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rPA
Minutes of actions taken by the Board of Governors of the
Feder
'91. Reserve System on Thursday, February 28, 1952. The Board met
exe
.
ciltive session in the Special Library at 10:00 a.m.
PREsENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Szymczak
Evans
Vardaman
Powell
Mills
Robertson
At the
conclusion of the executive session the following, members
Of
the staf
joined the meetinF:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
4arci
Carpenter, recretary
Sherman, _ssistant Secretary
Kenyon, .soistant 'ecrctary
Riefler, Assistant to the Chairman
Thomas, Economic Adviser to the Board
Leonard, Director, Division of Bank,
Operations
Vest, General Counsel
Noyes, Director, Division or (- elective
Credit Re,ful.ation
Chase, Assistant Solicitor
Garfield, /Aviser on Economic Research,
Division of Research and Statistics
Solomon, —ssistant General Counsel
wan, ...cting Assistant Director,
:vision of Selective Credit iegulation
Cherry, Assistant Counsel
Jones, Chief, Consumer Credit and Finances
Section, Division of Research and Statistics
13efore this meeting there had been sent to each member of the
c°127 of a memorandum dated February 26, 1952, from Mr. Evans, regarding
''4ner n-p
-4- suggestions made in recent weeks for chances, pcenerally or a
relaxi
)flatIlre, in the terms of Regulation
Consumer Credit.
The
2/28/52
-2?leill°1'anclurri. stated that these representations had bean most persistent with
l'esDect to
furniture and floor coverings, where it was argued that the current
rlarket was
extremely soft, and with respect to residential repairs, altera-
tiolis, and
improvements, where it was argued that the present down payment
l'eclUirements were unworkable and unfair to registrants attempting. to comPly
°Illsions of the regulation.
The memorandum also stated that It'''.
Zva.eris
c°11011rred in the recommendation of the starf that the Board authorize
.°11eultat,..
7:..nd desiral7ility
-0112 with the trade to detr,rnine the necessity for ,
"solne c
nec in the regulation of a relavinv nature, -oarticular17 whether
the
current down
Payment requirement on residential repairs, alterations,
irapr
ovements should be eliminated and whether the provision exempting
trerli the
d.own payment and loan value requirements of the regulation listed
`Intiel.es
1952)
h a cash
should be increased to a higher
of less than
price
rn
The
memorandum wa- accompanied by a staff report dated February 21,
reviewine the
In
'
etion on
goods situation.
consumer durable
commenting upon his memorandum, Mr. Evans emphasized. that no
the Part
of the Board to change the terms of the regulation was
hirig
recommended at this time but that in accordance with the usual proc"
'llre he
viehed to
situation and obtain the Poard's
advise the Beard of the
8.s to
whether consultations should be held with the trade.
At t
he request of Mr. Evans, Mr. Noyes outlined the reasons why the
tte
had been brought up for discussion at this time, stating that, in
2/28/52
-38.dcliti°4 to those mentioned ih Mr. Evans' memorandum,there was continued
Dl'eSSII
from automobile dealers L,enerally for on eytension of the maximum
lattlritY provision
relatinL to automobiles, and also from dealers on the
"ast who felt that a differential should be established for that
al'e to
allow for hiL;her freight
legarding the automobile situation, Mr. laves said that in the
Q13141°11 of the staff there was no economic justification for any relaxation
tItthis time
since prices 11(,re continuing upward, inventories were not
ecessive
'and res'oonsible rcuresentatives of the trade indicated alnost
1.11:L11°1-It
exce'otion that effective demand would exceed the number of cars
could he
Produced this
Y`''"
tfj
As to home improvements, he said that
slaff was in agreement with the industry that the present down paynent
Isec'reraent8 of the
QiPp.
that it would
in that field nresented great administrative
preferable to eliminate them as a matter of
ellit.6.131-0 tr
eatment of registrants, and that such action would have a
liee:lieible
effect on the voume
lfcredit.
o
He went on to sQl, however,
t
'la the Pefaeral Housing Administration would prefer to retain the present
tE*Iris
theY helped reduce risk in the Insurance of home improvement
:
1 11u °.11.(1 that ;n
the circumstances any removal of the restrictions would
t° 1°e di
scussed with that a7ency.
