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Minutes of actions taken by the Board of Governors of the
Federal Reserve System on Tuesday, October 27, 1953.
The Board
met in the Board Room at 10:00 a.m.
PITSENT:
Yr.
Mr.
Mr.
Mr.
Szymczak, Acting Chairman
Vardaman
Mills
Robertson
Mr.
Mr.
Mr.
Mr.
Carpenter, Secretary
Kenyon, Assistant Secretary
Thurston, Assintant to the Board
Young, Director, Division of Research
and Statistics
Reference was made to a memorandum dated October 22, 1953,
from the Office of the Secretary and the Division of International
Finance, which had been circulated among the members of the Board,
recommending, for reasons stated, that a program designed to afford
information concerning the organization and activities of the Board
and the Federal Reserve System be arranged on November
4, 1953,
for
a group of approximately 24 trainees from the International Monetary
Fund and the International Bank for Reconstruction and Development.
The memorandum also recommended that a luncheon for the group be
Provided in the staff dining room with available members of the Board
and appropriate members of the staff.
Governor Vardaman, who had indicated when the memorandum was
circulated that he had a question with respect to it, stated that,
while he had no objection to providing an informative program for the
group, he felt that some definite policy should be established with regard to providing luncheons at the Board's expense for outside groups.
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For the assistance of the Board in determining what policy should
be followed, Governor Vardaman suggested that the Controller be
requested to prepare a memorandum shoving the amount spent by the
Board for luncheona stnd dinners for various groups during the current calendar year and the past several years.
Following a discussion, the
recommendations contained in the
above-mentioned memorandum were
approved unanimously, with the
understanding that the Controller
would be requested to prepare a
statement of the type suggested
by Governor Vardaman with a view
to further consideration of the
matter by the Board.
There had been circulated among the members of the Board,
prior to consideration at a meeting, a memorandum from Mr. Young to
Governor Mills dated October a, 1953, regarding a request from the
University of Michigan Survey Research Center for permission, in the
light of the understanding set forth in a letter from Mr. Rends Likert
to the Board dated September 8, 1952, to make public the results of an
interim survey of consumer attitud7ts which the Center made this September.
The memorandum recommended that, in view of the widespread in-
terest in consumer attitudes at this time, the Board indicate to the
Survey Research Center that it would interpose no objection to the release of the results of the interim survey, with the understanding that
any release made in this connection should not contain any reference to
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the Board's Survey of Consumer Finances or to the fact that the
Survey Research Center conducts that survey for the Board.
Governor Mills recalled that the question of the publication
policy of the Center in connection with results of interim surveys
relating to economic attitudes and expectations, conducted either at
Its own expense or for other sponsors, had been raised in 1952 when
the formal contract covering the eighth annual Survey of Consumer Finances was under consideration because of the fact that some of the
Center's releases had been confused with the results of the Survey of
Consumer Finances.
Governor Mills stated that the matter had been
discussed with representatives of the Center at that time and that
Mr. Likert's letter of September
8, 1952, which was reported at the
meeting on September 161 1952, ga7e assurances that to avoid confusion
and embarrassment to the Board, the Center would not issue any releases
based on interim surveys, either generally or to selected newspapers or
weekly magazines, without first consulting the Board and obtaining its
approval.
Governor Mills then recommended that no objection to the
Proposed release be interposed by the Board.
During a discussion of the matter, Mr. Young stated that the
interim survey in question was conducted by the Center under the sponsorship of three parties, including the Department of the Navy, and that
three of 'he questions asked by the Center's interviewers duplicated
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questions asked in connection with the 1953 Survey of Consumer Finances.
Subsequently, he said, the Center had been approached by
two publications for special tabulations relating to two of these
questions.
Governor Vardaman stated that he would not vote in favor of
granting the Center the requested permission because he objected to
the Board having a veto power over, or having
anything to do with,
the release of data over the preparation of which it had no control.
At the conclusion of the discussion, Mr. Young was authorized
to advise the University of Michigan
Survey Research Center that the Board
would interpose no objection to the
Center making public the results of
the September interim survey of consumer attitudes, subject to the understanding that in the release of any
data there would be no reference to
the Board, to the Survey of Consumer
Finances, or to the fact that the
Survey Research Center conducts the
Survey of Consumer Finances for the
Board. On this action Governor Vardaman voted "no" for the reason which
he had stated.
