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"-- I Minutes of actions taken by the Board of Governors of the ecleral Reserve System on Monday, December 11, 1950. PRESENT: Mr. Szymczak, Chairman pro tem. Mr. Vardaman Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Memorandum dated December 7, 1950, from Mr. Carpenter, eel'etar, -., of the Board, recommending the appointment of Miss Margaret aket 11gllertY as a clerk in the Office of the Secretary on a tem- °48ie for a period of six months, with basic salary at the kte or $2,875 per annum, effective as of the date upon which she ekters 11Pon the performance of her duties after having passed the 4314.1. PhYsieal examination. Approved, Mr. Vardaman voting "no" . Memorandum dated December 11, 1950, from Mr. Sloan, Assist1t i tor of the Division of Examinations, recommending an in- • . 111 the basic salary of Nancy L. Chelberg, Secretary to Mr. b qoetrii in that Division, from $3,225 to $3,350 per annum, effective 'eoember 24, 1950. Approved unanimously. Letter to Mr. Sproul, President of the Federal Reserve Bank tIt New York, reading as follows: 7 "'Reference is made to your letter of December v9.50, requesting the Board of Governors to apPA e an increase in the salary structures of the aJ Reserve Bank of New York and the Buffalo 81'arleh. A 12/1a/so -2. 1/The Board of Governors approves the following Iraniazum and maximum salaries for the respective grades, effective November 30, 1950: Head Office Maximum Minimum Sala Grade 221EEL4,2280 1 0 2580 1920 2 2880 2100 3 3180 2340 4 3480 2580 5 3800 6 2820 4200 3120 7 4700 8 3480 5200 3800 9 5700 10 11200 6300 4600 11 7000 12 5200 7800 13 5800 8500 6300 14 9600 15 7100 1o600 16 7900 Buffalo Branch Maximum Minimum Grade 22121L. LLI-Eir._ MOO 1 i1560-2280 1680 2 2520 1860 3 2760 2040 4 3060 2280 5 3360 6 25201 3700 2760 7 4100 8 30610 4500 9 3360 5000 10 3700 11 4100 5500 6100 12 6800 13 14.ggg 5600 7500 14 8400 15 62oo 16 7000 the "The Board approves the payment of salaries to ap,, , 111Ployees, other than officers, within the limits catied for the grades in which the positions of the re : 'Pective employees are classified. It is understood l'Avso —3_ "that all employees whose salaries are below the ! linimum of their grades as a result of the structure -increase will be brought within the appropriate range imm ediately." Approved unanimously. Letter to Mr. Smyth, Vice President of the Federal Reserve 13ank Or mu-Las, reading as follows: of *For the reasons outlined in your two letters t,December 1, 1950, the Board of Governors approves rwa payment of salary to Mr. J. T. Pringle at the ti : a 418 of 45300 per annum and to Teresa E. Smith at .6:le rate of $2400 per annum. It is understood that 3"s rates are in excess of the maximum of the ,74arY grades in which these employees' jobs are Approved unanimously. Letter to The Peoples National Bank of Laconia, Laconia, zlanPshire, reading as follows: 3 "The Board of Governors of the Federal Reserve !nem has given consideration to your supplemental a 1cation for fiduciary powers, and grants you e4r (I 'lllority to act, when not in contravention of State pov ' cloal law, as executor. The exercise of this : er, in addition to those heretofore granted to ac. eb:.,as trustee and registrar of stocks and bonds, Re 'la be subject to the provisions of the Federal er ! erve Act and the regulations of the Board of Govrs of the Federal Reserve System. er "This letter will be your authority to exthe fiduciary powers granted by the Board ; 4111g the preparation of a formal certificate e0 tn'ellng such authorization, which will be forwarded - You in due course." Approved unanimously, for transmittal through the Federal Reserve Bank of Boston. 12/4/50 -4Letter to the board of directors, "Springfield Safe 1)ePoSi + —and Trust Company", Springfield, Massachusetts, reading aa r°1101Vs. "The Board of Governors has been advised the Federal Reserve Bank of Boston that the 31311-ngfield Safe Deposit and Trust Company, trngfield, Massachusetts, proposes to purchase e assets and assume the liabilities of The Mon National Bank, Monson, Massachusetts. 4, "Under the provision of Section 18(c) of 1;"e Federal Deposit Insurance Act, no insured shall assume liability to pay any deposits :cle in another insured bank if the capital stock -6,,eurP 1 us of the assuming bank will be less than aggregate capital stock or aggregate surplus, tiePeotively, of all the parties to the assumpb °11 of liabilities, unless, in case the assuming ! 0 Ilk is a State member bank, the Board of Governors 1 the Federal Reseme System gives prior written consent, of,"In accordance with this provision, the Board uovernors hereby consents to the proposed transactiono, Approved unanimously, together with the following letter to Mr. Latham, Vice President of the Federal Reserve Bank of Boston: 27 "Reference is made to your letter of November sal. 1950, submitting the request of the 'Springfield mase Deposit and Trust Company', Springfield, a beaohusetts, for approval of the establishment of th ranch at Monson, Massachusetts, in connection with Moe Proposed absorption of The Monson National Bank, ris", Massachusetts. 