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A meeting of the Board of Governors of the Federal Reserve .8retein was held in Washington on Tuesday, September 11, 1945, at 10:30 adile PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Hammond, Assistant Secretary Mr. Connell, General Assistant, Office of the Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman Mr. Leonard, Director of the Division of Personnel Administration Mr. Thomas, Director of the Division of Research and Statistics Mr. Vest, General Attorney MT. Wyatt, General Counsel Chairman Eccles described the broad scope of the activities in he had been called upon to participate as a member of the National klvis °rY Council under the Bretton Woods Agreements Act and as a member q.oth• er Interdepartmental groups dealing with questions of policy in— Nlre cl in the extension of foreign credits and the coordination of gov— eltvne rital activities in that field. He stated that, in addition to a t1114)rarY staff committee which is preparing plans for the organization ()r the Fund and the Bank, there is to be a continuing staff committee, ll collect and digest information and make reports for the use qthe Council and of the other groups, to assist them in determining (11.1"ti011e of general policy. On this committee there will be a repre— tattlie of the Board of Governors who, it is expected, will have to 1 450 9411/45 -2- devote practicslly all of his time to this work and to assisting the Chai Man of the Board for some time to come. The Board's existing ff would be utilized to the greatest extent possible but there Ii4)1114 be needed an additional staff member who could render this apeService. For this purpose he recommended that Mr. J. Burke Knapp, lo hmu formerly served in the Board's Division of Research and Statist. es and is now in the State Department, be appointed Special Asat8terit to the Chairman, on international finance, at an annual salary 01' ' 9 5°0. It was understood in this connection that consideration 4ight be given at a later date to Mr. Knapp's transfer to a position the n -ivision of Research and Statistics and that in the meantime his ' u Lc'rY would be charged to the budget of that Division which would be izcreased accordingly. Upon motion by Mr. Szymczak the appointment was approved as recommended to become effective as of the date upon which Mr. Knapp enters upon the performance of his duties after having passed the usual physical examination. Ur. Eccles stated that Mr. McKee had informed him that he did 11°"1-sh to continue as a member of the Board's Personnel Committee, ill view of the heavy schedule to be considered in the near future, ‘414il ' illarl Eccles suggested that the Board appoint Mr. Evans as a member "the C ommittee to serve with Mr. Draper until the expiration of the term ending February 28, 1946. It was moved that Mr. McKee's resignation be accepted and that Mr. 9/11/45 —3— Evans be appointed to serve in his stead for the period above indicated. Approved, Mr. McKee and Mr. Evans not voting. Mr. McKee stated that since there will be a number of impor— tawtu matters requiring early consideration by the Board in connection Ilith the selection of Class C directors, designation of chairmen and clektY chairmen, and the appointment of presidents and first vice pres— i*t8 of the Federal Reserve Banks, he felt that it would be desir— able that these matters be discussed at a full meeting of the Board at Ivilich problems relating to the policy to be followed by the Per— zonnel Committee could be considered. There was general agreement Point and it was understood that these matters would be placed blithe docket for the meeting on Friday, September 14, 1945, at 10:30 In accordance with the discussion at the meeting of September 7 1 4945) there was presented a proposed letter which had been prepared '' the signature of Chairman Eccles to Senator Patrick A. McCarran, ehai Illan of the Committee on the Judiciary, and to Congressman Carter 114as„,_ Chairman of the Committee on Expenditures in the Executive ilePar tments. After discussion, the letter was ap— proved in the following form, Mr. McKee voting "no" because he felt that such a letter was unnecessary at this time: "The Board has noted with approval the endorsement 14. Ma/45 —4- MY the Comptroller General and by the Director of the Budget of reorganization legislation without exemption Of any Government agency or department, excepting the General Accounting Office. "The Board desires to call the attention of the Committee to the enclosed excerpts from the Board's AnReport of 1938 emphasizing the need for reorganization of the Federal banking agencies, in view of the confusions and conflicts inherent in the existing diffusion °f powers and authority in the Federal bank supervisory and regulatory agencies. "The Board has long favored enactment of a reorganization measure that would give the President a free hand, subject to Congressional approval, to initiate necessary reorganizations in the Executive Branch. The Board had , I °t previously requested and does not now wish exemption 'Ibom the operation of such a measure. . "The Board, therefore, favors enactment of a reorganization bill which does not include exemptions, except for the General Accounting Office. Such a measure would make possible a reorganization of the Federal banking agencies which the Board feels is urgently needed to meet the needs of the postwar world." At this point Messrs. Leonard, Thomas, Vest, and Wyatt withan the meeting. The action stated with respect to each of the matters hereinreferred to was then taken by the Board: The minutes of the meeting of the Board of Governors of the Pecl r 41 Reserve System held on September 10, 1945, were approved unanikoilaky. Memorandum dated September 10, 1945, from Mr. Bethea, DirectO _ the Division of Administrative Services, submitting the resig11.4tio 11 of Mrs. Dorothy Erickson, a clerk in the Duplicating and Mail 1453 9/11/45 Section of that Division, and recommending that the resignation be accepted effective as of the close of September 8, 1945. The resignation was accepted as recommended. Letter to the board of directors of the "First State Bank of Co113118 " 8 t4t Christi," Corpus Christi, Texas, stating that, subject to condi- of membership numbered 1 to 3 contained in the Board's Regula- R3 the Board approves the bank's application for membership in the --,eral Reserve System and for the appropriate amount of stock in the rederal Reserve Bank of Dallas. The letter also contained the fol- -44g special comment: "It appears that the bank possesses the power to issue and sell investment certificates, which power is 1()t necessarily required in the conduct of a banking ' lollsiness. Attention is called to the fact that if the ank should desire to exercise such powers, it will be 2 . ecessary, under condition numbered 1, to obtain the vermission