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1463 A meeting of the Board of Governors of the Federal Reserve Systern was held in Washington on Tuesday, October 15, 1946, at 11:05 a..ra. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Draper Vardaman Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Chairman Thomas, Director of the Division of Research and Statistics Mr. Vest, General Counsel Leonard, Director of the Division of Examinations Mr. Van Fossen, Assistant Director of the Division of Bank Operations Mr. Townsend, Assistant General Counsel Mr. Mr. Mr. Mr. Mr. Mr. Vardaman referred to the recent informal discussions of the problem presented to the Board in situations such as that existing in Ale xandria, Louisiana, where the Rapides Bank and Trust Company of that city was suffering a serious competitive disadvantage because of it8 under the provisions of the Board's Regulation (,), Paymellt of Interest on Deposits, to absorb exchange and collection charges, arid the Guaranty Bank and Trust Company, e nonmember insured bank 1°eated in the same city, was attracting a considerable volume of dePcsits by absorbing such charges. He said that he would like the 13°ard to consider what, if any, action could be taken by it or by the ?ederal Reserve Bank of Atlanta to deny the use of any of the facilitie8 of the Bank, including check collection faciliFederal Reserve tO the nonmember bank as long as it continued its present 1464 10/15/46 -2Practices in this regard. It was Mr. Vardaman's thought that if 13°88ible the nonmember bank might be removed from the Federal Reserve Par liet so that it could not have the advantage of the Federal Reserve clearing and collection system. There was a general discussion of the steps that might be available to the Board in the light of the applicable provisions of W av, -"d the Board's Regulation J, Check Clearing and Collection, the 131411"es served by the par list, and the possible effects of the removal. of the Guaranty Bank and Trust Company from the list. All of the members of the Board were in agreement that some S°111tion -- of the problem should be found, and Mr. Vardaman stated that h e would call Mr. McLarin, President of the Federal Reserve Bank Atl„+ -- a, on the telephone and suggest that he give consideration to L, sen`ing to the Rapides Bank and Trust Company, rather than directly to the Guaranty Bank and Trust Company, checks drawn on the latter bank, and that he ask the Presidents' Conference Committee on Col- lections to the consider the problem and submit a recom:nendation as to action that might be taken to correct the present unfair compet- itize Position in which the Rapides Bank and other member banks in 81441ar s ituations were placed by the absorption of exchange and e°11ecti charges by nonmember banks. Preqd Mr. Vardaman referred to a proposed letter to Mr. Young, ent of the Federal Reserve Bank of Chicago, which would state 1465 10/15/46 —3— that the Board would interpose no objection to the employment of an architect to prepare preliminary plans for an addition of four stories to the Head Office building of that Bank, with the understanding that before any contract was entered into for completion of detailed plans arid sPecifications, the preliminary plans would be submitted to the Board for consideration. Mr. Vardaman stated that while he was in Chicago recently the ouestion came up Ithether the cost of preliminary Plans for a Federal Reserve branch building that might exceed the litait of t250,000 provided in the lav, on the amount that may be spent ror branch buildings without the specific approval of Congress, must be considered as part of the construction cost, which would require 611ch aPproval. He said he had taken the position that the preliminary Plans were nothing more than an undertaking to survey the bank's blinding needs and were not a part of the construction costs subject to Congressional approval. Mr. Vest read the applicable provisions ce the Federal Reserve Act and stated that it provided that no Fed— era'l Reserve Bank shall have authority to enter into a contract for the construction of a branch building which would cost in excess of 44 551 , n 1"°1 and therefore the question of a violation of the law could 4c 't arise until a contract for construction had been made. There was a.greellient by the members of the Board with the position which Mr. Vard bY the had taken, and that a Federal Reserve Bank was not limited statute in the employment of an architect to prepare preliminary 1466 ' 0/15/46 -4- In connection with the above matter, reference was made to the Present policy of the Board with respect to the preparation of bullding plans as set forth in its letter of September 14, 1 945, 84271, to all Federal Reserve Banks whTch stated that it was desirable or the B anks to proceed with prenainary plans for the provision of 5uc1 additional space as appeared to be necessary on the basis of the Probable future volume of Federal Reserve Bank operations