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11 k q a_ r Minutes of actions taken by the Board of Governors of the Federal Reserve System on Tuesday, September 161 1952. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chpirman Szymczak Evans Vardaman Mills Robertson Mr. Sherman, Assistant Secretary Chairman Martin stated that he had received a letter from . llerle E. Selecman, Secretary, The American Bankers Association, Stating that he understood Governor Robertson would be the only nftber of the Board to attend the forthcoming convention of the ass°ciation in Atlantic City and asking whether he (Governor Robertson) Inight be designated the Board's official representative so that he collid be introduced as such at the opening General Session of the c°rIvention. The members of the Board indicated they would favor 81-Joh a procedure, and it was understood that Chairman Martin would 8° inform Mr. Selecman. Chairman Martin referred to a memorandum from Mr. Marget, krector of the Division of International Finance, dated September 21 1952 3 stating that he had been invited to participate in a seminar to e-Ld October 16-17, 1952, at Princeton University on the general t°Pir, 'A Reexamination of United States Commercial Policy," and re- cliting that he be authorized to accept the invitation. The 9/16/52 -2- Chairman added that participation in the seminar would be conto senior members of the banking and business community, the Go vernment, and universities, and that each member would speak "off the for record". Under the circumstances, he felt it would be desirable Marget to participate. Thereupon, Mr. Marget's request was approved unanimously with the understanding that he would be granted official leave to attend the seminar and that his expenses would be paid by the Board in accordance with the Board's travel regulations. Chairman Martin stated that in view of the suspension of Re gulation X, Real Estate Credit, question arose as to action to be taken by the Board regarding discontinuance of the Division of Selective Credit Regulation and transfer of personnel now employed in that During a discussion of the matter, Governor Robertson suggested, for reasons which he stated, that final action in discontinuing the Division of Selective Credit Regulation and transferring personnel be postponed for a few days and it was agreed unanimously that this procedure would be followed. Governor Robertson referred to the discussion at the meeting (4 the Board on May 2, 1_952, at which time he was authorized to exPlc with representatives of the Office of the Comptroller of the 'encY and the Federal Deposit Insurance Corporation the feasibility r'Ill 9A6/52 of establishing a training school for new assistant examiners. The proposal had been discussed at subsequent meetings of the Board, including the joint meeting of the Board with the Presidents of the Federal Reserve Banks on June 19, 1952, and a memorandum had been addressed by Governor Robertson to the Board under date of June 20, 1952, reporting on plans -that had been developed for the school by an interagency committee. On August 20, 1952, Governor Robertson had written to each of the Federal Reserve Banks stating that it had been decided to hold an IntergeneY Bank Examination School for newly appointed assistant examiners, the school to be of five weeks' duration and to be held in W ashington beginning September 15. Governor Robertson commented that the school opened yesterda"ith 36 individuals enrolled, twelve from the Federal Reserve Barlks 3 12 from the regional offices of the Federal Deposit Insurance 'voration, and 12 from the regional offices of the Comptroller of the Currency, and with instructors from the three agencies. After 41ng briefly the arrangements for the school, Governor Robertstated that as part of the course of instruction, it would be desi /'able to use the sum of 0,000 in currency for training purposes &rico untinE currency, that the currency would not be needed for that 9/16/52 Purpose after September 22, 1.952, and that while in use it would be in the control of Federal Reserve Examiner Glenn M. Goodman. Following a discussion, upon motion by Governor Robertson, the Board authorized the Division of Administrative Services to make available during working hours each day when needed, beginning on September 1C, 1952, and ending on or about September 221 1952, the sum of $2,000 in currency to be used for training purposes in the InterAgency Bank Examination School, with the understanding that while the currency was in use it would be in the control of Glenn M. Goodman, Federal Reserve Examiner, and that when it was not in use for the purpose specified and in any event at the end of each day it would be returned to the Fiscal Section of the Division of Administrative Services. Before this meeting there had been circulated among the Inembers of the Board a draft of letter prepared for Chairman Martin's slgrlature addressed to the Presidents of all Federal Reserve Banks examining eclleerning a plan designed to strengthen the Board's field by having a group of about six men assigned from the Federal Res°, 've Banks to the Board's staff on a rotating basis. 