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, A joint neetin7 cf the Board. of Governors of the 7Peder, ..1 E:Ystem and t',-1.e Conference of Presid.ents of the Federal Reserve 7r72'...u171:s held at the offices in Washincton., D. C., on Frid.ay, SeDten1.-)er 7 PRECEET: Et. Earti, C.117.itman 7".iv?.ns VL,ranaa Mr. Robertscn Lr. Creici, ecretr; _Lusistsmt Lecret ies.t..ricksonl ,. -7 . Tr, .,, TounL, Lad - Eansas Gilbert, of - Federill Reserve Cleveland, aich Lt. Louis, Y.inneapolis„ ;Lad an Francisco, resi)cctivel.J. v'ice President of the Federal Er. TreiLer, ,Arst New York of Bank. Reserve Kr. He171.1n, 'iecfetJry of the Conference of Presidents 7efore this meetinr, there 4:.11. 1)(en sr1714_tted to the Board a ITiemothe to-4cs to he diseused at this joint ueetine and stating. the views c)7 the Conference ofFreb ijent,J l'ect to each topic. The t°DicE, the statement of the Conference of 'iru,,I,1(..1,ts with respect to each, atd the discussion concerning then at thinet 1. cru cc follows: Amendment of the LoSS Sbarinc ±i rL:ement of the firc Federarserve Bnks to include cveru aVt in-ter conand allied risks The Confercce the 1,o r:Jlend L:.[Jrine sideration to the pro2osal to risks in the Agreement to include fire and alled '61e 7 c.urds:er dirlight of the views ex.ressed ectors of the various Federal. 2- ,6L;CI-Ve Banks. The directors of ten of the .11ser-vc 72:ani; ic-Are new 9/26/52 -c- apProved the proposal, at least in principle, in the form recommended by the Insurance Committee in its report of April 23, 1952. The directors of the Philadelphia and Cleveland B_Lnks voted against the Plan as presently proposed. After full discussion the Conference agreed that the matter be referred to the Committee on Miscellaneous Operations for further study, with a view to arriving at a possible amendment of the Loss Sharing Agreement to include coverage of fire and allied risks that would be acceptable to all of the Reserve Banks. This action is reported to the Board for its information. President Leach commented that the existing loss sharing agreement contained a provision that it could not be amended without the consent of all of the Federal Reserve Banks, that the directors of the Federal Reserve 13811k of Philadelphia had suggested re-examination of certain aspects of the current Proposal to include coverage of fire and allied risks while the clirectors of the Federal Reserve Bank of Cleveland favored the establishment Of additional reserves, and that in the circumstances, it was proposed to refer the matter to the Committee on Miscellaneous Operations for study of the objections which had been registered with a view to formulating a plan '4111-0/1 would be acceptable to all of the Banks. Chairman Martin said that, as indicated at the last meeting of the 130ard and the Conference of Presidents on June 19, 1952, the Board favored the Principle of self-insurance, and hoped it would be possible to develop 8°Me acceptable plan so that a conclusion in the matter might he reached Eit as early a date as possible. 1689 9/26/52 P. Salary administration for Federal Reserve Dank employees. In accordance with the action taken by the Conference at its June 13, 19")2 meeting a Subcommittee on Salary Administration was appointed to review the plan of salary administration under which all of the Reserve Banks are operating to determine how it is working and particularly, to give consideration to a suggestion that the Reserve Banks' salary structures should be located in the fourth quarter brackets of their respective community rates. The subcommittee has held one meeting but has not had time to submit a written report to the Conference. However, in view of the Board's request that the topic be included on the agenda for this meeting the subcommittee made an oral report to the Conference Committee on Personnel. The subcommittee reviewed the System's plan of salary administration and feels that it is doing the job it was intended to do and on the whole is working well. Special consideration was given to the suggestion that the Reserve Banks consider raising the mid points of their salary grades from the present third quarter bracket of salaries pale' by local progressive organizations to the fourth quarter bracket. No clear understanding could be reached as to why it is said that the mid point of the salary grades are presently located in the third quarter bracket of salaries paid by local progressive concerns. On the other hand, it was the consensus of the subcommittee that the introduction of the "third quarter" terminology meant only that the salary structures should be related to the average or line of central tendency of the labor market and placed somewhere above it. Each bank has determined how far it wanted to be above this average line. The subcommittee was unanimously of the opinion that there is no need to relate salary structures to the so-called fourth quarter bracket. In this connection, It was pointed out that in making community surveys, a sampling technique is used which has a built-in bias, i.e., we are surveying the cream of the labor market and not the average and are trying to