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190? l'linutes of actions taken by the Board of Governors of the eeraiReserve S:,77trm on Friday, December 1, 1950. The Board met at 10:35 a.m. Mr. Mr. Mr. Sr. Mr. McCabe, Chairman Eccles Szymczak Vardaman Norton Mr. Carpenter, Secretary Yr. Sherman, Assistant Secretary Er. Kenyon, Assistant Secretary Mr. Morrill, Special Adviser to the Board Er. Thurston, Assistant to the Board Mr. Riefler, Assistant to the Chairman Mr. Thomas, Economic Adviser to the Board Mr. Leonard, Director, Division of Bank Operations Mr. Vest, General Counsel Mr. Young, Director, Division of Research and Statistics Mr. Noyes, Assistant Administrator, Office of Real Estate Credit Mr. Schmidt, Acting Chief, Business Finance and Capital Markets Section, Jivision of Research and Statistics r ‘ify Phelan, Vice President of the Federal Reserve Bank of Arh° was temporarily assisting the Board in connection with 1' : the Carlization of its work on selective credit controls, .as also 14lez3eilt, The, 'e ;Tore presented telegrams to the Federal Reserve Banks st 011, New York, Atlanta, Chicago, St. Louis, Kansas City, and thOu t CO stating that the Board approves the establishment b:j the Federal Reserve Bank of San Francisco on 2C3 bY the Federal Reserve Banks of Atlanta and St. Louis 1908 -2"°11ember 29 by the Federal Reserve Banks of New York and Chicap ° cm November 30, by the Federal Reserve Bank of Kansas City ollpleiber 1, 1950, and by the Federal Reserve Bank of Boston today, the rates of discount and purchase in their existing schedules. Approved unanimously. Before this meeting there had been distributed among the kii)el ' s of the Board a memorandum from Mr. Young dated November 20, 150, with respect to the potentialities of restricting the flow cireaPital funds through a "capital issues committee" such as was °Perated durinf:, jorld Jar I. r. Szymczak commented that that 4tiorw[um e mphasized the desirability of early determination of 131‘°gralri of further steps that should be taken to implement the ellera2- Policy agreed upon unanimously by the Board of Governors the ederal. Fo en h:arket Committee on August ]13, 1950. He then Ileac' menl°randura which he had prepared under date of December 1, 19533 in uhich he discussed the actions that had been taken and that ' 1121i/it be taken in this direction and in which he came to the con'1113i4)11 that as soon as the December and January refunding was cornP4teci the Board should increase member bank reserve requirements take Other tietorazchtrn has actions outlined in the memorandum. A copy of this been placed in the files. 1,4014d he After reading the memorandum, Mr. Szymczak stated that reco Mr,e- na that the study of the question of a capital issues 9t 12/1/50 —3— tee be continued by a committee of three Board members to aPPointed by the Chairman. Following a discussion, upon motion by Mr. Szymczak, it was unanimously understood that Chairman McCabe would appoint a committee of three members of the Board to make a study along the lines suggested. ltrs SzYmczak stated that he was continuing to study the `Illestioh Of margin requirements, that customers' debit balances had illereas from somewhat less than $800 million a year ago to over 110n at present, and that while the amount of such credit 7 844,11 comPared with consumer credit or housing credit the in- vase Iv 48 a Part of the over-all expansion of bank credit. 0 He 'qt that an increase in margin requirements was related to an in- cree.30 in reserve requirements of member banks, that the growth kts tar in loans for purchasing and carrying securities was not ktel, a8 to ---lua.re rAr,-4 action apart from action to increase reserve reS, vut that an increase in margin requirements should be a an Over-all program of restricting bank credit expansion. M r• Schmidt withdrew from the meeting at this point ahd '441eth 44(1 Research Acting Assistant Director, Division of Will ‘.atisti entered the room. PtIrsuant to the discussion at the meeting on November 28, there was presented a revised draft of reply to the memorandum 4°41 the President dated October 5, 1950, asking for (a) the Board's WIN 411ggest oriq on materials to be included in the President's State r/t h t -e Union message and the Economic Reports and (b) a report 011 elation of interest to the Federal Reserve System. The draft lej to the President and two accompanying memoranda on Re4tr1ct* " 1. Credit and Monetary Actions Taken by the Federal Reserve hetelam rice Korea, and Role of Fiscal, Credit, and Monetary Measures : t4 the, --rreeent Emergency, were read and changed. ji Loft Reference was also made to a draft of letter to Frederick teree Director, Bureau of the Budget, on legislation of inv° the Federal Reserve System. plIring the discussion of the draft Mr. Vardaman withdrew the -eeting to keep another appointment. At the conclusion of the discussion, unanimous approval was given to a letter prepared for the Chairman's signature to the President as follows: in rp," he Board appreciates the opportunity to suggest, for -813°nee to your memorandum of October 5, subjects allcirssible inclusion in your State of the Union Message tonomic Report. 