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Minutes of actions taken by the Board of Governors of the Federal Reserve System on Thursday, February 1, 1951. The Board met in the Board Room at 10:40 a.m. PRESENT: Mr. McCabe, Chairman Mr. Eccles Mr. Szymczak Mr. Evans Mr. Vardaman Mr. Norton Mr. Powell Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Mr. Thurston, Assistant to the Board Mr. Thomas, Economic Adviser to the Board Mr. Vest, General Counsel Mr. Townsend, Solicitor Mr. Ralph A. Young, Director, Division of Research and Statistics Mr. Powell stated that he and Mr. Vest were to go to Nea York too attend a meeting of the committee of representatives of financing illstitutions tomorrow morning with respect to the proposed voluntary E*eernent by such institutions to restrict the extension of credit, 4401 that if the program was approved by the committee tomorroa it 7111d1 be considered at a meeting, probably to be held next week, by • 114)resontative3 of the American Bankers Association, insurance compa— Ilies, and other financing institutions, following which it would be bmitted to the Board for approval. There followed a general discussion of possible legislation t° l'eseriet i nflationary credit expansion and of the question whether le Ciclation should be proposed by the Board direct to the Congress 2/1/51 -2- or through the Office of Defense Mobilization and whether it should apply only to banks or should also cover other credit-granting institutions. It was understood that there would be a further discussion of tho matter at the meeting on February 6, 1951. During the foregoing discussion Mr. Riefler, Assistant to the Chairman, joined the meeting and at the conclusion of the discussion airman McCabe withdrew from the room to keep another appointment. Mr. Vardaman referred to previous discussions of the procedure f alowed in handling investments of the Retirement System of the FedReserve Banks and to the understanding reached at the meeting on 14311-1 29) 1949, with officers of six of the Federal Reserve Banks who lifel'e also officers of the Retirement System, that if at the end of 1950 the Per cent rate was not earned on investments of the Retirement "- wen', there would be a determination of the policy which would justify guarant e of Retirement System benefits. Mr. Vardaman went on to say lt was his understanding that the Board agreed to g0 along with the in- Ire8tment procedure then being followed by the Retirement System until the end of 1950, that he mi hed to have the minutes of this meeting ehowthat he had raised the question of a further discussion of the Platters and that he did not approve of the policy being followed in in//"Ling funds of the Retirement System. In response to Mr. Vardamanis comment it was stated that the tter of organization and policy for the investment of retirement 230 2/1/51 -3- sYstem funds gas discussed at the last meeting of the Board and the Presidents and that the matter was in the hands of the Personnel Corntee for further study. At this point all of the members of the staff with the exceotien or fliessrs. Carpenter, Sherman, and Kenyon withdrea, and the action stated with respect to each or the matters hereinafter referred to gas taken by the Board: Minutes of actions taken by the Board of Governors of the Fed- eral Reserve System on January 31, 1951, were approved unanimously. Memorandum dated January 29, 1951, from Mr. Young, Director of the Division of Research and Statistics, recommending that the resignati°r1 of ti.rs. Audrey R. Merritt, a draftsman in that DivLsion„ be acto he effective, in accordance with her request, at the Of businc3s February 4, 1951. Approved unanimously. Telegram to Karl T. Compton, 111 Llenorial Drivu, Iltas eaehusette, reading as folloas: "Board of Governors of Federal Reserve System has '3? ,Pinted you Class C Director or the Federal Reserve nt_41K of Boston for the unexpired portion of term ending u"cember 31, 1953, and gill be pleased to have your •-eptance by collect telegram." Aoproved unanimously. Letter to the Board of Directors of the "Farmers State 'L'anl: c4:41P4ao ) Alpha, Illinois, stating that, subject to conditions of 231 2/1/51 -4- membership numbered 1 and 2 contained in the Board's Regulation H, the Board approves the Bank's application for membership in the Federal Reserve )5,./stern and for the appropriate amount of stock in the Federal Reserve Bank of Chicago. • Approved unanimously for transmittal through the Federal Reserve Bank of Chicago. Telegram to the Presidents of all Federal Reserve Banks, reading as follovis: "Please submit report in duplicate as of January 31 for each guaranteeing agency of guaranteed loans under Regulation V as revised September 27, 1950. Use present Form F. R. 579, omittin columns two and six and giving in column nine amount advanced on loan and in column ton amount 17ePa1d on loan for entire period to January 31. Include in re )rts any guarantees issued and terPiinated ) to dat,, - of report." Approved unanimously. Telegraq, to the Presidents of all Federal Reserve Banks, reading as follows: "The Board has today amended its designation TI.ciler Regulation 4 (see S-1136 ',4-62) of the Red Book "4!"Lional Used Car Market Report and B1ll0 Book-E ,s Edition published by Nat' - 11-,1 Used Car Mat '.'10rt„ Inc. This anencln,ent, :(_ctive Februar:v ' 1.1) has been made at vl request of the pub' transfers from its Rc to its Regime :States oC Alabima, Florida, Georgia, Mississippi, uovth Carolina, Carolin South Carolina, and Tennessee. r 232 2/1/51 -5- "The Board is not issuing a press statement in this connection but you should feel free to give this notice whatever distribution you believe desirable." Approved unanimously. Letter to Mr. Strathy, Vice President of the Federal Reserve Bank of Richmond, reading as follows: "Mr. Bernard Kaiser, Sales Manager of Home Demonstration, Dynamic Stores, 1300 G Street, W. d., Jashington, D. C., STerling 0250, has brought to our attention alleged violations of Regulation Wby the Michael Home Equipment ComPanY, Inc., 516 H Street, N. i., dashington, D. c. "According to