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1792 A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Wednesday, December 17, 1941, at 3:°°1 P.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Mr. Mr. Mr. Mr. Morrill, Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman Vest, Assistant General Counsel There was presented a draft of letter to Paul P. Cret, arelliteci- lor the addition to the Board's building, reading as follows: 2 "Receipt is acknowledged of your letter of December 111 'which you state that you have completed all of the Work required by your contract with the Board up to and l ancludine the stage at which you are entitled to receive se"nd 30% instalment payment, as provided in the paragraph designated (c) of my letter of October 30, 1940. "Receipt is also acknowledged of the three copies ° 131 the final draft of Bulletin No. 1 and the two sets of 1:le Prj prints designated Work No. 405B, consisting of 67 in each set. These documents, together with the +4 411111es designated 'Specification No. 405 B for the Erec'40n and Completion of the Addition to the Federal ReBoard Building', constitute the contract drawing s pecifications for the purposes of your contract with the Board. dec.,"As You indicate in your letter, the Board has not ti ILLed to ask for bids for the construction of the Addis: 12 or to let a contract for such construction and conthat portion of the project has been deferred. After the payment of the sum of $60,579.62 in accordance With the account submitted with your letter of December ° further payment will be due from the Board to the with respect to the Addition, under the terms Of t 11it ect sho he contract as modified, unless and until the Board or ,,d ask for bids or let a contract for the construction Line Addition. 44 1793 12/17/41 -2- "The documents submitted and the statement of account ansmitted with your letter of December 2 have been revIewed. I am authorized by the Board to make payment of $60/579.62 accordingly and am enclosing with this letter a form of voucher, upon execution of which a check will be mailed to you." Approved unanimously. *. Vest left the meeting at this point. Reference was made to a memorandum addressed by Mr. Foulk, ct-I. Agent, to each member of the Board under date of December 1, 1941, calling attention to the increased volume of work in the Fiscal Agent? 8 office and to the fact that he had had but one increase in la in 14 years. Mr. Szymczak moved that Mr. Foulk's salary be increased A300.00 to the rate of 84,800 per annum, effective January 1, 1942. This motion was put by the chair and carried unanimously. On behalf of the Personnel Committee, Mr. Clayton submitted the l'"(ftlendation that Michael E. Noonen, farmer, Kremmling, Colorado, be appointed a director of the Denver Branch of the Federal Reserve Ilatk of Kansas City for the unexpired portion of the three-year term eliding December 31, 1943. Mr. Szymczak was requested to ascertain through Mr. Caldwell, Chairman of the Federal Reserve Bank of Kansas Clty, whether Mr. Noonen would accept the appointment if tendered to him. PriOr to this meeting, each member of the Board had been 1794 12/17/41 —3— furnished with a copy of a proposed budget covering the expenses of the Board of Governors for the year 1942, and the matter was brought UP for c onsideration at this meeting at the request of the Personnel e°11111(ittee, 12, 1941, of he.vi , Accompanying the budget was a memorandum dated December from Mr. Morrill, stating (1) that, due to the necessity a cut-off date to permit the preparation of summary figures 4111'a master budget, the Divisions of the Board's staff were requested to submit their respective budgets not later than December 1, 1941, t herefore, appointments, resignations, salary changes, or other e.ciiilstinents approved by the Board subsequent to that date (or such "-ter date as of which the individual division budget was prepared) arid not provided for in the budget would increase or decrease the budget 1942 accordingly, (2) that reasonable margins had been provided to al-4W for price increases during 1942 insofar as normal requirements of the toara could be anticipated for printing, stationery, furniture, equipand supplies of all kinds, but that it was impossible to determine a*Chranee what unusual demands might be made upon the Board under war e°nditio ns, or, for example, in the field of consumer credit regulation, t° 8ee sufficiently far ahead to make any worthwhile estimates, partleille•rlY with regard to personnel, and, therefore, special recommenda..ti°118 woUld be submitted to the Board from time to time as circumstances NIA require, t0 ecil'er the and (3) that no provision had been made in the budget payment of bills rendered by the District Government cover- taXes and water rent in connection with the Board's building. 