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O' ()12 A meeting of the Board of Governors of the Federal Reserve 814.4. uuem was held in Washington on Tuesday, December 15, 1942, at 11:00 PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman McKee Draper Evans Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters herein4rter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the ecj ' 141 Reserve System held on December 14, 1942, were approved unanitaous4. Memorandum dated December 14, 1942, from Mr. Paulger, Chief of sion of Examinations, submitting the resignation of L. A. A. ' as a Federal Reserve Examiner, to become effective as of the close 48iness on January 4, 1943, and recommending that the resignation be ed as of that date. The resignation was accepted. Letter to Mr. Phelan, Assistant Vice President of the Federal Bank of New York, reading as follows: "Thank you for your letter of November 23 describing and commenting upon the operations of certain instalment vendors and so-called budget companies in your district. 2313 12/15/42 -2- "In the class of transactions which you describe, all parties (the customer, the store, and the budget comPanY) contemAate that all payments will be made by the customer to the comipany (which furnishes the customer with a payment book, instructions, etc.), ana the store obtains the approval of the company before selling the merchandise because the arrangement is that the comoany will take over the account without recourse against the store. "In view of the special circumstances outlined in your letter, we believe that the transaction may be treated as an extension of credit by the budget company and therefore -•,here is no question but that the obligations of a customer Incurred for purchases at different stores may be consolidated under Option 2 of section 10(b) by the budget company nlch holds all the resulting obligations. Also, as you say, tnese obligations may be added together in determining the t aggregate instalment indebtedness of one debtor to the same creditor' under section 4(6(1). "In the circumstances, it is not necessary that the merchant's records show the terms of payment, and the reRilxrements of Regulation W respecting records will be met if aclequate records are preserved by the budget company. How!very as you point out, the statement of transaction should ;e furnished to the customer in less time than two weeks (7-100 and S-477)." Approved unanimously. Letter to Mr. Phelan, Vice President of the Federal Reserve tallk c)f New York, reading as follows: "This refers to your letter of December 4, 1942 (InNo. 22), enclosing copies of letters to your bank ,rom the Western Electric Company of October 27 and Novem' I," 10, relating to the application of Regulation W to the 1-nancing of the repair and maintenance of residential property. "Briefly, you state that the Company sometimes finds it necessary to buy the residences of its employees or other Persons which subsequently are resold to other employees or (ersons P through the medium of unrecorded instalment contracts coPy of which you enclosed with your letter), pursuant to nuich the Company retains title until the contract price is Pald in full. From time to time, but generally several years atter such contracts are entered into, the buyers may request vances of the Company with which to pay for repairs, retecorations and other items of maintenance. You state that he amount of any such advance, whether paid by the Company r 2314 12/15/42 -3"to the buyer or directly to the contractor furnishing the materials and services, is added to the unpaid balance owing to the Company under the purchase contract and that provision is made for the buyer to pay such additional amount with or without an increase in the rate of payment under the contract. "The Board agrees with your view that when the ComPanY advances funds to the buyer with which to pay for the materials and services the Company makes an instalment loan subject to section 6 of the Regulation. The mere fact that same cases the proceeds of the advance may be paid by 'dile Company directly to the contractor supplying the matefials and services would not alter this view. Of course, the disposition of any particular case necessarily aepends 11Pori the facts involved. Thus, if the Company itself aid the work and added the cost thereof to the unpaid balance °f the instalment contract, it is probable that the transaction would constitute an extension of credit arising out ( 6)f . an instalment sale of materials and services listed in ,r°uP C of section 13(a), and consequently subject to secicn 4. "Section 8(a) of the Regulation is not applicable to the present situation, since neither the contracts of sale °f the residence involved, nor the subsequent transactions ;elating to the repairs, etc., is recorded. In addition, nuch subsequent transactions are not for the puroose of firallcing or refinancing the construction or purchase of such oesidences. However, in the Company's letter to your bank 2 November 10, it is suggested that the purchase contracts ;Nr be made of record, in which event it is the Board's blew that the credit in question, in the usual case, would !exempt from the Regulation under section 8(a), including t"e Principles set forth in 5-430-a and W-128. "Among the repairs, etc., sometimes involved in these Cas, , 1 S, you refer to the installation of insulating materi8* As you know, this may give rise to questions involv'ng the application of section 8(m)." Approved unanimously. 1)41 kiemorandum dated December 15, 1942, from Mr. Smead, Chief of the 11 of Bank Operations, referring to the approval by the Board on er 1942, of the temporary assignment of Frederick L. Alexander, 2315 12/15/42 —4— Assistant Chief of the Application and Records Division, Bank Examinaticn. Department of the Federal Reserve Bank of New York, to the Divi- 413 of Bank Operations for a period of not to exceed two weeks begin4i4 November 30,1942, with the understanding that the Board would "lorize the reimbursement of the Federal Reserve Bank of New York for 41(11a1 subsistence and transportation expenses incurred by Mr. Alexander illeitient to his assignment, and recommending, inasmuch as it was neces" r for Mr. Alexander to remain at the Board through December 15, 1942, to c__ 'inPlete the assignment, that the New York Reserve Bank be reimbursed actual subsistence and transportation expenses incurred by him durth he period November 29, when he left New York, to December 15, 1942, Approved unanimously. Thereupon the meeting adjourned. Chairman.
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