19481207_minutes.pdf

2068

Minutes of actions taken by the Board of Governors of the

4clel'8.1 Reserve Systera on Tuesday, December 7, 1948. The Boardtet

the Board Room at 10:30 a.m.

D0a

Mr. McCabe, ChairmanMr. EcclesMr. SzymczakMr. DraperMr. VardamanMr. Clayton

Mr. Carpenter, SecretaryMr. Morrill, Special AdviserMr. Thurston, Assistant to the BoardMr. Thomas, Director of the Division

of Research and StatisticsMr. Nelson, Director of the Division

of Personnel AdministrationMr. Solomon, Assistant General CounselMr. Wood, Economist, Division of Research

and StatisticsThe

statement was made that Mr. Evans was absent for the pur-

" Li;es---Lng as hearing officer at the henring in the ClaytonProce

tl%) eding instituted by the Board against Transamerica Corpora-

.11c1 that when the taking of evidence in the hearing got underYhe.

llost '4)114 be absent from the meetings of the Board a considerabler.°f the time.

Thef1.01 the was then presented a memorandum dated December 3, 1948,

Pel's°411e1 Committee reading as follows:"T+

l'pty ;," is recommended that the Board give a Christmasall employees of its staff during Christmas

'"'t the expenses of the Party be defrayed by theflcl that an increase be made in the miscellaneous

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

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1,17,(4A

lirL ssification of the budget of the Division of Personnele'"-nistration in an amount sufficient to cover thisPe iture

14en"4-il..t is contemplated that the Party will be held be-0- vkie hours of 4:00 p.m. to 7:00 p.m- on December 23,

te'4!) and that a buffet luncheon be served and entertain-arranged by a committee of staff members to be se-hY the Division of Personnel Administration.

limii:This type of party is recommended because of thepre 'lad seating facilities in the cafeteria which would

cltde the serving of a full course dinner.the,t ,The President of the Reserve Board Club has indicatedtt i 6ne Club would postpone its annual Christmas Party iftlpis decided that the Board will provide a party for allchlrh„.°Yees of its staff and would probably set a later datewolV the holidays for a Club party at which time they

aPPreciate the use of the facilities of the cafeteria."

-2-

Following a statement by ChairmanAcCabe of the reasons for the above rec-ommendation, Mr. Clayton moved that therecommendation be approved with the under-standing (1) that the Personnel Commit-tee would be authorized to approve suchprogram for the party as in its judgmentseemed desirable, and (2) that, as sug-gested in the last paragraph of the memo-randum, the facilities of the cafeteriawould be made available for the ReserveBoard Club for a party to be sponsoredby the Club on a suitable date duringthe holidays.

Mr. Clayton's motion was put by theChair and carried unanimously.

tilt °re this meeting there were distributed to the members oftokrilr1,4 coPies

of a memorandum dated December 6, 1948, from Messrs.thti 41c1140oci,4 Associate Director and economist, respectively, in

aesearch and Statistics, and Mr. Solomon, AssistantCob,.

t(I thtit ' with further reference to proposals for amendments-44sei ,

44? , to -14horize the Federal Home Loan Banks and the Federal


2WO

tttortg,

12/7/48

Se,Irb,and Loan

Illelitemorandurn. reviewed the background for18'zt

discussed at the meeting

as°48 for theillge of

loan associations

c111.111sticlinent, it

qeP8 t° maintain

hct them to some

V'kOrlarY periods.

reqUire that savings

suggestion

_3-

Insurance Corporation to borrow from the Treasury.

the proposals, which were

of the Board on November 9, 1948, and

that,

of the

should first

an appropriate

if the Government was to assure sav-

liquidity contemplated by the pro-

require the associations to take

degree of liquidity and should sub-

regulation of their lending policies, particularly

It also stated

and

that such an arrangement

loan associations (1) hold

securities in specified

ge loans, (3) regulate

1°44s, and (4) limit the extent

81411-lar sources, it being understoodNkilisetaetS

kinder each oftgq be lib

amounts,

the rate

cash and

(2) limit the amount of

of repayment of their

of their borrowings from

that by varying the

these four heads the regulatory agency

4t le) within whatever limits might be411(1

'4t, exPansion of mortgage credit by savings and loan asso-,.04a)

811c1 at the same time assure the associations of at least a144 or ca84 and ready assets in case a run developed. The memo--4

- submitted a draft of legislation covering these require-

dl'ee°1amended (1) that the Board inform the Bureau of theRet) thel4

N4rd -°11sing and Home Finance Agency, and the Home Loan Bankthat h

t-e draft was the Board's reply to the request of thet}

-udget for a statement of the conditions under which

set by the statute, to


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the kard would not object to legislation authorizing the Federal

H041e Loan Banks and the Federal Savings and Loan Insurance Corpora-

ticqitoborrow from the Treasury, (2) that the Board authorize the"aft to „ter

into such discussions with the staffs of the three4eries asmay la be necessary to draft a bill which was technically

:°11tEtble and equitable and which carried out the objectives of theAft, and

(3) that copies of the draft and of the letters of trans-littai be

sent to the Treasury and the Federal Deposit Insurance

C°1%P°1%ation for their information.