4E14 in IrieW of the rapidly changing character of the tlatit/1 defense emergency and the threat that Intercriis may at any time force a total mobilizaRepolti:Lt IS highly important that both your Message and cotilli" 'focus on the basic economic problems which this are tf:Y is obliged to face. It seems to us that there their"ree such paramount problems. Only the degree of IllobidillrgencY will be affected by whether or not full zation becomes necessary. These problems are: The need to divert manpower and irLhaqgial Nho whatever extent necessary from civilian rovide over-all defense needs. This diver- i Oo4 : .40n cannot be achieved without a narroaer choice 14 goods in the market than the public has enjoyed tP t e recent past and some hardships on the aorKers, afi rs, and businessmen directly and indirectly mobilization becomes necessary, living ' t ected. If airdards will have to be reduced substantially and fin eitiZenS will be called upon to make heavy sacriap;es and to accept increased Governmental direction ' j ecting their activities. a„ 2. Theneedtoexandfur. er indaistriai caacit , e--. 1t2......,.. talroduction a as well as to use manpower more l? t7ii24:1214.1.2 order to meet our defense needs and main12...aalprlyincr, economic stren7th upon which naTd7, po rlal securit- ultimatel,- rests. Over the short run, sinntialities for further expansion are generally limited, cl' e over-all production and employment are alreaZty_ partj°s? to capacity and supplies of some basic materials, ci.oularly metals, even nor are inadequate to meet j-itlan and military demands. Because present resources are ' uelng utilized so fully, particularly where defense nee, 0ff 0 greatest, it is highly essential that every co,°rt be made to increase productivity and to lo-Ner, apl,8 - in order that the purchasing power of our military ill Priations can be maintained and that rising prices , be '4e domestic economy can be checked. Emphasis should. , Placed on conservation of scarce skills, modernization of , for•odUction techniques, and development of substitutes ti, 14Ported strategic commodities and for scarce domesbe; zaterials. To the extent that shortage of manpower 001?Mes a bottleneck on essential production, present es with respect to maximum hours of work at ghich 'ove 1Me pay begins during the emergency may require retairi 3. The need to revent inflation in order to susvain c°nfidence in the value of the dollar and in the ourl,°f monei- savincrs. It is as imperative to maintain anr; -Ilancial strength as it is to enlarge our productive strength. 4ithout one, we cannot have the , cti; is becoming as deadly an enemy as would Inflation es be j '1 armed forces of a foreign aggressor. The Federal Reserve is charged Iith primary responsibil: 4ili', 1 ,tY for national monetary and credit policies that scon„,"elP to counteract, so far as possible within the ore',' of its authority, the development of inflationary 'se sures and threats to the value of the dollar. The and duration of inflationary pressures from credit 1q12 -6"and monetary sources in the period ahead will lePend largely on military developments, as well ac. .11 self-restraint in spending on the part of bu %° 'Inesses, individuals, and governments. th "In the strongly inflationary situation since Res outbreak of hostilities in Korea the Federal fis?rve has been given increased powers in the credit and has exercised these poaers, together with t$ other authority, to curb credit and monetary :ion and thus to contribute to the struggle r 1nst inflation. The System's actions in recent ;7ths have moderated the growth of inflationary g „ 81L: it es• A memorandum summarizing the actions 7 'DIY the System is attached. It -would be helpf1.0 th. lf You would indicate general concurrence with 18 anti-inflationary program. and "In spite of these restraining actions, credit zlinim?netary expansion as a result of private and flajlPal borrowing is still contributing to inabcoionary pressures. The Board is deeply concerned abi7. this continuing credit expansion. The System's ltY to apply additional restraints is limited by ti, triark:! Policy of keeping the Government securities refinancing of niatur ‘" :orderly, of supporting the maintaining the of ng and 4 . exi-Government issues, : ulng 2-1/2 per cent rate on outstanding long-term Gol the-lollment bonds. As long as this policy prevails, res °Ystem should be given broader powers over bank ereries with which to combat further inflationary w.i.aft developments. At an appropriate time the Board N3e,flbmit a program for increased powers over the Re , -"es of the banking system. In your Economic vc3I't of January 1949 you stated: 'On previous occasions I have recommended that adequate means be provided in order that monetary authorities may at all times be in a Position to carry out their traditional function of exerting effective restraint upon excessive credit expansion in an inflationary period and Conversely of easing credit conditions in a time of deflationary pressures.' iti„, "Events have noa made it clear that the authorwilislyrovided in the Defense Production Act of 1950 ex? required for a longer period than the statutory an -a'ion dates. Accordingly, the Board recommends e tension of this Act. The Board also recommends 4 -7"that the particular authority in the Act to regDeiate credit extended in connection with new conion be widened to include similar powers to fegillate credit in connection with existing housing and other real property. Bo, "A memorandum is attached setting forth the fi-rd'u general viewpoint respecting the role of emscal, credit, and monetary measures in the present : o g°110Y. In the event that full mobilization be:: n necessary, the Board may wish to make recomse;7ations for further legislation in order that the savings and credit resources may be made "J-LY available for the support of war finance." "Res • trictive Credit and Monfaig Actions taken 11Y...L2 Federal-Reserve System since Korea the "Since the outbreak of hostilities in Korea ih4Federal Reserve has been given increased powers lle monetary and credit fields and has exercised the ' ellIZ Powers together with other authority to place 8 on credit expansion. In August, the Federal 1:r'Ve Board and the Federal Open Market Committee tOArated a positive program of restraint on furcredit and monetary expansion. In view of this and the additional authority provided under the De rense Production Act of 1950, the following 1°11e have been taken: joih 9-) Early in August, the Board of Governors age su with other Federal and State bank supervisory ies, including the Home Loan Bank Board, in a j sta. baht.nlent requesting the voluntary cooperation of all;r3 and other lenders in restricting their lending investment activities. 