4141,"It is noted that prior approval of the State re -4)rities has been obtained and in view of your esZ°mmendation the Board of Governors approves the masablishment and operation of a branch in Monson, Tr4sZchu3etts, by the Springfield Safe Deposit and Company, Springfield, Massachusetts, provided I 985 12/11/50 -5"the absorption of The Monson National Bank is effected substantially in accordance with the as submitted and with the understanding that 1 se1 for the Reserve Bank will review and sati t efY himself as to the legality of all steps aken to effect the absorption and establishment of the branch. "In view of your favorable recommendation the ax:d of Governors also consents, under the proT 31°ns of Section 18(c) of the Federal Deposit 1311-rance Act (formerly Section 12B(v) (4) of the ,4ted zeral Reserve Act), to the completion of the 1/1saction substantially as proposed. A letter wii:,tshe applicant bank in this connection is enclosed, a copy for your files. Please transmit the A!'ter to the Board of Directors of the Springfield -le Deposit and Trust Company." " Telegram to Mr. Slade, Vice President of the Federal Reserve 411*or -an Francisco, reading as follows: "Rslet sixth Board notes your opinion that ;'el'e has been no material deviation from plan 0"iginally submitted and interposes no objecc: 4 to establishment of branch in Parlier, by Central Valley Bank of California, ti,?,"'°nd, California, in connection with absorph -n of First National Bank of Parlier under ap4-110val granted August 4, 1950." Approved unanimously. Letter to the Presidents of all Federal Reserve Banks, as follows: ,lAs you know, there has been considerable dis1182.ton in the press and elsewhere of the possible of leasing arrangements as a means of avoiding the liequirements of Regulation W. ."There is attached a copy of a statement that bc,i. elliv'ing published in the Federal Register on the tr.dect and it will be appreciated if you will dislbute copies to interested persons in your district. 12/4/50 -6' 1It is recognized that some operators of 1• 31n6. arrangements may have overlooked the bra°ad, necessary coverage of the legislation under Which Regulation W is issued and may not !!",lve realized that they are subject to the regu-ationo It is evident, however, that they are, e3-11 view of the definition of credit in the Extelltive Order which includes, among other things, or mortgage; any instalment purchase e:arlaocZ: any conditional sales contract, * * *; 111Y rental-purchase contract, or any contract for ti,,e bailment or leasing of property under which Ce bailee or lessee either has the option of ! t e°rning the owner thereof or obligates himself ai PaY as compensation a sum substantially equivament to or in excess of the value thereof; * * * anY transaction or series of transactions ' ' - 11g a similar purpose or effect.' As indicated in the published statement, the Bo is d interested in examining further into the ti7raoteristics of various leasing arrangements to determine whether it is feasible or desirable Theke any special provision for any of them. ge -board will appreciate any information or sug8ti°ns you may have on the subject. In the meantime, it would seem that no el earanoe ar, should be given to any rental or leasing ite'angement that, contemplates more than one payOf course, a transaction would not be sub it-" to the regulation if it is the usual drive or-Yollrself arrangement that contemplates a rental a oar Car for merely a day or so, with the car to be the arrangement terminated, and the gle veriodPayment made, at the end of the brief , eoulA"As indicated in the statement, a lessor comply with the regulation by obtaining the de.1`4J-red down payment and monthly payments (or in equal amounts), and later could return to de 41e customer any portion of such payments or le,°eits when the article is returned and the 443e terminated. The lease might even provide in arrallee for such refunds. It is possible that such wh angements, although perhaps not all that some erl° oPerate leasing arrangements would desire, would able them to continue their operations with a Z -7dmum of difficulty while meeting the necessary 11Nuirements of Regulation W." Approved unanimously, together with the following notice for publication in the Federal Register: , "Since the amendment to Part 222 (Regulation W) tolned effective October 16, 1950 (15 F. R. 6118, 0 31), the Federal Reserve Banks and the Board of : a .78/11ors of the Federal Reserve System have received orrillzber of inquiries concerning the applicability Part 222 to various proposed arrangements for leasing automobiles or other listed articles. f_, Nany of these inquiries seem to reflect a 1.:-Li-ure to appreciate the fact that Part 222 and the nislation under which it is issued extend to a m great ally transactions besides the ordinary conditio 4al or instalment sale. arrangements, other than those itOd "Leasing to a single payment, in general are subject to 222 and the legislation in the same manner as 8t6alment sales. They are not exempt, and they are 4 Privileged class of transactions. th,„ "In the past when Part 222 was not in effect, *Vie have been certain highly specialized operations or VI have been found somewhat more suited to leasing riarl'?