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1_32 A meeting of the Board of Governors of the Federal Reserve 3P3tem was held in Washington on Wednesday, January 28, 1942, at 10:40 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman (Part of meeting) Ransom, Vice Chairman McKee Draper Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Wyatt, General Counsel Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Gardner, Senior Economist, Division of Research and Statistics Mr. Bach, Associate Economist, Division of Research and Statistics Mr. Bean, Economic Assistant, Division of Research and Statistics This meeting was called in accordance with the action taken at th. , meeting of the Board on January 22, 1942, to consider a draft q stet ement that might be used by the representative of the Board in Present' ing the position of the Board at the proposed hearings before the Sete Banking and Currency Committee on the Inter-American Bank. Chai Eccles sent word into the meeting that because of other press- trig Illatters by lies he would not be able to attend. There were distributed copies of a draft of statement prepared for an,sre• Wyatt, Goldenweiser, and Gardner which discussed the need Ilter-American Bank, the management of the bank, the relatio n ()t the p Arl • "eral Reserve System to the Inter-American Bank, the Inter,erzcan Bank Co, 'ttee, and amendments to the bank's statutes. Mr. 1_33 1/28/42 -2- Gardner also distributed copies of a chronological summary of important events in connection with the proposed bank. As a preliminary to the discussion of the draft of statement, r. Gardner be Organ outlined briefly the purposes for which the bank would and the consideration that had been given to the relation- of the Federal Reserve System to the bank, and stated that it apPeared that the time had arrived for the System to determine whether it would seek to play a leading role in the relations of the United 'States with the bank. He also said that, if the opportunity that the *tAmtion presented to the System was to be taken advantage of, it W°11-ld be necessary for the Federal Reserve Banks, and particularly the Federal Reserve Bank of New York, to become interested in it and or a designated member of the Board to familiarize himself fully with then ' r°ject so that he could participate in conferences relating to the c,_ vziPletion of the establishment of the bank and the selection of theAme rlean director and the president of the bank. A discussion ensued of questions that would be raised by various 13%ibi e re lationships of the Federal Reserve System with the InterAkeric all Bank, the authorities under which the Federal Reserve System eal With the bank, and the extent to which the System might be e)cPected to extend credit to the bank in the form of discounts or the - Of its obligations. There was also a discussion of various clilestion ' 8 that might be asked the Board's representative at the hearings 134 ldW42 —3— before the Senate Banking and Currency Committee. The draft of statement distributed by Mr. Gardner was then ' l eacl and discussed paragraph by paragraph and suggestions were made by the members of the Board as to desirable changes therein. 15hile this discussion was under way, Chairman Eccles entered the room and referred to a draft of statement which had been prepared by Mr. to ,iser, Senior Economist in the Division of Research and Statistics 'and which it was proposed to send to Under Secretary of the Treas urY Bell in response to his letter of January 17, 1942, to Chairman Ecc, 'es asking for suggestions and criticisms on a memorandum enClosed . wlth the letter which discussed a proposed special security de84ned f -or the purpose of absorbing idle business balances. The draft Of &tatezent of had been revised following informal discussions by members the Board, and copies had been sent to the offices of the members ot the Board by Ur. Piser before this meeting. The draft of statement was read by Chairman Eccles and, after a discussion, it was understood that he would send it to Mr. Bell as reflecting the general views of the Board on the subject. Thereupon Messrs. Eccles and Carpenter withdrew from the meetand , the ztite 6he consideration of the draft of statement with respect to r-American Bank was continued. At the conclusion of the discussion of the statement, it was understood that Mr. Gardner would revise the statement in the light of suggestions made at this meeting. It was also understood that when the revised statement was approved by the Board it would 1_35 1/28/42 -4be submitted to Mr. Berle, Assistant Secretary of State, for the purpose of ascertaining whether he was in agreement with it or had any comments to make with respect thereto. At this point, Messrs. Wyatt, Goldenweiser, Gardner, Each, d Bean left the meeting, and the action stated with respect to each q the matters hereinafter referred to was then taken by the Board, Chliman Eccles participating: Bond in the amount of $10,000, executed under date of January 22, 191., 9-c-, by Albert M. Creighton as Federal Reserve Agent at the FedReserve Bank of Boston. Approved unanimously. teas , tiemorandum dated January 23, 1942, from Mr. Morrill, Secre- recommending that Paul H. Berntson, who was appointed on a tempo_ 'ax7Y basis on October 16, 1941, be appointed on a permanent basis as a clerk in the Secretary's Office and that his salary be eased from f!,2,000 to $2,200 per annum, effective February 1, 1942. Approved unanimously. M emorandum dated January 27, 1942, from Mr. Carpenter, Asqatant a SeCretary, submitting the resignation of Donald E. Peake as terapora.ry chauffeur in the Secretary's Office, to become effective 4s of the close of business on February 6, 1942, and recommending til4t the resignation be accepted as of that date. The resignation was accepted. 