Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, November 29, 1948, Volume 35, Part 4

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1985

Federal

Minutes of
actions taken by the Board of Governors of the

Reserve System
on Monday, November 29, 1948.
et 4 4,
tt
'"a Special
Library at 11:25 a.m.

The Board

PRESENT: Mr,
McCabe, Chairman
Mr. Eccles
Mr. Draper
Mr. Evans
Mr. Vardaman
Mr, Clayton
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Carpenter, Secretary
Sherman, Assistant Secretary
Morrill, Special Adviser
Thurston, Assistant to the Board
Riefler, Assistant to the Chairman
Smead, Director of the Division of
Bank Operations
Mr. Thomas, Director of the Division of
Research and Statistics
Mr. Vest, General Counsel

11q4a
%tIld

S
zymczak was not able to attend this meeting, the reason
that,

'while he
would

have

have preferred a morning meeting and

attended either a morning or afternoon meeting, when it
decided to
hold a meeting at 3:30 p.m. he left to keep an
411.1er
lippointzerit at the International Bank for Reconstruction and
holir of
theti

While completing that appointment, he was advised that
the
meeting had been changed to 11:15 a•m• but it was

fea.aible for
him to return to the meeting at that time.
Refe
rence
was made to a memorandum from Messrs. Morrill,
114r4r, Elrid
Thomas
kricl

dated November 29, 1948, presenting a draft of

ketaoranduin to
to the President in response to
be sent




11/29/48
his

-2rest

of November
6, 1948, transmitting material for use in the

Stkte of
the Union
message and the Economic Report.

The drafts of letter and of memorandum were read and discussed, and
it was agreed unanimously that they
should be revised in the light of the
discussion
and submitted to the Board
again for further consideration.
ot the

Chal4-“Flan McCabe
presented a draft of letter to the Chairmen

t.
eder61Reserve Banks asking that they send the Board informs1°11 based
ot
the opinions of
the directors of the Federal Reserve
4144 arid
branches with respect
to the current and prospective eco11°11-C
sitiaation.
Following a discussion, it was agreed
unanimously that a letter prepared for
Chairman McCabe's signature should be
transmitted in the following form:
share vi i.are
, 'wondering whether you would be willing to
Board and its staff the expression of
of
L-24 the business situation by the directors
Statistical
Itater
i-,4 at their
'
comprenext regular meeting.
he:
'
4 available
i
from various sources gives a
°t
Picture of what has happened and some indication
in
the e'
rtitUre but in
judging what is going to happenbusi_
lieSeten°11°)Iiie situation
'
a great deal depends on what
ticterl and
others are lfeeling and thinking. It is par!,
il 111. this
opinions
b° Z
realm that we would like to getobteined
tNt-r.; 'd-rectors
of your Bank. These might be
L'°118 1;
fg4.8-11
.
of them to discuss a common set of quedis_
s:
4'
ior1;"'er which you would send us digests of the us
followin questions have occurred to
CelPee-1111Y aPPropriatefor
general discussion at this
g g
1.
In
the case of the company or companies with
You are most familiar, has there been
substantial change in the plans for inIllastment in new facilities (plant or equip/ since October 31, 1948? Do you feel