95 12/17/41 -4The budget as submitted was as follows: Personal services S alaries P,etirement Contributions Total Personal Services 1,387,238•7 70 143.56 )1,457,382.31 -NZ:Personal Services Traveling Expenses Postage and Expressage Telephone and Telegraph Printing and Binding Stationery and Supplies Furniture and Equipment Books and Subscriptions Ileat, Lic-;ht, and Power RePairs and Alterations , (Building and Grounds) Ilepairs and Maintenance (Furniture and Equipment) liedical Service and Supplies Insurance Mlsce llaneous Tc3tal Non GI'llci Totka -Personal Services 83,400.00 74,270.00 9::2 110 0::00 675.00 22,075.00 8,085.00 27,000.00 16 ;iiii 364„.258.00 q,822,140.31 Mr. McKee raised the question whether ample provision had been 44 in the budget for salary increases that the Board might find it in_ 1-est.rable to make during the course of the year in line with general l'e4ses granted to other Government employees in T.ashington, and whether (Ictiti°flal provision should be made for expenses in connection with the Ntilation of consumer credit, He felt t that a margin of at least Should. be provided for Mr. two purposes. Morrill stated that it had been the practice in recent 1796 12/17/41 —5— Years to include in the semi-annual assessment against the Federal Reserve Banks an amount for contingencies over and above the budget t'equirellients during the period covered by the assessment, it being understood that any part of the contingency fund which was not expended dillIng the six months' period would be taken into account in figuring the basis of assessment for the next six months, and that the suggestion 4.d been made that in the assessment for the first six months of 1942 000 should be included, which it was felt would be sufficient to e°ver the point Mr. McKee had in mind. At the conclusion of the ensuing discussion, the proposed budget was approved unanimously, with the understanding that the assessment against the Federal Reserve Banks for the expenses of the Board during the first six months of 1942 would include $200,000 for contingencies. Thereupon, the following resolution, levying an assessment on the twelve Federal Reserve Banks to cover the expenses of the Board of Governors for the six Tonths' period beginning January 1, 1942, in accordance with a recommendation submitted by the Fiscal Agent in a memorandum dated today, was adopted by unanimous vote: ame,AliEEREAS, Section 10 of the Federal Reserve Act, as qo.tr—'eu, provides, among other things, that the Board of to 1:n°rs of the Federal Reserve System shall have power,~17Y se miannually upon the Federal Reserve Banks, in nien.t:ortion to their capital stock and surplus, an assesssill.a ufficient to pay its estimated expenses and the succ;„1!? of its members and employees for the half year aqy is.,',;?-ng the levying of such assessment, together with arld `'lleit carried forward from the preceding half year, titaat,' AS, it appears from a consideration of the es' d expenses of the Board of Governors of the Federal 1_797 12/17/41 -6- "Reserve System that for the six months' period beginning January 1, 1942, it is necessary that a fund equal to two hundred and eighty-eight thousandths of one per cent (.00288) of the total paid-in capital stock and surplus (Section 7 and Section 13b) of the Federal Reserve Banks be created for such Purposes, exclusive of the cost of printing, issuing and redeeming Federal Reserve notes; "NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEul, THAT: "(1) There is hereby levied upon the several Federal Reserve Banks an assessment in an amount equal to two hundred and eighty-eight thousandths of one per cent (.00288) the total paid-in capital and surplus (Section 7 and Section 13b) of each such Bank at the close of business D ecember 31, 1941. "(2) Such assessment shall be paid by each Federal Reservee Bank in two equal instalments on January 2, 1942, and March 2, 1942, respectively. , "(3) Every Federal Reserve Bank except the Federal ?serve Bank of Richmond shall pay such assessment bytrans4.!rring the amount thereof on the dates as above provided ii"r°ugh the Interdistrict Settlement Fund to the Federal : serve Bank of Richmond for credit to the account of the b°ard of Governors of the Federal Reserve System on the orks of that Bank, with telegraphic advice to Richmond Re the purpose and amount of the credit, and the Federal 4 _ serve Bank of Richmond shall pay its assessment by credit;g the amount thereof on its books to the Board of Gover,re of the Federal Reserve System on the dates as above jr°vided.11 The action stated with respect to each of the matters herein4Ir't.'er re ferred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Pecie Reserve System held on December 16, 1941, were approved unani- Lie nlorandum dated December 13, 1941, from Mr. Nelson, Assistretary, recommending that Miss Florence Braunsdorf be appointed arit see 1798 12/17/41 —748a st enographer in the Secretary's Office, with salary at the rate of t1,620 per annum, effective as of the date upon which she enters liPOrl the performance of her duties after having passed satisfactorily the, , Physical examination. Approved unanimously. Memorandum dated December 12, 1941, from Mr. Goldenweiser, Dil'eetor 1488 of the Division of Research and Statistics, recommending that PatricaL A. McDonald be appointed as a clerk in that Division, /lith zpi --arY at the rate of A11440 per annum, effective as of the date 1113°14 Which she enters upon the performance of her duties after having Pa88ed satisfactorily the usual physical examination. Approved unanimously. Of Letter to Mr. McLarin, President of the Federal Reserve Bank Atlati ta, reading as follows: "The Board of Governors approves the changes in the 1)ersonnel classification plan of your Bank as requested J-r1 Your letter of December 13, 1941." Approved unanimously. Letter to Mr. Meyer, Assistant Cashier of the Federal Reserve Of chic ago, reading as follows: ter ( 11 view of the circumstances set forth in your lete4..December 12, 1941 the Board of Governors approves, effe-4. lve January 1, 1942, the empi' payment of salaries to eight ari °Yeee of your Bank in excess of the maximum annual sa+p05.Provided in the personnel classification plan for the -LLlons occupied as follows: 1799 12/17/41 -a— •", "Name John M. Clark George W. Kuehn Arthur R. Monson Helen Franklin Louise Kilday Kathryn Lee Florence Musselman hie D. Parry Department Examination R. F. C. Mail Telephone Stenographic and Files Stenographic and Files Stenographic and Files Stenographic and Files Position Asst. Examiner Supervisor Supervisor Operator Annual Salary (:3,800 3,700 2,520 1,700 Secretary 2,640 Secretary 2,640 Secretary 2,580 Secretary 2,620" Approved unanimously. Letter to Mr. Young, President of the Federal Reserve Bank of 130.st011., reading as follows: / 0 I "Enclosed herewith is a copy of a letter of December 71; .J-, 74-1 from Ur. George J. Sokel, President, The Home. wh nal Bank of Meriden, Meriden, Connecticut, inquiring ,'`'iler, in the event his bank now surrenders its right to eer i; l cise fiduciary powers, there would be any difficulty be )1)t 1 aining such authority at a later date if it should ,eemed desirable. that "It will be appreciated if you advise Mr. Sokel for'-Ln such event, the bank could file a new application be aprmission to exercise fiduciary powers which would then Led upon in the light of all the pertinent facts and io —uustnces, but that the Board, of course, can now give nitassurance that such an application, filed at some indefiit utuPe date, would be approved. In this connection, sec.. 1 be desirable to call attention to the provisions of the VII 11(k) of the Federal Reserve Act and section ,of sider°ard's Regulation F relating to the matters to be conin acting upon such applications. cerninio t: i s also suggested that you advise Mr. Sokel conulle procedure which should be followed in the event the lo powersi:;, decides to surrender its right to exercise fiduciary V Approved unanimously. 