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1007 A meeting of the Board of Governors of the Federal Reserve Systern was held in Washington on Thursday, August 21, 1941, at 11:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak Draper Er. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Wyatt, General Counsel Mr. Parry, Chief of the Division of Security Loans Mr. Dreibelbis, Assistant General Counsel Mr. Bradley, Assistant Chief of the Division of Security Loans Mr. Thomas, Assistant Director of the Division of Research and Statistics Mr. Cravens, Consultant in the Division of Security Loans Mr. Solomon, Assistant Counsel Mr. Dembitz, Special Assistant in the Division of Security Loans Mr. Bonnar Brown, Special Assistant in the Division of Security Loans Mr. Ransom stated that immediately following the conference on AllPm Q"4°6 15 the draft of proposed regulation on instalment credit control /143 relsased to the press for the purpose of reaching the largest posible number of persons who would be affected by the regulation but who Were not represented at the conference, that numerous suggestions with respect to the draft were received from interested Government agencies 4" from representatives of the Federal Reserve Banks and the "trade", that a revised draft of the regulation had been prepared, after considerat i°11 of these suggestions, which was discussed at a conference yesterafternoon with representatives of the Secretary of the Treasury, L008 8/21/41 -2- the Federal Loan Administrator, and the Administrator of the Office of Price Administration and Civilian Supply serving as the advisory corn, mittee created by the President's executive order of August 9, 1941, and that a further revision of the regulation had been made in the light of suggestions made during that conference. Copies of the re- vised draft of regulation were distributed to the members of the Board "lire Ransom said that copies of the revised draft had been sent this morning to the representatives on the advisory committee who were Present at the conference yesterday afternoon. Mr. Ransom then stated that he felt that following the deterof certain questions which would be presented at this meeting the regulation would be ready for adoption by the Board. It was stated that if the usual procedure of the Board were followed of assigning letters to new regulations the proposed regulati°t1 would be Regulation V, and Mr. Ransom said that, because of the r'ecent publicity given to the "V" for victory movement the assignment f that letter to the regulation might be subject to misunderstanding 411d that it would be his recommendation that the regulation be desigAated by the letter "W". Unanimous approval was given to this recommendation. There followed a discussion whether the regulation should be entitled "Consumer Credit" or "Instalment Credit". It was agreed that, inasmuch as the executive order was entitled "Regulation of consumer credit", and the regulation 1_009 8/21/ill -3issued by the Board pursuant to the authority of the executive order would not necessarily be restricted to the regulation of instalment credit, the proposed regulation should be entitled "Consumer Credit". Mr. Morrill outlined the plans that had been made for print- ing at least 350,000 copies of the regulation to supply the needs of the Federal Reserve Banks which would distribute the regulation, and stated that orders had been placed with Judd & Detweiler and National Capital Press, as well as our own duplicating section, for simultaneous Printing of the regulation, that arrangements had been made to send copies by air to each of the western banks, and that additional eQ2ies would be placed in the hands of all of the Federal Reserve tani- aS promptly as possible. He pointed out that considerable ex- Pense would be involved particularly because of the fact that the Prl-"'ing would have to be done on Saturday and Sunday. He said that h ak-1 been arranged for the Reserve Banks to contact interested State and . natlonal organizations with headquarters in the respective Federal 've districts and either through those associations or by the use °f their mailing lists to send out copies of the regulation to members Of t he associations, and that every reasonable effort would be made by, "s and the Federal Reserve Banks to get copies of the regulation ill the hands of all interested concerns. Mr. Ransom then stated that in a conversation which he had Mr. Nugent this morning the latter was very complimentary of 1.010 8/21/41 —4— the representatives of the Board with whom he had worked as a representative of the Office of Price Administration and Civilian Supply and felt that he had been shown every consideration during his work in connection with the problem of consumer credit control. There followed a discussion of the changes that had been incorporated in the current draft of the regulation. One of the matters discussed was whether certain agricultural 1°arle should be excepted from the provisions of the regulation. Mr. ParrY reviewed the discussions which he had had with representatives of the Farm Security Administration and the Farm Credit Administration and there was read a draft of a proposed section 6(k) of the regulation which would except these loans and which Mr. Parry stated would be 4greeable to the two agricultural agencies. On recommendation of Mr. Ransom, it was agreed that the exception should be included in the regulation. Mr. Dreibelbis referred to the suggestions that had been oftereci Lhat provision be made in the regulation to except transactions invol ng the lease by dealers of automobiles to contractors on GovConstruction projects as well as transactions involving the transfer. of equities in automobiles from one private owner to another. It was agreed that these exceptions should not be included as it was believed possible, in the event it should be found necessary to meet these situations, to handle the matter by formal rulings by the Board. 8/21/41 -5Mr. Dreibelbis called attention to two new provisions in the l'egulation, one of which would become effective on January 1, 1942, and would require minimum instalment payments aggregating not less than ft,5.00 per month, and the other would be effective until December 31, /413 and would except instalment credit arising out of instalment s' al "of small amounts which were payable within a relatively few Months. These provisions were approved unanimously with the understanding the latter provision would apply to credits of less than '5() payable within nine months. Mr. Ransom referred to the discussions which had been had with l'ePresentatives of the Office of Price Administration and Civilian Supelating to the desirability of including instalment loan credits 14 the regulation and to the insistence of representatives of that clIrnization that they be included. The regulation having been written ill that form, Mr. Ransom said, the problem was presented of how to deal with r enewals, revisions, and additions, which were covered in section 8 of the regulation. He added that he was inclined to the position that f . urniture might well be omitted from the listed articles but that the r eProsentatives of the Office of Price Administration and Civilian 811P131-Y felt strongly that it should be included and, therefore, it . 111 the draft now before the Board. Mr. Ransom made the further state ment that the immediate question was the effective date of the 1'11 ' 8ft three paragraphs of section 8 and that Mr. Nugent had taken the 1.012 8/21/4 1 -6that the secondary controls contemplated by these provisions should be delayed until there had been an opportunity to discuss the Problems involved. In connection with this point, Mr. Ransom read an itir°rInal note sent to him by Mr. Nugent this morning transmitting a rcnIgh draft of a letter commenting on the draft of regulation discussed t the conference yesterday and stating reasons for delaying the apPlication of the regulation to renewals and revisions of, and additions to • ) Instalment credit contracts. The rough draft of letter was read X. Carpenter and Mr. Ransom stated that, while a delay in the ef- fective date of the applicable provisions of section 8 would not meet entiPslY the objections of the representatives of the Office of Price A dzilastration and Civilian Supply, he believed they would not raise allY' serious objection to that manner of meeting the immediate problem. There was a discussion of the question whether a delay of eiXtv a -aYs in the effective date of these provisions of section 8 of the, -L-egulation would result in accelerated efforts to avoid the rec:Illirellierits of the regulation and it was the consensus that, while the delltY would have that effect to some extent, it would not be particu1411-Y serious. At the conclusion of the discussion of this point, it was agreed unanimously that the effective date of the applicable provisions of section 8 of the regulation should be made November 1, 1941. Thereupon the meeting recessed and reconvened at 2:40 p.m. Ilith the same attendance as at the morning session. 