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1437 A meeting of the Board of Governors of the Federal Reserve Srstem with the Presidents of the Federal Reserve Banks in Executive Se8sion was held in the offices of the Board in 'Washington on Friday, September 22, 1944, beginning at 2:10 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman McKee Draper Evans Mr. Morrill, Secretary Messrs. Sproul, Williams, Gidney, Leach, McLarin, Young, Peyton, Leedy, Gilbert, and Day, Presidents of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco, respectively. Mr. Sienkiewicz, Secretary of the Presidents' Conference Chairman Day of the Presidents' Conference stated that the e8._, luents during the sessions of the Presidents' Conference held 8.111-er this week had agreed upon eleven items which they wished to bri r, -'g to the attention of the Board of Governors at this meeting. Nd. es of a memorandum containing the statement prepared for the intornction of the Board of Governors on these eleven items had been ''' N*Ilished to the members of the Board on September 21, 1944. A copy thi --s statement, bearing the caption "Notes on Topics for Joint et 1-g of the Board of Governors and the Presidents' Conference", le att. -ached to these minutes. Each item was taken up in the order set t orth in the statement and will be referred to in these minutes 1438 91(22/44 -2- bYnumber and caption. 1. Insurance--Loss Sharing Agreement. Chairman Day called attention to the fact that the recommendatic'n that the effective date for the agreement be set for January 1, 1916 had been accepted and approved by the Presidents' Conference and 8(114 that it had been suggested that the Insurance Committee explore the a dvisability of employing a competent full-time manager. Chairman Eccles asked for further information regarding this 131?cTiosa1 in view of the fact that the Board had been advised that there was a Marsh & McLennan, Proposal that the Insurance Committee employ -rporated, insurance brokers at Chicago, in a professional advisory 4PacitY at $10,000 a year. In the discussion which followed, it apPe ed that such an arrangement had not been consummated, that the 111113osed compensation of Marsh & McLennan might be greatly reduced, 411c1 that the whole matter was in the realm of exploration. There was )111e indication that it was thought unnecessary to employ both Marsh Lennan and a ful1-time manager, but that if Marsh & McLennan were ell1P4Yed it mould be on a temporary basis which might lead to the emP ment of a full-time manager at a later date. The principal purI3c)e Qf the proposal to employ Marsh & McLennan was to obtain their 41*/rices in a temporary and advisory capacity with a view to reaching 4 co nclusion as to the best method of meeting the responsibilities of the T 'nsurance Committee. 1439 9/22/44 —3— At the conclusion of the discussion Chairman Eccles indicated that the action of the Presidents' Conference with respect to the re— Port of the Committee on the insurance and loss sharing agreement was sati sfactory 2. Revision of Regulation J on Check Collection Circulars. There was no discussion. Chairman Eccles indicated that the 110mmendation that for the present no change be made in Regulation j 4n4 check collection circulars, pending further developments and 81:1101Y, was satisfactory. 3. Personnel Selection and Training. Chairman Day said that it was felt that the situation with l'eePect to the lower grades was satisfactory but that it was not eq.maly so in respect to the higher grades where we were losing men, that the most serious problem was in respect to the development 4" retention of competent senior officers. It was the feeling of thePresidents that this was primarily due to the restrictions upon 4aaries and retirement benefits and generally upon the powers and 411thoriDy A of the Federal Reserve Banks. Chairman Eccles said that, without undertaking to speak for the Other members of the Board, he felt that we were restricted by the eT°Irell'unent's salary—stabilization policies during the war and that we had gone about as far as we could within the framework of these poli— Cies • He referred to the fact that at the time these policies were 1440 9122/44 —4— established there was in effect a classification of salaries at the Federal Reserve Banks under which there were maximum rates for all Pc)sitions and that it would be impossible to get any clearance for l'`Ites above those maximum figures at this time, although arrangements 411cIluldertakings had been worked out whereby some latitude was per— kltted with respect to adjustments. In all the circumstances he be— lielisd that there was nothing more that could be done at this time. Re observed that before the war is over there mould probably be a e°11siderable number of competent men coming back from the military 411rice and that the difficulty of obtaining and retaining able men &tithe service of the Federal Reserve Banks would be very much re— Mr. McKee added the comment that it was not only the Federal "•_ Ilre Banks that were suffering but also commercial banks and that it iv as to be expected that when men of exceptional ability developed 111 the Federal Reserve Banks there would be the risk of losing them to the commercial banking system in the next two or three years. Chairman Day stated that it was felt that it would be neces— sar7 to do something in the way of giving these men increased responsi414Y or other reasons to encourage them to remain with the System. s Proul expressed a strong feeling against arbitrary limitations (41 4.aries of officers of the Federal Reserve Banks, the chipping ' alver of Powers, influence and authority of the Federal Reserve Banks, 1441 9/22/44 -5- the decreasing of their responsibilities and their share in the 111°1'e important matters with which the Federal Reserve System is con- Chairman Eccles responded with an expression of the feeling that the situation of the Federal Reserve Banks was different from that of private or commercial banks, that we would be extremely fortunate if we were able to keep the Federal Reserve personnel out of Pederal budgetary, civil service and general accounting control, and that.t appeared to him that the real issue presented was whether increased responsibilities should be given to the Federal Reserve 13441ks and correspondingly taken away from the Board of Governors, but that he felt that it would be necessary to rely upon the Board of nors as the agency of Congress to maintain an appropriate balkce. 4. Overtime payment under the Fair Labor Standards Act of 1938. Chairman Eccles offered the suggestion that the problem pre4nted under this heading be referred to a special committee desig1 nated , uY the Presidents' Conference of, say, two members, to confer /lith -r. Leonard and Mr. Dreibelbis of the Board's Staff for the pur- Poq of making a very thorough study and analysis of the situation atld a report. Chairman Day saw no objection to this suggestion. He kdd— 'ql however, that all the Presidents had been apprised of the situa' 4 which had developed in the Twelfth District because of the fact 1442 9/22/44 —6-- that an investigator for the Wages and Hours Administration had gone illto the Seattle Branch and it appeared that as a result of his in— li"tigations the Federal Reserve Bank might be called upon for back °Ir'ertime pay to the extent of some $45,000, plus penalties which would Illake the total claim amount to about $90,000. In response to an inquiry by Mr. Ransom as to the experience c't the other Federal Reserve Banks, Mr. Sproul said that at New York the 'e had certainly been no wilful violations and that there was no krlowl A euge of any violations whatsoever, although there had been two —""-nations by the Wages and Hours authorities, and up to the present time the New York Bank had received a clean bill of health. Conse— (illentlY, if any change occurred in the situation, the New 17°111c1 expect to resist any claims. Bank At this point Chairman Day said that Of course the San Francisco Bank would resist any claims, that it were made it would keep the matter open by appealing to head-. gilarters in the Wages and Hours