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Minutes for To: Members of the Board From: Office of the Secretary September 11, 1957 Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement With respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. Chm. Martin Gov. Szymczak Gov. Vardaman Gov. Mills Gov, Robertson Gov. Balderston Gov. Shepardson 2491 Minutes of actions taken by the Board of Governors of the Feder-1 44-2. Reserve System on Wednesday, September 11, 1957. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Szymczak Vardaman Mills Robertson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Kenyon, Assistant Secretary Riefler, Assistant to the Chairman Leonard, Director, Division of Bank Operations Young, Director, Division of Research and Statistics Hackley, General Counsel Molony, Special Assistant to the Board Noyes, Adviser, Division of Research and Statistics Persina, Consulting Architect to the Board Messrs. Prall, Allen,and Harris, Chairman, President, and First Vice President of the Federal Reserve Bank of Chicago Messrs. Naess and Sallinger, architects for the Federal Reserve Bank of Chicago Chicago building program (Item No. 1). Pursuant to arrange- Made by Governor Balderston in accordance with the discussion at the meeting on September 32 1957, the representatives of the Federal Rese , - Ye Bank of Chicago were present to discuss questions raised by the 1/clara regarding the proposed addition to and alterations of the bee4 Of'fice building of the Chicago Bank. 9/11/57 -2Governor Balderston stated that the Board's questions had centered around two points) the first being whether, as a matter of 131.1cY, a central bank could appropriately embark on such a large undertaking in what might prove ultimately to have been a peak period °I' construction prices. To put the question another way, could the Fede al Reserve System do this with propriety when it was urging Prudence on the part of others? The second question) he said, was the Iticre technical one relating to bidding procedure. Five generalconact__s trur had originally bid on the project and the two lowest bidders then were asked to submit revised bids. This had caused the Board to Inquire whether there might be questions about this procedure from the standPoint of legality or propriety. Among other things, it seemed P°ssible that one or more of the remaining contracting firms might Qlatull that its revised bid would have been lower than the one accepted. Mr. Allen turned first to the question of bidding procedure and 84ta that members of the Bank's Board of Directors who are involved in billlaing projects from time to time had felt that this was the way to 13rc'eeed; it was understood to be standard practice in the field of c°1111riercial construction. However, the Reserve Bank was not entirely te4illar with practices followed in Government construction programs I3erhaPs should have inquired into the matter further. d R. ' ' Q u-Le If it seemed to the Board of Governors, he said, the Reserve Bank would be :a aa to go back to the contractors and give them all an opportunity to , Qubmit revised bids, and this could be accomplished in a fairly short ttme. 9/11/57 -3Mr. Hackley said that the Legal Division had been unable to rind in the statutes or pertinent Governmental regulations any specific reqUirement for at least three bids on a construction project. a However, statutory provision permitting negotiation in cases where all bids for a project have been rejected provides that in such event an opportullitY for renogotiation shall be given to each of the responsible bidders- Along these lines, the Legal Division had been told by General Servi - Administration that it was their practice to notify all bidders 0 e. 44d give them an opportunity to renegotiate. This information would 81.1z11. -°°`86, therefore, that where bids are rejected a Government agency gO back to all of the bidders on a renegotiation basis. Mr. Allen noted that the Reserve Bank had actually invited six gezieral contractors to bid and that one had declined. He thought it vas a fair statement that all of the original bids were in effect rejected and) in response to a question, said that it was about a month trox the time that the originsl bids were received until the two revised bids 'were requested. In response to another question, he said that no c3thp.„ contractors had expressed a desire to bid. He also said that the 11 eeerve Bank's selection of the contractors invited to bid was baseA on knowledge of their reputation and credit standing, and that ' the e°4cerns included those whose situation 148.13 such as to indicate that they might be interested in such a project. 211 9/11/57 -4Governor Vardaman said he had felt that asking revised bids fr°1ra only two of the contractors might expose the Reserve Bank and the SYstem to unnecessary criticism. He went on to note that the 8eneral contract would provide for labor and materials over a period °fat least three years. Since any contractor might be expected in such a situation to make provision for contingencies, he said that he 11841 wondered whether the Bank should explore dividing the entire project 14t° sub-projects and letting a separate contract for each of them. Mr. Allen responded that the Reserve Bank had given some thought to t1,4_ L4-4u possibility since Governor Balderston was in Chicago last week, and that there were a number of aspects of the situation which it seemed important to mention. For one thing, there was a considerable .84)unt of deferred maintenance in the existing building because of the tact that the current program was in prospect. As examples, he pointed to the questionable condition of the boilers and the desirability of l'el3alring or removing an ornate cornice on the top of the building. II arris added to