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Minutes of actions taken by the Board of Governors of the Idertal Reserve System on Tuesday, September 9, 1952. The Board met the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Szymczak, Acting Chairman Evans Vardaman Mills Robertson Mr. Sherman, Assistant Secretary Governor Evans referred to the rules governing operation of the 1)rivate dining rooms as approved by the Board on April 12, 1946 and as ' D clified at the meeting on September 11, 1951, stating that it was clear fr°1/1 the third paragraph of the list of persons whose luncheon checks " De charged to the Board that any member of the Board may charge to the t. I'Doard's account the luncheon check of any official guest not listed 111th e Preceding two paragraphs by placing on it the notation "official .1.1est" and signing the check. He suggested that it would be desirable to e ella each member of the Board a revision of the rules which would incorpo 'ete both the action taken on April 12, 1946 and that taken on Septem—1,er 11, 1951 and which might include other minor clarifying state%ts. In this connection, Governor Vardaman suggested that when members the B oard's staff were called upon to attend official luncheons, the Coet or their luncheons should be borne by the Board rather than by the u1411 since, having been invited to attend, the individual might feel 1,..F1+‘ : 1 V9/52 -2- it a "command performance". Governor Vardaman also expressed the view that, if an individual dIdnot have some definite purpose in attending such luncheons officially, he should not be included in the list of those invited. There was no indication of disagreement with Governor Evans' sug„ . c-sulon for issuance of a revised memorandum covering the rules for °I) " . tion of the private dining rooms and it was understood that the quest10t1 raised by Governor Vardaman would be placed on the agenda for conSicie ration at a meeting when all members of the Board were present. Mr. Leonard, Director of the Division of Bank Operations, entered the r°om at this point. Before this meeting there had been circulated a draft of letter to Johns, President of the Federal Reserve Bank of St. Louis, concernProposed change in classification of member banks in the Eighth Federa. ' Reserve District for the purpose of electing Class A and Class B directors. Gol/e or Vardaman had requested that the letter be considered at a meeting 'r the Board and at this time he suggested that consideration be given to the Procedure followed in grouping banks for the purpose of electing etors. Mr. Leonard stated that the request of the St. Louis Bank arose as rois104. ---" of a review which showed that the present grouping of banks in the ts L°uis District had departed considerably from the formula. suggested 14 the ' 30ard's letter of September 19, 1934 (X-8012). This formula provides 7 I', that aPProximately one-third of the member banks in the district will be 41 4 Group 2 and that the number in Group 1 (the largest banks) will be c4° nearly as may be in the came ratio to the total number of banks 1i the district as is the combined capital and surplus of Group 3 banks (the smallest banks) to the capital and surplus of all banks in the district. Mr. Leonard described the effect of the changes proposed by the St. Louis Bank, stating that it would reduce the number of banks in 4°48 1 and 2 and would increase considerably the number of banks in 4°4 3) and that the resulting classification would be substantially lrj agreement with the formula suggested in the Board's 1934 letter. There followed a general discussion during which it was suggested tile:t Governor Robertson review the existing formula with a view to subLlittin0 '°,8.11Y changes which he felt would be desirable for the Board's conbut that no attempt be made to put such changes into effect IllItiletter the elections to be held this year had been completed. It vas 8.4330 suggested that inasmuch as the proposed changes in classificat1104, ln the St. Louis District were in substantial conformance with the instructions of the Board, the letter to Mr. Johns be approved. Thereupon, unanimous approval was given to a letter to Mr. Johns reading as follows: "This refers to your letter of August 25, 1952, and YoUr vire of September 2 concerning the proposed classification 1571 9/9/52 -4- °I Member banks in your district for purposes of electing Class A and Class B directors. "The Board has considered the matter, and in accordance with your recommendation has changed the classification of member banks in the Eighth District for the purpose of electing Class A and Class B directors, as follows: Banks with Capital and Surplus of: Group $700,000 and over 1 $200,000 and over but less than $700,000 2 Less than $200,000" 3 There was then presented a draft of letter to Mr. Joseph C. Duggan, Assistant Attorney General, Department of Justice, which would transmit e°144"t8 of the Federal Reserve Banks on a proposed Monday Holiday Act, col)ies °f which had been sent to the Reserve Banks under date of August 22.' 