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162 A meeting of the Board of Governors of the Federal Reserve Systelil Was held in Washington on Saturday, January 30, 1943, at 11:00 a.m. PRESENT: Mr. Szymczak Mr. Draper Mr. Evans 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 hereinter referred to was taken by the Board: Telegram to Mr. Hitt, First Vice President of the Federal Reserve Bank of St. Louis, reading as follows: "Retel Board approves designation of Arthur M. Markham, as special assistant examiner." Approved unanimously. Letter to the board of directors of the "First State Bank of Gra Yslake", Grayslake, Illinois, stating that, subject to conditions of illeniber'ship numbered 1 to 3 contained in the Board's Regulation H, the 11(3e4"4 aPproves the bank's application for membership in the Federal ReSe e System and for the appropriate amount of stock in the Federal Re- Serve Bank of Chicago. Approved unanimously, together with a letter to Mr. Young, President of the Federal Reserve Bank of Chicago, reading as follows: "The Board of Governors of the Federal Reserve System aPproves the application of the 'First State Bank of Grayslake!, Grayslake, Illinois, for membership in the Federal 163 1/30/43 -2- "Reserve 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 of si.ich letter are also enclosed, one of which is for your files and the other of which you are requested to forward to the Auditor of Public Account s for the State of Illinois for his information. "Since the amount of estimated losses shown in the rePort of examination for membership is relatively small, the usual condition of membership requiring elimination of losses has not been prescribed. It is assumed, however, that Proper provision for losses will be made as a matter Of sound banking practic e. "It has been noted that you have been assured that steps will be taken to secure the collective judgment of the directorate or duly appointed committees of directors in the prior conside ration of loans and investments." Letter to Mr. Hays, Vice President of the Federal Reserve Bank cif Cleveland, reading as follows: Me have read and considered with care your letter of January 9, 1943, in which you discuss the proposal that instalment sales scheduled to pay out within a short period such as forty days be exempt from the down-payment requirelasnts of Regulation W. This is a matter which, as you know, has troubled us for some time for reasons which you have mentioned in your letter. Our consideration of the problem has led us to the tentative conclusion that, for the present at least, we should not change the regulation in the manner that You suggest . This does not preclude future action to that effect, and is based principally on the view that the arguments for and against such an amendment are rather evenly balanced and that in these circumstances the presumption is in favor of retaining the status puo. "You will be interested in some of the arguments that have been made against the change. In the first place, the exemption would result in the removal of a certain amount of restraint. How much would be difficult to say, but it is certainly true that some of the fields in which the present requirement applies restrai nt are fields in which merchants s cnnot switch customers to true charge accounts without con..derable b1, evendifficulty. Secondly, the exemption would tend to more than it is blurred already, the distinction instalment credit and charge-account credit. There Is undoubtedly an area where the two overlap, or seem to do so, but our efforts hithert o have been in the direction of separating them rather than bringing them closer together, 164 1/30/43 -3- Hang the reasons for continuing to do so seem on balance to be at least a little better. In the third place, such an exemPtion would be a very distinct encouragement to 'no-downPayment advertising, which is a thing we should like to minimize as much as possible. Fourthly, there is a difficult Problem in deciding just what provisions should be applicable to short-term instalment credits of this kind if they are exempt from the down payment. Clearly it would not be possible to apply all the other regular instalment provisions, since mlany of these are predicated on considerably longer maturitles. If the short-term instalment accounts were not only exempted from down payments but were treated in other respects in the same manner as charge accounts there would Probably be operating and investigating difficulties. "We appreciate your point that there is a real hand.capon the investigators when they are trying to make a distinction between a charge sale and an instalment sale in this field. It must be recognized that it would probably be.difficult in many cases to prove to the satisfaction of a Jury that the sale is of the one type or the other, but we wonder if the evidence