Mr. Allen's comments by saying that renovations 114d been deferred on the eighth floor of the building because it was e)(13ected that this would be the "feeder" floor in the building operations. Mr. Allen then said that although theoretically the only escal atl011 clauses were for field labor, he thought Governor Vardaman Ifaz 4-1-tite correct in suggesting that any prudent contractor would make eorae. Provision for escalation. Mr. Naess estimated that escalation of 9/11/57 -5- Possibly 6 to 8 per cent was contained in the general and subsidiary contracts, or at a rate of about 2 per cent a year. Mr. Snllinger cbserved that as to field labor the contracts would provide that any increase in rates would be taken care of by the Reserve Bank, and that a. c°11tingency allowance of $250,000 had been provided for this purpose. TO tia.1.4i extent the risk would be taken away from the contractor. In l'esP011se to a question, he said that it was proposed to buy the necessary steel now, so that it would be ready for the second phase of the con8truction. Re added that the steel for the proposed seven-story addition to the head office building had already been purchased pursuant to aut horization from the Board of Governors. Mr. Allen then distributed to the members of the Board a tabula- t)0 11 Showing haw the money for the project would actually be spent (1111113.13 the period ending in July 1961. This tabulation indicated that the funds would be disbursed rather evenly over the years in question. At the request of Governor Balderston, the representatives of the Chicago Bank then discussed the Bank's commitment to make quarters It'lltilable to the United States Fidelity and Guaranty Company beginning 11(1/t later than October 19591 under a twenty-year lease. In this connection, the Y Pointed out that the Company's present building formerly was supported °40fle side by a building which bnd now been demolished as a part of the Reserve Bank's program, mid they said that the building had now til)15". away from the Reserve Bank building slightly and was beginning .r:st 1 9/11/57 -6- to exhibit certain structural defects. The arrangements with United States Fidelity and Guaranty Company, they brought out, were made in the expectation that the entire construction program would go forward, and the condition of the company's present building might create difficulty if the new offices were not available on schedule. In the circumstances, they deemed it essential that this part of the building Program proceed. At this point Mr. Sallinger discussed how the Reserve Bank, in 81184zing the bid of the ventilating contractor, had found that one item $55,000 represented provision against a possible rise in the (:)at f materials purchased during the period of the construction proIrk that case, he said, it was arranged that the contractor would bbo materials at present market prices and store the equipment, with sto rage charges in the neighborhood of $5,0001 thus eliminating the e°4tingencY provision. He indicated that the Bank was endeavoring to 14 , a.c74 out similar arrangements with some of the other contractors; howeve. -r, it was not considered desirable to keep the three required boilers in storage for a period as long as two years. Mr. Allen then returned to Governor Vardaman's question conCerh 4 'ng the possibility of piecemeal construction. He explained that Dr h u-LY the most urgent need from an operating standpoint was the truro.. ' 4 concourse and said that personary he did not think it would be feasible to undertake only that part of the program and defer the rest, 17, 9/11/57 -7- for this would involve a lot of caisson work and considerable expense. Mr. Harris added that it also involved a problem of elevators to get material out of the concourse. In a further discussion of escalation, Mr. Prall said that before the contracts were awarded the architects would sit down with each contractor and, if there was escalation, try to get it out. Mr. Sellinger confirmed this statement, saying that he thought negotiations the contractors would be even more productive if the Reserve Bank 1411e in a position to say that it was now authorized and ready to let the contracts. Mr. Allen stated that the directors, including Mr. Prall and °thers With experience in construction projects, had at first thought that the bids were high. However, they finally decided to accept the 44 bids, subject to the approval of the Board of Governors and subject to going over the bids again after additional negotiation, with the tI nderstand—lngthat no bid higher than the bid at the time of initial ' rc'ea by ''14 the Board of Directors would be accepted. Governor Vardaman inquired of Mr. Naess whether it could be 1314PPiceed that there might be as much as 4700,000 provided in the bids "Protective padding". When Mr. Naess indicated that this might be . 4'ussIble, Governor Vardaman stated that such a figure did not seem 114/'e sonable. He went on to say that if it was necessary to spend as 1111kh p. -- Y700,000 in order to get contractors to bid, it appeared that it 140,„ ‘.4.