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998
A meeting of the Board of Governors of the Federal Reserve
8Yetern1(11th the Presidents of the Federal Reserve Banks was held in
the offices of the Board in Washington on Thursday, June 21, 1945/
beginning at 10:00 a.m.
PRESENT:
Mr. Eccles, Chairman (who entered the meeting
during the discussion of Item 3)
Mr. Ransom, Vice Chairman
Mr. Szymczak
Mr. McKee
Mr. Draper
Mr. Evans
Mr. Morrill, Secretary
Messrs. Flanders, Williams, Gidney, Leach,
McLarin, Young, Davis, Peyton, Leedy,
Gilbert, and Day, Presidents of the
Federal Reserve Banks of Boston, Philadelphia, Cleveland, Richmond, Atlanta,
Chicago, St. Louis, Minneapolis, Kansas
City, Dallas, and San Francisco, respectively
Mr. Sienkiewicz, Secretary of the Presidents'
Conference
Chairman Day, of the Presidents' Conference, said that the
Neici
ents had considered the various suggestions on the agenda for
th
e
1dents' Conference and had prepared a list of items to be
cklied
to the attention of the members of the Board at this time. A
copii
4,
or this list had been furnished to each member of the Board yesHe took up each item in the following order:
Destruction of Records.
p
"The Conference of Presidents has accepted and ap017ed the Report of the Committee on Destruction of
e:!°rds dated May 24, 1945. It asks the Board of Gov'Ors to take the necessary action to carry out the
999
6/21/45
—2—
recommendations of the Committee as to records of the
Baak Examinations Department, as follows:
(1) that the Board of Governors authorize the
destruction of records of the Bank Exam—
inations Department in accordance with
Schedule I attached to the report of
the Committee; and
(2) that the Board of Governors authorize
the Federal Reserve Banks to destroy in
their discretion internal and inter—of—
fice records of the Bank Examinations
Department described in subdivision (b)
of the report, and any other records of
the Bank Examinations Department which
the Board feels may be disposed of after
stated limited periods.
"The Conference also requested the Committee on De—
ctlon of Records to proceed with a further study of,
to consult with the Treasury about, the fiscal agency
'records including those for which indefinite periods of
etention are recommended in the report."
Chaiman Day said that it was contemplated that a copy of the
4Port f
o- the Committee on Destruction of Records would be made avail-
41)1e t0 the
Board. There was no discussion.
"2,
1c22peration with the National Bureau of Economic
I_Iesearch.
44
BonalThe Conference considered the request of the Na—
Bureau of Economic Research for cooperation with
the
ureau in its research projects on urban real estate
ulcing and agricultural financing. The Bureau is un—
d'
"takin
g these projects primarily at the behest of the
Asso
a f,!lation of Reserve City Bankers and expects to raise
°f $350,000 over a period of three years for the
su
PPoft.t of the projects.
moAfter discussion, the Conference agreed that, pend—
1 e specific proposals by the Bureau, the Presidents
e.gre_ :
Principal to cooperate with the National Bureau
Ztqfnout
g
t
Iz:
the proposed research projects, with the
that the character and extent of such coopera—
ha_ between the Reserve Banks and their staffs on the one
"Q and the
National Bureau on the other will be determined
1600
6121/45
-3-
"IT the nature and circumstances of each case involving
such cooperation.
"This action is presented to the Board of Governors
toor information, pursuant to the Board's expression of
its willingness to have the Board's staff cooperate with
the staff of the National Bureau of Economic Research in
thls undertaking."
There was no discussion.
"3
' ELAPcial Aid to Small 1311Aine_P!
"The Conference reviewed and considered the report
°I- its Legislative Committee. After discussion, it has
reached a general agreement that:
(1) It is desirable to study further the regional investment plan as proposed by
the Investment Bankers Association of
America and to endeavor to develop a satisfactory and workable program; and
(
2 ) It is desirable to review the type of legislation suggested by the Committee on
Legislation in its report dated September
11, 1944 relating to the modification of
Section 13b of the Federal Reserve Act.
