19490506_Minutes.pdf

809

Minutes of actions taken by the Board of Governors of

l'ederal Reserve System on Friday, May 6, 1949. The Board met

theBoard Room

PRESENT:

at 10:35 a.m.

Mr.Mr.Mr.Mr.Mr.

McCabe, ChairmanEcclesSzymczakDraperClayton

Mr.Mr.Mr.Mr.Mr.Mr.Mr.

Mr.

Mr.

Carpenter, SecretarySherman, Assistant SecretaryMorrill, Special AdviserThurston, Assistant to the BoardRiefler, Assistant to the ChairmanVest, Geneial CounselNelson, Director of the Division of

Personnel AdministrationLeonard, Director of the Division of

Bank OperationsYoung, Associate Director, Division

of Research and Statistics

the

in

There were presented telegrams to the Federal Reserve Banks

Or Bost'n, New York, Philadelphia, Atlanta, Chicago, St. Louis, and

4.4'I'encisco stating that the Board approves the establishment with-

otit chn..---44te by the Federal Reserve Bank of San Francisco on May 3, by

the. pederal Reserve Bank of St. Louis on May 4, by the Federal Re-

serve v,'°13.11ks of New York, Philadelphia, and Atlanta on May ), 1949,

the Federal Reserve Banks of Boston and Chicago today, of the

°f discount and purchase in their existing schedules.

Approved unanimously.

Mr. Nelson then presented a draft of letter to the Board of

of the Retirement System of the Federal Reserve Banks

rEttet

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

5/6/49 -2-

aPProving amendments to the Rules and Regulations of the Retire-

tent System to make effective the changes in benefits outlined in

the Board's letter of April 29, 1949, to Mr. Leedy, Chairman of the

Ilosrd of Trustees, and adopted by the Trustees at its meeting on

May 4) 1949, as stated in a letter from Mr. Leedy on that date.

The draft read as follows:

"With your letter of May 4, 1949, you submit copiesof proposed amendments to the Rules and Regulations of the

Retirement System of the Federal Reserve Banks which wereapproved by the Board of Trustees on that date and request

approval of the Board of Governors of these amendments inorder to effect the following changes in the benefits ofthe Retirement System applicable to the Bank Plan:

1. Final Average Salary: The normal pension bene-

fits to be calculated on the average salary for

the five consecutive years of creditable service

when salary was highest, instead of the present

ten year average.2. Service Pension Benefits: The normal service pen-

sion benefits to be fixed as one per centum of

final average salary for each year of creditable

service on a straight life basis; the additional

Prior service pension in lieu of annuity to befixed as one per centum of the best 20 yearaverage salary on a straight life basis, disre-

garding any salary in excess of fifteen thousand

dollars per annum; present members to be giventhe right to take the pension benefit payable in

respect to creditable service rendered prior tothe date of change upon a cash refund basis, upon

Specific request therefor; the pension for service

accrued subsequent to the change to be on a straight

life basis without such conversion privilege.3. Minimum Pension Benefit: The minimum pension bene-

fit to be fixed at ra year for each of the last20 years of service, on a straight life basis, in-stead of the present minimum of $24 a year on acash refund basis.


5/6/49 -3-

4. Limitation on Normal Pension: The present limi-tation of $6,000 on the maximum normal pensionpayable to be removed and a new provision sub-stituted limiting the regular retirement allow-ance payable to 75% of final average salary.

5. Active Service Death Benefit: The limitation onthe maximum lump sum death benefit payable on deathIn active service to be increased from $15,000 to$25,000.

"In addition certain amendments have been proposed toclarify the Rules or to eliminate material no longer necessary.

"The Board of Governors approves the amendments to theRules and Regulations as submitted,"

Upon motion by Mr. Draper, the foregoingletter was approved unanimously, together withthe following letter to the Presidents of allFederal Reserve Banks:

"For your information, there is enclosed a copy of aletter from the Board of Governors to the Chairman of theBoard of Trustees of the Retirement System of the Federal Re-

Banks relative to certain amendments to the Rules andAegulations of the Retirement System.