_11tal arrangements than to other methods of fi01,24-11g. That fact does not exclude them from the arration of Part 222 and the legislation. Of course, 1,,,j'essor could comply with Part 222 by obtaining the polillired down payment and monthly payments (or detheits in equal amounts), and later could return to whe ellstomer any portion of such payments or deposits Theithe article is returned and the lease terminated. -Lease might even provide in advance for such re- , ds. the "However, the Board is examining further into ,characteristics of the various proposed arranger6 leasing automobiles or other listed articles ellohwill consider whether or not any of them are of 4 ,sPeeial character as to make it desirable or tea, '" to relax any of the provisions of Part 222 to-an extent for their benefit. be "To aid in such consideration, the Board will glad to receive any relevant explanations, data, Z 12Avso -8"or Other information; and any such material should be submitted in writing. Although such Taterial may be sent directly to the Board, it :Ls Preferable that it be sent to the Federal Re?erve Bank of the district, which will forward it to the Board to be considered. All such mashould be received not later than January 1951.11 rrlal Letter to Honorable James P. Kern, United States Senate, W4shila gton 25, D. C., reading as follows: mAre received your letter of November 1 "'dressed to Chairman McCabe with respect to a xnter which you received from Mr. Stuart Williams, 12:8as City, Missouri, concerning the disapproval the Federal Reserve Bank of Kansas City of re° Iilliams' request for an exemption from the of the Board's Regulation X in conco : ,"1°th riecluim..rementst1 with a proposed loan for the purpose of tl, etructing a new residence. We regret verymuch Il t the tremendous volume of work in connection mr vVh,Regulation X has prevented an earlier reply. 4illiams 1 letter and its enclosure are returned herewith Pr "As You know, Congress provided in the Defense es?duction Act of 1950 for the regulation of real pr ate credit with the view of reducing inflationary ab.7?ure8 in this field and increasing the availWit -7,1V of materials and labor for defense purposes. (i respect to so-called 'conventional' credit *2 credit not extended, guaranteed, or insured 'he Government or its agencies) the law provided njthe regulation of credit in connection with kilructures on which construction was begun after adg” 32 1950, or on which the construction of major dat;"lons or major improvements was begun after that wan-el The authority to regulate Iconventionall credit to-.'elegated to the Board by the President subject r°vision that the concurrence of the Housing (Irici-j anr, me Finance Administrator be obtained with.recet to regulations affecting residential credit. 14811ant to this authority, the Board issued its RegX, Residential Real Estate Credit, effective t; 12/11/50 -9- "October 12, 1950, which places restrictions upon tthe extension of 'conventional' credit after that 1c112.te with respect to one and two family residences ."ere the residences or major additions or major 1111Provements were begun after August 3, 1950. ."Such a regulation necessarily makes it more e-d ' ' ult for some individuals who had hoped or expected to build or purchase houses to carry out anelr plans. Otherwise the regulation would not ,?°111P1ish its purposes or the purposes of the law. me "ulle the circumstances of particular cases vary ne?tlY, it is inevitable that there will be some r 4 8'ances in which the persons affected will feel that they are being subjected to hardship and it is - °ssible to have an effective regulation under which 17 ° such cases may arise. of "The Board, however, has provided for a number th e emptions in Regulation X, some of which have wh? effect of materially reducing the instances in ,211 the regulation will interfere with prior arrange1 me, ti4.13 with respect to the financing of the construcofcT or purchase of houses. For example, section 6(b) Re ':-e gulation X exempts extensions of credit by a teT;?trant (a person engaged in the business of exreal estate credit) pursuant to a firm committo extend such credit which was made by the RegA.1. rant prior to the effective date of the regulation. by an amendment to the regulation effective - rber 14, 1950, the Board has exempted credit exte,, - ed prior to May 1, 1951, with respect to new con' st begun prior to October 12, 1950. erni "In addition, the regulation authorizes the Fedserve Banks to grant specific exemptions in a Reserve co 'er limited class of cases involving contemplated .ruction as provided in section 5(g) of the regtt ns ula 1r),, which reads as follows: 1(1, 'lg) Contemplated Construction.