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1530 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, October 15, 1954. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Vardaman Mills Robertson Miller Balderston Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Thurston, Assistant to the Board Vest, General Counsel Young, Director, Division of Research and Statistics n Mr. Noyes, Assistant Director, Divisio ics Statist of Research and Miss Burr, Assistant Director, Division of Research and Statistics Miss Sutherland, Chief Librarian, Division of Research and Statistics Miss Burgess, Librarian, Division of Research and Statistics Miss Dyer, Librarian, Division of Research and Statistics Mr. Mr. Mr. Mr. Mr. Mr. d a description of the Miss Sutherland and her associates presente work of the Research Library following which they withdrew from the meeting along with Messrs. Young and Noyes and Miss Burr. ted among the members The following matters, which had been circula °f the Board, were presented for consideration and action taken as indicated: from Mr. Bethea, Director, Memorandum dated October 7, 1954, Division of Administrative Services, recommending that the employment in that Division, be status of Lillian E. Wilson, Cafeteria Helper 1531 10/15/54 -2- changed from temporary (two months) to temporary indefinite, with no Change in her basic annual salary at the rate of $1,315 (four hour day basis), effective upon the expiration of her present appointment. Approved unanimously. Memorandum dated October 8, 1954, from Mr. Bethea, Director, Division of Administrative Services, recommending that the employment status of Andrew Fassino, Assistant Foreman of Laborers in that Division, be changed from temporary (two months) to temporary indefinite, with no Change in his basic annual salary at the rate of $2,974, effective upon the expiration of his present appointment. Approved unanimously. Memorandum dated October 6, 1954, from Mr. Sloan, Director, Division of Examinations, recommending that Frederic W. Reed, an employee Of the San Antonio Branch, Federal Reserve Bank of Dallas, be assigned to the Board's field examining staff for a one-year tour of duty during the calendar year 1955 and that he be appointed an Assistant Federal Reserve Examiner for the period of his service. The memorandum stated that Mr. Reed would remain on the Pay roll of the Federal Reserve Bank of Dallas on a reimbursable basis, with reimbursement to the Federal Reserve Bank to include his salary and all related payments such as retirement system, social security, hospitalization-surgical insurance, and group life inexpenses and per diem in lieu surance; that the Board would pay his travel Of subsistence on the same basis as is applicable to the other members of the field examining staff; that his headquarters would be San Antonio, Texas; and that it was contemplated that he would report in Washington, D. C., on January 3, 1955, and would join the field staff shortly thereafter. Approved unanimously. Letter to Mr. Armistead, Vice President, Federal Reserve Bank of Richmond, reading as follows: In accordance with the request contained in your letter of of October 6, 1954, the Board approves the designations as special Jr. Hutcheon, Robert H. Dillard, Jr. and William Bank of Richmond assistant examiners for the Federal Reserve of State examination the for the purpose of participating in member banks only. Approved unanimously. 1532 1015/54 Letter to Mr. Peterson, Vice President, Federal Reserve Bank of St. Lis, reading as follows: In accordance with the request contained in your es the letter of October 1, 1954, the Board approv l asspecia a designation of Bobbie Leroy McDonald as of St. sistant examiner for the Federal Reserve Bank Louis. Approved unanimously. Ohio Citizens Trust Company, Letter to the Board of Directors, The Toledo, Ohio, reading as follows: through the Pursuant to your request submitted Board of GovFederal Reserve Bank of Cleveland, the approves the estabernors of the Federal Reserve System Trust Company, lishment of a branch by The Ohio Citizens Detroit Avenue, Toledo, Ohio, at Anthony Wayne Trail and branch is estabMaumee, Lucas County, Ohio, provided the lished by March 21, 1955. Approved unanimously, for l transmittal through the Federa and. Clevel Reserve Bank of Currency, Treasury Department, Letter to the Comptroller of the Washington, D. C., (Attention: Mr. W. M. Taylor, Deputy Comptroller of the Currency), reading as follows: your office dated Reference is made to a letter from copies of an tatic photos September 14, 1954, enclosing Greer, South at bank al nation application to organize a to whether or as on endati recomm Carolina, and requesting a ed. approv not the application should be application made A report of investigation of the e Bank of Richmond Reserv by a representative of the Federal 00 is to be pro$150,0 of indicates that a capital structure ed in the appropos 00 vided for the bank instead of $120,0 ble findfavora lly genera plication. This report discloses cases these in ered consid ings with respect to the factors al approv ends recomm and, therefore, the Board of Governors of the application. will be glad to The Board's Division of Examinations representatives of discuss any aspects of this case with Your office, if you so desire. Approved unanimously. l0/15/54 Letter to Mr. Pondrom, Vice President, Federal Reserve Bank of Dallas, reading as follows: This refers to your letter of September 29, 1954, concerning Regulation Q and the