Your Bank is hereby authorized to make a lump sum pay-Illent of the amount necessary to liquidate its accrued?=iability resulting from the changes in the benefits of the:etirement System by reason of the amendments to the Rules

Regulations adopted by the Board of Trustees on May 4,

4terv.e Banks authorizing supplemental

Ste

13e.rein accordance with the discussion

194e,' and

reading as follows:

111 to provide increased allowances

Mr. Nelson also presented a draft of letter to all Federal

contributionsto the Retirement

to members already retired, pre-

at the meeting on April 29,

by th"Pursuant to the recommendation of the Committee appointedReti e Conference of Chairmen to study the benefits of thealltjement System of the Federal Reserve Banks, the Board

°rizes the Federal Reserve Banks to make supplemental


812

5/6/49 -4-

contributions to the Retirement System of the FederalReserve Banks to provide an increased retirement allow-ance on a straight life basis for members who werereceiving retirement allowances on May 6, 1949, providedthat no such allowance, inclusive of any supplementalbenefits previously provided, shall be increased to anamount above that which would have been payable as a re-tirement allowance if the person concerned had retiredunder the rules as amended effective May 6, 1949, andProvided further that no allowance shall be increased bymore than $40o per annum on a straight life basis andthat, except for persons retired for disability, noincrease shall be made in the allowance of any personwho separated before age 60. The foregoing authorizationis given with the understanding that it will be appliedUniformly to all such retired members by all FederalReserve Banks.

"In addition to the above, allowances of retired mem-bers who were receiving allowances on May 6, 1949, and whowtere retired at the request of the employing Bank betweenhe ages of 50 and 6o, may be supplemented in accordancewith the foregoing formula in cases which, in the judgment(n the employing Bank, are especially meritorious."

Upon motion by Mr. Draper, the letter wasapproved unanimously with the understandingthat the Board would make supplemental contri-butions to the Retirement System to provideIncreased allowances for retired members of theBoard's staff who were members of the "BankPlan", in accordance with the terms of the letter.

In connection with the foregoing, Mr. Nelson said that Mr.

Leecr's letter of May 4, 1949 stated that the Board of Trustees of

the Retirement System considered the recommendation in the Board's

11".;tel' April 29 that the Rules and Regulations be amended to pro-

a minimum allowance of 25 per cent of final average salaryto

e44 Member of the "Bank Plan" of the Retirement System who had

°Ilirgeted ten or more years of service, and that the Trustees


'

5/6/149

suggested that inasmuch as the proposal had not been considered by

the Special Committee of the Chairmen's Conference which studied the

Other changes in the benefits, it be referred to that Committee

t°1' atudY and comment.

The foregoing suggestion was approvedunanimously.

Secretary's note: Pursuant to the aboveaction, the following letter was sent toMr. Brainard, Chairman of the Special Com-mittee of the Chairmen's Conference to studythe Retirement System, under date of May 10,1949:

"The Board approved, at a meeting last Friday, changes:12_1 the Rules and Regulations of the Retirement System of'ne Federal Reserve Banks along the lines recommended inthe report of the Special Committee of the Chairmen's Con-ference which you submitted on behalf of the Conference.Inder date of April 14, 1949, which changes were adoptedbY the Board of Trustees of the Retirement System at a'fleeting on May 4, 1949.

In connection with the adoption of the amended Rules,lt,he Board of Trustees gave consideration to a recommendation2" the Board of Governors that an additional minimum pro-"'sion be incorporated in the Rules and Regulations whereby1fl15It,,x 'Bankber of the Retirement System retiring under the 'Bank_Ian' after attaining age 65 with at least ten years ofluireditable service with the Reserve System would receive a,.°1111e1 retirement allowance not less than 25 per cent of his

average salary.this "After discussion, the Board of Trustees felt that since

s, suggestion had not received the consideration of the

4.eacial Committee of the Chairmen's Conference which had con-and acted upon the other proposed changes in the

C-irement System, the Committee should be afforded an oppor-tnitY to consider this recommendation before any action byrt Board of Trustees. The Board of Governors, therefore,

Zests that your Committee give consideration to this pro-axd that it submit a statement as promptly as possible

tivcee:;11111g ithe suggested additional minimum, or any alterna-may wish to suggest."


5/6/49 -6-

Mr. Draper reported that at the meeting of the Executive

ectilmittee of the Board of Trustees of the Retirement System on May

4' 1949, the Trustees indicated they would be glad to have two

rePresentatives of the Board attend meetings of the investment

coralnittee. It was understood that Mr. Draper would make a recom-

ntelidation as to who should be appointed to represent the Board as

e'880ciates on the investment committee.

A memorandum from Mr. Leonard prepared under date of May 5,

1949/ was then presented in which he recommended that the Board

11/terPose no objection to acceptance by the Federal Reserve Bank

"Sett Francisco of the low bid for the construction of a building

tor „'le Portland Branch of the Federal Reserve Bank of San Francisco

"Po..„"land, Oregon. Mr. Leonard stated that the Portland Branch

-`.01"13 recommended the letting of contracts as proposed, thatthis

'les concurred in by the directors of the Federal Reserve Bank

or -'1"ancisco, and that he felt it would be desirable to authorize

the coAtracts .