-m have to be done. 2198 9/11/57 -8Governor Robertson said that, with agreement having been reached on the feasibility of giving each of the general contractors an o Pportunity to submit a revised bid, his concern was simply about the question of timing. In view of current System credit policy, the 1341.1)0se of which is to discourage deferrable expenditures to the extent P°ssible, he considered it unfortunate that the Reserve Bank was in a situation of having to enter into contracts at the present time for a 131'°Jsct of the kind contemplated. By and large, he felt that the System "such ought to enter into construction projects at times when they *)111c1 serve as a cushion to the economy, but he added that this argument 1141 not hold true when there was a sufficient need to go forward. TheretOle he felt that the essential question was how the Chicago Bank's 1)rogra11 might be justified. In answer to this question, he Observed that the construction of a building for the United States Fidelity and GilaralltY Company apparently could not be deferred, the need for the new c°ncourse seemed clear, Find there was an evident need for more 813ace within the head office building itself. He then asked whether colad be said that these factors would justify entering into the liecommended contracts now rather than waiting. Mr. Allen responded that Governor Robertson had covered very /lel' the factors in favor of going forward. On the matter of space, he Pointed out that the Chicago Bank was now renting more space and /364 ' 14 more rent than any of the other Reserve Banks. Operations the,. '4011e tended to be cumbersome, and in his opinion space was needed 24.. 9 9/11/57 -9- very badly. While he could not honestly say that it would be impossible for the Bank to get along without additional space, an expensive and cumbersome operation was involved. Mr. Harris mentioned, as an illustration of the current conditions, that the Bank would have to move something out of the building to make room for the electronic computer that it was now arranging to rent. If more vault space is not imperative, he noted, it is always possible for a Reserve Bank to get along, as in fact the Chicago Bank was now doing, Ut ° Aerations become cumbersome and expensive. He then asked whether the Bank could justify having spent and committed itself to the extent Or and. million, with no result except to take care of United States Fidelity Guaranty Company. Governor Robertson replied that he was talking solely about the Illetter of timing, that he recognized that the construction program could not be deferred indefinitely, and that in fact he did not think it could be Put off for more than two years, if that long. was His question S. '-Ply whether to go forward now or to wait for perhaps six months. With regard to the possibility of piecemeal construction, Mr. Salli tiger said that regardless of whether prices were to go lower, he belleved that piecemeal contracting would result in a higher total c()st to the Reserve Bank because of the advantages that are available In letting large contracts. If budget procedures could be set up on the basis of actual disbursements per year, he felt that this would be the most feasible and economical way to proceed. 2500 9/11/57 Mr. Allen said that consideration had been given to all of the things mentioned at this meeting, and that it was the opinion of the Chicago Bank that the need justified going forward. Governor Vardaman indicated that he was impressed by the fact that the entire amount of the contracts was not going to be spent 14Mlediate1y. Therefore, the impact of the expenditures would be sPread over a period of years through 1961 and a lot of the inflationary Potential would be removed. Governor Robertson stated that he was thinking in terms of the exa211Pie set by the System. He expected that questions would be raised 44c1 he felt that the System ought to be in a position of being able to jUstify the action taken. Governor Balderston said that he too had been concerned by the matter of timing, but that the realities of the situation had been Pointed up by Governor Vardaman. Even though the Chicago Bank committed itself this year, it would actually make payments over a period extending 1-Intil the middle of 1961. He then asked whether it would be possible to Illake this clear in any announcement concerning the project; that is, thet the Bank was not spending $16 million as of this moment but rather 14e..8 embarking on a program to be carried out over a period of time. Mr. Allen said that the Bank would just as soon make no announce- Of what it ° was spending. The architects would make no announcement, he e . 434, but the contractors could not be prevented from doing so if theY vished. 9/11/57 -11Governor Vardaman noted that the Bank was actually continuing with a program that had been in the planning stage for about ten Years. If there should be publicity on the part of the contractors, he suggested that it be emphasized that the payments were extending over Lir year period. Mr. Sallinger said he felt sure that this could be covered. Mr. Leonard commented that if the customary practice were followed, there would be mention of this project in the Board's Annual RePort for 1957, along with other Reserve Bank building projects approved °r coMpleted. He felt that it would be appropriate to make some comment el°11g the lines Governor Vardaman had suggested; if so the text could be .•,4 c..'ven to the Chicago Bank so that any comment from the Bank might be ecrlsistent. Mr. Allen said that if any announcement from Chicago 811°111d come first, the Bank would be glad to work the matter out with the Board. Mr. Sallinger commented that the fact that the Reserve Bank was 4 4. "going away from its present quarters would tend to convey the ssion that this was a modernization program and not a new building 1)rNect. Governor Vardaman then inquired whether it was believed that a Pie cemeal letting of contracts would cost more than the padding for '44-L8.tion that might be contained in the over-all contracts, and Mr. tke8, replied that he thought a piecemeal letting of contracts would eost at least 10 per cent more. He did not think that the "water" in the bids on account of escalation would run to more than 6 per cent. 02 9/11/57 -12Mr. Harris commented that another reason for going forward with the program arose from the possibility of a major sewer project being considered by the city. This possibility) he said, had been Provided for in the plans for the Bank's building