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Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, September 30, 1949. The Board met in the Board Room at 10:30 a.m. PRESENT: Mr. McCabe, Chairman Mr. Szymczak Mr. Draper Curpenter, Secretary Sherman, Assistant Secretary Thurston, Assistant to the Board Leonard, Director, Division of Bank Operations Mr. Millard, Director, Division of Examinations Mr. Solomon, Assistant General Counsel Mr. Smith, Special Counsel Mr. Mr. Mr. Mr. Reference was made to the Statement and Order approved at the request from counsel meeting on September 27, 1949, with respect to a for Transamerica Corporation for the production of certain records. Mr. Solomon stated that the information which the Board had requested from the Office of the Comptroller of the Currency and the Federal DePosit Insurance Corporation had been received and that it seemed desirable to show in the Statement and Order issued by the Board that such information was being furnished. He also said that as a result Of further discussions of the Order with Mr. Evans and Mr. Hodge, the language had been changed to make Technical Adviser to Mr. Evans, It clear that the Board was not passing upon the relevancy to the proand to permit counsel for respondent ceeding of the requested material to submit a memorandum at his earliest convenience (instead of within 30 days) setting forth reasons for requesting certain other information. Mr. Smith stated that the form of Order approved on September 161 9/30/49 -2- 27, 1949, was entirely acceptable to him but that he also felt the revised form of Order was satisfactory. In response to a question from Mr. Szymczak, Mr. Solomon added that none of the material being furnished by the Comptroller of the Currency or the Federal Deposit Insurance Corporation came from confidential sections of examination reports. Thereupon, upon motion duly made a revised Statement and seconded, and approved unanimously in the Order was the understanding with form, following the take place of the would it that Statement and Order approved at the meeting on September 27, 1949, which had not been sent: "UNITED STATES OF AMERICA BEFORE TEE "BOARD OF GOVERNORS OF TEE FEDERAL RESERVE SYSTEM IN THE MATTER OF TRANSAMERICA CORPORATION STATEMENT AND ORDER ON RESPONDENT'S DEMAND FOR PRODUCTION OF PAPERS FROM THE BOARD'S FILES De"Respondent has filed with the Board a 'Notice and dated mand for Production of Papers in the Board's Files', September 10, 1949. "Without passing upon the relevance or admissibility of the material, but in the interest of affording respondent every reasonable opportunity to prepare and present grantits defense to the Board's Complaint, the Board is to in referred ing respondent's requests for the documents had comhas and Notice Items (1) and (2) of respondent's piled, and is ordering that there be sent to respondent, the statistical information requested in Item (6) of respondent's Notice. Similarly, the Board referred to the and the Federal Office of the Comptroller of the Currency ly, respective n, Corporatio respondent's Deposit Insurance n informatio mentioned in l statistica requests for the Item (7) (said Notice being 's conrespondent Item (7) of those with filed ns agencies), applicatio and cerned with the Board is ordering that there be sent to respondent ••• 1612 9/30/49 -3- "certified copies of the statistical information with which those agencies responded. "The Board has been unable to find any records of any kind which are within the call of Item (3) of respondent's Notice. "It appears that the material referred to in Items (4) and (5) of respondent's Notice has no relevance whatever to any issues involved in this proceeding or to any evidence offered in support of the Board's Complaint, that some of the documents were prepared for the Board by members of its legal staff, and that all of them are of a character that should not be disclosed without some appropriate reason. In the circumstances, before acting upon respondent's request to produce the documents called for by Items (4) and ()) of its Notice, the Board will be glad to receive from counsel for respondent, if he desires to submit it, a memorandum setting forth the reasons why such documents are believed to be relevant, the purposes which respondent expects them to serve, the reasons why he believes such documents should be produced, and the authorities relied on by respondent in support of its request for their production. If counsel for respondent desires to submit such a memorandum he should submit it at his earliest convenience and serve copies upon the Board's Solicitor. The Board's Solicitor will be allowed five days from the date of his receipt of such memorandum within which to file with the Board, and serve upon counsel for respondent, a reply thereto. ORDER "It is ORDERED that the Secretary to the Board prepare and forward to counsel for respondent and to the Solicitor for the Board: 1. A certified copy of a letter (being the letter described in Item (1) of respondent's above-mentioned Notice) from M. S. Eccles to Henry Morgenthau, Jr., dated October 27, 1938, together with a certified copy of the memorandum referred to in said letter. P. A certified copy of an undated and unsigned memorandum (being the memorandum described in Item (2) of respondent's above-mentioned Notice) beginning with the words, 'The Board believes that, in the interest of all concerned,' and concluding with the words, 'thus best serve the public interest'. -4- 9/30/49 '3. The statistical information referred to in Item (6) of respondent's above-mentioned Notice. 