The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
462 Minutes of actions taken by the Board of Governors of the Reserve System on Wednesday, September 8, 1948. The Board Ntathe Board Room at 3:00 p.mPRESZIT: Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Szymczak Draper Vardaman Clayton Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Assistant Secretary Hammond, Assistant Secretary Morrill Special Adviser Riefler, Assistant to the Chairman Thomas, Director of the Division of Research and Statistics Vest, General Counsel Leonard, Associate Director of the Division of Bank Operations Young, Associate Director of the Division of Research and Statistics Horbett, Assistant Director of the Division of Bank Operations ellailTan McCabe referred to his meeting with Secretary of N:1'448147 SnYder yesterday afternoon at which he informed SectIrle.r that the Board proposed to increase reserve require14ta of, tuenlber banks in non-reserve cities effective September 14:r1 0948 'arid in other cities effective September 24, 1948, the t° be 2 percentage points against demand deposits and 14 Nitt174ge Points against time deposits. He also referred to the otttlItgt cir the executive committee of the Federal Open Market t,qz8lb : e this morning, at which there was a discussion of the crta e effects of the proposed increase on open market opera- ' ri th 4 \riew to determining whether current open market 1463 9/848 0 lea Berle should be modified in conjunction with any increase in re- tequirements. 14 Ill% Morrill stated that, in accordance with the understand- ortgatthe meeting yesterday, he called Messrs. Eccles and Evans kitthetelePhone and informed them that, after discussing various ,totsk4tlires, the Board arrived at a consensus without taking a ezleci'biltvrith the understanding that a vote would be taken today, th4t it had in mind increasing reserve requirements along the 'No 14_ He said that he also informed them there would rneetingr ' g of the executive committee of the Federal Open tetITImittee this morning. a5 tilseeci , Morrill stated that, in commenting upon the proposed inr„,„ -serve requirements and the various alternatives dis- 'Mr. %ea -coles said 444 44 increase of he could not agree to an approach which only 1 per cent in requirements against net d. 41)°eits. La tho response to Mr. Eccles' question as to the purpose of 5 of the executive committee, Mr. Morrill said that he tA41111 it vas to consider what 4. tees It I've requirements were Ettly) e ge should be made in tillttea koci • In this connection, ito 4111 to open market operations would enincreased as proposed and what, the support prices for government Mr. Morrill said that Mr. Eccles emphasize that, while he had no objection to advising ' 41Bury 'Ina the executive committee of the Open Market i46 9/8/48 _3.. c''faitte Of the action contemplated by the Board with respect to 4ser'e re quirements, he would want it understood that that was ue purpose of seeking their opinions and that doing so icIllotaffect the decision of the Board. 11.1'. Morrill said that Mr. Evans stated that he would preth4t the increase in reserve requirements take place in steps Per cent at a time, but that he was willing to go along with t4rMembers c14 of the Board in the proposal to make a 2 per ctt inere_ se ' t at this time, even though he felt increases of 1 Cent at a time would be more effective psychologically. There 4,1) followed a further discussion of the motion made by a. Yesterday's t4Per'1 meeting that member bank reserve re- g'4iNe/Its be increased 2 per cent against net demand deposits 11 Per cent against time deposits, effective September 16, N: t blanks in non-reserve cities and September 24, 1948, at At the close of the disucssion, Mr. Draper's motion was put by the Chair and carried unanimously. To carry this action into effect, the following actions were taken by unanimous vote: Approval was given to the following amendments to Regulation D, Reserves of Member Banks, and to the supplement thereof: 9/8/48 -4"AMENDMENT TO REGULATION D " egulation D is amended, effective September 16, ") In the following respects: 1. Subsection (a) of section 2 is amended by striks at the words 'the sixth paragraph of' in the last 44eace thereof. ' Footnote numbered 6 appended to subsection (a) 01 8 12 ection 2 is amended to read as follows: 'The amount of the reserves required to be maintained by any such member bank as a result °f any such change may not be less than the aMount of the reserves specified above nor more than twice such amount, except that through June 01949, the required reserves for time deposits 'ullY be not more than 7 1/2 per