stay above it. 9/26/52 The Conference concurs in the recommendation of the subcommittee and its Committee on Personnel that the Reserve Banks should not attempt to relate their salary structures to the so-called fourth quarter bracket, and feels, as does its committee, that proof of the effectiveness of the System's salary plan is to be found in the ability of the Reserve Banks to maintain staffs of competent employees. President Johns, Chairman of the Committee on Personnel, reviewed the conclusions reached by the Subcommittee on Salary Administration, which, PUrsuant to the instruction of the Conference of Presidents, met in St. Louis, Missouri, on September 15 and 16, 1952, to review the experience of the Federal Reserve Banks with the job classification and salary administration plan and, within this context, gave consideration to the suggestion in the Board's letter of May 29, 1952, that the Reserve Banks might wish to set the mid-points of their salary grades higher within the third citlarter bracket of salaries paid by local progressive organizations. After stating that the subcommittee believed that the salary'adlinistration plan was proving generally successful in accomplishing its intended objectives, President Johns said that the subcommittee encountered difficulty in determining precisely what was meant by the phrase, "third qUarter bracket of community wage rates", and concluded that those who established the salary administration plan had nothing more definite in mind than that the Reserve Banks should relate the mid-points of their Salary grades to the respective local markets, based on community surveys, 1691 9/26/72 -5- and that the mid-points should rest somewhat above the average of rates Paid by progressive local concerns. It was his understanding that the forthcoming written report of the subcommittee would recommend elimination of "quarter brackets" from the terminology of the eserve Bank sal- °Y administration plan on the theory that it indicated too much reliance O n, mathematical computations in a field which calls primarily for the exercise of judgment based on the results of market surveys. President Johns added that in the subcommittee's opinion, the Reserve Panic have been doing a creditable job in carrying out such surveys. President Johns said that a non of the members of the subcommittee l'evealed that seven felt that the current policies followed by their Banks in establishing their salary structures were appropriate while five thought that somewhat higher salary levels might be desirable, but that all were °P1Dosed to adjusting the mid-points of the grades to a place within the t°P quarter bracket since they believed that to go that far above the level °f the local market might provoke criticism not only Crom the commercial banks but other competing business establishments, particularly since the Reserve Bank surveys cover the more progressive employers. With respect to the relationship between Reserve Bank and commercial bank wage rates, Presiaent Johns said that the Reserve Banks are aware of the prevailing rates beirig paid by local commercial banks and take them into consideration when 92 9/26/-, -6- making their market surveys but that such rates do not constitute a determining "actor in arrivin6 at a Reserve Bank's salary structure. President Johns also pointed to the desirability of establishing, whenever possible, a single salary structure :or a Reserve Bank and its branches and stated that, whereas it w;:s citun fcssible to maintain a ncle structure through adherence to the 7)o1icies currently followed, arlY movement to the top quarter bracket miLlat necesitate tie establish, • ment of separate salary structures for the hc:a(1 office aud each. branch. Chairman Martin said that the purose of the 7oard's letter 29, 1952, was to indicate that the Board . ofMay s yLethetic. to the Reserve. allks t salary administration problems and the Ccsre of the Irosidents to attract and maintain competent staffs. Therefore, it sugfested. an explora:- tic:tfl of an upward revision cf the salary structures to determine whether that would be appropriate and helpful in establishing a relationship between. the Reserve Banks and the local markets Which would contribute to obtain.111E the most satisfactory personnel. Re the.a called upon Governor Evans for flIrther comments. Governor Evans referred to the studies 1:iWe hy hr. Horton, when he Iles a member of. the Board, of the salary levels at the 2ederi Reserve Banks eald to the conclusion reached by him that the scales at most of the Banks, particularly at the clerical level, were too low. He said that he had had, 8. further conversation with Mr. Norton following the latter's return to ‘11 9/26/52 -7- Private Industry durinz which he expressed himself as 'oein: even more strongly of that opinion. The matter having now had the benefit of con- sideration by the Presidents, Governor Evens felt that the purpose of the Board's letter had been accomplished. Concluding comments by President Leach were to the effect that the President's Conference was convinced that the whole matter of salary administration at the Reserve