1013 8/41/41 —7— Question was raised by Mr. Ransom as to whether the executive order should be included in the appendix to the printed regulation. It was agreed that in order to emphasize the background for the regulation, the executive order should be included with a footnote making specific reference to the criminal penalties involved in violations of the regulation. Reference was made to section 6(d) of the regulation which ftuld except from the requirements of the regulation certain extensio._ Liu of instalment loan credit the proceeds of which were to be used for b'Jlid fide medical, hospital, dental, or funeral expenses, and Mr. Parr7 pointed out that the inclusion of this section would constitute g°5-ng a considerable distance toward a purpose test in connection with Cash instalment loans. M. Ransom referred to the objections that had been raised by representatives of the Office of Price Administration and Civilian al'pPly. to th 6 the inclusion of a purpose test for instalment loan credit original regulation and said that they were not in favor of the in*, • 81°n of section 6(d), as was indicated in the draft of letter ' from Mt'. Nugent referred to earlier in this meeting. Mr. Ransom stated that Chairman Eccles had felt strongly that the provision should be that he was in agreement with that suggestion, and that he -11 W°1 d recommend that it be included. There was unanimous agreement with Mr. Ransom's recommendation. Following a consideration of the question whether the provisions relating to the 1_014 8/21/4i -8written record of a transaction to be made by the creditor should be made effective on September 15 or October 1, it was agreed that the effective date of these provisions should be October 1, 1941. Mr. Cravens raised the question whether the regulation reserved the right to the Board to examine records of creditors. It was agreed that, while the Board had such right without expressly reserving it in the regulation, an appropriate provision should be included. There ensued a discussion of the list of articles contained in the appendix and it was agreed that new household furniture should be included, but that floor coverings should be excluded. It was also agreed that mattresses of all kinds should be included. After further discussion it was agreed that the maximum credit value assigned to household furniture and pianos and household electrical organs should be changed from 85 to 90 per cent. Mr. Ransom stated that, while he was satisfied that the sugee8ti°ns made by the executive committee of the Federal Advisory Council toll °17ing the conference on August 15 had been given careful consider4t1c3n, he wctuld like to have read the letter received from Mr. Brown 46 Chairman of the Executive Committee under date of August 16, 1941. The letter was read by Mr. Carpenter. Reference was then made to a draft of foreword to the regulatl°11which had been prepared by Mr. Thurston at the request of Mr. 4480m. 1_015 8/21/41 -9The foreword was read and approved unanimously in the following form, with the understanding that it would be made clear in the printed regulation that the foreword was not a part of the formal regulation: "Regulation Vi has been adopted by the Board of Governors in order to carry out the President's Executive Order of August 9, 1941, which sets forth the necessity for and purpose of regulation of consumer credit, as follows: "1. A large volume of credit is being devoted to financing and refinancing purchases of consumers' goods and services through extensions of credit that usually are made to individuals and to a large extent are on an instalment payment basis. "2. The conditions under which such credit is available have an important influence upon the volume and timing of demand, not only for the particular goods and services Purchased on credit but also for goods and services in general. "3. Liberal terms for such credit tend to stimulate demand for consumers' durable goods the production of which requires materials, skills, and equipment needed for national defense. "4. The extension of such credit in excessive volume tends to generate inflationary developments of increasing consequence as the limits of productive capacity are approached in more and more fields and to hinder the accumu1 tlon of savings available for financing the defense proof. "5. The public interest requires control of the use instalment credit for financing and refinancing purchases of consumers' durable goods the production of which absorbs 1 esources needed for national defense, in order (a) to facil: a:tate the transfer of productive resources to defense industries, (b) to assist in curbing unwarranted price advances and profiteering which tend to result when the supply of such goods is curtailed without corresponding curtailment !?! demand, (c) to assist in restraining general inflationary 6eadencies, to support or supplement taxation imposed to restrain such tendencies, and to promote the accumulation of 8,vings available for financing the defense program, (d) to ald in creating a backlog of demand for consumers' durable goods, and (e) to restrain the development of a consumer 1016 -10"debt structure that would repress effective demand for goods and services in the post-defense period. 716. In order to prevent evasion or avoidance of this order and such regulations as may be prescribed to effectuate its purposes, means should also be available for regulating the use of other instalment credit and other forms of credit usually extended to consumers or on consumers' durable goods. "7. It is appropriate that such credit be controlled and regulated through an existing governmental agency which las primary responsibilities with respect to the determina6ion and administration of national credit policies. "Regulation VI is issued in the light of the foregoing considerations and as a step supplementing more fundamental governmental measures designed to combat inflationary dev elopments. "There will be changes from time to time in this regulation, particularly in the list of consumers' durable goods covered by the regulation, in the size of the minidown payments required, and in the maximum length permitted for instalment contracts. "Any inquiry relating to this regulation should be addressed to the Federal Reserve Bank or the Federal Reserve branch bank of the district in which the inquiry arises." I In connection with the discussion of the foreword, question the raised whether reference should be made to the fact that neither reePonsibility of the Board nor the objective of the regulation Was t° limit production but rather to exercise a restraining influence on the demand for goods. However, the opinion was expressed that if such a statement were necessary it could be contained in the atatement to the press when the regulation was released. Thereupon, upon motion by Mr. Ransom, the following resolution was adopted by unanimous vote: RESOLVED, That Regulation 11, Consumer Credit, be adopted in the following form to become effective as stated in Section 10 of the regulation: 1017 8/21/41 -11"SECTION 1. SCOPE OF REGULATION "This regulation is issued by the Board of Governors of the Federal Reserve System (hereinafter called the Board') under authority of section 5(b) of the Act of October 6, 1917, as amended, and Executive Order No. 8843/ dated August 9, 190 (hereinafter called the 'Executive Orderf),1 "The regulation applies, in general, to any person 1./10 is engaged in the business of making extensions of instalment credit, or of discounting or purchasing obligations arising out of extensions of instalment credit. It.applies whether the person so engaged is acting as Principal, agent, broker or otherwise, and whether the Person is a bank, loan company, or finance company, or a Person who is so engaged in connection with any other business, such as by making, such extensions of credit as a dealer, retailer, or other person in connection with the selling of consumers' durable goods.2 "SECTION 2, DEFINITIONS "For the Purposes of this regulation, unless the context otherwise requires: "(a) 'Person' means an individual, partnership, association, or corporation. "(b) 'Extension of Credit' means any loan or mortgage; any instalment purchase contract, any conditional sales contract, or any sale or contract of sale under which ?art or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract, or any contract for the bailment or leasing of property Under , , I which the bailee or lessee either has the option of ecomin8 the ovmer thereof or obligates himself to pay as "mPensation a sum substantially equivalent to or in excess of the value thereof; any contract creating any lien or similar claim on property to be discharged by the pay?nt of money; any purchase, discount, or other acquisition of, or any extension of credit upon the security of, "lThe Executive Order is printed in the Appendix. However, it has been the purpose to couch this regulation J-11 such terms as will eliminate the need of cross reference to the Order. "2The Supplement to this regulation lists the conslImers' durable goods within the scope of the regulation. 