1800 12/17/41 -9- Telegram to the Presidents of all Federal Reserve Banks, reading as follows: "Reg. W-117. Inquiries have been received as to the application of Regulation ti to loans of $1,000 or less for purpose of constructing new farm buildings, such as barns , uarns, silos, poultry houses and the like, on property !here there are existing buildings, such as a farm house. The question is whether or not the materials and services used. in such construction are included in Group E-1 of the Supplement. The Board has ruled that the building of a completely new structure is not a repair, alteration, or IMProvement in connection with existing structures and the mate rials and services would not be in Group E-1." Approved unanimously. Telegram to the Presidents of all Federal Reserve Banks, readilleas follows: d "A Reserve Bank has asked the Board whether in reproprescribed Statement of Borrower a Registrant may certain changes on back of form. Changes would be (1) Place paragraph headed 'listed articles' near top of Page and move warning box closer to that paragraph, and (2) t;add at bottom of page provision for setting forth the borras Of PaYment of the loan and also an acknowledgment by rrower of receipt of a copy. it "Board has replied that this -would be permissible since rra,c'es not call for the obtaining of any additional inforo,uon from the borrower and is otherwise within the terms Instructions to Registrant or printer which appear on ce of specimen form." 4 Approved unanimously. Telegram to the Presidents of all Federal Reserve Banks except go, reaulng as follows: 808.,. °Following explanation of W-115 has been suggested. 'd agrees that it is correct: 1801 12/17/41 -10"'For example, in the case described in the question, if the outstanding obligation which was repayable on the tenth of each month had been originally made on the fifth sc that only five days of the fifteen days permitted by section nine B had been used and if the outstanding obligalon Which was repayable on the fifteenth of each month had been the originally made on the fifth so that only ten days of fifteen days permitted by section nine B had been used and, the outstanding obligation which was repayable on the twentieth of each month had been originally made on the Ilfth indicating that all of the fifteen days permitted by !?ction nine B had been used then the consolidated obligaa could call for instalments payable on the twentieth.' Approved unanimously. Letter to Mr. Kennel, Assistant Counsel of the Federal Reserve of Boston, reading as follows: "Receipt is acknowledged of your letter of December 5 ,, enclosing a copy of a contract for the sale of a resirr.ltial building by Mr. Arthur E. Kenison, Trustee, to Mr. hIlip D. Noyes. "Briefly, the contract provides that the purchaser will furnish labor and materials to the extent of not less eeTT 2501 in addition to the purchase price, and that the re;:7* will furnish funds to cover the additional cost of chr'-'-rs and improvements to the extent of A550. The purrees? Price of;n. 150 (which includes the A550) is to be ,Pald in monthly ' instalments over a period of about 6 Jears. i by "The question is whether the transaction is exempted sta!ection 6(a) of the Regulation. In this connection you morZe, first, that the credit is not secured by a first 80m gage duly practice in 1404 States torecorded. However, it is the sell real estate on contract rather than on chusgage, and if it is possible under the laws of Massatitetts to record this contract, and if the contract conthatiltes a first lien on the real estate, it would seem transaction could be brought within the first 111 section 6(a). b Se"ndlY, you point out that the advance of ,,550 regarded either as the cost of repairs demanded PPir) -11"1337. the purchaser as a condition to purchasing, or as a sImple loan of funds which are needed by the purchaser to Make repairs and which are not otherwise available to him. The terms of the contract as enclosed with your letter do ralse some question on this point. It seems clear, however, that with a few changes in terminology and procedure the ler could make the repairs in advance and so arrange the transaction as to bring it squarely within the exemption of the latter part of section 6(a) as a loan for the purchase of an entire structure. t. "In the circumstances, the Board feels that the quesalT? should largely depend upon the net result of the transie'l°n. Assuming, therefore, that the entire transaction essentially the sale of an improved house and is not for t e Purpose of evasion, the Board is of the opinion that Lransaction would be exempt under section 6(a) as a Purchase of an entire house." Approved unanimously. Letter to Mr. Hult, Assistant Cashier of the Federal Reserve lat* of B oston, reading as follows: a "In Your letter of September 6, 1941, you enclosed Co PY °f a letter from General Electric Contracts Corpora'dated September 4, 1941, asking about the applicati.,11 : e 41 of Regulation W to instalment credit sales of fluorclTnt lighting equipment. A specific ruling on this inhas not been made prior to this time, pending tf,'81deration