The action of the Conference of Presidents
on that report was that it was in sympathy with the underlying purposes of the
pending legislation but that there were
fundamental questions inherent in the provision changing the location of the fund,
which should have consideration."
After Chairman Day had read the foregoing statement, Mr.
174 inTlired where this statement left the matter and Chairman
84id that it
did not change the situation as it had previously
ekleted* President Davis, however, made the comment with respect to
41113'134N.raPh (2) of the foregoing item that in reality there was no
:
11 1(lisell3sion of this subject.
The legislative committee of the
‘I‘e8ideritet
Conference had submitted, with its approval, a report pre14111 13Y its
sub-co
'ttee which embodied the above-mentioned language.
1001
6/21/45
—4—
Mr. Evans inquired whether the Presidents looked with favor
"he Investment Bankers Association Plan and President Davis re—
that they thought that there were
Some
possibilities in it,
bIlt that
there were substantial differences of opinion which the
'
4Lotents had not resolved by a vote.
There followed a general discussion of various phases of the
trive
stment Bankers Association Plan, during which Chairman Eccles en—
te
r,,,4 the
meeting.
Chairman Eccles referred to the fact that he had made a state1
thisLI
subject before the Committee on Small Business, known as
the patinan
Committee, in the House of Representatives, which corresponds
to
thel4urraY Committee in the Senate. He said that the Patman Cam44ttee
had, held hearings in various parts of the country and had done
4 lot of
hard work on the subject, in which they had taken a very ac—
tbre .
lalteres,.
k, He added that two members of the Committee were very
41 of banks and of bank examination policies.
They reported
that
their hearings everywhere the burden of testimony was critical
b
zaminations and that bankers had stated that they could not
4144 te
Were
I'm loans of the types necessary for small business because they
rlt
icized by the examiners as being slow or unsound.
iiRteeni Chairman Eccles said that he explained to the Committee the
ent which had been reached in 1938 among the supervisory author—
It
'esb t that he recognized that the habits of individual examiners
1002
6/21/45
—5raight not be easily changed and he would not be surprised if it ap—
Peal'ed that the agreement had been ignored by some examiners under
theFederal Deposit Insurance Corporation or the Comptroller's Office.
ever,
SO
far as the Federal Reserve was concerned, he said that he
telt 8ure that the examiners were adhering strictly to the examina—
tion
Procedure contemplated by the agreement.
Then, Chairman Eccles said, he explained to the Committee
raetber
8 the proposals contained in the pending Wagner—Spence Bill
to
tend Section 13b of the Federal Reserve Act, and said that the
of the Committee seemed to be very much in favor of that sort
approach
the
to the problem.
Chairman Eccles said that the members
Committee were of the opinion that it was not equity capital
that
/748 wanted by small business concerns, because they did not want
to
give 1.11) or share control of their own enterprises and they felt that
the
'lvestment Bankers Association proposal would involve giving up
ctte
e°11trol. They did not want to turn over such control to others
to A.1
1/44-aute their stock ownership by sharing it with others.
the7
What
114nted was low interest rate, long—term credit which was not the
tYDe np
credit that banks would provide without some form of insurance
gli
ntY comparable to the Federal Housing Association insured loan.
The Chairman said that he criticized the Investment Bankers
beeti atIon proposal, particularly in view of the opposition that had
elcPressed on the part of bankers to the Government being a par—
qP4/1t ln
• the
extension of credit, while at the same time the plan
1003
6har/45
—6-
PricINsedy in effect, that a substantial part of the funds should come
fro
la the Treasury, and therefore they were thoroughly inconsistent;
secOncly that the fund of $139,000,000 upon which they proposed to
Was
already committed, so that it would not be available; and,
that, if the proposed corporations took over equity capital of
ablas.
lness enterprise, there was a provision that they could sell it
whete
lier they chose to sell it, which would tend to open up opportuni—
ties
for monopolization rather than for the independence of little
14144ess
In other words, if an enterprise were profitable and suc—
Ceas4+._,
'
4 144,
the investment corporation could immediately turn around and
the
stock, whenever it had an opportunity, to someone who would
44 .
