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304 A meeting of the Board of Governors of the Federal Reserve Syste th the Presidents of the Federal Reserve Banks was held in the °tfices of the Board of Governors in Washington on Thursday, February 28, 1946, at 2:30 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Carpenter, Secretary Mr. Morrill, Special Adviser to the Board Messrs. Flanders, Sproul, Williams, Gidney, Leach, McLarin, Young, Davis, Peyton, Leedy, Gilbert, and Clerk, Presidents of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco, respectively. Mr. Sienkiewicz, Secretary of the Presidents' Conference azIr25 The Presidents' Conference met in a separate session on Febru26 '1946, and yesterday there were furnished to the members of the to411: Go vernors copies of a list of topics which the Presidents deed t takerl ° Present at this joint meeting with the Board. The matters were 141) a.nd discussed as follows: clerio 1. Discontinuance of Federal Reserve notes of large Pro nlations. The Conference of Presidents considered the in 1/-sal to discontinue the issuance of Federal Reserve notes Etbl_arge denominations. On the basis of information availe, '.11,e majority of the members of the Conference was not Priln. :u „ . 17 disposed toward such discontinuance at this time tiowe,'"-LY because of a possible adverse reaction by the public. tiori Ter) the Conference believes that the subject of eliminad withdrawal from circulation of notes in denominations ot t5alrL time VjVU and $10,000 should be considered at an appropriate i1 the future. 2/28/46 -2- Mr. Sproul stated that the position of the Conference was b4edot the feeling that there were legitimate uses for notes up to incluarig $1,000 denominations and that anything that might be bY those who would be critical of any change, as tinkering with the cill neY system would be undesirable at this time in the absence of 41re c°41Pelling reasons than those stated in the Board's letter of Dec64141'27/ 1945, asking for the views of the Presidents. Ur. Sproul '4° said that it was the feeling on the part of some of the Presirite cithat before action was taken to discontinue the higher denominatl°4110tes there should be a decision on the legal question whether theNlims a uthority under existing law to discontinue the circulation c)t the larger denominations. 6 Chairman Eccles stated that this matter oeen looked into th1"3°ardis Legal Division and that it was f::: discretion in the 44atter rested with the Board. He also statedtth heat any action taken 13°ard in this connection would not be for purpose of reducing 414°11alt of currency outstanding as had been done in other countries rEq4ler for the purpose of preventing the use of large denomination .11trelley for black market operations and tax evasion. He expressed the °11141°11 that Such :41 a step would not be effective alone in preventing °Perations or the evasion of taxes but would only make them more and that if further action were to be taken to curb these ''t4Qticee 1)114 4 it would have to be taken by the Treasury or the Office of is tratim. 2/28/46 -3_ 2. Job evaluation and classification. The Conference '°nsidered the necessity for comprehensive job evaluation !nd personnel classification at the Reserve Banks, and the k.already being done by the Banks. In view of the com',„e ltY of the task, the Conference directed its Committee pWrsonnel to assume the responsibility for working out d; 4 eles and methods as well as making suggestions to individual Reserve Banks which would bring about a maximum deevee of coordination and integration in matters of job ;2:illation and personnel classification, with the understandthat the Committee may engage the services of such conin this field as it may need for the purpose. 8,1. Subsequently, the Board's letter to Vice Chairman Allan °111, dated February 26, 1946, referring to this subject, di ;received by the Conference. It was considered that the wijetion given to the Personnel Committee was consistent " the suggestions of the Board of Governors. T ter 3. 1)ismissal waes and se aration allowances. The Conen Considered the request of the Board of Governors in te ! l, letter of February 15, 1946, and reviewed a proposed letfrom the Board to the Presidents of the Reserve Banks to wa- effect that authorization for the payment of dismissal iges or separation allowances be extended to cover employees a4)rliJntarily separated from service after age 55 and who have a sufficient length of time to be entitled to compensatio lindn out who have not served the 25 years necessary to come tri , : e.r the authorization for supplemental payments, contained the''ne Board's letter S-741. The Conference is in favor of to .. 