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125 A meeting of the Board of Governors of the Federal Reserve System Was held in Washington on Tuesday, January 27, 1_942, at 11:00 PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, 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 Niesrai Reserve System held on January 26, 1942, were approved unani- 1110118137.8 Memorandum dated January 23, 1942, from Mr. Wyatt, General e°141"1.) re commending that Miss LaRue Sargent be appointed as a stenc)grapher in the Office of General Counsel, with salary at the rate of 4)620 per annum, effective as of the date upon which she enters upon the Performance of her duties after having passed satisfactorily the Physical examination. Approved unanimously. t,ecoit Memorandum dated January 23, 1942, from Mr. Morrill, Secretary, ding that Misses M. Elizabeth Jones and Eugenia WaIyce, who apnevInted on a temporary basis on September 21 and November 10, 1941, resPectively, be appointed on a permanent basis as junior file were 126 1/27/42 -2- Clerks in the Secretary's Office and their salaries increased from $1,260 to 8. '71,440 per annum, effective February 1, 1942. Approved unanimously. Letter to Mr. Hill, Vice President of the Federal Reserve Bank °r Phi ladelphia, reading as follows: "In accordance with the recommendation contained a your letter of January 15, 1942, the Board rescinds the aPproval given in its letter of February 12, 1941, for the establishment and operation by the Markle Banking and Trust Company, Hazleton, Pennsylvania, of a branch at Weatherly, Pennsylvania, in connection with the proPosed assumption of the liabilities of the First National Bank of Weatherly by the trust company. "This action is taken in view of your advice that the management of the trust company and representatives of the Federal Deposit Insurance Corporation have been li,l!lable to agree upon certain terms in connection with one assets to be acquired, that negotiations have been "tied looking toward the assumption of the liabilities , the national bank by a national bank in Hazleton, :ad that the trust company is no longer being considered "a Participant in the transaction." l Approved unanimously. Letter to Mr. McLarin, President of the Federal Reserve Bank Ati anta, reading as follows: "This refers to your letter of January 14, 1942, in tislelsponse to the Board's letter of January 3, 1942, regardinquiry received by the Board from Mr. L. M. Gaddis, d:Zei-dent, Jackson-State National Bank, Jackson, Mississippi, 1N:`'ed December 30, 1941, as to the right of that bank to ;1Y interest on savings deposits in excess of n.,000, in miew of an order issued by the State Bank Comptroller of -'88issippi on December 29, 1941. th "Under the State Bank Comptroller's order, it appears st:lit: the maximum rate of interest which may be paid by is-7e,10,anks in Mississippi on savings accounts during 1942 -1--J-/2 per cent per annum, except that if any savings 127 1/27/42 —3— II account exceeds $1,000 no interest may be paid on the excess amount. "As you know, the Board is authorized by section 19 of the Federal Reserve Act to limit the rates of interest which may be paid by member banks on time or savings de— Posits; and section 3(c) of its Regulation Q provides that the rate of interest paid by a member bank upon a savings deposit shall not exceed the applicable maximum rate pre— scribed in the supplement to the Regulation or the appli— cable maximum rate authorized by law to be paid upon such dsPosits by State banks, whichever may be less. The latter r jstriction is in accordance with the requirement of sec— tl°n 24 of the Federal Reserve Act that the rate of in— !fest which a national bank may pay upon savings deposits sudll not exceed the maximum rate authorized by law to be Paid upon such deposits by State banks or trust companies; and this requirement of the law clearly is intended to PI :ace national banks and State banks on a basis of equality wlth respect to maximum interest rates on such deposits. "In view of these provisions of the law and of the Board, 41, e Regulation Q, it is the opinion of the Board that 'tele rate -s of interest which a national bank located in t1,883-ssiPpi may lawfully pay on savings deposits during 1;e Period the order of the State Bank Comptroller is s_gallY in effect may not exceed the rates prescribed in order; and that, accordingly, during such period it 1a. 4.3 not permissible for a national bank in Mississippi to anY interest on that part of a savings account which --4-ceeds ,t;ch will be appreciated if your bank will make reply to m Gaddis' letter of December 30, 1941, advising him Of the Board's views with respect to this matter as above et 8 forth. is noted that the State Bank Comptroller's order 'cieullibits the issuance by State banks of certificates of isP°eit except with maturities of 6 or 12 months; but there na.;,.