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AN ADDRESS OF WELCOME By Delos C. Johns President, Federal Reserve Bank of St. Louis To The Seminar on Central Banking At the Federal Reserve Bank of St. Louis February 10, 11 and 12, 1954 Gentlemen of the Seminar: In furthering the f i r s t a i m of my brief r e m a r k s I have m o r e than c u s t o m a r y confidence in my ability to speak for this bank. We welcome you to the F e d e r a l R e s e r v e Bank of St. Louis and e x p r e s s the e a r n e s t hope that your sojourn with us will be p l e a s a n t , profitable, and m e m o r a b l e . What we can do to bring that hope to full r e a l i z a t i o n will be done to the b e s t of our ability. In this I speak confidently for the d i r e c t o r s of this bank and for all my a s s o c i a t e s in the b a n k ' s staff. All a r e a w a r e that men whose training and experience w e r e in the law, a s my e a r l y training and experience w e r e , ofttimes find it difficult to achieve proficiency in that indispensable quality of public speech called " b r e v i t y " . Therefore I am sensible of the need to e r e c t defenses against my p r e d i s p o s i t i o n to prolixity. staff e r e c t s its defense by limiting me to fifteen m i n u t e s . The My own defense is a m a n u s c r i p t , shortened to an i r r e d u c i b l e m i n i m u m , then shortened some m o r e , and g r i m l y adhered to until the sand in my little h o u r g l a s s r u n s down. You have the p r o t e c t i o n of both t h e s e defenses as I launch you on t h r e e days and two nights of exposition and d i s c u s s i o n . This is our maiden voyage, so to say, on the sea of c e n t r a l banking s e m i n a r s . N e v e r t h e l e s s we a r e not without c h a r t s and, I hope, a r e l i a b l e c o m p a s s in laying our c o u r s e . The voyage h a s been taken by o t h e r s , and the r e s u l t s have been a p p r a i s e d a s good on the whole. The F e d e r a l R e s e r v e Banks of San F r a n c i s c o , Richmond, New York, and Dallas have conducted s e m i n a r s of this kind, and the New York R e s e r v e Bank will conduct a second one e a r l y next month. With the benefit of these e x p e r i e n c e s of our s i s t e r b a n k s , and with your i n t e r e s t , p r e p a r a t i o n , and p a r t i c i p a t i o n , we shall s t r i v e to make this p r o j e c t worth-while„ - 2 - When I say "worth-while 1 1 , I mean it in a two-way s e n s e . opinion, a one-way s t r e e t . This i s not, in our If we a r e successful in achieving our a i m s , the traffic of benefits will flow in both d i r e c t i o n s . We, who spend so g r e a t a portion of our t i m e thinking about the p r o b l e m s of this country 11 s c e n t r a l bank and doing all the things the c e n t r a l bank h a s to do, recogpize that the vantage points f r o m which we see the c e n t r a l bank may b e , and doubtless a r e , different f r o m the vantage points which you occupy. Your lookouts differ in t u r n f r o m those of the g r e a t majority of our fellow citizens who see the c e n t r a l bank dimly and f r o m afar, w h e r e a s you see it c l e a r l y and in bold relief on the background of our economic s t r u c t u r e . Whatever the differences between your vantage points and o u r s may b e , it o c c u r s to us that t h e r e i s benefit to be gained by both you and us f r o m m e r g i n g our o b s e r v a t i o n s , c o m p a r i n g our differences, if such t h e r e b e , and ultimately producing a p i c t u r e in all our minds which may be t r u e r than the s e p a r a t e views of any of u s . I m e a n by a traffic of benefits flowing in both d i r e c t i o n s . This is what Yet, a s I ponder it, I a m not s u r e that the figure of speech i s apt. The benefits which you may d e r i v e f r o m the coming s e s s i o n s , if we have planned well, and those benefits which we shall s u r e l y d e r i v e f r o m your p r e s e n c e and p a r t i c i p a t i o n will not be i m p o r t a n t m e r e l y b e c a u s e we, as men, have improved our knowledge, but b