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247 A meeting of the Board of Governors of the Federal Reserve Systern was held in Washington on Tuesday, February 19, 1946, at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Carpenter, Secretary Mr. Connell, General Assistant, Office of the Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman The action stated with respect to each of the matters hereinafter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Fedel'alneserve System held on February 18, 1946, were approved unanimously. The minutes of the meeting of the Board of Governors of the ?ederal Reserve System with the Federal Advisory Council held on Feb18, 1946, were approved unanimously. Memorandum dated February 11, 1946, from Mr. Carpenter rec°11141em., `4"Llig, with the concurrence of Mr. Vest, that, effective February 24, icoL Miss Mabel Goepfert, a secretary in the Legal Division, be tratia.0 'erred to the Secretary's Office as his secretary and that, eff ectiv e as of the same date, the salaries of the following employees the Secretary's Office be increased, as indicated below: Nazi 144 t el Gospfert " v t'Sr. Itrine Meiser Sanders Title Secretary to Mr. Carpenter Secretary to Mr. Hammond Clerk-Stenographer Approved unanimously. Salary Increase From To $2,980 2,650 2,232 3,240101 2,760 2,364 18 24 2/W/4.6 —2— Memorandum dated February 18, 1946, from Mr. Carpenter submit- ting the resignation of Mrs. Louise F. Thomason, a clerk-stenographer in the Secretary's Office, and recommending that the resignation be aceeloted as of the close of business February 28, 1946, and that a 111rELP Payment be made for the annual leave remaining to her credit at that time. The resignation was accepted as recommended. Memorandum dated February 18, 1946, from Mr. Paulger, Director °I' the n. ,avision of Examinations, submitting the resignation of Mrs. Jean G. S atterwhite, a stenographer in that Division, and recommendillgthat the resignation be accepted as of the close of business Feb28/ 1946, and that a lump sum payment be made for the annual leave . 'lf any, remaining to her credit at that time. The resignation was accepted as recommended. Letter to the board of directors of the "Bank of Lancaster," rnock, Virginia, stating that, subject to conditions of memberB11143 n limbered 1 to 3 contained in the Board's Regulation H, the Board 413Proy es the bank's application for membership in the Federal Reserve r`ltism n -nu for the appropriate amount of stock in the Federal Reserve 1/441( or Chicago. The letter also contained the following special corn- "It appears that the bank possesses certain powers 249 2/19/46 -3- "which are not being exercised and which are not necessarilY required in the conduct of a banking business, such as the power to guarantee the payment of bonds and Other obligations. Attention is invited to the fact that lf the bank desires to exercise any powers not actually exercised at the time of admission to membership, it will be necessary under condition of membership numbered 1 to obtain the permission of the Board of Governors before exercising them. In this connection, the Board understands that there has been no change in the scope of the corporate powers exercised by the bank since the date of its application for membership." 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 Sysem approves aPproves the application of the 'Bank of Lancaster,' "llmarnock, Virginia, for membership in the Federal Re”rve System, subject to the conditions prescribed in the enclosed letter which you are requested to forward to the Board of Directors of the institution. Two copies such letter are also enclosed, one of which is for Y r°11r files and the other of which you are requested to _ c)rward to the Commissioner of Banking for the Commonof Virginia for his information. It has been noted that although the management apPears capable of operating the bank satisfactorily, its • cies 11, 3c/11were, until recently, dominated completely by s°rmer President Gouldman who is still a director, and Th e of his practices were regarded as unsafe and unsound. '"e present management apparently has not had time to 'I'laem(?)nstrate its ability to act independently of Mr. GouldIan s influence and the supervising examiner for the F. D. tLC. indicated his belief that this domination will conCa'nueas long as he is connected with the bank in any B lcitY. It is understood, however, that the Reserve 4 .11K has given particular attention to this factor and 17 at/ upon approval of the application, Vice President t,Y12e expects to meet with the management and directorate d;„'.11scuss the matter further with a view to outlining m'lnite policies, procedures and practices for improveIL' of the situation." 