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583 A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Tuesday, April 23, 1946, at 2:30 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak Draper Evans Vardaman Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Hammond, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Chairman Paulger, Director of the Division of Examinations Smead, Director of the Division of Bank Operations Vest, General Counsel Townsend, Assistant General Counsel Piser, Chief of the Government Securities Section, Division of Research and Statistics Hostrup, Examiner in the Division of Examinations Chairman Eccles stated briefly the reasons for his decision sometime ago to suggest that the Board submit to Congress 4 revised draft of the bank holding company bill as a substitute for the bill which was introduced in both Houses of Congress in March 1945 at the request of the Board. He also reviewed the dis- cussions of the revised draft of bill that he and Mr. Townsend had had, pursuant to the procedure outlined to the Board on Ootober 16, 1945; with representatives of the Treasury, the Federal Deposit Insurance Corporation, and the Department of Jus- 584 4/23/46 -2- tice, stating that the Department of Justice had come to the conclusion that it would not be able to prove the necessary facts to establish a case against Transamerica Corporation under the Sherman Anti-Trust Act, and that the only recourse available to correct the practices of the corporation to which the Federal bank supervisory agencies objected was through additional legislation. During the discussions of the draft of bill by rep- resentatives of the Federal bank supervisory agencies, Mr. Eccles said/ agreement was reached on all points except the provisions which would (1) give the Board authority to control expansion of bank holding companies by the acquisition of bank stocks, and (2) require bank holding companies to dispose of holdings Oftock of non-banking corporations. The basis of the objec- tion to these provisions was that it was felt that the Board Should not have any more discretion in dealing with the control of bank holding companies than was absolutely necessary and that the bill should contain some kind of automatic formula beyond valich the Board and the other supervisory agencies might not go in permitting expansion of such companies and their affiliates. Chairman Eccles also said that representatives of the Department Of Justice had indicated that they would favor the revised draft, that Secretary Vinson was non-committal, and that the Chairman of the Federal Deposit Insurance Corporation was opposed to the bill 585 4/23/46 In its entirety. In connection with a comment by Ur. Ransom that Under Secretary of the Treasury Gardner had expressed the opinion that the draft of bill contained the "germ of a death sentence", Mr. Townsend read the applicable provision of the bill and stated that the bill did not, and was not intended to, contain anything in the nature of a death sentence with respect to bank holding c ompanies. Chairman Eccles made the further comment that recently re presentatives of the independent bankers associations again inquired whether the Board was going to propose a bill and, when theY were informed that the Treasury had not agreed to the sub— of the revised bill, called on the Under Secretary of the Treasury Gardner who took them in to see the Secretary of the Treasury Vinson, at which tiiae the latter stated that, inasmuch a8 the responsibility for bank holding companies under existing law was with the Board of Governors, the Treasury would have no obj ection to the submission by the Board of the revised draft of bill to the Congress with the understanding that the Treasury 11°111d not be committed in any way and would reserve the right to (IPPose or support the bill if and when hearings were held. Chairman Eccles went on to say that following the meeting of the rePresentatives of the independent bankers associations with Mr. 586 4/23/46 —4— the representatives asked him (Chairman Eccles) why the Board did not submit a bill and stated that the associations would support it in its revised form. It was Chairman Eccles' view that there was no possibility of the bill being enacted this year but that if it were presented, it would have the effect of placing the Board on record as recognizing the problems involved and it might be favorably considered during the next session of Congress. He also said that, in accordance with his e°mIllent at the meeting of the Board on April 16, 1946, he inquired of Secretary of the Treasury Vinson as to his position on the revised bili and that the Secretary confirmed the statement which he had made to the representatives of the independent bankers associations that he would not object to the submission of the bill by the Board with the understanding that the Treasury would not be committed in any way and would have the right to oppose or support the bill when it was under active consideration by the Congress. Chairman Eccles stated that the revised draft of bill was 'in his opinion, a very good one, that, in view of the responsibilitY of the Board under the law, he did not see any satisfactory course for the Board to follow other than to submit the and that he would recommend that the Board send the revised draft to the Chairmen of the Banking and Currency Committees of 587 4/23/46 -5- the