There was presented a draft of letter to Mr. H. V. Prochnow,
Secretary of the
Federal Advisory Council, suggesting topics for dis-
cussion at the meeting of the Board and the Council to be held on
November 17, 1953.
10/27/53
Following a discussion) unanimous approval was given to a letter
to Mt. Prochnow in the following
form:
The Board would appreciate having the following items
placed on the agenda for discussion at the meeting of the
Board and the Federal Advisory Council to be held on Tuesday, November 17) 1953:
1. The Board would be clad to have the views of
the Council on the prospective business and economic
situation during the rest of the year and into the
first half of 1954. The Board is particularly interested in the comments of the members of the Council
on the probable demands for bank credit during the
remainder of the year end the liquidation of loans
after the turn of the year.
2. The Board would also appreciate having the
comments of the Council as to what if eny changes
should be made in System credit policies to meet
changes in the business and economic situation in
the foreseeable future.
3. Does the Council have any comments with respect to the recent actJon of the New York State
Banking Board removing the limitation on the payment
of interest on savings accounts or with respect to
whether any action should be taken by the Federal
bank supervisory authorities to raise the existing
limitations on the payment of interest on time and
savings deposits by member and insured nonme..mber
banks.
In connection with the third topic suggested for discussion at
the joint meeting with the Council, Governor Robertson referred to the
discussion at the meeting on October 9, 1953, regarding the action
taken by the New York State Banking Board on the preceding day removinE
the limitation on the payment of interest on savings accounts, and to
the understanding that he would discuss the matter with the Federal
Deposit Insurance Corporat!on, in the light of that action, to ascertain
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10/27/53
the views of the Corporation.
-6Governor Robertson said that he had
Spoken to Mr. Earl Cook, Chairman of the Federal Deposit Insurance
Corporation, that a meeting with Mr. Cook had been arranged for next
week, but that the tentative conclusion was that nothing should be
done for the time being with regard to Federal limitations on the
Payment of interest on time and savings deposits pending review of
developments resulting from the action taken by the New York State
Banking Board.
There was presented a memorandum dated October 26, 1953, from
the Division of Bank Operations stating that net earnings of the Federal Reserve Banks after dividends for the third quarter of 1953
amounted to $100,588,802 and recommending that, in order to pay to
the Treasury approximately 90 per cent of such earnings in the form of
interest on Federal Reserve notes outstanding not collateraled by gold
certificates, the Board establish the rates of interest indicated in
a telegram to the Federal Reserve Banks attached to the memorandum,
Which would result in a payment of $90,528,455.33 for the third quarter.
The memorandum also stated that in computing the payments for the first
quarter, deductions totaling $3 million were made from earnings representing one-half the pro rata shares of the proposed $6 million reserve
for losses from fire and allied risks, but that because of the present
unsettled status of the amendment to the Loss Sharing Agreement to include these risks, no deduction was made from net earnings in making the
10/27/53
computations for interest payments in the second quarter and none
vas proposed for the third quarter.
Governor Vardaman suggested that the Division of Bank Operations be requested to submit for the information of the members of the
Board a memorandum showing the percentage relationship between gross
earnings of the Reserve Banks and the interest payments to the Treasury
for years beginning with 1947, along with any other details which might
be of interest.
Thereupon, unanimous approval
was given to the recommendation contained in the memorandum.
Mr. Young stated that the Division of Research and Statistics
was completing a revision of the index of industrial production and anticipated that the new index would be ready for release to the public
about the end of November. Prior to such release, he said, the Division would like to present to the Board the differences between the old
and new indexes, because this would be a matter which would receive a
great deal of publicity in the press.
Mr. Young added that the Division
had hoped to be ready to make a presentation to the Board early in November but that the work was running a little behind schedule and therefore, in the absence of objection, the Division would present the material to the Board some time during the second half of November.
Governor Robertson referred to a letter dated August 31, 1953
from Mr. Hilly Vice President of the Federal Reserve Bank of Philadelphia,
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submitting, with a favorable
-8recommendation, an application of the
Equitable Security Trust Company, Wilmington, Delaware, to establish
a branch in leased space in a proposed new shopping center, to be
known as the Newark Shopping Center, in Newark, Delaware.
