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1729 A meeting of the Board of Governors of the Federal Reserve 85r3te1fl was held in Washington on Wednesday, October 31, 1945, at 11:00 PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Carpenter, Secretary Mr. Connell, General Assistant, Office of the Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman The action stated with respect to each of the matters hereinafter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Pecierea Reserve System held on October 29, 1945, were approved unani4101184 . Letter to Mr. Logan, Vice President and General Counsel of the Pederaa Reserve Bank of New York, reading as follows: vo "In response to your letter of October 26, 1945, L4;1,ars advised that the Board approves payment of the dated September 15, 1945, of Winthrop, Stimson, ortrelala & Roberts, for a fee of $1,000, and disbursements 15-19 Re, 2 for services in the case of Schmoll v. Federal erve Bank of New York. Approved unanimously. _ Te legrdm to Mr. McLarin, President of the Federal Reserve Bank Atl 4-wa, stating that, subject to conditions of membership numbered tO 3 contained in the Board's Regulation HI the Board approves the 1730 10/31/45 -2- 4PPlication of the "Bank of Gueydan," Gueydan, Louisiana, for member8114 in the Federal Reserve System and for the appropriate amount of stcek in the Federal Reserve Bank of Atlanta. The telegram requested that the Federal Reserve Bank advise the applicant bank of the Board's 413PrOval of the application and conditions of membership prescribed, together with necessary instructions as to the procedure for accomplishing membership, and stated that a letter containing detailed advice regarding such approval mould be forwarded to the applicant bank t'llrolIgh the Reserve Bank. The telegram contained the following additional statement: It is understood that the bank will discontinue Prior to its admission to membership, the activities in Lake Arthur, Louisiana, which your counsel construed as ?oration of a branch within the meaning of the Federal ,,e_serve Act. Also, it is assumed that you will follow matter of the bank's bringing into conformity with ane.provisions of law and the Board's regulations, the n!Y1ngs accounts listed on Page 16 of the report of ex'nation for membership." Approved unanimously. Fred m. Letter prepared for the signature of Chairman Eccles to Mr. vineon, Secretary of the Treasury, reading as follows: d "There is transmitted herewith a copy of a letter ilated October 22, 1945, addressed to the Board by Mr. cOber t V. Fleming, a member of the Federal Advisory Counti;2 recommending on behalf of the Council the terminati-n of the present procedure for the licensing of nasec1141 and State member banks of the Federal Reuar rve System pursuant to Presidential Proclamations of 1^ ch 6 and March 9, 1933, and Executive Order of March ul 1933. 1731 10/31/45 -3- "The Board of Governors feels that the licensing requirement no longer serves any useful purpose and concurs in the recommendation made by the Federal Advisory Council. "One method by which the recommendation could be effectuated would be the issuance of a proclamation by the President expressly excluding member banks from the scope of the Proclamations of March 6 and March 9, 1933, and the Executive Order of March 10, 1933, and also expressly proelalnling, solely for the purposes of the provisions of section 4 of the Dmergency Banking Act of March 9, 1933, a termination of the 'emergency period' therein mentioned. Such proclamation could include, if desired, a proviso similar to that in the proclamation of December 30, 1933, with respect to nonmember banks, restricting the payment of 'Fold) the withdrawal of currency for hoarding, and engaglng in foreign exchange transactions. "The Board hopes that you will concur in this recommendation and that appropriate steps may be taken for the early termination of the licensing procedure." Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks read- in as "For your information and guidance there is enclosed of a memorandum, dated October 29, 1945, received G-2,111 the Navy Department, signed by Lieutenant Commander ni-i-rge W. Cook, Jr., Chief of the Finance Division, rec-;'.,:esting that after November 1, 1945, all certificates deposit issued under Executive Order 9112 and the Con?act Settlement Act of 1944 in connection with fees colfor, the account of the Navy Department be made out ° Lieutenant Commander A. Bruce Johnson." a Copy Approved unanimously. Letter to Mr. Slade, Vice President of the Federal Reserve Bank San Fr ancisco, reading as follows: 191 "This will acknowledge your letter of October 22, As 5) enclosing a copy of a letter from the Tide Water lasjciated Oil Company, San Francisco, relating to ReguW and the sale of tires, batteries, tubes, and 1732 10/31/45 —4- 11 accessories by means of credit cards. "Your answer to them was, as you know, entirely correct as the regulation stands at present. The considerations advanced in their letter bear on the question of Whether the regulation should be amended and you may be sure that they will be considered by the Board, in due ourse, in that connection. The basic question appears ! L.0 be that of when the time will be ripe to strike batteries, etc., off the list of articles." Approved unanimously. Telegram to Mr. Knoke, Vice President of the Federal Reserve Bank Of New York, reading as follows: "'Your 'wire wire October 30. Board of Governors approves extens Federal Reserve Bank of New York of loan or .._°arls to Royal Netherlands Government subject to following uerms and conditions: 1. The amount to be loaned shall not exceed $35,000,000 in the aggregate at any one time outstanding, such loans to be made up to 98 per cent of the value of the refined gold bars held by you in your vaults as collateral. 