Following a discussion, upon motion by Mr.Clayton, the following telegram to Mr. Mangels,First Vice President of the Federal ReserveBank of San Francisco, was approved unanimously.

to liaurtel May 3, Board will interpose no objectionRonnt!!ding contract for Portland Branch building to01,- Hammond Co. in the amount of $1,828,407 on basisEtuj"°1'1 basic bid adjusted for alternates accepted, and

Which ur,Iorizes expenditures for Portland building contracts"aye been or will be executed by your Bank and not


815

5/6/49 -7-

"assigned to general contractor, with aggregate amount

not to exceed $2,257,379, including allowance forredesign for earthquake resistance, all as outlined in

Your telegram. Also, as requested in your telegram,

Board authorizes allowance of $100,000 for contingencies.

Understand that such allowance will permit making minor

Changes and expenditures without prior submission to

Board but that any material items will be submitted for

Board's consideration."

Mr. Leonard then referred to the discussion at the meeting

011 /%bruary 20, 1949, concerning the proposed construction of an

ftadition to the Detroit branch building of the Federal Reserve

taalkOf Chicago and to the further discussion at the meeting on

letarch 8, 1949, of the Board's policy concerning major Federal

Reserve construction projects as set forth in the Bank's letter

orl'ebruary 27, 1948, (S-1015), which stated that the Board did

144 favor such construction unless the need was of an emergency,

48 4istinguished from an urgent, character.

In this connection, Mr. Leonard also referred to a memorandum

41464144Y 3, 1949 from Messrs. Young, Wood, and Klaman of the Divi-

411311 Of Research and Statistics concerning the proposed construction

1)r°/*ata of the Federal Reserve Banks and stating that in view of the

chaja43_ea that had taken place in the construction and construction

14Sterial8 industries, as well as the general economy, it would be

4Nalate to permit the Federal Reserve Banks to proceed with planstor'04struction. A memorandum from Mr. Leonard dated May 5, 1949,Net._

-44qaelided that the policy stated in the Board's letter 5-1015 dated


5/6/49 -8-

lebruary 27, 1948, be modified and that the Reserve Banks be advised

that the Board would now consider programs for alterations and im-

Provements believed to be necessary to provide satisfactory working

.conditions in. Federal Reserve buildings. Mr. Leonard stated that

141'. Vardaman concurred in this recommendation.

With respect to the proposed construction at the Detroit

btallch building, Mr. Leonard said that this project had not been con-

urgent but that it was believed to be highly desirable, and

Ile 'would recommend that the Chicago Bank should be authorized to pro-

firm bids for the construction at Detroit on the basis of the

Pl‘°Posed plans and specifications previously submitted. In this

CO'm:014XML, he presented a memorandum dated May 4, 1949 relating to

the petroit program which stated that Mt. VardemAn concurred in this

l'eccumendation.

There followed a discussion of the reasons which led to the

e4cl'tion of the policy in S-10151 of the changes in the economic

411414+4w-vall since that letter was issued, and of the needs for major

c'LlitIllation at some of the Federal Reserve Banks and branches. It

the consensus of the members present that at the appropriate time

41011,-'44- the next session of the Congress, the Board should propose

telklal of the existing limitation in the law on the cost of Federal

lieserv

e Eank branch buildings mnd, if Congress were not willing to

1144a 0change a request should be made for an increase in the


81[7

5/6/49 -9-

authorization granted by the Congress on July 30, 1947,

for the construction of branch buildings. During the discussion

Carpenter read a draft of proposed letter to all Federal Reserve

444/ as follows:

"In its letter of February 27, 1948 (S-1015; F.R.L.S.

#30)3), the Board expressed the belief that extensive

alterations or improvements to or construction of new

Federal Reserve Bank buildings should not be undertakenin times of pronounced inflationary conditions or when thereare substantial shortages of labor and construction materials.

Accordingly, the Board stated that it would not favor such

construction unless the need therefor was of an emergency,as distinguished from an urgent, character. Under that policy

various projects for modernizing both head office and branch

buildings and construction programs for branches have beenheld in abeyance.

"In view of changed conditions, the Board believes that

the policy set forth in letter S-1015 may now be appropriately

modified, and, accordingly, letter S-1015 is cancelled. Withmodification of that policy, which had been adopted as a tem-

P°rarY measure because of the post-war conditions, the Boardwill now consider programs for alterations and improvementsbelieved to be necessary to provide satisfactory working

conditions in Federal Reserve buildings."It will not be possible, however, to undertake all con-

struction programs at the branches until further amendment

i8 made to paragraph 9 of Section 10 of the Federal Reserve

Act) which contains the over-all limitation of $10,000,000 on

costs of 'building proper'."In this connection, the latest information the Board

has on some branch building programs was submitted in response

to its letter of August 8, 1947. Space requirements and

:stimates of cost may have changed considerably since then.

will be appreciated, therefore, if you will inform the

405.rd of any changes in branch building programs since infor-

!ation thereon was last submitted and of any changes in the

Zsttmated cost of 'building proper, exclusive of the cost ofrhe vaults, permanent equipment, furnishings, and fixtures'

,4r°ril figures heretofore submitted. This request, of course,

i;ces not apply to those branches for which programs have

,nn aPProved since August 1947 or which the Board now has"Lmer consideration.