project. In response to a question by Governor Vardaman, Mr. Allen said he envisaged that the architects would go to the three general e°4trac4.ors who were not invited to submit revised bids and invite the to submit new bids if they wished. Mr. Naess then said that he had in mind speaking to all five contractors, that he thought this could be handled in a way that would not result in loss of good 141l, and that this probably could be accomplished within a week or 10 daYs. Mr. Allen said that the discussion would be in terms of saying to 411 of the contractors that the Bank still did not like the bids and asking them what they would do. He commented that one of the c°4tractors who submitted a revised bid appeared to be getting a little restive) but he agreed that the new approach to the contractors " 11101 be taken care of promptly. The representatives of the Chicago Bank then withdrew from the tileetitig along with Messrs. Leonard and Persinal and Messrs. Masters, bir "°r, Division of Examinations, and Cherry) Legislative Counsel) rltered the room. 250 9/11/57 13 Chairman Martin inquired whether the Board felt disposed to settle the Chicago building program matter at this time and said that 13ere°na3ly he saw no purpose in stopping in midstream. Governor Mills expressed agreement and brought out that the 13°8.rd was really talking about a program that in effect was approved several years ago. He could not see anything in the matter other than 4 °bligatiOn to authorize the Bank to go ahead with the program, and he felt that the inflationary impact would be minimal at the most. If the Bank were embarking on an entirely new program as of the moment, that would be a different matter. Unanimous agreement then was expressed with a suggestion by the Chairman that the representatives of the Chicago Bank be informed 1/11121ealate1y that the Board approved acceptance of the low bids received 44d authorized expenditures of approximately $16,622,000 for the building 1111(11g1 ' 4111. This advice was given to the Bank's representatives by the Seelsetary, and a copy of the confirmatory letter sent later in the dllY 18 attached hereto as Item No. 1. Items circulated to the Board. The following items, which had been circulated to the members of the Board and copies of which are ttached to these minutes under the respective item numbers indicated, //else ap roved unanimously: 9/11/57 Item No. Letter to the Federal Reserve Bank of San Francisco extending the time within which Wells Fargo Bank, San Francisco, California, illaY establish a branch in the Fairway-Park Sh0PPing Center in Hayward, California. 2 Letter to the Comptroller of the Currency submitting an unfavorable recommendation with respect to an application to organize ad. national bank in St. George, Richmond T elIntY) New York. (With a copy to the Federal eserve Bank of New York) 3 Letter to the Congressional Joint Committee 1)efense Production transmitting requested ,!formation concerning the Board's operations 'der the Defense Production Act. 4 Letter to the Department of Justice regarding A,! aPPlicability of section 7 of the Clayton p;'sto the merger of The Bank of Arizona, cctt, Arizona, into the First National atilt Of Arizona, Phoenix, Arizona. 5 At this point Mr. Koch and Miss Burr, Assistant Directors, bivisi 0/1 of Research and Statistics entered the room. Study of small business financing (Item No. 6). been There had . circulated to the members of the Board letters from Senators 14rk and Sparkman, dated August 30 and September 6, 1957, respectively, e°fleerning the contemplated study of small business financing problems. Roth cr the Senators expressed disappointment that the proposed survey Of b, '-'rrowers, which would be a fundamental part of the study, could 40t be completed in time to be of benefit in connection with consideration 9/11/57 -15- Of smell business legislation at the next session of the Congress. There had also been distributed a copy of a letter written to Senator Clark by Senator Robertson unaer date of August 31, 1957, in which the latter expressed doubt as to the necessity for such a study at this time. Another item which had been distributed to the Board was a memorazdum from Mr. Young dated September 10, 1957, summarizing replies Of the Reserve Banks to the Board's request for comments on the study °Iltlirle submitted by the System Ad Hoc Research Subcommittee. Or the All Banks indicated general support of the proposal. Some of then1 "re enthusiastic, several suggested substantial additions to the 'Jcoloe of the study, and two expressed certain reservations. The Cleveland Bank suggested the inclusion of a business loan survey at e°113131ereial banks along the lines of the survey conducted in October 1955/ emphasizing the desirability of conducting such a survey in October 1957. Chairman Martin said that he was not surprised at the reaction t Senators Clark and Sparkman and that he thought he should talk with all of the Senators concerned. The developments, he said, did not ittrlilence his view that the Board should undertake the study. He felt that Senator Sparkman might have a point in suggesting that the S:ftteln vas remiss in not having marle such a study sooner. Somebody, he 13—, must do the job, and he thought it could best be done by the 2506 9/11/57 -16regardless of what might come out in the way of legislation. Governor Vardaman said that he would have to disagree with the Chairman, He went on to say that he had gone along with the Board l'eluotantly because it appeared that nobody else was doing anything and because he thought the Board was "hooked with it" by virtue of the letter of request received from Senator Fulbright. Nevertheless, he continued to feel that the Board was not the proper agency to make the study. It had been his understanding, he