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'948 Minutes of actions taken by the Board of Governors of the /1ederal Reserve System on Monday, July 17, 1950. the The Board met in Board Room at 10:25 a.m. PRESENT: Mr. McCabe, Chairman Mr. Szymczak Carpenter, Secretary Kenyon, Assistant Secretary Thurston, Assistant to the Board Riefler, Assistant to the Chairman Thomas, Economic Adviser Young, Director, Division of Research and Statistics Mr. Solomon, Assistant General Counsel Mr. Fauver, Administrative Assistant to the Chairman Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter stated that he had been notified by Mr. Vardaman's °trice that Mr. Vardaman probably would not return to his office 14411 Friday, July 21. At the request of Chairman McCabe, Mr. Riefler commented on nieeting he attended last Friday with representatives of the various 1°Irernment agencies concerned with the problem of real estate credit, 414 reviewed the suggestions which had been offered by the representati es as to the measures which could be taken by their agencies to elll ' ts-11 this type of credit in view of the current international aittlation. Mr. Solomon then stated that on Saturday morning Mr. Spingarn, 4`3141zistrative Assistant to the President, called to request that islation be drafted to restore authority to regulate consumer credit. ' 141. Solomon said he told Mr. Spingarn that the President had authority 7/17/5o to do so under existing law if he were willing to declare the existence or a national emergency. Mr. Spingarn felt, Mr. Solomon said, that the President would not want to take such action and that legislation should be drafted. Mr. Solomon added that Mr. Spingarn also asked that legislation be drafted to increase the authority of the Board to Be reserve requirements and, in a later conversation, that the cil'eXts to be prepared include authority over real estate credit. Mr. Solomon went on to say that he and other members of the Board's tlEtrf had prepared drafts on consumer and real estate credit which 111.(1 been submitted on Sunday afternoon with the understanding stated he the requests were made by Mr. Spingarn that Mr. Solomon had Prepared the drafts on a personal basis and they did not purport to l'el)l'esent the views of the Board. However, he did not present a draft "le Eislation on reserve requirements, telling Mr. Spingarn that he unable to determine any form of legislation that would be appropriate to the existing situation. Mr. Solomon made the further statement that tl e.rently it had been decided at the ‘,hite House that the "omnibus 1°111" being drafted to deal with the problems arising out of the Korean Illva'sion Would vest all of these powers in the President. At this point Mr. Evans entered the meeting. Mr. Solomon outlined briefly the substance of the drafts of legi int.; s ----Lon which had been prepared, and In the ensuing discussion 011 rman McCabe stated that any proposals for revision in reserve 7/17/5o -3- requirements, particularly if they covered non-member banks or changed the Present basis for computing reserves, would meet with strong °PPosition at this time. At this point Chairman McCabe was called from the meeting and //hell he returned stated that he had received a telephone cell from SPingarn requesting that Messrs. Riefler and Solomon attend a Itieeting at noon today to discuss the legislation which might be rested in the President's message to the Congress. At this point, Mr. Morrill, Special Adviser, joined the There was further discussion of the reasons why it would be 11114eeirable at this time for the President to request a revision of the _ authority to raise reserve requirements, and, if the request were mati e, the form the increased authority should take. It was the con- that when Messrs. Riefler and Solomon went to the meeting above r"erred to they should urge that, because of the opposition that ' li°111d be offered to a proposed increase in reserve requirements, the message say nothing more on that subject than that, should It heortle necessary, he would submit a recommendation at a later date. There Ifte also a discussion of the steps that might be taken in the ti8e8-1 and monetary fields in the light of international developments 411CI it vas agreed that an early meeting should be held with the Treets 147 to work out a program to be followed in this connection. 51 7/17/5o ellairman McCabe said he had called Secretary Snyder for the purpose of a conference but that the Secretary had been unable to fix ' e tilas for the meeting. Mr. Szymczak noted that if the Federal Reserve System should be p,4 i.4.7s1). authority for regulation of real estate credit, expert advice 1111°M outside consultants would be needed for the guidance of the staff, 44c1 it was agreed that the staff would explore possible means for qtaining such advice. In a further discussion, question was raised whether the regu14ti°11 was administratively feasible and it was the consensus that the 31104rd should not seek the authority to regulate such credit. The meeting then recessed and reconvened at 2:55 p.m. with the 641Ue attendance as at the end of the morning session. Chairman McCabe stated that Messrs. Riefler and Solomon e. ttellded the meeting