4
vo obtain an interest in it or possibly control of the enterprise.
Chairman Eccles reported further that he had said that one
Which to help small business was to modify the tax laws and
that 14e had suggested that a corporation should be exempted from the
of taxes on amounts distributed as dividends.
Williams said that he wanted to emphasize the point about
ttatio
n because casualties in small business are very heavy, and only
4 relat
ilrey" few small business enterprises were highly successful, and
t4
te
nd to become successful in a very large way, so that the tax
Arobierrt
will become acute. Chairman Eccles commented that the diffi—
of building up an equity under present tax laws were almost
ttleitt_
4101I1tab1e.
1004
6/21/45
-7In the course of the foregoing discussion, Chairman Eccles
cob..
-Attended a letter which had been sent by President Flanders of the
Pecieral Reserve Bank of Boston to all member banks in the First Dist1i,4. .
in regard to the Wagner-Spence Bill, under date of June 14/
1945
4rld suggested its consideration by the other Presidents.
"4• licErowing by Banks to Increase Excess Profits Tax
Base.
"The Conference discussed the question of member
04ak3 borrowing on Government securities, as collateral,
Purposes of increasing 'borrowed capital' to lessen
or avoid
excess profits taxes. In view of existing pol1
.cY with respect to loans on Government securities, and
fl view of
4,
the impossibility in most cases of determinaby
1:',°/1
the Reserve Banks whether such borrowing is for
c'48ineSS purposes, within the meaning of the income tax
'
417, the Conference was of the opinion that this is pri!ari4 and largely a matter for the Bureau of Internal
4evenue. The Presidents desire to discuss this matter
I,d this opinion with the Board of Governors, in the
.‘-1-ght of the Board's letter S-843, dated April 19, 1945.
"At its meeting in February, the Conference considered
L
tv),
l subject and the general consensus was that the
uus
2
.actice of using Reserve credit by a bank for purposes
"Li
t ncreasing excess profits tax base was improper, and
t4u4t supervisory authorities should discourage this praci'ee When it came to their attention. This, of course,
8 still the view of the Conference."
2
There was a considerable general discussion of the practicabIlitir
" °t1 determining in each case whether the purpose was to increase
the t4x h
_ase or some other purpose. The discussion touched upon a
4114be
Points, including the following: (1) Cases of banks that
Irritatarle0Usly buying Governments and borrowing when the circum-
keee
would indicate that the purpose was not merely to make a profit
111/ .easo
1,
n of the difference between the discount rate and the rate borne
1005
614),45
-8bYths Governments, but also to increase the excess profits tax base;
(2) Whether
the preferential rate based upon Government securities
within one year should be eliminated or raised; (3) The TreasIll'i financing program and the statement of policy announced by the
130arci
of Governors in September 1939 in regard to lending on Governet se
curities; (4) The desirability of obtaining a ruling from the
as to whether the amount of such borrowing will be allowed
e°111Pating the tax base; and (5) the provision incorporated in paragraPh 8 of section 4 of the Federal Reserve Act by the Banking Act of
1933
'which expressly requires that each Federal Reserve Bank shall
keep •
itself informed of the general character and amount of the loans
4rid
'
vestments of its member banks, with a view to ascertaining whether
Ulltke
Use is being made of bank credit for the speculative carrying of
"ram_
-444g in securities, real estate or commodities, or for any other
Purpo,.
'e inconsistent with the maintenance of sound credit conditions;
"
4
d
e'iermining whether to grant or refuse advances, rediscounts
oth
er credit accommodations the Federal Reserve Bank shall give conicieration to
such information.