Beaks was now :having more scientific consideration than at any time in the history of the ystem. Lump-sum death benefit for banh employees retIrincon service retirement at age 65. .t the mcetinc, of the Board of Trustees of the Retirement ,7ystem held on June 17, 1952, a proposal vas 11-41e that a lump-sum benefit of at least 47,1,0GO be provided for members retiring on service retirement at age C..). In the course of the discussion, it was suggested that this question be referred to the Retirement Committee for study. It was pointed out, however, that the Retirement Committee had previously given consideration to this matter and had made a comprehensive report to the Presidents' Conference on the subject. Accordingly, it was voted to refer the suggestion to the Presidents' Cenference for reconsideration. The question has been considered by the Conference Subcommittee on Personnel an. the Conference Committee on Personnel. The Conference concurs in the recommendation of its committee that a death benefit of 1,000. be made available to bank employees retiring on service retirement at age 65 and that it be provided through the purchase of paid-up insurance at time of retirement and wishes to know the Board's view on the subject. President Johns said that in the opinion of the Committee on Per"c3°41-Ie1, the proposal that a lump-sum death benefit payable to the benefi- .;.44 9/26/52 -8- ciaries of Reserve Bank employees retiring at age 65, which was advanced most recently by an elected member at the last meeting of the Board of Trustees of the Retirement System of the Federal Reserve Banks, deserved earnest and favorable consideration. He pointed to the increasing tend- ency on the part of private employers, including commercial banks, to Provide such a benefit, stating that it was understood that a number of the larger banks in New York and other cities were now following that Practice. President Johns discussed three ways in which the death benefit could be provided, the first two involving payments by the Reserve Banks into the Retirement System, either through regular payments or through 4 lumP-sum payment at the time of retirement. The third Possibility in- volved entering into a contract with a private insurance company. Should the Board concur in the recommendation of the Conference Principle, President Johns said, details of the plan could be studied erd a more precise recomendation provided. In addition, consideration ecUld be given to whether the benefit should be extended to employees who are already retired and to employees retiring under special service retiIfl Chairman Martin said that the recommendation of the Conference had come to the Board at a time when both Governor Mills, who serves as the Board's representative on the Board of Trustees of the Retirement 1695 9/26/52 -9- System, and Governor Szymczak, his predecessor in that capacity, were absent, and that the Board would prefer to defer a decision in the matter until it had had the benefit of their views. 4. Retirement allowances pa able to members who retired before qualifying for Social Security benefits. The Executive Committee of the Board of Trustees of the Retirement System, at a meeting held on June 17, 1952, requested the Retirement Committee to re-explore the whole problem of retirement allowances with a view to presenting a recommendation to the Lxecutive Committee of the Board of Trustees and to the Conference of Presidents with respect to increasing the allowances of members on retirement. The Retirement Committee has considered the matter and submitted a report dated September 16, 1952, copies of which have been made available to the Doard suggesting the manner in which such retirement allowances might be adjusted if the Presidents and the Board of Governors agreed that some adjustment would be desirable. The Conference agrees with the recommendation of its Committee on Personnel that allowances payable to members who retired before qualifying for Social Security benefits should be supplemented and in the manner suggested by the Retirement Committee in its report of September 16, 1952. The Presidents would like to discuss this matter with the Board. fter reviewing the history of this proposal, President Johns said that the Retirement Committee did not feel that it was within its province to recommend whether the allowances should be supplemented and that its l ePort had been restricted to a description of what type of action might ' he taken should the Conference of Presidents and the Board of Governors e9Me to a favorable decision. Chairman Martin stated that the Board would consider the matter 1696 9/26/52 -10- following the return of Governors Szymczak and Mills and advise the Presidents of its views. 