19480331_Minutes.pdf

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

eral Reserve System on Wednesday, March 31, 1948. The Board met in

the Board Room at 12:00 noon.

PRESENT: Mr. Eccles, Chairman pro tem.

Mr. Szymczak

Mr. DraperMr. EvansMr. Clayton

Mt. Sherman, Assistant Secretary

Mt. Thurston, Assistant to the Board

Mt. Thomas, Director of the Division of

Research and Statistics

Mt. Vest, General Counsel

Mt. Solomon, Assistant Counsel

Chairman Eccles stated that this morning he received a tele-

phone call from Mr. Clark M. Clifford, Special Counsel to the Presi-

dent, who said that he had learned that the Bureau of the Budget had

not yet received a report from the Board on H. R. 4790, a bill to re-

duce individual income tax payments and for other purposes, that he

(Mr. Clifford) was writing a veto message on the bill for the Presi-

dent, and that he would like to have the benefit of the Board's views

on the matter. Chairman Eccles added that a draft of letter to Mr.

Elmer B. Staats, Assistant Director, Legislative Reference, Bureau

of the Budget, had been prepared pursuant to the discussion at the

meeting yesterday, and at his suggestion the draft was read and

discussed.

Following the discussion, upon

motion by Mr. Evans, the draft of

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

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letter was approved unanimously sub-

ject to such changes as might be

deemed necessary by Chairman Eccles

in the light of the discussion during

the meeting. In taking this action,

it was understood that Chairman Eccles

would send Mr. Clifford a copy of the

letter.

Secretary's Note: The letter to the Bureau of the

Budget which was delivered later in the day read as

follows:

"This letter is in response to yours of March 25, 1948,

asking for the comments of the Board of Governors on H. R.

4790, a bill to reduce individual income tax payments and

for other purposes.

"The Board of Governors feels that there should be no

net reduction in tax revenues at this time. Total effec-

tive demand for goods and services is now greater than the

supply which can be produced by the nation's productive ca-

pacity and labor force. That is the essence of inflation.

A net reduction in tax revenue in this situation would ei-

ther create a Government deficit or reduce the amount of

funds that otherwise would be available for reduction in

the Government debt. In either instance the result would

be an increase in prices of consumer goods as well as cap-

ital goods. The resulting price rises would likely lead

to additional borrowing by businesses from banks, and such

expansion of bank credit would further add to inflationary

pressures."In view of the costs of carrying out

the Governmental

policies in the international field and, in addition, in

view of the recent program calling for a large increase in

military expenditures, it becomes more urgent than ever

that tax revenue be maintained so as to avoid a Government

deficit and, if possible, have some surplus to apply against

the public debt. This is imperative under present condi-

tions of full production and employment if further danger-

ous inflationary developments are to be avoided.

"For the reasons stated above, the Board feels that

the enactment of H. R. 4790 is undesirable at this time

especially the reduction in taxes provided in section 101

of the bill.


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3/31/48 -3-

"Nevertheless H. R. 4790 contains some provisions

which the Board believes to be desirable because they

recognize and correct certain gross inequities. One

such provision is that for the splitting of incomes in

order to bring about a more equitable situation as be-

tween taxpayers in a considerable number of States which

have community property laws and those in States which

at present do not have such laws. Since this provision

gives benefits chiefly to persons in the middle and

higher income brackets, it is necessary that the lower

income groups, both because of need and for reasons of

equity, have their personal exemptions increased along

the lines provided in the bill. It would be desirable

under the present economic conditions to limit the bene-

fits of increased exemptions to the persons who would

get little or no benefit from the split income pro-

visions because of their low incomes."It is believed, however, that if provisions such

as those mentioned above were to be enacted, with a re-

sulting reduction in revenue, there also should be such

changes in the tax laws as would provide an offsetting

increase in receipts. The Board would be glad, if called

upon to do so, to make suggestions as to some of the

changes it believes would be most desirable."

At this point Messrs. Thomas, Vest, and Solomon withdrew

and the action stated with respect to each of the matters herein-

after set forth was taken by the Board:

Minutes of actions taken by the Board of Governors of the

Federal Reserve System on March 30, 1948, were approved unanimously.

Memorandum dated March 25, 1948, from Mr. Thomas, Director

Of the Division of Research end Statistics, recommending an increase

in the basic salary of John H. Neill, Jr., an administrative assist-

ant in that Division, from $4,525J30 to $4,776c60 per annum, effec-

tive April 4, 1948.

Approved unanimously.


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Memorandum dated March 31, 1948, from the Division of Per-

sonnel Administration recommending that Mrs. Mary Rose Arnold, a

stenographer in the Division of Administrative Services, be trans-

ferred to Chairman Eccles' office as a stenographer, and that her

basic salary be increased from $2,394 to $2,544.48 per annum, both

effective April 4, 1948.