of a number of questions relating to Group °f the Supplement. ."The Board has now ruled that, where fluorescent lightinstalled under the circumstances described In Group re,!the instalment credit sales would be subject to the Approved unanimously. Letter tO Mr. Leedy, President of the Federal Reserve Bank of Pe 'ltY, reading as follows: 6 en, ' I'lleceipt is acknowledged of your letter of December 04y- Ping a request of First National Bank of Junction 'ansas, for an interpretation of Regulation L. 1803 12/17/ 41 -12- "The bank is situated near a permanent Army post, and the request states that the practice of the bank is to make a loan to an Army officer evidenced by an ordinary promissory note which in terms is payable in a single payment one Year from date. The borrower signs a card authorizing the bank to charge a certain amount to his account on the first day of each month and credit the amount against the note. Trhe card provides that the instructions are to remain in 4,?rce until the indebtedness is paid in full. However, e bank states that the borrower can revoke the authoriza1,10n at any time, and of course can make it inoperative uY d epositing his pay-checks elsewhere. iti"As you point out, the fact that the practice has been effect for many years shows clearly that it is not a deVice which has been formulated to evade Regulation W, and ka,nett.efore the only question is whether the transaction is 2(1 Nextension of instalment credit' as defined in section e,elb On this question it may be argued, as the bank has ,fle, that there is no enforceable agreement to repay in aa.,nstalments. On the other hand, the practice of taking rati. l°te repayable in a single payment and of making a sepael,: arrangement for periodic deposits to liquidate the iS widely used in connection with 'personal' loans. olle However, the real question is whether the loan is t or which the customer undertakes to repay in instalments Which has a similar purpose or effect' within the meanpre( jsection 2(c). It is apparently a well-established its lee cr the bank to make the above arrangement with the! ustomers, and the arrangement seems to have virtually t psr : arne Purpose and effect as the procedure adopted with ties °nal loans. Therefore, the Board feels that the praccred4ttlitble regarded as being an extension of instalment the meaning of Regulation la." j Approved unanimously. 4tik Or Letter to Mr. Stroud, First Vice President of the Federal Reserve a-L-Las, reading as follows: lati,:Tiswil acknowledge your letter of December 5 reLo the filing of a Registration Statement by a cer9perator of industrial loan offices. "It.13 • aholad noted that your opinion is that the Regis ) l t7.nt file one Registra tion Statement covering the usiness 1804 12/17/41 -13"of the ten concerns owned wholly by him, attaching a list of the ten offices, and that separate Registration Statements should be filed for the various partnerships in which he has an interest. The Board agrees with your opinion on this matter." Approved unanimously. Letter to Mr. Hale, Vice President of the Federal Reserve Bank q San Francisco, reading as follows: 'us will acknowledge your letters of November 26 and December 1 relating to a 'Lease-Lend-Rental Plan' devised by Mr. Karrakis of Los Angeles. "The Board agrees with the conclusion reached by You and your Los Angeles Branch that the operation of wo.s Plan, if it involves the leasing by dealers of new ..--omobiles for a total rental consideration in an amount aivalent to the approximate delivered price of the automobilew would be subject to the provisions of Regulation 0Y :Tirtue of sections 2(h) and 2(d). 'Unless you believe that some further action on this ;:ter is called for, we feel that you have disposed of the in an entirely satisfactory manner and that no '17'her action is necessary." Approved unanimously. Letter to Mr. Henry D. Brite, Commercial Manager of the Electric Rottie and Parm Authority, Washington, D. C., reading as follows: yo4 "It has been noted that in previous communications to you the Board has failed to comment upon a memorandum from Portland, Oregon, office which was enclosed with your quea ' t te; l of Sep September 10, 1941. This memorandum raised a tianc;"1.on as to the application of Regulation W to the fiwithIng of special wiring installations made in connection electric ranges or water heaters. to be"These special wiring installations are considered diti, im provements and, when they are made under the conoorttr'ne