5. Plan to strengthen the Board's Field Examining Staff, The Conference discussed Chairman Martin's letter of September 16, 1952 to the Presidents regarding the inauguration of a plan designed to strengthen the Board's field examining staff, which plan involves the borrowing of junior officers or key supervisory personnel from the Reserve Banks for duty with the Board's field examining staff. The Conference wishes to discuss with the Board the ways in which the project can be developed so as to assure maximum development not only of the Board's junior examiners but of the personnel loaned by the Reserve Banks. Governor Robertson stated that, although it was not possible to . foresee at this time what would result from the recommendations in the l'eDort of the Pathan Subcommittee regarding Federal Reserve Bank audits, he thought that it behooved the Board to make sure that its examinations C)f the Reserve Ranks were of such a quality that they would afford the Iloard a clear picture of the situation within each Bank and at the same ttNe would be of value to the Bank management. He then described the lifficulty which had been encountered in buildinc up an experienced field eXamining staff, stating that the turnover of Personnel had resulted in a situation where the senior men were forced to devote a large part of their time to supervising the inexperienced Personnel. He recognized that the building up of an adequately trained staff would require some time and said that this had resulted in the suggestion that the present situation 1697 9/26/52 -11- might be improved by obtaining a few selected men from the Reserve Banks for limited periods to undertake certain supervisory assignments, thus freeing the seasoned examiners for other duties. It was not the intention of the Board, Governor Robertson said, to use the borrowed men in purely routine functions but rather to employ them in such a way that they would become familiar with the operating departments of the Reserve Banks and thereby would obtain training that would be beneficial to them and their Banks. Governor Robertson also mentioned that the Board had in mind arranging to have new members of the field staff observe operations at a Federal Reserve Bank for a period so that they might be better prepared to Perform their duties with the examining staff. In concluding his comments on Reserve Bank examinations, Governor Robertson said that the objective of the Board was to reach the point where each Bank could have the benefit of full and frank discussion with the Chief Federal Reserve Examiner or, if necessary, with the Board, with a view to Providing the Banks with helpful and constructive suggestions. Turning to the field of commercial bank examinations, Governor Robertson discussed some of the steps which he envisaged in a long-run Program designed to improve the standard of Federal Reserve examinations end thereby afford the greatest benefit both to the System and to the tember banks. Among the points covered were the following: 1698 9/2E/72 -12- (a) Considerable progress already had been made toward the correction of criticized matters at so-called "problem" banks, with good cooperation between the staffs of the Board and the Reserve Bans being evident; however, additional work was necessary in some cases and insistence upon necessary corrections must not be deterred by fear of withdrawals from membership in the Federal Reserve System since in the long run the System can be expected to gain in membership by commanding respect for the System and membership in it. - amiliarize himAS soon as he had an opportunity to f (b) self with the examining staff of each Reserve Ppnl-, Governor Robertson intended to have a full discussion with the respective Presidents with a view to arriving at a Point where the System could be assured of being in a position to exercise the best possible supervision of banks. (c) Steps were under way to build up and strengthen the staff of the Board's Division of Examinations. (d) The Reserve Bpnks were to be recuested from time to time to arrange for examiners from the Board's Washington staff who had not participated in commercial bank examinations recently to accompany the Reserve Bank examiners on selected examinations, not to conduct or have responsibility for the examinations but to observe the procedures followed and refresh their understanding of the problems faced by the examiners. (c) A program was to be set up within the next few months whereby the assistant directors of the Division of Examinations would meet periodically with the full examining staffs of each of the Reserve Banks for the purpose of exchanging views on policies and practices and ascertaining what problems were being encountered in the course of examinations. (f) The training school for new assistant examiners was to be appraised at the end of the session now in progress. If on the basis of such appraisal, It should be determined that the school was not worthwhile, it would be dropped; otherwise, another session would be offered within a few weeks and additional sessions thereafter, the curriculum being modified to the extent found to be desirable in the light of experience. M99 -13- 9/26/52 (g) If the first school was continued, an attempt would be made some time next year to reach agreement with the other Federal bank supervisory agencies on a school for experienced assistant examiners to provide them with the training necessary to undertake the duties of senior examiners. In concluding his remarks, Governor Robertson urged the