Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, November 9, 1948, Volume 35, Part 4

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Minutes of actions
taken by the Board of Governors of the
1161 Reserve
System on Tuesday, November 9, 1948.
Illet ir
the Board
Room at 10:30 a.m.
PRESENT: Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

The Board

McCabe, Chairman
Szymczak
Draper
Evans
Vardaman
Clayton
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Carpenter, Secretary
Sherman, Assistant Secretary
Morrill, Special Adviser
Thurston, Assistant to the Board
Riefler, Assistant to the Chairman
Thomas, Director of the Division of
Research and Statistics
Vest, General Counsel
Young, Associate Director of the
Division of Research end Statistics
Solomon, Assistant General Counsel
Wood, Economist, Division of Research
and Statistics

ftozm Chaillnark McCabe
stated that yesterday a telegram was received
vrith r' Cl'eight°n, Chairman of
the Federal Reserve Bank of Boston,
resPeet to the
aPpointment as President of that Bank of Mr.
jc)Bek A-•
eks
on
tht130arci
This matter was discussed at the meeting of
ollth
FlIdaY, November
59 at which time it was agreed that,
btt8i5
Ar
(3ia the
c)ve h
information then available, the Board would ap—

kato4

EIPP°tritment as President of the Federal Reserve Bank of
Iftlade bY the
board of directors of that Bank.




11/9/48
—2—
Mr.

Carpenter read the telegram from Mr. Creighton, which

statelithat at the
meeting of the Bo
board on November 8, sub—
Jett to a
pproval of the Board of Governors, Mr. Erickson was unani—
141144
elected to the
presidency of the Bank for the unexpired portick of
the term
ending February 28, 1951, with salary at the rate
of
$25000 Per
annum for the period beginning when he assumed of—
rice
and
continuing through April 30, 1949.
Mr.
Vardaman stated that, in view of the feeling of the
other
zembers of
the board,
, he would interpose no objection to Mr.
Erickson's
appointment but
that he would like to know whether, as
14diCated ill
8.

letter received by the Chairman from Mr. Creighton
141" date of N
ovember 2, 1948, Mr. Erickson would continue as a
rectOr
wl the
Boston Edison Company.
There
followed an
extended discussion of the general policy
(4 411e
Board that
Presidents of Federal Reserve Banks should not
4rve as
d
irectors of
outside corporations, and of the exception
tlide 14 the
t.4 Boston case of Mr.
Flanders when he was appointed President of
11()t
the

Ballk in 1944 for a period which, it was then known, would
two
years. During the discussion it was the
consensus
1/1ftibera
ofPresent that the existing policy should
d be adhered to,
CEleti

on the telephone
(Iliti ll' g"t, t
Net
hat he
discuss with Mr- Erickson
desirability of
Ilillg as
director of the Boston Edison Company.




tci4
—3—
While the call to
Mr. Creighton was being placed, Mr. Clay
t°11 referred
to a memorandum dated November 8, 1948, prepared by
Messr
'
8 I°11ng, Solomon, and Wood which stated that a draft of Home
Loan Batk
le
gislation had been prepared along the lines of the
Netoratd
ura aPProved by the Board on October 11 1948, which would
give th
e Home
Loan Bank System access to Treasury funds under cert414 e tdi+

Eta. loa

--uions which
would safeguard the liquidity of the savings

4 aSSOc

Kthin th

iations and require the Home Loan Banks to operate

e frarnework of national monetary and financial policies,
"Id that the
Treasury had indicated it had no objection to the
draft, Th
ememomndum

also contained the following recommendations:

"We
give a recommend that the Board authorize the staff to
begta .,c)PY of the draft
to the FDIC for study, and to
eau L;41scu5sion
of
the draft with the staffs of the
and Z1 the
Budget, the Housing and Home Finance Agency,
a, Horne Loan
rinie we believe Bank Board.
that the language of the draft is sufeAimtlalitlY general to provide great latitude for flexible
tflleadiatration.
If the Board authorizes the staff to go
NLlounth discussions the staff will proceed on the
-.g
(I) assumptions:'
ere 8
All four of
the basic points in the draft, which
troMt:t f°rth in our memorandum of September 271 are,
esse 1t;e,13°Int of view of the central banking authorities,
(1-1- Parts of
the proposal.
Posel h 4 The staff
substantial
of tllepromay consider modification
'
elItnaY
l
not consider abandonment or
(3)' Of any of the four major points.
%Igich r If agreement cannot be reached on a proposal
8elatfo:'19irls the four points with essentially their prethe Board reserves full freedom of action to
!
!I ,e4 th;
!
v rselY on any future Home Loan Bank legislation,
th --g. such legislation should contain one or more
"r Points."




