Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, January 4, 1951, Volume 38, Part 1

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Minutes of actions taken by the Board of Governors of the
Federal Reserve System on Thursday, January

4, 1951.

The Board met

in the Board Room at 2:35 p.m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.

McCabe, Chairman
Evans
Vardaman
Norton
Powell
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Carpenter, Secretary
Sherman, Assistant Secretary
Kenyon, Assistant Secretary
Thurston, Assistant to the Board
Riefler, Assistant to the Chairman
Thomas, Economic adviser to the Board
Vest, General Counsel
Ralph A. Young, Director; Division of
Research and Statistics
Phelan, Acting Director, Division of
Selective Credit Regulation
Baumann, Assistant General Counsel
Noyes, Assistant Director, Division
of Selective Credit Regulation
Walter H. Young, Assistant Counsel
Eastburn, Assistant, Division of
Selective Credit Regulation

Before this meeting there had been sent to the members of
the Board a memorandum from Mr. Vest dated January 3, 1951 to which
was attached a draft of a revision of Regulation X, Residential Real
Estate Credit, designed to bring within the scope of the regulation
apartment houses and other similar structures known as "multiple
family or multi-unit residences".

The draft also included certain

amendments to the existing provisions of the regulation relating to
one- and two-family residences.

At Chairman McCabe's request, the

memorandum was read, following which Mr. Norton stated that with




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the possible exception of the provisions of the proposed regulation
with respect to defense housing and veterans' preferences accorded
by States and State housing programs, he would recommend that the
regulation be adopted by the Board subject to formal clearance with
the itdministrator of the Housing and Home Finance Agency.
In a discussion of the question whether the amended regulation should provide that the Board would grant different terms than
those specified in the regulation for housing essential to the national
defense, Chairman McCabe suggested that provision be made that such
terms would be granted only when requested by the Director of the
Office of Defense Mobilization and the Administrator of the Housing
and Home Finance Agency.




At the conclusion of a discussion
of this point, it was agreed unanimously
that the matter would be taken up informally with the Office of Defense
Mobilization and the Housing and Home
Finance Agency and in the absence of
objection from these offices, the regulation would be changed to provide
that whenever the Administrator of
the Housing and Home Finance Agency,
after consultation with the Director
of the Office of Defense Mobilization,
recommended that special terms be granted
for a specific defense housing project
such action would be taken by the
Board of Governors.
Following a discussion of the paragraphs in the regulation relating to
veterans programs under State law and
State housing programs, it was also agreed

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-3unanimously that the paragraphs should
be retained and that the latter should
be expanded to cover extensions of
credit to public corporations created
pursuant to a public housing program
of a municipality as well as of a
State.
Mr. Solomon, Assistant General Counsel, joined the meeting

at this point.
Pursuant to the understanding at the meeting on December 29,
there followed a discussion of margin requirements during which it
vas understood that no action would be taken at this time with
respect to changing such requirements but that the matter would be
considered at a later meeting of the Board. In this connection,
reference was made to Mr. Szymczak's position that, after intensive
study of all aspects of the stock market credit situation, he had
concluded that the imposition of a margin requirement level of 75
Per cent combined with elimination of withdrawal privileges would
not be justified at this stage) but that he would strongly recommend

that the Board act now to increase margin requirements to 60 per cent
in view of the recent expansion in stock market credit and volume of
trading, the rapid growth of private credit generally, the expanding
business and economic situation which were encouraging stock market
activity and speculation, and also because a further substantial
Price advance supported by rapid expansion of stock market credit
vas a real danger.




