Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, November 30, 1945, Volume 32, Part 4

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1888
A meeting
of the Board of Governors of the Federal Reserve
Srst
eillwas held in Washington on Friday, November 30, 1945, at
10:30 e.m.
PRESENT:

Mr. Draper
Mr. Evans
Mr. Carpenter, Secretary
Mr. Connell, General Assistant, Office of
the Secretary
Mr. Thurston, Assistant to the Chairman

The action stated
with respect to each of the matters herein-

after

referred to was taken by the Board:
Telegrams to Messrs. Treiber,
McCreedy and Clouse, Secretaries
the Fe _
aeral Reserve Banks of New York, Philadelphia and Cleveland,
r1413eetilrelY.
kliat

Mr. Dillard, Vice President of the Federal Reserve

Of Chicago, Mr. Stewart, Secretary of the Federal Reserve Bank
cit St,
Ltalis, Mr.
Caldwell, Chairman of the Federal Reserve Bank of
I;(414.
eitY, aad Mr. Earhart, Vice
President of the Federal Reserve
knit of
San Francisco,
stating that the Board approves the establish41erit .
without
change by the Federal Reserve Banks of St. Louis and
S414

y0
yet%

On November 27, and by the Federal Reserve Banks
of
Philadelphia, Cleveland, Chicago and Kansas City on

er 291 1945, of the rates of discount and purchase in their
schedules.
Approved unanimously.
Idettor
Q4f theniy. andum dated November 26, 1945, from Mr. Bethea, Director
lsion of Administrative Services, recommending that




1889
11/30/45

-2-

Robert P.
Varner, who has been on military leave, be reinstated as an
acc°uriting clerk in that Division, with basic salary at the rate of
42
'
43° Per annum, effective as of the date upon which he enters upon

the Performence of his duties after having passed the usual physical
ealkillation.

Mr. warner is a member of the Board's Retirement System.
Approved unanimously.

Letter to Mr. Rice, Vice President of the Federal Reserve
New York, reading as follows:
"In
contained in your
letter ofaccordance with the ree_uest
November 15, 1945, the Board of Governors
iPPrc'ves for a further period of six months beginning
veluber 28, 1945, the payment of salary to Mr. Joseph
5,,,Cosgrove at the rate of ,i3,400 per annum, which is
;:'4) in excess of the maximum for the position of
nior Clerk to which he is presently assigned.
th. "It is assumed that, prior to the expiration of
bels additional six month's period, Mr. Cosgrove will
assigned to a position commensurate with his salary.
per. "The Board of Governors also approves for a further
colli .c1, of six months beginning December 1, 1945, the
ponZuation of Mr. Joseph F. Delaney in an 'unassigned'
col
on in the Cash and Collection Function pending the
ketitLetion of his rotation throughout the various departyou 8 'Jlad divisions of the function in connection with
r lorogrrm of
rotation of employees.
the
:
The approval of the continuation of Mr. Delaney in
the -Pecial assignment is given with the understanding that
tlot slarY paid him thile serving in this assignment will
cia e)cceed the maximum established under the personnel
tim8sification plan for the position he occupied at the
of e he Was
rotetion.o given the special assignment under the program
H

e

Approved unanimously.
t,t1Thz
t

Te
legram to Mr. Knoke, Vice President of the Federal Reserve
ot New y
ork, reading as follows, in answer to his wire advising
vip,s

lqdve

Proposed to grant John J. Clarke, an employee of that Bank,
Irithotut,
Pay for a further temporary period of approximately three
)11t41
0
- rder that he may continue his work with the Allied 'Military




1890

11/30/45
—3—
Government in Gel many.
Be "Board acknowledges your telegram re Clarke's return to
.
rlin and interposes no objection to your proposed extension
04 his
leave."
Approved unanimously.

Letter to
Mr. Hilkert, Assistant Vice President of the Federal
Resent_
'Bank of Philadelphia, reading as follows:
nel "The Board of Governors approves the changes in the personphi classification plan of the Federal Reserve Bank of Philadelthe Building Department, as requested in your
let
eC inv°1/Ting
letter
of November
5/ 1945'
per "The Board of Governors
also approves the payment of a $15.00
Divi nth night shift bonus for the employees of the Night Transit
-s-L°r1 as further requested in your letter."
Approved unanimously.
Te
lesram to Mr. James M. Shrilier,B. F. Shriver Company;
et

Maryland, reading as follows:
p ; "Board of Governors of the Federal Reserve System has ap4
8It
4o/
you
u director of the Baltimore Branch of the Feder
alijfye Bank of Richmond for the unexpired portion of the term
December 31, 1947, and will be pleased to have your ace by collect
telegram."
ed

Approved unanimously.
11

Letter to Mr.
Bryan, First Vice President of the Federal Reserve

a.tlk °I
' Atlanta,

reading as follows:

Board regrets to learn from your letter of November 21
rresignation of Mr. Raisty as Assistant Vice President.
objee4
:
.n
4 answer to your inquiry, the Board will interpose no
Reaea
'
1.0n to the designation of Dr. Earle Rauber as Manager,
a. tiorirch and Statistics, Statistical and Analytical Department,
:°!ficial position under the personnel classification plan.
biogr
:
"
. accordance with your request, returned herewith is the
—PhieQ. sketch of Dr. Rauber which was enclosed with your
l tter
the




Approved unanimously.