8tarC. In commenting on the proposal, Governor Robertson stated that the letter had been prepared primarily with a view to strengththe Board's field examining staff but that he also believed it 17°111d be beneficial to the Federal Reserve Banks by augmenting their eXecu • tive training programs. He felt that if the letter were mailed 9/16/52 -5-- to reach the Federal Reserve Bank Presidents this week it would provide a basis for discussion of the proposal at the time of the Presidents' Conference to be held in Washington next ;reek, and he re commended that it be approved. Upon motion by Governor Robertson, prepared for Chairman Martin's letter the follows: signature was approved unanimously as "The Board of Governors is considering the inauguration of a plan designed to strengthen the Board's field examining staff - a plan which might incidentally serve tO augment the Executive Training Programs of the Federal Reserve Banks. "This plan has been brought about by the need for relieving the senior examiners, possessing broad experience and familiarity with Bank operations, of the necessity of devoting such an inordinately large proPortion of their time to the direction and supervision of the more routine aspects of the work and the training of inexperienced personnel. %e feel that a great many of the junior officers and key supervisory personnel of the various Banks possess the necessary ability and experience to perform this intermediate function. In the hope that we may be able to solve our problem through this source, we would appreciate Your careful consideration of a program by which we might borrow a few such persons for limited periods of time. "Our present thought is that three men be assigned to the Board's staff at the present time and three others a little later, with the ultimate aim of maintaining a group of about six on a rotating basis. It would be understood that each man recommended and selected for this work would serve for one year before returning to the Bank from which he was borrowed. As far as the administrative procedure is concerned, these men could be placed on our pay roll or remain on that of the lending Bank on a reimbursable basis, whichever suits the Bank. 01'1 1, 9/16/52 —6— "he would appreciate your submitting to us the names of one or more men whom you consider to be well qualified, so that the Board may make its selections and inaugurate this program as soon as possible. In order to facilitate final selection, please submit a brief resume of the experience and qualifications of any man you recommend. ne are principally concerned with obtaining men well versed in Bank operations, and it is not necessary that they have a knowledge of examining procedures. 'he would prefer that you recommend people who have had broad experience in the operations of the Bank and have Proved themselves to be officer material. In this connection, persons with auditing experience are more helpIul on the field staff, and experience with the field staff should be most beneficial to auditors. "It is our feeling that a tour of duty with our examining staff would provide experience and a knowledge of System policies and practices which could hardly be duplicated by any other means, and for that reason Should constitute a very definite contribution to the Bankst Executive Development programs." :Jr. Leonard, Director of the Division of Bank Operations, and Mr. Vest, General Counsel, entered the room at this point. Governor Robertson referred to the discussions of an elliergenoY banking program at the meetings of the Board on December 7 1951 and January 17, 1952, and to the report made by ljr. Leonard ' to the Board on January 31, 1952, of the approach taken by the titer agency group working on such plans for facilitating the con- tinu, °trice of commercial bank operations in the event of a war 4isaster• He stated that the inter-agency committee had completed 1623 9/16/52 -7- a report which it now recommended be approved tentatively by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board of Governors, and he called upon Mr. Leonard to review the contemplated procedures. In his review of the program, concerning which a memowas sent to each member of the Board under date of August d, 1952,Mr. Leonard emphasized that the committee had developed a Plan on the assumption that an attack probably would be concentrated in localized areas and that the important need was to be able to Place in • operation a plan immediately which would facilitate the continued transaction or resumption of normal banking operations, l'ee°gnizing that any plan prepared at this time would only be expected to take care of the immediate disruption that would result in the event of an enemy attack. He pointed out that the approach take, " was permissive rather than mandatory, and that the program cente mPlated that, by executive order to be issued by the President, l'egulaticn of the operati ons of the Federal Reserve Banks woulo be Placed with the Board of Governors and regulation of the oJerations or all other banks with the Secretary of the Treasury. He also said that 14r. Jenninrs, Deputy Comptroller of the Currency and a member c3r th• e inter-agency committee, had informed him that the Treasury 9/16/52 had informally approved the program. Mr. Leonard then described cy, Irarious features of the plan relating to supplies of curren trar,p t of cash letters, —Diers of deposits, extensions of credit, paymen and the like, reading some of the proposed provisions as drafted by the inter—agency committee. committee Mr. Leonard went on to say that the inter—agency felt that the proposed program should ncw be discussed with officials °f the National Association of Supervisors of State Banks in order t° obtain their suggestions and seek their cooperation and perhaps wit;11 basis, a few leading commercial bankers on a confidential suggestions treating it as a tentative program concerning which we'lad be appreciated. folloa— It also felt it might be desirable, of the ing such discussions, to send a letter to the presidents they had larger