House and Senate with the request that they introduce it as a substitute for the bill previously introduced at the request of the Board. In this connection, Chairman Eccles read the following draft of letter to Congressman Spence, Chairman of the House Banking and Currency Committee and submitted a draft of a similar letter to Senator Wagner, Chairman of the Banking and Currency Committee of the Senate: "On March 26, 1945, and at the request of the Board, you introduced a bill (H. R. 2776) to strengthen and to make effective the powers which the Congress vested in the Board in 1933 dealing with bank holding companies. Since this bill was introduced, the Board has received numerous expressions of opinion concerning it from representatives of banks and bank holding companies as well as from Government officials engaged in other bank supervisory activities. In the light of these many expressions of opinion, the Board has concluded that, in order to deal effectively with the problem, it is not necessary for the proposed legislation to be as sweeping in its terms as is H. R. 2776, nor is it necessary to 'freeze' existing bank holding companies at their present size or prevent the creation of new ones. "Accordingly, the Board has prepared a revised and much more simplified draft of a bill with the intention that it be substituted for that previously introduced by you. The Board has asked that I deliver a Copy of this draft to you for your consideration with the hope that you will offer it as a substitute for H. R. 2776. It is enclosed herewith. The Board will be glad to respond to any request for further information and to assist you and your Committee in any appropriate way. "There is also enclosed a statement concerning the revised bill which may be helpful to you if and when You offer it in substitution for H. R. 2776." The statement referred to in the above letter read as follows 588 4/23/46 -6"Statement Concerning Revised Legislation Affecting Bank Holding Companies "On March 26, 1945, a bill to regulate and control bank holding companies, which had been prepared under the direction of the Board of Governors of the Federal Reserve System, was introduced in the Congress by Senator Wagner (5.792) and Congressman Spence (H. R. 2776), chairmen of the Committees on Banking and Currency of the Senate and House, respectively. In introducing the proposed legislation both Senator Wagner and Congressman Spence explained to the Congress that the bill had been drafted in the light of the Board's experience in administering the totally ineffective provisions of the Banking Act of 1933 dealing with bank holding companies, and to supply the framework of legislation recommended by the Board in its Annual Report to Congress in 1943. "Since this bill was introduced, the Board received numerous expressions of opinion concerning the bill by representatives of banks and bank holding Companies, as well as by Government officials engaged :in other bank supervisory activities. After considering fully these many expressions of opinion, and particularly those which suggested certain revisions of the bill, the Board concluded that, to accomplish its fundamental objectives in respect of the holding company situation generally, it is not necessary for the pro1?osed legislation to be as a13-inclusive as it is in its present form, nor is it necessary to 'freeze' existing bank holdinz companies at their present size or prevent the creation of new ones. Accordingly, the Board has prepared a revised and streamlined version of its original bill and it is offered as a substitute for S.792 and H. R. 2776. "In its revised bill the Board has recommended that Congress treat bank holding companies in much the same manner as it has dealt with banks themselves. It recognizes that bank holding companies, if limited solely to managing, operating and controlling lonks and placed under appropriate governmental supervision, including control over their creation and exPansion, are and can be legitimate and effecient forms of banking enterprise. "The bill as revised, therefore, like that now before the Congress, requires all bank holding companies to register with the Board; to supply the 589 4/23/46 —7— "Board with such relevant information as may be required from time to time in order to disclose fully their relations with their subsidiary banks; to divorce themselves from all nonbanking subsidiaries; to submit to examinations from time to time; and to obey such rules, regulations and orders as the Board may make as being necessary for the protection of investors or depositors. In addition, however, the bill authorizes the Board to pernib new bank holding companies to Come into existence and to permit expansion of existing bank holding companies through acquisitions of stock or assets of banks if it finds that such a result would not be detrimental to the Public interest. "As in 8.792 and H. R. 2776 the revised bill would prohibit 'upstream' loans and intercompany sales of securities, except as they may be authorized under certain conditions by the Board. It would prohibit bank holding companies from exacting exorbitant or unreasonable managerial fees from the banks they control. Penalties are set up as well as means of enforcement; but there are also appropriate provisions for court review of all orders which the Board may be authorized to issue. Finally, the Board would be required to report back