1018 8/21/41 -12- "arty obligation or claim arising out of any of the foreping; and any transaction or series of transactions having a similar purpose or effect. "(c) 'Extension of Instalment Credit' means an extension of credit which the obligor undertakes to repay in two or more scheduled payments or as to which the Obligor undertakes to make two or more schedules payments or deposits usable to liquidate the credit, or which has a similar purpose or effect. "(d) 'Extension of Instalment Sale Credit' means at? extension of instalment credit which is made, as principal, agent or broker, by any seller of any consumers' dl .irable good specified in the Supplement to this regulation (hereinafter called a 'listed article') and arises out of the sale of such listed article. For the purposes ?f this section 2(d) a lease or bailment which is similar 111 purpose or effect to a sale shall be deemed to be a sale. "(e) 'Extension of Instalment Loan Credit' means an extension of instalment credit, other than instalment ale credit, which is a loan (as distinguished from other t?Pes of extensions of credit) and which (1) is in a prin?ipal amount of $1,000 or less, or (2) regardless of amount, ls.wholly or partly secured, or according to any oral or l'irritten agreement of the parties is to become so secured, any listed article which has been purchased within 45 uaYs prior to, or is to be purchased at any time after, a.uch extension of instalment credit; but the definition ?(?es not include any loan upon the security of any obliEation or claim which arises out of any extension (A) of instalment sale credit or (B) of instalment loan credit as defined above in this section 2(e). "SECTION 3. REGISTRATION AND GENERAL REQUIREMENTS . "(a) General Requirements.--No person engaged in the . 14181ness of making extensions of instalment sale credit3 or instalment loan credit, or engaged in the business of lendOn the security of or discounting or purchasing obliga' -'-ons or claims arising out of such extensions of credit, 811 ! 1-11 make any payment or receive any payment which constatutes or arises directly or indirectly out of any such "3It is to be noted that the term 'instalment sale credit, includes only credit connected with the sale of listed articles. 1_019 8/21/41 -13"extension of credit made by such person or out of any such obligation or claim lent on or discounted or purchased 1,-uy such person, except on the following conditions: (1) Such person shall be licensed pursuant to this section (any person so licensed being hereinafter called a 'Registrant'); and (2) The Registrant shall not make any such payment or receive any such payment (A) if, when the Registrant made the extension of instalment credit, the Registrant knew or had reason to know any fact by reason of which such extension of instalment credit failed to comply with any of the requirements of this regulation applicable thereto, or (B) if, when the Registrant purchased or discounted the obligation or claim or accepted the obligation or claim as collateral, the obligation or claim showed on its face some failure to comply -Ath such requirements, or the Registrant knew any fact by reason of which the extension of instalment credit giving rise to the obligation or claim failed to comply with such requirements, or (C) if, When the Registrant renewed, revised, or consolidated the obligation or claim arising out of an extension of instalment credit, the Registrant knew or had reason to know any fact by reason of which such renewal, revision or consolidation resulted in a failure to comply with such requirements. "(b) General License.--A general license is hereby Franted to all persons engaged on or before December 31, -L941 in the type of business described in section 3(a); ded, however, That such general license terminates the close of December 31, 1941 for every person who has not registered on or before that date in the manner Provided in section 3(c). After December 31, 1941, any rson, whose license is not suspended, may become licensed Y registering in the manner provided in section 3(c). sect. (c) Registration.--Registration as required by this p. 3-°n 3 may be accomplished by filing, with the Federal ti-lserve Bank of the district in which the main office of f e Registrant is located, a registration statement on orms obtainable from any Federal Reserve Bank or branch. "(d) Suspension of License.--The license of any Reghea .may, t after reasonable notice and opportunity for -ring, be suspended by the Board, either in its entirety r 1020 8/21/41 -14- n or as to particular activities or particular offices or for specified periods, on any of the following grounds: (1) Any material misstatement or omission vrillfully or negligently made in the registration statement; (2) Any willful or negligent failure to comply with any provision of this regulation or any requirement of the Board pursuant thereto. "A license which is suspended for a specified period will again become effective upon the expiration of such period. A license which is suspended indefinitely may be restored by the Board, in its discretion, if the Board is satisfied that its restoration would not lead to further yiolations of this regulation and would not be otherwise incompatible with the public interest. "SECTION 4. INSTALMENT SALE CREDIT "Except as otherwise permitted by section 61 any extension of instalment sale credit shall comply with the following requirements : "(a) Maximum Amount of Credit.--The deferred balance shall not exceed the miudimmn credit value of the listed article specified in the Supplement to this regulation (hereinafter caJled the 'Supplement'); "(b) Maximum Maturity.--The maturity shall not exceed that specified for the listed article in the Supplement; "(c) Amounts of Paymepts.--Except as permitted by section 4(d), the instalments in which the time balance is repayable shall be substantially equal in amount or be so arranged that no instalment is substantially greater in eaount than any preceding instalment; "(d) Intervals of Payments.--The instalments shall be payable at approximately equal intervals not exceeding °Ile month, except that, when appropriate for the purpose °Ib facilitating repayment in accordance with the seasonal nature of the obligor's main source of income or to encourage off-seasonal purchases of seasonal goods, the payMeat schedule may reduce or omit payments over any period °r periods totaling not more than 4 months during the life ?f such extension of instalment sale credit if the schedule Increases the scheduled payments in such manner as to meet 411 the other requirements of this section 4; 1021 8/21/41 -15- "e) Minimum Monthly Payment.--Except as permitted bY section 4(d), the schedule of payments shall call for instalments aggregating not less than 5.00 per month; "**(f) Statement of Transaction.--The extension of instalment sale credit shall be evidenced by a written instrument or record, and there shall be incorporated therein or attached thereto a written statement, of which a Copy shall be given to the obligor as promptly as circumstances will permit, and which shall set forth (in any order) the following information: (1) A brief description identifying the article purchased; (2) The bona fide cash purchase price of the article and accessories purchased (including any sales taxes thereon) and of any services (excluding any interest or finance charge and the cost of any insurance) rendered in connection with the acquisition thereof, itemized; (3) The amount of the purchaser's down payment (A) in cash and (B) in goods accepted in trade, together with a brief description identifying such Foods and stating the monetary value assi,:ned thereto in good faith; (4) The deferred balance, which is the difference between items (2) and (3); (5) The amount of any insurance premium for which credit is extended and of any finance charges or interest by way of discount included in the principal amount of the obligation, or the sum of these amounts; (6) The time balance owed by the purchaser, which is the sum total of items (4) and (5); and (7) The terms of payment. "(g) Creit of Which a Part Arises Put of Sale of a ' 141 ticle.