The memorandum and draft of legislation were read and cer-

in the draft were suggested and agreed upon.

ClaYton stated that he would recommend that the Board°N the

,,Ureau of the Budget that the Board was prepared to sub-the B,

"reau and such others as the Bureau might suggest the-ft or

egislation agreed upon at this meeting.

Upon motion by Mr. Vardaman, Mr.ClaYton's recommendation was approvedunanimously.

141..1/3111to "les auggest=d that the Board should advise the Ameri-

k ssociation, the Federal Advisory Council, and the As-

rs AteLtiola

the, °I' Reserve City Bankers of developments in connection withMatt

el', and that, if these organizations were not willingt the

Position taken by the Board in the draft of legisla-„ eta

`greecl ,'Pon at this meeting, there was some question whether

°111,”4 continue the opposition it had expressed in the


'30?2

12/7/

—5—

Paatofacloption of 1 .fislation authorizing the Federal Home Loan

448 and the Federal

the Treasury.

Nr. Clayton

'411ere it

the c'rlzress,

Bureau

1̂ /hela there

rli to take

thra Federal

a°e4tion,na if

Savings and Loan Insurance Corporation to bor-

stated that the Board had not yet reached the

was in. a position of supporting legislation before

as the draft would first

and representatives

was

.e11.1es to sunport

l'''%tcier'cl by thp

14'11-rig the discussio1t.o,rit

to the Board; r.tt()1'3

Erid /1r. Crodgp,

adviser131‘c)eedirig

against Transame ricatIci

liood

withdrew.MI'. Evans stated that

o 6i.rist Transamerica which

,cyt1 °11)()Iti0n. filed and-Lc)11z: asked for oral arguments on the following

agreement

have to be discussed with the

of the Home Loan Banking System.

at that level, he said, would it be

the matter up with the American Bankers Associa-

Advisory Council, and the Reserve City Bankers As-

1,

there were any hesitancy on the part of these

the Board's position the whole matter could be

Board.

referred to above nr. Evans; lir. Thurston,

Vest, General Counsel; Yir. Townsend, Soli-

to the hearing officer in the Clayton

Corporation, joined the meeting

at the hearing of the Clayton Act pro-

opened this morning, counsel for

hea;:?fl that complaint be dismissed and notices ofa

litf

_ling quashed and vacated for improper venue, in_

lit,4-311cY of allegations, and failure to comply''':rainistrative Procedure Act.


2()Y3

7

thIttc----Led for consideration by the Boardt11/11e4

caver to the Secretary of the Board for that purpose.

11r. Townsend

—6-

2' Motion to dismiss for lack of due process of law.

3' !otion that complaint be dismissed for lack ofjurisdiction.

Mr' Evans also said that these motions were of a character

.6r441'eE CorPorttion,

the tiotions,

N h stated

Igart ad

that

and that they had been

stated that Nr. Stewart, Counsel for Trans—

had requested an opportunity for oral argument

he (nr. Townsend) joined in that request, that

that he would like to1.11.31)ort of the

motions4 4(1 beerl to i

ndicetedhe'tz' the

b.rgurnents41,4,''tee of the

Chairmen of the

Deeert er 13) 1948.

idIi41114/1d

/1r, varaanian stated.Cht4

present his argument

at the earliest possible time, end that

to him

to„

the usual thing in aNIzelior the

other side whether

either

0111u.0riclay to fillof the

hearing

Tovinsend responded

that the Board might be in a position

Friday afternoon, following the con—

Federal Reserve Banks, or Monday

Yr. Stewart had indicated a preference,

for 1,1onday morning as the time for the argument.

that he would have to be absent in

an engagement that he had made before

in this proceeding had been fixed.

that in the absence of a member of

proceeding of this kind was to ask

he would object to the absent


20/4

Mr. Vardaman's motion was putby the Chair and carried. Messrs.Eccles and Clayton did not parti-cipate in the consideration of oraction on this matter,

Ir connection withtie

.?roceeding this14111It11

10:0 a.m.4e41(4.1 04 the

motions

tirae after°Illic)11 or the Board

he4tirle woulanot be

C141111, it was understood,

4/7/48

4tr'bel' readte

ecieton

_7-

the record of the oral argument and then voting

to be made by the Board.