referred t to in Group E-1 of the Supplement, the would be subject to the 18-month limitation. Approved unanimously with the 805 12/17/41 -14understanding that copies of the letter would be sent to the Presidents of all Federal Reserve Banks. Letter to the President of the Board of Commissioners of the Di ' 86rlet of Columbia, in accordance with the action taken at he eu 1/16 of the Board of Governors on December 16, 1941, reading as follows: , "This refers to the conversations which have taken P ttacs from time to time between you and your representa,11res and representatives of the Board of Governors of the Fe deral Reserve System regarding the taxation of the Pro perty in t1: 1 opertY the District of Columbia held in the name of “e Board of Governors of the Federal Reserve System. 8. The Board has been advised by its Counsel that, ”II:les it is an establishment of the Government of the ' 17!:ed States, the property is property of the United ajc'es Government and, therefore, is not subject to taxBoard has also been advised that it has no to pay such taxes and that the members of the tSZ;iit;lhe stil"raight render themselves personally liable if they °111 pay such taxes out of the Board's funds. pa , 4.. As You know, efforts were made in good faith by both zei:1l's several months ago to agree upon some method of ng this matter without litigation, but we were unfo7 to reach agreement on the method. The Board, there.rttuded that it would await further developments Property were actually advertised for sale, it 8titd im mediately request the Department of Justice to int-10,111'F suit to obtain a judicial determination of the ques- l'jnether or not the property is subject to taxation. e:*,,Accordingly, on December 3, 1941, the day the propt4 6a8 first advertised for sale because of nonpayment of 8 recIti, '?he Board addressed a letter to the Attorney General that him to institute suit for this purpose. Since rere Ime the matter has been the subject of several consertles between representatives of the Board and reprethata; ives of the Department of Justice. We understand ePre sentatives of the Department of Justice have also ' llssed the subject with your representatives. 1806 12/17/41 -15"In these discussions the representatives of the At-. 4t.orney General have endeavored to devise some means of ob' aining a determination or settlement of the matter without litigation between the Board and the District of Columbia. Owing to the national emergency created by the outbreak of war on December 7, representatives of the Attorney General's Office have indicated that they are unable to devote suffi!-Lent time to this matter and have requested that steps be 1-9-ken to have the property in question withdrawn from the ' ax sale scheduled to take place on January 6, 1942. "The Board, therefore, requests that the Commissioners Z11.1 the District of Columbia withdraw the property held in f e name of the Board from the list of property to be sold n°nPayment of taxes on January 6, 1942, with the underhat, steps will be taken with all reasonable disp,t?h to bring about a final disposition of this matter by lltigation or legislation. 4, "In this connection, attention is invited to the fact at the value of the property in question is more than iZequate to satisfy any assessments which could be made if je! should finally be determined that the property is subto taxation. Moreover, the Board has ample authority the law to levy assessments upon the Federal Reserve sns to obtain funds for the payment of the taxes, if it 'nal be determined that the taxes were validly assessed. of c Prom the above it is clear that neither the District by ti°1111mbia nor the Board would be prejudiced in any way th_ _e action requested and that the instrumentalities of .'.°1Ternment, including the Department of Justice, would not be ered in their defense activities." Approved unanimously. Letter ,o L the Comptroller of the Currency, reading as follows: Vith "It is respectfully requested that you place an order the the Bureau of Engraving and Printing, supplementing Pede!rder requested June 14, 1941, for the printing of Elnd 141_r?serye notes of the 1934 Series in the amounts Ati_ lionunatlons stated for the Federal Reserve Bank of 1807 4/41 -16"Denomination $10 20 50 1000 Number of sheets 500,000 84,000 9,000 400 Amount 360,000,000 20,160,000 5,400,000 4,800,000" Approved unaniinously. Thereupon the meeting adjourned. Secre Chairman.
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