Mr. Kaiser, the Michael conce -rn is collecting $15 down payments on $400 television sets, leaving them for a 5-day trial Period, and then collecting payments on a meter Plan, Because of this competition Mr. Kaiser said that Dynamic Stores recently had lost ales to various persons, including Tennessee 'arch, 1h02 15th Street, N. V. and Lenster Brooks 5 901 52nd Street, N. E. "The Michael Home Equipment Company was the Ilbjeet of our letter to you of November 16, 1)50, and your reply of November 30, 1950, con?erning the results of your investigations of lat Company. Your reply indicated that the , lchel concern had been doing business con' rarY to the regulation and that a re-investigation wac, to take place around the end of the year. "In the circumstances, it is considered °sPeeially apropmate 1, that la these later developT!flt2 be brought to your attention, and your ziyestigator should feel free to discuss them rith Mr. Kaiser who asked, however, that his -4me be kept confidential." Approved unanimously. ' 2/1/51 -6Letter to the Presidents of all Federal Reserve Banks, reading as follows: "A question has been received concerning the application of the down payment requirement in Regulation W to the instalment sale of an article listed in Group B having a cash price of more than $50 where, as the result of a trade-in received in connection with such sale, the net price of the listed article is less than $50. "In such a case, the Board is of the view that a down payment would not be required by the regulation. This result follows a reading of section 3(a), section 8(j)(7) and Part 1 of the Supplement in the light of Part 5 of the Supplement. In the case of any article listed in Groups B, C, or D1 Part 5 of the Supplement provides for the calculation or the required down Payment on the basis of the net price of the listed article after deducting from the cash Price the amount allowed for the trade-in.1 'plus, where there is a trade-in, net price! ls substituted for !cash price! for purposes of the down payment requirements applicable to articles listed in Groups B1 C1 or D." Approved unanimously. Letter to Mr. S. H. Scheuer, 39 Broadway, NeJ York 45, N. reading as follows: "This refers to your letter of January 201 1-95l, regarding the regulationsissued by this u°ard on the subject of margin requirements. !Tau state that before the amendment a short 8 0a1? of $201000 vrould require either $10,000 in ' asn or the deposit Of $20,000 in registered seit'"ies as margin. You add that under the recent rndment, effective January 171 19511 a short sale e v i- 4201000 would seem to require either $l5,000 in ash or a deposit of $601000 in registered securities, Y., 234 2/1/51 —7_ "and you ask whether the new requirement, in so far as it relates to the amount required in the case of a deposit of securities, was intended. "The results of the increased margin requirements and correspondingly reduced loan values, are as you indicated. This, of course, is true not only with respect to short sales, but also with respect to purchases. In other words, a purchase of $20,000 would require the same margin, whether in the form of cash or securities, as would a short sale." Approved unanimously. Letter to The Honorable, The Comptroller of the Currency, Tr( (-LL1/.-y Department, Washington 25,D. C., reading as follows: "It is respectfully requested that you place an order with the Bureau of Engraving and Printing, supplementinr, the orders heretofore requested, for 136,000 addiLionql sheets of 1934 Series Federal Reserve notes to be printed during the fiscal year ending June 30, 1951, for the Banks and in the amounts and denominations shown below: DenomiNumber of Bank nations Amount sheets BosT073277(77157.500 450 4,000 92600o000 100 8,000 Row York 100 49,600,000 41,333-1/3 Cleveland 50 333-1/3 200,000 100 1,000 15200,000 At'ant 100 6,666-2/3 8,000,000 Chicago 50 21,200,000 35,333-1/3 100 34,000,000 28,333-1/3 Minneapolis 50 1,666-2/3 1,000,000 100 3,200,000 2,666-2/3 Kansas City 100 6,666-2/3 8,000,000" Approved unanimously. Letter to Mr. H. V. Prochnow, Secretary, Federnl Advisory °434111eil, 36 South Dearborn Street, Chicago 90, Illinois, readinr, as 1'040,4.3: er?,35 2/1/51 -8- "This letter is in response to your3of January 181 1951, relating to the next meeting of the Federal Advisory Council which is to be held on February 18-20 1 195l. The Board Room will be available. for the Council on the afternoon of Monday, February 191 at 2:15 p.m. "I understand that Chairman McCabe has written to you suggesting that his luncheon with the Counci l be on Monday, the 19th, or that the Council have dinner with him on Sunday evening, the 18th. If you will let me know, we will make the dining room available for whatever program you work out. "The Board of Governors will be pleased if the following items could be added to the agenda for discussion vith the Board at the joint meeting on the morning of February 20: 1. What are the views of the Council as to the practicable fiscal and monetary actions that should be taken in the period that lies immediately ahead to combat inflation and to meet requirements for defense? 2. What are the prospects with respect to changes in the total volume of bank loans during the first half of 1951? 3. (hat have been the effects of Regulations and X and under what conditions would the Council favor tightening the terms of the Regulations? L. What steps would the Council recommend to make the V-loan proczram operate more effectively? Complaints have been coming to the Board that the small defense contractor who has the managerial and technical ability to produce defense goods but does not have established banking connections is having difficulty in getting necessary financing. How can this situation be met effectively without the creation of an additional Government agency or lending powers in an existing agency? S. The Board would be pleased to have any co.rnents that the Council might wish to make with respect to the program for voluntary agree= D inancing institutions." Approved unanimously Secretary.
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