Minutes of actions taken by the Board of Governors of the

Federal Reserve System on Wednesday, April 19, 19)0. The Board

Met in the Board Room at l2:0 p.m.

PRESENT: Mr. McCabe, ChairmanMr. EcclesMr. Evans

Mr. Carpenter, secretaryMr. Sherman, Assistant SecretaryMr. Morrill, Special AdviserMr. Vest, General CounselMr. Millard, Director, Division

of ExaminationsMr. Townsend, SolicitorMr. Baumann, Assistant General CounselMr. Hostrup, Assistant Director,

Division of Examinations

Mr. Vardaman requested that these minutes show that he had

aPPointment with a Senator at 12:20 p.m. today and therefore would

11°t attend this meeting.

Chairman McCabe stated that in accordance with the discussion

" the meeting of the Board yesterday, members of the staff had met

thismorning for the purpose of considering the position that might

be taken when he met with Mr. Delano, Comptroller of the Currency,

ill re sPonse to the request of Senator Robertson, for the purpose of

seeing whet agreements could be reached in connection with the

tvetitute bank holding company legislation which Senator Robertson

8tated he would like to have printed tomorrow. Chairman McCabe said

thathe had participated in part of the staff discussion and would

like to suggest that in his discussion with Mr. Delano he take

Ilbetantially the following position:

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The Board would be willing to accept the require-ment of )0 per cent stock ownership provided in thedefinition of a bank holding company contained in thesubstitute bill, provided the substance of the pro-visions contained in S. 2318 with respect to discretionfor the inclusion or exclusion of bank holding companiesfrom the provisions of the bill were written into thedefinition. The Comptroller of the Currency hasObjected to the placement in the Board of Governorsof the discretionary authority contemplated in S. 2318and in order to meet that objection the Board would beWilling to accept a compromise which would provide thatall of the supervisory or discretionary powers of the threeFederal bank supervisory agencies provided in the bill withrespect to bank holding companies and their subsidiarieswould be exercised by the unanimous action of the threeagencies. The bill should preserve the right of appealfrom these unanimous decisions. This authority wouldrelate to the inclusion or exclusion of bank holdingcompanies from the provisions of the bill, the acquisitionOf assets, the acquisition of stock, the establishment ofbranches, supervision, inspection, examination, investiga-tion, subpoena, and all other regulatory matters. It isalso the view of the Board that the provisions in thePresent law with respect to voting permits should berepealed. As indicated above, the provisions of the billShould apply to the acquisition of assets by subsidiarybanks and to the establishment of branches by such banks.It should also contain adequate provisions for in-vestigation and examination of bank holding companiesand their subsidiaries and adequate enforcementauthority, including the right of the subpoena power.

Following a discussion, ChairmanMcCabe's suggestion was approvedunanimously.

At this point all of the members of the staff with the

teePtion of Messrs. Carpenter and Sherman withdrew, and the action

8t4ted with respect to each of the matters hereinafter referred to

1'41'8 taken by the Board:

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Letter to Senator Maybank, prepared for the signature of

the Chairman in accordance with the discussion at the meeting on

April 14, 19)0, and reading as follows:

"The Board appreciates very much your letter ofApril 13 to which you attached a letter dated April8, 1950, from Silliman Evans, President and Publisher,Tennessean Newspapers, Inc., Nashville, Tennessee,regarding a letter written by Mr. Fort, Vice Presidentin charge of the Nashville Branch of the FederalReserve Bank of Atlanta, to a candidate in a localelection.

"The Board has already taken action on this matter.Upon being informed that such a letter had been writtenby Mr. Fort, the Board promptly communicated with theFederal Reserve Bank of Atlanta. The Bank has nowreported that Mr. Fort has been advised that a recurrenceOf a similar situation could not be countenanced by theAtlanta Bank or the Board of Governors and that heShould take every precaution not to become involved insuch a situation in the future.

