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57S A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Tuesday, October 17, 1944, at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Wyatt, General Counsel Mr. Vest, Assistant General Attorney There was presented for consideration a memorandum dated October 11 1944, from Mr. Goldenweiser, which had previously been circulated among the members of the Board, reading as follows: "Reference is made to your memorandum of July 28 ac .ldressed to me as Chairman of the System Research AdCommittee in regard to the request of the board of directors of the Atlanta Bank that the Board of Govapprove the participation of the Atlanta Bank to the extent of 825,000 a year for three years in the fianclng of the work of the Southern Research Institute. Ihe,Advisory Committee considered the matter at its meeL'Ing on September 23 and submits the following recom mendations which were adopted unanimously: (1) It is the opinion of the System Research Advisory Committee that the Federal Reserve System should not make contributions to private or public agencies organized to provide industrial technological research facilities to business. The Committee recognizes, however, that this is a matter of policy and of law on which the Committee is not competent i5) 1°/17/44 -2- "to pass and which in the end must be decided by the System authorities. (2) The Committee recommends that the Board of Governors and the Federal Reserve Banks give such industrial technological research institutions all of the assistance in the economic research phases of their work as the System's facilities permit and such public relations assistance as the officials of the Board of Governors and of each Bank may approve for their own organizations. (3) The Committee recognizes the importance of industrial technological research to the economic development of the nation and of the various regions and is of the opinion that the Federal Government should stand ready to provide or to assist in providing industrial research facilities, particularly for small business, whenever such facilities are not being adequately supplied by private or by other public agencies. The Committee believes, therefore, that Congress should give consideration to the establishment of adequate facilities to provide industrial technological research or to make available the results of industrial research to business generally and particularly to small business. The method of accomplishing this end could be either through existing agencies, such as the Bureau of Standards in the Department of Commerce and the Bureau of Agricultural and Industrial Chemistry in the Department of Agriculture; or, if necessary, through establishing new ones; through extending grants-in-aid to private or public organizations; or through some combination of these different approaches. In particular, Provision should be made in the appropriate department or agency of the Government for the continuance on a permanent basis of activities, such as the advisory referral service, which are now being provided by temporary wartime agencies. "During the discussion it was brought out that if industrial research facilities are to be provided by the IG3.0vernment on a national basis the matter is one that should e acted upon by Congress since such work, to be effective, Would require the continuous appropriation of a substantial 15/0 10/17/44 -3- "amount of funds. Moreover, the agency finally designated to assume responsibility for this work should have at its disposal a staff of persons trained in industrial research, i.e., engineers, physicists, chemists, and the like. The Federal Reserve System does not have such persons on its staff, and it hardly seems appropriate for the System to move into this field which more properly belongs to other Federal agencies, some of which are already staffed to deal with it. "There was general agreement that the Board of Governors and the Federal Reserve Banks should provide aid in the economic research aspects of any work that may be done by such organizations just as they now endeavor to meet similar requests from other governmental agencies and private organizations. It was also agreed that the Board of Governors and the Federal Reserve Banks could perform a useful service in the dissemination of informat?en regarding the facilities offered to business by public and private industrial research organizations. However, inasmuch as in some Banks the officers and directors are not as yet ready to assume such public relations work, the recommendation in regard to publicity was qualified to apply only to those Banks which wish to engage in such activity. , "Prior to the meeting of the Committee, Mr. Hopkins 01 the Federal Reserve Bank of Atlanta had been requested to make a brief survey of the industrial technological research facilities now being provided by the Federal Govi`rylient. A copy of Mr. Hopkins report is attached. In 0rief, this report shows that at present a number of Government agencies do industrial research work. The principal °nes are the Bureau of Standards in the Department of ComTerce; the Agricultural Research Administration and the rorest Service in the Department of Agriculture; the Bureau of 1,1ines in the Department of the Interior; and the Tennessee Valley Authority. The extent of their operations ls restricted, however, owing to limitations of funds and staff; few facilities are now available on a regional 2'sls; and, in general, small businesses benefit only in'Irectly from the Government's facilities. During the . 