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936 A meeting of the Board of Governors of the Federal Reserve Ptem was held in Washington on Friday, June 25, 1943, at 11:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Draper Evans Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman The action stated with respect to each of the matters hereinl'eferred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Pede raj- Reserve System held on June 24, 1943, were approved unanimously. Telegrams to Mr. Paddock, President of the Federal Reserve Bank "Bost °110 Mr. Brome, Assistant Secretary of the Federal Reserve Bank of Nevi 2 Ur. Keesee, Secretary of the Federal Reserve Bank of Richmond, york Pra zery Secretary pro tern of the Federal Reserve Bank of Atlanta, 14, 411arci, Vice President of the Federal Reserve Bank of Chicago, Mr. tat Secretary of the Federal Reserve Bank of St. Louis, Mr. Ziemer, resident of the Federal Reserve Bank of Minneapolis, Mr. Gilbert, °lit of the Federal Reserve Bank of Dallas, and Mr. Hale, Vice PresOf the irederal Reserve Bank of San Francisco, stating that the an -Proves the establishment without change by the Federal Reserve liaNt 0 f Dallas on June 21, by the Federal Reserve Banks of St. Louis and ' 41elsco on June 22, by the Federal Reserve Bank of Atlanta on June 11'. the Federal Reserve Banks of New York, Richmond, Chicago, and -8 on June 24, 1943, and by the Federal Reserve Bank of Boston 937 6/25/43 -2toga j2 of the rates of discount and purchase in their existing schedules. Approved unanimously. Memorandum dated June 22, 1943, from. Mx. Morrill, recommending that, 4r "Ruth Morris be appointed as an elevator operator in the Secretay _ _ Office on a temporary basis for an indefinite period, with basic sa lat7 at the rate of $1,200 per annum, effective as of the date upon She enters upon the performance of her duties after having passed 44tist actorily the usual physical examination, with the understanding that lf anYthing derogatory should develop in the investigation of her reter ences her services may be terminated immediately. Approved unanimously. Memorandum of this date from Mr. Morrill, recommending that, Nt. a lv- July 1, 1943, (1) the temporary appointment of Miss Annie sltes as a cafeteria helper in the Secretary's Office be made permanent, increase in her basic salary from $1,080 to $1,200 per annum, 44 (2) the temporary appointment of Mrs. Mary Cumberledge as a cafete114 he, 4-Per be made permanent, with no change in her present basic salary 'm rate of $1,200 per annum. Approved unanimously. Memorandum dated June 16, 1943, from Mr. Paulger, Chief of the ,leion of Examinations, recommending that the basic salary of Charles 4+ I, Ptssistant Federal Reserve Examiner, be increased from $2,200 to c,600 Per annum, effective July 1, 1943. Approved unanimously. 938 6/25/43 -3Memorandum dated June 23, 1943, from Mr. Morrill, recommending that 14. DuBose MacDowell, a clerk in the Correspondence and Publications Sectio 4 of the Secretary's Office, be granted leave of absence without 134Y. beginning July 3, t943, so that he might enter active duty with the tilted States Naval Reserve, and that he be granted the benefits prolfl the policy adopted by the Board on November 14, 1940, and 41erl August 20, 1941, for all employees entering military service. Approved unanimously, with the understanding that the payment of one month's unearned salary would be at the rate of basic salary plus overtime. Memorandum dated June 21, 1943, from Mr. Goldenweiser, Director °.r the T1 "lvision of Research and Statistics, submitting the resignation of ka8 ettY j. Strickler as a clerk-stenographer in that Division, to beeffective as of the close of business on July 26, 1943, and recommending that the resignation be accepted as of that date. The resignation was accepted. Letter to Mr. Brainard, Chairman of the Federal Reserve Bank of eland / reading as follows: 4 "The Board of Governors approves payment of salaries to ofj cers of the Federal Reserve Bank of Cleveland for the period 1, 1943 to April 30, 1944, inclusive, at the rates fixed by they Board of Directors as reported in your letter of May 25, 1943. ae The proposed increase of $2,000 in the salary of Mr. Kossin yaerne large in view of the rapid increases received during recent and particularly the substantial increase received January 1 1943. However, the Board understands that the directors are 0t 0-L the opinion that the increase is altogether warranted by reason hi th8 promotion of Mr. Kossin to the position of Vice President, gre ciemonstrated ability, the expansion of the activities at the toe'llehy and the fact that a salary of $10,000 has been recommended iir the Vice President in charge of the Cincinnati Branch. In the tiPt of these circumstances, the Board considers this an excep1„-nal case and approves a salary of $10,000 for Mr. Kossin as ' eoMmended by the directors. 