1952 following receipt of a request from Mr. Duggan dated August 21 t°1' the Board's comments. Mr. Duggan's communication stated that the act had been submitted to the Council of State Governments by the ational Association of Travel Organizations. legal holidays, 111 etc) or the 7 It specified a schedule of which would be observed on a Monday, the sched- become effective January 1, 1956, if adopted by 32 or more States United States of America before that date. The draft of reply stated , that. °le Board had no suggestions with respect to the proposed act but that it — Was transmitting for the information of the Department of Justice the c cftlents received from the Federal Reserve Banks regarding possible ertects of its adoption. Governor Vardaman stated that he felt it undesirable to transmit 1141 Reserve Bank comments to another Government agency since it might ''„ • ' •, 1 9/9/52 -5- °Pet the door for such agency to communicate directly with individual Fed• Reserve Banks, whereas it was his view that in all procedural matters the 13 u°ard of Governors should be the channel for communication by Govern• agencies with the Federal Reserve System. Governor Robertson suggested that the Attorney General might be allIriBed that the Board had no comments to make with respect to the probill, and that the letters of the Federal Reserve Banks not be tliallsmitted to the Department of Justice. Governor Mills questioned whether the Board should go so far as to Cate that it had no interest in the matter. He suggested that the lette , be changed to say to the Attorney General that the Board had sent e°IDie8 of the proposed act to the Federal Reserve Banks, that they had • eesed a variety of views regarding the proposal, but that it was the 6.1D13arent consensus that adoption of such legislation would not greatly l'reet bank operations although the congestion in check transactions refrom a holiday period could delay their processing with the degree Pro mptness and efficiency that is desired by the business community. This suggestion was approved unanimously, with the understanding that the letter would be sent to Mr. Duggan when in a form satisfactory to Governor Mills. Secretary's Note: The letter was sent to Mr. Duggan under date of September 9, 1952, reading as follows: 1573 9/9/52 -6-- "This refers to your letter of August 21, 19)2, addressed to the Board's General Counsel and enclosing a copy of a draft of a proposed Monday Holiday het prepared by the staff of the Council of State Governments. "After consideration of this matter, it is the view of the Board that this proposal is not one which would s ignificantly affect its functions and responsibilities under the law and, accordingly, it has no comments or suggestions to offer concerning the proposal. However, Since enactment of the Monday Holiday Act would affect ( operations to some extent, we have obtained the tax?1 °Plutons of the Federal Reserve Banks in that regard. While they express a variety of views, it is the apparent consensus that the proposed act would not greatly affect bank operations, although the congestion in check transactions resulting from a holiday period could delay their Pl'ocessing with the degree of promptness and efficiency that is desired by the business community." At this point Mr. Leonard withdrew from the meeting. Before this meeting there had been circulated among the members of the Board a memorandum from Mr. Raymond C. Kolb, President, Reserve Board C11113) dated September 3, 1952, recommending that the Board approve the 11°1(ling of a second annual hobby show for Board employees in space on the firB rloor of the Federal Reserve building on October e, 9, and 10, 1952, 12 1.4 that ' it authorize the continuance of air conditioning in the building on the 0 1)ening evening with approval of payment of overtime at the appropriate re.te for the operating engineer who would need to be on duty for one evenvo r aipProximately four hours beyond his usual working day. Governor '''''461•11 had requested that the matter be discussed at a meeting. Following a discussion, upon motion by Governor Robertson, the recommendation contained in Mr. Kolb's memorandum was approved unanimously. 1J)',74_ 9/9/52 -7Governor Robertson referred to a letter received from Mr. Leedy, President of the Federal Reserve Bank of Kansas City, dated August 15, 1952, Which stated that the board of directors of that Bank had approved esteblishment of salaries for Messrs. Frank H. Larson, as Assistant Vice ?resident at the head office, H. L. Stempel, as Cashier at the Denver and Howard W. Pritz, as Assistant Cashier at the Denver Branch, et the respective rates of $9,2001 $8,2001 and $6,500 effective August 15, 1952. The action of the board of directors of the Kansas City Bank had beet reviewed in a memorandum from the Division of Personnel Administration kted ' 111811et 26, 1952, which stated that it was submitting the matter to the. c)ard without recommendation in view of comments in the reports of e el " —liation of that Bank indicating that Mr. Larson, formerly Cashier at ther, d'erlver Branch, was being transferred to the head office because it 41" believed that he would develop sufficiently to enable him to Elash— ' ' 4 the position of Vice President in charge of the Denver Branch. Ther _ was also attached a memorandum from Mr. Carpenter, Secretary, dated - "st ao -.7) 19520 recommending that the Board approve the salaries as set by 44n8as City Bank directors with the understanding that it would 1.1scits the management problem with the appropriate people at the Bank at the arliest opportunity. Governor Robertson stated that following an informal discussion of 1n4tter he had looked into the question whether there were outstanding t S, 9/9/52 -8concerning