e c a u s e we, a s public and quasi-public s e r v a n t s , can b e t t e r s e r v e the public i n t e r e s t to which we a r e dedicated. b a n k e r s is s u r e l y in the public i n t e r e s t . Whatever m a k e s u s b e t t e r c e n t r a l Whatever helps you, as r e s e a r c h e r s and t e a c h e r s , to d i s s e m i n a t e a b e t t e r understanding of our c e n t r a l banking institutions as living o r g a n i s m s in a w o r k - a - d a y world i s , we d a r e to b e l i e v e , also a public - 3 benefit. T h e r e f o r e , maybe I should not have r e f e r r e d to a traffic of benefits in both directions. l?erhaps I would have been b e t t e r spoken if I had said !T a flow of benefits in the public interest 1 1 . We a r e not so bold a s to set for o u r s e l v e s the objective of improving your knowledge of the p u r p o s e s and functions of the F e d e r a l R e s e r v e S y s t e m or the t h e o r y of c e n t r a l banking. You have been invited to come h e r e b e c a u s e you have a l r e a d y a c q u i r e d that background and, having acquired it, a r e engaged in i m p a r t i n g it to o t h e r s . Opportunity to talk to and with people about the F e d e r a l R e s e r v e System is p a r t of your b u s i n e s s . We seek in this s e m i n a r , and in all other r e a s o n a b l y available w a y s , to have you come to know us and our work b e t t e r so that you can help us to enlighten an ever widening c i r c l e of people about us and our work. I never fail to be e m b a r r a s s e d when a new acquaintance, or p e r h a p s an old one, a s k s m e , R e s e r v e bank do? What kind of a bank i s i t ? H What does the F e d e r a l Who a r e your c u s t o m e r s ? ,f After n e a r l y forty y e a r s of existence we a r e still s t r a n g e r s to the g r e a t m a s s of our people. Now, I do not a s p i r e to bring about a m i l l e n i u m in which everybody, or n e a r l y everybody, knows as much, or one-tenth as much, about the p u r p o s e s and functions of the F e d e r a l R e s e r v e System a s you do. I do a s p i r e , however, to have t h e m know and understand that the institution behind the grey walls at 411 Locust Street is just made up of people, who work at d e s k s , t y p e w r i t e r s , proof m a c h i n e s , key punches, and t a b u l a t o r s like thousands upon thousands of people in other b u s i n e s s o r g a n i z a t i o n s . I would like t h e m to know also that the men who run this institution put on their p a n t s one leg at a t i m e , a s other men a r e reputed to do. we c r a v e . That i s the kind of understanding It i s the kind of understanding we need when once in a while we may not only put on our pants one leg at a t i m e , but also b a c k w a r d s . - 4 In the c o u r s e of today and the next two days we hope to give you a glimpse behind the s c e n e s of our operating d e p a r t m e n t s w h e r e checks a r e sped through e s s e n t i a l p r o c e s s e s of collection, w h e r e bonds and other public debt i n s t r u m e n t s a r e i s s u e d , r e i s s u e d , and r e d e e m e d , w h e r e w i r e t r a n s f e r s of funds and s e c u r i t i e s a r e dispatched and r e c e i v e d , w h e r e c u r r e n c y and coin a r e shipped and r e c e i v e d , and w h e r e many, many other kinds of b u s i n e s s a r e t r a n s a c t e d which the R e s e r v e banks have been appointed by statute or o t h e r w i s e to t r a n s a c t for the s e r v i c e , convenience, and benefit of the public, l a r g e l y through the c o m m e r c i a l banking s y s t e m . I n t e r s p e r s e d throughout the p r o g r a m t h e r e will be expositions and d i s c u s s i o n s of m o n e t a r y and c r e d i t policy making and policy action, with e m p h a s i s on the r o l e s played by the R e s e r v e bank and its officers and staff in these most i n t e r e s t i n g and i m p o r t a n t functions. The e x p o s i t o r s and d i s c u s s i o n l e a d e r s in all these m a t t e r s have been r e c r u i t e d not alone f r o m this b a n k ' s staff but