5/6/49 -10-

"The last two paragraphs of letter S-10151 which areOf continuing applicability, are included in this letteras the following paragraphs.

"There is no objection, of course, to the employmentOf architects to prepare preliminary plans for contemplatedhead office and branch building construction or alterations.The Board should be informed, however, concerning thedetails of any agreements made with the architects for suchPlans, which agreements should include a provision that theFederal Reserve Bank is not obligated to retain the archi-tect for any work beyond the preparation of preliminaryPlans, but that if he is retained the payment for such workwill be taken into account in the final fee. No commitmentShould be entered into for the preparation of detailed plansand specifications until the preliminary plans have beenreviewed by the Board. In submitting preliminary plans andestimates of cost for the construction of a Federal ReserveBranch bank building or a major alteration or additionthereto, it will be appreciated if the information includesthe data called for in letter S-1003 dated December 5, 1947(P.R.L.S. #3053).

"The above does not relate to normal maintenance, that!-13, to such repairs and alterations as are chargeable toRePairs and alterations' on Form F. R. 96, or to minorPlacements chargeable to the appropriate allowance for

"Predation. However, alterations and improvements, in-c uding replacements, of a major character and new con-

should„ not be undertaken without prior considera-tion by the Board.”

Upon motion by Mr. Szymczak, the foregoingletter was approved unanimously, together withthe following letter to Mr. Young, President ofthe Federal Reserve Bank of Chicago:

j "Reference is made to your letters of January 22 and

,.!nuarY 29, 1949, and to the Board's reply of February 23,4narding the Detroit Branch building program.

'It is noted that the architects estimated at the timethatthe cost of the program, including contractors' and

!Fehitects' fees, would be approximately $3,895,000, and that:.?eY recommended that an additional allowance be made of7erri140,000 for contingencies and $50,000 for necessaryu Aat„ ca,Les, dust partitions, and special conditions of con-''etion due to having to build a substantial portion of


9

5/6/49 -11-

"the addition before alteration of the old building canbe started.

"The Board will now interpose no Objection to theprocuring of firm bids for the construction at Detroiton the basis of the proposed plans and outline specifi-cations as submitted to the Board, with the understand-ing that the bids will be submitted to the Board forapproval before a contract for the work is entered intoby Your Bank. Please forward, when they are completed,a copy of the final specifications as submitted to thebidders."

Mr. Clayton then presented a draft of a tentative agenda

r0' the Conference of Chairmen of the Federal Reserve Banks to be

1114 at White Sulphur Springs, West Virginia, on May 28, 29, and

30, 1949.He stated that the agenda had been prepared on the

1111818 of suggestions made by the individual Chairmen and that he

41"r. Daarmont, Chairman of the Chairmen's Conference, had dis-

cUseed the arrangement of topics. In this connection, Mr. Clayton

1'4113" the question of providing entertainment at the evening meet-

Inas(n the Conference, stating that some members of the Chairmen's

e°4terence felt that such entertainment would be desirable. It

1/44 th-6 consensus that if the Chairmen's Conference desired such

Illitertairutent, the Board would not object to it, provided the

were kept within a reasonable amount. Mr. Clayton also sug-

ested that unless the members of the Chairmen's Conference felt ittleces

84rY to have a stenographic report of the proceedings, the

lIrkttiec,-- of preparing such a transcript not be followed at this

C°4terenes.


5/6/49

g'90

-12-

Mr. Clayton raised the question who from the Board's staff

should attend the Conference, stating that the presence of most of

the members of the senior staff was called for by topics on the

agenda and suggesting that those in the staff positions which were

l'ePresented at the Conference held in May 1948 be invited to attend.

Re also suggested that, in keeping with the custom that had been

r°110wed in the past, the Board authorize the payment of the ex-

/)ellses of the Conference which would not be covered by travel and

"bsistence expenses.

Mr. Clayton's suggestions were approvedunanimously with the understanding that theappropriate item in the 1949 nonpersonal bud-get of the Office of the Secretary would beincreased to cover the costs of the Conferencethat were not covered by travel and subsis-tence expenses of the individuals in attendance.