°f course, no provision in the Federal law which makes resl°nal banks subject to restrictions of State law with posP s,ct to maturities of certificates of deposit. It is trol ble that a question may arise, in view of the Comp— trayTri e order, as to the maximum rates of interest which Of d: Paid by national banks in Mississippi on certificates Posit having maturities of other than 6 or 12 months. ar question has not been raised with the Board nor, so the et.:8 I've are informed, with any Federal Reserve Bank or ' omPtroller of the Currency; and, accordingly, we are riot at this time attempting to express any view with respect 128 1/27/42 -1;- "!,o maximum rates payable by national banks in Mississ1Ppi on such time certificates. If such a question should be presented to you, it is suggested that it might be well for you to consult with the State Bank Comptroller regarding this phase of the matter before expressing opinion on this question or before submitting it to the Board if such action is deemed necessary." Approved unanimously. Telegram to the Presidents of all Federal Reserve Banks, readas follows: "Reg• W-125. Section 5(c)(1) requires that a copy of the statement of the transaction be given to the oblg°r• The Board has been asked whether a copy of the euatement should be given to each of the parties to a n°te which is made by several comakers, some of whom are accommodation makers. The Board replied that a copy of the statement need be D.1 only to the party who receives the proceeds of the loan. t (. "Similarly, the Statement of the Borrower required 5\ d) need be obtained only from the party who ecelvss the proceeds of the loan." ; 13,3, Approved unanimously. Letter to Mr. Miliams, Head of the Consumer Credit Department °I* the p eueral Reserve Bank of Philadelphia, reading as follows: 31 "Receipt is acknowledged of your letter of December ool.?4dressed to Dr. Parry regarding the substitution of is.4i'-ateral in automobile sales contracts where the col±S demolished or injured beyond repair. The ino(jY relates to the effect of RegulationW (1) where new of 'ateral is substituted without any change in the terms is ; 1 ePayment or the amount to be repaid, and (2) where it vehind impossible to replace the old car with an identical e l:e and additional money is necessary. agre,'Win regard to the first type of case, the Board 's you that the new collateral may be substituted 129 111 /42 -5- "and, the contract may be continued (or rewritten) on its Old terms. The insurance company in effect replaces the collateral, and the case is no different in principle from one where the collateral is merely damaged and the Insurance company pays for the repairs. "In the second type of case also the Board believes that the proceeds of the insurance may be substituted for the original collateral, making the provisions of section 'Lot* Regulation W applicable only to the amount by which the price of the new car exceeds the price of the old car, "As a practical matter, as you point out, the insuradnce company will usually pay the money directly to the _78-ler, and if the dealer furnishes the new car, the buyer "111 be in the same position as previously, except with 14:78Pect to the additional value of the new car. This addi:,'")nal value is therefore regarded as a new sale under ' Ite gulation "Or course, if the insurance company paid the money to the , buyer and the buyer used it to liquidate his orig' , 1 ,na1 obligation with the dealer, and then entered into a ew contract with some other dealer, the above principles , °uld not apply, and there would be a new sale subject to [legulation W. 4., "The principles discussed above would also apply to ' tle exchange of an unsatisfactory automobile. W-101 was ant to imply that an article found to be defective may if replaced at any time with a similar article, and that ti seller is unable to replace it with a similar ara ?1 ,j_1-e and has to give the purchaser another article of fellIgher price, the old contract may be continued in efoti%, and a new contract may be entered into covering the t,'"- erence in the price, provided the transaction is eninto in good faith. . le 0 As indicated in W-101, a transaction of this type for Pen to the suspicion that it is a mere formality used ci the purpose of evading the Regulation, and the suspithrt hecomes greater in proportion to the length of time anc, defective' article is held before being 'replaced' new in proportion to the amount by which the price of the pri article exceeds the value of the old. In fact, if the i_ce is very much greater, the suspicion may be almost However, this does not mean that there are fl f • "es where such a transaction is entered into in good alth.11 z Approved unanimously. 130 1127/42 -6Letter to the Presidents of all Federal Reserve Banks, read- ing as follows: "For your information you will find enclosed copies .0 tf the following communications in regard to the publica1°n of information that might be of value to the enemy: January 13, from Archibald MacLeish, Director of the Office of Facts and Figures, to Chairman Eccles, quoting a communication from Stephen Early, Secretary to the President. January 13, from Archibald MacLeish, Chairman, Committee on War Information, to Chairman Eccles, setting forth a statement of the action taken by the Committee on War Information upon a proposal submitted by the War Department relating to a uniform policy covering Government Publication of information bearing upon the letting of procurement contracts and similar matters. (A copy of the enclosure referred to in the above letter is also attached.) "Under the procedure that is being developed, it aprars.that the Government proposes to put the primary reINfInsIbility for censorship, that is, the withholding of °rmation that would be of value to the enemy, upon those dlsseminate information, whether they are Government artments, newspapers, radio, or magazines. It is evin betlY contemplated that where there is doubt matters can et4eferred to the appropriate Government authorities ,?,' 1 in the Office of Censorship or in that of Facts and r igures." 7 Approved unanimously. Letter to Honorable Cordell Hull, Secretary of State, reading 4"°1-lows: HT— the B "‘" response to your request you are advised that theNv e d,f.?.vors a proposed amendment to section 7 of tence:'trcalty Act which would add the following sen'This section shall not be operative When the United States is at war.'" Approved unanimously. • V27/42 -7- Thereupon the meeting adjourned. Secretary. Chairman.
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