1 !11 ge as expressed in the proposed letter from the Board Lille Presidents. There was no discussion of these two matters. Oorifts Hospitalization including surgical services. The pl,,.41;4e .pnce again reviewed the Personnel Committee's report on ':()x' making available to employees of the Federal Reserve 'roader facilities for meeting the hazards of illness °tafter discussion, reaffirmed the previous recomndatih atid e Conference to the effect that the plan for hospital lie8e1,81-trgic;s1 benefits should be adopted, with each Federal Bank assuming two-thirds of the cost of providing 144al, husband and wife, or family membership, as the tore be, in the Blue Cross Association of its district each of its employees who may wish to avail himself of 307 2/28/46 —4— !he privilege. It was the view of the Conference that the ' a'- camittee on Personnel and the Reserve Banks should make PPropriate arrangements to carry out this recommendation, a lthough it was understood that an individual Reserve Bank ght for special reason obtain the same protection for its employees through a private insurance contract. Chairman Eccles reviewed the consideration which had been to this matter and said that the Board had felt that before reaching a decision on the question whether it should approve a plan tt)r Making hospitalization and surgical services available to the Neral Reserve Banks there should be further consideration by the 4esiderrts of the question whether the services should be provided thr, o '4°1 aa insurance company or through the Blue Cross Association, 1144 that the Board would now give further study to the matter in the light Of the position of the Presidents as stated above. 14 response to a question from Mr. Szymczak, it was stated eleven of the Presidents favored provision of the services through tilie that the ross Association and that one favored the use of an insurance Melarin stated that the reason why he had favored an in— °flIPan Was the uncertainty whether and to what extent the itSsocjation services would be made available in the Federal 4:1eN Bank and branch cities in the Atlanta District, and that he 4-t that if the same services could be provided through an insurance .z)pazistat a lower rate than charged by the Blue Cross Association that N14(1 be Permitted. 308 2/28/46 -5 5. Compensation of Reserve Bank Officers. The Con.kerence again considered the problem of official salaries the Reserve Bank officers in the light of increasing difofellities in obtaining and retaining able and promosing men official type by reason of inadequate compensation and hiIflted opportunities for the future. It also reviewed the 1Thiri ,tations of the Retirement System with respect to the ofz.clai staff and recognized the continuing need for liberali/1114g the provisions of the Retirement System in this respect. asTilch as the salaries of the chief executive officers of the panics are involved, the Conference is of the opinion that addition to the ordinary reviews of official salaries with she Presidents of the Reserve Banks, the Board of Governors 14 review the general matter of salaries and of retireallowances with representatives of the Boards of Direcur8 of the Reserve Banks. f g In response to a comment by Chairman Eccles that it was the ot 44 of the Board to discuss salaries of officers with the boards ectc)re or committees thereof whenever the directors so desired, spro._ 11, exPlained that what the Presidents had in mind was a gen- etal re view of salary policy with representatives of the boards of clINct ° of all the Reserve Banks rather than the consideration of Ac s alaries •with the respective boards of directors or their NAr esentatives. that the Szymczak stated that as he understood the suggestion it the Presidents would like the Board to meet with the Chairmen Pede CohoqIINtee ral Reserve Banks or to have the Chairman of the Chairmen's tam tri a appoint a committee to represent all of the Federal Reserve discussion with the Board. 414 Chairrnan Eccles said that the Board had just finished conk01 - of the salaries of presidents and first vice presidents of the 309 2/28/46 —6— Pederal Reserve Banks for periods beginning March 1, 1946, and that acivice8 of the Board's action would be sent to the respective Banks shortl Ye He also said that, in that connection, the suggestion had been raade that c onsideration be given by the Board to the liberalization the ,k "enefits now provided under the retirement system of the Fed— eral R eserve Banks, that the Board had the matter under study for the 1514*Pose of determining whether there should be further liberalization, kd that the Banks would be advised in due course of the Board's views. In the ensuing discussion it was made clear that the Board had tot 1,4. 0-L, acted on salaries of officers of Federal Reserve Banks other th4lt, "e pr esidents and first vice presidents and that these would be takentip in due course toward the end of the present salary year for the apective Banks. M. Davis commented that there had been a number of changes (kIteide the eiee System in salary policy in recent years, to which Chairman replied ilterrIrttent It had that as long as salary levels for top positions in the remained unchanged the Board could not go beyond the salaries approved for the officers of the Federal Reserve Banks, that the ealarb the presidents were higher than the salary of any officer of 8 the 40 : t441 errinlent except the President of the United States, and that the W°41d have to keep that situation in mind. Mr. Clerk inquired whether the Board had given consideration r3r creases for officers with salaries above $7,500 based on 30 2/28/46 —7— illerleases in the cost of living as had