to the Congress before the exPiration of five years the results of its administration of tnis Act. In a discussion of the matter, Chairman Eccles referred t° the resolution recently introduced by Senator Downey which Provided for an investig;tion of the administration of the Federal banking laws, and stated that Mr. Vinson had said that he H;A "."I not think the submission of the revised draft of the ba holding company bill by the Board would have any adverse effect on the position of the Federal bank supervisory agencies in anY hearings or proceedings that might be conducted pursuant t° the resolution and that such hearings might afford an op- P°rtunitY to present fully to the Congress the problems facing 590 4/23/46 -8- such agencies with respect to bank holding companies. Mr. Ransom asked for the views of the members of the senior staff on the bill and it was stated that it had not been seen by an y of them, that it had been drafted by Mr. Townsend, and that Mr. Cagle had participated in some of the discussions of the draft with the representatives of the Treasury, Department of Justice, and the Federal Deposit Insurance Corporation. At this point, Mr. Thomas, Director of the Division Of Research and Statistics, joined the meeting. In response to an inquiry, Chairman Eccles stated that when the substitute bill, came up for hearings, amendments undoubtedly would be propbSed and the Board would have an opportunity at that time to accept Or oppose such amendments or to offer further'dhanges. Following a discussion of the basis upon which the Board would propose the revised bill and the reasons why it should be submitted by the Board rather than someone else, Mr. Ransom moved that the Board approve the letters to Chairmen Wagner and Spence as presented by Chairman Eccles, together with the enclosures referred to therein. Mr. Ransom's motion was put by the Chair and carried unanimously. At this point, Messrs. Paulger, Townsend, and Hostrup withdrew from the meeting. 591 4/23/46 -9Chairman Eccles referred to a letter addressed to him under date of April 18, 1946, by Mr. Sproul as Chairman °f the Presidents' Conference in which he referred to the tentative agreement reached at the last meeting of the Federal Open Market Committee that the next meetings of the C ommittee and the Presidents' Conference be held during the week of June 3, 1946. The letter outlined a suggested schedule of meetings of the Board of Trustees and committees of the Retirement System of the Federal Reserve Banks, the committees of the Presidents' Conference, the Presidents' Conference, the Federal Open Market Committee and its executive committee, and the joint meeting of the Board of Governors and the Pres- to commence either on June 1 or June 8, and stated that the later date would not be so likely to interfere with the De coration Day holiday and would fit Mr. Sproul's own schedule bett er as he would be in California at the end of May. During a discussion of the suggested dates, some of the members of the Board indicated that because ofaher engagements they would prefer the schedule beginning June 1, and it was understood that Chairman Eccles would discuss the matter with Mr. Sproul by telephone and work out a satisfactory schedule for the meetings which, if the June 1 schedule were not satisfactory, might begin on June 3, 4, or 5. Reference was then made to the decision reached at the fl eeting of the Board on Friday, April 19, 1946, to take up for 592 4/23/46 —10— consideration at this meeting the action of the directors of the Federal Reserve Banks of New York and Philadelphia in voting to eliminate the preferential rate of 1/2 per cent per annum on advances to member banks secured by direct obligations Of the United States maturing in one year or less. Mr. Carpenter stated that since that meeting, the Board had received a letter dated April 19, 1946, from Mr. Mangele, Secretary of the Federal Reserve Bank of San Francisco, advising that at a meeting on April 18, 1946,the board of directors of the Bank voted to eliminate (1) the preferential rate Of 1/2 per cent in effect at the Bank, and (2) the rate of 1 Per cent on advances to nonmember banks under the last paragraph of section 13 of the Federal Reserve Act. Other rates in the Bank's existing schedule were reestablished without change. The letter also stated that the directors voted to sxPrees to the Board of Governors the hope that the Federal °Pen Market Committee would give consideration to the suspension t an early date of the right to sell new issues of Treasury bills to the Federal Reserve Banks at a fixed rate with the °Ption to repurchase such bills at the same rate. An excerpt froril the minutes of the meeting of the directors giving the l'eaa°ns for the above actions was enclosed with Mr. Mangels' letter. 