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Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, October 9, 1953. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Evans Vardaman Mills Robertson Carpenter, Secretary Kenyon, Assistant Secretary Thurston, Assistant to the Board Young, Director, Division of Research and Statistics Mr. Horbett, Assistant Director, Division of Bank Operations Mr. Solomon, Assistant General Counsel Mr. Hackley, Assistant General Counsel Mr. Mr. Mr. Mr. from Reference was made to a telegram dated October 8, 1953, New Mr. Sproul, President of the Federal Reserve Bank of Of amendments made by the New advising State Banking Board that day to its those sections which General Regulation No. 3. The amendments repealed bank deposits and savings established maximum dividend rates on savings st payand loan association shares and removed the ceiling on intere ceiling on time ments on savings accounts in commercial banks. The at 1 to 2-1/2 per cent deposits of commercial banks was left unchanged permitted under the according to maturity, equal to the maximum rates Deposits, and the comparable Board's Regulation Q, Payment of Interest on Corporation. Mr. Sproul's regulation of the Federal Deposit Insurance York State Banking Board telegram pointed out that the action of the New st paid on raised the fundamental question whether control of intere ble. small savings or thrift deposits was any longer necessary or desira -2- 10/9/53 Governor Robertson stated that he had discussed informally with members of the staff what action, if any, should be taken by the Board in the light of the action of the New York State Banking Board and that he did not believe it was necessary for the Board to do anything for the moment except to confer with the Federal Deposit Insurance Corporation and ascertain the views of that organization. He pointed out in this connection that while all savings banks in the State of New York are insured nonmember institutions, they are not limited in the payment of dividends on deposits by regulation of the Federal Deposit Insurance Corporation, and that an important question would be whether the Federal Deposit Insurance Corporation should now extend the regulation to cover these institutions. Governor Robertson also referred to a tabulation prepared in the Division of Research and that the Statistics under date of October 9, 1953, which indicated average rate of interest paid on time and savings deposits by insured commercial banks was well within the maximum rate prescribed by the Board's Regulation Q. He added that, although a few commercial banks were understood to be paying the maximum permissible rate of interest on some types of time and savings deposits, the number of institutions involved was not large. Governor Robertson stated that there was a question in his mind whether current circumstances warranted the Board's continuing to Prescribe maximum rates of interest on time and savings deposits that 10/9/53 -3- may be paid by member banks and he suggested that this question should be studied carefully by the Board. During the course of Governor Robertson's comments, Governor Szymczak joined the meeting. In the discussion which followed, reference was made to reasons for the inclusion in the Banking Act of 1933 of the requirement that the Board prescribe maximum rates of interest on time and savings dePosits and to changes in conditions in recent years which might cast doubt on the need for continuing such regulations. Reference also was made to the related question of whether the prohibition against the payment of interest on demand deposits should be removed, to the competition for savings which commercial banks are receiving from savings and loan associations and other institutions, and to questions which have arisen recently regarding the application of Regulation Q to various forms of certificates of deposits with varying rates of interest which have been devised by member banks. It was brought out that the Board and the Federal Deposit Insurance Corporation had cooperated closely in the consideration of most questions in this field and that any action that the Board might consider should be taken up with the Corporation. Chairman Martin then suggested that Governor Robertson be requested to discuss the matter with the Federal Deposit Insurance Corporation in the light of the action taken by the New York State Banking Board t° ascertain the views of the Corporation and that Mr. Solomon be lo/9/53 requested to prepare for the Board's information, preliminary to further consideration of the matter, a summary of the legislative history of existing Federal legislation relating to the payment of interest on deposits. Chairman Martin's suggestions were approved unanimously. There were presented telegrams to the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Chicago, St. Louis, MinBoard approves neapolis, Kansas City, and Dallas stating that the the establishment without change by the Federal Reserve Bank of of New Kansas City on October 7, and by the Federal Reserve Banks York, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Dallas on October 8, 1953, of the rates of