4. In response to Item (7) of Respondent's abovementioned Notice: (e) A certified copy of each of four statistical tables forwarded to the Board by the Comptroller of the Currency, such tables being headed, respectively, 'Applications filed with Comptroller of the Currency to organize national banks and to convert State banks into national banking associations for the United States as a whole as shown in his Annual Reports to Congress', 'Applications filed with Comptroller of the Currency to organize national banks and to convert State banks into national banking associations as shown by the Comptroller's records', 'Branches brought into the national system for the United States as a whole as shown in Comptroller of the Currency's Annual Reports to Congress', and 'Branches brought into the national system for each State in the Twelfth Federal Reserve District individually as shown by the Comptroller's Annual Reports to Congress'. (b) A certified copy of each of three statistical tables forwarded to the Board by the Federal Deposit Insurance Corporation, such tables being headed, respectively, 'Actions of the Federal Deposit Insurance Corporation on applications for admission to insurance of new banks not members of the Federal Reserve System in the Twelfth Federal Reserve District', 'Actions of the Federal Deposit Insurance Corporation on applications related to new banks or offices from banks not members of the Federal Reserve System -- United States and possessions', and 'Actions of the Federal Deposit Insurance Corporation on applications for establishment of offices of banks not members of the Federal Reserve System in the Twelfth Federal Reserve District'. "This 30th day of September 1949. "By the Board. (signed) S. R. Carpenter, Secretary. (SEAL) "Governors Eccles and Clayton took no part in the consideration or decision of the Notice and Demand referred to in the foregoing Statement and Order. Mr. Eccles entered the meeting at this time. There were presented telegrams to the Federal Reserve Banks 1614 9/30/49 Of Cleveland, Atlanta, Chicago, St. Louis, and San Francisco stating that the Board approves the establishment without change by the Federal Reserve Bank of San Francisco on September 27, by the Federal Reserve Bank of St. Louis on September 28, and by the Federal Reserve Banks of Cleveland, Atlanta, and Chicago on Septenber 29, 1949, of the rates of discount and purchase in their existing schedules. Approved unanimously. Before this meeting there had been circulated among the members of the Board a memorandum from Mr. Leonard dated September 27, 1949, reading as follows: "In accordance with the authority given by the Board on September 22, I have discussed with Mr. Paul Grady of Price, Waterhouse & Co. the possibility of his serving as consultant in the review of the functional expense system and other accounting reports submitted by the Federal Reserve Banks. "Attached is a letter dated September 27 from Price, Waterhouse & Co. agreeing to undertake the work and containing their proposal. Under their proposal the work would be under the personal supervision of Mr. Paul Grady, a partner of the firm, and their charges for the service would be computed at the rate of $20 an hour per man. In the discussion Mr. Grady said that in the assignment he would expect to use one other man and that they would expect to complete the assignment and submit a report on or before December 1. The firm estimates that the aggregate fee for the assignment would be approximately $10,000, in addition to which they would expect reimbursement for necessary traveling expenses. Mr. Grady said that the fee of $20 an hour is their minimum fee for principals and that they usually charge higher fees for special assignments, such as this, but that in view of the interesting character of the particular assignment and the nature of the Federal Reserve they would base the charges on their regular minimum fee. -6- 9/30/49 "I inquired whether the firm could place Mr. Grady at the disposal of the Board so that he would be acting as a personal consultant to the Board. Mr. Grady replied that he felt it would be much better from the Board's point of view for this to be an engagement of the firm with all the advantages that implies. However, if the Board should insist upon the other arrangement he would be willing to take the matter up with his associates in the firm to see if such arrangements could be made. "I recommend that the proposal as outlined in the firm's letter of September 27 be accepted. Attached is a draft of a letter to that effect. "I recommend also that an appropriate increase be made in the budget of the Division of Bank Operations to cover payment of fee and reimbursement of the traveling expenses." Mr. Vardaman had noted on the copy of the draft letter to Price, Waterhouse and Company which accompanied Mr. Leonard's memorandum, that he felt it would be better to employ the individual, Mr. Grady, rather than the firm, but that this point might be a distinction without a difference. In response to a question from Chairman McCabe, Mr. Leonard stated that the reason for recommending the employment of Price, Waterhouse and Company was that an extensive study of the Board's functional expense reports had been completed by the President's Conference Committee on Accounting during the past year, that the study was now being reviewed with the expectation that certain changes would be made in the accounting procedures followed at the Federal Reserve Banks, and that before deciding finally on such changes it would be helpful to have the suggestions of a firm of Public accountants in order to help make certain that the procedures I61f -7- 9/30/49 adopted were the best available and were in accordance