Administration, and that it would be glacl to keep the other Federal Reserve Banks advised as to what hap— . Perled In response to a further question by Mr. Ransom, Mr. Lee4y etat ed that there were three Federal Reserve Banks that were facing the 'Itnation presented by the first problem mentioned relating to Where payment for overtime had been computed on basic salary Y, eXclusive of supplementary compensation, but that the San 1443 9/22/44 -.7situation came under the second problem where certain em- 111°Yees or classes of employees formerly considered by the Bank as elempt under the standards established by the Act were subsequently considered to be non—exempt. Mr. Leedy felt that this was important to all of the twelve Federal Reserve Banks, as it was a question of 4et as to how well each Bank had determined the classification of e%pt employees and there was a possibility that any Federal Reserve would be confronted with the problem at any time. He felt, how— that the question of payment of overtime based on supplemental con, —1,ensation was in a different category, as the problem exists only alLthree of the Reserve Banks and the facts involved at each Bank, /1hich would apparently determine liability, are not the same. that He said the Kansas City Bank was one of the three involved, the others g St. Louis and Boston; that the Board of Directors of his Bank had carefully explored the problem in the light of legal advice of corh, ""sel for the Bank and was satisfied with the conclusions that had bee, ' reached. He accordingly questioned the need of referring this 0b1ern to a system committee. The other problem he felt might well be 8t4died by a special committee. Chairman Day expressed the reservation that when an investiga— tor came into these Banks it might be found that there was some dif— ter, 11ce of opinion and that the Banks' policy might not be sustained ' ttl ail -4- respects. 1444 9/9 /44 Mr. Ransom expressed the opinion that there was a System prob— leat end that nothing could be done at this meeting in the light of the 'u-Lscussion. the Chairman Day stated that there was no objection to Procedure suggested by Chairman Eccles. Mr. Williams said that ileh a procedure would be helpful in bringing together the various interPretations at all Federal Reserve Banks and comparing them and ke r‘4 v4-11g the Federal Reserve Banks informed. It was understood as the result of the discussion that the Chairman of the Presidents' Conference would appoint a committee which W°11341 advise with Messrs. Leonard and Dreibelbis and then report to the Presidents. 5. Research Policy and Program. Chairman Day called upon Mr. Williams as Chairman of the sidents, Research Committee to make a statement. Mr. Williams said that he thought the statement presented to the Board of Governors expressed the views of the Conference. He cazi. ed attention to the fact that the last paragraph of the statement raise d a question of procedure, referring to the phrase "it was, there— tore ) agreed that hereafter the recommendation of the System Research ' c'rY Committee should be made both to the Board of Governors and to he Research Committee of the Presidents' Conference" and that the latt, er Committee would confer with the Board of Governors. He said that this would give the individual Presidents an opportunity to consult 1445 9/22/44 —9— with each other concerning matters of research policy and also would cl%ete an opportunity to confer with the Board of Governors before tirro decisions were reached. He stated that the Presidents' Confer— ellee had reduced the size of the Research Committee to three members 8° that it would be feasible for the members of the Board and of that -411.1.ttee to discuss implications of the research policy which was beit, -"g suggested by the Advisory Committee, and that there was no ques4c),, of jurisdiction involved. ' Chairman Eccles stated that upon reading the statement it had 41)13eared to the Board that perhaps the Presidents' Conference had not illadte itself entirely clear because, if the Board's understanding of the guage used were correct, it would have some objection to the proposal. Re Pointed out that the Research Advisory Committee consisted entirely of staff members of which Dr. Goldenweiser is chairman and that Prriong the8 e staff members were members of the Subcommittee of the Research C04111 attee of the Presidents' Conference. the He stated that, of course, e was no objection on the part of the Board to the establishment the Presidents' Conference of any committee or committees that it tho light desirable and that this was perfectly proper. As the Board 4(1 not feel that it should be represented in the Presidents' Confer— erice committees, Chairman Eccles outlined the purpose of the establish— of the Research Advisory Committee from the point of view of the 1446 9/22/44 —10- 4ard of Governors. He stated that this Committee, when they de— e1°Ped a proposed policy or program, should furnish to the Presidents e°Pies of the reports that they submitted to the Board of Governors, that the Board would give to the Committee an opportunity to discuss 4ttil it their recommendations and their program, and that, on the basi ‘ -8 of the proposals and the discussions, the Board would formulate the oYstem policy. The Chairman said, however, that it would appear t14°111 that the language of the statement, unless it had been misinterpreted, the Presidents' Conference was proposing to give to the Research 4dalttee of the Presidents' Conference the power to act in formulating 83rtam research programs after conferring with the Board, but the Board telt that the determination of policy in the research field was a re— al)°rIsibility of the Board of Governors. Chairman Day said that it appeared that a program had been to,„ ' 4ual.ated at Minneapolis without any of the Presidents knowing any— g about it and that it embraced a series of topics which had been ned to members of the research staffs of the Federal Reserve Banks without ascertaining the views of the Presidents. Mr. Williams said that what was meant by the statement of the ldentst conference was "power to act for the Presidents' Conference". rtere • rring to the Minneapolis situation as a case in point, Mr. Williams Za.td that this illustrated the need for an opportunity for discussion on the Part of the Presidents, so that if there were any objection the 1447 9/22/44 —11— Research Committee of the Presidents' Conference could take the matter 11P directly with the Board of Governors in an attempt to formulate a (3grain that would be satisfactory to everybody. ' 131 Chairman Eccles said that it appeared that Mr. Williams' point 17a 3 that when the Research Advisory Committee had developed a program the P residents? Conference Committee should receive a copy of that °gram before it is put into effect. ' 131 Messrs. Day and Williams agreed With this statement, adding that the opportunity for review and dis— ellaeion was necessary in order that the Presidents could exercise 13Nper supervision and could confer with the Board if there were any ob jections. Chairman Eccles said that that was satisfactory, but that When the matter had been discussed the decision as to the policy to be t°14wed should be made by the Board. Mr. Williams then said that there was involved in the refer— enoe to the meeting at Minneapolis the fact that certain assignments c't etibjects were made at Minneapolis to individuals in the employ of the Pederal Reserve Banks, not only in the case of men who were present at the not present, and meeting, but also in the case of men who were that the Presidents and the men to whom assignments were made were ttotified simultaneously concerning their assignments, without any op— 11°114141V being afforded to the Presidents to be informed about the anal 'gnments before this was done and consequently without any oppor— tum, —4-V to discuss the matter with the Board of Governors, regardless 1448 9/22/44 Of -12- Whether the individual assignments might or might not have been gc°c1 ones. Chairman Eccles commented that the discussion had brought out the fact that it might not be feasible in the limited