absorption by a member bank of exchange charges in amounts not exceeding $2. You indicated that a member bank has raised the question whether, in the case of an exchange charge in excess of $2, say $4.50, it would be permissible for the bank concerned to absorb up to $2 for the particular depositor in any one calendar month or in any other regularly established period of 30 days. This question would appear to be covered by an enclosure with the Board's letter S-862, July 13, 1945. The enclosure, S-862-a, also dated July 13, 1945, is included at #62401 FRLS. There it is stated that where a bank pays exchange charges totaling more than $2 for a customer during any one month, and absorbs all or any part of the amount paid, it will be presumed that the law has been violated; and in such a case the question whether absorption of exchange charges is being utilized as a device for the payment of interest will be determined after a consideration of all the relevant facts and circumstances as developed by examinations of the particular bank. From your letter it appears that your examiners have been instructed not to permit a $2 absorption of exchange as trivial within the meaning of the Board's letter of June 22, 1945 (1945 Federal Reserve Bulletin, p. 564), if the total exchange charges paid on items of the particular depositor exceed $2 in any one calendar month or in any other regularly established period of 30 days. This instruction would appear to conform to the views expressed in the letter S-862-a. Approved unanimously. There were presented telegrams to the Federal Reserve Banks of Boston, New York, Cleveland, Richmond, St. Louis, Minneapolis, and Dallas stating that the Board approves the establishment without change by the Federal Reserve Bank of Boston on October 11, and by the Federal Reserve 13anks of New York, Cleveland, Richmond, St. Louis, Minneapolis, and Dallas 1534 10/15/54 on October 14, 1954, of the rates of discount and purchase in their existing schedules. Approved unanimously. There was presented a memorandum dated October 12, 1954, from Mr. Young, Director, Division of Research and Statistics, recommending that the resignation of Joyce T. Fones, Clerk-Typist in that Division, be accepted effective October 22, 1954. Approved unanimously. At this point Messrs. Sprecher, Assistant Director, Division Of Personnel Administration, and Solomon, Assistant General Counsel, entered the room. In connection with a discussion of the Fringe Benefits Act and related Board personnel Policies at the meeting on September 28, 1954, it was understood that as soon as possible the Division of Personnel Administration would submit to the Board recommendations regarding the employment status of Board employees, including the restrictions currently placed on the status of appointments, promotions, and transfers. Accordingly, a memorandum had been prepared by Mr. Sprecher under date the members of Of October 12, 1954, and copies thereof had been sent to the Board prior to this meeting. For reasons discussed in the memorandum, it vas recommended that: 1. Effective upon approval by the Board, all current employees be given the same employment status, with the exception of those employees appointed temporarily for a specified period of time. (This would have the effect of rescinding previous actions of the Board creating various categories of employment status as reflected by terms such as temporary indefinite, nonpermanent, and permanent.) 1535 -6- lo/15/54 2. Effective from the date of approval by the Board, the same policy apply to all future appointments, promotions, and transfers. At the request of the Board, Mr. Sprecher reviewed in some detail the points covered in his memorandum, stressing the fact that if the recommendations were approved, employment of all members of the Board's staff would continue to depend, as in the past, on satisfactory work performance and the personnel needs of the Board, and that transfers and Promotions also would continue to be governed by prevailing personnel Policies. At the conclusion of a discussion, the recommendations contained in Mr. Sprecher's memorandum were approved unanimously. So that there might be no misunderstanding concerning the effect of the Board's action, it was understood that (1) Chairman Martin, Mr. Carpenter, and Mr. Sprecher would discuss the matter with all division heads, (2) Mr. Sprecher would meet with the Committee of Employees, and (3) an appropriate memorandum would be sent by Mr. Sprecher to all members of the Board's staff. Prior to this meeting Governor Mills had sent to the other members of the Board copies of a memorandum dated October 4, 1954, reviewing consideration given by a special committee (consisting of Governor Mills, Mr. Johns, President of the Federal Reserve Bank of St. Louis, and Mr. Wurts, Chairman of the Retirement Committee, Retirement System of the Federal Reserve Banks) to objections raised by the Internal Revenue Service 1536 -7- 10/15/54 to the last paragraph of section 9 of the Rules and Regulations of the Retirement System of the Federal Reserve Banks. That paragraph provides that the Board of Trustees of the Retirement System shall have the power to grant a retirement allowance to any employee retired by any "employing bank" or to grant a special additional benefit, provided that the emPloying bank, after first having obtained the approval of the Board of Governors, shall pay to the Retirement System the amount required to cover the full cost of any such allowance or benefit. The objections of the I ternal Revenue Service were on the grounds that the last paragraph of section 9 left the way open to discriminate, contrary to law and Treasury re gulations, and also that it prevented the benefits granted by the Retirement System from being "definitely determinable" as required by the regulations. Cases in the pest coming under the questioned paragraph fell into four categories, as follows: 1. Military service cases. 