Mr. Noyes
also said that the le(lera3 Reser-ve Banks:, with but one
exc
eDt'
1°4) we
-re Generally opposed to delisting furniture or relaxing the
2/28/52
-on with respect to furniture or other speCfc items, and that
the,
felt that
any increase in the present c.,:)0 exemption would be likely
to st t
1111111ate requests for other forms of relaxation. The Board's staff,
he ad-ded)
felt that while economic conditions did not clearl
call for
'ellarige in
the regulation at -tIv7 s tine there would be some adv;:,ntace in
relaXatiQn
which would indicate that the Board was administerinc the
re6111ation in a
flexible manner according to changes in, prevailinc. eccn
znaricet
414 the
conditions
For example, an increase in the exa-.
ic
tc
the 10 per cent down payment on home iml)y - ,
removal
- twise,he said, but would :drobaliy he 1-1'
11.1rerios'ubstantial effect cre0 I
l'eceilled by
1°.rtable
the rio
dealers in furniture and such articles as vacuum cleaners,
sewing machines, cedar chests, and to a, lesser extent radios.
tated that in
In response to 9. cruestion by Mr. _1- wins, Mr. Noyes
•
c°1-7-rse the 'Poard would offer the trade some time to study and
th
-e-tx reEional orflcco before consultations were held and that if
4k cop,
'01-11tations
were authorized it would probably be about the end of
larch
befo,•
1°4.11
a recommemktion
: Concerning
_resented to the Poard.
an inquiry by iy]r. Vardaman, Mr. Noyes stated that smF.1.1-
corapanies and consumer loanks had_ not pressed for a relaxation of the
but
had announced publicly that they intended to oppose r''
°11 th, toard,
authority over consumer crelt 1- eyond the ore sent
4te, hrie 30,
1952.
2/28/52
-5At this
point Messrs.
art n, Riefler, and Thomas withdrew from
the m
There followed a further ceneral discussion of the effect of
relaxations
lfl
such as those suggested by the staff during which it was stated,
reSPOZ1Se to
a question 'by Mr. Mills, that such
callss some
move probably would
criticism, on the grounds of discrimination, from automobile
cielers s4nce the regulation presently was more restrictive in that field
tiAll in the ljnes
that would be effected by an increase to
100 in the
exeraption or
the down payment requirement on home
eliminatiorl of
creaite. At
the conclusion of the discussion it was
tatter,
-°,4-1-d. 1.)e considered further by the Board in eyecutive
Mr* Ewan commented on the recent regional conferences
e°11FAIMer
Es4eral
that the
credit and real estate credit regulations, stating
agreement that the four conferences were worth while.
zost important topic concerned the proEram for obtain
He sai(7
c.,
%qth aricl
enforcement of the regulations and that the Board's letter to
Reserve Bealks of
January 18, 19')1, restating the objectives find prinJ
the
l'oEram, was well received, it having been the general feeling that
.t11 letter
would result in an improved program, with no disagreement on
Principle
s OT the minimul n-ocedi,res involved.
He said the Reserve
Eenerally fav ored the suggestion contd:ned in the letter for the
ete'/311
braerit 01 a
coma:It:tee
of Reserve RasP personnel to consider matters
2/28/52
-6relating to
Regulation L. rr. :wan also said that the noard'E re„)resent&tivs
e "ad benefited by sugrestions advanced by the Reserve Ban;'s for technichanEes in the re_ -ulation.
Mr. Noyes said that as the result of discussions at the conferences
cc)ricerninE cu-toner cont_ctr; in cases of apparent violatjons of the recu ati°11) the l'ederal Reserve Dank of Philadelphia was elTerimenti_ng with an
8.1ternative
procedure under which carefully worded letters were sent to
etlst°111ers asking that they cs,11 at the Reserve Dank at their convenience to
discla
138 their transactions with the registrant being investigated. He said
tt vas
11°t Yet fully apparent how well this would work but that in one case
c'2
letters were written, 21 persons had come to the Bank and 3 others
ni
c--leci the Dank on the telephone.
DIIX'ing a discussion of this alternative procedure Mr. 'Vardaman eythe
°Pinion that in some respects it would seem mare undesirable
4144 th
-e Pr°cedure of contacting customers at their residences.