time available t this meeting to formulate a clear and satisfactory statement as to the meaning which the Presidents' Conference had intended to convey bY it8 statement and, therefore, suggested that the Presidents' ConCommittee and a committee representing the Board of flee Gov ernors, say, Governor Evans and Dr. Goldenweiser, confer and draft 4 statement, which would meet the views of both the Presidents' Confer- ence and the Board. He pointed out that what the Board wished to have Clea 1Y recognized was the responsibility of the Board of Governors for to -`40.1ating System research policy. Mr. Sproul said that he thought that question was inherent in the A, 'lscussion and that there were two conceptions that had been ex, III sed by Chairman Eccles that were contrary to Mr. Sproul's underfig. First was the conception that the Research Committee was a e°ntlittee of the Board--he thought it was a committee of the System, 641c1 hat the System included the twelve Federal Reserve Banks as well 4 the SYItem a.a Board of Governors. Second, that the Board alone would formulate Policy, whereas he thought that the System, comprising the Banks 4.1 as the Board, upon recommendation of the System Research Ad7 Committee would formulate System research policy. He objected 1449 9/22/44 -13- IriOrously to the idea that a man working in the New York Bank, under 1141 as President of that Bank, could be told what he was to do in that 4eld without reference to the President. Mr. Ransom raised the question whether that difficulty could 1115t be overcome by determining where final responsibility for System earch policy rests. Mr. Sproul said that he thought research policy e°1Ja-cl be determined by consultation between the Presidents' Conference -arch Committee and the Board of Governors. Chairman Eccles said that he did not agree with that view and that there was evidently a tulld -"anlental difference. He stated that it was his view of the matter that the Board of Governors, as the agency of Congress, was publicly l'esPonsible for the actions of the System and its statements, and it 8"I11ed to him that the Board would have to take the responsibility for 8Yetera research policy. Mr. Sproul said that he did not understand the conception 4401ie d in the expression "agency of Congress", because it seemed to be ha sed upon the supposition that the Board of Governors was the sole trlet ent Federal Reserve Banks were of Congress, whereas the twelve alao created by Congress under the same statute as that which created 80 the ard and that they also had statutory responsibilities. He felt that there was a System composed of both the Board and the Banks. Chairman Eccles stated that he did not agree with Mr. Sproul, that gb. the Board is charged by Congress with the responsibility of the 1 -.1- supervision of the Federal Reserve Banks, that the members 1450 9/22/44 -14- ° the Board are appointed by the President and confirmed by the Senate, that the Board is required to make an annual report to the Congress, arid that from time to time committees of Congress call upon the Board tor information and for advice with respect to the affairs of the Stetll and matters in which the System is interested. He did not see 4514 it would be practicable to divide the responsibility for formulatinD Policy with the twelve Federal Reserve Bank Presidents, who, in tlun that are each responsible to nine directors, 108 in all. He added the Presidents' Conference was a wholly voluntary body without statutory authority or functions, while the Board of Governors is a tatutory body with statutory authority and functions. He felt that the r residents' Conference could formulate its views in regard to MI-cies and could express them to the Board, that the Board could lirc*/ 'with the Presidents' Conference in connection with policies and th L at should do so, and that there should be full confidence and e0overation, but that there was no escape, in his opinion, from the e°rIelusion that the final responsibility must rest with the Board of ernors Chairman Day expressed the opinion that what was desired was Pra that working arrangement and he believed that the suggestion the Presidents' Research Committee meet with Governor Evans pre- Ntlt d an eopportunity for working out such an arrangement. Chairman 'es said that that would be satisfactory to him, stating that the 1451 911 /44 -15- Members of the Board had discussed the whole matter before this meeting and were in agreement. Mr. Williams said that the immediate problem was how to handle the situation where national, regional and local research intermingled, Which presented practical problems. Chairman Eccles said that, so fat 'as local research was concerned, he felt that that was a matter Btrictl- within thin the prerogatives of the Presidents, but that, when it cablle to the national domain, the work should be done after consultation 11414 and advice of the Presidents' Research Committee, stating that the Ilati°nal program would have to be based upon a consolidation of the 1.001 "Programs so that the Board had to be the place for final decisions lipon which the Presidents' Research Committee should be an advisor after having had an opportunity to be fully informed. Mr. Williams added the 4.1_ 'uought that the two fields were interwoven into a fabric that 17°124 be destroyed if an attempt were made to distinguish, but that as , ' Practical working matter he felt that no serious problem should arise. *. Ransom commented that the language which had been used ti e statement received from the Presidents' Conference raised the Drobi " 1.4 by using the phrase "with power to act in formulating System arch programs" in such a manner as to appear to place that power the Research Committee of the Presidents' Conference. He felt that i t Would, be possible to work out the practical aspects of the 1452 911 /44 -16- Problem but that, as to the issue which had been raised in the discussion between Chairman Eccles and Mr. Sproul, he was in full agreement th Chairman Eccles. He suggested that the practical aspects of the Problem could be worked out through language that would not be as preas that formulated by the Presidents' Conference, without raising the issue of jurisdiction. Chairmen Day concluded the discussion by saying that the matter would be left to the proposed consultation between the Presidents' Research Committee and the representatives of the Board of Governors. 6. Commitment Fees under Section 13b and Regulation V. Chairman Eccles said that the Board agreed with the suggestion that certain rates under section 13b of the Federal Reserve Act be modi_ and that appropriate action should be taken by the Federal Reserve and by the Board of Governors to carry out the recommendations. 7. Reserve Ratios of the Federal Reserve Banks. It was agreed that the subject had been fully discussed in conferences. 8. Objectives of Postwar Monetary Policy. Mr. Williams stated that, after the monographs which were in ccqz. 'se of preparation had been finished, it would seem desirable for the t ' °ard of Governors and the Presidents to meet in an all-day session (leito ted exclusively to these monographs, at which the authors would 141.se, 'se their papers and there could be an exchange of views. He tIleh , "gat that an appropriate time for such a meeting might be imraectia, 'elY following the next meeting of the Federal Open Market 1453 914 /44 -17- C omaittee. A question was raised as to whether all of the material /7°111d, be available by that time, and it was the consensus of the meet&nZthat the authors should understand that they would be expected to e°111101ete their material a sufficient time in advance of the next meetof the Federal Open Market Committee to enable the Presidents and the members of the Board of Governors to read the material and be prefor a discussion at that time. 9. Treasury Financing. It was agreed that no discussion was necessary in view of the aet that the whole subject had been given exhaustive consideration at the meeting of the Federa3 Open Market Committee earlier this week in l'ihieh the Presidents participated. 