593 4/23/46 -11Copies of the statement for the press with respect to the elimination of the preferential rate, prepared pursuant to the understanding reached at the meeting of the Board on April 19, 1946, were then distributed and discussed and the statement was changed to read as follows: "The boards of directors of the Federal Reserve Banks of Philadelphia, New York, and San Francisco have voted to discontinue the special wartime Preferential discount rate of 1/2 of 1 per cent per annum on advances to member banks secured by Government obligations due or callable in not more than one Year. Changes in rates, to become effective at the Reserve Banks, must be approved by the Board of Governors. "The Board has approved discontinuance of the preferential rate because it has served the purpose of facilitating the war-financing program for Which it was adopted in 1942. The Board does not favor a higher level of interest rates on U. S. securities than the Government is now paying. Discontinuance of the special rate will not involve any increase in the cost to the Government of carrying the public debt. "The preferential rate encourages member banks to borrow at Federal Reserve Banks in order to hold or to purchase additional Government securities, or to lend to others at low rates for the purpose of holding or purchasing Government securities. While Such encouragement was justified early in the war to ?nduce the banks to utilize their reserves more fully in financing huge war expenditures, it has subsequently made for speculation in Government securities and has resulted in unnecessary expansion of the money supply through monetization of the public debt. The Government's program no longer calls for expansion of bank credit to help finance huge war expenditures. Instead, it calls for action that will stop additions to and bring about reductions in the country's monetary supply in order to reduce inflationary pressures. Discontinuance of the preferential rate, therefore, sig- 594 4/23/46 -12- it • • miles an appropriate adjustment from wartime to Postwar conditions in accordance with the Government's program of economic stabilization." Chairman Eccles stated that in accordance with the understanding at the meeting of the Board on April 19, 1946, When he Went to the Treasury in the afternoon of that day to attend a meeting of the National Advisory Council on International Monetary and Financial Problems, he handed to Secretary of the Treasury Vinson the letter approved by the Board with respect to the elimination of the preferential discount rate stating that it was a good reply to his letter of March 28, 1946, and that the Board hoped the Secretary would read it carefully. In response to an inquiry as to when action by the Other Federal Reserve Banks to eliminate the preferential rate might be expected, it was stated that meetings of the boards of directors of the Federal Reserve Banks of Cleveland and Chicago were scheduled for April 25, the Federal Reserve Bank of Boston for May 6, the Federal Reserve Banks of Richmond, Ste L°Ilie, Minneapolis, Kansas City, and Dallas for May 9, and the Federal Reserve Bank of Atlanta for May 10. Question was sed whether, if action were taken by the Board to approve the' e-Limination of the preferential rate at New York, Philadelphia, 4" San Francisco, the other Federal Reserve Banks should be ad- 4/23/46 —13— vieed that the Board was prepared to approve elimination of the rate at those banks as soon as action was taken by the respective boards of directors. It was agreed that all that should be done in this connection was to advise the Banks of the Board's approval of the elimination of the rate at the three Federal Reserve Banks mentioned. In a discussion of when action should be taken by the Board and when the action should be made effective, Chairman Eccles suggested that the Board act on Thursday or Friday of this week, effective as of Saturday, April 27, 1946, and that a s tatement be given to the press for publication in the morning Papers of that day. The advantage of this arrangement, he said, ftuld be that the market would have the weekend to appraise the effects of the action and any disturbance to the market probably 11°111d not be as marked as would be the case if the announcement were made during the week. Mr. Vardaman stated that in order to avoid the sitthat would exist if a further letter were received from the Treas ry u before action was taken by the Board and to avoid information getting out that the elimination of the preferential rate was the the being considered, he would strongly favor action by Board immediately with the understanding that a copy of p rs release would be sent to the Secretary of the Treasury 596 4/23/46 -14- so that he would know of the Board's decision. Mr. Szymczak suggested that action be taken by the Board effective tomorrow and that the release be given to the press for pu blication in tomorrow morning's papers. During the discussion of these suggestions, Mr. Vardaman left the meeting to keep another appointment. At the conclusion of the discussion, Mr. Szymczak moved (1) that effective April 25, 1946, the Board approve the elimination by the Federal Reserve Banks of New York, Philadelphia, and San Francisco of the preferential rate of 1/2 per cent per annum on advances to member banks under paragraphs 8 and 13 of section 13 of the Federal Reserve Act secured by obligations of the United States having one year or less to run to call date or to maturity, if no call date, it being understood that the rate of 1 per cent in effect at the Banks on advances to member banks would be applicable to all advances to member banks secured by such obligations irrespective of the date upon which they matured or were callable, (2) that effective April 25, 1946, the Board approve the elimination by the Federal Reserve Bank of San Francisco of the rate of 1 per cent on advances to nonmember banks under the last paragraph of section 13 of the Federal Reserve Act with the understanding that the rate of 