discount and purchase in their existing schedules. Approved unanimously. DiThere was presented a request that Mr. Benner, Assistant to Cleveland, rector, Division of Examinations, be authorized to travel Ohio, during the period October 13-17, 1953, to make a survey of the Bank Examination Department of the Federal Reserve Bank of Cleveland and meet with the Bank's examining staff. Approved unanimously. Reference was made to the discussion at the meeting yesterday regarding a memorandum dated October 6, 1953, in which Mr. Young stated that he had been invited by the Ford Foundation to serve as a member of 10/9/53 -5- an advisory group of the Foundation's Division of Economic Development and Administration. It was the consensus at yesterday's meeting that Mr. Young should not accept the invitation for various reasons, but it was understood that the matter would be considered further if there were additional factors which Mr. Young would like to bring to the Board's attention. At the request of the Board, Mr. Young outlined the work which the advisory group was to undertake, stating that the officer of the Ford Foundation who invited him to join the group explained that the Foundation was developing its areas of interest, that the trustees had directed the Division of Economic Development and Administration to formulate broad objectives for a program which the Foundation might support, and that the advisory group, consisting of a number of prominent economists, was being asked to meet in New York City on October 16 and 17, and probably a few times thereafter over the next several months, to consider problems in the area of strengthening the domestic economy and as a result to formulate a framework of specifications for activities for which the Foundation might want to provide funds. Mr. Young went on to say that the area of discussion by the advisory group appeared to be One in which the Board had a practical interest from the standpoint of development of its own research program. He also referred to the benefits which might be derived from professional association with outstanding economists in an undertaking of this sort. -6- 10/9/53 The matter was considered from the standpoint of the requirements on Mr. Young's time which would be involved and the consequences Which might follow from participation by members of the Board's staff in the activities of various kinds of outside organizations. During a discussion of the methods that might be employed to assure that the Board's research staff had the benefit of the views of leading economists outside the Federal Reserve System on current economic problems, Chairman Martin said that he would favor the arrangement of periodic seminars which would be held in the Board's offices at the Board's expense and in which outstanding economists would be invited to participate. The other members of the Board expressed agreement with Chairman Martin's view that such seminars would be valuable. that he At the conclusion of the discussion, Mr. Young said did not feel strongly about the matter and that in view of the questions that had been raised, he would decline the invitation from the Ford Foundation. by the National Mr. Young then stated that he had been invited e to be held Bureau of Economic Research to participate in a conferenc at Princeton University later this month at which leading economists would discuss problems of stabilization and measures which it would be appropriate for the Government to institute in the event of a business recession. 10/9/53 -7It was understood that there would be no objection to Mr. Young's attending the conference. Mr. Young also stated that Secretary of Commerce hieeks had appointed a committee of business economists and businessmen to consider the program of the Bureau of the Census and that the committee had asked members of the Board's research staff to attend a meeting today to describe the uses to which the statistics compiled by the Bureau of the Census were put by the Board and outline various things Which in their opinion might be done to strengthen the Bureau's program. Mr. Young said that the comments of the Board's staff would be at the technical level. It was would be no tion in the proposed by understood that there objection to participameeting along the lines Mr. Young. Governor Evans commented on the joint meeting of the directors of the head office and branches of the Federal Reserve Bank of Richmond Which he attended in Baltimore yesterday. In this connection, he ex- pressed the opinion that it would be desirable if arrangements could be worked out for at least one member of the Board to attend the joint meetings of head office and branch directors when they were held at any of the Federal Reserve Banks. Governor Evans also suggested consideration by the Board at an early date of a further reduction in reserve requirements of member 189 -8- 10/9/53 banks, stating that he felt such action might contribute to a lending psychology at country banks which would be helpful in averting any tendency toward a recession in business. Mr. Young then withdrew from the meeting. the meeting on Chairman Martin referred to the discussion at ber 16, 