with approved accounting practices. There followed a discussion of Mr. Vardaman's suggestion that Mr. Grady as an individual be employed rather than the firm of Price, consensus that this arrangeWaterhouse and Company, and it was the ment would not be practicable under all the circumstances. Following the discussion, upon motion by Mr. Szymczak, the recommendations contained in Mr. Leonard's memorandum dated September 27, 1949, were approved unanimously, together with a ny, letter to Price, Waterhouse and Compa reading as follows: approved the engagement "The Board of Governors has s in the review of the ltant consu of your firm to serve as reports submitted nting accou other functional expense and , in accordance Board the to Banks ve by the Federal Reser r of Septemlette your in forth set ts with the arrangemen 's Division of Board the of tor Direc ber 27 to Mr. Leonard, Bank Operations. services will be rendered "It is understood that such Mr. Paul Grady, and that of n visio super under the personal be completed and the rewill nment assig it is expected the 1, 1949." ber Decem e befor or port submitted on rd, Millard, Solomon, and Smith At this point Messrs. Leona stated with respect to each of the matters withdrew, and the action taken by the Board: hereinafter referred to was by the Board of Governors of the Minutes of actions taken September 29, 1949, were approved unaniFederal Reserve System on piously, 30, 1949, from Mr. Carpenter, Memorandum dated September recommending increases in the basic annual Secretary of the Board, 161 -8- 9/30/49 salaries of the following employees in that Division, effective October 2, 1949. Name John C. Brennan Mabel Goepfert Salary Increase From Title To $4,730.40 Assistant General $4785.80 Secretary to Mr. Carpenter 4,103.40 4,228.80 Approved unanimously. Memorandum dated September 30, 1949, from Mr. Nelson, Director of the Division of Personnel Administration, recommending that the resignation of Mrs. Mary B. Malarkey, a clerk-stenographer in that Division, be accepted to be effective, in accordance with her request, at the close of business September 30, 1949. Approved unanimously. Memorandum dated September 29, 1949, from Mr. Bethea, Director Of the Division of Administrative Services, recommending the appointment of Charles V. Carey as a laborer in that Division on a temporary basis for a period of two months, with basic salary at the rate of $2,020 per annum, effective as of the date upon which he enters upon the performance of his duties after having passed the usual physical examination. Approved unanimously. Letter to Mr. E. A. Goldenweiser, Institute of Advanced Study, reading as follows: Princeton University, Princeton, New Jersey, "This letter is in confirmation of Ralph Young's telephone conversation with you earlier this week. "There is a possibility that in the presentation of its case in the Clayton Act proceeding instituted by the 1618 9/30/49 -9- "Board against Transamerica Corporation, attorneys for the Corporation willcall an economist as a witness. If that is done it may prove to be desirable for you to be in San Franciscto to advise with Mr. Townsend on his cross examination and at some point to take the stand in rebuttal of the economist's testimony. There is no indication that the case will take this course but if it does, it may be necessary for Mr. Townsend to ask you to come to San Francisco on very short notice. In any event it may be that he will need to consult with you by telephone in connection with the matter and in that connection may wish to have sent to you sections of the transcript of the hearings so that you could read them and be prepared to discuss them when he called. "Accordingly, the Board has approved an arrangement -0 per under which you will be compensated at the rate of $) Act Clayton the of purposes the for day of your employment transnecessary your allowed be will you proceeding and portation expenses and e per diem in lieu of subsistence of $9.00 in accordance with the Board's official travel regulations applicable to heads of divisions, together with such supplemental allowance for other expenses as may be approved by the available members of the Personnel Committee in an amount not exceeding $425.00. This is the same basis as the authorization for your earlier trip to San Francisco. "Transportation requests should be used to cover all necessary transportation and, if you will keep a memorandum record of the dates, time consumed and expenses, we shall be glad to be of any assistance that we can in the preparation of your expense voucher. "The Board understands from your conversation with Mr. Young that this arrangement is satisfactory to you and that you will be available to go to San Francisco on short notice or to consult with Mr. Townsend by telephone if a trip to San Francisco does not prove to be necessary. The members of the Board have asked me to express to you their sincere appreciation of your willingness to help in this matter." Approved unanimously. Letter to Mr. Hill, Vice President of the Federal Reserve Bank Of Philadelphia, reading as follows: "In accordance with the request contained in your 1619 -10- 9/30/49 "letter of September 28, 1949, the Board approves the designation of the following employees of your Bank as special assistant examiners for the Federal Reserve Bank of Philadelphia: Edw. Fitzpatrick J. Elmer Boos John J. Jones, Jr. Jr. on, Eagles B. Wm. Gerhart, Jr. Harmon Geiger S. Wm. Hallahan d Richar Rieck C. ick Freder Murray Donald J. Jr. r, Windso T. Wm. " Weaver Edw. l Bonsal P. E. Jos. Koch A. s Charle Approved unanimously. l Reserve Bank Letter to Mr. Leach, President of the Federa Of