136 1/28/42 -5Letter to Mr. Williams, President of the Federal Reserve Bank Of Phi ladelphia, reading as follows: "In accordance with the request contained in your letter of January 2, the Board approves the appointment, effective January 1, 1942, of Leonard Markford, at present an assistant examiner, as an examiner for the Federal Reserve Bank of Philadelphia." Approved unanimously. In accordance with the recommendations contained in a memorandum dated January 27, 1942, from the Personnel Committee, the following actions were taken by unanimous vote: is 2. Jay Taylor was designated Chairman and Federal Reserve Agent at the Federal Reserve Bank of Dallas for the remainder of the year 1942, and his compensation as Chairman and Federal Reserve Agent fixed on the uniform basis fixed for the same position at all Federal Reserve Banks, i.e., the same amount as the aggregate of the fees payable during the same period to any other director for attendance corresponding to his at meetings of the Board of directors, executive committee, and other committees of the board of directors. , Coo was appointed Deputy Chairman of the Federald Reserve Bank of Dallas for the remainder of the year 1942. 3. n , 7 .°J-Ph Briscoe was appointed a Class C director of ' 1:le Federal Reserve Bank of Dallas for the unexPlred portion of the three-year term ending December 31 '1944. Of Letter to Mr. Creighton, Chairman of the Federal Reserve Bank 114tori 3 reading as follows: "During the conference of the Chairmen of the Federal 137 1128/42 -6- "Reserve Banks with the Board of Governors in the spring of 1940 the suggestion was made by the Chairmen that the Board submit to them from time to time questions involv?1:1g broad general policies for discussion by their respectave boards of directors and for their advice to the Board of Governors as to the conclusions reached in such discussions. . "The members of the Board of Governors are currently giving thought to the question, litihat should be the future Of the regulation of consumer credit? Should it continue along the same general lines as now embodied in Regulation "As you probably have in mind, the Regulation was adopted by the Board of Governors pursuant to an Executive Order of the President, which set forth the underlying ! onsiderations and made it clear that the Regulation was to be regarded as a step supplementing more fundamental measures designed to combat inflationary developments and ot herwise to further the defense program. The Order stated "rig other things that it was appropriate that such "redit be controlled and regulated through an existing pve rnmeatal agency which has primary responsibility with reePect to the determination and administration of national credit policies. "The position has been taken by some that Regulation Ir7 , a,`“A-1-ct be unnecessary under a system of price-fixing and _'1-ocations or rationing. On the other hand, advisers (71:the consultative committee set up by the President's aTer have expressed the opinion that these direct steps m2,11e would not be adequate, even if entirely practical, .o that something in the nature of selective credit conas°18 such as those embodied in Regulation IV is necessary a supplementary measure. mat "The Board will be pleased if you will discuss this theter with your directors at their convenience and advise Board as to their views." Z Approved unanimously, with the understanding that a similar letter would be sent to the Chairmen at the remaining Federal Reserve Banks. a Letter to Mr. Woolley, Vice President of the Federal Reserve of x, 'fleas City, reading as follows: 138 1/28/42 —7— "Reference is made to your letter of January 16, 1942, and earlier correspondence, regarding the coverage Of Group E of Regulation Iv. "A number of other inquiries have been received regarding Group E and, all things considered, it was decided that the description of Group E should be amended so that _ these questions might be answered more satisfactorily. -01.1 will note that the draft of proposed amendment No. 3 e°11.801idated) sent you on January 23 would add the word residential' to the Group E description. t. "It is believed that this will clarify the applica1°n of the regulation in a number of cases. However, Y( .311r letter of January 16 refers to a case in which a :ndnarging light plant is for the use of a dwelling, the Board is of the opinion that in such circumstances the plant would be included in Group E under both the Present provision and the proposed new language." Approved unanimously, with the understanding that a copy of the above letter would be sent to the Presidents of all the Federal Reserve Banks. Letter to Mr. Edward A. Kelly of The E. A. Kelly Furniture Com1/4113T) New Haven, Connecticut, reading as follows: 1 , "Reference is made to your letter of December 18, 14741 which you addressed to the Office of Production ban_agement with respect to Regulation W. Your letter has 'en referred to this Board, which administers the regulation. va "You describe a case in which a customer purchased b221°ue articles, including a range priced at 0.59.00, the range had to be ordered specially from the factory elld has not yet been delivered. The customer has since been , - making payments which appear to be partly on the ra ta4e and partly on the other articles, although the declearof the handling of these payments are not entirely et.