of the Board of Governors before doing so." Approved unanimously, for transmission through the Federal Reserve Bank of Dallas. In connection with the above matter the following letter to the Federal Deposit Insurance Corporation was also approved unanimously: "The Board of Governors of the Federal Reserve System today approved the application of the 'First State tank of b Corpus Christi,' Corpus Christi, Texas, for memZship in the Federal Reserve System subject to the coin' ' -4-lance with certain conditions. The bank has not yet 9/11/45 -6— "Opened for business and it is the plan to open as a member bank." Letter to the Federal Deposit Insurance Corporation reading as "Pursuant to the provisions of section 12B of the Federal Reserve Act, as amended, the Board of Governors of the Federal Reserve System hereby certifies that the State Bank, Billings, Montana, became a member of the Federal Reserve System on September 10, 1945 and is now a member of the System. The Board of Governors .0 tr the Federal Reserve System further hereby certifies hat, in connection with the admission of such bank to membership in the Federal Reserve System, consideration I t118 1 given to the following factors enumerated in subsecion (g) of section 12B of the Federal Reserve Act: 1. The financial history and condition of the bank, 2. The adequacy of its capital structure, 3. Its future earnings prospects, 4. The general character of its management, 5. The convenience and needs of the community to be served by the bank, and 6. Whether or not its corporate powers are consistent with the purposes of section 12B of the Federal Reserve Act." Approved unanimously. Letter to Mrs. Benj. F. Dunn, Philadelphia, Pennsylvania, read"follows: "This is in reply to your letter of August 21, 1945, *r1 Which you refer to your inability to purchase a piano your daughter under the provisions of the Board's 0;gulation W which sets terms for the purchase on credit , consumers' durable goods as well as terms for other ' 4)rislwIter credits. reel "Since your letter is courteous and thoughtful, we la that you will appreciate an explanation of the regution in question. 9/11/45 -7- "Regulation W is to be viewed as a part of the Government's anti-inflation program. It is a hard but basic fact of the situation which we have been facing during the war, and which we may face for some time after the l',,lart s end, that the amount of civilian goods available lor sale, particularly consumers' durable goods, is much smaller than the amount of goods that people want to buy. "If nothing had been done about this situation, .117ices of civilian goods would have risen to very high -Levels which would have meant hardship for a great many People and danger of a future readjustment that would have serious consequences for all. Price rises have c3ceurred, but they have been moderate in comparison to nat they might have been if various measures had not .been taken to fight inflation. Price ceilings were set, but it is quite apparent, as you no doubt have observed Yourself, that maintenance of price ceilings is a very difficult matter. It would be well-nigh impossible, if measures were taken to reduce general purchasing power, t0 o stem the tendency of people to find ways of avoiding price ceilings or of forcing then up. One of these 'eaeures was the curtailment of consumer credit, because unrestrained consumer credit would add to purchasing power j a i . a time when it is already very large for other reasons. ' 1 the same time, it was recognized that limited credit ?uld prevent serious personal difficulties from overended credit positions when war incomes decline. 4.„ "It is true that people who must use consumer credit .they are to buy certain things are being asked to acur'J their purchases on credit and, as in your case, to .13 J)8tPone some of them. While these people are not in X highest income brackets, they are not by any means in the lowest income brackets. In fact, they are t°" 11 in the income brackets which make up the bulk of ,7e population. Those whose incomes are high are not 'Jached by consumer credit control but this does not mean .1 ,14t they are free from anti-inflationary measures. Lima.tat. n Ions on salary increases, limitations on corporate ;orits, high taxation, and strong pressure for war bond .'r 'rchasos have affected the position of this group in pro°Unced degree. "No program has yet been devised that distributed , 1the 1.burdens of of war with complete equity nor is there corn.e on what is equity. We know that some induals will carry somewhat more than their share and _ 11 9d111/45 -1 it a-20 4-) -8- Your famfly may be in this group. But we do feel that 6he program formulated by the Government assisted greatly in helping us through these difficult times with few cases of extreme hardship and that even those who have been at a temporary disadvantage will benefit in the 1°ng run from the more stable economy that has been achieved and that would not have been achieved if these Illsasures had not been taken. "Regulation IV is continuously under study so that it may be adjusted to the course of events. What adjustlent may be called for by reason of the sudden ending of the war and the consequences of that great event is at present being carefully considered. You may be sure that A lls problem in which you are interested will be given our rincughtful attention." Approved unanimously. Memorandum dated September 4, 1945, from Mr. Smead, Director 0t thn4 e --vision of Bank Operations, recommending that the Board apProve 4 revision of forms F. R. 107 and 107b, annual and semi-annual report s of earnings and dividends of State member banks, to provide eegregation of interest received on United States Government oblieatio n8 from interest and dividends on other securities. Approved unanimously, together with a letter to Mr. Homer Jones, Chief of the Division of Research and Statistics, Federal Deposit Insurance Corporation, reading as follows: "This refers to your letter of August 180 suggestat the earnings and dividends report forms of all that ured banks should be changed to include a breakdown 81Initem 1(a), interest and dividends on securities, to 1.-17 separately interest on United States Government oba.gations. "The Board has approved such change with the underatanding . b, that similar changes are made in the forms used " Your Corporation and the Comptroller of the Currency." in T tUA5 _9— Memorandum dated September 11, 1945, from, Mr. Hooff, Attorney, reco".- . "muenclang that there be published in the September issue of the Fed°serve Bulletin a statement in the form attached to the memoran- luawith respect to the following subject: Executive Order to Stabilize National Economy During Transition from, War to Peace Approved unanimously. Thereupon the meeting adjourned. Assistant Secretary.. 41 1 41 Chairman.
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