been done with salaries below that aftunt, and Mr. Szymczak replied in the negative. Mr. Sproul expressed the opinion that in cases where there be ta no change in salary for a considerable period, the salary was L e--ecu being reduced by the higher costs of living, and that if 4clillstments were constantly made for the lower salaries with no change the higher brackets a new salary structure would result which would 401Lbe a d esirable one as it would fail to provide the necessary incetitilles for men to qualify for the more responsible positions. He qao said that the System was set up with the thought that it could 4.41'act competent men who could be compensated on a level commensurate Itith their competence recognizing, however, that the salaries paid c(411dcillet. not be on equal to those paid in private business. He said that he 1 was whether the Federal Reserve Banks were to be regarded 48 inIP°Itant parts of the System and entitled to salaries which would ettraet competent men or whether they should be expected to carry on °44 the routine functions required of the Banks. (1141,ect aplIring a discussion of Mr. Sproul's statement Mr. Williams into 8 tO the probable outcome of legislation now under consideration 'gcrsa*'e Government salaries. 4ttle Chairman Eccles stated that there was likelihood that the legislation would be enacted. 6. the , Le islation: membership. The Conference discussed %Ass provis.lrability of seeking legislative amendment of the 1°ns of the Federal Reserve Act and the National Bank 2 / 2 8/46 -8Act so as to make eligible for membership a large number °f banks that are at present ineligible for such memberbecause (a) they have out-of-town branches and do 2ot have the capital which is required for a national uan.. which establishes out-of-town branches; and (b) their is less than the amount required to entitle them to be 1,0 ecom national banks in the places where they are situan !tied. The Conference submits this subject to the Board of Licsvernors for preliminary discussion of the broader aspects 44d Implications of the problem. Mr. McKee inquired whether any of the Presidents felt that there wlould be any limitation in the law on membership of insured bklate 441 the Federal Reserve System. The Presidents expressed the that such conditions should be removed and that if the banks Wer e entitled to deposit insurance they should be eligible for member— ship in the System. that view. No_e Members of the Board indicated agreement with 111". Sproul raised the question as to what could be done to ' r the conditions at the present time, and Chairman Eccles replied that b eCalaSe of many other emergency matters now pending before the 441111n g and Currency Committees of Congress he did not think there was 37' 13"sibilitY of legislation on this subject. ot be tak d. He said that this was a number of desirable amendments to the law that would have to ell 1112, at a later time when the Congress was in position to con- elach matters. wort. 7. Legislation: information. In carrying on its effectively, the Conference believes that it would eXtremely helpful if its members could be kept posted be C) t 2/28/46 _9— °4 legislative developments affecting the System, particularly with respect to the present status of reorgani!ation of Federal agencies, and the status of the Wagner) 1 ence and the Holding Companies Bills. Chairrnai Eccles said that, so far as the Board knew, nothing 1148beiag done at the present time looking toward the reorganization qthe Federal banking agencies unless it were being done by the of the Budget, that that office had had a group working on the Problem of reorganization for a long time, and that after the 4e°11anization Act was passed the Bureau wrote a letter to all de134*trtients and agencies subject to the Act requesting their recommenda4°113 riot as to the changes that should be made, but that the Board had resPonded to that request for the reason that it did not want to recommendations to be criticized by other agencies. He made the. 4Urther comment that he had discussed the matter with Secretary °Is r the T• -eaeurY Vinson who said that he had not had time to consider thenlatter. Chairman Eccles added that he had expressed the opinion to }its thet Villaon that neither the Board nor the Treasury should reply to cila liclget Bureau request until there had been an opportunity to disthe matter, and that Secretary Vinson stated that he would not kbkit a• nnihing atililee We without first taking it up with the Board. Chairman on to say that he had also discussed the matter with Mr. th th, 11/irector of the Bureau of the Budget, and had stated to him Ithile the Board had not replied to the request for recommenda14 4s' • it Wa8 hoped that nothing would be done to reorganize the bank- aeeneles until he had had an opportunity to discuss the whole 2/28/46 Matter -10- with Mr. Smith. Chairman Eccles also said that the Board faltspred a reorganization for reasons which he outlined, that a con8°1idation of the banking agencies would be in the interest of the b. sYstem for reasons which he also stated, and that some work 41(ibeen done on a reorganization plan so that the Board would not be /44Prepared to make a recommendation at the proper time, but that "Piling had been done on the matter recently. Chairman Eccles then ead the request received by the Board from the Budget Bureau dated lleceinher 26, 1 945, which was followed by a discussion of the extent t15Ahich the Federal Deposit Insurance Corporation was subject to the ReNanization Act. Chairman Eccles stated that the Wagner-Spence Bill was still bef ' 131'e the R. -anking and Currency Committees and as long as the com4ittees were occupied as they were at the present time with emergency le • lelat' lon Was such as the extension of OPA and the British Loan there 4° Pc3seibility of the Wagner-Spence Bill being considered. He eaid that Congressman Spence had indicated to him recently that he tetvor ed the bill but did not see how it could be brought up for conaide rati0m in the immediate future. With respect to the holding company bill, Chairman Eccles e4icl that rneraber t, theh 3 simplified draft of bill had been prepared and discussed of the staff of the Board, the Treasury including the Compthe Currency, the Federal Deposit Insurance Corporation, and ,-Lraent of Justice, that the staff representatives had practically 2123 / 4 6 -11- a.ecePted the draft prepared by members of the Board's staff with the ecePtion of two or three points, and that it was agreed at the last teetin -g of the staff representatives that they should agree on a proglIafter which the Attorney General, Secretary Vinson, and Chairman tecl. ' 8110111d meet for the purpose of ascertaining if the Treasury would be wil, to agree to the program. Secretary Vinson, Chairman Eccles '11°111d be completely occupied for some time with the British Loan 4"therneeting at Savannah in connection with the Bretton Woods orand, while he had stated that he was anxious to get a 1°4 on the matter, he had not been able to set a time for the keetin. g. Chairman Eccles also reviewed the informal discussions which the At t°r4eY General, the Comptroller of the Currency, and he had had With 1, ePresentatives of a number of independent banks who had come to 11;4111411 gton to find out what the situation was with respect to the draft °t bill 44 ' , and stated that, although the Treasury might be willing to N3Port„ the bill, there was a real question whether the bill would be ell4etede , Ile thought that in any event it would not be passed until the rtekt "seion of Congress and that it could not be enacted without the 414313°rt of the Treasury. In response to an inquiry from Mr. Sproul whether the Presi411t could do anything in connection with the holding company bill or thti Pl'esbletn of the reorganization of the banking agencies, Chairman to lee stated that when the bill was agreed to here copies might be sent the Pederal Reserve Banks with full information with respect to it 2/28/46 -1280thall. they could support it in their respective districts. 8. Confer Revised edition of the Federal Reserve Act. The of Presidents recommends to the Board of Governors that steps should be taken to issue as soon as possible a felased edition of the Federal Reserve Act, inasmuch as no ° Z4 edition has been issued since October 1935. There is a need for another revision because numerous additions toowing and changes in the Act have been made since the last edition. Chairman Eccles said that the Board had already authorized the Prillting of a revised edition of the Act which would include all of the ortaxit banking legislation enacted in the present session of CollaNess In connection with an inquiry as to the number of copies Of the r . evlsion that the Federal Reserve Banks might desire, it was 114dersto °d that the Board would address a letter to the Presidents asktrig advi l'ith the e on this point and on such other matters in connection Printing of the new edition as might be necessary. re , 9s Bank andpublic relations. In connection with the V doirt containing summaries of what the Reserve Banks are eid 8 in promoting their bank and public relations, conproeratiOn was given to the advisability of developing a jecr:aM which would include a motion picture portraying ob(a)"elY the Federal Reserve System in action by showing: act rederal Reserve Bank operations; and (b) the System in Thei1n along broader lines, including Open Market operations. Conference believes that the development of such a proto -,: might be desirable for the Board and the Reserve Banks ' ,, °11sider on a cooperative basis in order to make the 1...sesntation of the System in action to the public as efctIve as possible. 14 re aPonse to a question by Mr. Ransom, there was a dis4104 ettro_ f methods that might be used in a motion picture to tell a r the Policy functions of the System, and Mr. Sproul stated that 3 2/28/46 —13- the thought of the Presidents that the Federal Reserve Bank 41148 °Pel'ati°118 and policy functions should not be undertaken in the same PletUre but that there should be a separate picture for each, and that the services of an expert in the field should be engaged in order to °146-14 the best results. Chairman that Eccles said that the idea appealed to the Board and l'ePresentative or representatives of the Board would be glad t()M3rIc "h a committee of the Presidents' Conference to prepare the vietaiis °t the plan. h4c1. Mr. Sproul stated that the Presidents' Conference c°mmittee on bank and public relations and that the committee 11°111c1 be ready to consult with representatives of the Board at any There was agreement that consideration of the matter should With a view to the submission of a report to the Presidents and the katd at the time of the next meeting of the Presidents' Conference in , be ktlIgton. 