2. Involuntary termination cases under the Board's letter of March 17, 1944 (S-741, F.R.L.S. #9152). 3. Involuntary termination cases under the Board's letter of March 15, 1946 (S-905, F.R.L.S. #9093). 14, Special cases in which Federal Reserve Banks, with approval of the Board of Governors, have occasionally provided additional benefits. Governor Mills' memorandum stated that at the meeting of the Con- ference of Presidents of the Federal Reserve Banks in September it was Eigr -ed (1) that provision should be made for continuing the military service cases, (2) that the special cases referred to above should be 1537 lo/15/54 -8- handled outside the Federal Reserve Retirement System, and (3) that in order to avoid giving up necessary discretion, the involuntary termination cases should be handled outside the Retirement System. Governor Mills reviewed at some length the objections of the Internal Revenue Service and the discussions of the special committee. It was his opinion that in all the circumstances the views of the Federal Reserve Bank Presidents were reasonable, and he suggested that the special committee be informed to that effect so that it could proceed to make a final report to the Trustees of the Retirement System recommending appropriate changes in the Rules and Regulations. Such changes, if approved by the Trustees, would then be referred to the Board of Governors for approval. There followed a general discussion of the matter during which Particular attention was given to the question whether the handling of cases outside the Retirement System, as suggested, would permit the giving Of any assurance to the employee that the arrangement would be binding uPon the Federal Reserve Bank concerned. After reviewing various possi- b ilities which had been considered by the special committee and were found to have unsatisfactory aspects, Governor Mills expressed the view that the mechanism of the program would have to be developed following a deciB ion to change the Rules and Regulations of the Retirement System. At the conclusion of the discussion, it was agreed unanimously that the views of the Reserve Bank Presidents, as stated in Governor Mills' memorandum, were reasonable and that they should be approved 1538 lo/15/54 -9by the Board. In this connection, it was understood that appropriate advice of the Board's position would be given to Mr. Erickson, Chairman of the Board of Trustees of the Retirement System, to Mr. Young, Chairman of the Conference of Presidents of the Federal Reserve Banks, and to Messrs. Johns and Wurts. Secretary's Note: The letter sent to Mr. Erickson in accordance with this action was as follows: You will recall the questions that have been raised by the Internal Revenue Service regarding the last paragraph of section 9 of the Rules and Regulations of the Retirement System of the Federal Reserve Banks, and which it is understood were discussed at the September meeting of the Conference of Presidents of the Federal Reserve Banks. As you know, it appears that the Internal Revenue Service Probably will permit military service cases to be handled subto the other classes stantially as in the past. With respect Of cases which have been handled under the questioned paragraph in the past, it is understood that the Presidents of the Reserve Banks were generally of the view that it would be unaddesirable to sacrifice necessary flexibility in personnel e preferabl method of ministration, and that, accordingly, the meeting the objections of the Internal Revenue Service would be to amend the Rules and Regulations of the Retirement System SO that in the future all such non-military cases will be handled outside the Retirement System. The Board has considered the question and is inclined to agree that the preferable solution for the problem would be a the lines suitable amendment to the Rules and Regulations along envisaged by the Presidents. Young, Similar letters are also being addressed to Mr. Wurts, Mr. and Chairs, President Chairman of the Conference of of the System Fedt Retiremen man of the Retirement Committee, eral Reserve Banks. At the meeting on October 11, 1954, consideration was given to a draft of letter to Mr. Jacob Seidenberg, Executive Director of the President's Committee on Government Contracts, who had requested a statement 1539 10/15/54 -10- of the fair employment practices followed by the Board of Governors. Pursuant to the understanding at that meeting, Mr. Sprecher had prepared a revised draft of letter, copies of which had been sent to the members Of the Board prior to this meeting. Following a discussion, during which one change in the draft was suggested, unanimous approval was given to a letter in the following form from Mr. Sprecher, as Fair Employment Officer, to Mr. Seidenberg: This refers to your telephone conversations with Chairman Martin and me concerning procedures in regard to fair employment practices that are followed here at the Board of Governors of the Federal Reserve System in order to carry out the spirit and purpose of Executive Order No. 9980 of the President, dated July 