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7 Mtnutes of actions taken by the Board of Governors of the " Leral Reserve System on Friday, August 3, 19)1. PRESENT: MX. Evans, Chairman pro tern Mr. Powell Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Telegrams to the Federal Reserve Banks of New York, Philadelphia, Chic9 St. Louis, Kansas City, and San Francisco stating that the 08'VA --A Approves the establishment without change by the Federal Reserve 13 4).t 'S,xn Francisco on July 31, by the Federal Reserve Bank of St. Louis 1)11 A ue:uct 1, and by the Federal Reserve Banks of New York, Phdladel hia 14cago and Kansas City on August 2, 19)1, of the rates of discount and kitehase la their existing schedules. Approved unanimously. Memorandum dated August 2, 1951, from Mx Marget, Director, c't Internat onal Finanee, recommend I ng an increase in the basic Etlar , • . °.* Ars,. Franc S. Valentine, Secretary to Mr. Marget, from $3,'75 ° '70 Per annum effective August 5, 1951. Approved unanimously. Pilttei„ 41.111 r170111 6, Memorandum dated August 1951, from Mr. Leonard, Director, 'Bank Operations, recommending an increase in the basic Miss Mary Louise Roberts, Statistical Clerk in that Division, ' 35° to •Al per annum effective August Approved unanimously. 5, 19')1. 8/3/51 -2Memorandum dated August 2, 1951, from Mr. Young, Director, Di-Vision of Research and Statistics, recommending that Mrs. Mary F. 14ealler, Clerk in that Division, be placed on leave without pay for the Period July 23, 1951 (10:45 a.m.) through August 31, 1951. Approved unanimously. Memorandum dated July 31, 1951, from Mr. Thomas, Economic Achrieer to the Board, requesting approval of his designation as a taeniber of the United States delegation to a session of the Interknerican Economic and Social Council to be held in Panama for a period Prc'beblY not over two weeks beginning August 20, 19>1, with the understeaading that his presence at the conference would be subject to decil'°111)Y the Department of State, which had requested his designation. The plemorazduz also stated that all of Mr. Thomas' ,expenses, should he be ""eci upon to attend the conference, would be paid by the Departraelit of State, and that Chairman Martin had indicated in a telephone e°1Wer8ation with Mr. Thomas that he would approve the proposal. Approved unanimously. Memorandum dated July 26, 1951, from the Personnel Committee tecoremerlding that Mr. William J. Meinel, President of the Heintz Manu4ctUrt4C°MPanY, Philadelphia, Pennsylvania, currently a Class B ill'ect°r 'be appointed a Class C director of the Federal Reserve Bank "1111441e1Phia, for the unexpired portion of the term expiring December V3/51 -3- 31.) 1951, if it were ascertained that he would accept the appointment It tendered Approved unanimously. Secretary's note: It having been ascertained through Chairman Whittier, of the Federal Reserve Bank of Philadelphia, that Mr. Meinel would accept the appointment, the following telegram was sent to Mr. Meinel under date of August 3, 1951: "Board of Governors has appointed you Class C director of Federal Reserve Bank of Philadelphia for Unexpired portion of term ending December 31, 1951, and will be pleased to have your acceptance by collect telegram." Letter to Mr. James L. Houghteling, Chairman, Fair Employment keLTA United States Civil Service Commission, Washington, D. C., reading tts follow: "Executive Order No. 9980, issued July 26, 1948, l'equested the designation of an official of each agency 48 Fair Employment Officer within that agency. "In accordance with the Order, the Assistant tirector of our Division of Personnel Administration, H. F. Sprecher, Jr., has been designated as Fair .v.°1131oyment Officer, effective August 1, 1951, and reMr. Herbert A. Johnson, Personnel Officer, who l'eeigned as of July 31, 1951. "The official address of the Assistant Director is .Listed below: Mr. H. F. Sprecher, Jr., Assistant Director, Division of Personnel Administration, Board of Governors of the Federal Reserve System, Washington 25, D. C. REpublic 1100, Extension 434." Approved unanimously. 8/3/51 -4Letter to Mr. DeMoss, Vice President of the Vederal Reserve Bank Otpallae, reading as follows: "Reference is made to your letter of July 24, 1951, submitting the request of the Fidelity Bank and Trust Company, Houston, Texas, for approval under Section 24A of the Federal Reserve Act of its proposal to increase the carrying value Of its investment in bank premises to $225,0001 an amount lihieh is $25,000 in excess of its capital stock. It is noted that the present book value of bank premises is $199,500 and that the additional investment is to be made up of monthly increases of approximately 000 each, representing the net aMount applicable to the principal of the mortgage on the building after allowance fer depreciation. "In view of your recommendation, the Board approves the additional investment in bank premises as proposed." Approved unanimously. Letter to Mx. T. F. Green, Jr., Treasurer, General Construction ' .t ration, Second Avenue, South from 22nd Street, St. Petersburg, ?iori reading as follows: "At the time of receipt of your letter of June 22, 1951, e examiners for the Board of Governors were conducting an ! xelmination of the Federal Reserve Bank of Atlanta and they " tTre instructed to investigate and report with respect to handling of your application for a loan under 'authority Z1 Section 13b of the Federal Reserve Act. This report has lu,een received, and It is clear that the application received and impartial consideration. "section 13b was added to the Federal Reserve Act by Aet of June 19, 1934, and provides in subsection (a) that: In exceptional circumstances, when it appears to the satisfaction of a Federal Reserve bank that an established Industrial or commercial business located in its district is unable to obtain requisite financial assistance on a reasonable basis from the usual sources) the Federal Reserve bank, pursuant to authority granted by the Board of Governors of 8/3/51 -5- "the Federal Reserve System, may make loans to, or purchase obligations of, such business, or may make commitments with respect thereto, on a reasonable and sound basis, for the purpose of providing it with working capital, but no obligation shall be acquired or commitment made hereunder with a maturity exceeding five years. "Most of the financing under Section 13b has been under irlother provision of the Section whereby a commercial bank makes a loan and the Reserve Bank makes a