"As you know, since the very early days of theFederal Reserve System it has been the announced policyOf the Board of Governors that officers and directors ofFederal Reserve Banks should not permit themselves tobecome identified with partisan political activities.The Board regrets very much Mr. Fort's failure toObserve this policy in this case. However, after care-fully reviewing all the circumstances, of which we havebeen fully informed by the Federal Reserve Bank ofAtlanta, the Board is satisfied that there will not bea similar occurrence.

"A member of the Board's senior staff will be inNashville this week and will call on Mr. Evans. If,after the interview of our staff member with Mr. Evans,there are any additional phases of this matter thatShould have consideration, you can be assured they willhave the attention of the Board."

Approved unanimously, togetherwith similar letters to Senators Cain,Fulbright, and Sparkman, and Represen-tative Patman.

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

legislative Reference, Bureau of the Budget, Washington 2..j, D.

reading as follows:

"This is in response to your letter of April6, 19)0, enclosing a proposed report by the Post-master General with respect to the bill H.R. 6456,to amend section 7 of the Postal Savings Act, andrequesting an expression of views by the Board ofGovernors regarding this proposal.

"Under the present law, interest at the rate of2 per cent per annum is required to be paid ondeposits in postal savings depositories, exceptthat section 8 of the Postal Savings Act providesthat the rate may not exceed that which may lawfullybe paid on savings deposits by member banks in thelocality in which the postal savings depository issituated under regulations prescribed by the Boardof Governors of the Federal Reserve System. The billH.R. 64)6 would authorize the Board of Trustees ofthe Postal Savings System to increase or decrease therate of interest payable on postal savings depositsto not more than 2 per cent and to not less than 1Per cent per annum, any such increase or decreaseto take effect on the 1st of January or the 1stof July after not less than three months' publicnotice.

"It is understood that the maximum rate payableon postal savings deposits would continue as atPresent to be limited by the maximum rate prescribedby the Board of Governors of the Federal ReserveSystem with respect to interest paid on savingsdeposits by member banks of the Federal Reserve System,since section 2 of the bill provides that nothing thereinshall be deemed to supersede any provision of section8 of the Postal Savings Act.

"Under this Board's Regulation Q, prescribedPursuant to section 19 of the Federal Reserve Act,member banks are prohibited from paying interest onany savings deposit at a rate in excess of 2 1/2 percent per annum, provided that if a lower maximum rateis prescribed by State law member banks may not payinterest at a rate in excess of such lower maximumrate. At the present time, most member banks are

C•j,

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"actually paying interest on savings deposits at arate much less than the 2 1/2 per cent maximum rateprescribed by the Board of Governors, the averagerate being somewhat less than 1 per cent. The billH.R. 64)6 authorizes a procedure for changes inthe rate of interest payable on postal savingsdeposits in post office depositories which wouldmake it possible to diminish the present widedifferential between the rate of interest paid onsuch deposits and the rate currently paid bybanks on the savings deposits of their customers.

"In the circumstances, the Board of Governorshas no objection to the enactment of this bill."

Approved unanimously.

Letter to Mr. Wayne, Vice President of the Federal Reserve

13ank of Richmond, reading as follows:

"Reference is made to your letter of April 11,1950, submitting the request of The Fidelity TrustCompany, Baltimore, Maryland, for permission toestablish a branch in the Administration Buildingof the Friendship International Airport, which islocated in Anne Arundel County about five milesfrom the City of Baltimore.

"In view of your recommendatdon, the Board ofGovernors approves the establishment and operationof a branch in the Administration Building of theFriendship International Airport, Anne ArundelCounty, Maryland, by The Fidelity Trust Company,Baltimore, Maryland, provided (a) the branch isestablished within six months of the date of thisletter and (b) that formal approval is obtainedfrom the appropriate State authorities; and withthe understanding that Counsel for the ReserveBank will review and satisfy himself as to thelegality of all steps taken to establish the branch."

Approved unanimously.

Secretary.

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