10. Modification of Section 13b. Chairman Eccles referred to the portion of the statement to the effect that "there are fundamental questions inherent in the prochanging the location of the Fund". He stated that the loca- 404 of the fund now is in the Treasury, that it had never heretofore bee„ - Possible to move it from there, and that the present arrangement he4 Proved to be unsatisfactory because of the position which the easurY had taken with respect to the manner in which the fund could 1111"(1 and the conditions under which it could be drawn upon. He that the proposal which had been laid before Congress was to the fund with the Board of Governors in substantially the capacity 1454 "/44 -18- (If trustees of an insurance fund. He pointed out that under the pro- Which had been laid before Congress the present section 13b would be entirely repealed, thus terminating any authority on the part of any ecieral Reserve Bank to make any loans and substituting authority only to guarantee financing institutions against loss and to make committo purchase from financing institutions loans made by them, the °Perations of the Federal Reserve Banks to be conducted under regula- tions , oy the Board of Governors. Chairman Eccles said that there had developed a considerable Misconception of the entire proposal and that the Board's position in 41stdon to it had been misrepresented. He explained that in his view Of the matter the Board would not be an operating body and that, contra__ 47 to statements emanating from other sources, the Federal Reserve 4rks Would not be engaged in competition with commercial financing institutions, because by the repeal of the present section 13b they 17°111d be entirely without authority to make loans in the first instance, 4nd that any loans which they guaranteed must be initiated by comer' banking institutions. He said that one reason for placing the with the Board was in a precedent which had already been estab"ed in the case of the Reconstruction Finance Corporation, so that the Board might see that the Fund was invested in Government securities Wh4 ' eh would yield an income which would help to meet any losses that rilight be chargeable against the fund. 1455 9/22/44 -19Chairman Eccles reviewed in detail the history of the develop- rtletit of the proposal, referred to a letter which had been received from SProul, and a reply which had been made by Yr. Draper, and also reterl'ed to the position which had been taken by the American Bankers 48sociation and other groups representing commercial bankers. He said that he had been pleased that the Treasury interposed no objection to the legislation, which he had not altogether expected. However, he 8a1d that he felt that this was the result of an extensive conference Which he had had with Under Secretary Bell, in which Mr. Bell did not l'alse any question about the transfer of the fund to the Board, but did j'ai8e other questions, which were met to the satisfaction of the Treas147 and which were covered by amendments which he (Chairman Eccles) proP"ed When he first appeared before the House and Senate Committees at the . tame when they were considering these bills. He said that Mr. Bell raised the question as to what would han 4en when there was no longer any need for the fund and whether the 1)1‘°13(1sal was just another way of getting the money permanently into the hands of the Federal Reserve Banks. He had assured Mr. Bell that that was not the intention and that he would propose an amendment to Inake it clear that the money would be returned to the Treasury. Another question raised by Mr. Bell was with respect to the absence of any limit upon the amount of guaranties that might be made 13Y the Federal Reserve Banks and he agreed with Mr. Bell to propose 1456 9/22/44 —20-- that the total amount of guaranties be limited to not exceeding four LlItes the amount of the fund. That was satisfactory to Mr. Bell. An objection advanced by LIT. Bell was that the bill would Permit 100 per cent guaranties and it was pointed out to him that t was the intention to cover this by regulation, as there was no Mr. Bell objected illtention of authorizing 100 per cent guaranties. t° the absence of the limitation in the bill, and it was agreed that aillendment should be proposed to limit it to 90 per cent. 11'48 There also an objection on the ground that there was no termination date stated in the bill, and consequently it was agreed that a limit f five years should be proposed. Chairman Eccles added that, upon the basis of these agreements, Bell expressed himself as entirely satisfied and subsequently re— to Congress that the Treasury had no objection to the bill. Dixt, ing the course of these discussions no objection was made by the Tren "ellrY to the transfer of the fund to the Board of Governors and no 111"tion was raised concerning this aspect of the matter at any time c11117.4-Lng the course of the hearings which were held. On the other hand, 'Man Eccles felt that serious objection would have been raised had it been proposed that the control be transferred to the Federal Reserve taro, or to the Presidents of the Federal Reserve Banks or to any group 4Presenting the Federal Reserve Banks as such. He pointed out that the fund, in order to be effective, had to be pooled, that the Board 1457 9/22/44 —21— the responsibility of making the regulations governing its use and ale° the responsibility of reporting to Congress and that, consequently, t seemed appropriate to place the fund under its control. He said that, it was obvious that it could not be split up into twelve funds because that would seriously handicap the Federal Reserve Banks, some °f/lrhich might need a larger share of the total fund than others. Mr. Sproul said that there were two aspects of the matter that c°11cerned various Presidents, some being concerned with one and others with the second. One aspect was the question of procedure. He reviewed the . clrcumstances connected with the manner in which the bill had been 111)rlitted to the Presidents, the brief time that was allowed them for l'eting their views, and the fact that some of the Presidents pro— P"ecl amendments and that none of these amendments appeared in the bth -- as presented to Congress, which led some of them to feel that 11"siblY their recommendations had not been considered by the Board. tfiiS connection Mr. Sproul referred to the fact that the Presidents 44 been informed that the submission of this particular bill to the 111.es. 'dents' Conference should not be taken as a precedent for future ")111-issions to the Presidents' Conference of bills in which the Board was . Interested. He stated that the Presidents had been informed that, lth°11gh the bill had been introduced, there lwould be ample time for flIrther discussion, but that the next thing that the Presidents learned /7e. that there had been hearings at which the Chairman appeared and 1458 9/22/44 -22- that amendments had been offered of which they had not been informed, (1) that they were again deprived of an opportunity for discussion and N:Tession of their views. He said that the aspect of the matter which he had been discussing was one which bothered some of the Presidents, while there was another aspect that bothered some of the Presidents 144 not altogether the same ones--the second aspect was the proposal that the Board in effect should be the custodian of the fund, which /148 regarded by some of the Presidents as being a step into the field f Operation of the System, which should be left to the Federal Reserve s because it did not properly fall in the field of general super' Bahl,“ On and coordination exercised by the Board of Governors. He said that . ln the view of some of the Presidents, if there were a clarificatiQa of the ambiguous provisions of the law with respect to the utilization of the fund, it could well be left in the Treasury as a common 15'3°1 which could be drawn on by the Federal Reserve Banks with the Boa "I's approval to meet losses and that that would be a better proposal fro m the standpoint of System organization and might be of some aid he passage of the legislation even though the Treasury had not exPl'eseed any opposition to the transfer