1 987
11/2948
-3"that expenditures of this type in
1949
will run ahead of or behind expenditures
in
2. n 1948?
You feel that there is a noticeable effort on the part of most companies with
which you are familiar to increase or decrease cormitments to purchase raw materials
and other
supplies?
3.
What is the inventory
policy of concerns of
which you have knowledge? Are they
planning
to (a) increase, (b) decrease, or (c) hold
inventories constant? Do you know of cases
Where inventories are increasing where the
increase is involuntary, i.e. due to unex4. pected falling off in sales?
Are you aware of any pressure in your district
,
a,s Yet for a fourth round of wage increases?
uo You feel that such
pressure is imminent,
ev
,,en if the Bureau of Labor Statistics' cost
'
o living index remains constant or recedes
slightly?
5.
13° You anticipate any increase in prices by
the
companies with which you are familiar
Within the next
six months even if there is
6, not a further rise in wages?
Are
there any elements in the economic situation today which you regard as especially
;gnificant or critical from the point of
7. :
/71r14 of business?
m at would you say are the major 'question
in the businessmen's minds today in
s'.'"-ag critical decisions related to expan%
1 11, 11;
,(
4114 or contraction of their activities?
us'
a 1, 11 appreciate that we do not wt
an this request
Peri
"4-Irde
ellce and :do
11
feel, however, that the broad exttr 8 ta a
, uackground of the directors of the Reserve
setivei- asset of
the System which should be used more
tile "Pox, 35:0& working out
cur policy problems.
tqls, eztra "r convenience, if you should care to use
"41tlo
' 4 toCopies of
this letter are enclosed for disYour directors."
At th.
IN
as Point
Messrs. Riefler,
ead, Thomas, and Vest with-

V

kELti.,Jers

zeeting and the
action stated with respect to each of

her.;
—Lester referred to was taken by the Board:




1988
11/29/48
-4eral

Minutes of actions
taken by the Board of Governors of the FedReserve
System on November 24, 1948, were approved unanimously.
Minutes of actions taken by the Board of Governors of the Fed-

ere'l Reserve SYstem
on November 26, 1948, were approved and the ac8
recorded therein
were ratified unanimously.
Of ?hi,

Letter to Mr.
Hill

Vice President of the Federal Reserve Bank

elPhia, reading as follows:
etber%closed herewith is a copy of a letter dated Novi,
' 1948, addressed to the Board's Division of Ex,
Itlitet9
,fricer-uti
v
s by Mr. M. E. Reeve, Vice President and Trust
reWR
,
"
1 'it3r National Bank of Philadelphia,
b
Philadelphia,
considered
the 6"•17ania,
relating to a proposal being
,ittee on
l'atia°r4t
Smaller Trust Departments of the Pennsy
oni-tlicers Association, under which a common trust fund
ibe set up
by one of the larger trust companies
in
particiPEit1j4"Valaia for the exclusive purpose of selling
throughout
the Ct8 t0 trusts in
small trust departments
ate.
Nqr
8i.
Reeve requests advice as to whether the Board
°P05
Phr
-313Prre this proposal but, since he states that the
a
v,or
f
r()Pr'%..,86ill is in the 'idea stage', it appears more philtias_;otatsidthierastitote. merely to offer certain comments
be e. ,
rurld of the kind described by 1ir. Reeve would not
111211t.
rmintained by a bank for the collective invest'ae ba-4 rei
nvestment of moneys contributed thereto byt
or znin its ca.pacity as trustee, executor, admini
t s ratrU ca
fL
idiarl; and therefore, it would not be a com13-,_`egr 81,
r, 'Ild t as that term is defined in the second
-44te%rileC- of
section 17(a) of the Board's Regulation F.
1Qa tio '
e it aPPears that regardless of the Board's regt41,
-tha
ll
tst
„
such a fund would
'common trust fund
a not be
L",n1P -"' is defined for the purposes of exemption
-""e411e-r1 taxation
in section 169 of the Internal
°del which reads in part as follows:
1%144"
DEFINITIONS.—The tern "common trust
tt
.111t eans a. fund maintained by a bank (as de-14/n section
104)—
‘1) exclusively for the collective
incontributed
'
and reinvestment of moneys




I"89
ik 4'