4/ (2) In August, discount rates were raised from ,i1 in 12 to Reserve Banks 1"- -3/4 per cent at all Federal A addrier to discourage borrowing by member banks of sioll'lonal reserves to support further credit expanhav. (3) Since that time, open market operations thehb?en e conducted with the particular aim of making sect;:°- cling of short-term United States Government ; -"ies more attractive to investors and discoll Res4ging sales of such securities to the Federal fund-yC SYstem, including sales by banks to obtain s for extending other types of credit0 or that) Effective September 18, under authority e agai Defense Production Act, the Board of Governors tionn Placed consumer instalment credit under regula- —8— Effective October 12, the Board of live/I-tors with the concurrence of the Housing and 4.?1 "Finance Administrator, placed under regula13 4 credit not extended, insured, or guaranteed i the Federal Government for constructing,.purm2ling, and financing new houses or major improveor additions to existing houses. At the same v44 4.e) the Federal Housing Administration and the e'eralls Administration issued new regulationsdesd to produce a similar tightening of credit 4 reSPeet to new and used houses under Federal PNrams. th .(6) Effective October 16, the Board stiffened by'' sgulatory limits on consumer instalment credit increasing the minimum down payments and reducing all' citiaJdzwn maturities on certain instalment credits, , totlowering the price below which down payments as required. iettp(7) On November 17, the Board addressed a t41;,/tO all member banks requesting them to screen ori :-Loans carefully and to discourage the types to -vans that do not make a definite contribution the defense effort. . 1 HT1e8e actions by the Federal Reserve have been 3- with the basic policy stated in your Midyear ter,„ne Report: 8110;First of all, for the immediate situation, we Me ' 4J-cirelY in major degree upon fiscal and credit ee. These general measures can be helpful not or 1.11 4 14 restraining inflationary pressures, but also eing the civilian demand for some specific th, edu , Pror elralic s, such as automobiles and housing, thus making ti.0;*aule for necessary military use a larger proporf an already short supply of some critical matel The more prompt and vigorous we are with tor -;"n gsneral measures, the less need there will be. ' vca - 1 of the comprehensive direct controls which insitlfetthe consideration of thousands of individual . ist;11 °ns and thus involve infinitely greater adminve difficulties and much greater interference 'ndividual choice and initiative." j "Rol and Monetary Measures :m2....21jliscal,.Credit, ---. in the present emergency. "Th -e Board strongly endorses a program of fiscal, tio, and monetary measures as the main anti-infla- l'sliance. The Board feels that only by this 1 915 -9approach can our country preserve the significant allacteristics of its economic system, namely, infreedom of opportunity and choice in work, " sPending, and in investing. "The core of individual opportunity and freedom 1..1 choice lies in the price mechanism--the changes market prices ,irhich help to channel consumption or cuptment into one field and away from another and alpt Purchases to:rard some products and suppliers so„.ray from others. Price movements do this imper7-41Y and for the most part efficiently. Control ins e.puellis tend to break don and to distribute resources especially if controls continue for a eo„,tinle or if the public Doses confidence in their er,able administration or enforcement. Moreover, lemensive direct controls cannot solve the basic probfis ().* inflation unless they are backed up by adequate or ca-L and monetary policies which serve to sterilize fer181Dserb the excess purchasing power created by dese sPendinc,. The inflation problem that confronts a national : clefe solir"se emergency of indefinite duration has its in the fact that those engaged in expanding eur for fdustrial capacity, those engaged in producing iefense, and those in the armed forces are paid ter .'l, pose eir services and equipment aithout there being sel,!ule an enlarged supply of consumers goods and ga-,: ces to match the higher income. This creates a 134; uetween current income and the supply of things to as ZPrevailing prices. Under these circumstances against to spend Inesses and individuals generally attempt prices eam, the larger income they bid up -" other. inn "At any time, because of the public's huge holdof-011°f liquid assets and because of the great elasticity ;credit supply, this disparity between buying Po-ae liw;,Iand goods may be widened by an increased use of rerl-i assets and credit to augment buying out of cur: c)me. This is what happened on a considerable. scalet Prot,; - ;'s summer as businesses and consumers rushed to themselves against future price advances or disaPpearance of goods from the market. be ef -if the attack on inflationary pressures is to and betiefective, it must be focused on reducing this gap goods er11 buYing poaer and suoolies of civilian aeriri , —es. The first line of attack is through