--In case an extension of instalment sale e edit arises partly out of a sale of an article listed in j e Supplement and partly out of another sale, the amount rd the terms of such extension of credit shall be such Would result if the credit were divided into two parts, re part relating to the listed article being treated in rcordance with the provisions of this regulation relating '° such article and the remainder being treated in the 'Effective January 1, 1942. Effective October 1, 1941. 1022 8/21/41 -16- manner in which the Registrant would in good faith treat a similar extension of credit if standing alone. "SECTION 5. INSTALMENT LOAN CREDIT "Except as otherwise permitted by section 6, any ex'ension of instalment loan credit shall comply with the ollowing requirements: " (a) Loans Secured by Listed Article.--If the extension of instalment loan credit is wholly or partly secured, or according to any oral or written agreement of the parties is to become so secured, by any listed article nich has been purchased within 45 days prior to, or is to De Purchased at any time after, such extension of instalment loan credit: (1) The principal amount lent to the obligor (excluding any interest or finance charges, and the cost of any insurance) shall not exceed the maximum credit value of the listed article Specified in the Supplement; and, in determining such maximum credit value, the Registrant may accept in good faith a written statement signed by the obligor setting forth the bona fide cash Purchase price of the article and of any accessories and of any services, except insurance, rendered in connection with the acquisition thereof, which statement so accepted shall, for purposes of this regulation, be deemed to be correct; and (2) The maturity shall not exceed that Specified for the listed article in the Supplement, and such maximum maturity shall be calculated from the date of purchase of such listed article or from the date of such extension of instalment loan credit, whichever is earlier. "(b) Miscellaneous Loans of $1,000 or Less.--If the extension of instalment loan credit is not subject to !lection 5(a) but is in a principal amount of $1,000 or teas, the maximum maturity shall not exceed that sped in the Supplement for extensions of instalment loan uredit subject to this section 5(b). tit \ (c) General Requirements.--Whether subject to sec.t14.°n 5(a) or section 5(b), the extension of instalment '°an credit shall comply with the following additional l*equirements: 1023 8/21/41 -17The extension of instalment loan credit shall be evidenced by a written instrument or record, and there shall be incorporated therein or attached thereto a written statement, of which a copy shall be given to the obligor as promptly as circumstances will permit, and Which shall set forth the terms of payment and, if the loan is subject to section 5(a), the bona fide cash purchase price used for determining the maximum credit value of the listed article involved; (2) Except as permitted by section 5(c)(3), the total of the principal and any interest or finance charges shall be payable in instalments Which shall be substantially equal in amount or be so arranged that no instalment is substantially greater in amount than any preceding instalment; (3) Instalments shall be payable at approximately equal intervals not exceeding one month, except that, when appropriate in order to facilitate repayment in accordance with the seasonal nature of the obligor's main source of income or to encourage off-seasonal purchases of seasonal goods, the payment schedule may reduce or omit payments over any period or periods totaling not more than 4 months during the life of such extension of credit if the schedule increases the scheduled payments in such manner as to meet the other requirements of this section 5; and **(4) Except as permitted by section 5(c)(3), the schedule of payments shall call for instalments aggregating not less than 5.00 per month. (d) DetermiAipgilhea_Litsted Article ,Purchase4.-In case the Registrant accepts in good faith a written st,tement signed by the obligor that any listed article ch secures an extension of instalment loan credit has been purchased within 45 days prior to such extension of credit such statement shall, for the purposes of this regulation, be deemed to be correct. Er ** fective October 1 1941. Effective January 1, 1942. 1024 8/21/41 "SECTION 6. CERTAIN EXCEPTIONS "Notwithstanding the provisions of sections 4 and 5, the requirements of such sections shall not apply to any of the following: "(a) Any extension of credit which is secured by a 21 .9111Ja4e. first lien on improved real estate duly recorded. "(b) Any extension of credit over ''1,000 which is made for materials and services in connection with repairs, alterations, or improvements upon urban, suburban, or rural real property in connection with existing structures, even though such materials include articles listed in Group C or D in the Supplement, provided the bona fide cash purchase Price of such articles so listed does not exceed 50 per cent of the total over-all deferred balance. "(c) Any extension of instalment loan credit which is made to or for a student for bona fide educational purPoses. "(d) Any extension of instalment loan credit if (1) the proceeds are to be used for bona fide medical, hospital, dental, or funeral expenses and (2) the income of the ob116or available for the purpose is such that he could not reasonably meet the requirements of this regulation otherIlse aPplicable, and failure to obtain the extension of credit would cause undue hardship to him; Provided, That lf the Registrant accepts in good faith a written state1?nt signed by the obligor and setting forth the facts reled upon to bring the loan within the exception of this Section 6(d) the facts set forth in such statement shall, for the purposes of this regulation, be deemed to be correct. 1 "(e) Any extension of credit (1) to finance the purchase of aircraft in order to facilitate participation in the. Civilian Pilot Training Program of the Civil Aeronautics Authority, or (2) to remodel or rehabilitate any dwelling _I 'residence which the Defense Housing Coordinator, or his liuthorized agent, shall designate as being for 'defense g,°11sing' as defined by the Coordinator. Information reell'ding the procedure for obtaining such a designation may L'e obtained through any Federal Reserve Bank or branch. "(f) Any extension of instalment sale credit which is to he repaid at approximately equal intervals and in I?Proximately equal instalments, the last of which matures months after the first day of the calendar month next following such extension. i Z 1025 8/21/41 -19- "(g) Any extension of credit to a dealer in any listed article, whether a wholesaler or retailer, to finance the purchase of any such article for resale. "(h) Any extension of credit which is to be repaid within not more than twelve months and is made to a bona fide salesman of automobiles in order to finance the purchase of a new automobile to be used by him principally as a demonstrator. "(i) Any extension of credit which is for the purpose of financing a premium in excess of one year on a fire or casualty insurance policy if the proceeds are Paid directly to the insurance agent, broker, or company issuing or underwriting the insurance and the extension of credit is fully secured by the unearned portion of the premium so financed. "(i) Any extension of instalment sale credit made on or before December 31, 1941, which (1) does not bring above $50 the total of the obligor's outstanding indebtedness to the Registrant arising out of extensions of instalment sale credit made on or after September 1, 1941, and (2) is to be repaid at approximately equal intervals and in approximately equal instalments the last of which matures within 9 months after the first day of the calendar month next following such extension. "(k) Any extension of instalment loan credit which i8 made to a person engaged in agriculture, or to a cooperative association of such persons, provided that the extension of instalment loan credit (1) is approved by the Farm Security Administrator, or his authorized agent, sr being necessary for the rehabilitation of a needy farm or (2) is for general agricultural purposes and 18 not for the purpose of purchasing any listed article and not secured by any listed article purchased within 45 days before the extension of credit. In determining Whether a loan meets the description of clause (2) above, a,negistrant may accept in good faith a written statement Z-Lgned by the obligor setting forth the facts relied upon O bring the loan within the description, and the facts !et forth in such statement shall, for the purposes of 'his regulation, be deemed to be correct. "SECTION 7. ENFORCEABILITY OF CONTRACTS "Pending an opportunity for the Board to observe this ' l egUlation in operation and except as may subsequently be 1_026 8/21/41 -20"otherwise provided, all of the provisions of this regulation are designated, pursuant to section 2(d) of the Executive Order, as being for administrative purposes within the meaning of said section 2(d) which provides that noncompliance with provisions of the regulation so designated shall not affect the right to enforce contracts. "SECTION 8. RENEWALS, REVISIONS, AND ADDITIONS * " (a) Renewals or Revisions.