2 1/2 per cent established on October 28, 1942, on advances to individuals, partnerships, and corporations other than banks under the last paragraph of section 13 would include nonmember banks, (3) that the Board approve the re-establishment without Change of the other rates of discount and purchase now in effect in the Federal Reserve Banks of New York, Philadelphia, and San Francisco, (4) that the statement set forth above be given to the press for release in the morning papers of Thursday, April 25) 1946, (5) that all Federal Reserve Banks be advised of the Board's action and that a copy of the press statement be sent to them by wire, 8-nd (6) that tomorrow afternoon, Chairman Eccles 591 4/23/46 -15- call Secretary of the Treasury Vinson on the telephone and tell him of the Board's action and send him a copy of the press statement. Mr. Szymczak's motion was put by the Chair and carried unanimously. Secretary's Note: Following the meeting, Mr. Vardaman advised that he favored the action of the Board as set forth above. There was then read the following memorandum addressed to Mr. Morrill, as Secretary of the Federal Open Market Committee, by Mr. Rouse, as Manager of the System open market account: "If the preferential discount rate of 1/2 of 1 per cent on short term Government securities at the Federal Reserve Banks is eliminated, a disturbance in existing short term rate relationships may be expected to develop at least temporarily. The rate charged to dealers in United States Government securities on loans collaterallized by certificates of indebtedness would be among those subject to an upward pressure. The rate currently charged for such loans is 5/8 of 1 per cent and provides dealers with what is known to the market as a 'carry,' i.e., the difference between the cost of borrowing funds to carry certificates and the rate of return available to the dealer on those issues. With excess reserves at relatively low levels and with reserve positions subject to some pressure from the retirement of Federal Reserve bank credit as a result of the Treasury's debt redemption program, it is expected that bank credit may no longer be freely available to dealers at 5/8 of 1 Per cent on loans collaterallized by certificates. Should banks, as now seems probable, contemplate an 31.1crease in those rates to a point more nearly in line With the future cost of funds to them, dealers would no longer be able to carry certificates profitably - a situation which would find immediate reflection in the market for those issues. Under these conditions, dealers nuld be forced to trade in certificates on an order basis or to work from a net short position. As a result, Purchases for the System Open Market account would probably be larger on balance than might otherwise be the 598 4/23/46 -16- "case and, therefore, larger than necessary or desirable. The private market for certificates, conversely, would suffer a contraction due to the narrowing of dealers' operations. "In order to anticipate the possible development of such a situation, a repurchase agreement rate of 3/4 of 1 per cent might be established immediately to be applicable only to dealers in Government securities who are qualified to do business With the System Open Market account. It is hoped that the priLary value of such an instrument would be its Psychological influence on commercial banks, especially in the period of market transition and adjustment following the elimination of the preferential discount rate when it should encourage banks to lend to dealers on at least an equally favorable basis. Moreover, the reintroduction of the repurchase agreement rate would carry with it some reassurance as to the System's intentions and tend to moderate any feeling that current action on the preferential rate is necessarily a forerunner of higher rates for United States Government securities. "Accordingly, I recommend that the Federal Open Market Committee approve the reinstatement of the authority granted to the Federal Reserve banks at the meeting of the Federal Open Market Committee on May 25, 1936, to make temporary purchases of Government securities under repurchase agreements for periods not exceeding fifteen days with non-bank dealers in Government securities qualified to do business with the System Open Market ount. The last action of the Federal Open Market t in this respect was at the meeting held on karch 1, 1945, when it terminated the then existing authority to the Reserve banks to make temporary purchases of Government securities under repurchase agreements. "I have recommended to Mr. Sproul that in the event this authority was re-established, that a rate of 3/4 per cent on such repurchase agreements be put into effect at this bank, which of course would be subject to review and determination by the Board of Governors. It my belief that if the preferential rate is eliminated 3-A, will create a substantial market problem, and the re. instatement of this authority, and the establishment of a .4 per cent rate thereunder, will help in meeting the 3/ situation." 