The recom-
mendation of the Division of Examinations, contained in a memorandum
to the Board dated September 24, 1953, was for approval of the application, provided the branch was established within twelve months from
the date of a proposed letter from the Board to the member bank approving the establishment and operation of the branch.
In a memorandum dated October 9, 1953, which he had placed
in circulation to the other members of the Board along with the file
on this matter, Governor Robertson stated that this appeared to be a
borderline case, but that he had not been able to bring himself to
believe that there was justification for approval of the application
at this time because, as indicated in an attached draft of letter to
Vice President Hill, it appeared that no temporary or permanent financing arrangements to cover the costs of construction of the shopping
center had been completed and that at least a year would expire before
the shopping center was constructed.
Governor Robertson reviewed the circumstances involved, mentioning) among other things, that the Delaware State law was amended earlier
this year to limit branch bank permits to six months and that the State
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bank supervisor in this case had granted a permit with the understanding that it would be extended from time to time.
Governor Robertson
brought out that the Board's general policy is to refrain from approving the establishment of branches which can not be placed in operation within a period of six months, and that deviations must be justified on the basis of the facts involved in a particular case.
Governor Robertson stated that it had now been ascertained
that the Newark Trust Company, Newark, Delaware, a nonmember insured
bank, had filed with the Federal Deposit Insurance Corporation an application to establish a branch in a proposed shopping center which would
be located about two miles from the place where the branch of the Equitable security Trust Company would be located.
He understood that the
Federal Deposit Insurance Corporation was inclined to approve the application and that although permanent financing covering the construction
of the shopping center was understood to have been ccmpleted, it appeared
that the branch could not be placed in operation for more than six months.
In the circumstances, Governor Robertson proposed to contact the
Federal Deposit Insurance Corporation to make sure that the practices
followed by that agency and by the Board in the approval of branch applications were comparable.
Then, if it developed that the Corporation in-
tended to approve the branch application of the Newark Trust Company, he
Proposed to talk by telephone with the management of the Equitable
Security
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Trust Company, after explaining the situation to Mr. Williams, President of the Federal Reserve Bank of Philadelphia, and state to the
trust company that the Board would not act on its application at this
time but would be willing to reconsider the application at such time
as permanent financing for the construction of the shopping center had
been arranged.
The procedure proposed by
Governor Robertson was approved
unanimously.
Mr. Young then withdrew from the meeting.
Reference was made to a draft of letter to the Presidents of
all Federal Reserve Banks, prepared for the purpose of consolidating instructions regarding approval by the Board of Governors of building operations of the Federal Reserve Banks, clarifying and bringing up to date
the outstanding letters, and supplementing the request for specific data
on building programs and making it applicable to building projects at
head offices as well as branches.
Certain changes in the draft, which had been circulated among
the members of the Board, were suggested, particularly with regard to the
necessity of taking up with the Board in advance the obtaining of an option for the purchase of a building site or the employment of architects
to prepare preliminary plans for contemplated head office and branch building construction and alterations.
At the conclusion of the discussion, it
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10/27/53
was understood that the draft would be referred back to the Division
of Bank Operations for revision in the light of the comments made at
this meeting.
The meeting then adjourned. During the day the following additional actions were taken by the Board with all of the members except Chairman Martin and Governor Evans present:
Minutes of actions taken by the Board of
Governors of the Fed-
eral Reserve System on October 261 1953, were approved unanimously.
Telegram to Mr. Woolley, Vice President, Federal Reserve Bank
of Kansas City, reading as follows:
Reurlet October 21, 1953. Board approves designation of George J. Hix as a special assistant examiner
for the Federal Reserve Bank of Kansas City. Please advise number of shares of stock held in nonmember bank
listed and whether he has any plans for disposition.
Approved unanimously.
Telegram to Mr. Pondrom, Vice President, Federal Reserve Bank
of Dallas, reading as follows:
Reurlet October 14, 1953, the Board approves appointment of Morris S. Moore as an assistant examiner
for the Federal Reserve Bank of Dallas, effective November 1, 1953. Please advise salary rate.
Approved unanimously.
@FedFRASER