is not usually sufficient to make it Possible for the investigator, by informal means, to get the Registrant into line. In talking with several men at other Federal Reserve Banks we have received the impression that thls problem has been bothering them but that it has not b?en so acute as they had at first supposed and that it is nelding to persuasion. It cannot be denied that with the best of enforcement there will continue to be some avoidance through this channel, but we doubt that there will be so much as to make a great deal of difference. "You will understand that this letter is not intended tO foreclose discussion, but only to indicate that we should like to flay the matter on the tablet for the present." Approved unanimously. Letter to Mr. John B. Blandford, Jr., Administrator of the National Housing Agency, reading as follows: "This is in reply to your letter of January 29, 1943, ?oncerning a proposed change in the procedure for the desnation of remodeling and rehabilitation projects as 'defense housing for purposes of section 8(e) of the Board's Regulation V. 165 1/30/43 -4- "The Board is conscious of the fact that this is a matter of great difficulty and is appreciative of the efforts You have made to overcome Some of the abuses that appear to have developed under the old -procedure. The Board has considered the proposed change and has no objection to it. . "It is recognized that, in the final analysis, a decision as to whether or not a proposed repair is essential to continued habitation is a matter of judgment which is being left to be determined by a party in interest. On the other ! , 1: and, it is appreciated that there are serious practical uilficulties in having every project approved by a GovernTent agency, such as the National Housing Agency, or one of Its divisions. Under the circumstances, there seems to be no alternative to a further trial of the 'creditor approval' method. It is noted that copies of the completed forms, after approval by the initial Registrant, will be sent to the nearest office of the National Housing Agency. This 12rocedure will not only help to inject some caution into the 1.ieg1strant8 ' practices, but also provide some means of judging whether or not the plan is operating reasonably well. "As soon as the new order and form have been adopted, we should like to have 15 copies so that we may send prompt notice to the Federal Reserve Banks. "It is assumed that you will distribute copies of the new order and form widely so that notice of the change of Procedure will be brought to the attention of contractors and lending institutions. It has been found that the Federal Reserve Banks receive requests for information on this subject from time to time, and we should like to have 3,000 c°Ples of the order and form as soon as they are available SO that we may send them to the Federal Reserve Banks." Approved unanimously. Of Letter to Mr. Creighton, Chairman of the Federal Reserve Bank Bo ston, reading as follows: "At the completion of the examination of the Federal Re2erve Bank of Boston, made as of December 1, 1942, by the !doardls examiners, a copy of the report of examination was for your information and that of the directors. A copy was also furnished President Paddock. Ca1i"The Board wishes your attention to be called specifto the examiners ' comments contained in pages 7-14. iLone Board feels that the matters therein referred to should e given your continued careful consideration, and would 166 1/30/43 _5_ "like to be advised as soon as practicable of action taken or to be taken by you and your board of directors on these Very important matters." Approved unanimously. Letter to the Comptroller of the Currency, reading as follows: "It is respectfully requested that you place an order With the Bureau of Engraving and Printing, ,supplementing the order of June 17, 1942, for printing Federal Reserve notes of the 1934 Series in the amounts and denominations stated for the following Eederal Reserve Banks: Number of Denomi— Amount sheets nations Boston 49,000,000 150,000 5's 36,000,000 150,000 20's 18,000,000 300,000 Philadelphia 5'8 Cleveland 15,000,000 250,000 5's 24,000,000 200,000 10's Richmond 18,000,000 300,000 5's 36,000,000 150,000 20/s Atlanta 36,000,000 300,000 10's 24,000,000 100,000 201s Chicago 65,400,000 1,090,000 5's 38,400,000 6,400 500's 40,800,000 3,400 1,000's 12,000,000 200 5,000's 12,000,000 100 10,000's St. Louis 9,540,000 159,000 5's 10,320,000 86,000 10's 9,840,000 41,000 20's 8,400,000 14,000 50's 6,000,000 Minneapolis 50,000 10's 12,000,000 50,000 20's Kansas City 9,000,000 150,000 5's 12,000,000 100,000 10's 12,000,000 50,000 20's 3,000,000 500's 500 Dallas 4,800,000 80,000 5's 10,800,000 90,000 10'8 7,200,000 30,000 20's 3,600,000" 3,000 100's Approved unanimously. Thereupon the meeting adjourned.
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