The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
1685 A meeting of the Board of Governors of the Federal Reserve SYStem was held in Washington on Tuesday, December 2, 1941, at 11:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymezak McKee Draper Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stat ed with respect to each of the matters hereinafter refer red to was taken by the Board: The minutes of the meeting of the Board of Governors of the Federal Mously. Reserve System held on Dece mber 1, 1941, were approved unani- Memorandum dated November 28, 1941, from Mr. Paulger, Chie f °t the D sion of Examinations recommen ding that, effective January , 1, 1942, Robert J. Schoenho ff be appointed as an Assistant Federal Reactive ILIner, with official headquarters at Minneapolis, Minnesota, 411d with salary at the rate of $2,500 per annum. In accordance with the above recommendation, Mr. Schoenhoff was appointed an examiner to examine Federal Reserve Banks, member banks of the Federal Reserve System, and corporat ions operating under the prov isions of Sections 25 and 25(a) of the Federal Reserve Act, for all purposes of the Federal Reserve Act and of all other acts of Congress pertaining to exami nations made by, for, or under the $186 12/2/41 direction of the Board of Governors of the Federal Reserve System, and was designated as an Assistant Federal Reserve Examiner, with salary at the rate of $2,500 per annum, all effective as of January 1, 1942. Memorandum dated November 29, 1941, from Mr. Morrill, recomlending, With the acquiescence of Mr. Goldenweiser, that Raymond J. Collier, junior economist in the Division of Research and Statistics, be transferred from that Division to the Correspondence and Publications Secti°n of the Secretary's Office, and that his salary be increased 1.111 $3,000 to $3,600 per annum, both effective as of December 16, 1941. Approved unanimously. Letter to Mr. Young, President of the Federal Reserve Bank of Chi cago, reading as follows: B "Referring to your letter of November 29, 1941, the Board of Governors approves the payment of a salary at 'a.te of $8,000 per annum to Mr. Allan M. Black as 4a8hler of your Bank, for the period December 15, 1941, March 311 1942." Approved unanimously. Letter to the board of directors of "The Fidelity Bank", Durham, North Carolina, stating that, subject to conditions of membership Nithered 1 to 6 contained in the Board's Regulation H and the following special condition, the Board approves the bank's application for nieillbership in the Federal Reserve System and for the appropriate amount Of stock in the Federal Reserve Bank of Richmond: "7. Prior to admission to membership, such bank, if it 1687 12/2/41 -3"has not already done so, shall charge off or otherwise eliminate estimated losses of 40,347.49, as shown in the report of examination of such bank as of October 13, 1941, made by an examiner for the Federal Reserve Bank of Richmond." The letter also contained the following special comment: "It has been noted that the bank possesses certain Powers which are not being exercised and which are not necessarily required in the conduct of a banking and trust business, such as the power to guarantee the payment of Attention is invited to the fact that if the bank desires to exercise any powers not actually exercised at the time of admission to membership, it will be necessary ur.Ider condition of membership numbered 1 to obtain the perTission of the Board of Gover nors before exercising them. It this conne ction , the Board understands that there has been no change in the scope of the corporate powers exerlsed by the bank since the date of its application for me mbership." Approved unanimously, together with a letter to Mr. Leach, President of the Federal Reserve Bank of Richmond, reading as follows: "The Board of Governors of the Federal Reserve SysSys„ nem approves the appli cation of 'The Fidelity Bank', i''"an, North Carolina, for membership in the Federal System, subject to the conditions prescribed in tieiser ve toe enclosed letter which you are requested to forward „ the Board of Directors of the institution. Two copies ; 0 4- such letter are also enclosed, one of which is for folLfiles and the other of which you are requested to m:7drd to he Commissioner of Banks for the State of the Worth n It has for his information. been noted that the bank has on deposit with xconniember bank in Wilson, North Carolina, an amount in it 7 .88 of 10 per cent of its own capital and surplus and of rd :assumed that the Reserve Bank will follow the matter thes ucing the balance to withi statutory limit n s. Since e banks have accounts with each other, your attention 1: 1_688 12/2/41 -4- "is called to the Board's ruling on the question of deduction of sums deposited in a member bank by a nonmember bank (see Loose-Leaf Service #6164). "Exhibit VI of the bank's application did not include, as required by the