1953, September 291 1953, concerning a memorandum dated Septem from Under Secretary of the Treasury Folsom requesting the views of the Board on a reduction in the rate of capital gains taxation, and to the understanding at that time that he (Chairman Martin) would discuss the matter with Mr. Folsom and take the matter up with the Board again. want a formal Chairman Martin said that Mr. Folsom seemed to ted raPly from the Board and that in the circumstances he had reques Mr. Thurston to draft a letter along the lines that a reduction in the rate of capital gains taxation would not be likely to have serious securities market consequences from the standpoint of the Government and that the extent to which it would tend to increase the fluidity Of investment funds over the years would be difficult to determine. raised whether During a discussion of the matter, question was the technical memorandum prepared by Mr. Miller, Economist in the Di24, 1953, vision of Research and Statistics, under date of September should be transmitted to Mr. Folsom with Chairman Martin's letter. Governor Robertson suggested that Mr. Miller's memorandum not be 181 10/9/53 transmitted but that the information therein be incorporated in the draft of reply to Mr. Folsom to the extent deemed desirable. Governors Evans and Mills, who expected to be away from their Offices next week, stated that they would be agreeable to a letter to Mr. Folsom in whatever form might be satisfactory to Chairman Martin. The meeting then adjourned. During the day the following ad- ditional actions were taken by the Board with all of the members present: Minutes of actions taken by the Board of Governors of the Federal Reserve System on October 8, 1953, were approved unanimously. Memoranda from appropriate individuals concerned recommending personnel actions as follows: APpointments, effective upon the -pte of assuming duties Name and title Division Esther P. Locke, Clerk-Typist Research and Statistics Type of appointment Basic annual salary Temporary (3 months) $3,030 Floyd L. Whittington, International Temporary indefinite Finance Chief, Far Eastern Section 10,000 Ruth J. Deck, Clerk-Typist Examinations Temporary indefinite 3)110 Walter M. Williams, Assistant Federal Reserve Examiner Examinations Temporary indefinite 14,580 Ruth A. Brown, Charwoman Administrative Temporary (2 months) Services 2,1;20 Garnet M. Lawrence, Telephone Operator Administrative Temporary indefinite Services 2,950 Stewart C. Crews, Cafeteria Helper Administrative Temporary (2 months) Services 2,420 10/9/53 -10- istatement following military serv1c!. Eugene C. Harrison, Clerk in the Legal Division, with basic annual salary at the rate of $3,335, effective October 19, 1953. Salasry increases, effective October 111 1953 Division Name and title Basic annual salary To From Office of the Secretary Margaret T. Notter, Index Clerk Jeanne Krieger Semia, General Assistant $3,335 $3,415 5,310 5,435 3,785 3,910 3,335 3,1415 3,190 3,270 3,335 321415 5,185 5,310 7,040 7,240 3,270 3,415 2,840 2,910 ,Legal Eleanor E. Omohundro, Clerk-Stenographer Research and Statistics Katherine Black, Clerk Dorothy A. Culbertson, Clerk Bank Operations Doris V. Bubb, Statistical Clerk International Finance Thomas E. Summers, Economist Ives Maroni, Economist Personnel Administration Marjorie Kidd, Clerk-Stenographer Administrative Services Margaret Dalton, Charwoman 1.8 10/9/53 Salary increases, effective October 11, 1953 Division Name and title (continued) Basic annual salary To From Administrative Services Catherine Gallagher, Cafeteria Helper Florence A. Norman, Cafeteria Helper Ida Sutphin, Cafeteria Helper Rudolph Reece, Laborer $2,700 $2,770 2,420 2,00 2,560 2,630 2792 2,910 3,575 3,655 Office of the Controller Kathleen J. O'Connor, Clerk Approved unanimously. Reserve Bank of Letter to Mr. Latham, Vice President, Federal Boston, reading as follows: r 29, 1953, This will acknowledge your letter of Septembe ion personnel. examinat advising of certain changes in your bank for Examiner Trust It is noted that Thomas McGovern, Jr., be referred to position your bank, will be transferred to a new that to as Assistant to Officers for a period of one year but detrust larger he will participate in the examinations of the partments during this period. records that the apNotation is being made in the Board's examiner for your pointment of Loring C. Nye as an assistant bank was cancelled effective October 1, 1953. Board approves the In accordance with your request, the Robert V. Clapp as designation of Francis C. Albertson and Reserve Bank of Federal the for special assistant examiners assistance in Boston for the specific purpose of rendering the examination of State member banks only. Approved unanimously. 