19430607_minutes.pdf

852

A meeting of the Board of Governors of the Federal Reserve

SYstern washeld in Washington on Monday, June 7, 1943,

PRESENT: Mr. Ransom, Vice ChairmanMr. SzymczakMr. DraperMr. Evans

at 11:30 a.m-

Mr. Bethea, Assistant Secretary

Mr. Carpenter, Assistant Secretary

Mr. Clayton, Assistant to the Chairman

The action stated with resnect to each of the matters herein-

referred to was taken by the Board:

The minutes of the meeting of the Board of Governors of the

?ecleral Reserve System held on Tune 5, 1943, were approved unanimously.

Tel sgram to Er. Mulroney, Vice President of the Federal Reserve

11:4k " Chicago, referring to the application of the "Jackson State

611.11g8 BElak", Maquoketa, Iowa, for permission to withdraw immediatelyzenabership

ScIFIra waives in the Federal Reserve ,System, and stating that the

to the usual requirement of six months' notice of intentionvatharetw,

and that, accordingly, upon surrender of the Federal Re-

illik stock issued to the "Jackson State Savings Bank", the Fed-

°1L ileser." Bank of Chicago is authorized to cancel such stock and

4*e .131)/'°131"'iate refund thereon.

Approved unanimously.

DI'llft of letter to Honorable Robert F. Wagner, Chairman of thee Ette

ft4laittee on Banking! and Currency, reading as follows:

'This is in reply to your letters of February 23rd request-' °Pinion as to the merits of the bills, S. 756 and S. 757,

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

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"which would amend the Federal Holoe Loan Bank Act and the nameOwners' Loan Act of 1933.

BOa "You will recall that on three previous occasions the

1\k, in response to similar requests, has expressed oppo-''

Ta

tion to like or related proposals contained in legislationl'hich was then pending. During the first session of the 76tho grass it reported on S. 2098, and during the third sessiont, tha same Congress it reported on S. 4095. Again, during

reportedsr first session of the 77th Congress, it reported on S. 2146,it 2147, and S. 2148, which together constituted one program.

oPPosition to S. 2098 was directed generally at provisionss ich would have expanded the field of operations of FederaltITLIC8 and Loan Associations and other member institutions ofeL;171 rederal Home Loan BAnks beyond their original objectivesthe

at

provisions which would have lent further liquidity to

131 shares of such institutions. In the bills or series ofpo 18 which followed, some of the provisions specifically op-bas?°1 by the Board were changed and some were omitted; but the0,818 of the objections remained and the Board has consistently(grad tlieir enactment both in its reports and in the testimony

°Yel'hor Ransom and myself at hearings on S. 4095.

to 'It has Mae to the Board's attention that, in additionis ;;I:e bills, S. 756 and S. 757, now under consideration, there

also so a bill pending, S. 1034, in which there is a proposal1430 similar to one which the Board heretofore has been calledkt.:1,t° consider. Accordingly, the Board's views on S. 1034cot,tncluded with its views on S. 756 and S. 757. The Boardpos's';fluas to believe that the enactment of any of these pro-

-L: Would not be desirable in the public interest.to wl,.The objectionable provisions of the above-mentioned bills.visi"lch the Board wishes to call attention are (1) the pro-

. 756 which would authorize the Secretary of the„za .411? to purchase obligations of Federal Home Loan Banksthe

to

Savings and Loan Insurance Corporation, (2))4t.,114% -f13i0n in S. 1034 which would reduce the insurance pre-cellt 'aue from 1/8 of 1 per centum per annum to 1/12 of 1 perPed:11 Per annum, (3) the provision in S. 757 which would allowem ',,V; Savings and Loan Associations to invest their funds intiO4-Z-Ligation which is insured under any provision of the Na-s4d (1'I"1Eousing Act 'as heretofore, now, or hereafter in force',4001.1c the provision in S. 756 allowing Federal Home Loan

t° make advances to their member associations on the se-amy such obligations.

the p"The first of these provisions would make it possible forthe Tederal Home Loan Banks to obtain additional funds from

It reesurY with which to meet the demands of their members.

0111"

A

also make it possible for the Federal Savings and Loan


854

617/43 -3-

:Insurance Corporation likewise to obtain additional funds.4aither operation would add liquidity to the obligations of in-sured Savings and loan associations, the bulk of which are rep-resented by shares. The Board knows of no reason why the Fed-!Fal Rome Loan BAnks should not be able to meet the needs of

fleir members so long as they operate within the scope of ther2inciples on which they were created. The need to resort

i the Treasury of the United States would seem to follow only0Perat10n5 are broadened to the point that the market for

t

heobligations would weaken or disappear. This would appear

11(/ be sufficient reason neither to broaden their operationsr°1' to authorize the purchase of their obligations by the Sec-starY of the Treasury.