939 6/25/43 -4Laning, who was transferred from the Audit Department al:Ict appointed an officer of the Bank in September 1942, has like!rise received substantial increases recently. In view of all of the circumstances, however, including Mr. Laning's long service ."8 assistant auditor, the readjustment of duties effective July with retirement of Mr. Zurlinden and the promotion of Mr. Hays t oo the position of First Vice President, and the responsibilities Laning in his new position as principal operating officer uf the Bank, the Board approves an increase of $1,000 in his ealarY effective July 1, 1943, as recommended by the directors. "The salaries as approved are as follows: NameSalary Approved Title Main Office Fleming, M. J. $25,000 President 15,000 President 1, 11_,Ys, h. B. First Vice -,,etcher, -L 15,000 Vice President W. H. laYlor, W. F. 10,000 Vice President MacKenzie, K. H. 7,000 President Vice Laning, A. 8,000 Cashier and President Vice H. 7,500 Assistant Vice President 'E . A. F,,,'ter H. ---Lton, A% 6,500 President Vice Assistant 6,500 Assistant Vice President Smith, H. E. j. 6,000 Cashier Assistant Bolthouse, C. J * ! indeisen, W. L. 6,000 Assistant Cashier 6,000 Assistant Cashier 7rrison, W. IL 5,200 " rtarrell, C. Assistant Cashier -rayeon, F. 9,000 Auditor V. incinnati Branch 10,000 'Llazar, B. J. Vice President Ott, H. N. 7,000 Cashier 5,000 Assistant Cashier , 1, c)11118°n, R. G. 4,700 Assistant Cashier -eers, P. J. 4,200 Assistant Cashier S P Br'° i Wri ir-Asbur h Branch 10,000 J. W. Vice President 8,000 Cashier 7,°ater, A. G. 5,000 °ehmidt j A Assistant Cashier Ste. ? 4,500 lnbrink R. J. Assistant Cashier 4,240 Assistant Cashier 14131te, Wm. H. retainer: fee "The Board likewise approves the payment of a r the firm of Squire, Sanders and Dempsey at the rate of 46,000 Per annum for the period from July 1, 1943 to April 30, 1944." Approved unanimously, together with the following additional letter to Mr. Brainard: of "In accordance with the request contained in your letter May 20, the Board of Governors approves the payment of a 940 6/25/43 -5- separation allowance of $9,000 to the Retirement System for the benefit of Mr. Frank J. Zurlinden, as proposed by the Board of Directors of your Bank. "This is an unusual case in that Mr. Zurlinden who reached the age of 65 last July, became a retired member of the Retire! Lent System January 1, 1943 and any payment to the Retirement oystem for his account reopens the case of a retired member, and , that the proposed payment is in excess of the amount auLhorized under the Board's letter 3-7 dated June 24, 1937. "However, Mr. Zurlinden continued to serve in the capacity r irst Vice President under his appointment for a five-year ",which does not expire until 1946, and is withdrawing from a 41c:dve service on June 30, 1943 in a spirit of cooperation with ,'_ne directors of the Bank in order to avoid a situation where :oth the President and First Vice President would retire at the tame time by reason of the simultaneous expiration of their oerms of office, and thereby to enable the directors to carry TlIst their program of reorganization of the executive personnel. 2erefore the Board approves the proposed payment in accordance ;11th the recommendation of the directors, with the understandg, however, that it does not establish any precedent." In connection with the above matter, unanimous approval was also given to the following additional letter to Mr. Brainard: "In the light of the reasons advanced by the directors of latik in their recent discussions with Governor Szymczak • a in view of all the circumstances, including the fact that Sep allowance of $4,500 in connection with the retire•11t Of Mr. C. W. Arnold as Vice President of the Bank on June co,'„,4-943 would have been within the terms of the authorization ' 130 - s,aned in the Board's letter 3-7 dated June 24, 1937, the tharg interposes no objection to the payment in accordance with e recommendation of the directors. It may be added in this corin ! etion that it is contemplated by the Board that the autho 1"-Lzation contained in letter S-7 will be canceled in the ear future." th re4,Qt Letter to the "First National Bank in Lamed", Lamed, Kansas, • as follows: 190 "This refers to the resolution adopted on February 9, bY the board of directors of your bank, signifying the puw desire to surrender its right to exercise fiduciary ers heretofore granted to it. tilail"The Board, understanding that your bank has never acaccepted or undertaken the exercise of any trust, has 941 2 5/43 6/ -6- "issued a formal certificate to your bank certifying that it 18 no longer authorized to exercise any of the fiduciary powers covered by the provisions of section 11(k) of the Federal Reserve Act, as amended. This certificate is enclosed herewith. "In this connection, your attention is called to the fact that, under the provisions of section 11(k) of the Federal Reserve Act, as amended, when such a certificate has been issued nY,the Board of Governors of the Federal Reserve System to a ,,8"-ional bank, such bank (1) shall no longer be subject to the ; !