Richmond, reading as follows: ned in your "In accordance with the requests contai es the approv Board letters of September 28, 1949, the , C. McLean Ernest appointment of Samuel A. Derieux and e Bank l Reserv Federa Jr. as assistant examiners for the made effective of Richmond. If the appointments are not us. advise please October 1), 1949, as planned, edness x's indebt Derieu "It has been noted that Mr. ty, at maturi paid be to a nonmember trust company will inthe same to McLean and that the indebtedness of Mr. " basis. ion stitution is on a regular reduct Approved unanimously. the Federal Reserve Bank Letter to Mr. Sproul, President of Of New York, reading as follows: of June 17, 1949, and to "This refers to your letter entatives of your Bank, with repres telephone conversations nine member banks in that on endati recomm concerning your tan of New York of h Manhat Boroug the the midtown area of in the mainta reserve requireto sion permis City be granted banks. ments of reserve city "Pursuant to the provisions of Section 19 of the Fed, eral Reserve Act, the Board has taken the following action e reserv eekly ation firstw comput period effective with the beginning after the date of this letter: fi2() 9/30/49 -11- "1. The Board's former ruling, under which a member bank having its head office or a branch in the Borough of Manhattan had to maintain the reserve requirements of central reserve city banks, has been amended so that a bank located in the Borough of Manhattanrorth of the downtown area as hereinafter described, and having no branch in such downtown area, will be regarded as being located in an 'outlying district' of the City of New York within the meaning of paragraph 5 of Section 19 of the Federal Reserve Act and eligible for permissionto maintain the reserves required to be maintained by banks located in reserve cities. The downtown area, member banks in which would continue to be classified as central reserve city banks, is bounded by the Hudson River, the East River, Canal Street from the Hudson River to East Broadway, and Rutgers Street from East Broadway to East River 2. In view of the character of business transacted by them, as described in your letter, the nine member banks now located north of the downtown area as abovedescribed have been given permission to maintain the reserves required to be maintained by banks located in reserve cities. The names of these banks are as follows: The Amalgamated Bank of New York Bank of Yorktown Clinton Trust Company Federation Bank and Trust Company The Merchants Bank of New York The National Safety Bank and Trust Company of New York The Pennsylvania Exchange Bank Sterling National Bank & Trust Company of New York Trade Bank and Trust Company "Please advise each of the banks of the Board's action in the matter, calling its attention to the fact that such permission is subject to revocation by the Board of Governors of the Federal Reserve System." Approved unanimously. Secretary's Note: While Mr. Clayton was absent when this action was taken, he indicated before he left that he would vote to approve it if he were present. t -12- 9/30/49 Letter to Mr. Sanford, Assistant Vice President of the Federal Reserve Bank of New York, reading as follows: "This is to acknowledge receipt of your letter of September 13, 1949, regarding arrangements between your bank and foreign correspondent banks for the authentication, by means of a test cipher, of cablegrams, radiograms and telegrams transmitted by such correspondents to your bank. "It is understood that such arrangements have not heretofore been entered into with foreign banks of two classes, namely, those with which you maintain foreign currency accounts for yourself and other Federal Reserve Banks (Bank of Canada, Bank of England, and Banque de France), and those with which you maintain foreign currency accounts in your capacity as fiscal agent of the United States (Reserve Bank of India, Banco de Mexico, and Banque Nationale Suisse), since you anticipate that you would be requested to give such banks corresponding written agreements and authorizations with respect to cablegrams, radiograms and telegrams which they might receive in your name. "We understand, however, that you are now prepared to give such corresponding agreements and authorizations, if requested to do so, to those foreign banks with which you have foreign currency accounts abroad for yourself and other Reserve Banks, and that you propose to dispatch letters to those foreign banks, substantially in the form of the specimen copy enclosed with your letter, under which they would give such agreements and authorizations with respect to messages transmitted by them to Your bank. lae also understand that you have in mind communicating with the Treasury Department for the purpose of ascertaining whether there would be any objection on the part of the Treasury to your giving such written those agreements and authorizations, if requested, to accounts. banks with which you maintain fiscal agency "The Board agrees that it would be appropriate for your bank to enter into arrangements whereby both classes of foreign banks would give authorizations of the kind the senddescribed and, therefore, sees no objection to Canada, Bank of to Bank the ing of the proposed letters g your consultin to or of England, and Banque de France, there would be any whether to the Treasury Department as I622 9/30/49 -13- corresponding authorizations, "objection to your giving maintain if requested, to those banks with which you the United of agent fiscal foreign currency accounts as States." Approved unanimously. Approved: Chairman.
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