Presidents to review the level of salaries being paid to their senior bank examiners, statTnE that he felt the duties to be more important than those performed bY many of the junior officers and that, although salaries appeared to be comparable in the starting brackets, the compensation being paid to e7perienced Reserve Bank examiners appeared lower than the scale paid by the Other Federal bank supervisory agencies. During a discussion based on the foregoing remarks, President Gidney, Chairman of the Committee on Bank Supervision, suggested that it Mould be to the mutual advantage of the Board and the Reserve Banks for Governor Robertson and the committee to work in close cooperation on Policies and programs in the field of bank supervision and Governor Robertson iladicated agreement with this suggestion. 6. Objectives of a Bank and Public Relations Program of the Federal Reserve Blieks. The Conference considered the report of its Subcommittee on Bank and Public Relations and Free Services of August 27, 19-.52, regarding the concept of a public relations program for the Federal Reserve Banks. Attention was called to the increased public attention focused upon the Federal Reserve System by the controversy and subsequent accord between the Federal Reserve System and the TreBsury and the hearings of the Subcommittee on General Credit Control and Debt Management of the Senate-House Joint Committee on the Economic Report. This pointed up the increased need 1700 9/26/52 for and the value of a carefully prepared statement of the objectives as well as the scope and content of the System's Dank and Public Relations Program, and the Conference concurred in the recommendation of its Committee on Bank and Public Relations that the Board be asked to collaborate in the preparation of such a statement and that the assistance and advice of the Federal 1,dvisory Council and the Chairmen's Conference be solicited. President Ulliams, Chairman of the Committee on Bank and Public Relations, discussed the increased interest beinc, displayed in the Federal Reserve System's role in the economy by bankers, businessmen, students, and the general public, and the apparent demand for teaching materials Phrased in understandable language. These factors, he felt, pointed up the need for a statement covering the objectives of the System's bank and Public relations programs pursuant to which thought might be given as to the best means of achieving these objectives. President Lilliams mentioned the possibility of adapting material already gathered by the System and of soliciting the support of Government agencies and private organizations such aS the Committee for Economic Development in furthering an understanding of the System's operations and policies. Chairman Martin said that the Board was entirely in sympathy with the views expressed, that it had been developing a number of ideas along these lines, and that it was felt that more progress would be made if the Presidents would formulate separately their views on the statement. He V 14 -15- 9/26b2 said that the Board would request the views of the Federal Advisory Council and that after the statements of the i'residents and the Council were received, the Board would like to collaborate on how to proceed in the preparation of a System statement. After discussion, it was understood that the work would proceed along the lines suggested by Chairman Mcrtin. 7. Free delivery of currency and coin to member banks. The Conference agreed with the recommendation of its Committee on Bank and Public Relations which was based on a report of the Subcommittee on Bank and Public Relations and Free Services dated August 27, 1952, that (1) there be no change at this time in the 2resent practices of Reserve Banks with resl)ect to free delivery of currency and coin to member banks and branches located within the corporate limits of Reserve Bank and branch cities, and (2) the Committee on Miscellaneous Operations be requested to survey the current and Prospective needs of the economy as a whole and the banking structure, in Particular, with respect to currency and coin with a view to recommending the most effective and economical methods by which these needs may be supplied. The Conference agreed with the view expressed by the subcommittee that free delivery of currency and coin in Reserve Bank and branch cities will not solve the problem but will serve only to move the line of inequality to another point and believes that the time has come for a broad over-all study of the entire subject. President Williams said that chances in mail and express service during recent Years had caused the Reserve Banks to resort more and more to armored car service in the delivery of currency and coin to member banks, arid that this trend seemed likely to continue. This development, he said, 9/26/52 -16- haa given rise to certain inequities in treatment as between member banks and sugEested the desirability of a broad survey of the kind proposed by the Presidents. Chairman Martin said that the Board favored such a study and considered the matter of such importance that t would urge that the study be expedited as much as possible. 