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Minutes of actions taken by the Board of Governors of the ' lederal Reserve System on Tuesday, September 20, 1949. The Board Zet iii the Special Library at 9:35 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Szymczak Draper Vardaman Clayton Carpenter, Secretary Sherman, Assistant Secretary Thurston, Assistant to the Board Leonard, Director, Division of Bank Operations Mr. Thomas, Director, Division of Research and Statistics Mr. Vest, General Counsel Mr. Millard, Director, Division of Bank Examinations Mr. Mr. Mr. Mr. Before this meeting the Federal Advisory Council submitted 441e1A0randUM covering topics which were considered at a separate Illeetiag of the Council on September 18 and 19, 1949, and which were t° be discussed with the Board at a joint meeting to be held at 10:30 t4i8 morning. The Board considered the statements of the Council on the, various topics and it was agreed that Chairman McCabe would state the "-elm of the Board substantially as recorded in the minutes of the meeting with the Council. The meeting then recessed and recon- '?erlea in the Special Library at 2:40 p.m. with the same attendance "at the morning session. There was a further full discussion of the reasons for and "' st approval of the reduced rates of discount and purchase fixed 8 1535 91/2(V49 -2- the Federal Reserve Bank of New York and considered at the meetOf the Board on September 16 and 19, 1949. Full consideration 48 giVen to the views expressed by the Federal Advisory Council at the Joint meeting of the Council and the Board this morning. It appeared from the discussion that Messrs. McCabe, Szymc24k) end Draper favored approval of the rates established by the directors of the New York Bunk and that Messrs. Eccles, Vardaman, ella Clhyton felt such rates should not be approved at this time. The sons advanced for approving the lower rates were that (1) devaluaof British and other currencies over the weekend was an outstand14 hew factor in the situation which might tend to have a depressing err ect on the domestic economy, (2) a reduction would be a logical 1)64'4 of the program agreed upon at the last meeting of the Federal °Pell rket Committee and was justified by existing conditions, (3) 41th °Ugh there had been some indication of an upturn in economic ac• tilqty - in recent weeks, it was probable that the depressing effects or " A ev aluation would be reflected in the domestic situation shortly azo. a Illove to reduce discount rates in anticipation of such a devel°Dille114. would be a step toward keeping the economy strong, and (4) action could not offset the effects of strikes it could establja4 a climate which would be more favorable to recovery from such tt'ects. The reasons advanced against a reduction in discount rates 4 AI S 9/20/49 "this -3time were that (1) the upturn in economic activity and in ctedit expansion during recent weeks had been sufficiently general to aUggest the possibility of a resumption of inflationary conditi°118 later on, (2) the elements that might be most depressing to tIle economy such as existing or prospective strikes in the coal, " t 1/ railroad, and automobile industries, were not monetary in chal'acter and their effects could not be cured by monetary action, 3) there was no immediate relation between discount rates and de'4'41-Illation, and a reduction in discount rates at this time would be aignal to the world that devaluation would have a depressing inl*:LILence on the domestic economy which the System was trying to off8") and (4) a reduction in discount rates at the present time would Izse ammunition which might be needed later on if it turned out that racilletarY action was needed to counteract a resumption of a downward ttelici and credit contraction. During the discussion, Mr. Carpenter reported his conversati°118 with seven Presidents of the Federal Reserve Banks. He said that the Presidents with whom he talked indicated their directors ''411-11d approve a reduction in the rate as a System program, that 14essrs. McLarin and Gilbert of the Atlanta and Dallas Banks did not reel the matter was of great importance, and that Messrs. Peyton, Lee vr, and Earhart of the Minneapolis., Kansas City, and San Francisco tam. --"`" were prepared to go ahead, Mr. Earhart stating that the avail- bilitY of credit to dealers should be taken care of by lowering 9/20/49 the -4-. rate rather than by cominuing the authority for re- chase agreements. ' 1°141 Mr. Carpenter also said that Mr. Young of bleago and his directors were strongly opposed to a reduction in cliscoUnt rates but that they probably would go along as a matter of krstam be policy although Mr. Young questioned whether action should so soon after devaluation, and that Mr. Davis of the St. 11°4 e Bank felt that his directors were prepared to approve a reductiA lbut that they would prefer to take action in October rather thalllead out in action at their meeting next Thursday, September 22. Chairman McCabe stated that Mr. Erickson of the Boston Bank rBit a reduction in discount rates was logical but it would have been Ilreferable if action could have been