1891
11/30/45

—4—

Letter to Mr. Stewart, Secretary of the Federal Reserve
Bank
of St. Louis, reading as follows:
1945,"Receipt is acknowledged of your letter of November 24,
advising that at the meeting of the Board of Directors
211 November 8, Mr. Earl R. Billen, Manager of the Check
Collection Department at the Head Office, was elected Acting
"sistant Manager of the Louisville Branch at his present
salary of $4,500.
a "It is noted that Mr. Billen's assignment is temporary
2
1 1-ng the absence of Mr. Stanley B. Jenks, who is on an
'4.1,ended sick leave of absence."

2

Approved unanimously.
Telegran to
Mr. Leedy, President of the Federal Reserve
Of

Kansas City, stating that subject to conditions of member-

4.
1
6'3

3 contained in the Board's Regulation H, the Board ap-

Proves the
application of "The Pleasant Hill Bank", Pleasant Hill,
1418s°11ri, for
membership in the Federal Reserve System and for the
41)1%)Priate amount of stock in the Federal Reserve Bank of Kansas
CIL%re
The telegram requested that the Federal Reserve Bank advise

the

aPPlicant bank of the Board's approval of the application and
e°rIclitions of
membership prescribed, together with necessary in-

qrlIctions

as

stated. that

to the procedure for accomplishing membership and

a letter containing detailed advice regarding such

'13111'01ral 'would
ileserve

Bank.

'tateinett

be forwarded to the applicant bank through the
The telegram contained the following additional

"It is assumed that you will follow the matter of the
ti a s reducing to within statutory limits the excess balance
n
onmember bank."




Approved unanimously.

1892
11/30/45

—5—

Letter to the board of directors of the "Skagit Valley State
411101
'Sedro Woolley, Washington, stating that subject to conditions
c'erLiellibership numbered 1 to 3 contained in the Board's Regulation H,
the13°ard approves the bank's application for membership in the
e(lera-1 Reserve System and for
the appropriate amount of stock in
thePederal Reserve Bank of San Francisco.
Approved unanimously together with a letter to
Mr. Day, President of the Federal Reserve Bank of
San Francisco, reading as follows:

"The Board of Governors of the Federal Reserve System
aprr,
RZ,'°ves the application of the Skagit Valley State Bank,
io Woolley, Washington, for membership in the Federal
erei rve System, subject to the conditions prescribed in the
'
Bo '- -°sed letter which you are requested to forward to the
14
,14'd of Directors of the institution. Two copies of such
t8,,h'
er are also enclosed, one of which is for your files and
e other of which you are requested to forward to the
ilervisor of Banking for the State of Washington for his
'
41°rmation.
e
81nce the amount of losses estimated in the report of
c0170-nation for membership is relatively small, the usual
iloi tion of membership requiring elimination of losses has
p12
'
0 been prescribed. It is assumed, however, that proper
/rision for losses will be made as a matter of sound bank—
Practice
re "The special condition recommended by the Reserve Bank
re ring that, prior to admission to membership, the bank be
bred to reduce excessive loans and investments, and also
by Fees in nonmember banks to within the limits prescribed
felttate and Federal laws has not been prescribed as it is
app,that the necessary corrections may be required more
or 'Priately as an administrative matter. It is assumed,
cor-°urse, that they will be followed by your office until
rections have been effected."
Letter
to Mr. Swanson, Vice President of the Federal Reserve
411kot
krineapolis, reading as follows:




1893
11/30/45

-6-

Ish "This refers to the application of The Peninsula Bank of
,, 'Deming, Ishpeming, Michigan, for permission to exercise
'
lduciary powers.
"In view of the information submitted by you, and in
accordance with your recommendation, the Board of Governors
the Federal Reserve System grants the applicant bank perunder the provisions of its condition of membership
,
1 11111bered 1, to exercise the fiduciary powers granted to it
the Banking Department of the State of Michigan. The
opard's approval is given subject to acceptance by the bank
following standard conditions prescribed in connection
with
admission to membership of State banks exercising
11?iarY Powers:
Such bank shall not invest funds held by it as
fiduciary in stock or obligations of, or property
acquired from, the bank or its directors, officers,
or employees, or their interests, or in stock or
Obligations of, or property acquired from, affiliates of the bank.
2. Such
bank, except as permitted in the case of national
banks exercising fiduciary powers, shall not invest
collectively funds held by the bank as fiduciary and
shall keep the securities and investments of each
trust separate from those of all other trusts and
separate also from the properties of the bank itself.
3- If funds held by such bank as fiduciary are deposited
in its commercial or savings department or otherwise
used in the conduct of its business, it shall deposit
With its trust department security in the same manner
and to the same extent as is required of national banks
exercising fiduciary powers.
44 You are requested to advise The Peninsula Bank of
obtll!Ling, Ishpeming, lichigan, of the Board's action and to
theal;
4 u an appropriate resolution of the board of directors of
cerjank accepting the conditions listed above and forward
lfied copy thereof to the Board."
Approved unanimously.
Letter to Senator H. Alexander Smith reading as follows:
Chairman Purcell of the Securities and Exchange Commission
:
haz
al
arded to us your letter of November 10, 1945, enclosing
l'eleafjer from Mr. Richard L. Scott of Caldwell, New Jersey,
brokers.
lye to margin requirements on accounts with security




