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Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, April 20, 1951. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Evans Vardaman Norton Powell Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Minutes of actions taken by the Board of Governors of the Federal Reserve System on April 18, 1951, were approved unanimously. Minutes of actions taken by the Board of Governors of the Federal Reserve System on April 19, 1951, were approved and the actions recorded therein were ratified unanimously. Telegrams to the Federal Reserve Banks of Boston, New York, Philadelphia, Atlanta, Chicago, St. Louis, and San Francisco stating that the Board approves the establishment without change by the Federal Reserve Bank of San Francisco on April 17, by the Federal Reserve Banks of Atlanta and St. Louis on April 18, by the Federal Reserve Banks of New York, Philadelphia, and Chicago on April 19, 1951, and by the Federal Reserve Bank of Boston today, of the rates Of discount and purchase in their existing schedules. Approved unanimously. Letter to Mr. Latham, Vice President of the F,Jderal Reserve 11411k of Boston, reading as follows: "In accordance with the request contained in your letter of April 16, 1951, the Board approves the designa-. 4/20/51 -2- "tion of the following as special assistant examiners for the Federal Reserve Bank of Boston: Bernard F. Kelley F. Meldon Hatch C. Lewis Pingree Herbert J. Wostrel Francis J. Murphy William R. Corkhum H. Lloyd Daley Robert L. Sullivan Richard T. Wall John A. Hayes William F. Flanders" Approved unanimously. Letter to Mr. Brainard, Federal Reserve Agent of the Federal Reserve Bank of Cleveland, reading as follows: "In accordance with the request contained in your letter of April 12, 191, the Board of Governors approves the appointments of Messrs. F. William Daeuble and Edison F. Peck as Alternate Assistant Federal Reserve Agents, each at his present salary of $4,290.00 per annum, to succeed Messrs. James K. Armstrong and Lester J. Henk. "This approval is given with the understanding that Messrs. Daeuble and Peck will be placed upon the Federal Reserve Agent's pay roll and will be solely responsible to him or, during a vacancy in the office of the Agent, to the Assistant Federal Reserve Agent, and to the Board of Governors, for the proper performance of their duties. When not engaged in the performance of their duties as Alternate Assistant Federal Reserve Agents they may, with the approval of the Federal Reserve Agent or, during a vacancy in the office of the Federal Reserve Agent, of the Assistant Federal Reserve Agent, and the President, perform such work for the Bank as will not be inconsistent with their duties as Alternate Assistant Federal Reserve Agents. "Messrs. Daeuble and Peck should execute the usual oath of office which should be forwarded to the Board of Governors. It is noted from your letter that the Board will be advised later of the effective date of these appointments." Approved unanimously. Telegram to Mr. DeMoss, Vice President of the Federal Reserve Barik of Dallas, reading as follows: 4/20/51 -3- "Reurtel April 17, concerning application of section 7(c) of Regulation W to credit to an automobile rental company to finance purchase of automobiles to be leased by it. "Board is of the view that first clause of section 7(c) exempts such credit." Approved unanimously. Letter to Mr. R. D. McKay, President, National Automobile Dealers Association, Washington, D. C., reading as follows: "In your letter of March 31 you requested that the Board of Governors, prior to any change in the maturities of automobiles under Regulation WI consult with representatives of your Association. "As you know, the Board has consulted with your Association on many occasions in the past and with automobile dealers and State associations both directly and through the twelve Federal Reserve Banks together with their twenty-four branches. It has been our experience that such consultations are valuable and often essential on questions concerning the scope of the regulation and its technical provisions. However, special circumstances have in the past and may again in the future render prior consultations and related announcement of impending action impracticable or contrary to the interest of the national defense as indicated in Section 709 of the Defense Production Act of 1950. Accordingly, the Board could not commit itself to a policy of holding trade consultations in connection with all amendments to Regulation W. "The Board is appreciative of the help and assistance rendered from time to time by your Association and wishes to assure you that we will continue to consult with you to the fullest extent feasible." Approved unanimously. Letter to Mr. Olson) Vice President of the Federal Reserve Iknk of Chicago, reading as follows: S66 4/2o/51 -4- "This refers to your telegram of March 2, 1951, regarding leases, and your letter of February 21, 1951, with which you enclosed a copy of a letter dated February 20, 1951, from your Detroit Branch which raised three questions relating to RegulatIon X and asked for our comments. We regret very much the delay in replying, but all of the questions related to subjects which were being discussed with a view toward possible amendments to the regulation. The three questions will be referred to in order. "(1) A proposed commercial building project, where it was contemplated that it would be financed by a 70 per