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1779 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Tuesday, October 19, 1948. it the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. The Board met McCabe, Chairman Szymczak Draper Clayton Carpenter, Secretary Sherman, Assistant Secretary Hammond, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Thomas, Director of the Division of Research and Statistics Mr. Vest, General Counsel Mr. Mr. Mr. Mr. Mr. Mr. Mr. Chairman McCabe stated that Mr. Roland Pierotti, Washington rePresentative of the Bank of America N.T. & S.A.,called at his ofrice Yesterday afternoon and stated that he understood one of the rnelbers °f the Board had said the Board would not grant an applica1'1°11 to the Bank of America for a foreign branch in Siam. 14e°e:be Vent on to k4°1whether llot yet the Chairman say that he informed Mr. Pierotti that he did not the application was in the Board's offices, that it had come before the Board for action, and that he could be assured application would receive full consideration when it had been processed it. the usual manner. (3otober T. In this connection Mr. Clayton presented a memorandum dated 19 '1948, stating that on Friday, October 15, 1948, Mr. James Seett 'Economic Adviser to His Majesty's Government of Siam, called 10/19/48 -2- Oh him for the purpose of requesting prompt and favorable action on the aPlaication of the Bank of America N.T. & S.A. for establishment Of 8. foreign branch at Bangkok, Siam. The memorandum also stated that Mr. Scott had been informed that the Board had other factors to consider in addition to those he mentioned and that the applicatiollvould have careful consideration. Mr. Clayton added that an alpplication had been received in the Board's offices within the Past fe w days and d was now being processed. Messrs. Szymczak and Draper both stated that they also had been 7isited by Mr. Scott for the purpose of urging that the applicati°11 °I' Bank of America for a branch in Siam be approved, that they 1184 responded by outlining the Board's procedure in processing such 84c4tI°11-s, and that they had informed him the matter would receive the ell3/4ary careful consideration. Mr. Draper also said that in talking With Mr. Scott, he expressed some doubt as to whether additl°118.1 branc hes would be approved at this time. There was presented a memorandum from Mr. Szymczak dated °et(Thel. 15 '1948, recommending that the services of Mr. John Exter, 44 sliadiable in the Division of Research and Statistics, be made a to de::::::::nment of Ceylon for a period of six months With the ut that consideration would be given to an extlIsio4 of the period and that the question of the terms on which 8erilices would be made available would be determined after 1781 10/19/48 -3- fulther study and discussion with the State Department. Mr. Szymczak stated that a request from the Government of Ceylon had been received through the State Department some time ago asking that the services of a member of the Board's staff be made OtLilable to assist in preparing central banking legislation, that 8. general reply without a commitment was given to that request, and that the State Department was now pressing the matter because it felt st rongly that, for reasons which he outlined, a representative from the United States should be made available to assist Ceylon in establishing a central bank. He went on to say that the request was ter s°Meone to assist for a period as long as two or three years, vould include a period during which he would serve as manager or the central bank after it was established, and that both Mr. Soll thard, As Director of the Division of Research and Statistics) and .Mr. Thomas recommended granting Mr. Exter leave for a 1)eri°11 of siz months beginning January 1, 1949, with the understand14 that the leave might be extended but with the thought that the ser's7lees °f a person from an operating department of the Board or or Pecleral Reserve Bank subsequently would be made available after theiegiele.tion relating to the central bank had been adopted. ChairIllan McCabe stated that he felt consideration should be given i4 'hilection with this matter to the question whether the Shod establish a procedure to check the work of members of 1182 10/19/48 the uarf made available to assist in preparing central banking legfor other countries to assure that their recommendations were based on practicable and not theoretical considerations and were 4 ln harmony with the ideas of central banking in this country alad with the free enterprise system. He stated that a representative tr°114 the Board's staff would be looked upon as reflecting Board views clesPite c+ 4-,auements in letters of instruction asserting that the pers°4 was loaned for technical assistance only and that the views he elPressed were not necessarily