cent and those f?r demand deposits of banks in central reserve cities, reserve cities, and other places may be aot more than 30 per cent, 24 per cent, and 18 r cent, respectively.' ttlg 3. Subsection (b) of section 2 is amended by strik°14 the following in the first sentence thereof: 'and, until six months after the cessation hostilities in the present war as determined proclamation of the President or concurrent lesolution of the Congress, no deposit payable 60 the United States by any member bank arising :°1elY as the result of subscriptions made by or ‘eitirou11ga_ such member bank for United States Govsecurities issued under authority of re Second Liberty Bond Act, as amended, shall r included in net demand deposits or in time "Posits which are subject to reserve requirements.'" 2 Ir r 4 "SUPPLEMENT TO REGULATION D "4'14.18 Board of Governors of the Federal Reserve System ve as to member banks not in reserve and central 1(a7e cities at opening of business on September 161 41„2 and as to member banks in reserve and central reCities at opening of business on September 24, 1948. "RESERVES REQUIRED TO BE MAINTAINED BY MEMBER BANKS WITH FEDERAL RESERVE BANKS nu, lea'suant to the provisions of section 19 of the FedBerve Act and section 2(a) of its Regulation D, 4ereb;,-*I'd of Governors of the Federal Reserve System Prescribes the following reserve balances which 1_466.4 9/848 _5_ „ member bank of the Federal Reserve System is re;Zed to maintain on deposit with the Federal Reserve V' its district: 7i per cent of its time deposits plus -16 per cent of its net demand deposits if not ina reserve or central reserve city, 22 per cent of its net demand deposits if in a reserve city, except as to any bank located in an outlying district of a reserve city or in territory added to such city by the extension of the citYts corporate limits, which, by the affirmative *vote of five members of the Board of Governors of the Federal Reserve System, is permitted to maintain 16 per cent reserves against its net demand deposits. 26 per cent of its net demand deposits if loated in a central reserve city, except as to any panic located in an outlying district of a central reserve city or in territory added to such city by the extension of the city's corporate limits, which, by the affirmative vote of five members °I the Board of Governors of the Federal Reserve ystem, is permitted to maintain 16 per cent or 2 Per cent reserves against its net demand dePosits." Approval was also given to a statement for publication in the Federal Register which, after quoting the amendments to the Regulation and the amended supplement, read as follows: grallt"These amendments are issued pursnAnt to the authority er,kild to the Board of Governors by section 19 of the Fedtto4,„-eserve Act in the light of existing economic conditlott;and the present inflationary credit situation. The 4(b public procedure described in sections 4(9 and Public plki-4 the Administrative Procedure Act, and the prior tzption described in section 4(c) of such Act, are lAtei .'Ioable, e unnecessary and contrary to the public !:' in connection with these amendments for the rea,1° good cause found as stated in section 262.2(e) ()fth,71! liti;,-040ard's Rules of Procedure (Part 262), and es11Q0.44.-Y because such notice, procedure and prior publoIl ould prevent the action from becoming effective Irith%'PtlY as necessary, would unreasonably interfere Pkrlsi ecessary efforts to prevent injurious credit ex-n, and would serve no useful purpose." 1_467 9/848 The following announcement of the Board's action was also approved unanimously, with the understanding that it would be given to the press for release at 6:00 p.m. Eastern Daylight Saving Time today: _ "As a further step toward restraining inflationary exkusio cb , n of bank credit, the Board of Governors todayin vi.4 78ed the amount of reserves required to be maintained , t:Frederal Reserve Banks by banks which are members of q lipt ederal Reserve System as follows: liellre!la d de.031t5 Effective ReBerv"re City banks From 14 to 16 per cent September 16, 1948 Neetitreie citY banks " 20 to 22 " " September 24, 1948 -m tittl,: , reserve city banks " 24 to 26 " September 24, 1948 " olire 4 - ue 0sits • Cellt1,41. ser7 „ e_ city banks From 6 to 7* per cent September 16, 1948 %ve serve and recity banks From 6 to 7-1- per cent September 24, 1948 re he effect of these increases will be to raise the pr,,tred reserves of banks in central reserve cities by apatel-w $500 million, of banks in reserve cities by apbY J4etelY t700 million, and of banks in nonreserve cities 1Troximately $700 million. (40 "At the recent