There were varying opinions among the Presidents as to the
te
'
"
4 b ity- of determining in all cases when member banks were borrowthe purpose of reducing their excess profits taxes. Mr. McKee
447 attention
to an actual case which had developed in one of the
coal
Reserve Districts, where the purpose had been entirely clear,
44t1 this was
discussed, and there seemed to be no difference of opinion
6121/45
—9—
that borrowing of that kind should be stopped.
Mr. Young referred to
the fact that the form of application for advances used at the Chicago
Bank
called for information as to the purpose of the borrowing. It
13/48 agreed that if flagrant cases should develop, the Federal Reserve
4114 should not permit such borrowing and, also, that an attempt
841111 be made to get a ruling from the Treasury. In this connection,
the
suggestion was made that if the Treasury would select one or more
elear
cases and announce a ruling, the whole problem would be disposed
01's
Chairman Day raised the question whether the Board would ap—
Prove
-- this time a raise in the discount rate, but Chairman Eccles
thott l.
gut that such action should be deferred until the matter had been
(11.ecti,
'
sec' with the Treasury, because of the close relationship between
keh act3
---"m and the Government financing program. It was understood
that th
e Board, at the earliest opportune time, would take up with the
ot
1117 both the question
of a ruling by the Treasury on borrowings
the
Purpose of raising the excess profits tax base and the question
nating or raising the preferential discount rate.
connection with the use of the borrowing facilities of the
Reserve Banks in order to reduce the excess profits tax, Chair—
es said that he was concerned about the vulnerability of banks
eh the
develops in the public mind a knowledge of the increasing
es
of the banking system and a feeling that something should be
1007
6/21/45
-10(1°11e about it which might, among other things, result in special tax814°4 an the banks. Mr. Davis felt that the fact that the Board and
the
ederal Reserve Banks had carried on a drive for the purpose of
ettirig
banks into a more fully invested position should not be over-
look
6'4'
Chairman Eccles, however, took the position that the question
illIder consideration related to cases where investment was not the pur15% bUt rather a temporary use of Government securities as a base for
borro ,
Illng from the Federal Reserve Banks to evade tax obligations, which
WoblA
not be a proper use of Federal Reserve credit.
Mr. Gilbert said that he thought that the Federal Reserve
8444 had a distinct responsibility in cases of the kind which had
411"14 in his District and Mr. Davis said that he felt that all of
he Presidents would take the same position as that which had been
takeri
Mr. Gilbert. Mr. Young described a case which had came to
4
att
e---an, in which the application had been disapproved, and
tel'eeci 1411-th Mr. Gilbert.
There appeared to be no disagreement on
ePart of any of the Presidents.
E.tgulation D - Reserve Requirements.
'The Conference discussed the proposed amendment to
31.10b'LLat1on D under which a member bank with its head office
1-110,.?. non-reserve city and having a branch in a reserve city
be considered to be in a reserve city for purposes
com
:
ixing reserves. Members expressed diverse views and
"entS• SOMB of the Presidents were inclined to leave
th;
a ,Present definition in the regulation unchanged, while
th
'
eew others recognized possible abuses by some banks if
51 Present definition is left unchanged. Beyond discushowever, no action was taken."
1008
6/21/45
-11Chairman Eccles said that the Board had reached a definite
cprIclusien regarding the action which should be taken and Mr. McKee
l'elliswed for the information of the Presidents the several situations
/41ich had been involved in reaching a decision. There was a general
disci,. •
-41.011 of the various aspects of the problem.
6.
Consumer Credit.
. "The Conference briefly discussed the new phase into
11113-eh the Federal Reserve System is entering in the adminIstration of Regulation VT, as a consequence of reconver—
,s_. In order to improve further the existing liaison
ustween Board and Banks, the Conference decided to establish
a.
Special committee on consumer credit to study the content
and administrative aspects of Regulation IV and to serve when
desired as a means of consultation and a channel of communieatIon between the Board and the Reserve Banks."