-5—
"'thereto
by the bank in its capacity- as a trustee,
executor, administrator, or guardian; and
(2) in conformity with the rules and regulations)
80ard of Prevailing from time to time, of the
Governors of the Federal Reserve SysPertaining to the collective investment of
„,rust
m
funds by national banks.'
kited
'
,
1 4 6 Proposed fund would be an investment trust operor l..,a
r ba-nk for the purpose of issuing and selling shares
and
thei,:'-'-eiPations to trusts administered by other banks;
irlve;lioUld be
considerable similarity between it and an
!
t ent trust in
Pithite
which shares were sold to the general
hethe The proposal immediately raises questions as to
etatlaztr the
Operation of such a fund would not violate the
1 44 ° restrictions upon the issuance and sale of secu'
by
,
the
.
ballke• Apart from the statutory restrictions,
.Q1tierrbe,"4
:
088-1 also suggests practical objections which
are
the mingling of banking and securities busi/lauei .
,
is would be particularly true if. as can be easily
,4.(I ect
611
-,:e`') a number of banks operated funds of this nature
c,:velY competed in the sale of participations. In
ootita.'"nriection, it is pertinent to note the
restrictions
,
skie °red
,in Regulation F which are designed to prevent the
'
n4c1 to 2.1,'articiPations in common trust funds to the public
`"Iler ti;„
arci against the use of such a fund for any purpose
as a mechanism to facilitate the investment of
"le th °' bc)na fide trusts administered by the bank operate A.M.
tr,
It •
the '
1'11
11
be
-Light of appreciated if you will advise Mr. Reeve
the foregoing."
Approved unanimously.

Letter

tkit

or 44

to
Volberg, Vice President of the Federal Reserve

Frarleisco, reading as follows:
nit
:/48 14%rerence
is wade
our letter of November
16,
establish'4It'or'h
enclosures regarding
toy
the proposed
Ick
fa 11° 1,,
a 2
1 11111c/1 by the Continental State Bank, Boise,
Is Ifhtch-- t,he
area knam as the Whitney Bench, aof
part .
br
recently
been
annexed
to
the
City
Boise
proposed
shatleh 1 18 un
derstood that the site of the
Boise
c1 therserlf,°1' w
t)
ithin the limits of the City of
IN

approval of the Board of Governors is
Ior its
establishment."




Approved unanimously.

4

41 4, ait: .161

11/29/48
-6Telegram to Mr. Creighton, Federal Reserve Agent of the Federlilleserve Bank of
Boston, stating that, subject to the conditions
4t torth
in, the
telegram, the Board
of Governors of the Federal Re8er've S\Y8te'll a
uthorizes the issuance of a general voting permit,
kde
the
1‘
provisions of Section 5144
the Revised Statutes of the
States,of
Iltted
"The
l'144chils
ti
e
tts, to
entitling
NationaolrSgahnawmizuatBonanktoovfoBtoestthoneus2tB000kstwonh:
which
such
it °11118 Or contro,_
- S of the "Somerville National Bank", Somerville,
Ilat3aachizL
setts, at
all meetings of shareholders of such bank,
the Period
within
containedwhinich
tha
e permit may be issued pursuant
64th°11-zation
telegram is limited to thirty
trIll the date
of the
bY th to
telegram unless an extension of time is
that

and
to the
days
granted

the e -Irci
' The
Conditions contained in the telegramupon which
Perth
Ras au
thorized were as follows:
P
Prior to issuance of general voting permi
.t
it4° You .
allthoriecl
herein, applicant shall execute and deliver
cr
'4, duPlicate
an agreement in form accompanyint,
kr€L
,
8 letteragreement
Q
L S. #7190), except that
7
e9
d64 (F.R..
Ph nizith ei
14
3 shall be modified in manner stated
i, ft2agrallh
numbered (3) of 5-964; and
'Ik_g IDer;,sila
ultaneousl with issuance of general votto
j'eliz t'
--A authorized
Y
herein,
there shall be issued
-11}301
:rjssZeiation general voting permit authorized
elegram of this date."
Approved unanimously.