special session of Congress the Board irlercsvernors was given temporary additional authority to the !"e reserve requirements of member banks and under tlksvrovisions of section 19 of the Federal Reserve Act as tabiireeently amended the Board now has authority to es— ker44811 reserve requirements for the various classes of r banks within the following limits: q4st Minimum Max ,let CIleeritr demand de osits se 44. reserve city banks 13 30 40014:::_!ity banks 10 24 -4Btti,,,, 4-ve city banks 7 18 lib '41e de osits 1 hipes of banks "7-3 N ;filen the increases become effective on the dates will ! +I b°ve, resee reserve requirements on time deposits l'iltilLvue maximum limit under existing authority and 4ae, , --, lents on net demand deposits will be 2 percentNe44-Lnt5 less than the maximum at reserve and nonthe l'e city banks and 4 percentage points less than rilaxi-ilium at central reserve city banks." prn 9/8/48 _7— Unanimous approval also was given to a telegram to all Federal Reserve Banks which informed them of the Board's action and which, after quoting the amended supplement, contained the following: ch "Please advise member banks in your District of above 1gee in reserve requirements as quickly as possible er by telephone, telegraph, or such other method as Allr Bank may deem best in the circumstances. It is intede 04.7") of course, that as to member banks in outlying 0_11e of reserve and central reserve cities which :ueen authorized by Board to maintain country bank res oiriee, amendment shall become effective at opening ,alsiness on September 16, 1948." 4 At this point 4essrs. Riefler, Thomas, Vest, Leonard, Young, Rt)rbett withdrew from the meeting and the action stated with 48Aect to each of the matters hereinafter referred to was Wcen the Board: Minutes of actions taken by the Board of Governors of the 1 Reserve System on September 7, 1948, were approved ible4146 (at Letter to Mr. McLarin, President of the Federal Reserve Bank klaw. 'ta) reading as follows: 1,48 "This refers to Mr. Patterson's letter of August 19, d_with respect to whether The Hamilton National Bank vial'uttanooga- and The Hamilton National Bank of Knoxthese 'as co-executors under a will, may sell stock in the:! °anks belonging to the estate of C. M. Preston to . ofe-incipal orrice beneficiaries thereof, two of whom are and directors of the co-executor banks. ettle Ae indicated in Mr. Patterson's letter, such a ecr1i °111d appear to violate the express provisions of 11(b) of Regulation F were it not for footnote oh provides that a transaction of this type - not be prohibited if it is specifically authorized Of 1469 9/8/48 -8:by court order. Mr. Patterson has also indicated that is the intention of the co-executor banks to apply a court having jurisdiction of this matter for perto make the sale. to, "If this procedure is followed, Regulation F will prohibit the sale, provided the co-executors of the tate are specifically authorized by an order from a urt of competent jurisdiction. The Board will neither or withhold its permission to make the sale, thie sey as indicated in footnote 12, the Board believes to be a function of the court." 4 Z Approved unanimously. a8 Telegram to the Presidents of all Federal Reserve Banks readLoilous: e pre-September 20 arrangements under Regulation 3i'.4.4'tuest10n has been raised about the following circume, c,:es: A customer on September 1 places an order for dr ;rtain type of refrigerator at an agreed price, makes Payment, and signs an obligation to pay the rer of the purchase price in instalments, but the tere:18-nt does not have the refrigerator in stock. The oejlant indicates that delivery will be made about ouer • that "Since these negotiations related to a refrigerator spe,.14 ,,as not then available, there was at that time no Sapil'ic item as contemplated by the Board's wire of Or tr i ber 2. If the merchant obtained a refrigerator type and set it aside for this transaction be014 °ePtember 20, the item would become specific. the extension of credit would not be cornbefore September 20 and Regulation leTwould 4.5r.11 Approved unanimously. Met-, ' °Isendum dated September 3, 1948, from Mr. Bethea, Director "tF ttNt slell of Administrative Services, enclosing a voucher in Of Re, q 1118 & Ewing in the amount of $165 covering the cost AOzen c°Pies each of two group photographs of the Board 14%4) N8/48 _9_ .ktbers and recommending payment of the voucher, with the underl ' IQ1cling that the appropriate classification in the 1948 nonktrs,, budget for the Board Members' Offices would be increased cover the expense involved. Approved unanimously. Assistant Secretary. Chairman.
@FedFRASER