commercial banks of the country asking that action taken for the protection of personnel, assets, and records and for the continuance of operations in the event of an attack. recommend that Governor Robertson stated that he would not the matter be taken up with the individual supervisors of State banko at this stage or with the heads of the larger commercial banks ' it with a few blit that he did feel it would be desirable to discuss president of the illciividual bankers, including possibly the incoming 9/16/52 -9- American Bankers Association and the incoming heads of the State and National divisions of that Association, with the Presidents of the Federal Reserve Banks, and with the standing committee consisting of a representative from each of the four bank supervisory entities (i.e., Board of Governors, Comptroller of the Currency, Federal Deposit Insurance Corporation, and ilational Association of SlIpervisors of State Banks). Governor Vardaman suggested that the matter be taken up wtth the Federal Advisory Council for the purpose of obtaining any sllggestions which members of the Council felt would be helpful in developing a program that would be of assistance to the banks and the business community in the event of an attack, and Governor Robertson agreed with this suggestion with the understanding that the Federal Advisory Council would be substituted for the individual ba. tion nkel-6 and representatives of the American Bankers Associa Who he had first suggested. Following a discussion, by unanimous vote, the Board approved (1) the tentative program outlined by Mr. Leonard and (2) Governor Robertsonis recommendation that it be discussed on a confidential basis with the Federal Advisory Council, the Federal Reserve Bank Presidents, and the standing committee of the four bank supervisory entities. Mr. Leonard withdrew from the meeting at this point. 9/16/52 -10Governor Evans said that he had received a letter from " M. Powell, President of the Federal Reserve Bank of ninneapolis, dated September 9, 1952, asking for an informal opinion as to Whether ifir. Archie Jackson, President of the St. Paul Fire and Marine Insurance Company, St. Paul, Minnesota, would be eligible fOr election as a Class B director of the Federal Reserve Bank of Minneapolis. Governor Evans referred to the Board's ruling on occupation julY 2,1925 (X-)43731 FRLS 3095) that a person whose sole is that of an officer of a life insurance company is not eligible election as a Class B director, stating that he would be inelined to indicate to Er. Powell that the president of a fire insurance Class B company would not be eligible for election as a di rector since, in his opinion such an individual would not be acti industrial velY engaged in commerce, agriculture, or some other if the 1311112/111t, at the time of his election. He also said that nienlber banks wanted to elect the president of a fire insurance e°a1ParlY as a Reserve Bank director it should be done as a Class A direct°r) i.e., as a representative of the stockholding banks rather than as one engaged in commerce, industry, or agriculture. unfortunate Chairman Martin expressed the view that it was in me respects that the System was deprived of the services of 1(;97 9A6/52 -1]- Officers or directors of insurance companies since they represented a large business and were not likely to be elected as Class A directors of the Federal Reserve Banks, At Chairman Martin's request, Mr. Vest reviewed the reasons for the Board's ruling in 1925, stating that a person whose sole Occupation aas that of an officer) director, or employee of a life illsuranee company was not then considered eligible for election as a Claes B director because (a) he was not actively engaged in commerce, agriculture, or some other industrial pursuit" within the meaning of that language as used in the Federal Reserve Act, (b) it was contrary to the policy of Congress for a person S to be permitted ° Closely identified with the financial interests to serve as a Class B director of a Federal Reserve Bank. Since that time, IAT. Vest said, the Supreme Court in United States v. S'31rth-Eastern Underwriters Association et al, 321 U.S. 533, had tied that the insurance business was "commerce", and that ruling diSp0 sed of the reason why, as a legal matter, the Board had taken the Position that an insurance company officer was not eligible to See as a Class B director. As to the other reason, Mr. Vest exPressed the opinion that if the Board still felt that it vas eontr arY to the intent of the Congress for a person who .vas engaged 1628 9/16/52 -12- in a business of lending to serve as a Class B director, it could SO rule and this would probably dispose of the question raised by -r. Powell. There followed a general discussion of the question whether the position taken by the Board in 1925 and maintained since then shtmld be modified. In the course of the discussion, Chairman Tn • -"ln stated that he felt it would not be desirable to change the rule without full study of the question, and he suggested that G"ernor Vardaman look into the matter and report back to the Board. Chairman Martin's suggestion was approved unanimously with the understanding that Governor Evans would inform Mr. Powell that the Board had discussed the matter but that it wished to explore the question further before determining whether the 1925 ruling should be followed in this situation. Vest withdrew from the meeting at this point and idr. Y011rig 3 Director of the Division of Research and Statistics, entered. Governor Mills stated that under date of July 23, 1952, formal Contract had been received from the Survey