The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
1736 A meeting of the Board of Governors of the Federal Reserve aYstem was held in Washington on Friday, November 24, 1944, at 10:30 a.ra. PRESENT: Mr. Eccles, Chairman Mr. Mr. Mr. Mr. Ransom, Vice Chairman Szymczak McKee Draper Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Hammond, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Smead, Director, Division of Bank Operations Mr. Vest, Assistant General Attorney Mr. Thomas, Assistant Director, Division of Research and Statistics Mr. Wyatt, General Counsel There Were presented telegrams to Mr. Flanders, President of he Reserve Bank of Boston, Mr. Treiber, Secretary of the Fed— eral Reserve Bank of New York, Messrs. Leach and McLarin, Presidents (4 the Fe _ deral Reserve Banks of Richmond and Atlanta, respectively, 13illard, Vice President of the Federal Reserve Bank of Chicago, 'Stewart/ Secretary of the Federal Reserve Bank of St. Louis, Mr. First Vice President of the Federal Reserve Bank of Minneapolis, ealdwe 1, 1 Chairman of the Federal Reserve Bank of Kansas City, 141% Ferhart, Vice President of the Federal Reserve Bank of San ?ra'lleisco, stating that the Board approved the establishment without ellarige 10Y the Federal Reserve Banks of St. Louis and San Francisco orl November 21, the Federal Reserve Banks of New York, Atlanta, ellleacl, Minneapolis, and Kansas City on November 22, the Federal 11/4/44 -2- Reserve Bank of Richmond on November 23, 1911, and the Federal Reserve Bank Of Boston today, of the rates of discount and purchase in their existing schedule5. Approved unanimously. Mr. Draper stated that under date of November 1, 1944, he received a letter from Senator Murray, Chairman of the special Senate e°1114ittee to study problems of American small business, asking for a 8tatellient of views on the problem of reconversion loan financing of 814'111 busi _, nesu including views on 10 points set forth in the letter " 11 illich the committee was particularly interested. The letter also 8tated that the committee would like to know whether Mr. Draper would be available to participate in public hearings if they were scheduled (1111141g the third or last week of November. Yr. Draper also said that he had --" /*equested the Division of Research and Statistics to prepare 8°111e material • which would be used in a reply which he had intended to mak tha. e to Senator Murray's letter, but that subsequently he learned tth e same letter had been addressed to other members of the Board el 'date of November 15, 1944, and, therefore, he would like to sug- that the he letter Board consider what response should be made to all of that had been received. There was unanimous agreement that Mr. Draper, with the assistance of such members of the staff as he desired to call Upon, should have a draft of reply to the Senate committee letters prepared for consideration by the Board. 1738 11/24/44 —3— Before this meeting there had been circulated among the members of the Board a memorandum dated November 1, 1944, from Mr. Vest "I which was submitted a summary of a confidential print, prepared bY the sPecial Senate committee to study problems of American small bil8ine", of a small business loan-insurance act which would provide tOl'illaking and guaranteeing small.business loans by the Smaller tar P144:t8 Co rporation. The summary called attention particularly to two 1311°16.8i°ns of the bill which would (1) authorize the corporation to laalte a, it Periodical review" of the operations of banks with respect to 10ans nsured by the corporation, from which it would appear that the corpo,. 'atlon would be authorized to make at least a limited examination et slIch Itith banks, and (2) authorize the corporation to discount its paper the Federal Reserve Banks or receive advances from them. It was pointed out that the bill had yet been introduced and it was unanimously agreed that, until a bill was offered in the Senate, no action was csJled for by the Board. not In tertion connection with the above matter, Mr. Morrill called at- t° an item appearing in the American Banker for November 24, whi ch reported on a hearing before the Banking and Currency Corntlit tee °.f* the House of Representatives on the bill authorizing an addition °I* *)200,000,000 to the funds available to the Smaller War Plants ec*P°rati --°n for direct and participation loans. The account quoted a (41141ent mad -e by the chairman of the Smaller War Plants Corporation, in 1739 1114/44 -4- response to an inquiry as to conflict with private banks, that "he knew' of nU substantial complaints from the bankers", and that "you couldn't help them making speeches once in a while". The account also stated that it was expected that the bill would be reported out at a 14"14ng of the co 'ttee on November 25, 1944. Mr. McKee inquired what was being done