said, that the Board 14" going to get the project cleared with the Senators, and he indicated that he would consider it unfortunate to proceed with the inquiry and Spend a lot of money with two or three Senators in disagreement. Chairman Martin stated that this was different from the position that he understood Governor Vardaman to have taken when the matter was 1°I'elli°us1Y discussed by the Board. His own position, he said, was that Ilear'lless of whether there were Congressional requests, the Board was Under obligation to do something in this field. the nieeting on August He had understood at 8, 1957, that Governor Vardaman agreed with that al)Pr°aoh. Secretary's Note: The minutes for the meetings at which this matter was discussed show that the interested Senators and Congressmen were to be informed that the Board had decided to go forward with the study, but there is no mention of the study being cleared with them. 2c 07 9/11/57 -17Governor Vardaman then said that he considered the matter 01' timing and the matter of getting the project cleared with the Senators to be the main things. He also made the comment that he lloUld not like to launch a project of this kind with "a couple of strikes on us at the Congressional level". Chairman Martin said that he had understood Governor Varaamsn's Position to be that the Board should not make the study simply on the basL8 that Senator Fulbright had suggested it, and Governor Vardaman l'ePlied that he did not think the study should be undertaken at the IleqUest of any individual Senator unless it could be cleared with the other interested Senators. Chairman Martin then spoke further of his own position, saying that irrespective of whether the Senate Finance Committee or anyone else tlieught it should be done, he personplly thought that the study should be tlade. He said that when the matter was up before for consideration arld Governor Vardaman went along, the point was made, as he understood it, that quite aside from satisfying the Congress this was something the ' t the Board should do. Governor Vardaman replied this was on the basis that nobody else that 'would make the study. However, he said, he had always contended such a study should be under the supervision of the Department r Commerce. If nobody else would do the job, then he thought that tile Board should do it. 2508 -18- 9/11/57 Mr. Young then commented on the responses of the Federal Reserve Banks and reported that the study proposal was supported by the Small Business Commission of the American Bankers Association. It was the feeling among the Board's staff, he said, that this was 4 Perennial problem, that the System did not have enough research capital in hand to deal with various aspects of it, as for example When the Board's advice was sought by Congressional committees, and that there was a need for getting into a stronger position. Recent developments in discussion of credit and monetary policy had brought to light the question of the impact sllegedly incurred by the small business segment of the economy, and not enough was known about those factors. He felt that the information gathered therefore would be UsefUi to the System as a whole. With regard to the letters from Senat°rs Clark and Sparkman, he said that the comprehensive survey Of b°rrowers could not be worked out on a short time schedule and that the course would appear to be to advise the Senators accordingly. An even longer time schedule than contemplated, he said, would be helbf,, 4. in spreading out the work so as to avoid excessive burden ' °lithe research staffs of the Board and the Reserve Banks. Mr. Koch reported on a meeting of the Ad Hoc Subcommittee IhIch Was held yesterday. He said it was pretty much the unanimous on of the group that this was an area that deserved study, that the °ne element of serious concern was the time schedule, and that 57 9/11/ -19- it was felt that furnishing part of the information by next March illight give a misleading impression. It was agreed, Mr. Koch went °rI to say, that the borrower survey could not possibly be completed bY that time. He then discussed the suggestion for another business loan survey and said that the case in favor of it was an appealing one. Governor Mills noted that a business loan survey would require the cooperation of a large sample of commercial banks and that within the last few months the Reserve Bank Presidents had raised the problem or bilrdening respondent banks with questionnaires and inquiries. If this survey were undertaken, he said, it would need the blessing of both the Presidents and the American Bankers Association. Mr. Young said he had in mind that a wire would be sent to the esiclents asking their reaction to the proposal. Bark, .-118 As to the American Association, be had the impression that cooperation would be wicoming. Chairman Martin then said that in view of the apparent misIlliciel'ste 'rlding about the basis of the program, he would like to talk to ' en Senator prior to further consideration of the matter by the BOar at a time when all of the members of the Board were present. Governor Vardaman said that he regarded the lack of information in th. Is field as almost tragic, but that unfortunately the study had beInvolved with Congressional politics. Also, in view of the bill ' 9/11/57 -20- introduced by Senator Humphrey calling for a study by the Small 13usine5s Administration, he felt that it would be almost necessary to N^J. obvt, the cooperation of that agency. Mr. Young said that he considered it absolutely necessary to take steps, as in the consumer instalment credit study, to advise ther agencies of the program and elicit their cooperation. He felt that it would be premature to pass judgment at this point on what the attitude of the Small Business Administration might be to