During the foregoing discussion, Mr. Eccles withdrew from

the 111 eti4g, and at this point Messrs. Morrill and Nelson left the

Before this meeting, copies of a letter dated April 20, 1949,trota mr

• Peyton, president of the Federal Reserve Bank of Minneapolis,

had464 sett to each member of the Board, outlining a proposed cen-

tl'41 king seminar for university and college teachers of money

114 banki--ng along the lines discussed at the meeting on November 9,

1948

teretic_Would be approximately $3,600, and that he would assume the

1'4% Peyton's letter stated that the total cost of such con-


821.

5/6/49 -13-

expenditure was satisfactory unless the Board advised to the con-

trary.

Although there was some question whether the project could

be carried out without giving the impression that the Federal Re-

serve was trying to "sell" those in attendance on a point of view,

it was the consensus that there would be no objection to its being

Ulidertaken as an experiment on the basis suggested by Mr. Peyton

14110 was fully aware of the problems involved.

Following the discussion, upon motion by

Mr. Clayton, a telegram to Mr. Peyton was ap-

proved unanimously in the following form:

"Board interposes no objection to your proceeding

as an experiment with plans for trip for teachers of

monetary economics as outlined your letter April 20, 1949

to Chairman McCabe. Board also approves addition to your

current budget for bank and public relations amount of

$3600 to cover anticipated expenses of trip."

Chairman McCabe referred to the discussion at the joint meet-

it&ct the Board with the Presidents of the Federal Reserve Banks on

May 1J, 1949, concerning proposed legislation on industrial loans,

41c1 to the feeling among the Presidents and the members of the Board

that legislation to liberalize the existing authority would have

littleoPportunity for consideration at the present session of Con-

Re suggested that, under the circumstances, no attempt be made

this time to have legislation introduced in the present session,

that 101--ans be made to present a proposal to the Congress at an appro-

Pllat e time in the future, that in his statement on proposed or pond-le

Eislation at the forthcoming Conference of Chairmen of the


5/6/49 -14-

Federal Reserve Banks he inform the Chairmen of the views of the

13ard and ask for /Ivy comments that the Chairmen might have.

Chairman McCabe's suggestion wasapproved unanimously.

Mr. Morrill and Mr. Millard, Director of Division of Examina-

t10118) entered the meeting at this time.

Mr. Szymczak stated that a draft of letter to the Bank of

Arlerica National Trust and Savings Association, San Francisco, Cali-

forni-a with respect to its applications for permission to establish

three branches in Germany had been prepared by the staff in the light

" the discussions at the conferences with Russell G. Smith, Execu-

tive Vice President of the Bank of America, on Wednesday and Thurs-

43r' APril 13 and 14, 1949. The draft, he said, after discussing the

8 view concerning the capital position of the Bank, proposed to

aPktIre the applications

tel&the't the Board would

for the branches in Germany and also indica-

be glad to consider a request for the forma-

Or a separate corporation under the provisions of Section 25a ofthe p--a

eral Reserve Act for the purpose of handling the foreign opera-tic),

-48 of Bank of America.

During a discussion of the draft, Mr. Szymczak suggested thatb

e taking action with respect to the proposed letter, the Secre_tEtry

utain the views of the members of the Board who were not pre-

0

411It at this meeting and that the matter be considered at another


82.?

5/6/49

meeting of the Board.

-15-

Mr. Szymczak's suggestion was approvedunanimously.

Mr. Clayton then withdrew from the meeting.

Mr. Morrill stated that he received a telephone call from

Mr. Townsend during the meeting who stated that Mr. Evans had in-

dicated that he contemplated recessing the hearings in the Clayton

ActProceeding about May 21, after which Messrs. Evans and Town-

would return to Washington with a view to discussing the case

with the members of the Board prior to resumption of the hearings in

Swarancisco about July 1, 1949.

At this point Messrs. Riefler, Vest, Leonard, Millard and

101) e.-"tsvithdrew and the action stated with respect to each of the

rukttershereinafter referred to was taken by the Board:

Minutes of actions taken by the Board of Governors of the

Peo%teral Reserve System on May 5, 1949, were approved uanimously.

Memorandum dated May 61 1949, from Mr. Bethea, Director oftheti

"-sion of Administrative Services, recommending that the tem-

DclretzlY aPPointment of Mrs. Ruth Buck, a page in that Division, be

"u for an additional period of one month from May 12, 1949,

4° Ilange in her present basic salary at the rate of $2,284.00Der atnalm.

vith



5/6/49 -16-

Memorandum dated May 4, 1949, from Mr. Bethea, Director

Of the Division of Administrative Services, recommending an in-

crease in the basic salary of William R. McDonald, a clerk in that

tivision, from $2,423.04 to $2,498.28 per annum, effective May 15,

1949.