also f r o m among the top level officers of two other R e s e r v e banks who have graciously consented to a s s i s t u s , and f r o m the senior staff of the Board of G o v e r n o r s who have taken t i m e f r o m their busy lives for this p u r p o s e . Your p a r t i c i - pation in the d i s c u s s i o n s , your questions, your c o m m e n t s , and your o b s e r v a t i o n s a r e e a g e r l y awaited and solicited in the b e s t tradition of the s e m i n a r . Throughout the d i s c u s s i o n s the word " S y s t e m " will undoubtedly be used over and over again. Even when we a r e talking about the o p e r a t i o n s and activities of the F e d e r a l R e s e r v e Bank of St. Louis, we shall generally be talking about F e d e r a l R e s e r v e System o p e r a t i o n s and a c t i v i t i e s , b e c a u s e in n e a r l y every instance our c o u n t e r p a r t s in eleven other F e d e r a l R e s e r v e banks a r e p e r f o r m i n g the same or s i m i l a r s e r v i c e s and a r e working on the same or s i m i l a r p r o b l e m s . "We shall not - 5 occupy your t i m e unduly by laboring the concept of a d e c e n t r a l i z e d c e n t r a l bank, with its diffusion and d i s p e r s i o n of authority and r e s p o n s i b i l i t y . T h e s e things you know and can r e f r e s h your r e c o l l e c t i o n s about by r e - r e a d i n g the F e d e r a l R e s e r v e Act and other s o u r c e s . It o c c u r s to m e , however, that t h e r e a r e c e r t a i n non- statutory devices of organization and a d m i n i s t r a t i o n , p e r h a p s not widely known, in which you might find i n t e r e s t and which I might a p p r o p r i a t e l y talk to you about. They a r e c o n s i d e r e d to b e , and I think a r e , indispensable to the achievement of that unity and that pooling of e x p e r i e n c e and judgment without which the name "System 1 1 would lack r e a l i t y . T h e r e is nothing unique about the devices I shall briefly mention. They would occur to anyone confronted by the s a m e p r o b l e m s they w e r e invented to deal with. They involve simply an application of the principle of voluntary collective action by p e r s o n s having common o b j e c t i v e s . Since the F e d e r a l R e s e r v e banks have m a n y common objectives and multifarious common p r o b l e m s - p r o b l e m s of operating policy, m e t h o d s , and p r o c e d u r e s , for example - we pool our r e s o u r c e s to attain our objectives and solve our p r o b l e m s . Obviously the principal r e s o u r c e to be pooled for t h e s e p u r p o s e s i s m a n p o w e r , through which experience and judgment a r e pooled. This is l a r g e l y a c c o m p l i s h e d by and through an organization known a s The Conference of P r e s i d e n t s of the F e d e r a l R e s e r v e B a n k s , which, I h a s t e n to add, is not an exclusive club of twelve but a working organization utilizing, in an imposing a r r a y of c o m m i t t e e s and s u b c o m m i t t e e s , at one t i m e and a n o t h e r , the s e r v i c e s of a g r e a t many of the officers and m e m b e r s of the staffs of all the R e s e r v e b a n k s . Not even the staff of the B o a r d of G o v e r n o r s e s c a p e s s e r v i c e in this extensive line o r g a n ization, for many of its m e m b e r s s e r v e a s m e m b e r s and a s s o c i a t e m e m b e r s of m a n y c o m m i t t e e s and s u b c o m m i t t e e s . Some of these bodies a r e s o m e t i m e s r e f e r r e d - 6 to a s "standing 1 1 c o m m i t t e e s and s u b c o m m i t t e s , to which c e r t a i n functions and operating or policy a r e a s a r e m o r e or l e s s p e r m a n e n t l y assignedo F o r many special p u r p o s e s , however, ad hoc bodies a r e c r e a t e d and go out of existence when t h e i r work is completed,, The Conference of P r e s i d e n t s m e e t s , u s u a l l y , four t i m e s a y e a r , and at these m e e t i n g s the work of the c o m m i t t e e s and s u b c o m m i t t e e s is r e v i e w e d and final action taken, subject, of c