application form, copies of the approvals or authorizations by the State authorities of the establishment of the branches operated by the bank. Apparently With reference to this requirement, Exhibit VI states: 'For authority see Amendment to Charter'. While such amendment gave the bank the power to establish branches, it provided that no branches should be established or conducted without first complying with the requirements of the laws of the State of North Carolina then or there.after in force respecting the right of banks to open branches. It is our understanding that when the bank established its branche s the State laws required that a bank obtain the approva l of State authorities before establishing a branch. If this is correct, it would appear the.t e the bank was required to obtain such approval of the _!tablishm ent of each branch and appropriate evidence there"should be furnished to the Board." Letter to the Federal Deposit Insurance Corporation, reading as rolaOW8: "Pursuant to the provisions of section 12B of the Federal Reserve Act, as amended, the Board of Governors the Federal Reserve System hereby certifies that The Fa barmers and Merchants Bank of Hill City, Hill City, Kansas, lee; a4le a member of the Federal Reserve System on December oc ; 1 1.140 9.% is now a member of the System. The Board of the Federal Reserve System further hereby 17afies that, in connection with the admission of such a,Tc to membersh ip in the Federal Reserve System, considerwtas given to the following factors enumerated in se.? 1-011 (g) of section 12B of the Federal Reserve Act: The financial history and condition of the 2. The bank, 3. Its adequacy of its capital structure, 4. The future earnings prospects, general character of its management, The convenience and needs of the community to be served by the bank and 4 1689 12/2/41 —5-"6. Whether or not its corporate powers are consistent with the purposes of section 12B of the Federal Reserve Act." Approved unanimously. Telegram to the Presidents of all of the Federal Reserve Banks 2 reading as follows: "Reg. R-112. The Board has been asked whether, in viaw of section 9(c) covering 'lay-away' plans, Regulation W permits a dealer to accept a small deposit (less than required down payment) on an article which he agrees 1,0 hold until the purchaser has accumulated and paid the required down payment, if as a part of the same transaction the dealer delivers another similar article (such !' i11 1 : 1-tci tnstrator) to the purchaser for him to use in the tive."The Board has answered this question in the nega"The Board has also been asked whether RegulationlY Pjrmits a dealer to delive r a demonstrator to a prospeclve purchaser, receiv ing a small deposit (less than the s?_cpired down payment) and, in some cases, an old article which the seller is willing to take as a trade-in, if the pr:ospective purchaser has and knows that he has the unconv„tional legal right to require the dealer to take back : it demonstrator and give back the deposit and the tradethe ifany, without being under any obligation to purchase iga.demonstrator or similar article or under any further tion whatsoever to the dealer. 4. lave. The Board has answered this question in the affirma- obi "The difference between these two cases is that in the „ *first case there was a contract of sale coupled with 481rde agreement which, in effect, would avoid the Regulasa ; while in the second case there was no contract of theeand the prospective purchaser had the right to return ticidemonstrator and receive back the deposit and old arther:' if arty. On the other hand if, in the second case, had been a wo,,?nal and the contract of sale, even though it was con"4-u have been purchaser had the right to rescind, it necessary for the seller to obtain the 1_690 12/2/41 -6- "required down paym ent and to calculate the maturity (in the event the contract became unconditional) from tl.le date of the contract rather than the subsequent delivery of the article. " Approved unanimously. Letter to Mr. Wallace, Counsel of the Federal Reserve Bank of Richmond, reading as follows: "This refers to the first two questions contained In your letter of November 24, 1941 regarding Regulation W. "The first question is whether a first mortgage creating a first lien on improved real estate which is subject to a rede emable ground rent is excepted by section 6ta\ ) of the Regulation. "It is our unde rstanding that although the ground rent is real estate, it is an incorporeal hereditament ;;_rfee the rent, as distinguished from the corporea ei l of the owner of the fee simple estate in the land. Accordingly, the Board agrees with your view alat the first mortgage creates a first lien on real este of the kind desc ribed in eection 6(a) and that the °an which it secures is therefore exempt. "Your second question is whether a loan to redeem such a ground rent will be exempt by the provisions of ec. o ef : i.i°n 6(a), as amended effective December 1. In view fact that the ground rent is a fee simple estate, 6'(11)15 real estate, the loan would be exempt under section you c,mted befo indicate (assuming that the ground rent was reserved , re the borrower purchased the land, or was because IDY the seller when the borrower bought the land ), the, in it would be a loan to finance the purchase of la_ terest of the owner of the rent and thus free the a charge, which would be a transaction of the ;711,r.lature, for present purposes, as a loan to pay off bo ht tgage which was on the land at the time the borrower ug it.li y a8 Appr a second oved unanimously, together with letter of the Federal to Mr. Wallace, Counsel Reserve Bank of Richmond, reading as follows: 12/2/41 -7-"This refers to the last question contained in your letter of November 24, 19h1 regarding Regulation V. "The question is whether a copy of the statement referred to in section 5(c)(1) should be give to each of n the parties to a note which is made by several co-makers, some of whom are acco mmodation makers. "The Board agrees with your view that a copy of the statement need be given only to the part y who receives the proceeds of the loan." Letter to Mr. John A. Schoonov er, President of The Idaho First Natic)nal Bank, Boise, Idaho, reading as follows: "This will acknowledge rece ipt of your letter of November 19, in whic h automobile dealers you urge that in the West be allowed to extend more liberal instalment aredit than elsewhere in the country because of the higher freight diff erentials to which they are subject. It is true that, owing to the higher prices for aut omoIles in the West , which result from higher transporIltion cost s, the regulation has the effect of requirin g ger minimum monthly payments on cars purchased in the West, : "This oint was made a number of times during the Preparationof Regulation V: and has been care fully considered- It is difficult to see, however, how the Board e0111d, as an administrati ve matter, impose different refor different sect than it ions of the country any more vcilth v could impose different requirements in accordan geog ce raphiariations in selling al fact prices due to other than pert ors. It would hardly be feasible, for example, to cars in the highest price bracket to be purchased n more liberal term s than cars in the lowest price bracket. i nstance'Althoug h the Board does not see its way clear in this tho, 'as in many others, to follow suggestions made by ct o its regulation, nevertheless your courtesy Presenting your views is much apprecia ted. The proto trs of Pegulation W are the subject of constant study : tend that the regulation may be made more equitable the tu impairing its effectiveness, and suggestions from rade are given attentive cons ideration." Approved unanimously. 1692 12/2/41 -8Letter to the Presidents of all Federal Reserve Banks, reading as follows: "There have been forwarded to you today under separate cover copies of form F. R. 107b to be used by State bank members in submitting their reports of earnings and dividends for the six and twelve months ending December 31, 1941. "The form is unchanged, so far as the items therein are concerned, from the form used in submitting reports for the six form has an months ended June 30, 1941. However, the new additional column in sections 1 and 2 for figures covering the full year ending December 31, 1941. The Nures in this column will represent the total of the _lhagures in the first column of the current report plus those shown in the report of earnings and dividends for the six months ended June 30, 1941. If the latter report was c orrected after it was submitted to your bank, the corrections should, of course, be taken into account in comPiling the full -year figures for the current report. "It is suggested that appropriate instructions be en to the banks at the time the forms are sent to them. also suggested that, in the examination of the reports 17_10mitted by the member banks before transmittal to the 4_17a?"(1) ;:acthe particular attention be given to the annual figures second column of section 2, to verify that they ?!Icile section 3 of the current report with section 3 Of the report submitted at the end of 1940." Ilv Approved unanimously. Memorandum dated November 27, 1941, from Mr. Nelson, Assist4nt se, -retary, r ecommending that the Board accept the bid submitted by the pr ank Parsons Paper Company, Washington, D. C., for kimeogr furnishing the aPh Paper needed by the Board during the year ranqum 1942. The memothe : ated that the bid provides for the following fixed prices for quarter of 1942 ased and for prices for each succeeding quarter P°n the price published by the International Paper Company: 1693 Size 16 x 21 inches - $1.86 per ream Size 16 x 25 inches - 2.21 per ream Size 17 x28 inches - 2.64 per ream Approved unanimously. Thereupon the meeting adjourned. Chairman.
@FedFRASER