Le the Board does not have a specific recommendation to
1837
1:1123Ar)
-22-
at this time, it may later wish to submit
Proposal to Congress on this subject.
"Vihile there may be other mlAters with respect to
oh the Board will later find it desirable tn ccrnmend some action by Congress during the forthcoming
session, the subjects mentioned above embrace the
Principal matters In the field of possible legislative
t1c-'n tc, which the Board is now giving consideration."
"
Following a discussion, the
letter was approved unanimously.
Chairman McCabe stated that in response to his letter of
li°vember 4, 1q40
to Mr. Paul G. Hoffman, Class C director of the
e(ler.'11. Reserve Bank of Chicago whose term of office expires at
the
end of this year, he had received word from Mr. Hoffman that
he
be unable to accept reappointment as a director of that
ata that
it would be necessary for the Board to choose a
At this point Messrs. Thomas, Leonard, Vest, Nelson, Millard,
Slo_
and Baumann withdrew, and the action stated with re-
't0 each of the matters hereinafter referred to was taken by
thc, toexd,
Minutes of actions taken by the Bonrd of Governors of the
-eserve system on November 22, 1949, were approvd unanimously.
Letter prepared in accordance with action taker by the
()I!
September 27, 1949, to Mr. Young, Director of the Division
'arch and Statistics, reading as follows:
"The Board hereby authorizes you, in your capacity
11/23/49
-23-
"as Director of the Division of Research and Statistics to proceed to Santiago, Chile, as the head
Of the Federal Reserve delegation to the second
conference of central banks of the western hemisPhere. En route to and from Santiago you are to
st°P in Rio de Janeiro, Brazil, Buenos Aires, Arntina, and Lima, Peru, to make brief calls on
the central banks of those countries.
"While you are absent from Washington, your
actUal necessary transportation expenses in accordice with the Board's travel regulations, charges
°1
'flight insurance, a per diem in lieu of subsistelles at the rate of $12.00, and an additional a111°Illat not to exceed $500 to cover other expenses
°f the delegation, including necessary entertainWithout however requiring detailed itemizan of the vouchers or the furnishing of receipts,
Will be paid from funds under control of the Board.
"It is reauested that you retain the original
letter, and that the file copy, after being
in
'
41
tialed by you, be returned to the Board's files."
itialed
T
Memoranda from the heads of the Divisions indicated below
°Iralding appointments to the staff in those divisions, effective
or
the dates upon which the appointees enter upon the performance
or their
duties
after having passed the usual physical examination:
Name
11/pAll
i
AND STATISTICS
177,7,99 Mrs. Joan N. Yamamoto
1.1/;-44./8,TRATIVE SERVICES
Miss Ruby Williams
Title
Clerk-typist
Clerk
Salary
$2,420
2,450
Duration of
Appointment
Temporary
(Indefinite)
Temporary
(Three months)
Approved unanimously.
or the T,Mftlerandum
dated November 22, 1949, from Mr. Young, Director
sion of Research and Statistics, recommending that the
submitted by Professor E. A. Kincaid of the University of
9
4/23/49
-24-
Vizgillia in connection with the talk he gave before the System
Rese"ch Advisory Committee and the Subcommittee of the Presidents'
Cellfereace Committee on Research and Statistics on November 14,
1949,
be aPproved for payment as submitted.
Approved unanimously.
Memorandum dated November 18, 1949, from Mr. Young, DiNtor of
the Division of Research and Statistics, recommending
that 4.
resi
tion of Mrs. Betty S. Meyer, a clerk in that
blvis
i°11/ be accepted to be effective, in accordance with her rec411°st/ at
the close of business November 15, 1949.
Approved unanimously.
Letter to Mr. DeMoss, Vice President of the Federal ReBalak of Dallas, reading as follows:
"In accordance with the requests contained in
letters of November 16, 1949, the Board approves
i"e aPpointments of Robert Elkin Zimmerman and Thomas
:Yea Sullivan, at present assistant examiners, as
p7miners for the Federal Reserve Bank of Dallas.
:
14 41aa advise us of the dates upon which the appoint'e become effective and also as to salary rates."
Your
Approved unanimously.
Peciertti.
Letter to Mr. Logan, Vice President and General Counsel,
Reserve Bank of New York, reading as follows:
19b "Reference is made to your letter of November 10,
'
Tr 9, submitting the request of 'Manufacturers and
Trust Company', Buffalo, New York, for approval
"r4Cielle
the establishment
of a branch in Lockport, New York,
1M0
11/23/49
-22"in connection with the proposed absorption through
merger of the Lockport Exchange Trust Company.
In view of your recommendation the Board of
Governors approves the establishment and operation
branch in Lockport, New York, by the Manufacturers and Traders Trust Company, Buffalo, New York,
Provided the merger with the Lockport Exchange Trust
,
.rnPanY is effected substantially in accordance with
C
4(
.)
he plan submitted; the prior approval of the appropriate State authorities is obtained, and with the
Understanding that Counsel for the Reserve Bank will
review and satisfy himself as to the legality of all
steps taken to effect the proposed merger and es- '
tablishment of the brahch."
Approved unanimously.