11ar the advisory referral service, taken over from a bank in Buffalo and expanded by the Smaller War Plants Corporation, has been of considerable help to small manufacturers. It appears from this report that an expansion r 1581 10/17/44 —4— "of Government facilities to provide industrial research services directly for small enterprises would be a desirable supplement to the private facilities now available and that the advisory referral service now performed by the Smaller War Plants Corporation should be retained on a permanent basis in an appropriate department or agency of the Government." Mr. Ransom said that he had read the foregoing memorandum and the memorandum attached thereto prepared by Mr. Hopkins of the Federal Reserve Bank of Atlanta with considerable interest. He indicated that he would be disposed to forward them to Mr. Fitzgerald Ha11, who, as a Class B Director of the Federal Reserve Bank of Atlanta and a member Of the directors' committee on Research, Planning and Public Relations, had, together with Mr. Thomas W. Martin, President of the Alabama Power Company and Chairman of the Southern Research Institute, personally appeared before the Board at a meeting on July 17, 1944, for the purpose of seeking the Board's approval of a proposal that the Reserve Bank Participate to the extent of $25,000 a year for three years in the financing of the work of the Southern Research Institute. It was P°1-rited out that under date of July 28, 1944, the Board had advised 141.** Hall that the proposal of the Atlanta Bank raised certain questions of SYstem policy which were without precedent; that the proposal had bee" referred to the System Research Advisory Committee for consideratian. 3 and that, as soon as the Committee's recommendations were re- ceived/ the Board would consider the matter further and advise him Of its decision. 1582 1°/17/44 Mr. McKee expressed the opinion that the Board should assume full responsibility for any decision in the matter and that to simply transmit the recommendations of the System Research Advisory Committee to Mr. Hall might create the impression that the Board desired to evade assuming full responsibility for a decision. He suggested as an alternative to Mr. Ransom's proposal that an appropriate letter be addressed to Mr. Hall referring to the recommendations of the 8stem committee and stating that after having given them careful consideration the Board had concluded that the Federal Reserve Sys— tem should not make contributions to the Southern Research Institute or to arv other private or public agencies organized to provide in— dustrial and technological research facilities to business. Mr. Evans called attention to the comment contained in the last Paragraph of Mr. Goldenweiser's memorandum relating to the ad— referral service taken over from a bank in Buffalo and expanded bY the Smaller tar Plants Corporation, which had apparently been of considerable help to small manufacturers during the war. He said that the referral service idea, in his opinion, could have been appropriately 8Pcinsored by the Federal Reserve System inasmuch as it constituted a service to small business which the System would be in a position to l'ender with its present organization. At the conclusion of further discus— sion, it was agreed that Mr. Evans would have an appropriate letter drafted advising 1583 10/17/44 -6— Mr. Hall that the Board could not see its way clear to approve the participation of the Federal Reserve Bank of Atlanta in the financing of the work of the Southern Research Institute and setting forth the reasons for the decision. Consideration was then given to a translation of a letter dated September 9, 1944, from Mr. Gonzalez, Manager, Banco de la Republica del Paraguay to Mr. Gardner, Chief, International Section, Divisi°n of Research and Statistics, which had been circulated among the members of the Board prior to this meeting, reading as follows: "I would like to thank you personally for the valuable cooperation that the International Section of the Board has given to this Bank by the mission of Dr. Robert Triffin, which has brought the reform and fundamental reo rganization of the monetary and banking regime