1

11/9/48

—4-

14r. Clayton stated that before submitting the draft to
either the
Bureau of the Budget or the Housing and Home Finance
AgeheY) he
felt it should be
cleared with the Federal Deposit In—
N:‘Elnee
Corporation, which had taken an active interest in con—
Ilectiot
with
earlier drafts of the proposal.
There was a
discussion of the proposed draft of legislation,
eqlee
of
which had been
sent to all members of the Board before
this
Meeting
together with the memorandum prepared by Messrs. Young,

solora,41, and
thtlt the

Wood under date
of November 8. Mr. Clayton suggested

Pro
cedure recommended by the staff be amended to authorize
the
staff to
give a copy of
the draft
the Federal Deposit Insur—

8'tIceecrPoration for
study and, only after obtaining agreement from
t:
h t 4gencY) to beplia
discussion of the draft with the staffs of

the Bure€41 of the Budget, the
Housing and Home Finance Agency, and
110le Lost
atElrf

with the understanding proposed in the

recotzaeT:::::ard

kr, wo
clete

or

44141,

11/..

After a discussion, upon motion by
Mr. Clayton, the staff was authorized
to discuss the
matter with representa—
ives of the
Deposit Insurance
Federal
uor
poration, after which it would be
considered
by the Board again.

°d left the
meeting at this point.

Now,

us referred

to a memorandum prepared by Mr. Young under

c

1948, with respect to a suggested central banking
fear ut
4ersitY and college teachers of Money and Banking. He
j2




11/9/48
—5—
stated that
the proposal for such a seminar was made by Mr.
PresA
i
A-Lent of
the Minneapolis Bank, and was discussed at the
Of the
Presidents' Conference with the Board on October
that m
re Y°1-Ing had discussed the matter with Mr. Peyton and
Officer

8 of

ezd that

the

Peyton,
meet-

5, 1948,
other

Minneapolis Bank when he was in Minneapolis recently,

while no
definite recommendation or proposal was yet reedy

fOr submi

8sion to the Board,
before proceeding further it was de"red t0
hate an
indication as to whether the Board was interested
of program
outlined in Mr. Young's memorandum and whether
e sYmpathetic
to approving the expenditure of as much as
t)500 ro
r an experimental three—week seminar session as proposed.
Chairman McCabe
stated that he was in favor of the proposed
1114ertakt
hg but
that, for reasons which he discussed, he felt it
14)14c1 be d
4Polleored esirable, at least at the outset, to have the seminar
b3r a Federal
ResPrve Bank rather than by the Board.
Disc
kIlla the Re ussi°11 of this point brought out that both the Board
for t
serve Banks would be concerned with preparing the program
he semila
tti
ale and
presenting it, and that Yr. Peyton, in propos—
the ra.
thkhad suggested
it should be a System proposition rather
sPonso
red
ta
exclusively either by the Board or by a Federal
mr
• Young expressed the view that a joint undertaking
be entira.1
teki_
practicable, and he stated that an experimental
.41111,1 if
tIndertaken,




could limit representation to one Federal

,
_6Reserve
thee.

district, but that it might
be preferable to cover two or

Mr• Szymczak
suggested that consideration be given to rethe u
niversity or college teachers who might be invited
111141i such a program
to share in the expenses as a means of increasillg thpi
-4-r
the Boa interest a:ad also as a means of keeping the expenses of
thet the

Idthin a reasonable figure and of avoiding any appearance

program might
be for propaganda purposes.
Mr• Evans
stated that, since the program was still in a formi:r
48:7eth:tte.gier)theoentsod
erat
wis
oncould be given to these various suggestions
Wished him to pursue the matter further he would
:11bIllit clefthite re
commendation at a later date as to whether the pro'teta
should be
undertaken and, if so, how it should be handled.
In
this
cQet of
connection \Ir. Thomas stated that the out-of-pocket
the
tItne
Proposed seminars
would be small, but that a great deal of
411(1 effort
would be required in order to plan and carry the pro* tht°11gh,
and
4444
that the Research Division was not now prepared to
e the project.