At the conclusion of a discus-sion, Mr. Vardaman stated that hewould like to be present when theoral arguments on the motions werepresented and that, therefore, hewould move that the time for theargument be set for the afternoonof Friday, December 10, 1948,

e(ItPQration.

At tH44 • point all of the members of the staff, with the ex-

• Carpe, withdrew from the mecting.

on

the above) Mr. Townsend stated that dur-

morning Mr. Evans had adjourned the hear-

of the tenth day after the Board issued its

filed today nnd that) inasmuch as it would

the oral arguments to prepare the decision and

in connection therewith, it was likely that

resumed until after the first of the

was agreeable to counsel for Trens-


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80e.rd

—8—

The following memorandum addressed to the members of the

bY the Secretary under date of October 13, 1948, was read:

in :Chairman reCabe has discussed with me wayswulch we could get better results from the pre—Procedure under which subjects are assigned to

:Idilridual members of the Board for primary consid—

Ztion end ways in which we could expedite some—h.11,t_ the discussions at our meetings. To that endt' 'as asked me to present the following suggestions„!,the members of the Board for their consideration

to discussion at a meeting.

11,,'Ir

1. From time to time in the past mattersB e been plEced on the agenda by a member of thehec8rd because he had some ouestion about it which„ nted to discuss. In many of these cases itcl''-Ld have been possible to answer the member's1;1:8„tiOn by a discussion with the appropriate mem—ti.C7 of the staff or the member cf the Board whoseths'gnments included the subject matter, withoutraee necessity of taking the time of all of the-Lott's of the Board. While there is no desiresut,:-Lse°urage useful discussion in any way, it istir7bested that it would be helpful in saving theb;;e of the members of the Board if, before a mem—ape2:equests that something be placed on the

"(la becausn he has a question about it, he81 discuss it with appropriate members of thecern' or the member of the Board primarily con—

in an effort to answer his question. Ofstiliei! if after such a discussion the memberby w9d 8 que stion which he wanted considered

ci0etLiae

Board,- the item could then be placed on the'4 .

i.ten:2. The Board's dockets have also includedjeet; Presenting cuestions falling within the sub—c()Ila;,lassigned to members of the Board for primaryby ;,7eration, but which have not been accompaniedprir-a l'ecommendetion of the member of the Board

4rilY concerned as to the action to be taken.


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12/748

0 —

411e disposition of such matters would be expedited?onsiderably if, in each such case, the member ofthe IQ, 'JOard to which the subject matter has been as-

would either make s recommendation as to the

rctlon to be taken by the Board, or (in the event he

i 'es not feel, because of the particular circumstancesz4volved, that he is prepared to make such a recom-tntion) as to the procedure to be followed in de--'11ing the action to be taken.

Much time is lost at meetings of the Board"lscussing matters without having clearly in mind

b..ef, background or the basis upon which the matter istil'°'re the Board for consideration. It is believedipc; discussions at Board meetings would be more1.111141ted and our conclusions 1Jonld be reached moreof1:1:17. if, as a preliminary to discussion of each

items on the agenda, an introductory state-Nql ,were made by the Secretary of the basis uponilr-eu. the matter is before the Board and by the ap-°Prigte division head of the problem involved."

After a brief discussion, uponmotion by Mr. Vardaman, it was a-greed unanimously that a copy ofthe memorandum would be furnishedto each member of the Board andthat the procedure outlined in themerorandum would be used as a sug-gested guide in connection withfuture meetings of the Board.

The following letter, preparedin accordance with the discussionat the meeting of the Board yester-day, to the Assistant Director ofthe Bureau of the Budget was ap-proved unanimously:

tO chti"This refers to your letter of November 23, 1948,kardlirman McCabe, requesting an expression of theerees 8 views with respect to a draft of bill 'T? in-heEici-e 1:he rate of compensation of heads and assistant

8 (4 executive departments and of other officers'.


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-10-

i "The Board is in full agreement with the general ob-1.1ive cf this measure. It feels, however, that the dif-

tials in salary levels proposed in the bill would be''411mtly prejudicial to the Federal Reserve System.