Letter to Mr. Sheehan, Chief Examiner of the Federal Re4rve
13ank of New York, reading as follows:
1,
"Reference is made to your letter of November
1949, submitting a request of 'The Marine Trust
t°111PanY of Buffalo', Buffalo, New York, for permission
_0 commence operation of a branch office in the Town
Of T
onawanda, New York, in temporary quarters with the
lInderstanding that when permanent quarters have been
ected on a lot now owned by the trust company, this
frauch will be moved to such permanent quarters. Int°rmation submitted by the bank indicates that the
rell1Porary quarters are located approximately 42) feet
Tom the site of the proposed permanent quarters.
i
In view of your recommendation, the Board will
,
Ilterpose no objection to the proposal as submitted,
ditioned upon approval being obtained from the apr°Priate State authorities, if required, and with the
derstanding that counsel for the Federal Reserve
snk is to be satisfied as to the legality of all
'
r ePs taken in establishment of the branch in tempoTy
quarters and its subsequent removal to the perallerlt quarters when they are ready for occupancy."
7
r
Approved unanimously.
Letter to the board of directors of "The Hartford-Connecticut
1841
11123/49
-2(-
Ilsust Company", Hartford, Connecticut, stating that subject to
c°11clition5 of membership numbered 1 and 2 contained in the Board's
RegIllation H the Board approved the bank's application for mem1)ershiP:U1 the Federal Reserve System and for the appropriate
e'r4(11111t of stock in the Federal Reserve Bank of Boston.
Approved unanimously, together with a letter to Mr.
Erickson, President of the Federal Reserve Bank of Boston,
reading as follows:
"The Board of Governors of the Federal Reserve
SYstem approves the application of 'The HartfordC
2nnecticut
Trust Company', Hartford, Connecticut,
?or membership in the Federal Reserve System, subject
I0 the conditions prescribed in the enclosed letter
Which you are requested to forward to the board of directors of the institution. Two copies of such letter
!re also enclosed, one of which is for your files and
the other of which you are requested to forward to the
rIlk Commissioner for the State of Connecticut, for
information.
"Enclosed is a letter approving the retention and
°Peration of the out-of-town branches established since
'
4927 and now operated by the bank which you are regllested to forward to the board of directors of the
?43Plicant bank. There is also enclosed a copy of this
-Letter for your files.
With respect to the nonconforming savings accounts
4e-lsted in the report of examination for membership,
,ccePtions noted regarding interlocking bank direcrates under the Clayton Act involving five trustees
e the subject institution, and the requirement that
4. ecutive officers of the bank file with the board of
s reports of their outstanding indebtedness with
s'0'Itlasteeher banks, it is assumed that you will follow to a
iZtisfactory conclusion the matter of bringing such
,„eMs into conformity with the law and the Board's
.1842
11/23/49
-27-
Letter to the board of directors of "The Hartford-ConnecticUt Trust Company', Hartford, Connecticut, reading as follows:
"In connection with the approval of your appliation for membership in the Federal Reserve System,
!
'l he Board of Governors of the Federal Reserve System
aPProves the retention and operation of the branches
Ilow operated in East Hampton, Meriden, Middletown,
°811P, Rockville, Stafford Springs, Norwick, West
z
lartford and Wethersfield, all in Connecticut, by The
tartford-Connecticut Trust Company, Hartford, Connecticut.,
Approved unAnimously together with a letter to Mr.
Willett, First Vice President
of the Federal Reserve Bank of
Boston, reading as follows:
is
"Reference is made to your letter of November
1949, submitting the request of 'The Hartfordi'lanecticut Trust Company', Hartford, Connecticut,
i°r approval of the establishment of two branches
Winsted, Connecticut, in connection with the pro.1:?sed absorption of the Hurlbut National Bank and
''a First National Bank, both of Winsted, Connect!"In view of your recommendation, the Board of
;‘)Nrernors approves the establishment and operation
Rf tvo branches in Winsted, Connecticut, by the
I lstford-Connecticut Trust Company, Hartford, Conr
cticut, provided the proposed absorptions of the
21-ribut National Bank and First National Bank are
7-rected substantially in accordance with the plan
flitted and the prior approval of the appropriate
state authorities is obtained; and with the undervinding that Counsel for the Reserve Bank will rean. satisfy himself as to the legality of the
4.;e138 taken to effect the absorptions and establish
the
branches."
e
Letter to Mr. Emil Schram, President of the New York Stock
4cha
4a, 11 Wall Street, New York 5, New York, reading as follows:
1S43
11/23/49
-28-
"Another count of the number of margin accounts
held by member firms of the New York Stock Exchange,
as of December 31, 1949, would be of interest and
value to the Board. As you know, the Exchange has
"
1de such surveys on several past occasions, including
oune 30) 1949, and has kindly informed us of the results
"If you feel, as we do, that this figure would
be 0,
1, interest and value also to the Exchange, we
!hould appreciate your cooperation in sending us this
lia
formation."
Approved unanimously.
Memorandum dated November 21, 1949, from Mr. Hammond, As
'
1stalit
Secretary of the Board, reading as follows:
, "Christmas Day, December 25, and New Year's Day,
rnUary 1, are statutory holidays, and this year they
,51 on Sunday. Under the terms of an Executive Order
1'1 October 3, 1945, when these holidays fall on Sunday,
le succeeding Monday is to be observed as a holiday
'Y all the Government Departments.
tio, "Accordingly, if the Board Interposes no objecs, it is planned to inform the Federal Reserve
i
that the Board's offices will be closed on MonY, December 26 in Observance of Christmas, and on
°IldaY, January 2, in observance of New Ye; 's Day."
e
Approved unanim
4111PSecretary.
@FedFRASER