to the Board of Governors. He added that he knew that some concern had been expressed about the pro13(3"d transfer to the Board and felt that some opposition might be elittlinated by leaving it in the Treasury. Chairman Eccles said that there had been no mention either by 1459 9/22/44 -23-- the Treasury or by any member of either committee in Congress during the Course of the hearings of any such opposition and that he had not seen it in any article or heard any other criticism except that advanced by the Presidents. Mr. Sproul added to his previous statement that he did not think the idea of investing funds and utilizing the interest in meeting 1°88ee,which is really an accounting device for transferring funds from orle Pocket to another, is a matter of importance. Mr. Draper reviewed at length the circumstances surrounding the reference to the Presidents of the proposed bill for comments and alleastions, the letter which the Chairman had received on this subject, and the reply which Mr. Draper had made to Mr. Sproul. He supplemented What the Chairman had previously said on this subject, stating that all f the points brought up in the Presidents suggestions were carefully ' l eviewed by himself and Chairman Eccles, and, in fact, had been given consideration previously. He also referred to the fact that the Board had not initiated the introduction of the bill at the particular 4111e, as it had not thought that anything would be done before election 4101 that its introduction was entirely due to a decision by Senator 1114ner, who thought the time was propitious. Chairman Eccles at this point again reviewed the history of the bill, going back to the Baruch-Hancock Report, and took the positic/1n that the Presidents, from the time of the publication of the 1460 9/2444 -24- Baruch-Hancock Report, had had ample opportunity to express their views arid recommendations to the Board of Governors. With respect to the position that the reference of this particular bill to the Presidents should not constitute a precedent, Chairman Eccles reiterated his view that the Board would have to decide in each case whether legislation which it might propose should be first submitted to the Banks, as there night be situations in which it wciald be inadvisable to discuss the legislation in advance. In the course of the discussion, Chairman Eccles stated that the recommendations that had been received from the Federal Reserve 441ks there was no unanimity, and the Board could not possibly have dOpted all of the recommendations, because they were conflicting, and added that the Presidents had lost no opportunity to present their by reason of the fact that their suggestions had not been in- porated in the bill before it was introduced. Mr. McKee stated that he would like to express his opinion becallee he had not favored this particular legislation, although he did 11°t intend by that statement to have it implied that he would favor He t1i- 1ng the fund over to the Federal Reserve Banks to handle. ' tho„ ught the Treasury requirements had been a hardship ever since the to those reEll4Ctillent of the present section 13b, and he was opposed atrictions. But he was also opposed to the Board having any operating allthority or having anything to do with operating the fund. He felt 1461 -25- 9/22/44 that money could not be loaned without creating liabilities and with°Ilt subjecting someone to litigation and he did not feel that that was arky Part of the proper functions of the Board of Governors. He said that he did not have in mind any particular solution of the problem hillt that he did not like the idea of a policy-making board created by Cellgress being vested with the responsibility of attempting to operate manage a fund like this. 4nd Chairman Eccles said that in order to avoid any erroneous imPl ' ession of his position in the matter, he wished it understood that the --egislative proposal had been reviewed carefully by the Board's l1eral Attorney, that every legal aspect had been thoroughly con4 ' 814red, that no part of the fund was to be loaned to anyone, and tha't no part of the Reserve Banks' funds was to be loaned in the first i'stance. He stated that under this proposal the Federal Reserve Banks W°111d act solely as guarantors of loans which were initiated and made ill the first instance by commercial banks, just as was the case in the T loan procedure, the initiation of which rests with private banks. Re said that the entire proposal had been reviewed very carefully from a Practical banking standpoint as well as from the standpoint of legal 4aPect5• He said, however, that he had been prepared to compromise With the Treasury if the Treasury had offered any objection and that, Previously recited, he had met every objection in a manner satist4et017 to the Treasury and that the idea that the Board should have 1462 9/22/44 —26— the proposed trusteeship over the fund was not one to which the Treas— 1117 offered any objection. He saw no reason why it would be better tor the Presidents to have trusteeship over the fund than for the 13(3e-rd to do so and, on the other hand, he thought that Congress would not be willing to approve such a proposal. Mr. Williams said that he felt, however, that there would be "ITeral advantages to such a proposal and referred to the great in— terest which the Directors of the Philadelphia Bank had taken in every cilleetion which had arisen under section 13b. He added that the pro— had been interpreted by some as a further move in the direction r centralization and referred to the experience which had been en— colIntered with the controversy which had developed under Regulation (4 along that line. Chairman Eccles then reviewed the position of the A.B.A. on '44.11g by governmental agencies, and read at length from a statement ent4tled "Legislation to Finance Business in the Post—War Period", c°Piee of which were distributed to all of the Presidents during the keeting. During the course of the reading of the statement, Chairman celes said that Mr. Silverman, Legislative Counsel of the Smaller 176.1.1 plants Committee of the Senate, had called up on the telephone With reference to a proposal that they were thinking of incorporating 14 the bill 'with respect to the Smaller War Plants Corporation, making 1463 9/22/44 —27— lOaris by that Corporation eligible for discount by the Federal Reserve 8anks and making it mandatory for the Federal Reserve Banks to accept 811ell Paper. He said that that had great political appeal to some People as a means of getting money for the use of a corporation with— out an appropriation by Congress and the argument was made that they were entitled to this consideration from the Federal Reserve Banks When private banks could get money that way. Chairman Eccles pointed Out to Mr. Silverman the reasons why such a proposal would be entirely bjectionable to the Federal Reserve System. He added that of course the Board would have to fight any such proposal if it were advanced. o also said that Mr. Maury Maverick had criticized the 13b program on 4,_ ' '- "u ground that it did not take care of small business and had ewlse criticized the V and VT program for the same reason. Chair- 111411 Eccles asked that every President, following the meeting, review ire:1'7 carefully the contents of the memorandum from which he had been reading. Mr. Williams said that the Presidents' Conference had a legis— latt ve committee which had had a great deal of experience, and that he thou ght that the problem presented was one of procedure or technique 141 considering legislative problems, with respect to which it would be „ (.QuITisable to take advantage of the machinery which had been estab— ed as a means of consultation. Mr. Sproul stated that he felt eha Lilian Eccles was following a very poor procedure if he took the 1464 9/22/44 -28that he could not consult or confer with all the elements in the System because they might not agree with or support the legis1414.0n that the Chairman thought desirable; he felt that consultation aIld conference would always be useful because it would very likely ' clevel°P important considerations that should be taken into