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206g A meeting of the Board of Governors of the Federal Reserve Syswas held in Washington on Tuesday, October 27, 1942, at 10:45 a411. PRESENT: Mr. Eccles, Chairman Mr. Ransom, Vice Chairman Mr. McKee Mr. Draper Mr. Evans Mr. Morrill, Secretary Mr. Thurston, Special Assistant to the Chairman Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Dreibelbis, General Attorney Mr. Wyatt, General Counsel At the request of the Chairman, Mr. Morrill reported the recent changes in discount rates of the Federal Reserve Banks. He stated that the Board had approved changes in the discount rates of the Federal Re-. 8allve Banks of Boston, Philadelphia, Cleveland, Atlanta, Chicago, St. t°111-s, Kansas City, and Dallas, which were submitted in accordance with the informal action taken by the Board on October 9, 1942; that corre815°nding changes had been submitted by the Federal Reserve Banks of Ilichmond and San Francisco except that they proposed a rate of 2-1/2 cent for advances to individuals, partnerships, and corporations 13 " (Other than banks) secured by direct obligations of the United States 148tead of the rate of 2 per cent suggested by the Board; that the Iledera1 Reserve Bank of New York had submitted a schedule which dift"ed from that suggested by the Board in that the reduced rate of 1/2 I) cent per annum on advances secured by direct or fully guaranteed " chligations of the United States maturing or callable within not more kiW),C"eli 10/27/42 -2- than one year would apply to nonmember banks as well as to member banks, and in that a rate of 2-1/2 per cent was proposed for advances to individuals, partnerships, and corporations (other than banks), and that a revised rate schedule had not been received from Minneapolis because that Bank was awaiting advice of the Board's action upon the schedule Proposed by the Federal Reserve Bank of New York. With reference to the schedule proposed by the Federal Reserve Ballic of New York, Chairman Eccles reported that he had discussed the Matter with President Sproul over the telephone since the receipt of 1411* Sprouts letter of October 13, copies of which had been furnished to all members of the Board, and that in these conversations he (Chair- Ian Eccles) had indicated his reasons for feeling that the 1/2 per cent l'ate should be confined to member banks. Mr. Clayton, Assistant to the Chairman, entered the meeting at this point. Board, in acting Chairman Eccles expressed the view that the 11Pon the 1/2 per cent rate submitted by the New York Bank, should adhere to the conclusion reached on October 9 but stated that he would like to have the question of what should be done with respect to the existing the next meeting Isate of 1 per cent for nonmember banks discussed at °f the Presidents and the Board of Governors. He saw no reason why nonMember banks were any more entitled to a differential rate than were bUilding and loan associations, Federal savings and loan associations, "A other institutions of similar character. He said he had advised Ott4-01,-I 10/27/42 -3- MII• Sproul that he did not see how the Board at this time could ap13r°ve the schedule as submitted by the New York Bank in view of the discussions during the last meeting with the Presidents, the decision eUbsequently reached by the Board in its consideration of the matter °11 October 9, and the fact that the changes in the rates of four of the Federal Reserve Banks, which had been submitted in accordance with the schedule proposed by the Board, had already been approved. Theref°re, he had advised MT. Sproul that he would recommend that the rate c/f 1/2 per cent, in its application to nonmember banks, be disapproved Elnd that at the next meeting of the Presidents with the Board there be 4 discussion of the rates of discount applicable to nonmember banks, with a view to the adoption of a uniform System policy. Following this report by Chairman Eccles there was a general cliscussion of various aspects of the questions and procedure involved, krticularly with respect to the question raised as to rates applicable t° nonmenber banks. In that connection, reference was made to the buy- rate which had been established for Treasury bills and to its pearelation to the question of discount rate policy. Mr. McKee stated that he was in favor of disapproving the rate ID1'°13°8ed by New York for nonmember banks on the ground that it was a deParture from the uniformity contemplated by the procedure which had been followed, but that he would be agreeable to having the question taken up at the next meeting of the Board with the Presidents, and that he felt any decision reached as a result of that discussion should be 206f) 10/27/42 -.4- fiven uniform application. Mr. Ransom indicated his concurrence with the views expressed by Mr. McKee. Mr. McKee added that he felt the policy with respect to the rate for Treasury bill purchases was a separate and distinct matter I l'ara the discount rate policy. ' Chairman Eccles, on the other hand, felt that they should be considered together. Mr. Evans stated that he felt nonmember banks should not be given the benefit of the lower rate accorded to member banks and indicated that he was influenced in thinking by his experience in the agricultural field in connection with the general policy involved in encouraging the development of the coo perative movement among farmers. Mr. McKee then moved that, in conformity with the conclusions reached at the meeting on October 9, the Board approve the rates submitted by the New York Bank with the exception of the reduction to 1/2 per cent in the case of advances to nonmember banks. In connection with his motion, Mr. McKee said that he did not wish to raise any question with respect to the proposed rate of 2-1/2 'cent for advances to individuals, partnerships, and corporations €11 (other than bfulks), even though it was not in conformity with the action teen on the rate of 2 per cent which had been proposed by the Board 84ad adopted by the Banks whose schedules had been approved, because he did not feel that the difference in rate involved was sufficiently imbrtant to create an issue. 