At the
conclusion of the discussion,
!*Lwas agreed unanimously that Mr. Evans
such members of the staff as he
select should explore the proposal
rurther and submit a recommendation to
the
Board.
,
.
..tgan
4
„
IcCabe stated that, in accordance with the action
ree4tinoro
of the Board, he had arranged for a meeting
eAre
-serltativ„
'
of the National Association of Supervisors of

illicht




11/9/48
-7Nte
444 in the Board's offices on November 29, 1948, for the
PlIrPose of
discussing holding company legislation, and that it
1148"Peoted that
Messrs. Rapport, Amundson, Sperling, Bell,
11°8Pelh°171) and B

baugh of the Supervisors' Association would

be Pl'esent,
At this
time Chairman McCabe was called to the telephone
t° tIllk with Mr.
Creighton concerning the appointment of Mr.
I'lleks°a as P
resident of the Federal Reserve Bank of Boston and
1APot his
return to the meeting stated that Mr. Creighton felt
thet at
this late
date he could not reouest Mr. Erickson to re-

11441114sh his connection with
the Boston Edison Company without
e°1181derable emb
arrassment, that the matter was not mentioned
he
4nd Mr.
Erickson were in Washington last week, and that
I*1°4-14 be h
is
suggestion that the Board approve the appointment
Ilith the

unde
rstanding that if at any time the directorship proved
to be erabarrassing
ter up aria have it to the Board, Mr. Creighton would take the matclarified.
the ensuing
discussion Mr. Clayton talked further
11/%41:rienigght en and
reported that the latter had stated that
11 '4()111d not want
to take the matter up with Mr. Erickson with:
It cli8eus8ing it
first with the board of directors of the Boston
'
-41t) thrat

ula not want to do that, and that he would like to
:
44 e tkl 141e°11ditionai
approval from the Board with the under—
rig that
he would
work the problem out if it should prove




"

-8eLtEll.rassing to the
Board. Mr. Clayton stated that he told Mr. Greight°11 that members
of the Board felt Mr. Erickson should resign the
ditectorship
by the end
of the year or not later than the end of the
telt 0
or
which he
would be appointed and that there should be an
ilhders
.
talldlng to
that effect in advance. At the end of the conversa404
:
actt
4 Clanon said, Mr.
Creighton stated that he would take no
he had
given further consideration to the matter, and
that he
ri4Z7 t
elephone the Board early this afternoon to discuss

There followed a further discussion during Which various alternatives were suggested as a means of disposing of the
matter at the conclusion of which, upon
motion by Mr. Vardaman and by unanimous
vote, the following telegram was approved
eald the Question
of Mr. Erickson serving
"a
director of the Boston Edison Company
we.s referred to Chairman McCabe to settle
,1
j,
1 such manner as he thought best after
'tlsoussing with Messrs. Creighton and
El'iokson the policy followed by the Board
/4:!1 the past and the views expressed at
'"is meeting that Mr. Erickson should re(11g4 as a director of the Boston Edison
;,:41panY by the end of the year and in any
- etlt by the end of the term for which he
:
being appointed
so that the question
-41d. not arise when his appointment for
a further term
was taken up in 1951:
rtter,4 ,ftRetei
4;;140.yeztoiti:NovemberBoaraof8. Board of Governors approves appointDirectors of Joseph A. Erickson as
%?
Ph
4
t.,!(1. portl_
f_the Federal Reserve Bank of Boston for unexv4 he
rf F
rIving ebruary 28, 1951, effective
repociurt°s




11/9/48
-9to pr,,"Board of Governors also approves paymentofsalary:
's Erickson for
period from date he assumes his duties
resident through April 30,
1949) at the rate of $25,000
tors
"
num) which is the rate fixed by the Board of Direca. as reported
in your telegram. Please advise when he
.sumes
office."

q;:

Chairman McCabe
presented a letter from Mr. Wysor, Chairman
Federal
::tI
Reserve0
of Richmond, dated November 2, 1948, in
l'hichhe
asked
reasons set forth in the letter, he be not
ree.13Poitt
ed as
a Class C
director of the Richmond Bank after the
'cloiratiot of
his present
term on December 31, 1948.