commitment to discount or purchase the loan upon request and assume up to 80 Per cent of the risk. While the provisions of Section 13b ere not orginally intended for war or defense financjng, they have been used on occasion for such purposes. The .,_18-Jor portion of the so-called wai and defense loans handled y the Federal Reserve Banks, however, have been made under the 1/-loan program, which was developed especiallL, to aid 1-!1 the financing of defense contracts. Under this program theWar and Navy departments and the Maritime Commission were authorized in 1942 to guarantee loans made by financing institutions for the purpose of financing war production contracts, ot.d' the Federal Reserve Banks were authorized to act as agents the War and Navy departments and the Maritime Commission .0, the guarantee program. This program was reinstituted under Provisions of the Defense Production Act of 1950. Mention ,! made of these two types of loans because it 'appears from ffIr correspondence that you may not have understood clearly the d istinction between the two types of programs. bank was "The Board is commerci to know that a commercial able t 0 meet your credit needs." Approved unanimously. Letter to the Honorable Edward J. Thye, United States Senate, ligtori, C. reading as follows: i4 "Supplementing our letter of July 19 replying to an RerirY about methods used by representatives of the Federal gai.?rve BFulk of Minneapolis in connection with an investi110;lon relating to Regulation W--Consumer Credit, we have seryreceived additional material from the Minneapolis Reexplains the circumstances in that partic•-.4. ease 8/3/51 -6- "You will be particularly interested in the following Paragraphs taken from the letter to the Board written by Mr. John N. Peyton, President of the Federal Reserve Bank Of Minneapolis: 'Immediately upon receipt of your letter of July 18 enclosing excerpts of letters from Senator Thye and Congressman Wier, calling attention to an investigation made by our Regulation W men in connection with a contract between Dean Jones and the Patsey Motor Company, I made a personal investigation. 'You well know that any evasion of Regulation W Which inspires a reasonable doubt in the mind of the investigator for any reason should be investigated further, if the finance company is to be fairly treated. Otherwise unwarranted suspicion might continue to exist. I speak of a finance company because in this instance, while the contract was made between the Patsey Motor Company and Mr. Jones, our investigation was made of the finance company Which had rediscounted the contract. In this case we have had no contact with the Patsey Motor Company. 'In this particular instance, our two investigators felt there was reasonable doubt and for that reason contacted Mr. Jones. Mr. Jones reassured them in what appeared to be a completely friendly contact, which eliminated any question of suspicion with -regard to the finance company in this case. To me this seems a desirable procedure from point of view of all concerned, but most particularly from point of view of the finance Company. 'We have established a definite basic policy with regard to these investigations, a copy of which I enclose. It is unfortunate that a police duty of this character has been imposed on a central bank whose functions, in my opinion, should never be tinged in the Mlle mind with a police operation. But Congress has seen fit to impose this duty on un and I do not see how we can fulfill the intent of Congress if we do not investigate suspect contracts to assure compliance. It would be most unfair to allow one finance company to evade the terms of the regulation, while other finance ?,?4Panies were living up to its intent.' letter copy of the policy outline referred to in Mr. Peyton's 'is attached for your personal information. This statement 813/51 -7- Indicates the practices and procedures which are observed by the Vederal Reserve Bank of Minneapolis whenever it Is necessary in the course of an investigation to make customer contacts. It demonstrates clearly the extent to which steps have been taken to safeguard the rights of both the person doing business under the regulation and the customer." Approved unanimously, together with an identical letter to the Honorable Roy W. Wier, House of Representatives, Washington, D. C. Letter to the Honorable Charles E. Wilson, Director, Office of se Mobilization, reading as follows: "The Board is presently engaged, with the Housing Administrator, in a review of the down payment requirements relates to real prescribed by its Regulation X, which estate construction credit. Chairman Martin's absence the Board has asked 171e 4,to -nquire of you whether it is your present view that ue av ailability of manpower and materials will be such as .l ermit the construction of at least 8)0,000 residential Lling units in the calendar year 1952. As I am sure yoe' totl are aware, this is the interpretation which was given Y°nr letter to Mr. Ralph Walker, who wrote to you on beof the Chamber of Commerce of the United States. thi "It goes without saying that the Board desires 114, information in connection with its deliberations and _4 41 not : release it unless you so desire. The Board would '1VPreciate hearing from you at your earliest convenience.' "Tt Z Approved unanimously. Letter Etncl to the Honorable Raymond M. Foley, Administrator, Housing liorne Vinanee Agency, 1626 K Street, N. W.; Washington, D. rcalove: C•jp reading is to"In response to your letter of August 2, 19)1, this desio.,advise You that the Board of Governors concurs an your -e*tion of the Lancaster-Palmdale-Mojave, California, area ' 8/3/51 -8- EIS an area for the application of special credit terms under section 6(p) of Regulation X, Real Estate Credit, for purposes Of defense construction. Your letter states that there is a need for approximately 200 housing units to be located within reasonable commuting distance of the defense establishments, , E1, 1-1.4 we understand that 100 are to be rental units ranging from to0,to $85 per month each, and 100 are to be sale units at 0)150 and $10,000 each. Under the terms of the exemption, rtA_he entire 200 units will be controlled by your agency through he issuance of specific certificates. "In accordance with your suggestion, the relaxation terms prescribed by Regulation X will be similar to that Previously announced for other designated defense areas." Approved unanimously. Secretary.
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