Research Center Of the University of Michigan relating to the Eighth Annual Survey Of C, wrisumer Finances as authorized by the Board on June 9, 1952, that , ntract question had been raised as °110wing receipt of the ' 1629 9/16/52 -13- to the publication policy of the Survey Research Center in connection with the results of certain interim surveys which it conducted either at its own expense or for other sponsors relating to economic attitudes and expectations, and that he had discussed the matter of publication of such results with Messrs. Likert and Campbell of the Survey Research Center since some of their releases had been confused with the results of the Surveys Of Consumer Finances which the Center conducted for the Board. Governor Mills :lent on to say that in a letter from 1.1r. Likert dated September 8, 1952, assurance was given that, to avoid conand possible embarrassment to the Board, the Survey Research Center proposed that for the next year on a trial basis it would 11°t issue any "spot news" release based on "interim" surveys either magazines, and that geflerallY or to selected newspapers and weekly that a if it appeared especially important for national welfare publicity, the Particular item of information be given immediate Center Would not release it without previously consulting the Board and obtaining its approval. In view of this understanding, G"ernor ails said, he would recommend that the contract be approved in the form submitted by the Survey Research Center under date of 23, 1952. 4 ir,cNd—, 9/16/52 Governor Mills' suggestion was approved, Mr. Vardaman voting "no" because, as he had indicated in the past, he does not approve having the Survey of Consumer Finances made by the Survey Research Center. At this point Mr. Young withdrew from the meeting and the following additional actions were taken by the Board: Minutes of actions taken by the Board of Governors of the Federal Reserve System on September 15, 1952, were approved unanialdusly. Letter to Mr. Latham, Vice President, Federal Reserve Bank of Boston, reading as follows: ,"Reference is made to your letter of August 29, 195e, submitting the request of the Sanford Trust ComPa4Y, Sanford, Maine, for approval of its proposed investment in bank premises under the provisions of Section 24A of the Federal Reserve Act. "According to the information submitted it appears that the trust company proposes to purchase the building In which it is located for the consideration of $206,500; that $106,500 of the purchase price is to be charged off and that the carrying value of the premises will be $100,000. is noted also that the trust company proposes to increase Its capital from $100,000 to $150,0001 and, therefore, the carrYing value of the bank premises will be less than the amount of capital. "As indicated in its letter dated April 30, 1951, FRIS #6851, the Board has given its approval in all cases Where a bank's investment in bank premises is reduced simultaneously through a special charge off to an amount not 9/16/52 "exceeding its capital stock provided the Federal Reserve Bank is satisfied that the charge off is justified in view of the condition of the bank and other Pertinent circumstances. Inasmuch as you are of the opinion that the proposal of the Sanford Trust Company ls reasonably sound and recommend its approval, it appears that further specific approval by the Board of Governors is unnecessary." Approved unanimously. Letter to The Charleston National Bank, Charleston, illinois2 reading as follows: "The Board of Governors of the Federal Reserve System has given consideration to your supplemental application for fiduciary powers, and grants you autnority to act, when not in contravention of State or local law, as registrar of stocks and bonds, assignee, receiver, or in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are Permitted to act under the laws of the State of Illinois. The exercise of these powers, in addition to those heretofore granted to act as trustee, executor, administrator, guardian of estates, and committee of estates of lunatics, shall be subject to the provisions 0-L the Federal Reserve Act and the regulations of the Board of Governors of the Federal Reserve System. "This letter will be your authority to exercise the fiduciary powers granted by the Board pending the Preparation of a formal certificate covering such authorization, which will be forwarded to you in due course.fl Approved unanimously, for transmittal through the Federal Reserve Bank of Chicago. (7"?gik 9/16/52 -16Letter to the Board of Directors, Citizens Banking Company, Anderson, Indiana, reading as follows: "Pursuant to your request submitted through the Federal Reserve Bank of Chicago, the Board of Governors approves the establishment and operation of a branch at the southwest corner of 37th and Tain Streets, Anderson, Indiana, by the Citizens Banking Company, provided such branch is established :iithin six months from the date of this letter." Approved unanimously, for transmittal through the Federal Reserve Bank of Chicago. Letter to the Board of Directors, Jackson City Bank and Tliust Company, Jackson, Michigan, reading as follo:is: "Pursuant to your request submitted through the Federal Reserve Bank of Chicago, the Board of Governors approves the establishment and operation of a branch at 1708-12 East Michigan Avenue, Jackson, Michigan, by the Jackson City Bank and Trust Company, provided such branch is established prior to December 31, 1952." Approved unanimously, for transmittal through the Federal Reserve Bank of Chicago. Assist ccretary.
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