Of the

It was agreed to accede to Mr. Wysorts
request and the staff was requested to
Prepare an appropriate reply to his letter for
consideration by the Board.
Chairman
thlited
States
to

McCabe presented a letter from the President of the

dated November 6, 1948, requesting that the Board sub-

1141 bY

November 29, 1948, the subjects it would propose for
trIellIsion in
the
State of the Union message and the Economic Report

ot the

President to be
;resented to Congress in January 1949. The
also
reouested that the Board submit a report on the proposed
leateiative
proarain of
the Federal Reserve System, to reach the Dir"'cltr of
the
Bureau of the Budget by November 29, 1948. Chairman
l'I°41)
stated that
he had asked Messrs. Riefler, Morrill, Vest, and
CallIter to
Prepare an
outline of questions to be considered in
ellitiectiori
'with the
request and that when the outline was ready it
'4°1111' be
submitted to
th
'
the Board for discussion and decision as to

letter

Position to
be
taken in the reply to the letter on the various
Illtiorts
raised.




-10At this
Withdrew

point Messrs. Riefler, Thomas, Vest, Young, and Solomon

froz the meeting
and the action stated with respect to each
tuatters

hereinafter referred to was taken by the Board:

Minutes of
actions taken by the Board of Governors of the Fed-

erea D__e
"8

kellc14
4.4g

rve SYstam on
November 8, 1948, were approved unanimously.

Memorandum dated November 2, 1948, from Mr. Carpenter recomthat the
basic salary of Merritt Sherman, Assistant Sect
Board, be increased from $9,407.25 to $10,000 per

1/41,
effective

November 14, 1948Approved unanimously.

tor ot Mera°ranclum dated November 4,
1948/ from Mr. Bethea, Direct Division of
the
Administrative Services, recommending the apkittzell
- of Mrs.
Marie Smith Alleman as a stenographer in that Di'41()11 it
$
basic salary
at the rate of$2,724 per annum, effective
%ea; ate upon which she enters upon the performance of her
ter he'ving passed the usual physical examination..
Approved unanimously.
Lett
er to Mr. Young, President of the 'Federal Reserve Bank of
re4ding as
follows:
"The
41")ard
Your B;:!e whichwishes to record its appreciation ofothe
Mr. E. A. Heath, Assistant Cashier
'
/ ithtc;
1 %
lrendered during the mcgvbh he spent in working
i
N./. ard's staff on Regulation 14 matters.
h'gh
:
1„
'
1 -'eath was
most cooperative, his work was of
ere 2,--4er,
and his participation was a great help. We
—re
that You
would like to know that during his




11/94a
-11-

"pert°d

.
with us Mr. Heath reflected great credit on the
'"er,11 Reserve
Bank of Chicago as well as upon himself.
The Board also wishes to express its appreciation
of
abl"lirCo°
to theperation in making Mr. Heath's services availBoard."
Approved unanimously.
Telegram

to Mr. VanZante, Chief Examiner of the Federal Reserve

of Chicago,
reading as follows:
thep"Illetel November 5. Board approves designation of
taw2c414/wing employees of your bank as special assisexatmtners: Merton Jones, John Egeland, Clifford
mich'ik) Peter
Zaleski George Bentz, James J. Chmelik,
l T Collins,
Ete.
;Ind Frank Schreiber."
Approved unanimously.
Letter ,
0
138,4k 01,

Mr. Phelan, Vice President of the Federal Reserve
Nelg York,

reading as follows:

27 1.1 48 refers
to Mr. Lyon Boston's letter of October
ttr
teat 748 and its enclosures, concerning whether a
organization, not otherwise engaged in the instalits :VIA b
usiness, which makes instalment loans to
!egt.11 -11);
c7ees must file a registration statement under
-k Na ll
tit;
i °2 W if all such loans are of the kind exempted
ni.i'4egulation except in certain isolated cases
be ohl;'°ugh the mere
fact thPt nonexempt loans mayOC
not
silleasional or a small part of total loans would
therezZ,
ce in itself to relieve an organization froma
klorge;Tration
long
employees
requirements, nevertheless, so
l
!
tion makes instalment loans to its
f'.1-0:rt'
es not hold itself out to its employees a
;
:
1 c321 tlie-! lake instalment loans which are not exempt
'-k01114.0 '"egulation
zere4
the Board's view is that registrab,er the
,,egulation would not become necessary
e teheioece-lise in
isolated instances there might be
th 1114:e°I nonexempt instalment credit to employees.
1-1111 r .such ELn organization does nothing to creatd
Ze
3rZ:zT2' among its employees that nonexempt cr
?'obtn
credits
%"Ilule or
that only
'edits areindicates to its employeesnonexempt
available, extensions of




11/9/48
-12:illatalment credit in rare or isolated instances in cirtances
such as those here involved would not constisec
:
I t engaged in the business' within the meaning of
'
to..°11 2(a) of the Regulation. In general, this would
ppear
to conform
with your views."

ir

Approved unanimously.

tarlit or

Letter to Mr.
Olson, Vice President of the Federal Reserve
Chicago) reading as
follows:

.
"This refers
Ilaquir•
to your letter of October 19, 1948,
for a. lug whether an instalment credit which qualifies
ct,lYpo_f over 15 months under Part 2 to the
4%_11)pleZtruit.
'41Elt%Ment of -lc&ttliaTs140!ay have a final monthly
Part,
I11 S-1036,
dated September 2, 1948, concerning
or'
. of the
Supplement, and particularly the inclusion_
eatl
inter
neat or finance charge in determining the app
1.rere°1/
,-! the $70
monthly payment requirement, there
Nrra,..;!r6ain illustrative examples using equal monthly
ta1.4Z''S and
explaining
charts
the
of
payment
con
use
Boarcrg Pre
equal monthly payments. The
es) however, that the $70 monthly payment
recluire
Ze.,
‘'erit
2416 in Part 2 of
the
ezita011..
regulated
) n.?does nct
the Supplement
last
instalment payment of a
obli
(It
th fr°ril being less
charge
toal
t
than $70. Thus, if the amount
4rige;) shozbligation,
including interest or finance
be $1 220.80, repayment could be arof
$710
0
each, that thereul
l would be 17 monthly payments
13°.80c-1 11c1 an eighteenth
or final instalment of
*;
rath
ner
than 17 monthly payments of $71.81 plus.
°t Beett
irnila
40t pre °118 rlY, the $5 monthly payment requirements
3(b), 4(c) and
regulated
o
5(a) of the Regulation
ci2„
bliga47
• 11t the last
479 .lon
instalment payment of a
from being
less than $51 as indicated by
rIterr°.'
1*Y 13, 19j (F.R.L.S. #8571.1), to which you
edol

Approved unanimously.

Teiaar
folio.vraz

t° the Presidents of all Federal Reserve Banks read-




1884
-13se "In view of
anticipated difficulties of adjusting rere requirements
,wee4.Z
because of holidays on Thursday of this
,Tht.) de
ficiencies
reserves of any member bank in a
ro ral reserve or in
reserve city, if it so desires, may be
"'
11etrPuted
covering six-day period ending Wednesday, Novemloaati°P and eight-day period ending Thursday, November 18,
3.slab2_eead. of the usual seven-day periods ending on Thursday.
practice may be followed Thanksgiving week and any
elidsequent week in
which weekly reserve computation period
take °11 a holiday.
Please advise extent to which banks
e-clvantage of the authorization this week and Thanksznar,,,ng Ileek this year. For statistical purposes, your sumform F. R. 422, should be on usual sevenap'prPoXIer.iod
basis. These reports may be submitted on
;rEtrita Thiate basis if
any banks in your district take adfitia, e of the
authorization and on revised basis when
J- data
are available




Approved unanimously.

Secretary.

Chairman.