Memorandum dated March 30, 1948, from Mr. Johnson, Per-

sonnel Officer in the Division of Personnel Administration, rec-

ommending an increase in the basic salary of Mrs. Mary Virginia

Malarkey, a clerk-stenographer in that Division, from $2,394 to

$2,469.24 per annum, effective April 4, 1948.


Memorandum dated March 30, 1948, from Mr. Bethea, Direc-

tor of the Division of Administrative Services, recommending that

Miss Catherine L. Schmidt, Secretary to Mr. Parry, Division of

Security Loans, be transferred to the Division of Administrative

Services as a stenographer, with no change in her present basic

salary of $3,146.40 per annum, effective April 1, 1948.


Memorandum dated March 30, 1948, from Mr. Bethea, Direc-

tor of the Division of Administrative Services, recommending


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increases in the basic annual salaries of the following employees

in that Division, effective April 4, 1948:

Name Designation

Salary Increase

From To

John Blash Maintenance Mechanic $3,146.40 $3,271.80Bernard W. Larson Operating Engineer 3,021.00 3,271.80Mary S. Seagle Telegraph Operator 2,770.20 2,8)4.5.14I

Ethelyn M. Palmer Stenographer 2,168.28 2,243.52

Gertrude E. Trivett Stenographer 2,168.28 2,243.52

Elizabeth M. Young Charwoman 1,888.00 1,954.00Anna M. Utz Charwoman 1,756.00 1,822.00Hazel M. Glover Elevator Operator 1,690.00 1,756.00


Letter to Honorable Harry B. Mitchell, President, Civil

Service Commission, reading as follows:

"Reference is made to your letter of February 9,

1948 addressed to Chairman Eccles, regarding the status

of the Federal Employees Loyalty Program in this agency.

"The Board has designated its Division of Personnel

Administration as the unit to conduct the necessary loy-

alty investigation of new employees. In the case of all

new employees this division obtains a Standard Form No.

86, 'Fingerprint Chart', and Standard Form No. 84, 'Re-

quest for Report on Loyalty Data' and forwards the re-

quired copies of these forms to the Federal Bureau of

Investigation. Standard Form No. 79, 'Notice of Per-

sonnel Investigation' is forwarded in duplicate to the

Investigations Division of the Civil Service Commission.

Record checks and inquiries as specified in Section 3

of Part 1 of Executive Order 9835 are made of all new

employees."On incumbent employees on the rolls of this agency

on September 30, 1947, Standard Forms 86 and 84 have been

sent to the Federal Bureau of Investigation.

"As you know, employees of the Board of Governors

of the Federal Reserve System are appointed by the Board


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"without regard to the provisions of the Civil Service

laws, and this organization does not operate on appro-

priated funds. Under Section 10 of the Federal ReserveAct it is expressly provided that funds of the Board

'shall not be construed to be government funds or ap-

propriated moneys.' Consequently, employees of theBoard are in a somewhat different status from thoseof other agencies.

"We have been diligent in keeping abreast of de-

velopments of the Federal Employees Loyalty Program,and it is our feeling that we are meeting our re-

sponsibilities under such Program as outlined in

Executive Order 9835."Incidentally, members of our staff have met on

several occasions with Mr. James E. Hatcher, Chiefof Investigations Division, Civil Service Commission,and members of his staff, and we appreciate the co-operation which they have given to our staff."


Letter to Mr. Dillard, Vice President and Secretary of the

Federal Reserve Bank of Chicago, reading as follows:

"Reference is made to your letter of March 24,

1948, advising that the Board of Directors has votedto give officer status to C. Paul Van Zante, Chief

Examiner, and Arthur M. Gustayson, Assistant Auditor,

effective April 1, 1948, without change of title or

salary."The Board approves the payment of salary to

Mr. Van Zante as an officer of the Bank with the

title of Chief Examiner at the rate of $8,000 per

annum and to Mr. Gustayson as an officer of theBank with the title of Assistant Auditor at the

rate of $7,500 per annum, the rates fixed by the

Board of Directors, for the period from April 1,1948 to March 31, 1949, inclusive."


Memorandum dated March 29, 1948, from Mr. Smead, Director

of the Division of Bank Operations, recommending that the Board


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approve the purchase by the Federal Reserve Banks, at a cost of

$7,330 exclusive of the cost of postage and labels, of 20,000

MPS showing Federal Reserve districts and branch territories in

colors together with a table showing check routing symbols for

each district or branch territory, and that each member and non-

ember bank be furnished a copy of the map.

Approved vrnRnimously.


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