1894
3-V30/45
-7"Margin requirements are prescribed by the Board under
Pr°Irisions of the Securities Exchange Act of 1934. Most of the
ec,-etivities established under that act are administered by the
'ecurities and Exchange Commission, but the margin requirements
were placed under the supervision of the Board as the agency
responsible for nationr1 credit policy.
"Prior to the adoption of the Securities Exchange Act, the
results of unrestrained credit in the security markets were
Zszined in great detail at Congressional hearings. The powers
created at
that time were the result of the conclusion that
security market credit when utilized excessively contributes
:7"erially to economic instability and that provision should be
- cle for the restraint of such use.
'
h. "We are now in one of the most difficult periods
of our
t°rY• With the supply of goods short, the demand tremendous,
'
ia,
tliquid
funds at unprecedented heights, the dangers of inse ion are extremely serious. A great volume of money is
ase
i,'ing investment. Under such circumstances, it may well be
ed whether any credit at all should be available to
swell
"e
already excessive purchasing power.
"The Board has felt that it would not be fulfilling its
responsibilities
unless it acted to curtail credit in the
bialalrities market. Such action by no means solves the problem,
of
'
it does serve to prevent what might be a serious aggravation
that problem.
or "Mr. Scott quite rightly inquires as to the justification
11017,3Y act which interferes v.ith an individual's choice as to
mle 'le governs his oval financial affairs. The answer is that
?' his free choice combined with the free choices of other
ill;jiduals interfere with the national welfare, restraint is
lal„Ified. It is true that he may be prevented from making as
on a particular transaction as other Aisemight
IbIT„.28:i1Te
if he has judged the prospects correctly. But
clitra
.ction plus similar actions of others will help to create
elculties of national scope which affect all of us. Few
kir,,,ed will be those who can escape the consequences of one
or
another.
irive ,,argin
l
requirements do not imply any disapproval of
Pren:Zeht in American industry. As a matter of fact, under
aeli-"u conditions most of the proceeds of borrowing go to the
evene!'s of e)cjstjpg securities, not to business concerns. But
Gltm,-Lf they did, there would be more than sufficient funds
pag-Lable
without the borrowing, as has been noted in en earlier
-graPh.
/tr. ,"Ile have been glad to have the opportunity to cannent on
'cott's letter, which is returned to you
herewith."

X




Approved unanimously.

11395
11/30/45
-8Memorandum dated November 28, 1945, from Mr. Tom send,
Azsistant General
Attorney, suggesting that the Board hear oral
4relamerit in the
proceeding under Regulation W in the case of the
1410r City
Credit Jewelry Company, Inc., Van Dyke, Michigan, on
43-clay, D
ecember 14, at 10:30 a.m.
Approved unanimously.
Memorandum dated November 26, 1945, from Mr. Thomas,
birector of
the Division of Research and Statistics, with further
Nference to
the national survey to be made by the Bureau of AgriNatural E
conomics of the Department of Agriculture, at a cost of
NA to
exceed 60,000, of individual holdings of liquid assets,
lihich
was d
iscussed at the meeting of the Board on November 1, 1945.
zetiorexidura outlined the procedure to be followed in connection
V.Ltil the stirvey
and stated that approximately 87,500 of the estimated
°8.t11'0111-ci be
incurred in 1945 and recommended that an advance not to
7,500 be
made in 1945 toward the work of the survey and that

t eeci

the

441'010/late item of the non-personal services budget of the
1)1111ierl or
Research and Statistics be increased by that amount
that
the
remaining 52,500 be similarly treated in 1946.
Approved unanimously, together with the
following letter to Mr. Howard R. Tolley,
Chief, Bureau of Agricultural Economics,
U. S. Department of Agriculture, Washington,
D. C. :
s "The Board of Governors of the Federal Reserve
Yst
would again like to make arrangements with




1896
11130/45

-9-

"the Bureau of Agricultural Economics for the services of
?our Division of Program Surveys. The Board has authorized the payment of the cost up to $60,000 for a national
el
,IrveY of individual holdings of liquid assets, thus comP-Leting the study started a year ago with two exploratory
81111/Ve of holdings in farm and nonfarm groups.
a "If arrangements can be made by your Bureau to con-olilet this survey, the Board agrees to reimburse the Bureau
6, Agricultural Economics for the cost, not exceeding
c00,000.”

Thereupon the meeting adjourned.

Secretary.

APPI‘oveci: