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1179
Minutes of actions taken by the Board of Governors of the
Federal Reserve
System on Friday, July 30, 1948.
The Board met
inthe Board
Room at 10:30 a.m.
PRESENT:
Mr.
Mt.
Mr.
Mr.
McCabe, Chairman
Eccles
Evans
Vardaman
Carpenter, Secretary
Sherman, Assistant Secretary
Thurston, Assistant to the Board
Riefler, Assistant to the Chairman
Thomas, Director of the Division of
Research and Statistics
Mr. Vest, General Counsel
Mr.
Mr.
Mr.
Mr.
Mt.
Chairman McCabe reviewed briefly the testimony he had given
beror
e the Senate Banking and Currency Committee yesterday with retc) Proposals that authority to regulate consumer instalment
'
el
edit and to
increase reserve requirements be given to the Board
Of
Governors.
He also stated that he had been asked to appear be-
t°11e the Rouse Banking and Currency Committee on Monday, August 2,
'and that he would like to have any comments that the other
1948
keiribe
Of the Board might have to make on his testimony before
the
Senate Banking and Currency Committee yesterday. In response
to a
question by Mr. Vardaman, Chairman McCabe said that he ex13ected to
make a statement similar to that made before the Senate
444lig and
Currency Committee yesterday, including the statement
413/'°Veci by the Board as set forth in the minutes for July 29, 1948
Irhich
not appear to require amplification. Mr. Evans suggested
that i
11 orto meet the comment that the System had not used the
1180
7/W48
-2-
Powers it
had, Chairman McCabe, in the personal portion of his
testi111°nY, might point out what those powers were and what the
resUlts would
be of letting the Government securities market deCurie
substantially. It was agreed that this point might well
be st_ _
''ssed before the House Committee together with the additi°11e1 Point of why the existing credit powers of the System canriot
be Used fully as long as the policy is maintained of supportthe
Government securities market.
In connection with a comment by Mr. Evans that he had a
state
Xent ready for presentation on the regulation of instalment
credit)
Chairman McCabe stated that he would like to have Mr. Evans
attenA
the hearings before the House Banking and Currency Committee
On
14(3nclaY so that he would be prepared to discuss the question of
co4s-'
Luer credit legislation when that matter came up.
This procedure was agreed to.
Mr. Vardaman asked the question whether the Board members
Were
Ilgreed that
the Board should not be given authority to regulate
C Oris
er credit if legislation with respect to bank reserves was
riot enacted.
There was a discussion of the position that the Board might
take
Ifith
respect to the desirability of the Congress granting only
"lori+
'
3 to regulate consumer instalment credit, during which Mr.
'
1181
7/W48
-3-
'
Ir t•rdellan stated that he favored the reimposition of consumer credit
c()Iltrels only as
an integral part of the Board's announced program
tcYr credit control, and that he was unalterably opposed to the re61°11
of consumer credit controls alone because he did not
th1.116c they would be effective.
Mr. Eccles stated that he felt the Board should make it
clear to
the Congress at this time that it felt consumer credit
e("r°1s alone were entirely inadequate to deal with the inflation1/17 si
tuation, and that, if Congress were to give the Board addit1°118.1
powers in the credit field, increased authority over bank
l'eserves was essential if the consumer credit controls were to be
"fecti„.
Chairman McCabe stated that he had made it clear in his
te"1111°11Y before the Senate Banking and Currency Committee yestercl"hat authority to regulate consumer credit was a minor instrulellt Of control, and that it would not be effective alone as a
Of
combating the inflation.
He questioned, however, that
theBoard should take the position that the granting of authority
tc)1%
e r
egulation of consumer credit without other legislation
14)11-1(3- be
undesirable, as it was his view that the authority could
he 118ed to curb the extension of excessive credit for the purchase
or (114'e-hie goods, particularly automobiles.
1182
7131q48
Mr. Evans stated that in his testimony before the Senate
41*ing and Currency Committee on the regulation of consumer in"411Ment credit on November 24, 1947, he had pointed out that the
regulation of consumer credit was needed as a supplement to, and
licit as a substitute for, general credit control powers, and that
It
be looked upon as a type of regulation which had its
131'°Per Place in a well-rounded anti-inflation program. He added
that
if called
upon to make a statement, he would contemplate
saYing that
the regulation of consumer instalment credit was one
c)f the minor tools in the kit of powers the Reserve System might
114ve for use in
the discharge of its responsibilities for the
l'eglaation of
credit.
Mr. Vardaman
suggested that at the hearing before the
110
118e Banking and Currency Committee Congress might be asked
rel' an exPression whether the policy of supporting the Governniellt sec
Urities market should be abandoned. This point was disellBsela but
no conclusions were reached.
Following the discussion, it was
understood that when Chairman McCabe
appeared before the House Banking and
Currency Committee on August 2, 1948,
he would present the Board's views as
set forth in the three paragraph statement approved in the minutes of the
Board on July 29, 1948, and that, in
the light of the discussion at this
meeting, he would consider revising
the part of his statement before the
House Committee which represented his
personal views.
1183
7W48
-5There were presented telegrams to the Federal Reserve Banks
or
le'st°n) Chicago, St. Louis, Kansas City, and San Francisco
stating that
the Board approves the establishment without change
by the Federal Reserve Banks of Kansas City and San Francisco on
'1114 27) by the Federal Reserve Bank of St. Louis on July 28, by
the
ederal Reserve Bank of Chicago on July 29, and by the Federal
Reser—
ye Bank of Boston today, of the rates of discount and purchase
in thei
-r existing schedules.
Approved unanimously.