account 8113r legislative program, which might not be forthcoming under the ellairman's conception of the procedure that might be followed. Chairman Eccles said that he was not taking the position that the Board should not confer with the Presidents or their committees 44c1 get System support and that the sole position which he was taking that he did not want to be put in the position of saying that the N was an obligation on the part of the Board to confer in all mat- ters because he did not believe that to be true. He stated that the toe., 4-k1 does confer very freely and is likely to continue to confer freely, that SO far as the particular legislation under discussion was con- ed, the Presidents had had ample opportunity to present their Itiews and the fact that the bill was introduced under the particular cir curnstances did not mean that they had not had their opportunity to 1)1‘esent their views either before or subsequently. Mr. Sproul reiterated that there was a difference between havIrig an opportunity to express views and having an opportunity to con- 8''It and to discuss and to present arguments and to obtain clarification of positions before commitments were made. Chairman Eccles 1465 -29- /44 (91 WA. that he had discussed this whole matter fully with Mr. Sproul, had told him about the amendments that had been agreed to and had exto him why the amendments which he had proposed were not acce ptable. Mr. Leedy raised the question whether any consideration had b • e..,-LI given to a suggestion as to the possible value of retaining the Federal Deposit Insurance Corporation stock and not surrendering it to the Treasury. Chairman Eccles said that he could not see any value such a suggestion, pointing out that the stock had been charged off u,T the Federal Reserve Banks. Mr. Sproul said that the point inWas that,whenever the question of supervision of banks and autl"tY of the various Federal agencies arose, there might be some ad- van tage, even though it was small, in the Federal Reserve System having retained ownership of the stock in taking the position that the System 811°111d absorb the Federal Deposit Insurance Corporation rather than th e Pederal Deposit Insurance Corporation taking over the System. eha irman Eccles expressed the view that this point would carry no 11. International Finance--Monetary Fund and Bank for Ree°118truction and Development. Chairman Eccles read a statement which had been prepared enled "Federal Reserve Policy with Respect to the Proposed Internatio tlal Monetary Fund and Bank for Reconstruction and Development". tee 1466 9/22/44 -30- Copies of this statement were distributed to the Presidents. Chairman Eccles said that this statement was the unanimous view of the Board, except Mr. McKee, who had voted "No". At the con- clusion of his reading of the statement, Chairman Eccles said that he would like to supplement it by saying that he had personally hoped that the Bretton Woods Conference mould not be held until after elec4°11 and that there were certain aspects of the program which he did 40t like, but that he also had difficulty in accepting any alternative that he had seen. He felt that the System could not well be left out Of the Conference, but that the System played no greater part, in fact P°88:11b17 a lesser part, than most of the central banks of other countll'es- He said that the Board had taken the position that the results ()lithe Conference were public property and it seemed to him that, certai,,, -u47 on the part of the officers of the Federal Reserve Banks, it W°11-1d be bad taste to go out and oppose the program. He said he recog- rlized the fact the situation was different as to individual directors or the Federal Reserve Banks, but that it seemed to him that we had to do, 'Ur part in cooperating hereafter. He felt that there was no doubt that the opposition to the Plan had been fully expressed by many who had ra; -4-soussed it and that it had had a very wholesome effect because the p la as finally developed was greatly influenced and improved. Re said that the fundamental difference was on the question whether there should be a key country approach or an international approach 1467 9/22/44 —31- ahd that that was settled by the outcome of the Bretton Woods Confer— ence Which had been accepted by the representatives of all the countries Participating in the Conference. Mr. Sproul said that he could not accept the view which had been expressed by Chairman Eccles, that he did not think that there hacl been a day in court, and that he did not like the way the matter Ilad been handled, although that was really a minor aspect of the matter xl°w. He did not think that this was an agreement which had been ac— cePted otherwise than in the sense that it was a recommendation to the various governments, that, so far as he was concerned, in a matter (If this importance, until it became the law of the land as adopted by the Congress of the United States, if he had any view contrary to that exhr eased by the delegates at the International Conference, he had a cilltY to express his view and that, if it became a question of such an exy,, 1-'esslon being damaging to the System, then he would have to decide l'fbether to leave the System, but that he could not agree with the view that the officers of the System from here on should be muzzled, because be felt that that would lead to the destruction of the System. Chairman Eccles said that the Board was not undertaking to Ut (311 a muzzle, but that it was stating its position as to the con— slljences of publicizing any position on the part of the officers of the banks which might be contrary to the Bretton Woods program even til01101 he personally did not like all the aspects of the matter. Mr. 1468 9/W44 —32— who found it necessary to leave the conference at this point, stated that he was in agreement with Mr. Sproul's position. Chairman tccles said that it seemed to him that to the extent that there were e°4flicting views among the Federal Reserve Banks they were perfectly at liberty to express them but that what he was trying to point out Ilas that it would not be constructive for the System to indulge in %bite controversy on the subject, and to follow that course would InerelY result in the elimination of the System as at present constituted. At this point Chairman Eccles and Chairman Day left the meet— rig because of previous arrangements for leaving Washington and, by 1111artimou8 agreement, Mr. Ransom took the chair. Mr. Williams raised the question as to what our position should if the Treasury asks those Reserve Bank men who participated in the 8rettOn Voods Conference to go out and sell the plans to the banks and the Public in their districts. No discussion developed as several par— pants already had left to make train connections. Mr. Leedy stated that the subject of the Fund and the Bank has been Under discussion with the directors and branch directors of his , '4 ‘ that as a part of a program to inform these groups as fully as P°88ible Mr. Edward E. Brown has recently discussed the proposals with the,. 411 that Mr. John Williams has been invited to present his views, and that , Lt is contemplated that Dr. Goldenweiser and perhaps others will be a sked to participate in the discussions. He expressed the hope that 469 9/22/a -33- tothialg would interfere with carrying out that program. His own views °flCerning the proposed plans, he said, were not in accord with those of lvtr- Sproul, but regardless of individual views, he feels that the 48°I've Banks should seek the best answers they can get to the ques— t 1°11u Involved and that the proposed plans are entitled to be examined slim pathetically. Mr. Leach said that the plans for the Fund and the Bank as 4gre°d upon at Bretton Vloods may be satisfactory, but he can not sub— to the idea of instructing anyone as to the position he should take before these plans are approved by the legislature. Mr. LcKee saw 110 harm in expressing personal views and convictions but felt that it W0111 -4.,4 be well not to talk much about the matter. The meeting adjourned at 4:10 Appr Chairman. 