those of the Board, and that he felt it w°111d be desirable on such undertakings to have the views of one 1)el ' sQr1 checked by another person on the ground. There was an extended discussion of the function of foreign Zissions and of the terms on which individuals had been loaned to °ther Governments for the purpose of assisting in preparing legislati°4r°r central banks as well as of the concepts that had been apAiled in assisting smaller countries in establishing central banks. lias stated in this connection that the recommendations made to Latilikerican countries were made in the light of economic condi- ti°11s alld the needs of the respective countries for central banking tlInctions rather than on the basis of the highly developed systems 111 111(3re advanced nations. The discussion included a consideration "the cillestion whether the expenses of persons loaned to assist c'therG°Irernillents should be borne by the Board or by the Government 1783 1q19/48 -5- 'which asked for their assistance. There was also a discussion of the possibility of using the services of persons from outside the Federal Reserve System to assist with such projects. During the discussion it We's suggested that a committee be appointed tD look into the proand the terms under which members of the staff should be made available to assist in foreign assignments and to submit a recommendati-nn to the Board. This suggestion was approved unanimously, and Messrs. Szymczak, Riefler, Thomas, and Southard were appointed as the members of the special committee. With further reference to the recommendation contained in SzYmczaki e raent memorandum with respect to the request of the Govern- of ceylon for Mr. Exter's services, Mr. Carpenter then read a Cirart of cable to be sent by the State Department to Mr. Jester, Aterican 84 (1. Consul General at Colombo, Ceylon. The draft was discussed ellarlged to read as follows: tem "The Board of Governors of the Federal Reserve Sysij informs Department that it takes pleasure in offerEg-L!° the Government of Ceylon the services of Mr. John or ' aa f°r a maximum period of six months for the purpose Ceylon on the drafting of appropriate legisand the making of other plans for a central bank. Mr. is Assistant Head of the Far East Unit of the erno:'°n of Research and Statistics of the Board of Govs„,and has served on similar assignments in other ecRilli, Ifolald rs. The terms on which Mr. Exter's services ue available will be a matter for subsequent consid eration. 40tb:The Board hopes that Mr. Exter's services need made available before January 1, 1949. However, 1784 10/19/48 -6- " )-f the Ceylon Government considers that the urgency of the project requires it, the date could be advanced to December 1, 1948. With respect to the Ceylon request for a Manager Of the new Central Bank for an initial period of two (J three years, the Board of Governors offers to undertake to obtain from within its own staff or elsewhere In the Federal Reserve System the services of an apPr°Priate expert in the field of central bank operations .1 ( ) ." replace Mr. Exter when the time approaches to set up tr,e new bank. It is not possible however for the Board give assurance at this time that it can obtain such an expert or that he could remain in Ceylon for a period ' 18 long as 'two or three years. t I Upon motion by Mr. Szymczaksthe cable was approved unanimously i Changed for transmission throughthe State Department. Mr. Carpenter stated that Mr. Williams, President of the l'etierai Reserve Bank of Philadelphia, telephoned him yesterday 8tEttilig that the Treasury Department Savings Bonds Division had Etskea that the Federal Reserve Bank of Philadelphia bear the cost or 131'il1 ting 50,000 a44 118.1Ti. s. copies of an address which he gave before the savings bond sales development conference in St. Paul, nne 0+ Mi8--a, on September 14, 1948. The copies would not show they ha,a b eell Printed by the Federal Reserve Bank and they would be used 1 Y the Treasury for distribution to industrial concerns and others to Arc/note the Payroll savings plan and other means of selling saythat The reason for the request, Mr. Carpenter said, was the Treasury had no funds with which to pay the cost of printing. Mr. 0 4/1I3ellter added that Mr. Williams saw no objection to granting 1'785 10/19/48 -7tile request but would like to know whether the Board would have any 6bieeti°11, and that the question involved was similar to the one raised on several occasions in the past when the Reserve Banks and the Board had paid expenses designed to facilitate the Treasury 84//ingS bond program. Chairman McCabe suggested that a copy of Mr. Williams' stateIllezit be reviewed by Mr. Thurston in the light of its possible effect 11"Pc411711blic relations of the Federal Reserve System and that if Mr. 14.111'ston. saw 0 n objection Mr. Williams