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'77 A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Wednesday, August 29, 1945, at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak Draper Mr. Carpenter, Secretary Mr. Connell, General Assistant, Office of the Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman The action stated with respect to each of the matters hereinte r eferred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Pe(leral Reserve System held on August 28, 1945, were approved unanirt1la4. Letter to the "State Bank of Slater," Slater, Missouri, reading oiaows: ar "The Board is .0.1ad to learn that you have completed all thrangements for the admission of your bank to membership in h-e Federal Reserve System and takes pleasure in transmitting 'rewith a formal certificate of your membership. will be appreciated if you will acknowledge receipt certificate ' s" Approved unanimously. Letter to Mr. Ray Spalding, New York, New York, reading as fol- Whip : This is to acknowledge your letter of August 20, in You comment on the 75 per cent margin rules prescribed by Board's Regulations T and U. eta "It appears to be your opinion that a 75 per cent marrequirement is too high and that in any event a margin 1413 8/29/45 -2"trader who, by reason of action in the past, happens to have b°Prowed more than 25 oer cent against the stocks in his account should be permitted to switch on the old basis from one st°ck to another. You may be sure that both of these views were carefully weighed and considered by the Board before it "pted the present rules. The fact that after such conslderation the rules were in fact adopted indicates, as you will understand, that in the judgment of the Board their :dvantages, from the ooint of view of the public interest, utweigh their disadvantages. . "The reference made in your letter to investors' 'smalit dicates in the context that you draw no distinction between the investor and the speculator. It cannot be maintained, h°1 -ever$ that the margin trader is not a speculator, whether is a small operator or a large one. It is the operations t. all such traders that are restricted by the Board's regulail°11e, pursuant to the mandate given to the Board by Congress trl. the Securities Exchange Act of 1934. We cannot agree, 0,"efore, that these regulations are, as you state, 'dis' tolminatory in favor of the wealthy.' We should like to add ver,Y°ur conAderation that in the long run, for small inas a class, the stabilizing effect of margin requirerite on the course of the market should be of genuine benefit. 111 "At a time like the present, when inflationary forces set ha:!tion by the war are so strong, there is good reason for g higher margin requirements than have been customary in the the past. If and when the time arrives to consider changing wii,Present requirements, the views presented in your letter -11 be weighed and considered afresh." 0; Approved unanimously. t Letter to Reverend David Isaac, Luzerne, Pennsylvania, reading 118 "The Securities and Exchange Commission has forwarded to lie Y°11r letter of August 14, 1945, because it is the Board's gula l tion T which governs margin requirements. to The recent changes in margin requirements were intended a/Ictx% : 8train both increases in stock positions held on credit are' rading on the basis of existing credit, unless accounts I1Trgined to the extent of 75 per cent. is in the nature of the rules that new commitments The °' be undertaken unless 75 per cent margin is provided. Worke 'equisition by you of 200 shares of Baldwin Locomotive s etock on the exercise of the warrants would be a new 1,114 8/29/45 -3commitment, since you are free either to exercise the warrants or sell them. "The decline in the value of the warrants is of course °Ille of the risks of market trading. Warrants are almost e'laYs more speculative than the stocks which can be obtained "rough exercising them, since they are usually lower in I4.os than the corresponding stocks and their price fluctua4,rns are as large as the fluctuations in the stock prices. ' ae fluctuations are accordingly larger in relation to the value of the commitment. c ."We regret that we cannot grant your request for an ex1410n in your case. To do so would require either per8 btIng you to do something not permitted to others in the thee and similar positions or changing the basic rule which e Board decided was required by the situation." Z t 4 Approved unanimously. Thereupon the meeting adjourned. ItpDroved: Chairman.
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