191 "When the Federal Reserve System was established insi2 as the governmental agency charged with primary respon-

litY for national monetary and credit policies, Con-1:! specified, for the then-as-now full-time Reservesip members, salaries equal to those of Cabinet heads.ofreinuently, though not concurrently, salaries of Cabinetti5'n,s and of Reserve Board members were increased to

11°, the levels at which all are at present.te144,It has been recognized from the beginning of the Sys-4811:"at the salaries of members of the Board could not be

eralt as those of the top executive officers of the Fed-Banks notwithstanding the fact that the res-

the R"-Litles of the Board include general supervision ofbe Thell erve Banks. e reason for this relationship hasn%.11. lat the salaries of the senior officers of the Re-roziae 1:4Eink5 (the salaries of the Presidents of the Banksri0t i011t. $25,000 to $50,000 per annum) are determinedbilt a-l'Y on the basis of the public character of the Banksillti-1:2° of the higher salaries paid in large private bankslocat:Al'esPective cities in which the Reserve Banks areofDr-'• However, Congress has always followed a policyq'thrlding salaries for members of the Board at the topthe G-ealarY scale for the departments and agencies of

te

overnmentsThetn ,b111 proposes to increase Cabinet officer sala-

le. e an d to place those of members of this BoardNa.rt-',500 category, while raising to $18,000 Under Sec-!IleAd:' the Comptroller General, the Budget Director,414iZa1strator of Veterans' Affairs, the Federal Secu-tl,tssio'ilaistrator, the Chairman of the Atomic Energy Coin-

the Housing and Home Finance Adrinistrator, the1:1441i:117orks Administrator, and, at the discret:on of the'eci34,,i+-1.") the National Security Council, the National4110 ce;ir. Resources Board, the Council of Economic Advisers,

a—elt Positions in the President's executive office.q;eAti classification would imply an opinion that the

ttliFesci:11nresponsibilities of the Board of Governors of44 th Reserve System have become relatively lessosa

Qf all the other officials mentioned. Itlkittoli-shc'ti. do otherwise than to affect adversely the re-th 138 of the Board not only in Washington but also

'LtPpA

erel Reserve Banks and the commercial banking


20',8

12/7/48

hslyNete/a of the country. The Board does not perceive the

cs°rIs for thus substantially reversing the position takenhl5t ress with respect to the Board throughout its entire

by „"If the responsibilities and public services renderedthe 'la Federal Reserve System had diminished over the yearsp ogic of the realignment of salary relationships pro-th;s4' in the bill would be understandable. The fact istWe' the powers and responsibilities of the Board and ofliteni i°n-wide system which the Board supervises haveset;'-',Y and greatly enlarged not only in the absolutetil:es but relative to many other Federal agencies. Dur-tal:' alcl Particularly since the war, the rapid growth in cilqA/14'ion's banking structure, the magnitude of the publicb 1 and the problem of its management, have made centralarid ,flg oPerations of critical importance under current

v11;0apective econmic conditions in this country.olm[i. Accordingly, the Board feels that the proposed sub-Zentration of the System in salary status would be detri-fied-:' to the System's best interests and can not be justi-kqlit.4n the light of the facts or of the objective. Thethose ellance of Board salaries at levels comparable with35y a!xisting throughout practically all of the Board'sera.' L's of existence would entail no charge on the Fed-

vi

141% Eccles withdrew from the meeting at this point.

lietel'ellee t4ilt to the

waschairman,

41"tfiti°11 to htrn to

''1(*irli)(311Eir Shortage

th ilationa and What Is Back Of It" at the annual meeting

Tlte Farm Institute to be conducted by the Des Moinesvta r r bun

1111'' t/Ivitation had been discussed by the Personnel Committee, at

at Des Moines, Iowa, on February 18-19, 1949.

11111t,t1111'' Mr. Vardaman cuestioned the desirability of members of411 other n thu_

th

Se at

the Chairman and members of its staff makingat

this time.

made to a letter received by Mr. Riefler, Assis-

under date of November 22, 1948, extending an

serve as a member of a panel on the subject "The


20Pi9

12/7/48—12—

Mr. Evans stated that he was thoroughly familiar with the Na—tioneo

arm Institute and felt that it would be highly desirable for4. Di

'"fler to accept the invitation.