--If any obligation or Claim evidencing any extension of instalment sale credit or instalment loan credit is renewed or revised by a Registrant, the extension of instalment credit does not comply with the requirements of this regulation if such renewal or revision has the effect of changing the terms of repayment to terms which this regulation would not have permitted in first instance for such credit; Provided, however, That tILLS shall not prevent the Registrant from taking any such action if the Registrant accepts in good faith a statement of necessity as provided in section 8(d) and the extension ?f instalment credit provides for a schedule of repayment in conformity with this regulation as though it were a new extension of instalment credit; and Provided further, That nothing in this regulation shall be construed to prevent .?..11Y Registrant from making any renewal or revision, or talcany action that it shall deem necessary in good faith, \-14 with respect to any obligation of any member of the a:rifled forces of the United States incurred prior to his induction into such service, or (2) for the Registrant's awn Protection in connection with any obligation which is in efault and is the subject of bona fide collection effort °9 the Registrant. "*(b) Additions to Outstanding; Credit.--If any Registrant makes any extension of instalment sale credit or instalMerit loan credit and such extension of instalment credit is rnsolidated with any obligation held by the Registrant evineing any prior extension of instalment sale credit or instalment loan credit to the same obligor, neither extension of instalment credit complies with the requirements of this regulation unless the terms of the consolidated obligation are such as would have been necessary to meet the requireillents of this regulation if the two extensions had not been !° consolidated; Provided, however, That if the Registrant 'ecepts in good faith a statement of necessity as provided Effective November 1, 1941. 1027 8/21/41 -21- section 8(d), the combined obligation may provide for a schedule of repayment in conformity with this regulation as though it were a new extension of instalment credit. 0* (c) Credit to Retire Obligations Held Elsewhere.-Any extension of instalment credit, the proceeds of which a Registrant knows or has reason to know will be used in Whole or in part to reduce or retire any extension of instalment sale credit or instalment loan credit not held bY such Registrant, shall be subject to the requirements of section 8(a) or 8(b), including the provisos thereof, to the same extent as if the obligation being reduced or retired were held by the Registrant. In determining whether the proceeds of any extension of instalment credit will be so used, if the Registrant accepts in good faith a written statement with respect thereto signed by the obligor, such statement shall, for the purposes of this regulation, be deelmedto be correct. "w(d) Statement of necessity to Prevent Undue Hardshj40The requirements of a statement of necessity, as provided for in sections 8(a), 8(b), and 8(c), will be complied with Only if the Registrant accepts in good faith a written statement on a form prescribed by the Board and signed by the obllgo' that the contemplated renewal, revision, or other action is necessary in order to avoid undue hardship upon the obligor resulting from contingencies which were unforeseen by the obligor at the time of obtaining the original extension of instalment credit or which were beyond the IcpcTtrol of the obligor, which statement also sets forth ,rlefly the principal facts and circumstances with respect 60 such contingencies and specifically states that the renewal revision, or other action is not pursuant to any pre"nceived plan, arrangement, or intention to evade or circumvent any requirement of this regulation. "(e) Obligations Outstandino. on SepIgmber 1, 1941.-The requirements of sections 8(a), 8(b), and 8(c), do not apply to any renewal or revision of any obligation arising out of any extension of instalment sale credit or instalMent loan credit made prior to September 1, 1941; but when anY such outstanding obligation has been combined with any eXtension of instalment sale credit or instalment loan credit made on or after September 1, 1941, or has been the subject °f anY renewal or revision made on or after such date, such eXtension of instalment credit shall thereafter be treated * Effective November 1, 1941. 1028 -22"for the purposes of this regulation as having been made on or after such date. "(f) Side Loan to Make Down-Payment on Listed Article.-An extension of instalment credit which is limited in amount bY this regulation to the maximum credit value of any listed article, does not comply with the requirements of this regulation if the Registrant making such extension of instalent credit knows or has reason to know that there is, or ,,hat there is to be, any other extension of credit in connection with the purchase of the listed article which would bring the total amount of credit extended in connection with such purchase beyond the maximum credit value of such article as specified in the Supplement; Provided, That, if the Registrant accepts in good faith a written statement signed by the obligor that no such other extension exists or is to be Tado, such statement shall, for the purposes of this regulation, be deemed to be correct. "(g) Evasive Side Agreements.--No extension of instalment credit complies with the requirements of this regulation if at the time it is made there is any agreement, :arranT:ement, or understanding by which the obligor is to be enabled to make repayment on conditions inconsistent with th°8e required by this regulation, or which would otherwise ev , ade or circumvent, or conceal any evasion or circumvention any requirement of this regulation. T "SECTION 9. MISCELLANEOUS PROVISIONS "(a) Clerical Errors.--Any failure to comply with this regulation resulting from a mistake in determining, t calculating, or recordin any price, credit value, or exion of credit, or other similar matter, shall not be ?onstrued to he a violation of this regulation if the Registrant establishes that such failure to comply was the l'esult of excusable error and was not occasioned by a regular course of dealing. , "(b) Calculatrig Maximo Maturity of Contra.--In ea culatin[: the maximum maturity of a contract from the ic4late on which any listed article was purchased or any loan made, depending upon which such date is required by tlis regulation to be used for such calculation, a Regisant may, at his option, use as such date of purchase or : °an any date not more than 15 days subsequent to the acUaJ date thereof. t! \ (o) 'Lay-away' Plans.--Mth respect to any extenof siOn instalment sale credit involving a bona fide j 1029 8/21/41 -23- "'law-away' plan, or other similar plan by which a purchaser makes one or more payments on an article before receiving delivery thereof, the Registrant may, for the Purposes of this regulation, treat the extension of instalment sale credit as not having been made until the date of the delivery of the article to the purchaser. "(d) Outstanding Contracts.—Except as provided in section 8(e) with respect to contracts made prior to September 1, 190, which have been renewed, revised, or consolidated on or after such date, nothing in this regulation shall apply with respect to any valid contract made Prior to such date. "(e) Payments Arising otlt of Loau on InstalnIgnI 2121Lal.LLIa2.--With respect to any loan on the security of an obligation or claim which arises out of an extension of instalment credit, the prohibitions of this regulation shall be deemed to apply only to payments arising out of the obligation or claim rather than to payments arising out of the loan. "(f) Detqrmining Securi,k_fgrJaatigUngati,oan credit.