Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, January 7, 1942, Volume 29, Part 1

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A meeting of the Board of Governors of the Federal Reserve
System was held in Washington on Wednesday, January 7, 1942, at 11:30
a.m.
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
Federal Reserve System held on January 6, 1942, were approved unanimously.
Memorandum dated January 6, 1942, from Mr. Clayton, Assistant
to the Chairman, recommending, with the approval of Chairman Eccles,
that, effective immediately, Miss Charlotte N. Mitchell be retransferred
from the Board Members' Offices to the Office of the Secretary as a
stenographer

with no change in her present salary at the rate of

1,800 per annum.
Approved unanimously.
Memorandum dated January 5, 1942, from Mr. Nelson, Assistant
Secretary, recommending that Lee W. Langham, senior guard in the Building Operation and Maintenance Section of the Secretary's Office, be




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granted leave of absence without pay beginning January 12, 1942, so
that he might enter active duty with the United States Marine Corps,
and that he be granted the benefits provided by the policy adopted by
the Board on November 14, 1940, and amended August 20, 1941, for all
employees entering military service.
Approved unanimously.
Letter to Mr. Drinnen, First Vice President of the Federal Reserve Bank of Philadelphia, reading as follows:
"The Board of Governors approves the changes in
the personnel classification plan of your Bank as requested in your letter of December 27, 1941."
Approved unanimously.
Letter to Mr. Leach, President of the Federal Reserve Bank
of Richmond, reading as follows:
"In accordance with the request contained in your
letter of January 2 the Board approves the appointment
of Upton S. Martin as an examiner for the Federal Reserve
Bank of Richmond. Please advise us of the effective
date."
Approved unanimously.
Letter to Mr. Evans, Vice President of the Federal Reserve
Bank of Dallas, reading as follows:
"In accordance with the request contained in your
letter of December 31 the Board approves the appointment,
effective December 31, 1941, of E. A. Thaxton, who has
previously been designated as a special assistant examiner, as an assistant examiner for the Federal Reserve
Bank of Dallas."




Approved unanimously.

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1/7/42

—3Telegram to Mr. Ruml, Federal Reserve Agent at the Federal Re-

serve Bank of New York, authorizing him to issue a limited voting permit, under the provisions of Section 5144 of the Revised Statutes of
the United States, to the "First Securities Corporation of Syracuse",
Syracuse, New York, entitling such organization to vote the stock which
it owns or controls of "The First National Bank of Canastota", Cenastota,
New York, "Liverpool Bank", Liverpool, New York, "Citizens Bank of
Clyde", Clyde, New York, and "The State Bank of Parish", Parish, New
York, at any time prior to April 1, 1942, and to elect directors of
such banks at the annual meetings of shareholders, or any adjournments
thereof, and to act thereat upon such matters of a routine nature as
are ordinarily acted upon at the annual meetings of such banks.
telegram also stated that:
"It is noted that applicant has been purchasing
and retiring shares of its own capital stock. In view
of its impaired capital and lack of actual net earnings,
applicant is prohibited from paying dividends by the
terms of paragraph 7 of its voting permit application.
For all practical purposes the purchase of its own capital stock reduces the capital structure of the applicant
to the same extent as if dividends were paid in the amount
of the cost of such stock. It is felt that the financial
circumstances of the applicant do not warrant use of any
of its funds for the purchase of its own stock. Please
advise applicant accordingly."
Approved unanimously, together with
a letter to Mr. Sproul, President of the
Federal Reserve Bank of New York, reading
as follows:
"This refers to the Board's letter of December 11,
1941 (R-930), requesting that you obtain annual reports




The

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"for 1941 from the holding company affiliates in your district which hold general voting permits. You will recall
that, although First Securities Corporation of Syracuse,
Syracuse, New York, does not hold a general voting permit,
an annual report was obtained from it for 1940 pursuant to
our letter to you dated January 11, 1941. In order that
we may have full information regarding First Securities
Corporation of Syracuse covering the year 1941, it will
be appreciated if you will request the corporation to furnish an annual report for 1941 on Form F.R. 437.
"A supply of Form F.R. 437 is enclosed for use in
obtaining the report from First Securities Corporation
of Syracuse."
Telegram to the Presidents of all Federal Reserve Banks, readin.g

as follows:
"Reg. E-123. The words 'down payment' in section
5(f) of Regulation W refer to the down payment required
by the Regulation. Accordingly, if a seller asks for a
larger down payment than is required by the Regulation,
section 5(f) would not prevent a bank or other lender
from lending the purchaser the difference between the
down payment required by the Regulation and the down
payment required by the seller."
Approved unanimously.
Letter to Mr. Swanson, Vice President of the Federal Reserve