be informed that the Board l'i°111d interPose no objection to the proposed expenditure with the lIrderstanding that it would not constitute a precedent for the %titre. Chairman McCabe's suggestion was approved unanimously. S ecretary's note: Following the meeting Mr. Thurston informed the Secretary that he saw no objection to .c;omplying with the Treasury's request but that, having il mind the overall credit policy of the System, Mr. tilliams might wish to make certain changes in the ! xt of the address. These suggested changes were igi'ven to Mr. Williams by telephone which he indicated re would make, and at the same time he was also inc)rzled of the Board's action with respect to his in- G Before this meeting Mr. Clayton had addressed a memorandum t° the Board re commending that, for the reasons stated in the memo(1) the Division of Examinations be authorized to inform kook?. s Itvestors Service of the Board's willingness to absorb 1786 10/19/48 -8- hair of the cost of computing the 18 months' average figures °I1Gr°1110 2 corporate securities published by Moody's, Fitch, Nat10 1181 quotation Bureau, and Standard & Poor's under an arrangeet similar to that in effect with the Federal Deposit Insurance n, and (2) that the budget for the Division of Examina- C°111c)r tiolas be increased by the necessary nmount. Mr. Clayton's recommendation was approved unanimously. At this point Messrs. Riefler, Thomas, and Vest withdrew atbithe action stated with respect to each of the matters herein- Set forth was taken by the Board: Minutes of actions taken by the Board of Governors of the l'ederal eral Reserve System on October 18, 1948, were approved unanimously. Letter to Mr. Laning, Vice President and Cashier of the FedReserve -vo , ank of Cleveland, reading as follows: gard."This refers to your letter of October 14, reSalri g the Penalty of $70.98 incurred by The Chardon Bank Company, Chardon, Ohio, as a result of iencY in its reserves for the period ended Sepe t sult; , 17111uer 30. It is noted that the deficiency rerese;' from an erroneous estimate of the member bank's prifs ' ve Position given to it by your Bank a few days t° the close of the reserve period. Board"In the circumstances stated in your letter the au thorizes your Bank not to make the assessment." Approved unanimously. Letter to Mr. W. Cloyd Snyder, Snyder and Fletcher, 1124 Oaks Avenue, south Pasadena, California, reading as follows: 1.787 10/19/48 -9"This refers to your letter of October 12, 1948, enclosing a copy of your correspondence with the Federal Reserve Bank of San Francisco concerning the reqUirements of subsections (b) and (c) of section 5144 c)f the Revised Statutes of the United States with respect to the readily marketable assets which must be Possessed or acquired by holding company affiliates hich are granted voting permits. "The Board concurs in the opinion of Counsel for the Reserve Bank that if there is no statutory haimposed upon the holders of the bank stock which _s,°wned or controlled by a holding company affiliate, nbsection (b) is not applicable and the holding cornPay affiliate need only establish and maintain a reserve of readily marketable assets other than bank 5t0ck in accordance with subsection (c)." Approved unanimously. Letter to Mr. Jno. K. Althaus, Secretary, The Credit Bureau, 14c'' 1221 G Street, N W., Washington 13, D. C., reading as follows: cer ,"This refers to your letter of October 2, 1948 conn'ng Section 4(d) of Regulation W. the "Ipur question has to do with those cases where, in out aPPlication for an instalment loan, a borrower sets put the specific uses to which the proceeds are to be thatand asks whether, if the expressed purpose indicates row,2° Part of the proceeds are to be so used, the borare-1 must nevertheless state whether any of the proceeds k .a e a downpayment on, or to purchase c7em is eduLe.tit anz Io "Section 4(d) as now written would require the adtho;fal statement relating to listed articles, even are'r the loan application indicates that the proceeds be otherwise used. We realize that under some sZe. t11m tance s, such as you describe, compliance with 8 broal,.°4 4(d) appears somewhat redundant. However, laloviTer ad ministrative considerations make it appear ne at Present to alter the wording of the section Or cs specipe the regulation does not require that the Of Br2C Purpose of a loan be set out in the Statement rower nor is that statement required at all in 1788 1O/19/1.8 -10connection with any loan which is exempt from the provisions of Regulation W, by Section 7. "Your interest in the regulation, as well as your assistance in acquainting others with its provisions, are greatly appreciated. We shall be glad to help you with questions of interpretation at any time." Approved unanimously. 1DDroved.: Chairman.
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