-In determining whether an extension of instalment loan credit is secured by any recently acquired listed article, as described in section 5(a), the Registrant acting in good faith maY disregard any such listed article which specifically secures some other extension of credit and secures the loan in question merely by reason of an 'overlap agreement,' ePreader clause,' or other form of general over-all lien. keep"(g) Records and Reports.--Every Registrant shall such records and make such reports as the Board may 'rom time to time require as necessary or appropriate for enabling it to perform its functions under the Executive Order. "(h) Production of Records.--Every Registrant, as and When required by the Board, shall furnish complete information relative to any transaction within the scope of the ,xeoutive Order, including the production of any books of "count, contracts, letters, or other papers in connection therewith United States.--Nothing in this "(1) Transactions Outside regulation shall apply with respect to any extension ()! t credit made in Alaska, the Panama Canal Zone, or any 4247Y or possession outside the continental United "(i) Right of RUiZiTADI_LCLIDUag_g_11UfkgIlLiEg2A.irgMen+. ------Nothing in this regulation shall be construed to 1.030 8/21/41 -24— "modify the right of any Registrant to refuse to extend credit, or to extend less credit than the amount permitted by this regula tion, or to require that repayment be made Within a shorter period than the maximum permitted by this regulation. "SECTION 10. EFFECTIVE DATE OF REGULATION "This regulation shall become effective September 1, 1941, except that sections 4(f) and 5(c)(1) shall not become effective until October 1, 1941, sections 8(a), 8(b), 8(c), and 8(d) shall not become effective until Novemb er 1, 1941, and sectio ns 4(e) and 5(c)(4) shall not become effective until January 1, 1942." "SUPPLEMENT 70 REGULATION W "Part 1. Listed Articl Mat r• t es • d ,„ _ um.Credit Values.--For the purposes of the regulation the fol°wIng maximum maturities and maximum credit values shall apP-LY to the following list of articles: Maximum Credit Maximum Value in per Articles of Consumers' Durable Maturity cent of Basis Price in Months or T 1. Automobiles (passe nger cars designed for the purpose of transporting less than 10 passengers, including taxicabs) 1. Aircraft (inclu ding gliders). 2. Power driven boats, and motors designed for use therein, other than boats or motors designed specifically for commercial use.... 3. Outboard boat motors 4. Motorcycles (two or threewheel motor vehicles, including motor bicycles) galS1.4.2_1 ls Mechanical refrigerators of less than 12 cubic feet rated capacity (See Part 3 of 18 this Supplement) 18 66-2/3 18 66-2/3 18 66-2/3 18 66-2/3 18 80 1031 8/21/41 -25Maximum Maturity in Months Maximum Credit Value in per cent of Basis Price Articles of Consumers' Durable __22Dde (nether new or used) 2./2.212a_la: (Continued) 2. Washing machines designed for household use 18 80 3. Ironers designed for household use 18 80 4. Suction cleaners designed for household use... 18 80 5. Cooking stoves and ranges with less than seven heating surfaces 18 80 6. Heating stoves and space heaters designed for household use 80 18 7. Electric dishwashers designed for household use 18 80 8. Room-unit air conditioners 18 80 9. Sewing machines designed for household use 80 18 10. Radio receiving sets, phonographs, or combinations 80 18 11, Musical instruments composed principally of metals 80 18 2: 1214-1 .12 1. Household furnaces and heati ng units for furnaces (including oil burners, gas conversion burners, and stokers) 18 85 2. Water heaters desig ned for household use 18 85 3. Water pumps designed for household use 18 85 4. Plumbing and sanitary fixtures designed for household use 18 85 6 5. Home air conditioni 18 85 ng systems • Attic venti 18 lating fans 85 7. New household furniture (including ice refrigerators, bed springs, and mattresses but excluding floor coverings, wall coverings, drap„ ?ries, and bed coverings)i... 18 90 's Planos and household elect ric organs 18 90 1An article is not new if it has been used by a consumer. 1032 8/21/41 -26-Maximum Maturity in Months Maximum Credit Value in per cent of Basis Price Articles of Consumers' Durable 2IWhethenew or used) Gr 1. Materials and services (other than materials listed in Group C or D) in connection With repairs, alterations, or improvements upon urban, suburban, or rural real property in connection with existing structures, provided the deferred balance does not exceed $'1,000 No limitation 18 "Part 2. Basis friQe ,of Listed Articles Other Than Automobiles.—The basis price of any listed article other than an automobile shall be the bona fide cash purchase price of the article and accessories purchased, including any sales taxes thereon and any bona fide delivery and installation charges, atlaa the amount of any allowance made by the seller for any ?-rticle traded-in by the purchaser (including as such a trade„ 3.11 anything which the seller buys or arranges to have bought 'rom the purchaser at or about the time of the purchase of the listed article). nillazU. Maximum Credit Value of Automobiles.--For the Purposes of section 4 and section 5(a) of the regulation: "(a) The maximum credit value of a new automobile shall be 6A 0/ - ''/3 per cent of the bona fide cash purchase price of th automobile and accessories (including any sales taxes aereon and any bona fide delivery charges) but in no event , to exceed 66 2/3 per cent of the sum of the following items: (1) The advertised delivery price of the automobile (with standard equipment) at the factory; (2) Transportation charges established by the manufacturer from factory to point of delivery; (3) Any Federal, State, or local taxes not included in the foregoing; and (4) Any bona fide charges for delivery or accessories not included in the foregoing items. In case the automobile is sold for delivery at the factory, by a dealer in a given place to resident of such place or its vicinity who actually intends to bring the automobile to such Place or vicinity and use it there, an amount 1033 8/21/4i -27- equal to the freight from the factory to such place may be included. "(b) For any used automobile the maximum credit value, ntil otherwise provided, shall be 66 2/3 per cent of the bona fide cash purchase price (including any sales taxes thereon) . " ILA. Instalment Loan credit Subject to Section . of the Regulation.--The maximum maturity of any extension of instalment loan credit of *1,000 or less subject to section 5(b) of the regulation shall be 18 months." "APPENDIX TO REGULATION W "EXECUTIVE ORDER "REGULATION OF CONSUMER CREDIT "DECLARATION OF NECESSITY AND PURPOSE walEREAS a large volume of credit is being devoted to 41nancing and refinancing purchases of consumers' goods and Te-vices through extensions of credit that usually are made u° individuals and to a large extent are on an instalment Payment basis; and "MiEREAS the conditions under which such credit is yailable have an important influence upon the volume and ming of demand, not only for the particular ,goods and ser1ces Purchased on credit but also for goods and services ln general; and "tHEREAS liberal terms for such credit tend to stimulate demand for consumers' durable goods the production of , /1, 111 ch requires materials, skills, and equipment needed for " Lional defense; and 6HEREAS the extension of such credit in excessive volume tends to generate inflationary developments of ina ereasing consequence as the limits of productive capacity are approached in more and more fields and to hinder the ecumulation of savings available for financing the defense Program; and %HEREAS the public interest requires control of the use of • instalment credit for financing and refinancing pur:res of consumers' durable goods the production of which (a c'rlos resources needed for national defense, in order A to facilitate the transfer of productive resources to '17!1..ense industries, (b) to assist in curbing unwarranted advances and profiteering which tend to result when the supply of such goods is curtailed without corresponding Z j 1034 -28curtailment of demand, (c) to assist in restraining general inflationary tendencies, to support or supplement taxation imposed to restrain such tendencies, and to promote the accumulation of savings available for financing the defense program, (d) to aid in creating a backlog of demand for consumers' durable goods, and (e) to restrain the development of a consumer debt structure that would repress effective demand for goods and services in