N.egr

Nt,
ee
*uve
tr

to

Mr. Creighton, Federal Reserve Agent of the Fed-

of Boston, stating that, subject to the conditions
°)th •
1/1 the t
e'egram, the Board of Governors of the Federal




lik9/48
"e aystem
the

authorizes the issuance of a general voting permit,

Provisions
of Section 5144 of the Revised Statues of the

1J4ited states,

to the
"Shawmut Association", Boston, Massachusetts,
ng such

organization to vote the stock which it owns or conor the
"Somerville
National Bank", Somerville, Massachusetts,
tit ail
2"eet1ng5
of shareholders of such bank, and that the period

trol.

colataill
:
Ch a

Permit may be issued pursuant to the authorization

the tel

is limited to thirty days from the date

the to
-Legram

unless an extension of time is granted by the Board.
ec)4(l
,it'
1°n-`) contained in the telegram upon which the permit was
thollz 1,
ed .ere as
follows:
ill
auth 4-.• Prior
to issuance of general voting permit
to v(Irlzed
herein, applicant shall execute
apanying
deliver
toav °d11 ill du
plicate an agreement in form accompanying
l'-ltie letter
s-96
111 2' sinlultane4 (F.R.L.S. #7190); and
e
ously with issuance of general
vatTh; )liit
eil
a
uthorized herein, there shall b issued
lto
Illtt,!att°nal Shawmut
gene
voting per-11thori
Bank of Boston general
Zed in Board's telegram of this date."
Approved unanimously, together with
a letter to Mr. Latham, Vice Preside
of the
Federal Reserve Bank of Boston,
'
l eading as
follows:
"10.4.
T:lo8
I
d''h his letter
dated October 3, 19471 Mr- Willett,
Ri Beee +4 C°P3r of a letter dated September 19,
1947, ad-41'aetd r,() him by Mr. Edward S. Stimpson, 185 Albany
'
i,_kll
‘
1 t'
t11,7tur
lib
idge 39 Massachusetts, objecting to the
Boe...
'111 l'itt-r' or a Voting Y ponait to Shawmut Association,
stock
thich
authorizing it to vote the
14z*vili
:
c3 41,
8 or controls of Somerville National Bank,
tesachusetts'
nth 4-1
liassachusetts
4
1
11'
as4Z.,t?ram of 7
date to Mr. Creighton, the
,". lzed the issuance cs a general voting
to s'
mut Association covering the bank in question.




11/2948

-8hiihen the
if
permit has been issued, it will be appreciated
to ,11 will so
advise Mr. Stimpson, and, with reference
18n letter, advise
him further as follows:
'Before granting a general voting permit to Shawmut
oloavsciation
authorizing it to vote the stock which it
fcr controls of
Board
Somerville National Bank, theobjected
to t
ehl111.7 Considered Mr. Stimpson's letter which
th,e granting of the
permit on the ground that there was
arranted concentration of banking in Middlesex
County,
thert..'eh Somerville is
located. As Mr. Stimpson stated,
s-i,are two bank holding companies, Baystate Corporation
Courit-8-14mut Association, which
control banks in Middlesex
the 1)7
' The two
organizations are active competitors
grour,'
e rik
,._ 111"ti field. The operations of the Baystate banz
bank
the
Middlesex County
are much greater than those of
a
a.g.y,nut
group both in number of banking offices and
eciris %gate banking resources. In the circumstances,
:
group ,,"ion of Somerville E!.tional Bank to the Shairmut
4tA b
not be said to have tended to create a monopoly
in Middlesex County. Moreover, there is no intona
that the acquisition of control of Somerville Na1,,,"se 13
,:ank
Shawmut Association tended to substantially
d4illeas-°1aPetiti0n between that bank and other banks in
in the-ex County, and it would appear that if the change
oo cola control
of Somerville National Bank had any effect
t.litteP°Iatit'°n in Somerville, the effect probably would be
j
4.
e-#
89 competition. Mr. Stimuson emphasized the fact
hn-44° bank holding companies together control banks
8. majority of the demand deposits in Middlesex
appr,"°wever, this fact alone would not appear to be
kit to "Priate
basis for refusing to grant a voting per,the on."31.1e of the
companies and, particularly, to
b4t_ter-c-ow„h_i.ch controls
holding
smaller bank group in the county.
the
"uzi.rd
'1.3.deration
of
the facts of this case, the
all
of
th
the,,not conclude that the public interest required
'"ing permit be withheld."
tette_
r to
Mr. Williams, Assistant Vice President of the Fed-