At this point Messrs. Riefler, Thomas, and Vest withdrew
the
action stated with respect to each of the matters herein-
atter
set forth was taken by the Board:
Minutes of actions taken by the Board of Governors of the
Pecler
41 Reserve System on July 29, 1948, were approved unanimously.
Telegram to Mr. Walden, First Vice President of the Federel lieserve
Bank of Richmond, reading as follows:
"Reference letter July 27. Board approves ap131/Itment, effective August 1, 1948, of Jesse Harold
B'lsworth as assistant examiner for Federal Reserve
stIlit of Richmond."
Approved unanimously.
Telegram to the Presidents of all Federal Reserve Banks
reeil 4
'
4.11g as
follows:
1184
7/30/48
-6-
"Inquiry has been received from a Federal Reserve
as to the policy to be followed with respect to
employees entering service in the Armed Forces of the
_Tatted States under the Selective Service Act of 1948.
It has been suggested that a policy similar to that in
e_ffect during the last war would be desirable except
ror reimbursement for insurance premiums and the paylue
Xlt f unearned salary. In view of the desirability
of reaching an agreement as soon as practicable on the
1?0licY to be followed, the Board is sending the following draft of policy statement to the Presidents of all
of the Federal Reserve Banks for their comments instead
°11 suggesting that the matter be referred to a committee
°J. the Presidents' Conference for recommendation. If
his procedure is agreeable the Board will appreciate
Your comments as promptly as possible on the draft of
P°1icy statement set forth below:
'In accordance with the intent of Congress as
expressed in the Selective Service Act of 1948
the following policy has been adopted with respect to employees who may enter upon active
service in the Armed Forces.
'The benefits mentioned below will be granted to
employees other than temporary employees, entering upon active duty in the Armed Forces of the
United States pursuant to the Selective Service
Act of 1948, including persons who voluntarily
enlist thereunder, but such benefits will not
apply to employees who voluntarily remain in
the service longer than required under .said Act.
While an employee is in such military service
he shall be deemed not to be in the active service of the Bank within the meaning of the rules
and regulations of the Federal Reserve Retirement
SYstem.
'At the expiration of such military service the
employee will be reinstated (provided the Bank's
circumstances have not so changed as to make it
impossible or unreasonable to do so) in the position he left, or one of like seniority, status,
and Pay, provided:
'1. He presents a certificate in evidence of
satisfactory completion of training and
service;
1185
7/30/48
-7" 2. He makes application for reemployment
within 90 days after he is relieved from
training and service or from hospitalization continuing after discharge for a
period of not more than one year;
'3. He is still qualified to perform the duties
of such position.
'If the employee meets the above conditions but is
found to be not qualified for the position he left
(or one of like seniority, status, and pay) because
Of disability sustained during training and service he will be restored to such other position, the
duties of which he is qualified to perform, as will
provide him like seniority, status, and pay, or the
nearest approximation thereof, consistent with the
circumstances in his case, unless the Banks circumstances have so changed as to make it impossible
or unreasonable to do so.
'Upon reinstatement the employee will be restored
to membership in the Retirement System and, provided he has not withdrawn his accumulated contributions, or if they have been withdrawn provided
they are redeposited, he will retain all benefits
based on creditable service rendered prior to entering into military service and in addition will
receive full service credit for the period of military service without additional cost to him.
'If after being reemployed following return from
training and service the employee is subsequently
retired for disability, the disability allowance
Which he would otherwise receive from the Federal
Reserve Retirement System may be reduced by the
amount he receives, if any, from the Government
ability incurred in the military or naval
c:.
li
1 vci
:
:
:
'The foregoing statement is subject to modification or revision within the limitations of law
Whenever deemed necessary.'"
Approved unanimously.
r
O
Telegram
to Mr. Shepard, Chairman of the Federal Reserve
milnneapolis,
stating that, subject to the condition set
1_186
7/30/48
-8-
forth in
the telegram, the Board of Governors of the Federal ReSYstem authorizes the issuance of a general voting permit,
Illacier the provisions of section 5144 of the Revised Statutes of
the
united States, to the "First Bank Stock Corporation", MinneNXais, Minnesota, entitling such organization to vote the stock
.1111-ch it owns
or controls of the "First National Bank of Hopkins",
413kills) Minnesota, at all meetings of shareholders of such bank,
411d till..
-,t
to
the period within which a permit may be issued pursuant
the au
thorization contained in the telegram is limited to 30
from the date of the telegram unless an extension of time is
attte
by the Board.
The condition contained in the telegram
13°11 `41lich the permit was authorized was as follows:
."Prior to issuance of general voting permit autu°r1zed herein, applicant shall execute and deliver
b° You in duplicate an agreement in form accompanying
ard's letter S-964 (F.R.L.S. #7190)."
Approved unanimously.
Letter to Dr. Theodore N. Beckman, Chairman, Committee on
COlis
11Mer
Credit Statistics, The Ohio State University, Columbus
10, ohio,
reading as follows:
This is with reference to your letter of July 12
•
c°11cer
the meeting which your committee would like
1, 'ling
to
im 'lave with Board representatives on the subject of
rovement of the consumer credit statistics. We
orilld suggest that the meeting be held August 18, 25,
or 26, whichever day might be suited to the schedules
the members of the committee. It would seem best
1187
7/30/48
9-
"to have it at the Board's offices and we would be
Pleased to provide lunch for the group.
"As to the Budget Bureau, we should be glad to
arrange for someone from that agency to be present.
"
- might be mentioned that the Bureau would have to
aPProve any change in reporting forms which might
ev
entuate from the discussions, and it has a general
,:esPonsty with reference to the adequacy and
uurden of Government statistical operations.
"M
"Mr. Brown will be writing you further about the
to
for discussion and the procedure to be followed."
Approved unanimously.
Secretary.
%roved:
Chairman.
@FedFRASER