1470 9/22/44 NOTES ON TOPICS FOR JOINT MEETING OF THE BOARD OF GOVERNORS AND THE PRESIDENTS' CONFERENCE 1. illauzsace - Laaa_aaring_Agicumgat The report of the Committee on the insurance and loss sharing agreement was discussed. The Conference indicated its general approval c/f the report on the loss sharing agreement as presented by the Insurlee Committee, through the Committee on Operations, subject to certain ! Li.l.nor changes. The Committee's recommendation that the effective date for the a. Q-eement be set for January 1, 1945 was accepted and approved. It suggested that the Insurance Committee explore the advisability 4.; employing a competent, full-time manager to carry on the work of i e Committee under its supervision and general direction. It was r neemed impractical for the chairman of the Committee to devote the ecessary time to the administrative work. 2. Zaldaisla _of egulation J_0101hck coligiatiQILiarsullaza Consideration was given to the report of the subcommittee on RegUlation J and the cash collection circulars, dealing with possible acceptance of conditional remittances for cash letters. Reasons for lid against amending Regulation J and check collection circulars were 4..;lscussed. It was decided to accept and approve the recommendation of ' ire Committee on Operations to the effect that for the present no change e made, pending further developments and study. 3. zezzsuagi_aejsaticm_auLTraiaing The Conference reviewed the progress that is being made by the Ileserve Banks in 10, personnel training programs. Various methods are fols,4ed by the Banks but most of them include educational encouragement, .'aff meetings, rotation, participation of officers and employees in 1 7 life of the Reserve Districts, and continued appraisal of the de10pment of promising men. ' Under present conditions, few of the Banks have been able to attract young men of real promise. All of the Banks have lost many (3;,Pable men to the armed services and some have lost or are in danger losing men of unusual qualities to commercial banks, industries, rid services that are offering greater opportunities for advancement. 1471 9/22/44 -2- a certain volume of turnover in this area is to be expected, .• 11.e problem of attracting and keeping promising persons is becoming Increasingly difficult and requires continued consideration of the subject by the Board of Governors and the Presidents, if the System iS to acquire, retain, and develop the kind of key personnel that 11?u1d eventually provide the necessary leadership in the Reserve Districts. DlIgrtime Tvment, under the Fai • TAlt.s In response to the Board's request in its letter of September 8 1 some of the 944, the Conference considered the problems facing iLl?serve Banks in connection with the payment retroactively of overzaJme under the standards established by the Fair Labor Standards Act 1938. Specific problems that have arisen dealing with wage adjustments under two conditions are: 1. Where payment for overtime has been computed on basic salary only, exclusive of supplemental compensation; and 2. Where certain employees or classes of employees formerly considered by the Bank as exempt under the standards established by the Act are subsequently determined to be non-exempt. These problems are becoming particularly acute at the Federal neserve Bank of San Francisco, which may have to face a legal ._ t i 'sue involving not only payment of claims for overtime in the past also a penalty in the like amount in cases of violation. Because rae subject is of direct concern to all Reserve Banks the Conference 4e53-res to discuss it with the Board of Governors. ' 5* BasearQh PUiay_and_Emgram The Conference reviewed interim developments in the field of re search as recently broadened by the Reserve System authorities. Deplite difficult conditions, all Federal Reserve Banks have strengthened y. A conv sir research staffs and enlarged their scope of activit and h product researc the in mlderable improvement has been noted public through the and s busines method of conveying it to banks, Donthly bulletins, special publications, conferences, and addresses. ineMands for this product, as well as participation in conferences and !stings, from leaders in banking and business have increased subsuantially. ZI 1472 9/22/44 -3- In one way or another the Reserve Banks are participating to at? increasing degree in special outside activities at all levels--na: ta onal, district, and local. Included in these activities are par.slcipation in the Monetary Conference at Bretton Woods; participation ?-ri the work of the Committee for Economic Development; assistance to the special legislative committee on postwar economic policy and Planning; assistance to various state and local banking committees; Promotion of educational activities, and otherwise initiating, deeloping, or participating in seminars or discussion groups among uankers and business men. The Conference considered the progress now being made by the 8aaking and Credit Policy Committee established (a) to appraise the Present and future position of banking in the light of prevailing Policies of the Reserve System and the Treasury, and (b) to survey possible postwar problems and suggest credit policies appropriate to 'he then prevailing conditions. It appears that the investigation this Committee may provide a real opportunity to evolve a compreresearch program in the field of primary interest to the ,sive ren 1 stem in discharging its monetary and credit responsibilities. The 7 1(311ference desires to have continued review of these possibilities wiith the Board of Governors at their joint meetings. Furthermore, t is prepared to hold a special session for the purpose of disenseing the findings of the Committee when its work is completed. Because of the strategic importance of the System in the national and regional economies and its unique relationship to public 1:nd Private agencies, institutions or establishments, it is felt that 8 'road research policies of the System should be among the primary re:Ponsibilities of the Board of Governors and of the Presidents' Con'erence. It was, therefore, agreed that hereafter the recommendations the System Research Advisory Committee should be made both to the n°ard of Governors and to the Research Committee of the Presidents' e°11ference, and that the Research Committee of the Presidents' Confer' rice, after consultation with the Presidents whenever necessary, should with the Board of Governors, with power to act in formulating 'Ystem research programs. r 6 , •CisZuniimantLiaga.9._unciaration 131D and Rezasitiola The Conference considered the existing rate schedule for adw • ences and commitments made under section 13b in relation to rates buarged under Regulation V in connection with T loans. The Reserve 'ank rate schedule provides for a minimum commitment charge of 1/2 c)r cent, whereas the maximum commitment charge that can be made on ans granted under Regulation V is 1/4 per cent. Inasmuch as it is r 1473 -4- 9/22/44 Possible, even though unlikely, for the Reserve Banks to enter into ?clinnlitments on loans guaranteed under Regulation V, it was suggested that certain rates under section 13b be modified, and it was the view ?f the Conference that the subject be discussed with the Board of Uovernors as a preliminary to some uniform action by all Reserve Banks It was suggested that the problem might be met by adding a footnote to the existing section 13b rate schedule, as follows: "With respect to any loan as to which a guarantee is issued under the Contract Settlement Act of 1944 or Regulation V, the commitment fee will be not in excess of whichever is the higher of 21 , of 1% per annum or 50." The Conference also desires to discuss with the Board of Govr4ors certain developments under the T-loan program, one of which is pe sponsoring of clinics conducted by the Ordnance Corps of the Smaller ea/' Plants Corporation. In these clinics, representatives of the Corps 2cPaain the facilities for financing contractors and subcontractors on ?rmination but make only scant reference to interim financing under he T-loan program. 