a fiscal 1 91 12/1/so -10- : 13°11-eY that will restrain private spending, curb oe!s essential private investment, and limit public a. laYs wherever possible. Tax policy should aim 1Pay as WO go' objective. On the basis of Present and contemplated military programs, this will : lire a substanidal increase in taxes. For greatest a. ,:u1"-inflationary effects, the taxes to be increased 4: those that curb purchasing power throughout the mY, particularly for those goods that are in shr,rt., -rsupply. po,, "G overnment policy to encourage savings is another ba, rrill force that can be brought to bear in com1,ng inflation. Policy which discourages the expaneald" ef private and State and local government debt ri, encourages the repayment of such debt is in the c.11 direction. Federal debt management policy, in-, beildl .ng the aggressive selling of saving bonds, should c, thallaed at absorbing real savings and funds that les : r4ise would be spent for consumption or used for Inerli' essential investment. In so far as the Goyernis finds it necessary to refinance its outstanding 'or to finance its rapidly expanding defense ex sLes be:ndltures through borrowing, such borroaing should invas largely as Possible from individual and corporate t()rs and as little as possible from the banking : sz e velll. The latter is highly inflationary because it orraonates nea deposits and thus adds to the country's. Rre:ir .i suPPly. The liquidity position of the bank whiZLY affected by the types of Government securities be ,;' are Offered, and adequate consideration should ven to this factor in determining the securities to —"issued. Effective fiscal policy and programs to encourage Pa0n.n2es are closely related to restrictive credit and )arY Policy ahich also attacks inflationary pressurqs at ii:, a, ai eir source. It accomplishes little in the fight Pto)of,:?,!' inflation, if dollars taxed out of the public's doil'''''uook or held as savings are replaced by credit a1,0 Zoreover, it stores up trouble for the future. a/1d,under present circumstances, restrictive credit of enetary policy is complicated by the large volume PUbliC debt outstanding, which not only presents cult debt ' management problems for the Government busja'se p;ives ready access to funds for individuals, Of esses, and financial institutions by liquidation Goer securities. Similarly banks are able to 1917 W1/50 -11- Note . reserves on which they can pyramid credit el „ in sirTsien. The principal means available for rent on credit expansion are as follows: er Selectivo credit instruments.--Some tqes of ;:t can be restrained by imposing conditions as th toe, in' ,le terms on vhich credit is advanced. Outstandz44.exelnples are maturity and doan payment requireOn consumer instalment credit and on mortgage These'24 and margin requirements on security loans. selective instruments, while of secondary imor tance, are effective in their respective spheres oPeration. sllit lective credit measures are not generally fa„aule to other types of credit, such as loans to aorkinp capital loans to business, or some lo 0,Z's to finance expansion of industrial plant and t}11'&1Pmerlt• Expansion of these credits, as aell as a-Z 3ubject to selective regulation, can be reof ifed to sore extent through voluntary cooperation I ding institutions and increased efforts should be,, l 0te along these lines. The most effective means eit,„2eir restraint, hoaever, are general credit in'4F.ftts which would limit bank reserves. Or ,General credit instruments.--General instruments colliqedlt policy include open market operations, disquir ,rates, and changes in member bank reservezeOfAlthoumethodsh these are interrelated methods to "C,,rie tarY influence, they have tended in recent years As' regarded as separate and alternative instruments. opead sult, considerable misunderstanding has develrest aoout the -way in which they function together in r ning bank credit expansion. , u nder Present conditions, the major source of 170,C -Lor credit extension is the sale by private inand financial institutions of Government sein the market. Sales of such securities, if sysi"aeed in the open market by the Federal Reserve pAult?'11, create bank reserves which can be used for Federal Reserve an ItPle expansion of bank credit. The by reserves Ttrict bank of rest the availability the limits within operations open-market . rqietive Pernil IV the necessity of maintaining orderly conPorti — ln the Government securities market, of suparidd -411-E the refinancing of maturing Government issues, 04 ,!.' o maintaininF the existing 2-1/2 per cent rate -11L8tanding long-term Government bonds. Such a 1 918 -12- ?aicy can be effective only if accompanied by sexifoility of short-term money rates and Reserve tYstein discount rates. Flexible money rates in tif lin are necessary as an anti-inflation restraint iiir4 bankesaks the holding of short-to n1 Government securmore attractive to investors--bank and nont° impose a penalty on those investors rho shift out of them to finance inflationary lenut r sPendinr, and to encourage bank investors to of ;s?unt with tilt, Federal Reserve Banks in place .rec6-e'Ling short-ter:1 Government securities. .Sucn bani-,sc°11rIting, ahich outs banks into debt, makes clebrIfeluctant to extend nea loans until the inbox, ,;:zg% paid rates on member bank atZing are thus an important supplementary in-, of monetary policy. In addition, such changes have tilcr - 4 considerable psychological influence because tel eflect to the financial markets the Reserve Sysr,re judgment of the over-all credit situation. For ;1.41-est effectiveness in curbing bank credit expani changes in discount rates need to be related e -;',Y