referred to during the morning session at which there was presented and discussed a draft of the proposed "omnibus ' • The request was made at that time, Chairman McCabe said, that the comments of the Board on that portion of the bill in which it 14" interested be submitted not later than 5:00 p.m. today and that a-13.1r comment s on the balance of the bill be submitted not later than lloon tomorrow. The five titles of the bill included (1) authority to institute 1311°Istties and allocations, (2) authority to requisition materials "u for national defense, (3) expansion of productive capacity 7/17/30 -5- Supply, including authority to reinstitute the V loan program Ilsed in the last war under which, through the agency of the Federal Reserve Banks the armed services guaranteed loans for war production 1)11-11Poses (the provisions of the draft bill on this subject were substaztially in the form of legislation previously approved by the 11°4rd except that the authority to institute the program was in the President, and any Federal agency in addition to any Federal Rese ve Bank could be designated to act as fiscal agent of the armed e srir4 T -Lces in making contracts of guarantee), (4) control of credit, illeludiug consumer and real estate credit and speculation in 111(p dities, and () general provisions, including delegation of e.t1thority, enforcement, etc. The Secretary read that portion of the draft bill covering the regulation of consumer and real estate credit, which, except for the rovisions relating to real estate, was substantially in the form -ui Proposed legislation previously approved by the Board. No objection was made to the draft as read and it was agreed unanimously that the Legal Division should study the several titles of the bill for the purpose of determining whether there were any technical changes that should be suggested in the legislation or further points that should have the consideration of the Board. At this point Mr. Leonard, Director of the Division of Bank (4)eratt -°ns, joined the meeting. 953 7/17/50 -6Mr. Riefler said that at the meeting which he and Mr. Solomon attended there was a discussion of the reasons for the suggestion that the bill contain further authority to increase reserve requirebut that on the basis of that discussion and subsequent conversations which he had with representatives of the Treasury Departet and the Budget Bureau, it was his judgment that provisions on this subject would be eliminated from the proposed bill, although there might be some reference to the matter in the President's Illessage to Congress. The members of the Board present indicated that they would tavor such elimination. Chairman McCabe said that he had just received a letter from the Se cretary of the Treasury in response tc the letter sent to him t011o wing the meeting of the executive committee of the Federal Open Ivlarke t n -ommittee on July 10, 1950, and that he had read this reply bYtei0ne to Mr. Rouse, Manager of the System Open Market .-xcount . At the Chairman's request, the letter was read, and Chairman Vith stated that he was not disposed to do anything in connection reply until the Board had had an opportunity to study the ecktent, -- of the President's message, after which he would undertake to arrange a conversation with Mr. Fnyder. The procedure suggested by Chairman McCabe was approved unanimously, with the understanding that copies of Secretary 7/17/50 -7Snyder's letter would be sent to the Presidents of all of the Federal Reserve Banks under confidential cover. At this point all of the members of the staff with the exception of Messrs. Carpenter and Kenyon withdrew, and the action stated with respect to the matter hereinafter referred to was taken by the Board: Telegram to the Presidents of the Federal Reserve Banks, l'eMing as follows: "In order that the Federal Reserve System may make a more prompt evaluation of developments in the field of consumer durable goods and consumer credit, the Board, on the recommendation of the Executive Committee of the Current Business Developments Committee, is asking that the weekly series on department store sales in selected departments be reinstituted for a time. We should appreciate it, therefore, if you would contact the respondents who cooperated in this project last year and ask them to begin reporting again on a regular basis dollar sales figures for each of the four dePartmental categories included in last year's report. "At the same time we should like to have you explore the possibility of obtaining from the stores, also on a regular weekly basis, a dollar figure for total-store instalment sales. We should also like to have grand total entire store sales for the stores in this special sample. We assume the latter figure /gill be available from your regular weekly sales reports. "It is contemplated that back data for the earlier weeks in July and monthly figures for June for this _ample will be needed to permit an appraisal of de velopments since the outbreak of hostilities in 1C.oreas "Please advise us by Tuesday afternoon, July 18, of the feasibility of obtaining the information outlined above," 7/17/5o -8Approved unanimously.
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