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-4Mr. Vardaman referred to previous discussions of his suggestion

that the regular meetings of the Board be scheduled on Tuesdays and
Thursdays rather than on Tuesday and Friday of each week.
Following a discussion, it was
agreed unanimously that hereafter the
regular meetings of the Board would
be held on Tuesdays and Thursdays, with
the understanding that a docket would
be circulated for each meeting which
would list the specific items for consideration and if there were no matters
on the agenda the docket would so state.
At this point all of the members of the staff with the exception
•

Of Messrs. Carpenter, Sherman, and Kenyon withdrew, and the action
stated with respect to each of the matters hereinafter referred to
was taken by the Board:
Minutes of actions taken by the Board of Governors of the
Federal Reserve System on January 3, 1951, were approved unanimously.
Letter to Mr. Samuel I. Katz, Board of Governors of the
Federal Reserve System, Washington, D. C., reading as follows:
"The Board of Governors hereby authorizes you in
Your capacity as economist in the Division of International Finance to proceed to England for a period
of approximately six weeks plus travel time, beginning
on or about January 21, 1951. It is umierstood that
YOU will undertake a study of the British domestic
financial situation and the balance of payments
Prospects of the United Kingdom, and that during the
course of this study you will visit the Bank of
England, bankers and businessmen in London, and
economists in London and near-by universities.
"Your actual necessary transportation expenses,
in accordance with the Board's travel regulations,
Will be paid from funds under the control of the




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"Board, and you will be allowed a per diem in lieu
of subsistence at the rate of $10 while in London,
and at the rate of $8 while traveling in other
parts of England on official business. While en
route to London and return, you will be allowed
per diem or expenses in accordance with the Board's
travel regulations.
"It is requested that you retain the original
of this letter and that the file copy, after being
initialed by you, be returned to the Board's files."
Approved unanimously.
Letter to Mr. Boyd, Chief Examiner of the Federal Reserve
Bank of Cleveland, reading as follows:
"In accordance with the request contained in
your letter of December 27, 1950, the Board approves
the designation of the following as special assistant
examiners for the Federal Reserve Bank of Cleveland:
Cincinnati Branch
Head Office
Brehm, Robert J.
Boanas, Arthur T.
Bobinger, William L.
Cassell, Paul H.
Comarata, Vincent J.
Deady, Daniel J.
Walters, Albert L.
Evans, Howard O.
Wald) Jack
Kunz, Robert H.
Ormiston, Thomas E.
Pittsburgh Branch
Cedel, Emil E.
"Appropriate notations have been made in the Board's
records of the names reported as deletions."
Approved unanimously.
Letter to Mr. Shepard, Federal Reserve Agent of the Federb)
11"eme Bank of Minneapolis, reading as follows:
"In accordance with the request contained in
your letter of December 28, 1950, the Board of Governors
approves effective January 1, 1951, the appointment of
Mr. Walter S. Ferrian as Assistant Federal Reserve
Agent at his present salary of 00,00 per annum, to
succeed Mr. Clayton E. Tillander.




-6"This approval is given with the understanding
that while serving as Assistant Federal Reserve Agent
Mr. Ferrian will remain on the Federal Reserve Agent's
pay roll and will be solely responsible to him or,
during a vacancy in the office of the Agent, to the
Board of Governors for the proper performance of
his duties. When not engaged in the performance of
his duties as Assistant Federal Reserve Agent he
may, with the approval of the Federal Reserve Agent,
and the President, perform such work for the Bank
as will not be inconsistent with his duties as
Assistant Federal Reserve Agent.
"Mr. Ferrian should execute the usual oath of
office for the new position which should be forwarded
to the Board of Governors."
Approved unanimously.
Letter to Mr. Leedy, President of the Federal Reserve Bank
Of Kansas City, reading as follows:
"The Board of Governors approves, as requested
in your letter of December 27) 1950, the payment of
Salary to John R. Snow at the rate of $3793.20 per
annum which is in excess of the salary maximum of
the position in which his present duties are
classified."
Approved unanimously.
Letter to Mr. Koppang, First Vice President of the Federal
Reserve Bank of Kansas City, reading as follows:
"As requested in your letter of December 27,
1950, the Board of Governors approves the payment
Of salary to the following employees at the rates
indicated for the period January 1, 1951, through
June 30, 1952:
Annual Salary
Name
Maude Lindenberg
-$2112
Roy Shaw
3000
J. V. Refregier
4774
(Omaha Branch)"




Approved unanimously.