to open market operations. plema An increase in reserve requirements is a comeXpall arY means of restraining excessive creditbank Of 01;''''°n• It may be used alien the joint mechanism reasmarket operations and discount rates, for tierit-ef of debt manacreLlent policy, need to be supple' in order to apply additional restraint. to in In summary, a vigorous fiscal prograli, a policy ,_” savinrs and to lodge Federal debt as far 4a na 1C with nonbank investors, greater emphasis On arY restraint by lenders and borroJers, and a re() s the i;ctive monetary program aould go far to meet clopt at1on problem and make less necessary the °n Of extensive direct price, :rage, and rationIlag n; Par-ti:T.sures if the military situation remains one of ectip it pre 4ar. If full mobilization is required and a prograrn of direct controls is adopted, Of inAl: still be necessary to follow a vigorous policy 'a-reot controls in order to back-stop the direct aea.slIres.n . Unanimous approval aas also given to a letter to Frederick J. LaAon, director, Bureau of the Budget, as folloas: 19-19 -13t "This is in response to that portion of the 'resident's memorandum of October 5, 1950, re? 1 ting that the BoPrd. of Governors submit throuEh .-til.-/frioe a report on the legislative program of vae.Dederal Reserve System. There are listed below 11„1:,1°11s legislative proposals -Alich the Board has "er consideration. bajr,1 "Bank reserve reouirements. - The subject of the reserve requireiuents has been under study by its B°ard for some time. The Board is continuing Of 4,tudY of this problem, and in viaa of the policy of ;-?, Government that every effort be made by means cielruirect controls to prevent further inflationary siP°Pments, the Board, at an appropriate time, aill 0,: t to Congress a program for increased powers reserves of the banking system. o ter/Tv, Cns , 0 1.s and real estate credit. -.The oar0 Of fjarY authority under the Defense Production Act A 0011: : ,20 and Executive Order No. 10161 to regulate on j "--u'Ler credit and real estate credit All expire aart,h,, uri 3° 19'51. The Board will recommend that such cilld : r4Y be continued and that it be widened to intic,: similar powers to regulate credit in connecth existing housing and. other real property. to n, rik heldinF company LegLegislation r.lp;ulation. com c04' panyide more effective regulation of bank holding toCies and to curb abuses in that field has hereC C recommended by the Board. A bill (S. 82)) ln 0; 1 4.8 Purpose v;as favorably reported during the 80th 004. 811i,;is_s by the Senate Banking and Currency Committee. were "aving similar objectives (S. 2318 and H. R. 5744) trles in troduced in the 81st Congress; and hearings on e bills, as well as a proposed substitute bill r„. 35b ! were held before the Senate Banking and -cY Committee in the Spring of 1950. the 1- , `-..1,ta]....,__-_-esuireraPnts of State member banks of Past erral Reserve System. - From time to time in the the Board has called to the attention of Congress ,a ,ct that certain statutory capital requirements Pect4". admission of State banks to membership in the 1*-4Reeerve System and for the establishment of - :rwn branches by State member banks have operated ell, in tC"antial and. unnecessary obstacles to membership ' i, ll a: fstom. The Board has recommended that these re114 Qa:-.;:n's be eliminated or substantially modified and olst- 0 accomplish this purpose were introduced in the tigress as S. 249h and H. R. 5749. a 2 1920 -14b .1 "Limitation on cost of Federal Reserve branch There is serious need at many of the i l.;;;:cues of the Federal Reserve Banks for larger or ori 'llied- quarters in order to enable them to carry neeri'5ectively their functions under the lad and this vol. ' -Ls likely to be accentuated by reason of increased evs// 1,111e and activities due to the Defense Procrar..HONp.,ncl - ', 4.13resent lad limits the aggregate amount of ex— for' Federal Reserve branch bank building to bee million (with certain exclusions); this amount has bran substantially exhausted; and the needs of the 11103 cannot be adequately met within the statutory r'ert•Ltation• Early in the 81st Congress, the Board thnmended a bill (S. 3105 and H. R. 7895) to increase vtitilTaximum authorized by the statute and that b111, a4 amendment, passed the Senate in April 1950 and was, c0 Ported favorably by the House Banking and Currency ne7ittee in July. The Board may wish to consider ret0tLg its Proposal for such legislation when it appears Justified by economic conditions. P na'inc- out Federal Reserve Notes by Federal Re2. 124a. - Section 1 - of the Federal Reserve Act px7 ( Res,,'Lts a Federal Reserve Bank from paying out Federal ExI3; notes issued by another Federal Reserve Bank. thi;r4-ence over the years has conclusively shown that c01.17 a.reqU1rement serves no useful purpose and entails Rea Iderable expense. The cost of sorting fit Federal Of Ve notes and of shipping such notes to the banks 3311e is presently about „600,000 a year. For the kr, , u, Poq;;se of eliminating this expense and saving manrequ;' the Board may dish to recommend repeal of this -flement of the law. • • which the 8'There may be other matters 7ith respect to .• 131:44.