this stud,. He also noted that in their letters Senators Clark and 8Parkman were not critical of the study as such/ but only of the timina. Governor Balderston pointed out that in an attempt to be eallaid, the Board had warned the appropriate members of Congress that the third part of the study could not be ready in time for legislative discussion at the next session of Congress; the Board had stressed ' 41lat it -- could not do and had failed to indicate what it would have been Willing to do. 841d, to It would have been satisfactory to him, he convey to the Senators the Board's willingness to help foster e>.43eriment5.l efforts under legislative authority, and it seemed to htrn that it would be impossible to draft workable legislation unless the Problem were taken in at least two bites. He suggested that in tiel'7 al'ea of this kind, what was needed was the counterpart of a 9/11/57 -21- Pilot study; that is, to set up a few experimental projects under enabli, --g legislation. After a couple of years of observation, legislation could perhaps be adopted which would be more sound. He concluded by l'ePeating that the Board, in its desire to be fair and candid, perhaps haa taken what was construed as a negative attitude. Governor Robertson expressed the view that the study should be by the Board irrespective of Congressional developments and what grelg out of them, since he felt that the information was needed. He th°11ght that Senators Clark and Sparkman were entitled to be chagrined 413c4it the delay that would be involved in completing the study, but he e4w 4° alternative. Like Governor Balderston, he felt that the Board 1144 failed to indicate clearly in its letter to Senator Fulbright that available portions of the study might be useful to the Congress in its legislative discussion and that the Board would try to be as ilelPflal as possible on the basis of whatever information it had at the tinle. In his opinion the Board should not cut down the scope of the 0 , '"udY because, for its awn purposes, the study should be made on 44 COmPlete a basis as possible. Governor Robertson then said that he fel+ it would have been better if other agencies of the Government 4/41 be ea brought into the matter in the course of preparing the outthe study. However, he thought the situation could be corrected by 8l1*ting their cooperation at this time and requesting their comments 1 °4 the ., , - ind of study that was contemplated. Once this had been done, he 9/11/57 -22- felt that the study should go forward as quickly as possible. Governor Robertson also said that he was in complete agreein the suggestion of the Cleveland Reserve Bank for another business loan survey in October 1957. He expressed the view that the survey would not be unduly burdensome to anyone, and he thought that the respondent banks would be cooperative in an effort to 131"ovide information that would be valuable to the Federal Reserve SYstelll and the committees of Congress, as well as to themselves. In response to a question by Chairman Martin, Mr. Young said that the views of the American Bankers Association regarding the loan survey could be obtained promptly. After Governor Vardaman stated that he saw no objection and G°vernor Mills indicated that he would not object to the loan survey if it could be cleared with the American Bankers Association, Mr. 1.°13.413 Iras authorized to get in touch with representatives of the Association to obtain their views. In addition, approval was given t° 4 telegram, attached hereto as Item No. 6, asking the Federal Ilsserve Banks for their views. Chairman Martin said that he would like an opportunity to llt with Senators Clark, Sparkman, and Robertson before further ' te stePs were taken on the study of small business financing. he Should, Personskily, he subscribed to Governor Robertson's position that the study be made in any event. 4 . 9/11/57 -23Governor Vardaman stated that in principle this was his 13esition also, but that in this particular situation the Board was caught in the midst of Congressional procedure. In view of the °Ilginal request from Senator Fulbright and the subsequent develop1/1' he felt that the Board must make clear to the Senators con- cerned that the study was not one that would be undertaken exclusively on the basis of an immediate need for legislation. He also felt that it /431 l4 be well to admit that the Board had been remiss in not undert ai a study of this kind in the past. He agreed that Governor 11()bert8oni8 suggestion would tend to relieve to some degree the Unilateral nature of the study by providing consultation with other g neies to obtain their suggestions on the scope and outline of the tUdY, and he suggested that the Select Committee on Small Business t the Senate should be contacted along with the Small Business A d111:44 abcctdon, the Council of Economic Advisers, and the Department t commerce. In this manner, he said, the Board would in some degree iltlt the study on a Governmental rather than a unilateral basis. After the Chairman had stated that he would report back to the Board as quickly as he could after talking with the three Senators, Gc'rerilor Vardaman suggested discussion with Senator Humphrey also. aoted that a letter had been received from Congressman Patman exll'easiag approval of such a study but suggested that the Chairman ki*Itvant to talk with Mr. Patman. 