Mr. Vardaman stated that he felt strongly that the members ofBoarrl

hel,t "and the staff were making too many public addresses, that

as tot questioning the merit or standing of forums conducted by

liel'TsPapers throughout the country, but that he felt the next

the

Itertou

IcIriths would be an extremely importantthe s3,8teni,

and that for that reason only the Chairman should under-

- 81:1mk for the oard.

t6.1te tHaving that view, he said, he was de—

NoPiaig information on the official travels of the Board and itsttitr

the twelve months periodfts a

the data were available he411c1Elt,

1°14 that Vir. Thurston be asked to prepareby 41,

4:1:1:8 of the Board and the staff

qth il ch a Program official travel would be undertaken in accordance

e°c"inated plan which would carry a representative of the

e"h Year tothe greatest

1,1r. 4bytIle ans suggested that whatever schedule might be adopted

bYlit. I'd in carrying out an arrangement along the lines proposed

ending November 30, 1948, and

proposed to submit a recom—

ketti

period in the history of

a program for travel

during 1949. He added that

the major areas of the country and bring to the

Possible benefit from such travel.

NT, 'flaql, it was believed that participation in the National-matitut

e was of sufficient importance to justify its inclusion.


201012h

Mil. Vardaman emphasized

ktietPation but felt that the114cler+

QL44 should be based on a

-13-

that he was not objecting to such

decision when the travel should be

coordinated program.

After some further discussion, Mr.Draper moved that Mr. Riefler be au,thorized to accept the invitation toParticipate in the panel before theNational Farm Institute.

Mr. Draper's motion was put by theChair and carried unanimously.

1'4'4 EvansItit to

Ineeting

Itttild6c1 by aboutthq

1%4 orthe

Public relations of the Board that he had attended in44/11g tize.

414

liotizci Ch"lan McCabe stated that he had come to the conclusion thatbe

extremely helpful

stated that yesterday evening he and Chairman McCabe

of bankers in Winchester, Virginia, which was also

150 officers and directors of banks in the area,

itl'as one of the most worthwhile meetings from the stand-

if the Board would work out an arrange-

141i4411°tIld Provide for visits by members of the Board to the

°tr:1 Ileeel've Banks at the time of the meeting of the combined headek1c1 branch directors, at which time a group of outstanding

k orer:er'e4 arid bankers in the district could be invited to attend

1441-l'eecn'd discussion of some of the principal problems with

b4tztohret:e:eral Reserve System was faced. He said that, on the

exPerience at several of the Federal Reserve Banks, hestktitri

that a meeting of this kind created a tremendous amount


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1Z/7/14.8

—14—good

'will for the System which radiated through the

Reserve district.

Mr. Clayton said that there was feeling in some quarters onthe

otitside that members

tc); 8̀11c1 that if only theclt the

Board that feeling

kr. Vardaman

.°1' B°Itrd make no

tFIB acii°urratent of

1:'°88ible to

C°11*eee that

444'8 Of the

1,1 141% SzYmczak

'1-44414/hers to exercise sound

Ik4lcitke PlIblic addresses.

th MI% Vardaman stated that when he received the information4ePect to travel

c l,ted earlier. during the past 12 months, to which he re—in

this meeting, he would propose that a coordinated

Of travel be adopted.

ozlth1111. 4Ylalczak stated that he had received invitations to speak

140 tee"cur different occasions in the relatively near future,

thq "Ilhich ere extended to him by

of the Board stayed too close to Washing—

Chairman made public addresses on behalf

might be encouraged.

stated that he was not suggesting that members

speeches, but that during the period prior to

the forthcoming session of Congress or until it

ascertain what legislation

session,

Board

would be passed by the

there should not be any speeches by the

other than the Chairman, who should speak for

suggested that the Board should rely on indi—

judgment as to when and where they

1114elatiori of Chairman

McCabe'

entire Federal

the organizations involved at

and that he would like to know


20824/748

r the Board planned to make any change in the understanding noweffi"eet that members of the Board would be free to accept such in-

-8 as appeared to them to be justified.

Chairman McCabe suggested that it be understood that there

(Ild he no restriction on the acceptance by members of the Board

°t141tations to speak "off the record", and that when set speeches

11e4t0be made it be understood that the other members of the Board1°111(1 be

furnished with copies SO they would know what the speechN114 comalt.

7114 suggestion was discussed but no action was taken withN/Pectto it.