o u r s e , to the approval or a s s e n t of the B o a r d of G o v e r n o r s when such is r e q u i r e d . An i m p o r t a n t p a r t of e v e r y meeting of the Conference is a joint meeting with the B o a r d of G o v e r n o r s . This does not imply, of c o u r s e , that contacts between the p r e s i d e n t s and the B o a r d m e m b e r s a r e l i m i t e d to such joint m e e t i n g s . Those contacts a r e frequent, usually quite informal and i n t i m a t e , a s they should b e , and m o r e often between individuals than between groups. In any general view of the workings and o p e r a t i o n s of the S y s t e m , however, the Conference of P r e s i d e n t s with its l i n e - u p of c o m m i t t e e s and s u b c o m m i t t e e s m u s t be recognized a s the focus around which a v e r y g r e a t deal of F e d e r a l R e s e r v e bank b u s i n e s s r e v o l v e s . The C h a i r m e n of the F e d e r a l R e s e r v e Banks also have t h e i r Conference, which m e e t s g e n e r a l l y once or twice a year and at such t i m e s has joint s e s s i o n s with the Board of G o v e r n o r s . Individual m e m b e r s of the Conference of C h a i r m e n frequently s e r v e on joint c o m m i t t e e s set up for special p u r p o s e s and also containing r e p r e s e n t a t i v e s of the B o a r d of G o v e r n o r s and Conference of P r e s i d e n t s ^ One of our visiting s p e a k e r s will d i s c u s s with you the organization and work of the F e d e r a l Open Market C o m m i t t e e , which, a s you know, is a body made up of the m e m b e r s of the B o a r d of G o v e r n o r s and five p r e s i d e n t s of R e s e r v e b a n k s . I mention that body h e r e only for the purpose of rounding out a thumbnail sketch of . 7 the t h r e e b o d i e s , one statutory (the Open M a r k e t Committee) and two voluntary, which together with the Board of G o v e r n o r s , e x e r c i s i n g general s u p e r v i s i o n of the whole, furnish the organizational f r a m e w o r k for m a r s h a l l i n g the manpower r e s o u r c e s of the e n t i r e System to attach any S y s t e m p r o b l e m or further any endeavor 0 The existence of t h e s e bodies does not m e a n nor should it be taken a s implying that the individual R e s e r v e banks do not p o s s e s s nor e x e r c i s e any autonomy in performing t h e i r functions in t h e i r r e s p e c t i v e d i s t r i c t s and serving p e c u l i a r needs of their d i s t r i c t s within the a p p r o p r i a t e purview of R e s e r v e b a n k s . The point I wish to make is that when System m a t t e r s a r e involved, as distinguished from c l e a r l y regional or local m a t t e r s , the F e d e r a l R e s e r v e System i s o r g a n i z e d and equipped to t a k e , and does t a k e , System action. Thus twelve F e d e r a l R e s e r v e banks - twelve s e p a r a t e c o r p o r a t e entities - can and do act, when need b e , a s one, and all bodies of the F e d e r a l R e s e r v e can and do act a s a S y s t e m . T h e r e has been, a s you know, much d i s c u s s i o n and a r g u m e n t about v a r i o u s organizational c h a r a c t e r i s t i c s of the F e d e r a l R e s e r v e S y s t e m . Changes in s e v e r a l r e s p e c t s a r e under a l m o s t continual d i s c u s s i o n s o m e w h e r e . Logic and a b s t r a c t r e a s o n can make m o r e or l e s s tenable c a s e s for this or that change in the delegation of authority and r e s p o n s i b i l i t y . One finds it difficult, however, to escape the force of the view, so well e x p r e s s e d on m o r e than one occasion by the late D r . E . A. Goldenweiser, that t h e r e is doubt beyond a m e r e shadow whether change for the sake of logic in organizational f o r m s long institutionalized and p e r f o r m i n g s a t i s f a c t o r i l y is worth the c a n d l e . The sand in m y h o u r g l a s s has run down. a m through and t u r n you over to t h e i r tender c a r e . 000OOO000 The staff m a y now r e l a x , for I
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