8. Size and scope of the activities which Federal Reserve Bank 'buildings should be elanned to accommodate over the next 20 or ''„) years. The Conference discussed the roard'a letter of June 27, 1952, and noted that each of the Presidents had expressed to the Board his views concerning the size and scope of the activities which his Bank should be planned to accommodate over the next 20 or 25 years. The Presidents expressed great concern over the need for legislation that would permit the urgently needed branch building program to go forward and are prepared to discuss with the Board their individual requirements for both head office and branch buildings. Governor Evans commented on the Board's letter of June 27, and the responses thereto, stating that the primary purpose of the letter was not to reque st comments on the individual building plans of Reserve Banks but rather to explore what might be accomplished in the way of establishine GUiding principles for the planning of buildings to accommodate the needs °f the System over the next 20 or 25 years. He said that a number of the replies dealt primarily with the requirements of the respondent Banks, and that/ in the circumstances, the Board would be glad to receive such additional 9/26/52 -17- comments as the Banks might wish to make concerning the long-range requirements of the System. Governor Evans also mentioned the adoption by the Board on September 24 of a revised formula for determination of the costs of branch building Projects allocable to "building proper", and stated that the decision of the Board that the new formula should be applicable to construction hOW in process meant that there would have to be a recon,-vt7Ition of the costs of the new Jacksonville Branch buildiry7 and the add't,en to the Detroit Branch to ascertain the charge to "buildinr inrc_Ther" in each case. 9. Plan for War Emercency Operations. 1°,1(_ Conference concurs in the Pord's T'ew that it would be appropriate at this tine to e, e, over-all review of niana 'cr keen acca . cperationsto see -what v't"_ .1:Lhow the System eh-:(3s at t' spect to preparedness .h 1 CucrLd.0 , _Id what remains to be done, to 1attflC cbjec. _t this meetin6 of the UO.CLA,fGliCk, it was decided TaalninL, aor .ar to ash the Coordinator a nceu'q_ to he call to Operations Emergency each c the reixesentatc._ attended by hauls aid. the_c r(i of Reserve telve Federal I (I, lc, to Governors to discuss conseler what to Raand exchange experiences taken. be ditional steps should President Leach said it was the view of the I.,cesidents that the suzgested meeting would be particularly valuable because of the centersPlated arrangements under which certain Reserve Lanks would be designated to perform functions for other Reserve BanLs in the event of an emergency. Chailman Martin responded that the Board concurred in the L74 9/26/52 desirability of such a meeting and wculd be glad to have a representative Present. He then called upon Governor Evans, who recLllod that the plan for war emergency operations was instituted as the result of a suggestion by the Presidents' Conference some time ago. He said that the Board had checked into the progress of the prouran and had found that p]ns were in various stages of development at the several iTLniS, and- that it seemed appropriate to hold a meeting at this tine for the :,ur:mse or detcrminTn,; haw to expedite the program. lie said that it wus the Boo rd-' cHnion that the System should be as well prepared for alv enerLenc, (E )ossIble. At the request of Chairman Martin, Governor _o'nertson discussed Ilans which had been formulated by an interagency committee comprised of representatives of the three Federal bank supervisory agencies designed tr_ keep the banking system in operation in the event of a war disaster. He said that the proposed plan, which was being prepared at the s uggestion of the National Security Resources Lear,T, had been given no Publicity, that its details were not yet co..loleted, and. that at a later stage it would be submitted to the Reserve .7-, r their comments. The legal basis of the program would rest on the e:tr-ord 7 n1r; powers of the President of the United States In time of eAlerLEf,cy and the plan would Operate under the authority of a President1-1 e;.ecutive order subject to ratification by the Congress. The problem envisaged was one of or maintaining banking services In on affected community. torinc; I Or 9/26/52 -19Under the contemplated executive order, he said, banks whose facilities were destroyed would be pernitted to operate in temporary quarters at other locations, temporary curtailment of banking operations in areas affected by military action would be authorized, and limitations on interbank lending and borrowing would be suspended. Banks would be given the power to ration currency and might also be given authority to restrict transfers of credit. They would be protected against any lia- bility from such rationings or restrictions. The whole program would be designed for application on a localized basis and would be on a permissive rather than a mandatory basis so far as individual banks