2. Such loan or loans to run for three months, but no loan or renewal thereof to mature later than November 1, 1946. 3. Interest, until further notice, to be at rate of 1 per cent per annum on amounts actually advanced. It to is understood that usual participation will be offered the other Federal Reserve Banks." Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks reads follows: tt 'ILis letter refers to the recommendations with rea; l.lec u to compensation policy of the Federal Reserve Banks pr 4?Proved at the recent meeting of the Conference of 8?dents and discussed with the Board of Governors at a! Joznt meeting on October 18, 1945. e 10/31/45 -5- "At the time of the joint meeting the Presidents were informed that the Board favored their recommendation relative to the discontinuance of the payment by the Reserve Banks of suPplemental compensation and an increase in the maximum annual salary for each position in the respective classification plans of the Banks in an amount equal to the supplemental compensation authorized by the Boards of Directors of the Banks. "In order that your Bank may be in a position to carry such an arrangement into effect, the Board authorizes, upon appropriate action by your Board of Directors, an increase 111 the maximum annual salaries under the personnel classification plan of your Bank by the amount of supplemental comf Pensation applicable to the respective positions under the .°rmula of supplemental compensation which has been authorized heretofore by your Board of Directors. "If any action is taken under such authorization, please f urnishu the Board promptly with a list of positions affected, both the present and the adjusted maximum salaries. Please advise also of the dates of discontinuance of the payment of supplemental compensation and of the resultant inureases in maximum salaries. "In order that any program with respect to the discontinuance of supplemental compensation may apply to a31 now receiving such compensation, officers as well as employees, i,le Board will approve requests, if the directors so au,norize, for such increases in the salaries of officers as °Ll'e necessary to convert into basic salary the amount of nplemental compensation being received by an officer the formula which has been authorized heretofore by the directors. "In submitting a request for such approval, please acc 130-j"Pc'llY t with a list of the salaries affected, showing the present and the adjusted salaries, and with advice 1. the effective dates proposed for discontinuance of the 1 1,YMent of supplemental compensation and the resultant ineases in salaries. re "The Presidents' Conference approved an additional m,!°mmendation that authority be sought to exceed the maxiannual salaries which would be provided in the personnel as ification plans, when revised as proposed above, by uch as 15 per cent on the first Pw3,000 provided that thir4 , amount added to the adjusted maximum annual salary ''d not exceed a total of $7,500. During the joint z 10/31/45 -6- meeting with the Presidents it was made clear that this proposal was designed as a temporary measure to enable the banks to meet special individual situations pending a general revision of the personnel classification plans of the Panks and that it was not expected that the authority would ale used to increase the salaries of W employees. "It was understood that a committee of the Presidents' Conference would prepare a statement setting forth the , 1:easons for the recommendation, which would be presented Y each of the Presidents to the boards of directors of his "nk for action, and that each Bank would submit the matter to the Board of Governors for consideration in the light cf the action taken by the board of directors of the Bank. "On the basis of the discussions at the joint meeting, the Board of Governors is prepared to give careful ?nsideration to such requests for adjustments along the , lnes recommended by the Presidents as the directors of the ' esPective Reserve Banks may wish to authorize. , "A copy of this letter is being sent to the Chairman anu President of each of the Federal Reserve Banks." 1 Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks readc5 follows: S-83 of Tvlar "Reference is made to the Board's letters e" 29, 1938, and R-465 of May 15, 1939, regarding visits 35? the Federal Reserve Banks by representatives of the I:vision of Bank Operations for the purpose of reviewing ,leeal agency and other expenses, and particularly the ' Tethods followed in allocating expenses to the various unctions and expense units. AUg"The Treasury advised all Federal Reserve Banks on 5t 4, 1945, that from the present trend of questions investigative inquiries from both the Bureau of the i ' t 'dget and the Congressional Appropriations Committees niadis evident a more accurate analysis of expenditures de e by Federal Reserve Banks as fiscal agents must be Trveloped for the purpose of justifying estimates for the annual appropriation. The Treasury pointed out that aw, because of expanding activities, reimbursement to 1735 10/31/45 —7— "the Banks has increased from a total of approximately $1,500,000 for the fiscal year 1941 to 825,000,000 for the fiscal year 1945. It further stated that it is anticipated this expenditure will be subjected to