7. of declining Consideration was given to the current problem re nge implicalonger-ra the ti:erve position of individual banks and to in individual decline the that b n of this decrease. The consensus was but that Account Market Open tnk ratios can be adjusted through the inprobably ratio System 1 1.7 general question of the decline in the ; yet not has present at 2'1-ves legislative action. The System ratio 'sached the danger point but may approach it at the turn of the year. The sense of the Conference was that as the ratio approaches to the Federal legal limit it would be desirable to seek amendment say, 25 per to, nt requireme 11.ceserve Act reducing the present reserve present disthe that t?nt uniformly against notes and deposits, and be should deposits and I:letion in the requirements against notes e; lininated as unrealistic. It was also felt that the opportune time Jr legislative action in this respect might be when a renewal of au: to use Government securities as collateral against Federal serve notes is sought before June 30, 1945. the E 8, . Ztaaatimu_tf_Rost,Rer Monetary Polic credit problems There was a general discussion of banking and 1474 9/22/44 -5-- are likely to arise during the transition period and afterward. While it was recognized that under current conditions present policy and operation of the System and the Treasury in general coincide, this nlaY not be the case after the war. It was also pointed out that there Prevails a good deal of skepticism among the bankers and the public cith I respect to the future position of the System and its ability to arrY out its present monetary commitments, should they remain in elfect after the war. Inasmuch as the Committee on Banking and Credit Policy is noW working on the project that embraces many of the postwar monetary credit problems, the Conference agreed that it may be desirable for one Board of Governors and the Conference to continue the discussion 4.!1 objectives of postwar monetary policy in a separate session when :41e work of the Committee becomes sufficiently advanced to crystallize Its findings. 9. The Conference reviewed various developments during the Fifth Loan Drive. Particular attention was given to the speculative and 1,41airect purchases of marketable securities by commercial banks during ;fld at the close of the drive. The consensus was that the memorandum 1,!ted August 11, 1944, from the Executive Committee of the Federal Open 7-rket Committee to the Secretary of the Treasury clearly stated the ;.2-fferent aspects of the problem and suggested appropriate remedies. Conference, therefore, subscribes to the analysis and the recommenda' -°ns contained in this memorandum. 10. gsadj-ticallsaLAt_actisza_1,12 The proposal for modifying section 13b of the Reserve Act was ussed and various provisions of the bill now pending before the "gress reviewed. The Conference is in sympathy with the underlying purposes pending legislation designed to modify section 13b of the Re1 e Act, but there are fundamental questions inherent in the provith°11 changin7, the location of the fund which should be discussed with e Board of Governors. or Eleven Presidents voted for this resolution. Mr. Young, of Chicago, voted against it, stating that he is 'vor of the bill now before the Congress and that this resolution in f, 1475 9/22/44 -6- 1.8 inadvisable because it may be construed as opposing the proposed legislation. 11. inIErnational Finance--MoDetary FlInd ank_Lon_Ee.e..2astruction and DQvel2pialLaii, Consideration was given to the proposals for the establishment 2f the International Monetary Fund and of the International Bank for Reconstruction and Development as agreed upon at the Monetary Confer!nee held at Bretton 'Woods last July. All members of the Conference dgreed with the underlying purposes and objectives of the proposals but they expressed divergent views as to the best means of achieving them. 421:61-Againat CAMeat2 else 0" ri.. There was a feeling, on the one hand, that the proposed Monetar, / Fund is not a practical way of obtaining international currency stabilization during immediate postwar years and that it has defects r longer-run use. There does not appear to be an urgent need for tue Fund so that the plan agreed upon at Bretton Woods seems premaIlre. A more desirable approach would be to deal directly with the Problems that are bound to arise in the transition period. For this urpose the proposed International Bank could be made more useful and provide a concrete step toward currency stabilization. The nited States and Great Britain should get together to consider suitUnited able arrangements for pound-dollar stabilization, including the problem 4 unfreezing or funding blocked sterling balances. j g According to this view, it would be desirable to consider separately the Bank and the Fund without imposing mandatory membership in both. The Bank, which is now designed to supply long-term capital could be t adapted to the solution of the problems arising during the transition period. It would also serve to develop two things which it s desirable to salvage from the International Fund proposal. The Bank could provide a cls meeting place for international consideration of ex, uarige problems and rates and, with some modification, the Bank could rovide exchange stabilization loans when exchange controls can be reaxed and international currency stabilization is possible. The pror cedure in developing the proposed monetary and credit plans is to be „?gretted because it excluded consideration of alternative approaches d involved moral commitment by the United States before general pubIC acceptance was obtained. V 1476 9/22/44 -7- 4Q.1XZjavorirILI Curreie, Exoakos&,1 Zow Several Presidents, on the other hand, expressed diametrically °PPosite views. They recognized most of the difficulties that surround ;:he proposed plans but stated their belief that the difficulties would be present under any other plan, or in the absence of any organized Plan. They felt that, in the absence of other concrete plans, the current proposals should be given a fair trial. The present provisions °an still be modified whenever is deemed necessary. It was pointed Out that the proposed organization creates a "nerve center" where Problems of currency stabilization can be handled in the open by all n'tions. One of the most valuable features of the plans is the pronslon for continuous information in the central spot. It was held 11at the purposes of the Fund and the Bank are different, particularly s6. the provisions of the two institutions have been clarified in the ue final drafts at Bretton Woods. Mille originally there was considerable skepticism about the inc lusive approach to the problem, it is now becoming clearer that this is preferable to that of the key countries. The Conference at 1 Pproach I retton Woods showed that many nations could reach a definite agreement , or setting up international monetary mechanisms. It was felt that under the proposed arrangements the interest °f the United States will be amply protected and that by rejecting the resent proposals the eventual cost to this country might be increased. was also believed that in the final adoption of the plans certain s laimers might be adopted, such as giving notice to other particiPating countries of the limit of our obligation in the Fund. Some of the proponents of this view also criticized the proced il t,hat-re followed in the development of the plans but felt, nevertheless, at this stage there is moral commitment on the part of this !Tarltry to submit them for legislative approval. Balancing All conerations, they favored the adoption of the proposals for the Fund :fild the Bank even if some modifications may have to be made when the 1J4-ans reach the legislative consideration. Because of the vital importance of international monetary ar"gements to the Reserve System for the transition period and afterConference desires 0 and of the prevailing differences in views, themeeting current joint the ciscuss with the Board of Governors at related aspects of tretarY and banking proposals, as well as other trade relainternational Problem bearing on the restoration of .1011s. ra.,
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