°ard may later find it desirable to recommend le v0 action during the 82nd Congress. For the pres-, bra ,,,"° ever, the subjects mentioned in this letter emthe the field of possible legiziati,ve Principal matters in tiorlo action to anich the Board is 7,iving considera- - At thi 3 Point all of the members of the staff with the ex- " lorl i'lessrs. Carpenter, Sherman, and Kenyon withdrew, and the CiAori at -I-. a-ed 'Tith respect to each of the matters hereinafter referred 01 12/1/50 towas -15- taken by the Board: Minutes of actions taken by the Board of Governors of the Pederal R eserve System on November 30, 1950, were approved unanimously. Ilemorandum dated November 27, 1950, from Mr. Young, Director the i)ivision of Research and Statistics, recommending that the ttPorary a ppointment of Duncan Holthausen, a consultant in that be extended for a period not to exceed December 31, 1950, ftilthrio change in his fee of •iA.0.00 for each day of service for the )4d and with no change in his transportation allowance or in the cliern allowance of 4;9.00 in lieu of subsistence for each day aay home. Approved unanimously. ot erandum dated November 30, 1950, from Er. Marget, Director the Diliision of International Finance, recommending the appointment muton Hartmann as Research Assistant in that Division, aith 4,1a&c date salary at the rate of 0,475 per annum, effective as of the 1 P011 Tihich he enters upon the performance of his duties after 11 '' 9ssed the usual physical examination. Approved unanimously. Letter to Mr. Sproul, President of the Federal Reserve Bank 1\11)v, reading as folloas: 'cTrany thanks for your letter of November 21, alth respect to the temporary loan of Mr. 111elan* services as a member of the Board's staff. -L950 1922 -16t "The Board appreciates very much the reasons LIP„r the desire of your Bank to limit the period of Phelant s assignment to three months and, because lil the i nconvenience to you that vrill result from abSel-lee, we will do everything we can to shorten the Period will be re(Mired . 11- during which his services that the job it quite probable is hav We r-YvevPr, in mind for him to do will require a some'that le to ,-Longer period and the Board. trusts that if that : te out to be the case you will be willing to ext? arrangement for a further period, during Itic:1,", nIs , DIans for his annual vacation can be carried %Ito i Approved unanimously. Letter to Mr. Gidney, President of the Federal Reserve Bank elev.el and, readinr as follows: 15, i nfteference is made to your letter of November prov'e-950, requesting the Board of Governors to apPede an increase in the salary structure of the ral Reserve Bank of Cleveland. tnini The Board of Governors approves the following occjilti and maximum salaries for the resp active grades the Federal Reserve Bank of Cleveland, including 31ranches, effective December 1, 1950: Maximum Minimum Grade Salary Salary 1 L,2100 2 2260 1680 3 1060 2520 4 2o4o 2760 5 3000 2220 3300 2460 7 3660 2700 ,a560 8 9 10 11 12 13 14 15 16 3000 3300 3700 41o0 45oo 5000 5600 6300 7200 4100 4500 5000 5500 6100 6800 7600 8600 9600 I 923 -17-th "The Board approves the payment of salaries to ene emPloyees, other than officers, /ithin the limits positions of the r ledfor the grades in ghich the espective employees are classified. It is underStood , 3,from your subsequent conversation aith tda,,-er-u,, that all employees ghose salaries are belov st' 111111i-raums of their grades as a result of the p1: ,1 114..etilre increase aill be brought aithin the approalue range as soon as practicable and not later than 14a ; with specific approval being requested tine Board of Governors in any cases where addl. :minithe to adjustments will time for inirrp.'Ll ' be needed Approved unanimously. Letter to Mr. Albur, Chairman and Federal Reserve Agent of the peaa ral Reserve Bank of San Francisco, reading as follows: jri I/ "In accordance with the request contained Boarl ,;* ltangelst letter of November 28, 1950, the 1951' of Governors approves, effective January 1, the Payment of salaries to the following memberR 3„, :ul the Federal Reserve Agent's staff at the rat '8 indicated: Name Annual Salary Title P.m Head Office Stone $4,980 Assistant Federal P. Reserve Agent -* Claxton 5,280 Alternate Assistant Federal Reserve Agent L, R. staffer Los Aneles Branch 6,000 Federal Reserve Agent's Representative Salt Lake City Branch 5,8City j% Anderson Reserve Agent's Representative" Approved unanimously. Letter °4tiac to the Board of Directors of the "Bank of Pontiac", 3 illin°i8, stating that, subject to conditions of membership I 924 -184141115ered 1 and 2 contained in the Board's Regulation H, and the 11O n"Pecial condition, the Board approves the Bank's applica- tion tor membership in the Federal Reserve System and for the apPr°Priate amount of stock in the Federal Reserve Bank of Chicago. 3. Prior to admission to membership such bank shall increase its paid-in and unimpaired capital stock to .,100,000 through the sale of a0,000 of new common stock at not less than par. Approved unanimously together with a letter to Mr. Young, President of the Federal Reserve Bank of Chicago, reading as folloas: Syst "The Board of Governors of the Federal Reserve Portr aPProves the application of the 'Bank of Pe e Pontiac, Illinois, for membership in the pree-a-1 Reserve System, subject to the conditions cillesned in the enclosed letter ahich you are reinat4",to forward to the board of directors of the enol-116ion. Two copies of such letter are also 014:3ed, one of which is for your files and the Audi; °f Which you are requested to forward to the tor-7?r of Public Accounts for the State of Illinois '.178 information. • noted to e,"It is that, under its statutory autholty tlitli4se4rei3e fiduciary powers, the bank has under a to p;:uration several appointments, confined principally aecl;!rdian and conservator accounts accepted as an atar;"°dation to the U. S. Veterans Bureau and to inWherein the administrative requirements are tIlate4limited in nature. It is further understood is not the present desire or plan of the managerte the bank to actively solicit or develop ktila„-usiness and that