Mr. Noyes
reiteted that the alternative procedure v„:s exi_erjmcntal, adding that it
/1Eci
been
sugrested by representatives of the Board, hut was an outgrowth
110t
Of
el:1
discussion at the regional conferences.
At this point, all of the nembers of the staff withdrew and the
again gent into executive session.
Following the eyecutive session,
Mr. Szymczak advised the Pecretary that
a decision had been reached to postpone
rzc,
“
212R/32
action on the recommendation contained in Mr. Evans' nemorandum
Pending developments over the next
two or three weeks.
The action
stated with respect to each of the matters hereinafter
referred to
was then taken by the Board:
Minutes of actions taken Ty the Board of Governors of the Federal
Reserv,
E'Ystem on Fel,ruary 27, l92,uere approved unanimously.
Me
morandum dated Fe-hruary
1952, from Mr. Bethea, Director,
Administrattve ,S,ervices, stating that Elizabeth M. Young,
Nrlio
raell in that Divisin, had applied for retirement in accordance
1?ith 1)1,
---°-visions of the Civil L,ervice rietireraent Eystem, effective as
e --Lose of
business Fe'bruary 2
1952.
Noted.
il1ians, Assistant
Meill°randum Opted February 25, 1 952, from Nr
141,
ector
'Division of Research and f-tatistics, recommending increases in
theba
sin
- annual
salaries of the following employees in that Division,
effecti
Ire Mr21
'
ch 2
1952:
m
Naze
,le'rrlard N.
'',11-110r R. Freedman
re.tricia Harris
C
Johnz°n
tlezet
rawley
Lone
Title
Econom:'st (Editorial)
Economist
Economist
recretary to Mr. Villiams
Clerk
Clerk
Approved unanimously.
Salary Increase
From
To
$7,4.0
6P
'2,560
7)105
2,5
(0
3,(6o
3,335
3,190
3,78)
2
J,413,270
2/2%2
-8Letter to Mr. Clarke, Secretary, federal Reserve Bank of New York,
as follows:
19, "Reference is made to your letter of February 21,
2',a(lvisinc that at the meeting of the board of direc,'S -Reid on February 14, 19,2, the appointment of Mr.
1:1!rding Cowan as Acting -ssictc,nt Secretary-was terminated
trfective March 1, 1952.
In accordance with this action, the Board of Governors
aDDroveg
ealt
the payment of salary to Mr. Harding Cowan as Assist19,e°11nsel for the period Yrirch 1, 1952, through March 31,
$))-) at his present rate of :3 1.1 000 per annum."
Approved umnimously.
Letter to Mr.
Clarke, First lice President, Federal Reserve Bank
Of
Atlante,
reading as follows:
"Reference is made to your letter of February 6, 1952
il
penl./hich you advised the "Board of the reasons why the ex-.
alle„e_s for certain items of expenditures at uour decA_ Office
uFanches exceeded the 1951 budget estimates.
Board's
recor,z'ITPropriate notations are 'being made in the
u'S concerning these overexpendAtures."
Approved unanimously.
Lett
Letter +
P1,4Lcisco
Mr.
Vice President, Federal Reserve Bank of Can
'reading as follows:
,"This refers to your letter of January 3, and to sul:seq.
skln.2ent correspondence and conversations, in which t was
'
366ested
cert.
that consideration be given to the acce.ctance rof_
beliklfied copies of the reports of cordition of ,YLate member
N
California as Published on the California ,-,tate
,'licL,tion of the reDort 41 lieu of requiring se!
°11 the Board's form F.
10,
with
,, If negotiations
-s noted that, as a result
'=.-tate'lle State Superintendent (
' —ed revised
whIch will
f0rm has been submitte('
,
2/2882
-9-
1I
8401i (or the information will be readily obtainable therefrom)
8
11.1
t1 °f the items on the Beard's form except second preferred
:
:01.°1!W
oNi
i
.t
iiEstl notes and debentures, and the opcional item 33
reserves against loans and securities. However,
is time, no State member bank in California has any sec"' Preferred stock or capital notes and debentures.
is the Board's understanding that, at the top of the
baNs,fsed form, space will be iirovided for use by State member
ii7s in which may be stamped or overprinted the phrase, 'PubUI accordance with a call made by the
-t.,,te bilking
,%Itigie and by the Federal Reserve Bank of this District'.
t
,
l_ls, there would be no differences of any substance between
"Q Et.tate form and the Beard's requirements.
the t'In the circumstances, and in view or your recommendatn,
will Interpose no objection to the acceptance, until
flirt,-°ard
calirr notice, of the publication of condition reports of
:= State member banks on the proposed California State
antially the same as the one you submitted to the
coard
the B
express to the California Superintendent of Banks
arcP.s appreciation of his cooperation in this matter.
ase
Approved unanimously.