--Any builder °r other person who had made substantial commitMents or undertakings before August 3, 1950, with a view to the building of new construction and who asserts that his inability to obtain credit to flance such new construction on the basis contem' Plated by him and by the Registrant prior to August 3 1950, would cause him substantial hardship, may ' applY to the Federal Reserve Bank of the district I 12/11/so -10- "in which the new construction is contemplated for an exemption from this regulation for such new construction, showing all the facts and submltting all necessary supporting documents with respect to his commitments or undertakings and whY compliance with the regulation would cause him substantial hardship. If such Federal Reserve Bank after consideration of the application and supporting documents determines that substantial commitments were made prior to August 3, 19501 and that substantial hardship would resUlt from the application of this regulation in 811oh case, it may issue to such builder or other Person a certificate approving such application and thereupon any extension of credit to such builder or other person by any Registrant with respect to the new construction that may be specified in such certificate shall be exempt from the Prohibitions of this regulation.' 11.1 "It was under this provision that Mr. Williams reated the Federal Reserve Bank of Kansas City to grant ! hi an exemption. You will note that this provision con.:1111:aates that an exemption will not be granted unless, 07n other things, the applicant's inability to obtain co'llt to finance the proposed construction on the basis 3 -4'emPlated by him and by the Registrant prior to August A: 25°, would cause the applicant substantial hardship. 404"e understand the facts of this case, Mr. Williams had approached the Kansas City Life Insurance Company, 1 which he now desires a loan, prior to August 31 19501 re did not do so until after the effective date of the ation. In addition there is considerable question lyt isZVer the action taken by Mr. Williams before August 3, ta'n with a view of building his new house, constituted IllelluStantial commitments or undertakings' within the -ng of this provision of the regulation, and whether tvl,lnability to proceed with his plans will result in Re-ustantial hardship' such as is contemplated by the the dirlation. We are, of course, fully conscious of disruption or aPPointment and inconvenience which the hi of lIrs Williams' plans may cause him, but this provision ataZhe regulation contemplates financial hardship. As (Ille'ed above, the authority to approve or disapprove rearvsts for exemptions under section 5(g) is a discretionBanks, and °ne W hich is vested in the Federal Reserve 4 n 12/11/50 -11:from our review of the available information, we naIre no reason to disagree with the conclusion !eached by the Federal Reserve Bank of Kansas City 14 this case. "We wish to assure you that it is our desire r exercise the authority which has been granted to 'he Board in this field as fairly as possible and !ith as little hardship upon individuals affected as °°nsistent with effective regulation to carry , ,1:8 II, the objectives of the law, and we believe that !ft your acquaintance with the officials of the Fed:1:al Reserve Bank of Kansas City, you will be satistied that their approach in the administration of the regulation in that area is the same. If you have , further questions concerning Regulation X and ! ' administration, we will be glad to have you take the 1 up with us." V Z Approved unanimously, together with the following letter to Mr. Stuart Williams, R. J. Potts-Calkins & Holden, Inc., 215 West Pershing Road, Kansas City 8, Missouri: "The Board has received a letter from Senator in response to your letter to him recling the application of the Board's Regulation X , .,1‘ oi 6he house which you planned to build. A copy °ur reply to Senator Kern is attached. to The Board of Governors has asked me to say 0u that it regrets very much the need for the ,j-sion reached by the Federal Reserve Bank of --e 6, 83?as City in this matter. However, the responlitY placed upon the Board by the Congress to 3i,2-, si74--L the use of credit for new residential concannot be effectively carried out without , r °°nvenience to a number of people who had plans home construction. The Board desires to emthat, as stated in the last paragraph of the ; letter to Senator Kern, it has been our desire t as exercise the authority in this field as fairly iroPossible and with as little hardship upon the t4'lviduals affected as is consistent with effecobjectives of -LIre regulation to carry out the th e law. "Should you still feel that the reasons for 111 written ' V 1: 19,92 12/11/50 -12- ;the decision made by the Federal Reserve Bank of i ansas City in your case are not entirely clear, it :! suggested that you call at the Bank and discuss :41a matter with