10. D. 404 iscount rate. The Conference considered the questO what the Reserve System can do in contributing its ttatjuare toward economic stability through credit administh44On and monetary controls. It reiterated its belief Gove,„_l_le preferential discount rate of one-half per cent on eli4Lirsnt securities maturing in one year or less should be develf,ted and that the System should immediately attempt to th' e43 a comprehensive, well-integrated post-war program Nile field of money and credit. The Conference desires to to ti' lw the basic issues involved particularly as they relate 6 Position of the System in the developing situation. the pedetai "fluch as this matter had been discussed at the meeting of °Pen Market Committee this morning and would be considered vT, t 2/28/46 -14tl/Ither at the meeting of the Committee to be held tomorrow, there was 40 discussion of it at this meeting. 11. The role of Reserve Banks in relation to the In,gallqional Bank and Fund. The Conference again reviewed a possible functions that the Reserve Banks can perform 'he 2,,fiecal agents or otherwise for the International Bank :1.1Q1 International Fund. It suggests that further consideraozgi t e. llis subject with the Board of Governors would be de Mr. Sproul stated that what the Presidents had in mind was Whether the Board had any views as to how the Federal Reserve Banks tilt°1 " °rk with the Internatioral Bank and the Fund or whether there IN 44:Y additional information that would be helpful to the Banks in tileirStliqr of the subject. the sir Mr. Morrill stated that this subject was being studied by emll staff group on foreign interests for the purpose of submitting rekrt. i twoa, ! hairman Eccles referred to the study being made currently que°mIzittees of the Technical Committee of the National Advisory eobv, or th -e question of the marketing in this country of the securilea to b e issued by the International Bank. In response to a question from Mr. Williams, it was stated tha, 4 the Ilect,tort P°ssibility of stabilizing operations in this market in connth securities of the International Bank was also being con4ereA w tto on t as on the agenda of the forthcoming meeting of the staff °reign interests. er4 2/28/4 6 -15Chairman Eccles stated that it was generally accepted that the Fecist'al Reserve Banks would be asked to serve as fiscal agents of the Btetton Tioods organizations. In answer to a question whether material being preixred by " the committees ecnIti working under the direction of the National Advisory could be sent to the Federal Reserve Banks, Chairman Eccles tated• that none of the matters under consideraticn by the committees ret' been considered by the Council, that the work being done was 11N14111411`117 and tentative in character, and that to send it to the Pet ' elsel Reserve Banks at this time would serve no useful purpose. rev.1 42 ' AnglarAmerican loan agreement. The Conference 13t wed the prevailing sentiments and attitudes of the tlemutle toward the Anglo-American financial agreement. The v.re uers of the Conference are in favor of the agreement and the :t-Ling to cooperate in every way possible to present -11viect to bankers, civic, business, and other organizatiotley but they believe that their assistance would be much lor 11a4 effective if they could be kept informed of the general of program for public education and of the time schedule program and of proposed legislative action. therai 1111* Sproul stated that the Presidents felt that anything that d° in undertaking to present this matter in their respective tliqqct s might be largely wasted unless they knew what the general (IRN14 Wa8 and how they could be most effective. Chairman Eccles stated that representatives of the Government thq alld were making a number of speeches in support of the loan, 411 th4 .-s expected that hearings on the bill would begin next week, t the Board would send the Banks all of the available information 2/28/46 -16ti Lt, it received with respect to the loan. It appeared, he said, td1q4.1— "" newspaper support for the loan was increasing and that when t4 hearings started there would be a great deal of publicity given he Proposed legislation. 13. Building facilities of Reserve Banks and branches. -uasmuch as the situation with respect to vault space and Other facilities at some Reserve Banks, particularly San allcisco, is becoming more acute the Conference suggests G 46 the subject again should be reviewed with the Board of e°Irernors to the end that some relief may be provided as arly as possible. 