At the conclusion of the discussion, Chairman McCabe stated

ottla tIle Present arrangement would remain unchanged for the time

ttiotga-11(1 th" if later Mr. Vardaman wished to propose something

"he lines he had indicated at this meeting, the Board woulda€1c1 t

consider

At thist Point Mr. Townsend came back into the meeting and

til8Lt he had informed Mr. Stewart, Counsel for Transamerica'41'4404

the time proposed by the Board for the hearing of

t°'"etkraents on the motions filed by the Corporation today,.4 thatt4ttlr *1 Stewart had expressed a decided preference for a morn—

k4 allettbie

knd had suggested that, if Mr. Vardaman found it im—

—15—

to be present at a morning session, he be allowed to read


C);e1SZO,

1.21,01.8-16-

the Ill'itten record of the arguments and, on the basis of the record,

t()14tticiPate in the decision of the Board on the motions.

The matter was discussed and, uponmotion by Mr. Vardaman, the followingorder was approved. Messrs. Ecclesand Clayton did not participate in theconsideration of or action on thismatter:

"UNTIED STATES OF AMERICA

tOARn BEFORE THEuF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

41,11132 MATTER OF—4SAMERICA CORPORATION

"ORDER

"It appearing to the Board that, at the opening of the44ac hearings of the above-entitled matter, respondenttIlerefIhree separate motions and requested oral argumenttrq, 4' before the Board prior to the taking of any testi-

; 11 the procf-eding, it is by the BoardsezIteriRED that oral argument before the Board be pre-

Oh4 Saturday morning, December 11, 1948, at 9:30b. 411 Room 1202 of the Board's offices in Washington,

41111 c:! IS FURTHER ORDERED that counsel for respondentth1rt.„7"sel for the Board each be allowed one hour andf Minutes in which to present such oral argument.

?)41"11 IS FURTHER ORDERED that such oral argument beto a discussion of the issues raised by the

14-4 motions filed herein by respondent:Motion That Complaint Be Dismissed and Noti-

ces of Hearing Quashed and Vacated for Im-Proper Venue, Insufficiency of Allegations

Failure to Comply with Administrative

2 Procedure Act..1,(3tion to Dismiss for Lack of Due Process ofLaw.

3• m„.--k-ton That Complaint

4B of Jurisdicti,on., the Board."

kct.4111 At tl,„,

,A.Ls point Mr. Townsend withdrew from the meeting and the

4tEtteci

'with respect to each of the matters hereinafter re-

8 taken by the Board:

Be Dismissed for Lack


208412/7/48

era'

-17-

Minutes of actions taken by the Board of Governors of the Fed-

serve 6ystem on December 6, 1948, were approved unanimously.

Meftrandum dated December 1, 1948, from Mr. Nelson, Direc-

t°rc)fthe Division of Personnel Administration, stating that Mr.

&4Elcispirector of the Division of Bank Operations, who would at-

t1411'etarement age of 65 in February 1949, had filed an applica-

4°11 frIr optional retirement effective January 1, 1949.

Noted.

Metot, allam7orandum dated December 7, 1948, from Mr. Townsend, Solici-

,D r• Vest, General Counsel, recommending the transfer of.01.0

Chase, an Assistant Counsel in the Legal Division, toortic

e (If the Solicitor as an attorney, effective immediately.

Approved unanimously.

to Mr. Fulton, Vice President of the Federal ReserveLett„

folevel

reading as follows:

4AtA:Ill accordance with the request contained in your

kiaarn°f November 29 1948, the Board approves the ap-tt of Richard joseph Ginnane as an assistant ex-

MIries;, for the Federal Reserve Bank of Cleveland. Pleaseerre i:",11 of the date upon which the appointment s made-ve

i and also as to salary rate."

Approved unanimously.Letter

to Mr. Diercks, Vice President of the Federal Reserve

go, reading as follows:or_

ateLfr a recent conference with members of the Board's,r1411 H. R. Sackett, a director of Gary Trust anduota;Irnk, Gary Indiana, requested that Mr. A.

permitted to continue to serve as a direct

orIjellk, although he is an employee of Strauss and

the :er'l Chicagot Illinois, a firm primarily engaged in

ecurities business.


2085

12/7/48-18-

'Mx, Sackett described in detail the situation withJI!sPect to the management of the bank which he felt madeaelVortant that Mr. O'Donnell continue as a director.an 4'4 effect conceded, however, that unless the Board makesa rl?xcePtion Covering this case, Mr. O'Donnell's service asor'll*eotor is prohibited by section 32 of the Banking Actce

41ori „1?33, as amended. He therefore urged that such an ex-

,ue stating that none of the abuses at which

the statute was directed exist in this instance and thatsalci lation is purely technical. In this connection, heba/lk 'Ilat Mr. O'Donnell has not sold securities to the

110111 (SZs one minor exception) and that his connections and Blosser does not influence the investment

gi7 of the bank or the investment edvice which the bankottes its customers. He also emphasized the feet that Mr./Idi()riPell has nothing to do with the management of Strauss

i'losser and is merely a part-time salesman for thatto '' serving as its representative in Gary in additionother work.