fiduciary activities in the will be limited, generally, to the acceptance 1st ec°11nts similar in type to those now under adminl'ations ofro _ ,'!evor, in recognition of the responsibilities 1st aullities involved in fiduciary account adminrat; -°n and the requirement for the directors to give I• 925 12N.Sb nao ti 8.7 and qualified attention to the activities -e4n involved, the directors should adopt such ial measures as gill insure a satisfactory superand discharge of fiduciary undertakings. tiv "It is requested, therefore, that you bring ba-T matter to the attention of the directors of the : 81 14 to the end that a more active and effective Pervision of its fiduciary activities may result. sect to savings deposits, it is noted i'ilijti e-l hpalrlrip t slir t passbooks refer to by-laws anich ,ate that thirty days' notice may be required 0111 ber13 to i;:e their withdrawal. Your attention is callec, pjt' T'e Board's letter of April 3, 1945 (S-841-a; pasZ'S• #6420), wherein it aas indicated that a aati , °°k Provision merely referring to a statute rea(1 4.t0 Withdrawal of savings deposits does not NyV'elY inform depositors as to the notice which 4vbe required by the bank before any githdraaal made. It gould seem that reference to proandIrs in the bank's by-lags would be less adequate °he he bank should be requested to make appropriate lles in • e0.4 Its passbooks when it may conveniently do e Letter to , r.:HcCreedy, Vice President of the Federal Reserve Philadel phia, reading as follows: 20 17!.oference is made to your letter of November PeL:7)°, in which you advised that it appears exceed -8 for certain functions at your Bank will ex-the 1950 budget estimates as follows: Amount Functions 011.suzler Credit 7770 -r;!al Estate Credit 11,000 rrenoY and coin 31,000 l'4tted e Board accepts the revised figures as subthe' and appropriate notations are being made in ard's records." Approved unanimously. Letter to Mr. Leach, President of the Federal Reserve Bank 411 1:1 (311c1, readinp. as follows: 946, -202 "Reference is made to your letter of November . T12 ,' 1950, in which you advised that estimated exor 1950 for Real Estate Credit, a previously 11021dgeted function, aill be incurred at your head "Ice and branches as folio,vs: Amount Office 777771 Richmond 1,211 Baltimore 1,090 Charlotte as "The Board accepts these estimated expenses ma,mitLed, SUb and appropriate notations are being ' e in the Board's records." Approved unanimously. Telegram to the Presidents of all Federal Reserve Banks, reading as folloas: V,1 "Beard's telegram of September 26 regarding plirn Program requested that one copy of each apt ateinOn for guarantee should be forwarded immeai--4 (4) Board for transmittal to guaranteeing G',17 Y. Air Force has advised us that its processcoV guarantees will be greatly facilitated if.it tion ' receive tNo copies of the preliminary appl ca: it attached schedule of contracts. Accordingly .'la be appreciated if your bank will obtain five inj aniZd of four copies of the application for guarand schedule of contracts there Department of for.7 ,ce is guaranteeing agency and immediately --u tJo copies to Board for transmittal to Air oree.4 Approved unanimously. Tel egram to the Presidents of all Federal Reserve Banks, as follows: "Oonference on V-loan program is being planned ror, kfr L'I ndaY, December 11 at 9:30 a.m. in order to 1- representatives of Federal Reserve Banks 01 rtunity to raise with guaranteeing agencies ques:which have arisen in connection with program. Corrt '111Plated that meeting will last only one day. 1 927 -21chLtgC st it desirable that operating officer in of proprald at your Bank attend meeting and Ipri fr4--L appreciate advice by aire as to :rho .ill attend 1,,,A.c ur Bank and ahether it is desired that hotel ' servations be made." Approved unanimously. Letter for the simature of the Chairman to Honorable Hugh 3 House of Representatives, .ashington 25, C., reading "As requested in your letter of November 28, tic) ,Illcst happy to respond more fully to the (ruesaz„: raised in your telegram of Cotober.20 and No e in the letter addressed to you under date o9 by the .iashinton State Auto Dealers Aa Res°ciation concerning the terms of this Board's all(3/1 d, relating to consumer credit. appl. -Lae question of the high freight factor Coan cable to automobiles sold in the Pacific area has been considered from time to time ,2 Past and again in recent weeks as a result ' l -uctests received from the west Coast. ae have L,4.1re Uetailed consideration to possible aays in lch this differential might be recognized in the Ion but, up to now, vie have not been satisr ied lie , h1 that there is a workable solution under the te;Vtion which would solve the problem and not 401. ' 113 undermine the effectiveness of the Regula°tile:, Transportation charges, handling costs, and Strailar Costs must be reflected in the cash thQ , 1 1 r1C Price of a commodity. As a consequence, , with respect to freight cost;r°1pler'l which you in reality a pricing problem rather than a 01,-(1 t7r()Culation problem. As you kno, the Reg114L expan::: 1-s primarily concerned with the rate of , °11 of consumer credit and with limiting the Tile;'for the type of goods bought on credit. re, it has seemed to us that we must continue_ to to Itle1ate the requirements of the Regulation directly (31 'the e cash selling price of a commodity regardless components which make up that price. c A number of administrative problems also arise °Ilnection with a proposal such as you submit to 92,8 -224,!