of this Republic to a happy conclusion. We hope that this ad11:rTantage0u5 interchange with the Board will be continued. :e shall be pleased to inform you of the progress realized In this matter, and at the same time, ask your opinion on new problems that may present themselves in the future. "Before Dr. Triffin's departure, the Directorate of the Banco de la Republica wished to express its gratitude for the important work accomplished for the Bank. Since he had refused to accept any personal gift from the Bank 9/1 his former trip, the Directorate decided this time to be responsible for the transportation costs of his wife, ,l_no acknowledgment of the effective collaboration given by her in her husband's work, besides her gratuitous English Classes to our employees. "The Directorate did not consider this offer objectionable. Unfortunately, Dr. Triffin opposed this proceeding also, telling us that his expenses were paid by the Board and that his wife's expenses are personal and do not Concern our Bank. We do not share this opinion, since Triffin incurred these expenses in connection with his 'r3421 to this city, and we do not think it right that his private finances should be burdened by them. 1584 10/17/44 -7- "Therefore, we are asking your permission to send you the draft which the Directorate decided to present to Dr. Triffin, with the hope that he may be persuaded to accept it as a sincere token of our respect. "Once again, I would like to express our gratitude. We hope that it will be possible, at some future date, for you to visit us personally and acquaint yourself with the work which would not have been accomplished here with— out the kind cooperation of the representatives of the Board of Governors of the Federal Reserve System." Mr. Szymczak stated that, before Mr. Triffin left Washington °n his present trip to South America, the question whether Mrs. Triffin's exPenses should be paid by the Board had been considered and at that time it had been decided that the Board should not pay them. He said that later the question had been raised whether, if the Paraguayan Central Bank offered to pay such expenses, the Board would interpose objection. Mr. Szymczak said that it was his recollection that he had discussed this possibility with Chairman Eccles and that it had been agreed that payment by the Bank would also be undesirable. He said that there seemed to be no doubt in Mr. Triffin's mind as to the Boa , I IQ s position and that it appeared from subsequent developments that, upon such an offer having been made, he quite properly refused to accept any payment from the Bank. However, Mr. Szymczak said the question had now been reopened directly by the Banco de la Republica, Which was very appreciative of the services Mr. Triffin had rendered and wa8 hopeful that it might prevail upon the Board to interpose no 1585 10/17/44 —8— objection to its paying Mr. Triffin approximately 1.,000. Mr. SzYmczak added that, while Mr. Triffin had submitted no recommendation in the matter, Messrs. Goldenweiser and Gardner favored the proposal. In response to a question by Mr. Szymczak as to whether Mr. Go ldenweiser had anything to add to the statement which he had made, 11r. Goldenweiser said that there was the minor point that Mrs. Triffin had conducted English classes for the Bank's employees. However, he continued, the fact of the matter was that the proposal of the Bank t° pay a portion of Mrs. Triffin's expenses was an indirect way of ex— Pressing its appreciation to Mr. Triffin. He concluded by saying that in his opinion no harm would be done by permitting Mrs. Triffin to accept the payment; that the Bank would appreciate it; and that it would be of considerable assistance to Mr. Triffin personally. Mr. McKee said that he thought that it might be well if some— °Ile would explain the Board's position to the Paraguayan Embassy and 8ugge5t that, if the payment was in fact in the nature of a tribute to 1111'd. Triffin, perhaps the Bank could disassociate it from ex— penses incurred or services rendered by Mr. Triffin, and the fact c°u-Ld be brought out clearly that the Board fully recognized and ap— Prcciated the attitude of the Bank, but that it would be inconsistent viith the Board's policy to permit such a payment to be made directly or indirectly to one of its employees. 