Chairman Day said that the Committee of Presidents referred
t° 111 this statement had not yet been appointed; that the matter had
beet
re
ferred to the Committee on Committees of the Presidents' Conferetlee; and
that, when the appointments were made, the Board would be
4(iltied-
Mr. Ransom said that he wished to thank the Presidents' Con-
tel%ellee for taking this action, and that he believed that it would be a
ll'erlihelPful move.
At this point, Chairman Day said that he had presented aTI the
1)44tters
Which the Presidents' Conference wished to bring to the atten°I' the Board at this time.
Chairman Eccles said that he had some matters which he would
discuss with the Presidents.
He then outlined the developments
°P°sal which had come to his attention during a visit which he
-;-1-Ired last Friday from Federal Loan Administrator Snyder and Mr.
1009
6/21/45
-12Pieher, a Director of the Reconstruction Finance Corporation.
This
151'°13"a1 would involve the substitution of the Reconstruction Finance
C°rPoration for the Army, Navy, and Maritime Commission in relation to
V Art A
T loans.
Chairman Eccles reported that Mr. Snyder and Mr. Fisher
4141 that there
had been some discussions by the Armed Services and
them .
areltims Commission of this proposal; that Messrs. Patterson and
setal had said that they would like to have the Reconstruction
khan
ee Corporation take over their position with respect to such guaranties
because they would like to get out of this function.
The proposal came as a surprise to Chairman Eccles.
He said
that it was presented to him, however, as a matter which would lie
eritirely
between the Armed Services and the Reconstruction Finance
e(41/°ration and that there would be no change in the functions of the
kard
and the Federal Reserve Banks--it would be merely a substitution
:: the Reconstruction Finance Corporation for the Armed Services and the
tim
Commission. Viewed in this light alone, Chairman Eccles did
Ilest see how We could reasonably say that there was any objection, but
48 a practical operating matter he did not see how it would
°lit and he did not see how the Armed Services could be eliminated,
in the field.
He did not see how the questions involved in
hterm,_.
the necessity of war production and questions growing out
the
.korl
to
''"Qcelation of contracts could be transferred to the Reconstruc'lance Corporation because it seemed to him that they would have
- Ile to be determined by the Armed Services. In that connection,
1010
—13—
Chairsman Eccles said that Mr. Snyder and Mr. Fisher had told him that
the7 did not wish to give the matter consideration without first talk—
ilig to
him about it. Chairman Eccles thereupon suggested that Federal
Ilese
,
've and Reconstruction Finance Corporation staff people give the
m'atter careful study before going further.
He referred to the fact
that
41r• Hinckley's organization would have to be consulted because
them. L
Bad certain statutory responsibilities.
The Chairman was impressed with the thought that possibly the
14140„..
"ving motive of the plan was to provide a continuing place for
the vla
shington staffs of the Armed Services who had been working on
'414
Pl
'
°graln and who would feel that the Reconstruction Finance Cor—
P°ratio
-n could provide them this opportunity, and in that connection,
the 8
'eferred participation plan of the Reconstruction Finance Corpora—
t411
/148
their
mentioned as a function which should be tied together with
aad T loan program.
The Chairman then said that he had received from Mr. Vest of
the
4rd's staff a memorandum which presented some information that
hzki
t come to Mr. Vest before yesterday.
Mr. Vest's memorandum con—
*i a number of extracts from a memorandum prepared by Paul Cleve—
t.
showed that the matter had been under discussion since last
Pobr.o.
argY, without the knowledge of any member of the Board or its staff.
At thi
torte
:
Point the Presidents made it clear that they had not been in—
1011
6/21/45
—14—
The Chairman went on to say that First Vice President Rounds
qthe New
York Bank was in Washington last Saturday on other business
aladthat advantage was taken of his presence to discuss the question
)41.1.ch had been raised on the preceding day by Messrs. Snyder and Fisher;
that
141% Rounds, in turn, had discussed it with Mr. Phelan of the New
York
Dank, who had been directly in charge of the V and T loan program
th New
York Bank, and that Mr. Phelan had prepared an excellent
keittor
44dum pointing out substantial objections, which the Chairman
read in
full.