14r. McKee. Chairman Eccles indicated agreement with 10/27/42 _5_ Mr. McKee's motion was approved unanimously, with the understanding that it should not be treated as formal action by the Board at this time but that Chairman Eccles should advise President Sproul informally of the conclusion reached by the Board and ascertain from him whether he wished the Board to take formal action on the schedule which had been submitted by the Federal Reserve Bank of New York or whether he preferred that the Board defer formal action until the board of directors of the New York Bank had had an opportunity to reconsider the matter. Thereupon, the Board approved unanimously, effective October 28, 1942, the rates as submitted by the Federal Reserve Banks of Richmond and San Francisco, of 1/2 per cent on advances to member banks, under paragraphs 8 and 13 of section 13 of the Federal Reserve Act, secured by direct or fully guaranteed obligations of the United States which have one year or less to run to can date or to maturity if no call date, of 2-1/2 per cent on advances to individuals, partnerships, or corporations other than banks under the last paragraph of section 13, and of 1-1/2 per cent on advances to member banks under section 10(b) of the Federal Reserve Act, end the establishment without change of the other rates of discount and purchase in the respective Banks' existing schedules. It was agreed that Mr. Morrill should advise Mr. Peyton, President of the Federal Reserve Bank of Minneapolis, informally as to the tions which the Board had taken on the discount rates which had been elibmitted up to this time and particularly as to the position which the I30ard had now decided to take with respect to the rates submitted by the Federal Reserve Bank of New York. Secretary's Note: Mr. Morrill subsequently reported that he had discussed the matter with Firsi Vice President Powell, Mr. Peyton being absent, and that Mr. Powell indicated that he understood the situation, that the next meeting at which rates would be considered would be on Thursday of this week, and that he anticipated action would be taken at that time. 10/27/42 -6- The question was then raised whether a press statement should be issued by the Board with respect to the reductions in discount rates Which had taken place. Mr. Goldenweiser reported that there were some Paragraphs regarding the changes in discount rates in the "Review of the Month" which was being prepared for the next issue of the Federal leserve Bulletin. After a discussion, it was agreed that no special Press statement should be prepared but that Mr. Thurston should be ellthorized to call the attention of such press representatives as might be to the interested to the portion of the Bulletin which referred d iscount rates. Secretary's Note: Chairman Eccles subsequently reported that he had advised President Sproul of the Board's views with respect to the changes in discount rates at New York, and that Mr. Sproul had stated that the next meeting at which the matand ter could be considered would be on Thursday be that he would prefer that no formal action taken until the matter could be reviewed by his board of directors. At this point, Messrs. Thurston, Goldenweiser, Dreibelbis, and IlY"t left the meeting, and the action stated with respect to each of the matters hereinafter referred to was then taken by the Board: The minutes of the meeting of the Board of Governors of the l'ederal Reserve System held on October 26, 1942, were approved unanimously. Memorandum dated October 26, 1942, from kr. Goldenweiser, Disector of the Division of Research and Statistics, submitting the resig118Ilon of Mrs. Ruth Dewey Allwine, a clerk-typist in that Division, 2072 -7- 10/27/42 to become effective as of the close of business on November 4, 1942, ezd recommending that the resignation be accepted as of that date. The resignation was accepted. ee on Letter to Mr. Robert M. Barnett, Chairman of the Committ °coUpational Deferment, United States Civil Service Commission, reading as follows: rn, "In accordance with the suggestion made by Ir. Hartsho Board's the of r Directo Of your office, to Mr. R. F. Leonard, nal information Division of Personnel Administration, additio positions the Is herewith submitted regarding certain of 16, were October of Which, according to Mr. McNutt's letter s submitted position eliminated from the list of proposed key With our letter of October 6, 1942. Division Salary Title of Position Z3,200 and up Research and Statistics Economists 2,600 and up Research and Statistics Economists Technical Assistants and Associate Tech3,200 and up Bank Operations nical Assistants 3,200 and up Security Loans Special Assistants Supervisor, AccountOffice of Secretary of 3,600 ing Section the Board positions these of "Reconsideration of the elimination fully is respect nt) Assista (except that of Associate Technical ed. furnish ion informat requested in the light of the additional