Telegram to Mr. McLarin, President of the Federal Reserve

BellIC of Atlanta, reading as follows:

"In accordance with your wire, copy of Board's let-ter of May 4, 1949, enclosing proposed bill relating tocapital requirements for admission to membership and theestablishment of branches by State member banks is being

sent direct to the officer in charge at your Birminghqm,

Jacksonville, Nashville, and New Orleans Branches."

Approved lin5nimous1y.

Letter to the Honorable H. E. Cook, Director, Federal Deposit

Illetlralace Corporation, reading as follows:

"In view of the circumstances described in your letter

of April 22, 1949, the Board of Governors assents to your

Proposal to audit the certified statements filed in connec-tion with determining the deposit insurance assessment baseby State member banks in New York, New Jersey and Delaware'with deposits of over $10,000,000, also to audit the state-

rtlents filed by smaller banks in a limited number of casesIlhere the checking of statements and reports indicates thatsuch action is desirable. The Federal Reserve Banks of New

4°rk and Philadelphia have been advised of this action.

"The Board is pleased to learn that, as was reportedvith respect to other States in which audits have been made,

110 discrepancies were found through your audits of statementsbubmitted by State member banks in Ohio, Pennsylvania and

b nnessee which were considered of sufficient importance to be!ought to its attention. If any significant discrepancies'I's disclosed by the audits presently being undertaken, it


5/6/49 -17-

"will be appreciated if you will advise the Reserve Bankconcerned and the Board.

"It is noted that, in your opinion, after the pro-

posed audits in New York, New Jersey and Delaware, a

sufficiently representative group will have been con-

tacted to develop the information desired with respectto your original project. It is assumed that it may be

Practicable, thereafter, to develop a procedure, to be

followed as a part of the regular examination of banks,

which will provide the information or verification con-

sidered necessary with respect to statements submitted

for assessment purposes. The Board feels that it is

Important that this matter be clarified at an early date."


Letter to Mr. Gidney, President of the Federal Reserve Bank

"Cleveland, reading as follows:

"Reference is made to your letter of April 29, 1949,

regarding the retirement of Mr. Charles Koenig, chief

engineer, and the desire of your board of directors to

retain his services for one year following his retire-

Ment."In cases of this kind it has been the general

Policy to make some adjustment in the salary of an em-

Ployee retained in service after retirement, due to the

fact that he would be receiving an allowance from the

Retirement System. It appears, however, that yourBank

Proposes to continue to pay Mr. Koenig the same salary

that he is now receiving."Due to the special circumstances outlined in your

letter, the Board is willing in this case to depart from

the usual policy, and approves the payment of salary to

kr. Charles Koenig, chief engineer, at the rate of $5,250

Per annum for the period July 1, 1949 through June 30,1950."


Seere tarY of the Treasury, reading as follows:

Letter to the Honorable E. F. Bartelt, Fiscal Assistant

825


5/6/49 -18-

"Enclosed is a copy of a letter dated April 26, 1949,from Vice President Peterson of the Federal Reserve Bankof St. Louis with reference to inquiries received fromState member banks asking whether wholly-owned affiliates ofsuch banks would be allowed to purchase non-eligible govern-ment bonds in the market for their own investment accountand whether a bank would be permitted to purchase at thistime non-eligible governments for a trading account as per-

mitted by Treasury Department Circular No. 787 dated May 17,1946, where such bank had not availed itself of the privi-lege at the time offered. Also enclosed is a copy of a

telegram dated May 4, 1949, from Mr. Peterson stating thatseveral inquiries had been received from banks asking

whether a bank which had availed itself of the right to

Purchase restricted issues and had since sold the bonds,

Presumably in the open market, could reestablish a bond

trading account in the restricted issues covered by that

circular."In response to a telephone inquiry made by Mr. Goodman

Of the Board's Division of Examinations, Commissioner of the

Public Debt Kilby advised that the authorization in Depart-

ment Circular No. 787 permitting commercial banks to hold,for the purpose of facilitating transactions for the account

Of customers, a limited amount of non-eligible governmentsIS a continuing authority. It was indicated that the fact

that a bank had not availed itself of the privilege of pur-

chasing restricted issues or that a bank had disposed of

such bonds originally acquired under the authority of De-

Partment Circular No. 787 should not be regarded as a bar-rier to the establishment of such a bond trading account.

Enclosed is a copy of our telegram of this date to the Fed-

eral Reserve Bank of St. Louis advising of the position of

Your Department."Mr. Kilby said that the inquiry concerning the purchase

Of non-eligible government bonds by —holly-owned affiliatesOf commercial banks presents a different question and sug-

gested that the Treasury Department be asked for a formal

ruling on the matter. Accordingly, it will be appreciated

if You will advise as to the views of your Department with

reference to this matter in order that we may inform the

Pederal Reserve Bank of St. Louis."