599 4/23/46 -17Members of the Board, speaking as members of the Fed- eral Open Market Committee, were of the opinion that the proPosal contained in the memorandum was equivalent to the establishment of a special buying rate of 3/4 per cent on certificates, that in accordance with the commitment contained in the Boardts letter of April 19, 1946, to Secretary Vinson, the System should stand ready to purchase whatever securities were offered to the Federal Reserve Banks as a result of the elimination of the Preferential rate, and that all that needed to be done was for Chairman Eccles as Chairman of the Federal Open Market Committee, to advise Mr. Sproul that the New York Bank, as agent for the 8 etem account, should support the market for Goverment secur'tiee by Purchasing whatever securities were offered to the Reserve Bank at current market rates. It was understood that Chair- Ilan Eccles would call Mr. Sproul on the telephone tomorrow and ' advise him accordingly. Mr. Ransom then referred to the draft of the special l'ePort that had been prepared for submission to Congress with reapect to the changed monetary and credit situation brought ab°11t by the war financing program and the credit problems confronted 1,uy the Board because of the changed situation. Of Copies the draft were sent to the members of the Board with a memofrom Mr. Thomas on April 18, 1946. Mr. Ransom stated that the draft had gone through several revisions and contained 600 4/23/46 -18-- all of the material that should be in the report and that, with the concurrence of Mr. Thomas, he would suggest that Mr. Go ldenweiser as consultant to the Board be asked to review- the draft for the purpose of placing it in somewhat shorter and simpler form. Chairman Eccles expressed the opinion that in view of the Board's action on the preferential discount rate and Other changes in the situation since the draft of report was Prepared, it should largely be rewritten. Mr. Ransom then suggested that it would be appropriate to include the substance of the special report in the Board's regular annual report which should be issued as promptly as possible. This suggestion was discussed and Mr. Ransom moved that it be approved with the understanding that Mr. Goldenweiser as consultant to the Board would be asked to prepare a draft of the portion of the text of the report containing the review of the present monetary and credit situation and the problems presented by that situation. This motion was put by the Chair and carried unanimously. There was also a discussion of the question asked by Mr. Ransom whether the annual report should include a statement that the Board of Governors favored continuation of Regulation WI Consumer Credit, as an instrument of selective credit con- 601 4/23/46 -19trol, and all of the members present indicated agreement with such a statement. Upon motion by Mr. Ransom, the inclusion of the statement in the annual report was approved unanimously. At this point, Messrs. Thomas, Smead, Vest, and Piser withdrew from the meeting and the action stated with respect to eaal of the matters hereinafter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on April 22, 1946, were apProved unanimously. Memorandum dated April 221 19461 from Mr. Thomas, Director of the Division of Research and Statistics, submitting the resignation of Mrs. Alice Davis, a Secretary in that Division, effective as of the close of business on April 26, 1946, and Inend. recomm gthat the resignation be accepted as of that date. The m.ernorandum stated that Mrs. Davis understood that an appropriate deduction would be made from her last salary payment for any overannual leave. The resignation was accepted as recommended. Letter to Mr. R. T. Hardy, Assistant Vice President of the Federal Reserve Bank of San Francisco, reading as follows: 602 4/23/46 -20- "Thank you for your letter of April 9, 1946, stating that in order to relieve congestion In your vault arrangements have been made with the Treasury Department for the temporary storage of surplus subsidiary and minor coin at the United States Mint in San Francisco. "It is noted that the coin so stored will be Charged to the Treasurer's General Account as a transfer of funds and reported on the reverse of Form F. R. 34 as a custody held for the account of the Treasurer of the United States." Approved unanimously. Letter to Mr. Berge, Secretary and Assistant Counsel 0 the Federal Reserve Bank of Boston, reading as follows: "This refers to your letter of April 6, 1946, regarding section 8(o) of Regulation 1/i, the question being whether it applies not only to the extensions of credit 'guaranteed' by the Administrator of Veterans' Affairs, but also to loans insured by the Administrator pursuant to section 508, which was added to Title III of the Servicemen's Readjustment Act of 1944 by the Act of December 28, 1945. "When section 8(o) was added to Regulation W, Title III provided only for the guaranteeing of loans by the Administrator. The new section provides: "Sec.508. (a) Any loans which might be guaranteed under the provisions of this Title * * * may, in lieu of such guarantee, be insured by the Administrator* *1. "There are differences in mechanics and in Percentage of coverage as between guaranteed loans aad insured loans, but the objective of both the guaranty and the insurance is the same. Consequently, the Board is of the opinion that the word 'guaranteed' can be taken to include the word 'insured' for purposes of section 8(o). "If experience should demonstrate the desirability of so doing, section 8(o) will be clarified the next time there is a comprehensive revision of Regulation IL" Approved unanimously. 603 4/23/46 Thereupon the meeting adjourned. Secretary.
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