are concerned. Federal Reserve Banks would be permitted to make credit available to nonmember as well as member banks on a secured or unsecured basis. Governor Robertson said that the plan, as developed to date, would be discussed at a meeting, probably in October or November, of a committee consisting of representatives of the three Federal bank supervisory agencies and the National Association of Supervisors of State Bcmks, and that at a later date it was contemplated that the details of the plan might be subflitted to the Reserve Bnnks, to representatives of the State bank supervisors, and to some commercial bankers for comments. The whole scheme, he said, was designed to enable fast action in a suitable manner in the event of emergency. Following a brief discussion based on Governor Robertson's statement, President Earhart, Chairman of the Committee on Miscellaneous Operations, 1:;10; 9/26/52 -20- said that he had been in touch with the Bureau of the Iiflt to ascertain the possibility of a recurrence of the coin shortage which occurred last Year, that the supply of metals appeared to be adequate, 'nut that the 7ureau did not receive the full appropriations which it requested so that Production was not Proceeding on as rapid a schedule as might ho desired. Re said that the reserve supply of coins of certain denominations, particUlarly nickels, was reported by the Bureau to be low. Chairman Martin said that the Board was glad to have iresident Earhart's report and would keep the matter in mind. 10. Discussion of recommendations contained in the Patman Report. The Presidents discussed the specific recommendations for legislation contained in the Patman Report as well as the possibility of developin a mandate on the responsibilities of the System, the establishment, as recommended by ,ecret.pry Snyder, of a consultative and advisory council and the establishment of a monetary commission to study various problems of the financial, monetary, fiscal and debt situation. The Conference is prepared to e.,change tentative views regarding these recommendations and to discuss future procedure. President Leach stated that the Conference had before it a report Of a committee of Presidents but that this was merely a summary of the items in the Patman subcommittee report and contained no recommendations. In the c ircumstances, he said, the Conference discussed its View's in a tentative lae.Y but prepared no formal report to the Board since it seemed preferable tO first discuss with the Board the best way of proceeding. 1707 -21- 9/26/52 Chairman Martin stated that the Board would api)rociate being furnished a copy of the summary report of the Conference connaittee and that it would also like to hear the tentative views of the Presidents on the Patman subcommittee recommendations. He said that the Board had not yet had time to formulate its own views and that such information would be helpful. President Leach then summarized the views of the Conference as follows: (a) The Presidents felt that it would be difficult to express views for or against a mandate on the responsibilities of the System without studying a particular draft, and believed that it would be difficult to draw up a suitable mandate. However, it was the opinion of a majority of the Presidents that some mandate might be preferable to the current situation provided it was so worded as to protect properly the position of the E,ystem in the monetary and credit field. (President Powell thought that in view of the inflationary implications of the Full Emoloynent Act of ]946, which stresses full employment as a goal of public policy, there shOuld be, as a minimum, an amendment to the declaration of policy in that Act which would specify that the goal of maximum employment must be consistent with sound monetary and credit conditions. He also thought that it might be possible to inject into the Federal Reserve Act some more positive statement of policy but had no specific language to suggest at this time.) (b) The Presidents were opposed unanimously to the creation of an interagency consultative and advisory council, as suggested by the Secretary of the Treasury, but they saw less danger in such a council if a suitable mandate on the responsibilities of the System also was in effect, and particularly if the council was set 111) on a basis that it would be advisory only Without power to direct. (c) The Presidents were inclined to think that the establishment of a monetary commission to study various problems of 17'08 9/26/52 -22- the financisl, monetary, fiscal, and debt situation might be worthwhile. Some favored a provision which would require a comprehensive study of the entire situation at intervals of about every ten years. (d) The Conference was not disposed to favor the introduction by the System at this time of any legislation to extend its authority over reserve requirements to nonmember banks. It would favor legislation that would permit vault cash to be counted as part of a bank's required reserves, but was undecided whether legislation should be introduced at this time specifically for the purpose. Uniform reserve requirement proposals