2/19/46 -4Letter to Mr. J. B. Herold, Attorney at Law, Shreveport, Loi,; --Lsiana, reading as follows: "This refers to your letter to Chairman Eccles which waS dated February 8, 1946, and addressed to New York City. "You state that you have a client who desires to form a s corporation for the purpose of loaning money on listed tocks as security, and you ask whether this can be legally done. "At present, the Board has two regulations on the !ubject, and we are enclosing a copy of each. Regulation applies to extensions of credit by members of national securities exchanges and brokers or dealers who transact a business in securities through the medium of any such member. Regulation U applies to banks. As a general Proposon subject to certain limited exceptions, both regulations now prohibit the persons subject to them from e)5tending any new credit on listed stocks for the purpose or Purchasing or carrying such stocks. "A broker, corporation or other person that is not a member, dealer, or bank, is not subject to either of these regulations. "You will note, however,that under section 7(d) of ;74'e Securities Exchange Act of 1934, which appears on page s.of Regulation U, the Board is authorized to prescribe a milar regulation which could apply to any one. You will, ,'„Ierefore, recognize that even though there is no such regtation at present, the Board might prescribe such an addi'-Lcnal regulation at any time. "Any substantial development of loans on stocks by Pe not subject to Regulation T or U would naturally an important consideration that might lead to the is'ance of such an additional regulation." j Approved unanimously. Letter to Mr. Alvin L. Bear, Los Angeles, California, reading az f i, o-L-Lows: "This is in reply to your letter of February 6, 1946, about the purposes of the Securities Exchange Act °' 1934 as related to the Board's authority over margin asking 251 2/19/46 II -5- requirements and particularly the power to require existing margin accounts to be closed out. "The general necessity for regulation is referred to in section 2(4) which reads as follows: t(4) National emergencies, which produce Widespread unemployment and the dislocation of trade, transportation, and industry, and which burden interstate commerce and adversely affect the general welfare, are precipitated, intensified, and prolonged by manipulation and sudden and unreasonable fluctuations of security prices and by excessive speculation on such exchanges and markets, and to meet such emergencies the Federal Government is put to such great expense as to burden the national credit.' ,_ "Specific provision for margin regulation is provided section 7. Pertinent excerpts from this section are as follows: '(a) For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Federal Reserve Board shall, prior to the effective date of this section and from time to time thereafter, prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security (other than an exempted security) registered on a national securities exchange. * * *I '(b) Notwithstanding the provisions of subsection (a) of this section, the Federal Reserve Board, maY, from time to time, with respect to all or Specified securities or transactions, or classes of securities, or classes of transactions, by such rules and regulations (1) prescribe such lower margin requirements for the initial extension or maintenance of credit as it deems necessary or appropriate for the accommodation of commerce and industry, having due regard to the general credit Situation of the country, and (2) prescribe such higher margin requirements for the initial extension or maintenance of credit as it may deem necessary or appropriate to prevent the excessive use Of credit to finance transactions in securities.' 252 2/19/46 -6- "You will note that these excerpts refer to both the amount of credit that may be extended and the amount of credit that may be maintained. Since many varied eco!1°m1c matters are involved, the standard to be followed °Y the Board is necessarily broad and will lead to the Prescribing of different requirements as to the extension of credit or, if appropriate, as to its maintenance, in varYlng economic circumstances. "We hope that this information will be of assistance to You. We realize that it may not be as exact as you would Prefer, but it is as complete as Congress found it possible tie° prescribe, considering the circumstances and the complex conomic subject matter involved." Approved unanimously. Telegram to the Presidents of all the Federal Reserve Banks reading as follows: "In order to assist the Czechoslovakian authorities, the State Department requests that the following statement lboe handled as a press release by the Federal Reserve Banks r,„°_th in their head office cities and in branch cities. it'ine statement was released by the State Department in ashington at noon today. Your cooperation will be apPreciated. The text of the statement follows: 'The Department of State has been informed that the Czechoslovak Government has extended until March 10, 1946 the n deadline for the deposit of Czechoslovak currency (de, °111inations of 20 crowns or less) and registration of bank deposits and life insurance policies held by residents of the United States, with Czechoslovak Consular nsular offices in the United States. The deadline prelously announced was December 31, 1945. si 'The deadline for deposit and registration of Czecho, r°vak securities held by residents of the United States, eviously fixed at February 28, 1946, has been extended i° April 30, 1946. The official forms required to be used Ithe registration of the securities together with direct? i -s for their use may be obtained from Czechoslovak Consj , Offices located in New York City,Chicago, Cleveland, 4-Lt sburgh, San Francisco, and Washington, D. c.'" j Approved unanimously. 253 2/19/46 Thereupon the meeting adjourned.
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