the post-defense period; and . "Rs in order to prevent evasion or avoidance of is order and such regulations as may be prescribed to „% e-Lfectuate its purposes, means should also be available for regulating the use of other instalment credit and Other forms of credit usually extended to consumers or on consumers' durable goods; and YHEREAS it is appropriate that such credit be controlled and regulated through an existing governmental ?gencY which has primary responsibilities with respect to Tthe determination and administration of national credit Policies: "WA, THMLFORE, by virtue of the authority vested in me by section 5(b) of the act of October 6, 1917, as amended, and by virtue of all other authority vested in me, and in cer3 in the national emergency declared by me on May 27, to promote the national defense and protect the naLlonal economy, it is hereby ordered as follows: "ADMINISTRATION "Section 1. (a) The Board of Governors of the Fed.edral Reserve System (hereinafter called the Board) is hereby besignated as the agency through which transfers of credit p?tween and payments by or to banking institutions (as deed herein pursuaat to section 5(b) of the aforesaid Act) flach constitute, or arise directly or indirectly out of, exteasion of credit of a type set out in section 2(a) 1,,this order shall be investigated, regulated and prou-Loited, "(b) The Board shall, whenever it deems such action to L'e necessary or appropriate, take any lawful steps herein : , a uthorized and such other lawful steps as are within its .er to carry out the purposes of this order, and may, administering this order, utilize the services of the s!deral Reserve Banks and any other agencies, Federal or Late, which are available and appropriate. :ay r 1.035 8/21/41 -29- "(c) In order to facilitate the coordination of the Board's functions under this order with other phases of the program for national defense and for protecting the national economy, there shall be a committee consisting of the Secretary of the Treasury, the Federal Loan Administrator, and the Administrator of the Office of Price Administration and Civilian Supply, or such alternate as each shall designate and such other members as the President shall subsequently appoint. The Board shall maintain liaison with the committee, and in formulating policies With respect to down-payments, maturities, terms of repayment) and other such questions of general policy shall c°nsult with the committee and take into consideration anY suggestions or recommendations it may make. "REGULATIONS "Section 2. (a) Vhenever the Board all determine .?hat such action is necessary or appropriate for carrying out the purposes of this order, the Board shall prescribe regulations with respect to transfers and payments :hich constitute, or arise directly or indirectly out of, 11Y extension of instalment credit for the purpose of purchasing or carrying any consumers' durable good except a ;esidential building in its entirety; and the Board may 111 a ddition, to the extent deemed by it to be desirable I:ld feasible in order to prevent evasion of such regula, ; 3 °ns as may be so prescribed or in order to control forms Lcredit the use of which might defeat the purposes of , 1-1-s order and such regulations, prescribe regulations 71th respect to transfers and payments which constitute, r arise directly or indirectly out of, (1) any other exorsion of instalment credit, or (2) any other extension c credit for the purpose of purchasing or carrying any c°121,Imers' durable good, or (3) any other extension of Cult in the form of a loan other than a loan made for ellt I ness purposes to a business enterprise or for agrisu ::ural purposes to a person engaged in agriculture. t4!" regulations may be prescribed by the Board at such 442:es and with such effective dates as the Board shall m to be in accordance with the purposes of this or- Z il Z "(b) Such regulations may from time to time, originailY or by amendment, regulate or prohibit such transfers 1_036 8/21/41 -30- and payments or exempt them from regulation or prohibiand Lion he or goods or persons involved or upon such other basis as may reasonably differentiate such transfers and payments for the purposes of regulations under this order, and may be made applicable to one or more of the classes so established; and, without limiting the generality of the foregoing, such regulations TaY require transactions or persons or classes thereof be registered or licensed; may prescribe appropriate -Limitation s, terms, and conditions for such registrations otr licenses; may provide for suspension of any such regisration or license for violation of any provision thereof °r of any regulation, rule, or order prescribed hereunder, rY prescribe appropriate requirements as to the keePing records and as to the form, contents, or substantive Pr°visions of contracts, liens, or any relevant documents; prohibit solicitations by banking institutions which vuld encourage evasion or avoidance of the requirements any regulation, license, or registration under this er; and may from time to time make appropriate provi'ions with respect to-(1) The maximum amount of credit which may be extended on, or in connection with any purchase of, any consumers' durable good; (2) The maximum maturity, minimum periodic Payments, and maximum periods between payments, Which may be stipulated in connection with extensions of credit; (3) The methods of determining purchase Prices or market values or other bases for computing permissible extensions of credit or required down-payments; and (4) Special or different terms, conditions, or exemptions with respect to new or used goods, minimum original cash payments, temporary credits which are merely incidental to cash purchases, Payment or deposits usable to liquidate credits, and other adjustments or special situations. "(e) On and after the effective date of any regulati , of- prescribed by the Board with respect to any extension ste„ redit of a type set out in section 2(a), and notwithre...nng the provisions of any other proclamation, order, fe -"atiol, or license under the aforesaid Act, all trans's and payments which are in violation of such regulation r 103'7 8/21/La -31- "Shall be and hereby are prohibited to the extent specified in such regulation. "(d) Neither this order nor any regulation issued thereunder shall affect the right of any person to enforce any contract, except that after the effective date of any such regulation every contract which is made in connection With any extension of credit and which violates, or the performance of which would violate, any provision of such (other than a provision designated therein as being peing for administrative purposes), and every lien, pledge, Sellers interest in a conditional sale, or other property interest, subject to the provisions of such contract or created in connection therewith, shall be unenforceable by the person who extends such credit or by any person Who acquires any right of such person in such contract; Provided that such disability shall not apply to any person who extends such credit, or acquires such right for value, in good faith and without knowing or having reason to know the , facts by reason of which the making or per1°Pm5nce of such contract was or would be such a violaLion. "REPORTS "Section 3. Reports concerning the kinds, amounts, and characteristics of any extensions of credit subject t ao.this order, concerning transfers and payments which irlse out of any such extensions of credit, or concern_lir circumstances related to such extensions of credit or ch transfers or payments or to the regulation thereof, shall be filed on such forms, under oath or otherwise, at sUch times and from time to time, and by such persons, . 