Telegram to
Mr. Barrett, Assistant Cashier, Federal Reserve Bank of
eall ?ran
cieco, reading as follows:
to f "Reurtel February
concerning Regulation T. You refer
f.11.act that Fan Francisco rtock Exchange will conform to
zeh-f1-111-business-day settlement rule adopted by New York
,
a g
4e, You ask whether amendment to section 3 of Resulatio
CUI T t° Permit similar four-day period for settlement in
"re i general accounts is under considerat'on.
txch 'The move toward four-day settlement by New York Stock
and
it 11614e and other exchanges has been closely rollowed
question
ae
some
recognized that it might present
to
NeW.(1),. Possible amendment of rule in Regulation 'J. In fact,
Howt::change has informally raised the question.
when
time
8 cis no necessary connection between
ital
.0.1iltY is delivered to broker and time when he must obtain
is rIl• The significant date for purposes of Regulation ri
13.1st;Elte
cal Which transaction is executed. No matter when
1" receives delivery of securities purchased, customer
"
933
2128/52
-10-
If
sh°111c1 he advised ond margin oltair.ed, aJ soon as 1.?ossible
:rte
uould net be appropriate, howexecution of order.
to carry this to the point of imposing an unreasonrThie
_ccordingly, althoucji it has
burden on brokers.
-Lericalriot seemed
advisable to amend, the rule in liegulation T at
this t
time, the situation is being closely watched to bet a
clear
„earer picture of how conditions will work cut in actual
:ttilactice when exchanges have :put four-day rule into operaT ?n, If it appears that present provisions of Regulation
dalITIP°se undue administrative burden on brokers after four.cj
trule of exchange goes into (Deration, Board would appre
—e 'being advised of any pertinent facts in that regard.'
Approved unanimously.
Letter to Mr. Debus, assistant Cashier, Federal Reserve Lank of
sas CIt
relative to the matter of Western Slci:e Sales, Rifle, Colorado,
Cistrant
unoter Regulation W, Consumer Credit, reading as follows:
nR
eference is made to your letter of 1,ebruary '), 19)2,
Etild enclosures regarding the above matter.
vi "It is noted that the investigation disclosed a few
IZ'timns, which were app-,rent13, willful, but that the
par
'
:
.
t es chiefly responsible for the violations were a
sale.ner Igho is now in the armed services and a 2orMer
fur;traan, who is not longer endloyed by the firm. It i,
noted that you plan to reinvestigate the regisEInt again in sixty days.
ree, "In the circumstances, the Board concurs in your
re,v7 Illeridation that disciclinvxy action against tivt
"
strant be withheld pending the reinvestigatien.
Approved unanimously.
Letter t,
Fank of
, ,'.
Delus, Assistant Cashier, Federal Reerve
1sas City
4,
relative to the matter of
e°1111,
estern Slope Sales and Lqui-2ment
Rifle, Colorado, a registrant under Regulation W, Consumer Credit,
l'ee41171€ as
follows:
334.
2/28/52
-11"Reference is rx_icile tc your letter of FeIru_r;
regp,A4
,
the above mtter. It is ieted that a few ii*cl',A'cza,
"ere discovered which were 2rcl' 1 1, unlful, but that the
.P
iaztner who was responsifie f'c- 1,12
,6 in the armed servic.
ilitthe circumstances, To,u, .' ,Jan a _',.'-vestigation in approx.:1rther disciplinary acdays and recnmmene. the
t0,
- Lde taken acan,--,t the re,;-'cLr1,, vendinc. such reinvestiCation
Loard is in agreement with this recommendation.
ipproved unanimously.
L,,,oretary.
@FedFRASER