1586 10/17/44 -9- Mr. Draper said that he would not object if a payment had been made to Mrs. Triffin but that he would not like to see a foreign central bank paying for services rendered by an employee of the Board. He added that, while Mrs. Triffin is not in the employ of the Board, it was possible that she did perform some services for the central bank. On the other hand, he thought that it would not be desirable for the Board to pay the expenses of the wife of an employee. Mr. Evans was of the opinion that the Board's program of assisting Latin American central banks should be one in which the Board renders a service without receiving any payment or reimbursement from foreign central banks concerned. Mr. McKee said that, since the Paraguayan Central Bank wanted to show its appreciation of services rendered to it, the Board was in POsitiOn where it had to take some action, and he thought that care 811010A, be taken not to offend the Bank or the Paraguayan Government in There was considerable further discussion, during which Mr. Gold snweiser stated that he thought the matter could be handled tact. ful,--v *with the State Department and the Paraguayan Embassy if the 13°ard decided to adhere to its existing policy and not approve the PaYzent tendered by the Bank. Mr. Ransom said that such a course appealed to him, but he sUgge sted that the matter be tabled for the time being so that Mr. 1587 10/17/44 —10- SzYmczak could give it further consideration. He added, however, that he thought the Banco de la Republica should be politely and diplomat— ically advised in reply to the inquiry that the Board could not, con— sistently with the policy it has pursued heretofore, accede to the Bank's request that Mr. Triffin be 11 owed to accept the payment ten— dered by the Bank. Without objection, the matter was referred to Mr. Szymczak for further at— tention in the light of the discussion, With the understanding that, before the Board's position was communicated to the Banco de la Republica, the State Depart— ment and the Paraguayan Embassy in Wash— ington would be consulted. At this point Mr. Leonard entered the meeting and Messrs. Thurst_ Goldenweiser, Wyatt and Vest withdrew. Mr. McKee said that he would like to have the Board consider the P°1icy to be pursued in the future with regard to the appointment of Class C Directors and the designation of Chairmen. He suggested that some advantage might be derived from switching Chairmen and Deputy Chairmen periodically. Mr. Ransom said that he had given some thought to a program f rotating the three Class C Directors at each Reserve Bank in the 113sition of Chairman and the question whether such a plan was feasible, but that he felt that the director designated as Chairman and Federal , Rese ' Ire Agent should be one who had his residence in or close to the head office city. 1588 10/17/44 —11-- Mr. Szymczak doubted that such a policy would result in ob— taining the best men in the post of Chairman and Federal Reserve Agent. He pointed out that a similar policy had been pursued at the branches with rather unsatisfactory results. He went on to say that it took a Class C Director years to become fully informed about the SYstem and to become thoroughly familiar with his duties and respon— sibilities. On the other hand, he said he would not favor a policy Which would lead Chairmen to think they could hold such positions for life. Mr. McKee stated that he had not intended to suggest going as far he as was contemplated by Mr. Ransom's question. But, he said, Itas thinking of the problem from a long range point of view and he felt that the Board was making a pattern at this time which it Inight not wish to adhere to later on. Mr. Draper suggested that it night be well to limit the serv— ice of Chairmen to two terms as is done in the case of other Class C Directors. He thought that the Board should be able to find, at least elierY six years, qualified and competent men outside of the System to fill these posts. He also thought that the prestige and opportunity Public service offered by membership on the directorate of a Fed— "al Reserve Bank would be sufficient inducement to obtain the services Of OUtStanding men. Mr. McKee doubted whether six years would be adequate time 1589 10/17/44 —12-- for a director to become thoroughly familiar with the System. He also pointed out that the election by member banks of Class A and B Directors created a competitive situation which provided an added in— ducement for the Board to get the most capable individuals they could rind to serve as Class C Directors. Mr. Ransom said that he thought the Board should pursue a P°11°Y of considering each case individually with a view to not re— aPPointing a director simply because he was already in office. He added that the Board's Personnel Committee had reviewed all Class C Directors recently and that there was not one that he (Mr. Ransom) would not be willing to reappoint. Mr. McKee stated that he was not thinking of changes made or cause, but he had in mird some Class C Directors who had not lived 1113 to exPectations and he thought that it would be desirable to exer— cise careful discretion in each case from that standpoint. He said that he had no recommendation to make to the Board at this time, but that , simply wanted the Board to be thinking about the problem. Mr. Clayton said that in line with Mr. Draper's suggestion that illairmen be subjected to the six—year limitation as in the case