S. 1034 would reduce the premiums or assessments due byn "red members to the Federal Savings and Loan Insurance Cor-:fation from the existing rate of 1/8 of 1 per centum per

Zulza ti

to 1/12 of 1 per centum per annum. The purpose of such

:aPparently would be to place the premiums charged by

o Federal Savings and Loan Insurance Corporation and those

singed by the Federal Deposit Insurance Corporation upon a1407"-ar basis. In this connection, however, it should be re-

ered that the Federal Deposit Insurance Corporation insuresTr• deposits and not the shareholders of its insured banks.i,s capital, surplus, undivided profits, and reserves of its1:gured banks stand between it and loss, and there is no com-

morable counterpart in the case of savings and loan associations.

sir?le

r, the liabilities which it insures are offset by diver-

cl,,d assets, the greatest portion of which is short-term inez,r_acter and a substantial portion of which is represented by

til?1 and Government obligations. The institutions insured byrir4 Fede ral Savings and Loan Insurance Corporation are largely

to ilt1 in character. The great bulk of their liabilities isotrsuareholders. These liabilities, as they should be, areset:t almost wholly by long-term investments secured by real

the e,

An investment in such institutions should partake ofand 'ame character and should be for the purpose of acquiring

da11122:oldinC the investment. Insured banks pay no interest oncielZd deposits and only limited interest on time or savings

at S. Insured savings and loan associations pay dividends

shs;1',7atlY higher rates and upon all of their liability toenolders. It follows that holders of their obligations

ili• tic;114 not expect such obligations to be as freely convertible

Ittillr cash as bank deposits. By all of these standards the pre-

rsti ebarged by the Federal savings and Loan Insurance Corpo-1,_'°11 should be higher than that charged by the Federal Deposit'16nralice Corporation.


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"Federal Savings and Loan Associations are now permittedto lend their funds only on the security cf their shares orO

the security of first liens upon homes within 50 miles of"lair office, with certain excetions. The effect of the two11;r°visions of the pending bills (S. 756 and S. 757) would, there-

be to enlarge the field of their permissible operations7J-cl the sources from which they could attract funds by permit-lne'them to invest (a) in modernization loans, (b) in home mort-

r'geS regardless of location and (c) in large scale mortgages,,uell as those upon large apartment houses, if FHA insured, and'e41)1 obt ain advances from their Federal Home Loan Banks on the .4

se-or investments. In addition, this expansion in thes

field of operation would extend to any mortgage or

Z°iFttion insured under any provision of the National housing-c as heretofore, now, or hereafter in force.'

b "The Board is in sympathy with what it understands to haveteen the original objectives of the Federal Home Loan Bank Sys-

Whereby Federal Savings and Loan Associations and similiarhortitutions would supply the need for local mutual thrift andac.r financing institutions, and Federal Home Loan Banks would

lipril.77ZultIrors:oirs of funds for the accommodation of their member

The Board believes that the enactment of these04 would represent a material departure from these objectives.in8141fle one hand, high dividend rates to shareholders plus the

t ranee of their investment in such shares would tend to at-et

uome junds far beyond those incident to local mutual thrift and

woul, luancing programs. On the other hand, broadened powerssee " offer investment outlets for such funds equally beyond thecojse of the original objectives. Thus, their enactment would

bald !itute a step in the direction of establishing a separate

orcli'oMplete banking system with an opportunity to compete fornary banking deposits on favored terms.

the :For the foregoing reasons, the Board of Governors is of

that the enactment of the bills would not be in the

Approved unanimously, with the under-

standing that the letter would be sent onlyin the event it appeared that the pendingbills referred to in the letter were to begiven active consideration at this sessionOf Congress, in which event the letter wouldbe sent over the signature of Chairman Ecclesor in his absence over the signature of Mr.

Ransom.


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Letter to Mr. F. J. Bailey, Assistant Director of Legislative

Reference, Bureau of the Budget, reading as follows:

"This refers to your letter of May 31, 1943, addressedtolieirman Eccles, enclosing a copy of the Treasury Depart-

rent's proposed re'Port to the Chairman of the Senate Commit-teeeOfl Bankine and Currency relative to S. 986, which appar-ently

is intended to exempt any deposit made by the UnitedeXes in an insured bank from insurance assessments; and

an expression of the Board's views with respect thereto."In the proposed report of the Treasury Department, ref-erence is made to the bill b. 700, approved on April 13, 19431

zelch exemoted from insurance assessments and reserve require-esnt8 balances payable to the United States that arise solelyi, la result of subscriutions for Government securities, and itr:cstated that the reasons which prompted the Treasury to

8. nailend S. 700 afford no justification for the enactment of

Accordingly, the Treasury recommends against enact-116 °f S. 986.

Zen+ "The Board of Governors is in agreement with the state-me: contained in the proposed report of the Treasury Depart-

On this bill and sees no objection to the transmission ofreport in the form enclosed with your letter."


Letterto :0.1r. Young, President of the Federal Reserve Bank of

ellieego, reading asfollows:

int? i:This refers to your letter of May 29, 1943, /..eTe4

4-

est-Board's ap,)roval of the purchase of the buildingknown as 150 West fort Street, Detroit, Michigan.

by .1t! noted that the proposed purchase has been approvedExecutive Committee of your Bank end by the Board

'if'ectors of the Detroit Branch.the 1:The Board of Governors has considered the matter inwill-;Leht of the material enclosed with your letter and

erty TnterPose no objection to the purchase of the prop-" 'n qUestion at a cost of not to exceed 76,666."



Thereu-lon the meeting adjourned.


19430607_minutes.pdf

Documents

federal reserve bank

board of governors

federal reserve11

federal holoe loan bank

bank of chicago

e bills

federal reservesystern

loan associations