%tee "Under section 32, the Board has authority to makeof ePtions by general regulations covering limited classestio4ses but is not authorized to make individual excep-tio4 : Regulation R now prescribes only one minor excep-exee 74.3:1d the Board has consistently declined to make otherbroll °ns. From time to time, particular cases have beenitapr(Q) to the Board's attention where it was felt thatcat40,1),er action was highly improbab-le and that the appli-8ecti" of section 32 resulted in some hardship. However,Port,!:11 32 is aimed at relationships which present the op-

for improper action, regardless of whether abusesexist in specific cases. As stated by the Supreme

in themewA th •e-Fuerwea er case.any -,Section 32 is not concerned, of course, with

.,10141 ng that the director in question has in

i;act been derelict in his duties or has in any waye olled his fiduciary obligation to the bank. It

jr1 Preventive or prophylactic measure. The factrespondents have been scrupulous in their re-

ionships to the bank is therefore immaterial.'cleR'

oWhile the Board fully appreciates the reasons for thet abus retain Mr. O'Donnell as a director and recognizes

, eve t), :s may not result in this instance, it does not be-'eAtiob-,!u it can properly amend Regulation R to make an ex-

enough to include this case. It will beeri if you will advise the bank accordingly."



2086

1048-19-

Letter to The State National Bank of Texarkana, Texarkana,Arickr._

reading as follows:

Ren "This refers to your correspondence with the Federal

efi bje Bank of St. Louis concerning the holding companyr4-date status of Commercial Investment Company.

etf. 7Commercial Investment Company is a holding companykrlllate of The First National Bank in Ashdown, Ashdown,

Zsas, because it owns more than fifty per cent of thecoir; s stock. It is understood that all of the stock of

he Investment InvestmentInvstment Company is held by the president ofkuState National Bank of Texarkana under a verbal decla-tha:i°1L1 of trust for the benefit of the stockholders ofthat ,4k14k; and, from theavailable information, it appearslicad.ine State National Bank of Texarkana may also beaAehdl iollg company affiliate of The First National Bank n

•that :Rowever, it is understood that except for the fact(les Commercial Investment Company owns a small amounttict:ithan three per cent) of the stock of The State Na-or IC; Bank of Texarkana, and that The State National Bankeiti:21111"-na may hold some bank stock in fiduciary capa-Copra— In the normal course of its trust business, neitnercTTercial Investment Company nor The State National BankEit0ci7carkana directly or indirectly owns or controls anytIther °f, or manages or controls, any banking institutionOf 'h

than The First National Bank in Ashdown. In view

1/wen:ae facts, the Board has determined that Commercial/N4;',,441ent Company and The State National Bank of TexarkanaholcifT engaged, directly or indirectly, as a business in11a411. the stock of, or managing or controlling, banks,thibg,associations, savings banks, or trust companies,

the meaning of section 2(c) of the Banking Act ofare; :1.8 amended; and, accordingly, these organizationsthan (1.6, holding company affiliates for any purposes other

11;re of section 23A of the Federal Reserve Act.6;e/1111.1in-1+7 lloard reserves the right to make a further de-

1.1, any time on the basis of the then existing!8 to' a"!cl if there should be such a change in the factsi:11tella-nuicate that either The State National Bank of Tex-0

b or CommPrcial Investment Company might be deemed

141, se ged, directly or indirectly, as a business inthe stock of or managing or controlling, banks,

k associations savings banks, or trust companies,n

atter s, ould again be submitted to the Board."


20S7

-20-

Approved unanimously, together witha letter to Mr. Peterson, Vice Presi-dent of the Federal Reserve Bank of St.Louis, reading as follows:

• "This refers to your letter of November 26, 1948, re-to the holding company affiliate status of Comer-I

nvestment Company, Texarkana, Arkansas.th. "As stated in the enclosed letter, it appears fromTe;available information that The State National Bank ofve:!,fka.laal Texarkana, Arkansas, as well as Commercial In-Th-wient Company, may be a holding company affiliate ofatied PI-rat National Bank in Ashdown, Ashdown, Arkansas;tlea,::ie have treated it as such, although it appears un-the-m%s8-17 to reach & definite conclusion with respect toterl; t br:LItil.lis time in view of the determination re-