the officer in charge of the adminl Iis etration of Regulation X. You can be assured that will give you every consideration and will be glad to outline fully the basis upon which the conlusion was reached." Letter to Mr. Strathy, Vice President of the Federal Reserve (3r Richmond, reading as follows: "Reference is made to the letters which you '41? received, and which you have supplied this Ea lee in photostatic form, from Mr. Goldsten of 4,_st-West Development Corporation, Rock Creek "ii7frace Development Corporation and Goldsten Brothers (4ed November 6, 16 and 17, as well as the letter m llovember 8 from Mr. T. A. Sedan, Richmond Regional A,711 „ aPr of the Prudential Insurance Company of ' era-ca. 0• "kr. Goldsten, among othei- things, is of the 01.1.1lion that with respect to a real estate develop1413 as Donn, -brook Estates, Montgomery County, th:!-Land, Regulation X has no application in view of - Provons of section 6(b)(2). 'The Boardts staff has considered the facts as nIlist forth by both Mr. Goldsten and Mr. Sedan and in ticular the negotiations between the Goldsten it°1:113 and representatives of the Prudential Company. ' mad s noted that Mr. Sedan confirms the statements de -7.bY Mr. Goldsten not only in regard to prior • but gs involving loans totaling more than $5 million the also negotiations in the instant case. Apparently , D0 negotiations for the financing by Prudential of• thWbrook Estates had proceeded precisely as had been toejustom in previous dealings and all that remained prucl ue done by the Goldsten group was to apply to tha.4.ential for a written commitment. Mr. Sedan states 4 had this been done prior to issuance of Regulation x , such a commitment would have been issued by Prudential. 04,"Accordingly, the Board wishes to advise that 40 'the basis of the facts presented there would be csbisetion to the Registrant reporting the under- ir 12/11/50 -13"standings with Goldsten Brothers as a 'firm com!a4ment'l if he so regards them. As you are aware, 1°Weli"er, section 6(b) does not contemplate the 2suanoe of a certificate of exemption such as is °Liggested in the last paragraph of Mr. Sedam's letter.n 1 Approved unanimously. Telegram to Mr. DeMoss, Vice President of the Federal Reserve krat of ,, uallas, reading as follows: considers that "Reurtel November 91 1950, Board n under the facts as stated there would be ! a °Ipieotion to the Registrant reporting the 'oral ereementl as a firm commitment, if he so regards itor Approved unanimously. Letter to Mr. James L. Houghteling, Chairman, Fair Employtristit -oarA U, United States Civil Service Commission, Washington 25, 0. 'l'eading as follows: 19.5,„ "With reference to your letter of November 13, ta41-1 .1 addressed to Chairman McCabe requesting cert04 information regarding the procedures followed ordinl°rm personnel of the existence of Executive 6, Z.11°. 9980, the Fair Employment Board, on October c;C49, was furnished a copy of the Board's proregarding fair employment practices and on these. 133 1950 ,rocedures. $ was furnished a revised copy of 48 4. °The Board's Personnel Officer is designated as ;he Fair Employment Officer; and in his capacity the ersonnel Officer, he periodically meets with supervisors of the Board's staff to re'View i8;and discuss personnel procedures, one of which 4.5xcutive Order No. 9980. email As you no doubt know, the Board's staff is a Thi One, and we do not recruit on a large scale. S Makes it possible for the Personnel Officer to qcj 12/11/50 -14:.i.nterview at or about the time of induction 1 new employees who are informed by him of the " roedures through which allegations of discriminaion are to be presented, heard, and adjudicated. "It is expected that a new handbook for the e of the members of the staff will be issued in re future, and this will include information on ' 4teoutive Order No. 99800" Approved unanimously. Memorandum dated December 6, 1950, from Mr. Young, Director q the Division of Research and Statistics, recommending that in e°14leeti -4°11 with the meetings of the American Statistical Association, the m_ 'Le/lean Economic Association, and other organizations holding 1t -- u-l-ngs with these associations in Chicago during the period tecenth el '26-30, 1950, the following employees of the Division of 4seaz C h and Statistics be sent to the meetings at Board expense: Anyone who is to be on the program, plus (41e.person from each of the six sections in the Division plus those from the head offices of the Division. The memorandum also recommended that official leave be Ntit ' 4111 ed to other employees who wished to attend the meetings at their -Tense. Approved unanimously. ot liemorandum dated December 11, 1950, from Mr. Marget, Director the 1144.0 Division of International Finance, recommending that Mr. ranshaw and Miss Caroline Lichtenberg attend the meetings 1995 12/11/50 c3f the lean Economic Association and the Econometric Society Chicago December 26-30. Approved unanimously.
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