Of Other Class C Directors, it might be advisable to consider limiting the 8 . ervice of Chairmen to nine years, or three terms, as Class C Di— rectors. m,, ipus, he said, would tend to meet Mr. McKee's point that considerable time was required for a Director to become thoroughly 1590 10/17/44 —13— familiar with the System's problems. Mr. Evans pointed out that the Board had agreed generarly that it would not enforce the six-year limitation during the war, and that " P siblY for that reason it had not been as active in looking for new niaterial as it would be under normal conditions. Mr- Ransom concluded the discussion by saying that he assumed that each member of the Board, regardless of whether or not he happened to be serving on the Personnel Committee, felt free to propose names for consideration or to suggest that reappointments not be made, and that, since it was not contemplated that any action would be taken by - the Board at this time, the matter could be left with the understanding that anyone had any reservations as to the policy being currently if Pursued, he would bring them up for discussion at a subsequent meeting. At this point Mr. Leonard withdrew from the meeting, and the Etetton to stated with respect to each of the matters hereinafter referred wag:taken by the Board: The minutes of the meeting of the Board of Governors of the Feci • eral Reserve System held on October 16, 1944/ were approved unaniMousiy. Memorandum dated October 17, 1944, from Mr. Morrill recommendfor the reasons stated in the memorandum, that Miss Ramona Arnold, a cafeteria helper in the Secretary's Office, be separated from service ftective as of the close of business October 15, 1944. Approved unanimously. 10/17/44 —14- Memorandum dated October 17, 1944, from Mr. Morrill recommend— that the Board authorize the reimbursement to the Western Union Telegraph Company for the salary of Miss Muriel Pace, at the rate of 160 per month for a period of not to exceed two months, who has been assigned to the Board's telegraph office on a temporary basis pending the return of two of the regular telegraph operators. Approved unanimously. Letter to "The First National Bank of Troy", Troy, Kansas, reading as follows: "This refers to the resolution adopted on March 29, t44,the board of directors of your bank, signifying bank's desire to surrender its right to exercise fidu— ciary powers heretofore granted to it. "The Board understanding that your bank has never actually accepted or undertaken the exercise of any trust, nas issued a formal certificate to your bank certifying that it is no longer authorized to exercise any of the ,fiducary. powers covered by the provisions of section of the (k) Federal Reserve Act as amended. This cer— t : j ulficate is enclosed herewith. "In this connection, your attention is called to the fact that, under the provisions of section 11(k) of the Fed eral Reserve Act, as amended, when such a certifi— cate has been issued by the Board of Governors of the Federal Reserve System to a national bank, such bank (1) -L134. no longer be subject to the provisions of section , 'k) .of the Federal Reserve Act or the regulations of the Board of Governors of the Federal Reserve System made pursuant thereto, (2) shall be entitled to have re— turned to it any securities which it may have deposited with the State or similar authorities for the protection of Private (3) shall not exercise any of the or court trusts, andsection 11(k) of the powers conferred by Federal Reserve Act, except with the permission of the V l a 6-11; 15-0? 10/17/44 -15- "Board of Governors of the Federal Reserve System." Approved unanimously. Telegram to the Presidents of all the Federal Reserve Banks except Cleveland and to Mr. Hays, First Vice President of the Federal Reserve Bank of Cleveland, reading as follows: . "Board has recently had occasion to review the question and has decided that billiard tables and pool tables and equipment are not included in any of the classifications of 'listed articles' in Regulation W. This modifies 517 Approved unanimously. Letter to Mr. Caldwell, Chairman of the Federal Reserve Bank or Kansas City, Kansas City, Missouri, reading as follows: "At the completion of the examination of the Federal .eserve Bank of Kansas City, made as of August 5, 1944, bY the Board's examiners, a copy of the report of the et xamination was left for your information and that of the directors. A copy was also furnished President Leedy. The Board will appreciate advice that the report has been considered by the Board of Directors. Any comment you may y care to offer regarding discussions with Fespect to the exnmination, or as to action taken, or to te t . ar, a result of the examination, will also be apZet ed Approved unanimously. Thereupon the meeting adjourned. kn A pproved: Vice Chairman. Secretary.
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