- °visions of section 11(k) of the Federal Reserve Act or the ' seglalations of the Board of Governors of the Federal Reserve ateln made pursuant thereto, (2) shall be entitled to have re4,_Irned 1 to it any securities which it may have deposited with 1,1 State or similar authorities for the protection of private 'e co court trusts, and (3) shall not exercise any of the powers 2ferred by section 11(k) of the Federal Reserve Act, except the permission of the Board of Governors of the Federal Reserve System." j Approved unanimously. Letter to Mr. Hays, Vice President and Secretary of the Federal Bank of Cleveland, reading as follows: th 'This refers to your letter of June 14, 1943, requesting „ 1 6 views of the Services and of the Board of Governors with ZsPect to the manner in which suit should be brought on a 645ranteed loan. fort wrhe views of the Services regarding this matter are set Bac21 in the enclosed letters from Lieutenant Colonel John S. wilL" I a of the War Department, dated June 16, 1943, Mr. azIcr-i-a111 A. Coolidge of the Navy Department, dated June 17, 1943, tis Lieutenant B. B. Griffith of the United States Maritime Corndated June 19, 1943. t4 "The Board of Governors agrees with the opinion eess v srur letter that a suit on a loan guaranteed under Regulation Ilia".°111d be brought in the name of the United States, particCivitY in the light of the requirement of the Federal Rules of . Procedure that all suits be brought in the name of the real' Party in interest." Approved unanimously. Letter to Mr. Kennel, Assistant Counsel of the Federal Reserve or Bo 8-0n, reading as follows: 942 6/25/43 -7"This refers to your letter to the Board of June 14, 1943, elosing a copy of a letter to you of June 3 from Mr. D. L. orfman, New England Home Equipment Company, Boston, Massachusetts, a copy of your reply to Mr. Dorfman of June 14, all relating the application of the $6 down-payment exemption of Section 4(a)(3) of Regulation W in the light of Section 12(1) of the Reg- r "The fact that certain items of merchandise retail individ1,al Y for $6 or less does not mean that several such items may e1 sold at or about the same time without a down payment where .1e total cost of all such items purchased, based upon their indual retail prices, exceeds $6 and such items constitute a sOt or group within the meaning of Section 12(1). Thus, you are c.)rrect in your view that the $6 down-payment exemption of Sec(34 4(a)(3) was not intended to do more than facilitate the sale (4 low-priced articles purchased miscellaneously. "The Board has previously stated that the principal purposes °f Section 12(1) were to make the Regulation more realistic by 4rilalcing it conform to customs and merchandising methods, and also Prevent evasion. This view is implicit in your letter to Mr. uorfman. So far as Regulation W is concerned a merchant, as you Paointed out, may sell his wares in such groups or combinations he wishes. However, as indicated by the Board's letter to :1 41 of June 19, 1942, the fact that a customer is permitted to : Pgrehase a combination comprised of fewer items than might be !enerally considered as a complete set or group does not prevent 'Ilch items as the customer does buy at or about the same time which are commonly used together from constituting an larIcier under Section 12(1). ql he Board, therefore, is in general agreement with your letter of June 14, 1943, to Mr. Dorfman." 1 Approved unanimously. Letter to Mr. Wallace, Counsel of the Federal Reserve Bank of reading as follows: t. "Your letter of June 10, 1943 inquires whether under Op1111°n 2 in section 10(b) of Regulation W a loan company may 44'ke a loan, part of which is to be used to retire a loan made the same borrower by another loan company, if the payments t ier the new loan are smaller than the payments under the loan ' t!Ing retired but the difference is due solely to the fact that ,ue second loan company charges a lower rate of interest than 'he first. 94P 6/25/43 "The example which you give is that the loan by the first company was originally $300 payable in 12 instalments of $31.05 each. After two instalments have been paid, the borrower borr°vIs $300 from the second loan company payable in 12 instalments °f 429.65, using part of the proceeds to pay off the remaining Qalance on the old loan. "Option 2 provides that the new obligation shall provide for a rate of payment tat least as large' as the rate of payMent on the old obligation. Where a flat-payment loan replaces 4 flat-payment loan as in the example which you give, this provision refers to the regular amount of the payment (which in Your example would be $31.05) except in a case where the rate ?f interest on the new loan is lower than on the old loan and such a case the payment on the new loan may be smaller by "e amount representing the difference in interest. Under .!ection 10(a) the original lender in a 12-months instalment "!