Approved unanimously, together with a

telegram to Mr. Peterson, Vice President of

the Federal Reserve Bank of St. Louis, read-

ing as follows:


827

5/6/49 -19-

"Reurlet April 26 and telegram May 4 Commissionerof Public Debt Kilby advised us informally that authoriza-

tion in Department Circular No. 787 permitting commercial

banks to hold, for the purpose of facilitating transactions

for the account of customers, a limited amount of non-

eligible governments is continuing authority. The fact

that bpnk had not availed itself of privilege of purchasing

restricted issues or that bank had disposed of such bonds

originally acquired under this authority should not be re-

garded as barrier to establishment of such a bond trading

account. Kilby felt that inquiry concerning purchase of

non-eligible government bonds by wholly-owned affiliates of

commercial banks presents different question and suggested

Treasury Department be asked for formal ruling. Accordingly,

ruling is being requested and you will be advised upon

receipt."

let

Letter to Mr. Thomas Graham, The Bankers Bond Company, Inc.,

Floor Kentucky Home Life Building, Louisville 2, Kentucky, read-

as follows:

"This refers to your letter of April 26, 1949 to Chair-

man McCabe, inquiring as to the attitude of the Board with

regard to allowing banks to underwrite housing bonds as

Provided in section 502(a) of the Housing Act of 1949 which

haS recently passed the Senate."You are, of course, aware of the fact that under

existing law national banks are permitted to deal in andUnderwrite general obligations of any State or politicalsubdivision thereof, obligations issued under the authority

of the Federal Farm Loan Act, obligations issued by the

Federal Home Loan Banks or the Home Owners' Loan Corporation,

itsured obligations of the Federal Housing Administration

if guaranteed as to principal and interest, and obligations?f national mortgage associations. In these circumstances,

Ihe Board did not interpose an objection to the provision21 the Housing bill permitting national banks to underwritehe bonds provided for therein, particularly since such

nligations appear to be adequately secured and their maturi-'lee are limited to not more than 18 months."



82.M

5/6/49 -20-

Letter to Mr. Emil Schram, President of the New York Stock

Exeu--0-uce, reading as follows:

"From time to time in the last few years the NewYork Stock Exchange has surveyed its members to determinethe number of margin accounts and has cooperated withUS in making this information available to the Board.

"Following the count of margin accounts that youkindly supplied to us as of June 30, 1948, vs would be

Interested in knowing the number of margin accounts atthe end of June 1949. If you feel, as we do, that thisfigure would be of interest and value also to the Exchange,we should appreciate your sending us the result of yoursurvey."


Letter to the Honorable W. M. Wheeler, House of Representa-

tives, reading as follows:

"The attached letter, dated April 15, from Mr. W. M.48e, Woodbine, Georgia, was received with your memorandumOf April 28. Mr. Bass suggests that Regulation W should be

changed so that 'trade-in' allowances for old articlescould be used as all or part of the down payment for instal-

143171t purchases of new or different furniture, appliances,

cooking stoves, etc.'As Mr. Bass mentions, the provisions are different for

automobiles, in which case trade-in allowances may be used

" all or part of the required down payment for anotherautomobile.

"The difference in the manner in which 'trade-ins' are. 1Lu1dled in the case of automobiles arises from the fact that

.nm is a well established used-car market, with recognized

Published standards of used-car prices, and it has long'Jaen customary for the trade-in to be accepted as part ofthe Purchase price of automobiles., "In the case of furniture, appliances, etc., prices of;sed models are not nearly as well standardized as they arer.or used cars. Newspaper advertisements often reflect this:?ndition with such phrases as '(so many) dollars for your'31.11.)cl (article) regardless of condition'. Also, as Mr. Bassanx8rVes, the down payment requirements for automobiles are

'higher, 33-1/3 per cent, while for all other articlesdown

cent Payment required by the regulation is only 10 per


5/6/49

}38.zat

-21-

"Regulation W exerts its influence on the rate ofexpansion of instalment credit through the establishmentOf minimum down payments and maximum maturities. In viewof the conditions described above the down payment restric-tions would be much less effective if trade-in allowancescould be used as all or a part of the required down paymentfor furniture, appliances, etc. Mr. Bass' arguments areappealing and have received careful consideration. However,In view of all the circumstances it does not appear feasibleto amend the regulation in this respect at this time."

Approved manimously.