10/9/53 -12Letter to Mr. Slade, Vice President, Federal Reserve Bank of San Francisco, reading as follows: In accordance with the recommendation contained in your letter of October 2, 1953, the Board of Governors extends to January 11, 1954 1 the time within which the Occidental Savings and Commercial Bank, North Hollywood (Los Angeles), California, may accomplish membership in the Federal Reserve System, as provided in our letter of August 261 1953. Approved unanimously. Letter to the Chairmen of all Federal Reserve Banks except Minneapolis reading as follows: The Board's letter of August 31 1948, S-10301 outlined a procedure to be followed in connection with obtaining the Board's approval annually for salaries of officers of Federal Reserve Banks. In view of the adoption earlier this year of the new plan for administration of officers! e and salaries, the procedure outlined in S-1030 is obsolet prothe of nt stateme a by in due course will be superseded future. cedure to be followed in the traYou will recall that the new plan for the adminis ng this beginni that lated tion of officers' salaries contemp made and months fall year they would be considered in the dates later effective January 1, rather than on staggered With past. the in the year as has been the practice in Federal each of this thought in mind, salaries of officers new plan Reserve Bank were approved by the Board under the re was procedu for the period ending December 311 1953. The of Report referred to on the first and sixth pages of the the Special Committee on Officers' Salary Administration dated March 17, 1953, copies of which were sent to the Chairman and President of each Federal Reserve Bank with a letter from the Special Committee dated March 18, 1953. In order that the Board may give consideration, in cons' nection with your budget, to the amount provided for officer submit will you if ated appreci salaries in 1954, it will be 1 8.1.?f- 10/9/53 -13- as promptly as possible and in any event not later than November 15, a list of proposed official salaries as fixed by the Board of Directors of your Bank for the calendar year 1954. It will be helpful if the list can be accompanied by (1) such comments as seem pertinent with respect to any proposed salary increases, and (2) an explanation of any substantial difference between the aggregate of proposed officers' salaries and the amount provided in your budget for 1954 taking into account any first additions or reductions in official staff after the of the year. A copy of this letter is being sent to the President Of your Bank. Approved unanimously. Banks reading Letter to the Presidents of all Federal Reserve as follows: In order to incorporate changes in references made ion Act necessary by 1953 amendments to the Defense Product and by the issuance of Executive Order No. 10480 on August 14, is being 1953, the standard form of V-loan guarantee agreement ted designa be will s, purpose reprinted and, for identification 1, 1953)". October to amended as 'Tom of September 27, 1950 (As s a The reprinted standard form of agreement also include ed suggest was which minor change in the language of section 9 by d approve been by the Department of Defense and which has the Board of Governors after consultation with the guaranteeing agencies. to the conAs previously in effect, section 9 was subject the obligaof struction that, when the Guarantor is the Holder or to Guarant tion, the Financing Institution might request the the than institute "legal proceedings" against a party other ral and borrower in order to enforce realization of the collate ings within that if the Guarantor did not institute such proceed 30 days, the guaranteed percentage would be increased to 100 Per cent. Thus, in one instance, the Department of the Army was requested to institute legal proceedings against itself in -114- 10/9/53 order to enforce a disputed claim on an army contract of a bankrupt borrower. The present amendment inserts the words "against the Borrower" after the words "legal proceedings" in order to make it clear that such an increase in the guaranteed percentage will occur only in the event that the Guarantor, when the Holder of the obligation, fails within the prescribed time to institute requested legal proceedings against the borrower. Approved unanimously. Letter for the signature of Chairman Martin to the United States Civil Service Commission, Washington, D. C., (Attention: Security Appraisal Staff) reading as follows: In accordance with the request contained in Mr. Young's letter of October 5, 1953, I am returning to you the questionnaire on our security program. If you desire further information on this matter, I shall be happy to furnish it. Approved unanimously. Letter to Mr. C. Victor Johnson, Executive Director, Committee on Retirement Policy for Federal Personnel,Executive Office of the President, Washington, D. C., reading as follows: Your letter of August 24, 1953, transmitted an analysis of the Board of Governors Plan of the Federal Reserve Retirement System, with a request that it be reviewed for accuracy. Mr. Allen was asked to review the questions and the draft which you submitted and the results of his review are given in the attached memorandum. Also enclosed for Your use are two copies of the latest Annual Report of the Federal Reserve Retirement System. The analysis, with the modifications suggested in the attached material, would appear to us to be accurate, and 18(rlk 10/9/53 -is the Board will have no objection to its inclusion in the Committee's report to Congress. Approved unanimously.
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