in connection with the 141deratanding reached at the last meeting of the Board with the Presi— (lents of the Federal Reserve Banks that at the time of the next meeting °tithe Federal Open Market Committee a special meeting of the members °f the Board and the Presidents would be held for the consideration of ellen of the postwar studies being made under the direction of Mr. Gc44enweiser as would be completed at that time. It was stated that e( e8 of the studies prepared by the special committee on banking and credit policy had been sent to the members of the Board and the Pts"idents so that in accordance with the understanding at the last leetillg with the Presidents the members of the Board and the Presi— dellts would have time to read them before the next meeting of the °I)" Liarket Committee, which had been called for December 11. In a discussion of the procedure that Should be followed in considering the studies, it was agreed that the members of the Board Should read the papers before December 8, 1944, and that on that date the Board would meet for a preliminary discussion of the questions presented by the studies. 11/24/44 -5At this point Mr. Leonard, Director of the Division of Per8°1111e1 Ad ministration, joined the meeting. Mr. Ransom referred to the recent action of the Board in connection with the service of Mr. Dennison, a director of the Federal Reserve Bank of Boston, as a member of the campaign committee organized by oBusin esamen for Roosevelt, Inc.", and stated that, because of what e(Itteci to him to be the inconsistent results that were made possible the -age of the resolution adopted by the Federal Reserve Board in 915 .4.th respect to directors of Federal Reserve Banks holding Pcslitical or public office, he felt the Board should review the language Qf the resolution and determine whether it should be changed. There1113On, he read the resolution and, after calling particular attention t0 the statement therein that directors of Federal Reserve Banks 8)1°111d not act as members of political party committees, stated that he felt that to permit a director of a Federal Reserve Bank in his Per'sonai capacity to take such part in a political campaign as he kight wish, to raise funds, to campaign actively or otherwise, and at the same time to say that he could not do the same things as a entbel' of a campaign committee, whether it was identified with a par: 4ell-ler Political party or not, was totally inconsistent. For that l'eae°11 he felt that the language of the resolution was either too broad °I' too narrow and should be changed. Chairman Eccles stated that during the recent national campaign 1741 11/24/44 -6Gracky, ' Was as Chairman of the Federal Reserve Bank of San Francisco, to approach certain of his friends in CaTifornia for con— tributions to the campaign, and that he had responded that he was Pllohibited from doing so by the Board's resolution. Chairman Eccles also said that he was asked the question whether there was any objec— tiorl to such activity on the part of Mr. Grady and that he (Chairman celes) had taken the position that since any action that Mr. Grady keht take would be in his personal capacity the Board could have no Objection. There was a discussion of the point raised by Mr. Ransom dur— Ing which a majority of the members expressed the opinion that the 44443111tion had been very effective in the past in preventing the Fed— sl'al Reserve Banks from appearing to be identified with partisan pol— itle8 and for that reason it should not be changed. *. Ranson said that, if the Board should so desire, he was to let the matter drop but that he felt that the resolution &II it s Present form did not furnish a satisfactory basis on which to deel4e the questions that arose under it. No action was taken to change the resolution. At this point Messrs. Smead, Leonard, Vest, Thomas, and Wyatt i*drew from the meeting. The action stated with respect to each of the matters herein— afte referred to was taken by the Board: 1742 11/24/44 —7— The minutes of the meeting of the Board of Governors of the Pederal Reserve System held on November 23, 1944, were approved unani— MOlasly. Letter to Mr. Rice, Vice President of the Federal Reserve 84* of New York, reading as follows: "In view of the circumstances described in your of November 20, 1944, the Board of Governors approve 10: a further period of six months beginning SleZ 1944, the assignment of Mr. Joseph F. ! 