4 ci8c0 Ur. Clerk stated that the Federal Reserve Bank of San Fran- was not going to be able to renew the leases on some of the tlee which it had been renting for the use of its branches, in- 14 vault facilities, that additional permanent vault facilities hre neeessarY if the Bank was to continue to carry on its present t&t1", particularly those being conducted for the Treasury, and the . situation was one of emergency so far as his Bank was con- Chairj Eccles said that the general policy of the Board atell in its letter of September 14, 1945, still applied, but that 44. a taxlic was faced with a situaticn such as stated by Mr. Clerk it 11()11 talti submit a plan to the Board for approval and after that was obit, t1441 should proceed to get the necessary permits and, if necesIlthority should be requested from Congress for the construe- rite A the provisions of paragraph 9 of section 10 of the Federal et. He did not thiTY..c that it would be difficult to get a 2/28/46 -17Per*41t in such a situation and that if the matter were brought to the at tention of Congress it might be helpful in bringing about the aci0 13tic'n of the legislation to remove the limitation on the cost of Pecleral Reserve Branch Bank buildings. In connection with a comment by Mx. Clerk that the entire ng Program of the San Francisco Bank would involve an expendittire that of between $5 million and $10 million, Chairman Eccles stated the Bank should delay as much of that program as possible until the situation with respect to building materials and labor improved a.ricish°41d undertake at this time to provide only the facilities for *lich there was an emergency need. 0 14. The interest rate on loans secured by time Re ulation The Conference considered briefly _ue Board's letter of February 25, 1946, regarding the of interest a member bank may charge on loans made t4.a.te 8 0 d epositors upon the security of time deposits and the jggsstion that a present rate of 2% fixed under Regula04.0n.Q is excessive. While the Conference recognizes the p;!llne in interest rates since the establishment of the arivsevs, 2,1? maximum rate on time deposits under Regulation Q CI 4'11 k that in due time the regulation should be changed, ra,"-e not disposed to favor the suggested change in the ot'e at this time particularly since the number and amount 1°ane secured by time deposits have been small. There was no discussion of this subject. Th The 15. Non-member bank loans on Government securities. 9onference again considered the advisability of disraen tli. 11ing the privilege of securing advances on Govern°bligations by non-member banks at the same rate as al3 ,ver banks. After reviewing the present and prospective of ! ati°n, the general consensus was that this privilege ' 1°n-member banks should be withdrawn. 4 2 / 2 4/46 -18Chairman Eccles stated that the Board agreed with the Presi(terts on this matter and that the reasons for granting the privilege to Ql-tmmber banks in 1939 no longer applied. It was understood that the ---uu would approve action by the Federal Reserve Banks to disc°11tirille the rate of one per cent on advances to nonmember banks Sedirect obligations of the United States. Enforcenent of Re ulationlie Consumer Credit. This matter was lict0 11 the list of items which the Presidents desired to consider with the Board but was presented by Mr. Ransom. He said that it was expected that the Board would issue a call in the course of the next few days NI'a COrlferenCe in Washington on the enforcement of Regulation W, CollallMer Credit, and that the Board would like to have each of the Fedel.41 Reserve Banks send the senior officer who had responsibility for th, kbilinistrati on of Regulation W to attend the Conference. He also e414 that the System would face in the future a much more difficult Itilati°11 than in the past with respect to the enforcement of the regu- 141°14 444 that he felt that unless the regulation could be enforced effectively it should be discontinued. In this connection, Mr. Ransom t4"erred to the consent injunctions recently obtained n Chicago 114trict against the Motor City Credit di Jewelry Company, Cori Inc., inhe 11111ers Home Equipment Company, and stated that, while it might not 1)()e qble to get such an injunction in all cases of violations in the recildring action by the Board and that litigation might result ItIl e°111e eases, he thought that would be preferable to a failure to enforce 2hTV46 -19He then reviewed the information obtained in the reports re- ceived by the Board from the Federal Reserve Banks from which it apPellred that the Banks were following widely different policies in the cr investigating work that was being done to determine whether the 1, illation was being complied with. t0 the the He stated that he had come conclusion that it was necessary to have more uniformit y in Pr°grams of the Federal Reserve Banks and that there would have to be some It was his standard below which no Federal Reserve Bank would fall. thought that at the forthcoming conference a program would be17°1 ked out for effective enforcement of the regulation and he stated ' that he wo uld like to have the cooperation of the Presidents in supkrtine the program which he felt would be necessary if the Board was t()e°11tirlue to administer the regulation. Mr. Ransom concurred in the suggestion thA most of the violati°11athat had been discovered had not been willful and that the en- ree'llent program in the past had