cent mortgage, the prospective borrower having spent approximately $1 million in acquiring land, grading, etc. before February 15, 1951, but had no written firm commitment for credit to finance the project. "We assume that you have re-examined this case under the new section 5 (g) adopted on March 21, 1951. The mere fact that the National Production Authority may grant permission to build on the basis of hardship does not mean that the financing would be exempt from the provisions of Regulation X. "(2) A case where nonresidential construction was begun before February 15, 1951, but no written firm commitment relative to financing had been made, and the prospective mortgage could be executed and recorded before May 1, 1951, although funds pursuant to the credit extension could not be completely disbursed until next fall. "We assume that this has been answered by the Board's letter S. 1274 (X-33) of March 6, 1951, and the March 21, 1951 amendment to section 5 (k). "(3) Both properties would be leased for terms of from 20 to 25 years and the aggregate rentals under the leases over such terms would equal the 'value' of the property rented. Referencc was made to the definition of credit In the regulation, and the statement -)"made that a strict interpretation would prevent such leases unless a 50 per cent deposit were made and the balance amortized at the rate of 4 per cent annually. "As you know from the Board's telegram of April 17, 19511 the general problem of leasing arrangements under Regulation X is 'being considered, and the regulation probably will be amended in the near future. In any event, however, we doubt that the amendment would subject leases of the type mentioned to control." ADproved unanimously. Letter to the Honorable E. F. Bartelt, Fiscal Assistant Secretary of the Treasury, Washington 2), D. C., reading as follows: "Thank you for your letter of April 12 enclosa copy of your letter of April 5 to the Federal Reserve Banks regarding a change in the regulations governing the payment of United States savings bonds. "It is noted that a draft of a circular has been prepared for the purpose of establishing procedure whereby qualified paying agents may accept savings bonds without the owner's signature and either pay the bonds or forward them to the Reserve Bank for payment. "thile we have no suggestions to offer regarding the operating details relative to the proposed Procedure, we appreciate being advised with respect to the matter. It is hoped that the corunentc of the Resene Bqnks will be helpful to you in preparing the circular In final form." Approved unanimously. 4/20/51 -6The Attorney General, in a letter dated April 18, 1951, having advised that he approved certain amendments to the Program for Voluntary Credit Restraint in the form approved by the Board at the meeting of April 5, 1951, the following finding was adopted by unanimous vote: "WHEREAS, section 708 of the Defense Production Act of 1950 authorizes the President to consult with representatives of financing with a view to encouraging the making of voluntary agreements and programs to further the objectives of that Act; "WHEREAS, by Executive Order No. 10161 the President has delegated this function to the Board of Governors of the Federal Reserve System; "WHEREAS, the Defense Production Act of 1950 provides that it is the intention of the Congress that the President should use the powers conferred by the Act 'to promote the national defense * * * by preventing undue strains and dislocations upon wages, prices and production or distribution of materials for civilian use, within the framework, as far as practicable, of the American system of competitive enterprise'; "WHEREAS, the restraint of unnecessary credit expansion is essential to the resistance of the inflationary pressures now present in our economy and is an important measure in furthering the objectives of the Defense Production Act of 1950; "WHEREAS, the Board has consulted with representatives of financing pursuant to the authority referred to above and such representatives have formulated a Program for Voluntary Credit Restraint and have now formulated certain amendments thereto; "WHEREAS, the said Program for Voluntary Credit Restraint as thus amended provides that 'it shall be the purpose of financing institutions to extend credit in such a way as to help maintain and increase the strength of the domestic economy through the restraint of inflationary tendencies and at the same time to help finance the defense program and the essential needs of agriculture, industry and commerce'; and "WHEREAS, the Board has consulted with the Attorney General and with the Chairman of the Federal Trade Commission with respect to the said Program for Voluntary Credit Restraint as thus amended not less than 10 days before making this Finding, and the Attorney General has approved a request by the Board to all financing institutions in the United States S69 4/20/51 -7- "to act and to refrain from acting in accordance with the Program as thus amended; "NOW, THEREFORE, the Board of Governors of the Federal Reserve System, acting pursuant to section 708 of the Defense Production Act of 1950 and Executive Order No. 10161, hereby approves the said Program for Voluntary Credit Restraint as amended, in the form attached hereto, and finds the said Program as thus amended to be in the public interest as contributing to the national defense." In accordance with the above action unanimous approval was given to