- It is now proposed that a range already held in ell> but selling for P28 more, be delivered to the ask -°111erin lieu of the range originally ordered. You pr. whether the entire $28 increase must be paid in cash erl,°r to delivery, or whether only 20% of the P28 in' ase need be paid. 139 1128/42 -8- "A copy of Regulation 11:, with amendments, is enclosed for your convenience, and you will note that under Part 2 of the Supplement the regulation in effect requires a down payment equal to 20% of the net cost of the range after deducting any trade-in allowance. In the case you _?Leseribe, however, the range that was never delivered to the customer need not be counted as a trade-in, and the transaction may be treated as if the sale of the 187.00 range were a new sale. If this is done, any payments which Y:011 have received on the sale of the original range may be applied toward the 20% down payment required on the ore expensive range, and they may prove to be sufficient o meet the requirement. For your information in this .ejnnection, there is enclosed a copy of an interpretation (W-101) regarding a similar revision of a contract under the regulation. be "There is also enclosed a copy of r-71, which would applicable if the range origina3ly purchased had been deliv ered and was now being traded in on the more expen8iVe range. ized "As the administration of Regulation W is decentralamong the twelve Federal Reserve Banks, it is suggested that You may find it more convenient to address the Federal R?'erve Bank of Boston if you should have any further questions T Approved unanimously. Letter to Mr. W. C. Smith, General Manager of The Beebe Company, P°rt1 and, Oregon, reading as follows: "This refers to your letter of January 16, 1942, about the application of the Board's Regulation instalment credit sales of boat motors. Plea"If a motor is so designed that it may be used in alatisure craft, then the credit is subject to the regIl on even though the motor may actually be installed lina boat used for commercial purposes. On the other c.5 41 if the design of the motor is such that it is only not ' able for boats used commercially, then the credit is 8-lbject to the regulation. can 1,'As You suggest, most of the smaller types of motors -e Put in any kind of a boat and so are included in r -4 1-ng 140 1/28/42 -9- "the classification subject to the terms of the regulation." Approved unanimously. Letter to the Presidents of all Federal Reserve Banks, reading as follows: "There is attached a copy of a letter dated January ,2 13, 1942, from Mr. D. W. Bell, Under Secretary of the therein.together with copies of the enclosures referred roeal Mr. Bell states that the information provided or in the form will permit the Secretary to keep up to 'ate on the progress of sales of savings bonds under pay roll savings plans. a, "As your Bank has previously established a pay roll 4t.l?tment plan for the purchase of Defense Savings Bonds, ls assumed that you have received a copy of the letter c_ir the form direct from the Secretary of the Treasury d that the desired information will be submitted as requested. will "y1 this connection, it will be appreciated if you thc, mglve the Board monthly the same information furnished ques+ireasury Department, in lieu of the information re-ed in the Board's letter dated October 11, 1941, '372.11 Approved unanimously. Letter reari to Honorable D. W. Bell, Under Secretary of the Treas- as follous: Bon Szymczak has advised the other members of the wij' of the conclusions reached during his conversation fi ;;Z°11 on January 20 as a result of experience with agency conferences. The principal points which * srmczak mentioned were as follows: tha -L- That the conferences have been very useful and ta t the , Policy of rotation among the Federal Reserve ifti -Le a desirable one; that it would be advantageous twel-r Were held more frequently -- at least once in all'Irs months and oftener if possible; and that occasionthey should be held at the larger and more important 141 1/28/42 -10-- "branches, such as New Orleans and Detroit. "2. That it would be desirable to have standing joint committees of representatives of the Federal Reserve Banks, the Board of Governors, and the Treasury, who would be available to meet upon call and to report to the Treasury, the Board of Governors, and the general 2?nferences. Such committees would submit reports to the Treasury, the Board of Governors and the Federal Re?I've Banks and when the reports are placed on the agenda 1°r a general conference the Federal Reserve Banks and 'ne Board will be given adequate time to consider them before the conference. In this connection, the size of leach committee, the manner in which the membership would _ e determined, and the functions to be assigned to it are to be discussed shortly at the Treasury. be t That the agenda for a conference should ransmitted to the Federal Reserve Banks and the Board of (113vernors at least ten days in advance of the conference; and (b) That whenever the statement of a topic does not s ea P k i„ for itself, a brief explanation should be given connection with it, so that the participants in the i_eting will have an opportunity to consider the point "vaved before the meeting. er 4. That the Treasury will keep the Board of Govpromptly informed as to all important fiscal agency arid y,allied questions which are taken up by the Treasury the Federal Reserve Banks, so that the Board will of in Position not only to meet its own responsibilities 0 ,811Pervision and coordination of Federal Reserve Bank erations but also to be helpful to the Treasury in workany problems that may arise in connection with sug eh matters. flai, "The Board wishes me to assure you that it is in eve4 ' accord with these conclusions and will cooperate in rY possible way in carrying them out." Approved unanimously. 142 1/28/42 -11- Thereupon the meeting adjourned. Assistant Secretary.
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