In the discussion which followed, it appeared that there was
--L agreement on
the part of both the Presidents and the members
('t the B
oard with the views expressed by Mr. Phelan in his memorandum.
No-Ltima
„
" Eccles then stated that since he had come into the meeting he
head
l'eceived advice that General Carter and Colonel Mechem wished to
NtLe
and see him sometime today and Chairman Eccles assumed that this
kbien#
—"was what they wished to discuss. Chairman Eccles said that he
tqt th
at, the procedure now in existence should not be disturbed, be—
Nlae .
It is not practical to make the proposed change; second, that
,
h
°Ivever, it should be the decision of the Armed Services that they
t
° substitute the Reconstruction Finance Corporation for them-
Zel.lre8
the
then the Reconstruction Finance Corporation should take over
kN elltil'e project; they should not on3y step into the place of the
8erv1.ces but they should also take the place of the Board and
1 012
6h1/45
—15—
"he Federal Reserve Banks, because the whole program would have
tc)be run from the Washington office of the Reconstruction Finance
C°1130ration through their own Agencies in the field and their own fa—
Mr. McKee raised a question as to whether the transfer could
de
effectively under present law and whether the Federal Reserve
could function for the Reconstruction Finance Corporation as a
agency operation, or whether it would not require new legisla—
tiob,
,
Chaiman Eccles said that, while there had not been time to
gi'le it thorough consideration, Mr. Vest was of the opinion that very
likely' 4 4.
'
46 could be done under existing law and that he had no doubt
thatp_
64111 Cleveland had thoroughly considered that question.
Chairman Eccles said that, while nothing could be done about
It
tobe
t
his time
because it is in a state of uncertainty, he would like
able to say to Messrs. Snyder and Fisher that he had discussed
the illat
ter with the Presidents and that they were unanimously opposed
t° the
to
ehang'e at this time, but that, if the final decision were reached
ltute the Reconstruction Finance Corporation for the Armed
rvice
a, they would strongly object to the proposal to use the fa—
of the
Federal Reserve Banks and their personnel as agencies
l'thst
"econstruction Finance Corporation. It appeared that there
Wzta
elle1"41 agreement on the part of the Presidents with this position.
Thereupon the Chairman brought up the subject of the Wagner—
1013
6/21/45
—16—
SI3erice Bill to amend Section 13b of the Federal Reserve Act.
He re—
ilieived the development of this proposal and explained its present
etatals in Congress.
Chairman Eccles said that he felt considerable
cil4tht at this time as to the probability of its enactment.
Chairman Eccles then discussed the program to which there had
been
some reference in the public press for dealing with capital gains
alici8Peculative activities in the real estate field and in the stock
Markets. He
reviewed the history of the proposals which had developed
Y from fears in the Agriculture Department and the Housing
istration and on the part of Mr. Vinson, when he was Director of
habilization,
as to the effects of inflation in the farm and urban
4a'l estate
markets, as well as in the stock markets. It had been
Pqrited out
that sale prices of farms and houses were increasing
1‘41)ictly. and
a desire had been expressed for an Executive Order to
eill‘b credit in these fields by increasing down payments and taking
*Atelier other
terms might be necessary
to
steps -with respect to credit
l'e8trairl the inflationary development. At that time there were
ech4e dif
ferences of opinion as to where the responsibility should be
134eecil and
Chairman Eccles submitted a memorandum to the Stabilization
C°Ialltitteel in
which he felt that he had presented effectively the
re4ac118 why
credit controls would not be adequate, and took the posi—
tIori
that the
problem could only be attacked through an adequate tax
1113°11 eaPital
gains, which would reach not only transactions in which
ted-it, had
been
utilized'
but also transactions effected through the
1014
6/21145
—17-
of cash, which could not be reached at all through credit controls.
--Pointed out that there was a large volume of the latter class
Oil transactions.