-Qan could reduce the rate of payment by reducing the rate of terest, and the regulation does not prevent the second lender br°m aoing the same thing under Option 2 in the case presented YOU. Of course, where the old obligation is in arrears, reunder section 10(a) would call for the spreading of the arrearage over the remaining payments and this might or might et result in a lower rate of payment on the new obligation i Pending upon the amount of the arrearage and the difference 1.1 the rates of interest." r r Approved unanimously. Letter to the Chairmen and Presidents of all the Federal Reserve 'reading as follows: t, "As you know, there has been considerable discussion of Tile Preliminary outlines of separate plans prepared in the easury Department and by the British Government for postwar ternational monetary stabilization which were released to r ue press in April of this year. The texts of the two plans ',e1Arrently referred to as the White plan and the Keynes plan) set forth beginning on page 501 of the June issue of the 'ederal Reserve Bulletin. "Members of the Board's staff have participated with rep!,8?ntatives of the Treasury staff and others in our Government informal discussions of these plans and are participating in pee discussions which are now taking place with technical exfrom united and associated nations. All of these dis1esions have been on a staff level. The comments of the Board 01 , Governors with respect to the plans have not yet been reclrIlilested and the Board has reserved its right to express its own ews whenever it seems appropriate to do so. j j 944 6/25/43 -9"The Board of Governors has not determined the extent to which it may wish to express its views on the two proposals, anct in connection with its consiaeration of the whole matter would be glad to have any comments that the officers and directors of the Federal Reserve Banks might wish to make. It 2uld be appreciated, therefore, if at an early meeting of the 111 directors of your Bank the plans could be discussed with the senior officers of the Bank and if the Board of Governors could be given the benefit of any conclusions that might be reached. nhis letter is being sent to the Chairmen and President of all --s of the Federal Reserve Banks." Approved unanimously. Letter to Mr. &noke, Vice President of the Federal Reserve Bank 11 York, reading as follows: "In accordance with the request contained in your letter June 11, 1943, we forwarded to the Office of Censorship 41(i the Bureau of Customs your letters of the same date with : sPect to the procedure to be followed in handling communica131°ns between the Federal Reserve Bank of New York and the bo ailque Nationale Suisse with reference to the accounts on your Qks in the name of the latter institution. Copies of the rep received to both of these letters are enclosed. It t1,11 be noted from the reply from the Bureau of Customs that Ce matter is being given some study and that as soon as cer4in information is obtained they will advise us further. "In connection with the first paragraph of the letter • fr°14 the of Censorship, it is our understanding that e Director tL t're proceaure followed by the Federal Reserve Bank of New York arictharldling communications between your Bank and the Vatican olf.tbe Sveriges Riksbank was discussed informally with the tee of Censorship, but there is nothing in our files to esthes fact that that was done, and as you know, Mr. WingP. 14, who handled the matter, is temporarily away from the of4.1" of J "As Mr. Tiebout was advised by Mr. Vest over the telephone, FrY in the Office of Censorship called on the telephone on the ee daY following the date of the letter from the Director of we'lscrship to discuss your letter of June 11 and suggested that eiv e°nfirm with you the fact that from the standpoint of censorContthere would be no damage done if any of the information th ained in the communications between your Bank and the Vatican, e Sveriges Riksbank, and the Banque Nationale Suisse fell Into kr 945 6/25/43 -10"enemy hands. It was understood at that time that upon receipt °II such confirmation, your letter of June 11 would be considered LYY the Office of Censorship. Before we could communicate with You the reply from the Office of Censorship was received, and in discussing the matter further with Mr. Fry over the telephone he stated that it was realized that the sending of the reply was " tIi in accordance with the earlier telephone conversation and at, although the letter on its face might appear to be critical n the procedure followed in connection with communications be"leen your Bank and the Vatican and the Sveriges Riksbenk, no criticism was intended. "If after considering the matter further you should desire to submit the communications in question for precensorship, we ( lhall be pleased to make the necessary arrangements with the ttice of Censorship." Approved unanimously. tarliters Letter to Mr. Robert H. Bolman, President of The Independent Association of Southern California, Los Angeles, California, Naqt., "g as follows: to "In response to your letter of June 5, 1943, addressed Chairman Eccles the Board has asked me to advise you that would favor legislation which would provide effective region of bank holding companies." Approved unanimously, Mr. Ransom stating that he approved with reservations as to both the form and substance of the letter. Attorrie 4smorandum dated June 24, 1943, from Mr. Dreibelbis, General ' 1r recommending that there be published in the July issue of the rtes erve Bulletin statements in the form attached to the memorandum ' l esPect to the following subject: Consumer Credit Suspension of License Advances to Life Insurance Agents Approved unanimously. 946 V Thereupon the meeting adjourned. Chairman.
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