Telegram to Mr. Slade, Vice President of the Federal Reserve

Of San Francisco, reading as follows:

"Reurtel regarding plan of Kelley Blue Book to Subscribers that prewar car prices in current guide book shouldbe reduced 10 per cent for all purposes. Although as statedin its wire of January 25 to Watkins at Los Angeles the Boarddoes not in general approve of flat percentage changes toadjust estimated values to current market, under special cir-cUmstanoes in this case the Board does not object to the pro-

for the change in values. However, notification toelley subscribers should be explicit as to effective datend as to the model years covered; also, it should clearlyIndicate that on and after the effective date the reduced

Pl'icee apply for purposes of Regulation W."


Letter to Mr. Roger W. Jones, Assistant Director, Legislative

e, Bureau of the Budget, reading as follows:

uest.,"This refers to your letter dated April 25, 1949, re-re-

the,-,all. . ',Ilq 1451 'To amend section s5 06 of the Servicemen 'expression of the Board's views with respect toi

12diustment Act of 1944, as amended, to provide a prooedure017er 'which veterans who are in default in meeting payments11..

i

?)a or farm mortgages guaranteed under such Act may bethose111

411 retaining possession of such homes or farms in., t4nitscases in which the default is not due to their own

.,


5/6/149 -22-

"The bill would provide that whenever there is a de-fault on a home or farm mortgage insured by the Veterans'Administration, the Administrator of Veterans' AffairsShall cause an immediate investigation to be made for thePurpose of determining whether the veteran wishes to retainPossession of the farm or home and also the cause of thedefault. If, as a result of such investigation, the Ad-

ministrator determined that the veteran desired to retainthe home or farm, that the default was due to no fault ofthe veteran, and that there is a reasonable likelihoodthat the veteran if extended reasonable forbearance wouldbe able to satisfy the mortgage, the Administrator wouldbe directed to take over the mortgage, if the mortgageeIs willing, or to pay to the mortgagee on behalf of theveteran payments on the mortgage for up to three years.If the Administrator took over the mortgage he could granta three year moratorium to the veteran.

"The Board is of course in sympathy with the objectiveOf preventing unnecessary foreclosures and assisting de-serving veterans to retain their homes and farms. This goalalso accords with the general purpose of helping to pro-.”Ct the general economy against the dislocations associa--ced with widespread foreclosures.

"It would appear that under the present sections 506

2c1 509 of the Servicemen's Readjustment Act of 1944, asu.'?ended, the Veterans' Administration may be able to accom-

ttish results similar to those provided for in the proposed1.4.1, but we recognize that there may be advantages in mak-

4 this authority somewhat clearer and more specific., "There may be a question however, whether it is de-

able 1slrpro to make mondatory a provision as detailed as theauiPosed bill. For example, it is conceivable that the re-e,2"ement of an immediate investigation In each case may4:ail substantial expense and in many cases may as a

bir matter be unnecessary. In the circumstances itbe well to consider the advisability of changing the

b, to authorize rather than direct the specific action4 Laie stat Admie_ _ n strator, and perhaps to substitute a general

men., nt of objectives for some of the detailed require-k.s of the bill."


Memorandum dated April 29, 1949, from Mr. Clayton with

tn- a routine request from the House Committee on Post


5/6/49 -23-

Office and Civil Service for a report on H. R. 4169, a bill to re-

l'ise the Classification Act of 1923, reading as follows:

"After conferring with the Legal Division, it is myrecommendation that no report be made unless a specialrequest is later received. The abovementioned bill is acomprehensive revision of the Classification Act of 1923governing rates of basic compensation for employees ofthe Government generally. In lieu of the present schedulesthe bill establishes two new basic compensation schedules-- General Schedules and Crafts, Protective and Custodial;it is understood that in the transition from present schedulesto the new schedules some employees will realize moderate

salary increases; the bill provides for in-grade increasesWithin certain limitations; longevity increases are pro-vided for employees below the higher grades; and the newclassification schedules embrace positions, the salariesOf which go up to $15,000. At the present time it isUnderstood that the top salary classification is $10,330.Al though the existing Classification Act and the acts in-

the pay of Federal employees are not applicable tohe Board, the Board as a matter of policy has followed

such acts in a general way."The bill contains a number of exemptions, one of which

18 that it shall not apply to 'employees none or only part::!!' whose compensation is paid from appropriated funds of thenited States.' This provision clearly exempts the Board,.dllice its finds are expressly declared not to be appropriated

it "The request for a report appears to be routine, sinceBo is not signed. Therefore, unless other members of the„?.rd have a different view, the request for a report on'us bill will be filed pending further developments.

If at a later date it should appear desirable to make;0112Po7t, because of the receipt of a follow-up request orettother reasons, it would probably be advisable merely toolak_s that the Board has no objection to the bill and not toem any comment as to whether it is applicable to Board

P-LoYees."




Documents

19490506_Minutes.pdf