been largely one of education. He ale() ti °11 the that he felt that without an adequate program of investiga' l 11)1uld not be possible to know, in the future, to what extent regulation was being observed willingly and to what extent entcl'ee'/Ient measures were required, and that this would be true par- tte4larly as goods came on to the market and there were increased in411t111" t° violate the regulation. • 'eYton expressed the opinion that a program calling for inVestigation of the business of registrants would be a source 2/28/46 -20qneedless irritation, that the System had the right to investigate allYcase where there was evidence of a violation, but that it would be unwlse policy to go beyond that. Mr. Ransom commented that it was necessary that the Board haVe 'c'me idea whether the regulation was being observed and that that c°111d not be accomplished without a broader program of investigatiorl Chairman Eccles inquired whether there was any feeling on the Part of the Presidents that the responsibility for the administrati Oil Of RegUlatiOn W should be shifted to some other agency. He state,q that the regulation constituted an instrument of selective cret control, that when the supply of goods again became large and et un available at low rates insta)ment credit would reach a nlgh total, and that it would be necessary to exercise control "'31101 credit in the interest of maintaining a sound credit situa- He felt that the System should be concerned with that situatl°11) t hat it should set up a program which would do an effective job, 44 that the whole matter should be considered from the standpoint Ot ..1Cillg'srange getrtrol There was a discussion of the problem of consumer credit 8 tiorlarir r4ovaI policy. in the light of the whole economic situation and the infla- Pressures that were being exerted as the result of the real' war controls, and Chairman Eccles stated that these controls :34)4 2/28/46 had been removed prematurely, that the removal of instalment credit restrictions would only serve to make the situation worse, and that thssYstem Should undertake to discharge its responsibility with r"Pect to Regulation W unless the Presidents felt that the responsibtut should be shifted to some other agency. Mr. Sproul suggested that consumer credit controls should be 00 ntlnued, that the responsibility belonged to the System as the age. charged with the administration of credit policies, but that the Problera to which Mr. Peyton lad referred would largely disappear the r egulation were streamlined to eliminate everything except Isestri^44 -.-Lons that were important from the standpoint of credit Kier. Mr. Ransom stated that streamlining the regulation meant ther l iberalization and that in the face of the present situation there wa s no justification for further liberalization. lir. Peyton felt that the program of enforcement should be ttreet c4 °IllY toward those violations that were harmful to the efellese of the regulation, and Mr. Ransom stated that such violac°41d not be discovered without an effective program of investiga- Mr. investigations where thher iver Peyton responded that he would favor irtraatio e evidences of important violations, but would disregard minor Ile the correction of which would only serve to irritate the t. ''Riatrant. C)' 2/28/46 -22Ur. Ransom expressed the opinion that such a policy would not 81Ittic . e in the months ahead when there would be much less willingness to abi , `le by the provisions of the regulation and that unless the Syst41 t°°k steps to see that the regulation was being complied with and toan "cePt full responsibility for its administration he would favor the 4. ' 1'arisfer of the responsibility to some other agency. In a further discussion Mr. Peyton inquired if the Board were ' l eqqes • tIng that the Federal Reserve Banks undertake an extensive progl'414 °f investigation, and Mr. Ransom responded that the Board was not a.ek g that the Banks do anything at the moment but that when the cotter snee to which he had referred was called he would like to have the senior officer in charge of Regulation W at each of the Banks att ci erith conference with the affirmative support of the President for t4 pla l'i"se of drawing up a workable program. He made it clear that &lithe Process of developing an enforcement program he did not want tow, -4tagonize a large number of people because he realized that that t4ght is°Pardize the future of consumer credit regulation as an inof credit policy. 141% Leedy reviewed the policy that had been followed at the : 41 Reserve Bank of Kansas City in connection with the investigat1 or P°ssible violations of Regulation W and stated that he was 40t. allial‘e that the program carried out by the Bank was not in line with Ithat Ilae being done by other Federal Reserve Banks and that it would be h el--111 if a procedure could be worked out under which periodic 326 2/28/46 4-'41'68 wt Wald be sent to the Reserve Banks so that each would know the others were doing and what the Board expected in the way of etforcement program. It was agreed that this suggestion should be Carried out. Thereupon the meeting adjourned. Secretary.
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