-L-!.of additional time in connection aith the cost factor. For example: hat, Jould be 'lone In the case of used automobiles? ,ould a islVar allowance, if given in the case of auto' s lles, 1— L) granted in the case of other commodities el&ct to the Rer-ulation? :,hat would be done in act ection uith foreign-made cars? HOj aould the da 1°11 be reconciled aith the more-or-loss stan:. :sized financinc, schedules used by the major 1.1: AI companies, including the schedule issued by the in -eah Bankers Association? .hat aould be done ;..,_aos v cliff e areas where freight charges are only slightly 1 ent but would result in a month's difference in ! +' ""e maturity permitted? These and other questions ati just illustrative of the problems that arise in th„eraPting to give some recognition to that part of on th e of a commodity represented by .freight paid ; shed product. mind As You know, the Board always keeps an open ada t 11,questions such as this and is prepared to calL'ne Rezulation if such action seems to be call ';' for and if a practicable means of doing so ti: .411 found. You may be certain that we shall con' oto study the problem of ahich you arite. Since Your letter does not question the genera],, anti .4,leed for credit restrictions as a part of the tre.-hflationary program, but is directed to the oCh .,t rate differential, I have not gone into other aspl of the consumer credit regulation. Let me t.4)r You, however, that, if you desire any additkn';'; information as to the basis or objectives of creai'rgulation or any other aspects of the Board's hapn,""'restriction efforts, we All be only too a.iJ i to respond to your inquiries as promptly and 141Y as possible." Approved unanimously. Letter to :r. E. A. Leete, President, National Association ,itate s Nw „, airings, Building and Loan Supervisors, 270 Broa&raY, Or p 3 York, reading as follows: the "T hank you for your letter of November 5 and adr °Peration you have shown with respect to the tration of ItrTulation 1929 n7- had assumed. that the various supervisory 1cl-es cooperating in the programmuld treat ,ne s e 'Outli of Enforcement of Regulation -J 1 in the irtie e°nfidential manner as they do their own super1 memoranda and instructions to their examiners. Ijuld hesitate to suggest that you send a second ; t,1 er to the members of your association calling 01,1;(r attention to the confidential nature of the whi,, 1 1 ne, but in vier of the possible uncertainty to as -" You invite attention, it might be desirable, NZ11 suEgest, to advise the supervisors in this tu,4—ct in order to avoid any misunderstanding in Matter. the ,"e appreciate your thoughtfulness in raising a 47 Approved unanimously. readin Tel, -gram to the Presidents of all Federal Reserve Banks, g as follons: the r7An inquiry received by the Board relates to ahd;'lrst Paragraph of section 6(f) of Regulation .1 on A-1117°117es a registrant's practice of delivering, in - rental basis or otherAse, a used listed article lieniciPaton of an instalment sale of a ne;T similar , ezlcm'' article. The question asked related to the 11t of the deposit to be obtained by the Registran-k; at ; the used art.reie l before the time of the delivery of that 7 -- should it be equal to the dcmn payme9t„,,, arti 4.°uld be required on the instalment sale of the dowtcle delivered, or should it be equal to the higher Rev. PaYnienet applicable to the nor article Jhich the sant anticipates selling? req ' i n such cases the first paragraph of section 6(f) hi, 1h; 1 :s r that a deposit shall be obtained equal to the d°an payment. It is recognized that in some instanc;' cleciZ the exact model to be purchased may not be ' ever uPon when the used article is delivered. Jo4T-1 be a -?ven in such a case, the deposit required shou_ a nj-Least as large as the doxn payment required on l Of t;.( 1 article of a make and model comparable to that d 1, 11sed article. Furthermore, the Registrant's 0. Of e-'-Len should be considered questionable and in nee Planation by the Registrant if there is any size- I 930 "able volume of transactions in which the deposit *tained was significantly below the down payment Nilired on the article later sold." Approved unanimously. Telegram to the Presidents of all Federal Reserve Banks, reacli as foil DecenZlease telegraph as soon as possible before er7 an estimate for your District of the ,,, seei r amount of commitments reported so far under OfZ1 6(b) (2) of Regulation X, and the number yol,-" 3-incr, units involved. If possible, indicate co-r estimate of what proportion of all 6(b) (2) 111111i1;71ents has been reported. re iould also appreciate summaries of the : irlfors on in these reports, which should have -Lrl enforcement of the Regulation, sent to the by December 13. Information which would be larlY useful to the Board includes: Total cortn repo,;;11,ts reported in your District; commitments sileCeu bY each important class of registrant, raort as banks, savings and loan associations, and impogaCe companies; commitments by registrants in 0111:ant cities in your District; and commitments inC to builders, as opposed to buyers. h his information is wanted in connection with : Prod' arings before the Joint Committee on Defense Z Approved unanimously. .T1 Letter to The Honorable, The Comptroller of the Currency, i)ePartent, .iashington 25, D. 3., reading as follows: r "This refers to our letter of July 28,19p, 530Po eciiiest nillE: that a supplemental order for printing sheets of Federal Reserve notes of the 1951 sle ,ries during the fiscal y,3ar ending June 30 a.,.n0 Placed -Ath the Bureau of Engraving , -"g. It is respectfully requested that ',200,0u0 1931 "shets of this total be allocated to notes of tile'F ederal Reserve Bank of Boston, as indicated Denoma. nation Number of sheets 500,000 Amount 00,000,000" Approved unanimous4_, Secretari.
@FedFRASER