4 .s the Board may prescribe by rule, regulation, or order "necessary or appropriate for enabling the Board to rform its functions under this order. The Board may any person to furnish, under oath or otherwise, trPlete information relative to any transaction within b_e scope of this order, including the production of any isrks of account, contracts, letters, or other papers, nnection therewith in the custody or control of such Person.e r "DEFINITIONS "Section 4. For the purposes of this order, unless 1.038 8/21/41 -32- "the context otherwise requires, the following terms shall have the following meanings, provided that the Board may 3-11 its regulations give such terms more restricted meanings "(a) 'Person' has the meaning set forth in section 5(b) of the act of October 6, 1917, as amended. "(b) 'Transfers and payments' means 'transfers of credit between and payments by or to banking institutions'. "(c) 'Banking institution' means any person engaged as Principal, agent, broker, or otherwise, in the business of making or holding extensions of credit and includes, Without limitation, any bank, any loan company, and finance company, or any other person engaged in the business of making or holding extensions of credit whether as a ven'°r of consumers' durable goods or otherwise. "(d) 'Consumers' durable good' includes any good, nether new or used, which is durable or semi-durable and Is used or usable for personal, family or household purP°ses, and any service connected with the acquisition of any such good or of any interest therein. "(e) 'Extension of credit' means any loan or mortgage; any instalment purchase contract, any conditional sales c ontract, or any sale or contract of sale under which part (3 ,1: all of the price is payable subsequent to the making '1 ' 0 such sale or contract; any rental-purchase contract, ,f any contract for the bailment or leasing of property ;' ) .';ler which the bailee or lessee either has the option becoming the owner thereof or obligates himself to Pay , as compensation a sum substantially equivalent to in excess of the value thereof; any contract creating an lien or similar claim or property to be discharged by the payment of money; any purchase, discount, or other ceq1:11sit10n of, or any extension of credit upon the setrltY of, any obligation or claim arising out of any of t foregoing; and any transaction or series of transactions ons having a similar purpose or effect. 84. "(f) An extension of credit is an extension of 'ine`'alTent credit' if the obligor undertakes to repay the toedlt in two or more scheduled payments or undertakes tuo make two or more scheduled payments or deposits usable ha liquidate the credit, or if the extension of credit pos a similar purpose or effect, or if it is for the purex ! e °f financing a business enterprise which makes such tdensions of credit. 1039 8/21/41 —33-"(g) An extension of credit is 'for the purpose of Purchasing or carrying any consumers' durable good' if . a.t is directly or indirectly for the purpose of financing or refinancing the purchase of any consumers' durable good or is directly or indirectly secured by any consumers' durable good, or if the extension of credit has a simi!-r purpose or effect, or if it is for the 'purpose of 9.nancing a business enterprise which makes such extensions of credit. 1 "PENALTIES ."Section 5. Whoever willfully violates or knowingly Participates in the violation of this order or of any regulation prescribed hereunder, shall be subject to the Penalties applicable with respect to violations of section 5(b) of the said act of October 6, 1917, as amended.* (Signed) FRANKLIN D. ROOSEVELT. The White House, August 9, 1941. The section reads in part: 'Whoever willfully violates any o of the provisions of this subdivision or of any license, ' I der, rule or regulation issued thereunder, shall, upon e°nviction, be fined not more than ,10,000, or if a natural 0 13,f! e n: may be imprisoned for not more than ten years, or Irn; and any officer, director, or agent of any corporation knowingly participates in such violation may be pun.Lehed by a like fine, imprisonment, or both.'" Mr. Parry stated that he would like to have included in the 1k4111tee an expression of his sincere appreciation of the valuable con- triblations made in connection with the drafting of Regulation W by iteears. Brown and Dembitz. He said that over a period of more than a rear Ur. Brown had carried on extensive research and developed many tillIcia`nlental suggestions with respect to the various aspects of this 1040 8/21/41 —34— f°1 ' in of selective credit control and that Mr. Dembitz, over a period or manY months, had performed distinguished service with respect to the matter in general and certain highly technical aspects in particu— Mr. Szymczak moved that the Board approve Mr. Parry's suggestion, and that the Board express especially to Mr. Ransom and to Mr. Parry, and to all other members of the staff who had a part in the prepa— ration of Regulation 17, the sincere ap— preciation of the members of the Board for the results that had been obtained and the highly satisfactory manner in which the matter had been handled. Mr. Szymczak's motion was put by the chair and carried unanimously. At this point all of the members of the staff with the excep— ti v4 be Messrs. Morrill, Clayton, Parry/ and Thomas left the meeting. Uz. Ransom then called attention to the fact that it would "eeessary for Mr. Parry to obtain additional help to do the work tIlat Would arise in connection with the regulation, particularly c°1413e tent men who had had practical experience of a specialized char— acter 1. -Ln fields affected by the regulation, as well as clerical help, anci -- said that Mr. Parry's recommendations should be prepared and sub— kitted as soon as possible, and that the personnel committee and the toard should act upon them promptly. Chairman Eccles concurred, stat— ine that 4 — -Lf the System failed to do a good job, the Board would be %'erel -LY cr iticized, and Messrs. Szymczak and Draper expressed their 4't'eerlietit• It was also agreed that letters should be gotten out to 1041 8/21/41 —35— the Federal Reserve Banks as soon as possible outlining what the Board would expect in the way of organization for, and methods and Pcaicies to be followed in, administering the regulation in accord.11ce With the Board's decision to decentralize this activity as far as practicable through the twelve Federal Reserve Banks and their tenty-four branches. Mr. Szymczak was asked by the other members and agreed to supervise the preparation of these instructions. At this point Messrs. Parry and Thomas left the meeting and the action stated with respect to each of the matters hereinafter reto was then taken by the Board: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on August 20, 1941, were approved unanimouzay. Ilank Telegran1 to Mr. Swanson, Vice President of the Federal Reserve 0' a inneapolis, reading as follows: The "oard extends to September 8 the time within which Onida Bank, Onida, South Dakota, may accomplish membership in the System." Approved unanimously. eNa Re Letter to M. Denmark, Assistant Vice President of the Fed- serve Bank of Atlanta, reading as follows: with"Reference is made to your letter of August 9, 1941, respect to the loan of Director George T. Hunter for 1042 8/21/4i -36- "$250,000 listed on page 20(1) of the report of examination of the American Trust and Banking Company, Chattanooga, Tennessee, as of July 25, 1941, as being in possible violation of section 11(m) of the Federal Reserve Act. You state: 'Director Hunter has been indebted to the bank some two or three years on a note for :5p100,000 secured by various stocks, being in the main those stocks now held by the bank as security to his indebtedness. Since the previous examination the bank loaned Director Hunter an additional $150,000 with which to Open a new bottling plant in Alabama but no further security was accepted. In actuality the new note is unsecured except for the statements embodied in the note to the effect that collaterals held by the bank to secure any of the maker's indebtedness are to be considered as applicable to all of his indebtedness.' In view of the above statement, it appears that the collateral held by the bank is security for the secloan of ! I .n.50,000 as well as the first loan of $100,000 and that both loans are loans secured by stocks under the Provisions of section 11(m) of the Federal Reserve Act .. d that the latter loan is, therefore, a violation of that section." Approved unanimously. Memorandum dated August 18, 1941, from Mr. Wingfield, Assistant , Counsel, recommending that there be published in the September isau,„ ' of the Federal Reserve Bulletin statements in the form attached to the memorandum with respect to the following subjects: Executive Order and spect to Regulation (The regulations of will be included as nally approved.) Regulations With Reof Consumer Credit. the Board of Governors soon as they are fi- Broker Borrowing from Nonmember Bank under Section 8(a) of the Securities Exchange Act of 1934. 1.043 8/21/0. -37Legislation Relating to Use of Obligations of the United States as Collateral for Federal Reserve Notes. Legislation Relating to Extension of Powers Relating to the Stabilization Fund and the Weight of the Dollar. Executive Order Establishing the Economic Defense Board. Executive Order and Regulations on Transfers of Property of Foreign Countries and Their Nationals. General Licenses and Public Circulars Issued by the Secretary of the Treasury. Approved unanimously. Thereupon the meeting adjourned. Secretary. Chairman.
@FedFRASER