the following Request: "REqUEST BY BOARD OF GOVERNORS OF THE MDERAL RESERVE SYSTEM UNDER SECTION 708 OF DEFENSE PRODUCTION ACT OF 1950 TO FINANCING INSTITUTIONS TO ACT PURSUANT TO A PROGRAM FOR VOLUNTARY CREDIT RESTRAINT AS AMENDED "This 'Request' is addressed to all financing institutions in the United States, including without limitation all individuals, firms, partnerships, corporations and other organizations of any kind which are engaged in the business of extending credit, making loans, or purchasing, discounting, selling, distributing, dealing in, or underwriting securities, any and all of such institutions being hereinafter referred to as 'financing institutions.' "Pursuant to the provisions of section 708 of the Defense Production Act of 1950 (hereinafter called the 'Act') and of section 701 of Executive Order No. 10161, the Board of Governors of the Federal Reserve System consulted with representatives of financing with a view to encouraging the making of voluntary agreements and programs to further the objectives of the Act. As a result of such consultations, such representatives prepared a 'Program for Voluntary Credit Restraint,' including as a part thereof a Statement of Principles. The Board of Governors approved the Program and found it to be in the public interest as contributing to the national defense. Certain amendments to the Program have now been suggested by the Voluntary Credit Restraint Committee created under the Program. The Board of Governors of the Federal Reserve System hereby approves these 4/2o/51 -8- . "amendments to the Program, approves the Program as thus amended, and finds the Program as thus amended to be in the public interest as contributing to the national defense. The Program as thus amended, which is hereinafter referred to as the 'Program,' is attached hereto. "Under section 708 of the said Act and section 701 of the said Order, acts or omissions to act pursuant to this Request and the Program which occur while said section 708 is in effect and before the withdrawal of this Request or of the finding of the Board referred to in the preceding paragraph are not construed to be within the prohibitions of the antitrust laws or of the Federal Trade Commission Act of the United States. "The Board of Governors of the Federal Reserve System has consulted with the Attorney General and with the Chairman of the Federal Trade Commission on and before April 5, 1951, said date being not less than ten days before the date of this Request, with regard to the provisions of the Program, the finding by the Board above mentioned, and this Request; and the Attorney General has approved this Request. "Every financing institution in the United States is hereby requested by the Board of Governors of the Federal Reserve System to act, and to refrain from acting, pursuant to and in accordance with the provisions of the Program. The Voluntary Credit Restraint Committee created pursuant to the provisions of the Program, each and every subcommittee created or to be created pursuant to the provisions of the Program, and each and every individual who is or may become a member of the Voluntary Credit Restraint Committee or of any of said subcommittees are hereby requested by the Board of Governors of the Federal Reserve System to act, and to refrain from acting, pursuant to and in accordance with the provisions of the Program. "By order of the Board of Governors of the Federal Reserve System this 20th day of April, 1951. S. R. Carpenter, Secretary." S71 4/20/)1 -9In this connection unanimous approval also was given to the following letter to the Honorable James Howard McGrath, Attorney General, Washington, D. C., together with a similar letter to the Honorable James M. Mead, Chairman, Federal Trade Commission, Washington, D. C.: "Pursuant to the requirements of section 708 of the Defense Production Act of 1950 and Executive Order 10161, there is submitted herewith a copy of a Request made today by the Board of Governors of the Federal Reserve System to financing institutions to act pursuant to a Program for Voluntary Credit Restraint as amended under section 708 of the Defense Production Act of 1950. "This Request is identical with the one submitted by the Board of Governors to you with its letter of April 5, 1951, and was approved by you in your letter of April 18, 19)1. "There is also enclosed a copy of a finding by the Board of Governors of the Federal Reserve System pursuant to section 708 of the Defense Production Act of 1950 that the Program for Voluntary Credit listraint as amended in the respects set forth in our letter to you of April 5, 1951, is in the public interest as contributing to the national defense, together with a copy of such Program as amended." Letter to Mr. B. R. Kennedy, Director, Division of the Federal Register, The National Archives, Washington 25, D. C., reading as follows: "In compliance with the provisions of section 708(b) of the Defense Production Act of 1950, ther3 are transmitted to you for publication in the Peden.' Register an original and th)..3e certified copies of a Request by the Board of Govornors of the Federal Reserve System under Section 708 of the Defense Production Act of 1950 to Financing Institutions to Act Pursuant to a Program for Voluntary Credit Restraint as Amended, to- 4/20/51 -10- "gether with the Program for Voluntary Credit Restraint as Amended to April 20, 1951." Approved unanimously. Secretary.
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