were discussed by the Presidents, but no conclusion was reached concerning them. (e) The Presidents were strongly opposed to any compulsory audit of the Reserve Banks by outside auditors or the General ,ccounting Office, to any audit of the Board's accounts by the General Accounting Office, and to any submission of Board or Reserve Bank budgets to Congressional committees. (f) If a franchise tax should be proposed, the Presidents did not see how the System could oppose it, provided the proposal took into account the surplus positions of the individua3 Reserve Banks. Some of the Presidents thought it would be better to have a franchise tax written into the law than to pay a portion of the Banks' earnings to the Treasury under the current procedure, and would be willing to have the System advocate such legislation. (g) All of the Presidents favored legislation which would permit the Reserve Banks to proceed with their branch building Programs. (h) The Presidents were not ready to support the introduction at this time of legislation to permit a Federal Reserve 7-7,2„nk to Pay out notes of other Reserve Banks. Governor Vardaman suggested that the Presidents give further consideration to their Position on the audit of the Reserve Banks by outside 1 auditors since he considered it likely that legislation to that effect 9/26/52 -23- would receive strong support during the next session of Congress. During a discussion of future --)rocedure for consideratinn of the Patman Subcommittee report, President Gilbert suggested that it would be helpful if the Conference were to select a committee to analyze and apPraise the report and its implications, and Chairman Martin commented that anY such analysis would be of value to the Board and that the Board in turn would furnish the Presidents with any analysis which it rairdit prepare. President Leach stated that there was some question whether e meetof the Presidents should be held at the time of the next meeting of the Federal Open Market Committee early in December, and he inquired whether , further discussion of the Patman subcommittee recommendations might not be desirable at that time. Chairman Martin suggested that a meeting in December would depend on whether the views of the Presidents on the Patman subcommittee's recomraendations could be formulated and made available by that date. President Leach said that the Conference would meet again after this joint meeting and reach a decision on that point. 11. System's participation in savings bond program. At the invitation of the Conference, Mr. Overby, Assistant Secretary of the Treasury, reviewed the progress of the savings bond program since the last meeting of the Conference and discussed some of the problems which the savings bond division of the Treasury must face during the coming months. The Presidents would welcome a discussion of this matter with the Board. -24- 9/26/52 Chairman Martin stated that the Board had transmitted to the Presidents copies of a letter recently received from Secretary of the Treasury Snyder expressing appreciation of the work of the Reserve pinks in support of the savings bond program. In response to comments by Presi- dent Gidney regarding the progress of the program in the Fourth Federal Reserve District, Chairman Martin suggested that it would be desirable if each president would formulate such views as he night have concerning the Program and send them to the Board in a form in which they could be Presented to the Secretary of the Treasury. At this point Governor Vardaman withdrew from the meeting. Chairman Martin referred to the series showing changes in commercial and industrial loans at a sample of reporting banks, by industry, which was Initiated in connection with the Voluntary Credit Restraint Pro8m, and stated that, in view of objections raised by a few or the banks to continued reporting of this information, the Board had decided to ask President Powell if he would discuss the matter with Mr. Potts, Chairman Of the committee on Bank Credit Policy of the Association of Reserve City Bankers, and other appropriate persons during the forthconlng convention Of the American Bankers Association at :ttlantic City, and encourage such individuals to do everything that they could to urge the continued reporting Of the statistics. Chairman Martin said that such figures were of t_ great deal of value to the Board in discussing trends in bank loans with the 1711 9/26/52 staffs of Congressional committees and other Government agencies, and. that the Board would appreciate it if any of the other Presidents who Were attendinr7, the convention also would talk to appropriate persons along these lines. President Powell said that he thought the series provided Information which was vitally needed, that he would be FL:3d to discuss the natter during the course of the convention, and that he hoped the other PresIdents would do likewise and would keen in touch with their research staffs to determine whether any difficulty was being encountered in curing the cooperation of the reporting banks. Thereupon the meeting adjourned.
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