Z

sank of

Philadelphia, reading as follows:

tbr "This

tiel,r to
.48 in reply to your letter of November 17, rela'
e
" cation of Regulation W to the sale of a
411
Et1-1141
atove
'
signed for the use of bottled gas
re lace
„
uY the Previously converted to the use of
p of
tobottled
46111e
.`1111c1
‘
whether
part
is
question
dealer.
The
'''rt
8 PEC
t11,
, Or the ld to
convert the old stove may be treated as
44 at^ d'Tn payment on the subsequent purchase of




-9Boa "On the basis
of the facts in your letter, the
tb
rci egrees with your
conclusion that the conversion
arid"
fi,
e old stove is a comolete transaction in itself,
or
'
e Registr.nt may not subsequently apply credit
ft_ rebate
representing, a pert of the charge to the
threet tr
ansaction as part of the cash down payment on
to thilew stove.
There would be no objection, of course,
:
t e Registrant
oermittin such discount or credit
the ",,e Purchase price of the new stove and calculating
Partlsh down payment on the net price, as provided in
of the
Supplement, to Regulation W.
Approved unanimously.
Letter to
Mr. Dwight L.
Chapman, President, Board of Directors,
1€1r1)el)Etrt,„
EmPloyees Credit Union, P. 0, Box
38292 San Juan,
1\lerto
reading as follows:
filed '''uur registration statement dated
November 9,
ti°11 Form F.
R. 563-h in connection with Regula.sq.7,:t_s hes been
forwarded to us by the Federal Re"
4.11k
?Ise
_ of Atlanta.
8411 vtic)ri 8(f) of Regulation W provides that it
aPP1Y to credit extended outside rein
ithe contg
Yoikr''
'
United
States. Accordingly, we are
registration statement to you."

lq..

Approved unanimously.
Teiegr
k oi, ii
to mi.. Knoke,
Vice President of the Federal Reserve
el,'
York,
readina as follows:
trto
21.
'the illr, letter
19 y
November 18. Board approves renewal
414tIlrb,' ''°°90001000
of
de
Banque
gold
loans
to
% th l frora
France
December 22, 19481 to February 23,
Ilere
eze
ter.lis and conditions as now app
which
4
t,i ) 19
8:5
Z. r°11th i
Novembe
of
your
Board
to
the
letter
r4)1
1the .(,) uut such
renewal to run either for three
N
yolirar iallej'hrt)raillat
tur
heir
it
eu
sri
to
tymoayf
loan or for a period
as set forth in
1949,
23,
tohlaectetter of
that
November 18. The Board notes in this
thl°11 that You plan
to advise Banque de France
ello:' ti erlgx,,,ellting of these renewals would be continelPt%,-ceePtance by the Banque de France of one of
1:)tv'uhtie;
114.
tive re a
i-lt schedules providing
b" 'he Banque de France at the time offo
er
acIr
ie-




1 ffiu,l_
lah/
3
48,
—10—
ftfIlur
olist e renewal of
at least 25 per cent of the loans now
Fra„411ding, with the understanding that (1) Banque de
se —ee request such renewal in each case and (2) if subreTrt developments in the interaational situation make
EgEit
:
t V.ssion to your directors desirable the matter will
be r
esubmitted to the Board of Governors.
becif:It is understood that the usual participation will
.Lered to the
other Federal Reserve Banks."
A
unanimously.
pproved
Merl'orandum dated November 26, 1948, from Mr. Hooff, Assistant
C1:411141)
recommending
in addition to material previously subthat'
kitted,
there be
published in the law department of the December is
13f4
the
Pederal
Reserve Bulletin the recent amendments to Reg1114°4
togethel- With an introductory statement in the form
hed to
tIle
memorandum -




Approved unanimousl

dow'of „.„‘ /,fift
Secretary.
-"4