The There is enclosed, for transmittal, a letter advisingterrar'ate National Bank of Texarkana that the Board has de-

that it and Commercial Investment Company are nott1Wg:c1) directly or indirectly, as a business in holdingeissc k of, or managing or controlling, banks, bankingtearli„--aticlns, savings banks, or trust companies, within thethet-',!g of section 2(c) of the Banking Act of 1933, and

23AaffilleTefore neither organization is a holding company --ate for

any purposes other than those of sectionelleic)f the Federal Reserve Act. A copy of the letter is

°sell for your files."Tele,

4 t,tam to the officers in charge of the administration of.qttiorlw

at allFederal Reserve Banks reading as follows:

NMR,

ITI ,,,, ..quest has been received for exemption of taxicabsQ4ed-cv"le or all reauirements of Regulation W.

1 ExemptionXernipt(?1:1 de8-‘„ , grl of vehicle only would seem unworkable,

'Dazed on special regulatory requir?mentsapp liu

atki, '0 title, license and insurance of taxicabs is beingled,q1late R.; 80me such basis for exemption might prove zde-`4(kle-"andard under which to differentiate other au o-1!)%44 Used comm

f.commercially. We believe that any basis or

1Pgcl i-,°11 of taxicabs should provide a standard which ell -e-e generally applicable throughout the country

and

1c),,l'cloftL1(1 be made an easily verifiable part of the rec-"z1 to'stalment sales. Would you please obtain and for--i. 8Peel. °Pinion of Reserve Bank Counsel as to provisions

-4. State laws or regulations, if any, in those


2088

12N48

:!ftetes whose capitals are in your district, governing (1);:gistration of or ownership title to taxicabs; (2) licensesrae

nt Permits for taxicab operators; and (3) insurance require-

Le ,e for taxicab operators. Solomon and Shay of Board's,p Division will be available to discuss this matter byateePhone with your Counsel if desired. Would also appreci-her Your views for or against such a possible exemption as

e suggested. Please consider this matter as confidential."

-21-


Letter to Mr. Alfred Goldstein, Esq., 402 - 6th St., N. W.

On, D. C., reading as follows:

tts en"This refers to your letter of October 28, 1948, andto closures, concerning the application of Regulation Wsalr'ensions of instalment credit in connection with thedie- °f taxicabs. Your letter was written following a111Zesion on the above matter, and in pursuance of anPrending for a written submission of your views e)-offst-,-' at a meeting on October 25, 1948, in the Board's

c

I,elit'es between you, your client, Mr. Sterling, and Messrs.3: Pewley, and Heath of the Board's staff.

194E3 indicated to you by its letter of September 14,%lasIA -"e Board on numerous, previous occasions has given114 d'eration and study to the ouestion raised by you andlattemeided consistently that it would be undesirable tolata-2,' to exclude taxicabs from coverage under the regu-4re The principal reasons for the Board's position

the41"Itt:— forth in that letter. However, in the light ofdeveloped at the meeting on October 25, 1948, and

NaAfiarial submitted with your letter of October 28,(11%" Board is giving further study to the matter in

Approved unanimously.Letter t

q 0otila Earhart, President of the Federal Reserve Bank

nej CO, reading as follows:

111 1qh"Reference is made to your letter of November 15, 1948,/a:V1 You advised that it appears the actual expenses for

ttraat-e-,'Yi,°ur head office and branches will exceed budget es-0r the year as follows:


2089

1,098

10/48-22-

al Overheaduvlsion of SpaceN111.p_ lture and Eouipment

01,7"ision of Personnel;Teral Servicestage and ExpressageI of SuPpliesPsurance-ecuritiescb_ encY and Coin

CollectionA cash CollectioneeNiting

Legal ngties, 4,500-- and

PublicReA atioas 9,000 3,405 2,412i

uditinpede,‘1 r

8101nation 24,15672Reserve Note

wearc4 and Statisticalorei

?lac f4 11,000IL 1.T AgeI. ncy 66,000

t‘t " l'/ould seem from the statements made in your letter that

toincreased expenditures are necessary and appropriate ?foto-

-43 this effect are being made in the Boardts records."s.

LosHead Angeles PortlandOffice Branch Branch $56,000 $ 2,325 $1,906200000 4,389

4,40020,0003,0005,000 9,578 3,6977,000 5,000400 280 460

1,900 33020,701 16,085 7,379

21,400

8,785

Approved unanimous),

SaltLakeCity

BranchSeattleBranch

$2,7468,281 $ 3,100

4,5003,113 4,950308253 400

2,217 6,10034,400

8004,544

189 210

839

Secretary,


19481207_minutes.pdf

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