more searching questions during the postwar period when appropriation requests will undoubtedly be reviewed with increasing stress Upon reduction in Government spending. "In this connection, the Treasury in its August 4, 1945, letter requested the Reserve Banks to submit a new statement (Form PD 804-A) with their monthly requests for of expenses. Form PD 804-A provides for breaking down the expenses of handling United States Savings Bonds into nine units and the cost of performing work flcident to other Treasury issues into eight units. Both the Board and Treasury received inquiries from a number Of Federal Reserve Banks with respect to the preparation of this form, which involves a classification of expenses , 37n considerable more detail than previously requested either by the Treasury or by the Board. "Other Government departments and agencies are, of course, also very much interested in reimbursable expenses afld from time to time the Board has received inquiries from Som of them with respect thereto. As you no doubt know, the .! General Accounting Office is now required to audit the liti,lancial transactions of all Government corporations. :1. . 111e the Reserve Banks act as fiscal agents for a number ' ev Government corporations, such audits should not, of R°uree, extend to the accounting records of the Federal aes:rve Banks (except those maintained in their capacity n8 lAscal agents, custodians, and depositaries) and if _Y", questions should be raised with respect to such record, particularly those relating to operating costs, it 2 suggested that they be referred to the Board of Gover- V "Sometime before the Treasury sent the letter referred the same the Board had agreed that it stands in somewhat relationship to the Federal Reserve Banks as the General Accounting Office to Government departments and tgencies; that accordingly the Board should be relied upon see that the fiscal agency operations of the Reserve tl,nks are efficiently and economically conducted and that a:2e cost of such operations are reasonable and are accurately Irounted for. As mentioned in the Board's letter of January 1945, the Board feels that Congress has placed upon it to ' wove, 4 1736 10/31/45 -8II a substantial measure of responsibility for the expenditures of the Reserve Banks. It was also agreed that field surveys, such as those referred to in the Board's letters S-83 and R-465, would be carried on by the Division of Bank Operations as they have been in the past and that there might be Some expansion of the studies at the various Reserve Banks. Pursuant to this understanding, representatives of the Division of Bank Operations visited several Federal Reserve Banks but found it difficult to review allocations of functional expenses, reports on which are made °n1Y once a year, and to make worthwhile comparisons of unit costs. "Under the circumstances, arrangements were made recently to have representatives of two Reserve Banks and a member of the Board's staff review the Functional Expense Report, Which was revised and simplified as a wartime measure 1944, with the view of improving it from a cost accountIng standpoint. A copy of their suggestions is attached, and it will be appreciated if you will furnish the Board Il rith any comments or suggestions you may wish to make with ,!spect thereto. It is planned to have such revisions in he present Functional Expense Report as are adopted made effective as of January 1, 1946, and field surveys will be ' l esumed by the Division of Bank Operations shortly there"The attached suggestions do not cover the Treasury and United States Savings Bonds units as it was deued to defer consideration of these units until after of the special reports on Savings Bonds operations °' the six-month period ending October 31, 1945, which ;Ire requested by the Division of Bank Operations on March tem1,1945. The Treasury advised all Reserve Banks on Sepsubuuer8, 1945, that it had decided to withhold requestmission of PD 804-A pending study of these reports ' mILIZ if the data should prove insufficient it hoped through 80,11al agreement a functional report more simple than PD boZ:' might be devised which would meet the requirements it " of the Board and the Treasury. In the circumstances, rearl be appreciated if the Savings Bonds reports are , I Promptly after October 31 (by November 15 if practiXec of 47,:'-e) in order to allow sufficient time before the end the'ue year to make any additional changes necessary in Functional Expense Report form. % 1737 10/31/45 _9_ "Replies to the Board's letter of March 29, 1945, re— garding the Functional Expense Exhibit for the calendar Year 1944 ,, indicate that there is some doubt as to the ac— racy of certain of the figures reported therein. It is tillought that such inaccuracies as may exist are due in large part at least to the manpower problem during the war. If lour Bank has not done so recently, you may now wish to aIre a survey made of the adequacy of its cost accounting !.?tem including both personnel and records. It would be s ,?-43ful in this connection if you would inform the Board name of the official of your Bank and each branch, if *LIIY, who is charged with responsibility for the preparation °f the Functional Expense Report. "The Board will be pleased to have your general views on these matters by November 15, if practicable, so there t be ample time to have the forms printed and distributed bithe first of the year." f Approved unanimously. Thereupon the meeting adjourned. 646( Chairman.
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