taken last Friday in conjunction Ilith devaluation, that Mr. Williams of the Philadelphia Bank felt that tbe80ard should not act until after it had met with the Federal AdOIJ Council and that he (Mr. Williams) was inclined to wait to see Ilhat the economic developments were before making a reduction, and tb"Mr. Leach of the Richmond Bank stated that he had considered the illEttter last week, that he concluded action should not be taken at tht time, but that the devaluation altered the situation somewhat and he v. °uld be inclined to go along with a System move to reduce the rates. Gidney's views were reported at the meeting of the Board yesterday. At the conclusion of the discussion it was understood that the 418:tter would be discussed at the meeting of the executive committee of the Pederal Open Market Committee to be held tomorrow morning on the 153S 9/20/49 -5- basis of the relationship of the discount rate to open market policy 4115, that in the meantime Chairman McCabe would ascertain whether Mr. 411rks wished to express any views on the matter. It was also under- "c/c)cl that the Board would meet again following the meeting of the elecUtive committee of the Federal Open Market Committee. At this IcsilltMessrs. Eccles and Clayton withdrew from the meeting. Reference was made to a draft of statement and order prepared by the Legal Division in response to the "Request for Formal Determi- 4°4°4 of Power to Issue Subpoenas and Applications for Subpoenas" tiled by counsel for Transamerica Corporation under date of September 10, 1949, Mr. Vest stated that the order was in the same form in Ilich it was discussed at the meeting on September 161 1949. Following a discussion, upon motion by Mr. Szymczak, unanimous approval was given to the following statement and order: "UNITED STATES OF AMERICA BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM IN TIM MATTER OF TRANSAMERICA CORPORATION STATEMENT AND ORDER ON RESPONDENT'S REQUEST FOR FORMAL DETERMINATION OF POWER TO ISSUE SUBPOENAS AND APPLICATION FOR SUBPOENAS "Respondent has filed with the Board a request, dated September 10, 1949, entitled 'Request for Formal Determination of Power to Issue Subpoenas and Application for Subpoenas.' "Responsive to respondent's request that the Board 'determine whether or not it has power to issue subpoenas requiring the attendance of witnesses and the productioncf documents upon aPPlication of respondent,' the Board is of the opinion, and hereby determines, that it has no power to issue subpoenas on be/Alf of the Board or on behalf of the respondent in a proceeding Under the Clayton Act. In the circumstances, the Board has no 1539 -6- /2o/49 9 alternative but to deny respondent's application for subpoenas. ORDER For the reasons set forth in the foregoing statebent, it is ORDERED that: 1. The respondent be, and it hereby is, advised that the Board of Governors of the Federal Reserve System is of the opinion, and has determined, that the Board has no Power to issue subpoenas requiring the attendance of witIlesses or the production of documents in a proceeding instituted by the Board under the Clayton Act. 2. Respondent's application for the issuance of 50 subpoenas ad testificandum and 25 subpoenas duces tecum be, and it hereby is, denied. This 20th day of September, 1949. By the Board. (signed) S. R. Carpenter, S. R. Carpenter, (Seal) Secretary no part in the contook Clayton and Eccles "Governors sideration or decision of the request and application referred to in the foregoing statement and order." At this point Messrs. Leonard, Thomas, Vestpand Millard littlicireW, and the action stated with respect to each of the matters here4_ after referred to was taken by the Board: Minutes of actions taken by the Board of Governors of the Federa, 4. Reserve System on September 19, 1949, were approved unanimously. Memorandum dated September 20, 1949, from Mr. Vest, General CoU4se 1, recommending that the resignation of Mrs. Erma Lee Hufford, 4 Steil -°grapher in the Legal Division, be accepted to be effective, in esecor.z `4111oe with her request, at the close of business September 30, 1949. Approved unanimously. Letter to Mr. Brainard, Federal Reserve Agent at the Federal 9/20/49 -7- Reserve Bank of Cleveland, reading as follows: "In accordance with the request contained in your letter of September 15, 1949, the Board of Governors apProves, effective October 1, 1949, the payment of salaries to the following members of the Federal Reserve Agent's staff at the rates indicated: Annual Salary Title Name Main Office James K. Armstrong Alternate Assistant $4,370 Federal Reserve Agent Lester J. Henk Alternate Assistant 4,780 Federal Reserve Agent Cincinnati Branch Federal Reserve Agent's Ilarry H. Ostendorf Representative at 4,900 Cincinnati Branch W. Howard Marsh Federal Reserve Agent's Representative at 41400 Cincinnati Branch Pittsburgh Branch Federal Reserve Agent's Will, J. Cosgrove Representative at 3,720 Pittsburgh Branch Gordon M. Trowbridge Federal Reserve Agent's Representative at 3,900" Pittsburgh Branch Approved unanimously. Secretary. ADPrOved Chairman.
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