26, 1948, relating to fair employment practices within the Federal establishment. In accordance with your request, I am enclosing a copy of "Procedures Regarding Fair Employment Practices of the Board of Governors of the Federal Reserve System" together with a copy of a letter dated February 21, 1952, addressed to Mr. James L. Houghteling, Chairman, Fair Employment Board, United States Civil Service Commission, which discusses in detail the practices and steps which are being followed by the Board of Governors. While the contents of this letter to Mr. Houghteling are in the form of answers to questions, they are self-explanatory in themselves. Further, the practices outlined in the letter constitute our present practice in every detail. You will note from paragraph "A" of the "Procedures Regarding Fair Employment Practices of the Board of Governors of the Federal Reserve System" that it is the policy of the Board of Governors Of the Federal Reserve System that all personnel actions, including selection for employment, shall be based solely on merit and on the qualifications of applicants or employees available, regardless of political affiliations, creed, color, race, or national origin, and having due regard for veterans' preference as set forth in the Veterans' Preference Act of 1944. Accordingly, our employees are not classified by minority groups. However, in answer to your specific questions, we have 559 employees of whom 49 are Negroes. Of the latter, 7 serve in supervisory capacities, 6 are in clerical lines, and 36 are in maintenance positions. We trust the information given above will be of some value to You. SI. -11- 10/15/54 In connection with the discussion of the foregoing item, inquiry was made regarding the contributions of the Board to the Reserve Board the Club employee Club, including the contribution toward the salary of in charge of the Recreational Library. It was suggested that Governors an ad hoc committee to reRobertson and Miller be requested to serve as view various aspects of this matter and report to the Board. This suggestion was approved unanimously. Carpenter then withAll of the members of the staff except Mr. drew from the meeting. accordance with the underGovernor Szymczak reported that in 1954, he discussed with Mr. Hodgstanding at the meeting on October 11, of Boston, and Mr. Neal, kinson, Chairman of the Federal Reserve Bank First Vice President of that Bank, the question of the latter's proposed adviser in connection with an industrial Participation as special economic under contract with survey of Iraq to be undertaken by A. D. Little, Inc., the Foreign Operations Administration. He said Mr. Neal subsequently ad- Iraq delayed from vised that he had arranged to have his departure for 1955. December 15, 1954, until on or about January 15, e The Board agreed to approv the Mr. Neal's participation in later the of survey on the basis departure date and it was understood that Chairman Martin would ions so advise the Foreign Operat an Chairm the Administration and of Bank e of the Federal Reserv Boston. 10/15/54 Chairman Martin said that he had received a letter dated October 12, 1954, from Mr. Harold E. Stassen, Director of the Foreign Operations Administration, requesting that the Board make the services of Mr. Heuser, Chief of the Central and Eastern European Section in the Division of International Finance, available to the Director of the U. S. Operations Mission to Turkey and, under his general direction, to the Government of Turkey for a period of ninety days beginning about November 1, 1954, to 'work on matters pertaining to the functions and activities of the Central Bank of Turkey and collateral problems. The Foreign Operations Administra- tion would pay Mr. Heuser's transportation and living expenses but he would continue on the pay roll of the Board during the period of his as- signment. Governor Szymczak reported that Mr. Heuser would prefer not to go for personal reasons but that because of the fiscal and financial situation in Turkey, he and Mr. Marget felt that someone should go and if the Board approved the arrangement, Mr. Heuser would be willing to undertake the assignment. The arrangement was approved unanimously, with the understanding that it would be made clear to Mr. Heuser that the Board was not urging him to go but approved the assignment should he wish to undertake it. Minutes of actions taken by the Board of Governors of the Federal Reserve System on October 13, 1954, were approved unanimously. 1_542 10/15/54 -13- Mr. Carpenter then withdrew from the meeting and the Board went into executive session. The Secretary subsequently was informed by the Chairman that during the executive session the Board gave consideration to the question raised at the meeting on August 5, 1954, as to whether all Federal Reserve head office directors should be invited to a meeting in conjunction vith the meeting of the Conference of Chairmen of the Federal Reserve Banks, scheduled for December 2 and 3, 1954. It was agreed unanimously that it would be better to forego a meeting of all of the Federal Reserve Bank directors at this time and to plan the usual meeting of the Chairmen's Conference, which would be attended by all Chairmen and available Deputy Chairmen. The Secretary also was advised that at this point Mr. Thomas, Economic Adviser to the Board, was called into the meeting for an informal discussion of member bank reserve requirements. The meeting then adjourned.
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