Bank

of Minneapolis, reading as follows:
"This refers to your letter of November 29 regarding the effect of Regulation W on an instalment contract
originally drawn for 12 months, where the borrower is unable to make one of the monthly payments and desires to
make it on the 13th month. The question is a rather
troublesome one, and the delay in answering your letter
has been the result of the study which has been given to
it by various members of the Board's staff.
"As you point out, it would be undesirable to require
the use of the Statement of Necessity to make minor adjustments of a kind which are apt to occur in a fairly large




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"proportion of cases. To do so would encourage evasion
on the part of some Registrants, and would cause annoyance at 'useless formalities' on the part of others.
Similarly, it would be undesirable to encourage resort
to the provision in section 8(a)(2) regarding defaulted
contracts in the type of case to which you refer since
that provision also was intended to provide for exceptional cases, and not for the common type of case where
only a slight readjustment is required.
"However, Regulation l; does not require a Registrant
to take any action when a payment is omitted or paid only
in part. If a Registrant wishes to revise or rewrite
the contract, he must comply with the applicable provisions
of the Regulation, such as section 8(a), section 8(d) and
section 3(a)(2)(B). However, if a Registrant in the ordinary course of business merely refrains from foreclosing,
repossessing or bringing suit in a case such as you describe, he would not be violating the Regulation, unless,
of course, he were acting pursuant to a scheme designed
to evade the Regulation. Obviously, if a Registrant made
a practice of taking no action in such cases, and if the
practice were known to his obligors, there would be at
least a presumption that he was evading the Regulation.
"This will probably furnish a practical solution to
the problem in most cases, but we will be very glad to receive any comments or suggestions which you may have regarding it."
Approved unanimously, with the understanding that copies of the above letter would be sent to the Presidents of
all Federal Reserve Banks.
Letter to Mr. William E. Carney, PluMber & Heating Engineer,
Philmont, New York, reading as follows:
"The Commissioner of Internal Revenue forwarded to
us your letter of December 16, 1941, calling attention
to an advertisement appearing in the Albany Times-Union
on December 9, 1941, referring to the terms of sale of
radios. In your letter you say 'May I ask you on what
authority, rule or law they can offer goods at
down payment?'
"Under section 6(j) of Regulation W a seller of




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"goods may extend instalment sale credit on or before
December 31, 1941, which does not bring above 501 the
total of the obligor's outstanding indebtedness to the
Registrant arising out of extensions of instalment sale
credit made on or after September 1, 1941, and (2) is to
be repaid at approximately equal intervals and in approximately equal instalments the last of which matures within
9 months after the first day of the calendar month next
following such extension. In other words, the advertiser
in selling a 24.95 radio at ,1;
1. 1.00 down and 't1.00 weekly
was not violating Regulation W. The section of the regulation noted above was not extended by the Board of Governors of the Federal Reserve System beyond its expiration
date so that on and after January 1, 1942, the sale of a
radio, for example, on the terms stated in the advertisement would be illegal although it was not irregular prior
to December 31, 1941.
"In case you have other inquiries with reference to
the instalment credit regulations, you may find it more
convenient to address your questions to the Federal Reserve Bank of New York, the Reserve Bank of the District
in which your business is located.
"A copy of this letter is being forwarded to the Commissioner of Internal Revenue."
Approved unanimously.
Letter to Mr. Young, President of the Federal Reserve Bank of
Boston, reading as follows:
"Receipt is acknowledged of your letter of December
29, 1941, enclosing a bill dated December 22, 1941 rendered to you by Mr. Phillips Ketchum for professional
services from January 1, 1938 to December 22, 1941. The
bill for services is in the net amount of a5,400 and the
bill for reimbursement of expenses paid out is in the sum
of $3,566.56, making a total of 118,966.56.
"It is noted that this is a general settlement covering all services and expenses during the period stated with
the exception of one law suit which is pending on appeal
and for services in connection with certain loans under section 13b of the Federal Reserve Act as to which legal expenses are reimbursable. It is further noted that in
arriving at the net amount of $15,400, you allow credit
for fees for certain services covered by interim bill which




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"was paid in August, 1939, and also for the retainer payments for 1938, 1939, 1940 and 1941.
"It is understood that at a regular meeting of your
Board of Directors on December 24, 1941, the directors approved the payment of this bill subject to the approval of
the Board. You are advised that the Board hereby approves
the payment of '
,18,966.56 to Mr. Phillips Ketchum for services and expenses as contained in the bill referred to
above and submitted with your letter of December 29, 1941."




Approved unanimously.

Thereupon the meeting adjourned.

Chairman.