The Chairman therefore had opposed vigorously the
1317°1308a1 to deal with the problem through credit controls.
On the
other hand,
Mr- Vinson was not favorable to the tax approach because
4 bel.
.41eved that the necessary action could not be obtained from
Coro,.
ese, but it was the Chairman's view that it would be only diffiellit
to get because it would be realized that it would be effective,
Which
not be the case through credit controls.
In that connection, Chairman Eccles referred to a discussion
which
had arisen before the Senate Banking and Currency Committee when
he had
appeared in support of the bill to reduce the reserve requireIller118 of the
Federal Reserve Banks, which led to the question what
81411114 be done about a capital gains tax. This discussion, however,
114clbeeln
relatively brief, although it had been given a great deal of
Pl'c'knence in the papers.
111 (lei/eloped
Chairman Eccles said that the situation had
to the point where, notwithstanding his resistance to
4(14 centrels, a definite program had been developed for submission
:
°the Pr
esident. This program involved three parts: first, an Exeelltilre Order
providing for the imposition of credit controls in conIleeti°4 Ilith mortgages upon real estate, urban and farm; second, a
Niae
in margin
requirements in connection with stock transactions;
441
thi
CI, a request to Congress to increase the holding period on
1015
6/21/45
—18-
Capital assets from six months to three years, and possibly also
41 increase in the rate of tax. In that connection, the Chairman
said that he
felt that the present exemptions for refugees should
be
'-lillinated and that he would make that suggestion.
The program contemplated that there would be a directive
*()Ill Stabilization Director Davis to the Board to increase margin
Isecillirernents, but the responsibility for the program as a whole would
bete411 bY the President. An Executive Order had been drafted by
the 13c3ardls staff in consultation with counsel for Stabilization Di—
Netc1I'Davis covering the program for imposing credit controls on
Nal
estate transactions. There had arisen, however, a request on
the Pe'rt of the Housing Administration to exempt from the proposed
le"tive Order or from the regulations under the Order all new con—
t'.1''Ll!tict, and Chairman Eccles had vigorously opposed any such exemp—
tthe ground that the Agency charged with the responsibility
4d4linistering the proposed credit controls should not be handi—
capped
b07' restrictions laid down in advance, and particularly so in
the
'14 of new construction, as to which the Chairman was strongly
1(114Nreement with the Housing Administration.
Nevertheless, it
4.111eel'ecl likely
that something might be incorporated in a statement
blitheN'esident to this effect.
The Chairman said that the Executive Order under existing
Dz.f,wee1:41re
would be sent to the Budget Bureau for clearance with
101_8
61(21/45
—19—
interested Agencies and that Yr. Vinson had suggested that that would
be the tin
when Chairman Eccles might record his views.
He therefore
ilric%sed to prepare a report to the Budget Bureau on the progrraTL.
He
not undertake to oppose the program as a whole, but would point
°Itt the ineffectiveness of the credit control mechanism alone and the
11411011s objections that would be made to it on the part of the public,
t°geth
her with the fact that the public would be led to expect a great
cleal
more from credit controls than will actually be realized, par—
a'rlY at this late stage. Consequently, it would be pointed out
that ,
'
the tax part of the program should come first, and that unless
Co41e8s is willing to recognize the whole program as one program and
to N.
88 an effective tax measure for the purpose of carrying out the
ilti°13(38e°1 program, the credit controls should not be used. In this
getierel connection, the Chairman said that reports coming in from all
oirer
the
country show that the inflationary situation is becoming in—
aziugly bad.
Chairman Eccles emphasized the necessity for treating all of
thiz
be lie
iseussion as a matter of a strictly confidential nature, not to
eated, and that it was of the utmost importance that nothing be
414 or
'lone by the Federal Reserve System which might be misconstrued
4 cth
'
e- as an evidence of opposition on the part of the System to
the
131'°gram as a
whole.
Thereupon the meeting adjourned.
Seereta
@FedFRASER