9/11/57 -24Messrs. Cherry, Molony, Noyes, and Koch and Miss Burr then with- drew from the meeting. Epenses of emergency planning program. Governor Robertson re- ferred to the discussion at the meeting on September 71 19561 regarding "Penses incurred by the Advisory Committee on Commercial Bank PreparedIlese and the Banking Committee on Emergency Operations, which were ged in preparing an emergency planning program for the banks of the e°1211t17, and to the agreement reached at that time that if necessary t/le committees, expenses would be paid by the Federal Reserve System. Re said that the committees had been working industriously, that several 1)a21Ph1ets were now ready for distribution to commercial banks, and that 14 a recent letter, a portion of which he read, the Chairman of the Advis°rY Committee had stated that the matter of expenses, including e413e/asea incident to printing and distributing the pamphlets, would be C1:4 the agenda for a meeting of the committees to be held in New York CitY Cu the 26th of this month. Governor Robertson said that in his opinion the American Bankers 11880ciation should pay the expenses involved, which might amount to $25,000 Or Inore, that he did not think the banks which contributed personnel t° the committees should pay the bill, and if the American Bankers Aesceiation would not pay the expenses it appeared that the Board 14°41d have to pay them. He said that the Office of Defense Mobilization 4 114*d ° funds available and that he doubted whether any contribution 251.5 9/11/57 -25- could be obtained from the Comptroller of the Currency or the Federal Deposit Insurance Corporation. He proposed to discuss the matter those in the American Bankers Association who control expenditures to see whether agreement could be reached on a basis whereby the Association and the Board would each pay half of the expenses. While he felt that it would be unfortunate if it should become known that the American Bankers Association had refused to pay the expenses of the Prqxam, in the circumstances he thought that the suggested comDromise would be appropriate. Governor Vardaman suggested that the initial approach be on the b _.s asl that the Board was not going to pay the expenses, and that if it developed to be necessary, some compromise could then be offered. Governor Mills likewise expressed doubt as to whether the Board should PaY the cost of the program. He observed that commercial banks fre- cluentlY contribute the services of personnel for a variety of purposes, ttli g with out-of-pocket expenses, and he went on to suggest that payment Of these expenses by the Board would be open to the kind of criticism s°111etimes directed at the Business Advisory Council of the Department C°n7merce. Governor Robertson agreed with these observations in principle Pointed out that the emergency planning programs of other industries had be ea paid for by the industries concerned. Nevertheless, he said, the t °ard had previously authorized him to take the position that if the b 4nks would not pay for the program, the Board would do so. -26Chairman Martin then expressed the view that the Board could not go back on a commitment which it hnii made. However, he suggested that Governor Robertson might state to the American Bankers Association 811(1 the Chairman of the Advisory Committee that the Board had considered the matter and thought the banks should pay the expenses of the prog11411. Then, if they refused, Governor Robertson could bring the matter back to the Board for further consideration. At the conclusion of the discussion, it was understood that Governor Robertson would handle the matter along the lines suggested bYChni --Man Martin, except that if no other means of payment was available the Board would pay the costs in accordance with its earlier cellarlitraerit. The meeting then adjourned. Secretary's Note: Acting in the absence of Governor Shepardson, Governor Balderston today approved on behalf of the Board the following letters, copies of which are attached hereto under the respective item numbers indicated: Item No. Lett „ er to the Federal Reserve Bank ;IA Min neapolis approving the appointant of Lester Granville Gable as -Blatant examiner. 7 2517 9/11/57 -27Item No. am.1110.011 0001•1•6 . . 10 011110 Letter to the Federal Reserve Bank of San Francisco approving the sPpointment of Edward P. Cole as assistant examin er. 8 251.8 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 9/11/57 WASHINGTON 25, D. C. ADDRESS OrrICIAL CORRESPONDENCE — At scc, TO THE BOARD 440104— September 11, 1957 PERSONAL AND CONFIDENTIAL Mr. Carl E. Allen, President, Federal Reserve Bank of Chicago, Chicago 90, Illinois. bear Mr. Allen: This letter confirms the advice given you orally toda the Y that the Board approves acceptance of low bids for ,, construction of the addition to and the alterations of ;' 41r head office building, as recommended by the Board of lerect ors of your Bank, and authorizes expenditures of rePr°ximately $16,622,000, which amount includes architects' e8 and allowance of $650,000 for contingencies. Sincerely yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 2519 BOARD OF GOVERNORS OF THE Item No. 2 9/11/57 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD September 11, 1957 E. R. Millard, Vice President, rederal Reserve Bank of San Francisco, San F rancisco 20, California. Dear Mr• Millard: As recommended in your letter of August 28, 3_957, the witL Board uard of Governors extends to June 18, 1958, the time nin which Wells Fargo Bank, San Francisco, California, _e stablish a branch in the Fairway-Park Shopping Center givh aYward-Niles Road, Hayward, California, under the approval al en by the Board in its letter of October Z le, 1956. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 2520 BOARD OF GOVERNORS OF THE t•D 411 ' 4t) Item No. 3 FEDERAL RESERVE SYSTEM V40 9/1/57 WASHINGTON 25, D. C. iZt ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD °40,00 ' September 11, 1957 of the Currency, 9,re 4Cmptroller a Bury Department, Washington 25, D. C. Attention Mr. L. A. Jennings, Deputy Comptroller of the Currency. Dear *. March Comptroller: Reference is made to a letter from your office dated a nat.14, 1957, enclosing copies of an application to organize regu lcmal bank in St. George, Richmond County, New York, and shorc7fting a recommendation as to whether or not the application be approved. A report of investigation of the application made by exatune the, r8 for the Federal Reserve Bank of New York indicates that Rewevroposed capital structure of the bank mou]d be adequate. are it operations expenot'veryappears that the prospects for profitable in the lacking favorable, the proposed management is the nce believed necessary to assure sound administration of tion-stitution, and there is not a sufficient need for an addiview%-,banking facility in the immediate area at this time. In Gever-4. the unfavorable factors in this situation, the Board of nc)re do es not feel justified in recommending approval of the aPpli cation. The Board's Division of Examinations will be glad to aspects of this case with representatives of your e It you so desire. discus Offic 8,any Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 21- tott‘tAt'f,q0 I' ‘.:4 ,:•, i . ..Vr t BOARD OF GOVERNORS OF THE ''°. .1, Item No. 4 FEDERAL RESERVE SYSTEM 9/11/57 WAS H I N GTO N 4 OFFICE OF THE CHAIRMAN j4101,1 ri . 4 :;t4 September 11, 1957 Honorable A. Willis Robertson, Chairman, Joint Committee on Defense Production, Congress of the United States, Washington 25, D. C. Attention: Mr. Harold J. Warren, Clerk & Counsel, Room 927, H.O.L.C. Building, 101 Indiana Avenue, N. W., Washington, D. C. Dear Senator Robertson: In response to your letter of August 8, 1957, there is attached, for inclusion in the proposed report of the Joint Committee on Defense Production being prepared pursuant to section 712(b) of the Defense Production Act, as amended, information relating to the operations carried out by the Board under authority of that Act. Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC. Martin, Jr. At tachment. 1.1 tYkrtAy BOARD OF GOVERNORS Item No. 5 OF THE 9111/57 FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN September 11, 1957 Honorable Victor R. Hansen, Assistant Attorney General, Antitrust DePartmentDivision, of Justice, '41eh1ngton 25, D. C. Dear Judge Hansen: This is in response to your letter of August 221 requesting cominent on the statement, in my letter of June 25, that the on emplated merger of The Bank of Arizona, Prescott, Arizona, into-e Arizona, "does not thte First National Bank of Arizona, Phoenix, el aPPear . to be within the purview of section 7 of the aYtOn Act.ft Section 7 appears to recognize two different kinds of acquisi Acnu. ions: acquisitions of stock and acquisitions of assets. tions of assets are within section 7 if the acquiring corportion but°4 18 "subject to the jurisdiction of the Federal Trade Commission" subi.ar? not within section 7 if the acquiring corporation is not &lb:et, to the jurisdiction of that Commission. In the case mentioned an ae c, the Board understood that the proposed acquisition VAS to be bani, quisition of assets, and since the acquiring corporation is a Tril and is not subject to the jurisdiction of the Federal app,l! Commission under section 7, it peared that section 7 would not to the transaction. thi 3 Please let us know if we can be of further assistance in matter. Sincerely yours, (Signed) Wm. McC. Martin, Jr. WM. McC. Martin, Jr. TELEGRAM Item No. LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 6 9/11/57 September 11, 1957. To the Presidents of all Federal Reserve Banks except Cleveland President Fulton and the staff of the Cleveland Bank recommend that a business loan survey along the lines of the October 1955 survey be conducted this October as an addition to the proposed small business financing project. A major consideration in support of this recommendation is that any System study of small business fillancing at this time should contain comprehensive and reliable data on changes, if any, in the share of bank loans going to small c°ncerns during the past two years of credit restraint. Your Research DePartment is already familiar with the Cleveland Bank's specific pro13°841. Also, it was discussed yesterday by the Ad Hoc System Research 84beommittee on Small Business Financing and the consensus of the C°Mmittee was favorable for undertaking such a survey. The proposal has been the President's discussed by telephone with Mr. Bryan, Chairman of C°11ference Committee on Research and Statistics, who concurs in this Illethod Of canvassing eserve Lank opinion. The Board would appreciate 'views on the proposal by Friday, September 13. 7'()111 (Signed) S. R. Carpenter CARPENTER 2524 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 7 9/11/57 WASHINGTON 25. D. C. ADDRESS OFFICtAL CORRESPONDENCE TO THE BOARD September 110 Prederick L. Deming, President, ,:cle/%1 Reserve Bank of Minneapolis, "nneapolis 2, Minnesota. Deal 'Mrs Deming: In accordance with the request contained in your letter- of SepteMber 4, 1957, the Board approves the appointh+1Thof Lester Granville Gable as an assistant examiner for eral Reserve Bank of Minneapolis. If the appointment th,„-;:' made effective September .16 as planned, please advise 'joarde 4e Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1957 2525 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 8 9/11/57 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD September 11, 1957 R. H. Morrill, Vice President sederal Reserve Bank of San Francisco, an Francisco 20, California. 1)"4/'11r. Morrill: In accordance with the request contained in your letter 4,1!!!Ptember 4, 1957, the Board approves the appointment of narli7d P. Cole as an assistant examiner for the Federal Reserve San Francisco. Please advise as to the date upon which the aPPointment is made effective. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistaat Secretary.
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