so that constrtletim work could be commenced without delay when conditions permit, elidthere was a discussion of whether there should be any change made in the letter. Chairman Eccles said that the Banks might be advised that 114e4 entering into an agreement for preliminary plans the contract Should be so drawn that no commitment would be made to employ the architect for preparation of final plans and specifications. sUggested that the Banks should also advise the Board of -11Y.Plahs for substantial purchases of new vaults and other permanent er-iuipment. It was unanimously agreed (1) that the staff vou1d review the letter of . September 14, 1945, in the light of this discussion and, if thought necessary, prepare for consideration by the Board a further letter to the Federal Reserve Banks 'which would make it clear that the banks were authorized to pr:Tare preliminary plans and specifications for buildings, including vaults and fixed equipment, but that they would 1467 10/15/46 -5not go beyond that point without the ap -roval of the Board, and (2) that a letter would be sent to President Young interposing no objection to the employment of an architect to prepare preliminary plans for the prorosed addition to the Head Office building on the assumption that any such agreement would provide that the Bank would not bc obligated to retain the architect for any work beyond the preparation of oreliminary plans, but that if he were retained the payment for such preliminary work would be taken into account in the final fee. 2 "Young, Assistant Director of the Division of Research rnd ' les, joined the meetirg at thls point. Mr. Thomas presented and the Secretary read a memorandum prePaect bY Messrs. Thomas and Young under date of October 15, 1946, the results of a canvass of Federal Reserve Banks and °t'hers as 0 t the timing for conducting the surveys of commercial, and farm loans, discussed at the meeting of the Board on °etober 1,, -L 1946, Mr. Thomas stated that the Reserve Banks generally 411(11*ea the 11 18king of the survey of commercial loans as of November 18" 1946, but that a majority preferred postponing the survey of farm 1-(lis Until next, spring. He also said that the Chairman of the Credit P°1ieY C°Irimittee of the Association of Reserve City Bankers had suggested November 30, 1946, as a date for both surveys, that representa%es °r the American Bankers Association had stated that it was not ill a P°8ition to endorse the proposed surveys Fathough it did not (31e them, that the U. S. Department of Agriculture, the U. S. 1468 10/15/46 _6_ Department of Commerce, and the National Bureau of Economic Research Preferred making the surveys this fall in order to have the data as soon as possible, and that the FDIC had not officially taken Mr. a position as to whether it would cooperate in the surveys. Thomas added that Mr. Evens had been informed by telephone of the replies that had been received and had said he would like to have the surveys made as proposed. Mr. Vardaman stated that based on informal inquiries which he Made on his recent visitL-. to Chicago, Minneapolis, St. Louis, ()110111a City, Memphis, Little Rock, and other points, and which indicated strong objection to the farm loan survey at this time, aricl Irie-kv of opposition at several of the Federal Reserve Banks, he felt that the Board should consider postponing the farm loan sill'IreY until next spring. This point was discussed and it was sug— gested that action be taken to approve the industrial and commercial 1044 survey as proposed, and a decision on the agricultural loan stirIleY held for consideration at the meeting of the Bev rd on Tuesday, Octob er 22, 1946, when Mr. Evans -would be present. '1,4r. Vardaman moved that the Board authorize the making of the survey of commercial loans as of a date during the latter part of November, and that a decision on the timing of the survey of farm loans be postponed until Tuesday of next week when Mr. Evans would have returned. In making this motion, 1469 10/151 -7— Mr. Vardaman stated that he favored the surveys in principle and while he would be out of the city next Tuesday, if, after considering all of the circumstances involved, including the views of the Federal Reserve Banks, the Board felt that the farm loan survey should be made as proposed, he would concur in the Board's decision. Approved unanimously. At this point, Messrs. Thomas, Vest, Leonard, Van Fossen, Young and Town, -end withdrew from the meeting and the action stated with respect to each of the matters hereinafter set forth was then taken bY the Board: Pe derai zousiy. The minutes of the meeting of the Board of Governors of the Reserve System held on October 14, 1946, were approved unani- Ilemorandum dated October 10, 1946, from Mr. Carpenter, reconlilLe"ing an additional leave without pay for six months, beginnitig October 21) 1946, for Miss Helen A. Haltigan, a file clerk in the offi_ e c of the Secretary, with the understanding that she will retilr'n to work at an earlier date if conditions permit her to do so. Theillemorandum also stated that Miss Haltigan is a contributing member to the Civil Service Retirement and Disability Fund. Approved unanimously. 