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Telegram to Mr. Hodgkinson, Chairman of the Federal Reserve
Bank of Boston, authorizing him to issue a general voting permit,
under the provisions of Section 5144 of the Revised Statutes of the
United States, to "New Hampshire Bankshares, Inc.", Nashua, New
Hampshire, entitling that organization to vote the stock which it
owns or controls of "The New Market National Bank", Newmarket, New
HamPshire.

The condition contained in the telegram upon which the

permit was authorized is as follows:
1. Prior to issuance of general voting permit. authorized
herein, applicant shall execute and deliver to you in
duplicate an agreement in form accompanying Board's
letter S-964 (F.R.L.S. #7190).
Approved unanimously.
Telegram to the Presidents of all Federal Reserve Banks,
reading as follows:
"Following statement to be given to press for
release in afternoon papers on Friday, January 5, 1951:
'Preliminary figures received from the Federal
Reserve Banks indicate that during the year 1950
their current earnings amounted to $275 million, a
decrease of $41 million compared with 1949. This
decrease was the result of lower earnings on U. S.
Government securities, reflecting a smaller volume
of holdings and a shift from higher-yield to loweryield securities. Current expenses were $80 million,
leaving current net earnings of $195 million, or $44 million
less than in 1949. Net additions to current net
earnings, mostly profits on sales of U. S. Government securities, amounted to $36 million, making
$231 million net earnings before payments to the
United States Treasury. Payments to the United States
Treasury as interest on outstanding Federal Reserve
notes were $196 million, and payments of dividends
to member banks, as required by the Federal Reserve




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"Act, amounted to $13 million. Remaining net earnings
of $22 million were added to surplus.'"
Approved unanimously.
Letter to Mr. Olson, Vice President of the Federal Reserve
Bank of Chicago, reading as follows:
"Enclosed herewith is a copy of a letter dated
December 15, 1950, from Mr. Charles R. Barrett of
Chicago concerning the application of section 3(c)
of Regulation W to custom-built combination storm
windows and screens manufactured and sold by the
Dodge Window Company of Oak Park, Illinois. Also
enclosed is a copy of our reply to Mr. Barrett:
"The question raised by Mr. Barrett's letter
was discussed by a member of the Board's staff with
Mr. Barton of your Bank.
"While the language of the regulation would
sustain the interpretation quoted by Mr. Barrett,
we understand that you recognized that a less
restrictive view would also be permissible and
perhaps more workable, especially in those cases
where a home modernization project includes both
Group B and Group D articles.
"Storm windows and screens, of course, constitute 'repairs, alterations, or improvements'
under Group D (W-69), and section 3(c) requires
that the minimum down payment be obtained 'at
or before the time of beginning the agreed upon
repairs, alterations, or improvements'. Inasmuch
as the repairs, alterations, or improvements
covered under Group D are 'in connection with
existing structures', the Board is of the view
that the above requirement of section 3(c) will
be met if the required down payment is obtained
at or before the time of delivery of the Group
D article for installation in or upon the
existing structure to which it relates.
"It would seem appropriate that, in making
further reply to Mr. Barrett, the foregoing view
be indicated as either the view of the Board or
the view of your Bank following a reconsideration
of his question.




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"The view expressed herein is the subject
of an S-letter of this date."
Approved unanimously.
Telegram to the Presidents of all Federal Reserve Bankp
reading as follows:
"An inquiry has been received concerning the
application of Regulation X to loans which are
made by banks and other lending agencies pursuant
to commodity loan programs of the Commodity Credit
Corporation and which the Commodity Credit Corporation is committed to purchase. It is the Board's
view that such loans should be regarded for this
Purpose as loans guaranteed by a wholly owned .
Government corporation and that, therefore, they
do not constitute real estate construction
credit as defined in section 2(e) of Regulation
X and are not subject to Regulation, X."




Approved unanimou ly