0 )-8.neY to an 'unassigned' position in the Cash and ‘,011ection Function, at his present salary of $4,000 Per annum." Approved unanimously. Letter to Mr. Leedy, President of the Federal Reserve Bank of 44848 City, reading as follows: sal— Board of Governors approves payment of.sal— oliles to Mr. George H. Pipkin as Vice President in charge p, the Denver Branch, and Mr. Oliver P. Cordill as Vice pe t fl charge of the Oklahoma City Branch, for the thl,:lc4 January 1, 1945 to May 31, 1945, inclusive, at of 1.0,000 and ,4 8,500 per annum, respectively, re -" are the rates fixed by your Board of Directors as Ported in your letter of November 15, 1944." Approved unanimously. Letter to the board of directors of the "First State Bank of keriae " ke 'Meriden Minnesota, stating that, subject to conditions of InbershiP numbered 1 to 3 contained in the Board's Regulation H, the toarc, : Ileaerve al r°ves the bank's application for membership in the Federal YStern and for the appropriate amount, of stock in the Federal 1713 1.111/44 -8- Reserve Bank of Minneapolis. . Approved unanimously, for transmission through the Federal Reserve Bank of Minneapolis. Letter to "The Souhegan National Bank of Milford", Milford, New tr "aMpShire, reading as follows: "The Board of Governors of the Federal Reserve System has ., given consideration to your supplemental applicaty th u for fiduciary powers, and, in addition to the au: 0 ritY heretofore granted to act as trustee and registrar stocks and bonds, grants you authority to act, when not contravention of State or local law, as executor, the of all such rights to be subject to the provisions of L'Ile „ Federal Reserve Act and the regulations of the Board Of Governors of the Federal Reserve System. 'This letter will be your authority to exercise the ti , uciarY powers granted by the Board pending the prepara1 wi51 °f a fmal or certificate covering such authority, which 1 be forwarded to you in due course." Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks read- 48 roll OWs: pli "911estion5 have been raised recently as to the apthecatlon of section 8W of Regulation VI to credit for cor repair or instarlation of coal stokers. It has acbeen considered desirable to consolidate and I'lfY certain previous rulings on this subject: 1. Credit for the repair of a stoker is exempt. 2. Credit for the replacement of a stoker that is worn out, damaged beyond repair, or destroyed is exempt. 3. Credit for a stoker that is to be installed in a heating system to be converted from oil to coal is exempt. 1744 11/24/ 44 -9"4. Credit for a stoker that is to be installed in a heating system to be converted from hand—fired coal to stoker—fired coal is ex— empt. "The last item modifies 5-546 slightly. Since the c°41 for which stokers are designed and which is generally 14;eed for stoker—firing is of a different kind from that or which hand—fired furnaces are designed and which is g:nerallY used for hand—firing, the heating equipment can Said to be converted to the use of another fuel, even hough in a few instances the kinds of coal used before a rid after the conversion may be similar." Approved unanimously. Letter to Mr. Hitt, First Vice President of the Federal Reserve tarlit of St. Louis, reading as follows: "This refers to your letter of November 8, 1944, re— giTting a ruling on the question whether notes of Com,; 131° 0'ItY Credit Corporation are eligible as collateral for the provisions of section 13 of the Fed— erTReilXvIeln=. "This raised in your letter of May 19, 1944, but question was to the circumstances then existing did not appear th 'equire a definite ruling. You now advise, however, die't this question has been again raised by one of the e rectors of your bank with respect to notes which are IJIP ! eted to be issued by the Commodity Credit Corporation pa,'he near future for the purpose of financing antici— s4 ' ed Purchases of cotton at parity. It is also under— such notes are to be payable upon demand, will alt.'er interest at the rate of 1 per cent, and will be guar— ieed as to principal and interest by the United States. 1._ "Section 14(b) of the Federal Reserve Act authores the Federal Reserve Banks to purchase 'bonds, notes, e thOther obligations * * * which are fully guaranteed by re United States as to principal and interest' without frgard to maturities either in the open market or directly the United States. The eighth paragraph of section 13-uthorizes advances by Federal Reserve Banks to member on their promissory notes secured by notes which are eligible for purchase by Federal Reserve Banks under 4 11/24/4 4 -10- :the provisions of the Federal Reserve Act. Accordingly, is the Board's opinion that notes of Commodity Credit rporation which are guaranteed as to principal and in,rest by the United States may properly be accepted as ecuritY for 90-day advances to member banks under this : Paragraph. n t "The Board is further of the opinion that, since the "in question are guaranteed as to principal and inLserest by the United States, advances on the security of notes would be entitled to the rate of discount apNace to advances secured by Government obligations tuablring or callable in one year or less." r Approved unanimously. Thereupon the meeting adjourned. 4 2 , re , " kr ) Secre a
@FedFRASER