on ns positio other the Reconsideration of the elimination of the list attached to Mr. McNutt's letter of October 16 is not is in accord requested on the assumption that the elimination With the general policy. is sufficient "We trust that the additional information not, it will If s. and in the form desired for your purpose with Mr. touch in be appreciated if your office will get with utmost the to e cooperat R. F. Leonard, as we desire to work." Your office and to facilitate your Approved unanimously. Federal Reserve Bank of Letter to Yr. LIcLarin, President of the Atlanta, reading as follows: 10/27/42 to "The proposal outlined in your letter of October 15 the of ng handli employ a young attorney to assist in the the work at an annual salary of approximately $2,700 has be not will he approval of the Board. It is assumed that nel a , person course an officer of the Bank and that, in due al." for approv ted submit Classification sheet on Form A will be Approved unanimously. ent of the Western Life Telegram to Mr. R. B. Richardson, Presid Inenrance Company, Helena, Montana, reading as follows: e System has "Board of Governors of the Federal Reserv the Federal of Branch appointed you director of the Helena n of portio red unexpi Reserve Bank of Minneapolis for the have to d please be will term ending December 31, 1942, end Your acceptance by collect telegram." Approved unanimously. sity of California, Telegram to Mr. Harry R. Wellman, Univer 8erkeley, California, reading as follows: e System has "Board of Governors of the Federal Reserv e Bank Reserv l Federa the of appointed you Class C director ending term of n portio red Of San Francisco for the unexpi have your acDecember 31, 1942, and will be pleased to ceptance by collect telegram." Approved unanimously. the Federal Reserve Letter to Mr. Mercer, Vice President of 11411k of Richmond, reading as follows: October 21, 1942, "Reference is made to your letter of Durham, North Bank, ty reviving the request of The Fideli at Camp branch a ish establ Carolina, for permission to ted submit ally origin was Butner, North Carolina, which 1942. With your letter of August 7, approval of the "The Board understands that written ed and, in State Commissioner of Banks has been obtain ation submitted, view of your recommendation and the inform Reserve Bank, the including the opinion of counsel for the ion of a branch Board approves the establishment and operat Fidelity Bank, Durin Camp Butner, North Carolina, by The ham, North Carolina." Approved unanimously. 2074 10/27/42 -9- Letter to Mr. Trimble, Assistant General Counsel of the Federal Reserve Bank of New 'York, reading as follows: "This refers to your letter of October 21, 1942, enclosing a copy of a letter from the firm of Davis Polk lardwell Sunderland & Kiendl with regard to the inclusion in all guarantee agreements of certain provisions which appear in the agreement with respect to the loan to General Motors Corporation. We are today addressing letters to the War Department and the Navy Department with reference to this matter and will be glad to advise you further When we have heard from them." Approved unanimously, together with the following letter to Lieutenant Colonel Paul Cleveland, Chief of the Loan Section, Advance Payment and Loan Branch, Fiscal Division of the War Department, and Kr. Sidney A. Mitchell, Chief of Finance Section, Office of Procurement and Material, Navy Department: "There is enclosed a copy of a letter received by us and a copy of the from the Federal Reserve Bank of New Davis Polk Wardof firm the letter enclosed therewith from raises the ndence correspo well Sunderland & Kiendl. This contained were which question whether certain provisions to respect with t agreemen in section 13 of the guarantee not were which but the loan to General Motors Corporation to referred ns conditio included among the standard special made be availnot in your letter of October 9, 1942, should able as additional conditions in all guarantee agreements. "It will be noted that the views of the War Department and Navy Department with respect to this matter are you requested and accordingly it will be appreciated if ReFederal the Will advise us in order that we may inform serve Bank of New York." Letter to Honorable Lindsay C. Warren, Comptroller General of the United States, reading as follows: "Reference is made to your letter of October 12, 1942, drawn by regarding the custody, after payment, of checks Reserve Federal the of s an official of the Board of Governor purpose the for States United SYstem on the Treasurer of the Reserve Federal the between Of effecting a transfer of funds Banks and Agents and the Treasurer of the United States. 2075 10/27/42 -10- "It is not necessary for such checks to be returned to the Board when paid in order to ascertain whether the transfer actually took place. Accordingly, if such checks are available to the Board for inspection, should their inspection appear to be necessary or desirable at any time, and are not destroyed without the consent of the Board, it is Immaterial to the Board whether the checks are kept on file at the Treasury or at the General Accounting Office. "In the circumstances, it is suggested that you take Up with the Treasurer of the United States the question as to whether such checks, when paid, should be filed at the Treasurer's Office or at the General Accounting Office." Approved unanimously. Thereupon the meeting adjourned. • 160q/(1,4Uai )1(1 Seers ary. APproved: , f A Chairman.
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