assignments of officers of Federal Reserve Banks were not observed by the Kansas City Bank in making the transfer in cluestion and had found no such instructions. He also said that the Chief ederal Reserve Examiner does not discuss personalities with the Chairman the President of a Federal Reserve Bank and that he did not do so in T on's case. Under the circumstances, Governor Robertson recommended thatthe Board approve the payment of salaries to Messrs. Stempel and Pritz "he rates set by the board of directors of the Kansas City Bank but that 1117iew of the examiner's comments regarding Mr. Larson, it approve payment of ale7 to him as Assistant Vice President at the rate he is presently receivine, i.e., *8,800 per annum, pending further observation of his work he head office. Governor Mills stated that the Board was not familiar with the reaao4s , ck of the action of the board of directors of the Kansas City Bank 14 i 4creasing Mr. Larson's salary at the time of his transfer to Head Office. A that, if the increase were not to be approved at this time, it 1401.11,1 `& be Preferable to say to the Kansas City Bank that the Board would to discuss the matter with President Leedy when he is in Washington litte this month and that, in the meantime, it approved payment of Mr. 4111 °Ws salary at the present rate. This suggestion was approved unanimously, with the understanding that a letter would be sent to Mr. Leedy in a form satisfactory to Governor Robertson. -9Secretary's Note: The letter to Mr. Leedy read as follows: "The Board of Governors approves the payment of salaries to the following officers of the Federal Reserve Bank of Kansas City and the Denver Branch, for the period August 15, 1952, through May 31, 1953, at the rates indicated, which are the rates fixed by the Board of Directors as reported in your letter of August 15, 1952. "Name Title Annual Salary H. L. Stempel $8,200 Cashier, Denver Branch Howard W. Pritz Assistant Cashier, 6,00 Denver Branch "With respect to the salary for Mr. Frank H. Larson, the . Board has not been advised of all the circumstances surround14g his transfer to the heed office and would like to discuss tae matter with you when you are in Washington at the time of the forthcoming Presidents' Conference. In the meantime, it aPProves the payment of salary to Mr. Larson as Assistant Vice President at the rate he is now receiving, namely $8,800 Per annum, if that rate is approved by the Board of Directors Of your Bank." In this connection, Governor Vardaman suggested that Governor Robertson be Is(Ntlested to explore the question whether the directors of the Federal "e Banks should be advised that they shall not make transfers of in(14id 4alc from one office of a Federal Reserve Bank to another without prior cons, 'it tion with the Board. He also suggested that consideration 'be given to i ' 34tructing the Board's examiner in charge of the field force to discuss 'lel of the Federal Reserve Banks with the Chairman of each Federal Re41,17 ve Bank and with such committee of directors as might be designated for that , -rpose. It was understood that Governor Robertson would explore these suggestions. ,g 1 - •v'll-"s4 I I 9/9/52 -10At this point the following members of the staff entered the : root, Mr. Riefler, Assistant to the Chairman Mr. Thomas, Economic Adviser to the Board Mr. Young, Director, Division of Research and Statistics Mr. Leach, Acting Chief, Government Finance Section, Division of Research and Statistics Mr. Leach reported on recent developments in the Government securitiev 'market and there followed a discussion of factors which might be Pected eX— to affect the supply of reserves available to banks during the next tvo veeks. At this point all of the members of the staff except Mr. Sherman lit}4rew and the following additional actions were taken by the Board: Minutes of actions taken by the Board of Governors of the Federal ReBerve System on September 8, 1952, were approved unanimously. Letter to all Federal Reserve Agents, reading as follows: "On December 4, 1914, the Board sent requests to the 0u6 Federal Reserve Agents that in issuing notes to 1 alsi 4 federal Reserve Banks they 'issue the lowest serial numLi ters of each denomination first, in so far as possible, ,erebY insuring the issuance of the notes somewhat in 41 'ne order of their serial numbers.' th "The Board's files indicate that the Comptroller of e Currency directed a similar request to the Federal Re"rye Agents on November 18, 1914. "The desirability of general adherence to this rule is vious. Nevertheless, the Board realizes that with the ecUmulation of unusually large stocks of currency it may ' ,! impracticable to follow the rule in some cases without clue inconvenience. The purpose of this letter is to n orm you that the Board sees no objection to your departfrom the practice of issuing noteE of the lowest serial bere first when to do so will save time and expense. In 6 connection, we have been advised informally by the Of, ice of the Comptroller of the Currency that they no longer have any objection to discontinuance of the requirement that totes be issued in strict serial order. "It is essential however, that a record be kept of the aerial nuMbers of notes issued, inasmuch as this record furIshes the only information as to the approximate date a given Federal Reserve note was placed into circulation." Approved unanimously.
@FedFRASER