1470 10/15/46 -8dated October 11, 1946, from Mr. Nelson, Director Of n; --Lvision of Personnel Administration, recommending that the t°11°17ing increases in basic salaries for employees in that Division be a.131t.ved, effective October 20, 1946: bmt Designation PhYllis E. Stewart Ruth A. Westergren Ikrgaret C. 8eniarkin R. Huffman Reading Secretary to Mr. Nelson Personnel Clerk Clerk-Stenographer Leave Clerk Salary Increase To From 43,397.20 3,773.40 2,694.96 2,394.00 48.00 4,024.20 2,845.44 2,469.24 Approved unanimously. Letter to "The Adams Bank", Millersburg, Ohio, and the "Gruver State B ", Gruver, Texas, reading as follows: , "The PtJ-sted allBoard is glad to learn that you have comarrangements for the admission of your bank pi%illembership in the Federal Reserve System and takes .tting herewith a formal certificate lmtbt e2zi Your re .'It will be appreciated if you will acknoLledge eelpt of this certificate." Approved unanimously. T elegram to Mr. Volberg, Vice President of the Federal Reserve Sari Francisco, reading as follows: fiRel at, et October 3. In view your recommendation Board j°ves establishment and operation of branch in ,,-,1Frarl eek, California, by American Trust Company, San liei;co, California, provided such branch is estabre ed %Nithin six months from September 18, 1946, as red by State authorities and with understanding thcit uip hiLinsel for Reserve Bank will review and satisfy bra--" as to legality of all steps taken to establish 1471 10/15/46 -9Approved unanimously. In connection with the above matter, the Board approved the recommendation contained in a memorandum dated October 10, 1946, from Mr. Sloan, Federal Reserve Exaainer, that, in connection with the approval of so-called "de novo" branches, the Board's approval be conditioned (1) upon establishment of the proposed branch within such time limits as may have been imposed by State authorities if such limits are kno;,n and considered reasonable, or (2) upon establishment of the proposed branch within six months of the date of approval if no time limit has been imposed by State authorities or such limit is unknown, unless unusual conditions appear to justify a longer term or no time limitation. Letter to the Honorable Walter F. George, United States enate Washington, D. C reading as follows: wit "This letter is in response to yours of September 25, which you enclosed a letl,er from Mr. D. D. Webb, Healy Builli, th-:'ing, Atlanta 3, GeorgiiLl in which Mr. V:ebb suggests tit !' Regulation V:, relating to consumer credit, he disconued. Yr. Webb is under the impression that with the terth:t°n of the war the need for the regulation is past end in its present form it operates to discriminate against QI-vilduals in the lower income groups. Tiith respect to the first point, the purpose served by th fZ.reg ulation at the present time is well indicated by the g excerpt from the July 1, 1946 raoort of the Director °I Gar Mobilization and Reconversion: 'Inflationary pressure is exerted, not only by expenditures out of current income or out of accumulated savings, but also by the extension of credit, which augments total purchasing power. For this reason, it is important for the protection of consumers themselves that controls over the extension of consumer credit be continued nd rigidly enforced.' is t As to the second point, the purpose of the regulation , ° induce people to refrain from trying to buy as much as the " liv(puld like, and certainly some of these individuals will t 1472 10/15/46 —10-'be people who have low incomes and little or no savings. do not believe that this is contrary to the interests of the latter group. No one is more concerned with the flaintenance of economic stability than individuals with ffi incomes, for the reason that they are injured more 'T inflation and deflation than any other group. Further— at a time like the present Ahen prices are high and pods on sale are of lower quality than i1l be available -Later on, it would be a distinct disservice to encourage people with limited incomes to obligate themselves for high Payments over a long period of time." Approved unanimously. Letter to Mr. Fletcher, First Vice President of the Federal a"erve Bank of Cleveland, reading as follows: "Referring to your October 3 letter, it would appear - at the r Purpose of the September 24 visit of Customs n°mPtroller men at the Cincinnati Branch was, in effect, °thing more than a verification of a deposit balance. It the Board . is unnecessary to furnish information to In regard to visits to the Federal Reserve Banks Branches by representatives of Government depart— nts, agencies, and corporations for such purposes." Approved unanimously. Thereupon the meeting adjourne Secretary. Chairman.
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