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999 Minutes of actions taken by the Board of Governors of the Pederai the Reserve System on Tuesday, June 7, 1949. The Board met in Board Room at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Draper Vardaman Clayton Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Hammond, Assistant Secretary Morrill, Special Adviser Vest, General Counsel Leonard, Director, Division of Bank Operations Mr. Young, Associate Director, Division of Research and Statistics Mr. Solomon, Assistant General Counsel Mr. Parry, Consultant Chairman McCabe stated that he received a telephone call this Mortur,,. from Mr. Parsons of the staff of the Senate Banking and Cur- retc , 4 Committee who referred to 5.1664, a bill to exempt securities issueA bY the International Bank for Reconstruction and Development l'(114 the lates Provisions of Section 5136 of the revised statutes which re- 40 dealings in securities by National and State member banks. Chat 11484 McCabe stated that Mr. Parsons asked whether the Board would 1/44 to have someone appear at hearings on the measure which were ex- 13'z'cted 40 be held on Friday, June 10, 1949. It was the consensus that vi thews expressed in the Board's letter to Chairman Maybank of the Sete Itanking and Currency Committee of May 51 1949, adequately 1000 6/7/49 -2Presented the Board's views with respect to this bill, and it was suggested that Mr. Carpenter telephone Mr. Parsons suggesting that the letter to Chairman Maybank could be read into the record and Unless the Committee expressly desired that a member of the Board srPear at the hearing, the Board would see no reason for doing so. The foregoing suggestion was approved unanimously. Chairman McCabe stated that he received a call from Mr. 1)Et171c1 E. Scoll, attorney with Scoll and Longcope of New York City, ho stated that he had been asked to serve as Counsel for the Joint er3ronlittee on the Economic Report in connection with hearings to be under the authority NA% financing) of S.Con.Res. 26, on the question of prd that he would appreciate suggestions as to 11411E388es Who might be called to testify and the order in which they 84°1411 aPPear. He also said that the Division of Research and Ste- t1"1" Was preparing such a list pnd that he would be glad to have tha suggestions of the members of the Board. The matter was discus- Bed briefly. At this time Mr. Shay, Assistant Counsel, and Mr. Koch, Chief or the Business Finance and Capital Markets Section, Division of Retie Etl'ell and Statistics, entered the meeting. Mr. Clayton stated that Mr. Parry had completed a history of atlons m, T Extension and Maintenance of Credit by Brokers, Dealers, 411r1Members of National Securities Exchanges, and U, Loans by Banks for the p,, of Purchasing or Carrying Stocks Registered on a National 1001 6/7/49 ecurities Exchange, in accordance with the action taken at the Ineeting of the Board on February 23, 1949, and that copies had been sent to all members of the Board before this meeting. At Mr. Claytow s request Mr. Parry summarized the contents of the history, and stated that he did not consider it to be in form for distribution outstde the Federal Reserve System and that if wider distribution were c°AtetaPlated, it should be submitted to the Federal Reserve Banks and se on the basis of comments received from the Banks and the mem- bers of the Board and its staff. In this connection Mr. Clayton referred to the discussion at the meeting on February 23, 1949, of the formation of a System margin eQflutlittee and to the letter to Mr. Dearmont, Chairman of the Chairmen's Com. —4erence under date of March 15, 1949, asking that he give considerati04 to the desirability of forming such a committee for the purpose of rkkillg an analysis of factors that should be considered by the Board in 411Proaci,,4 ng a chnnge in margin requirements and of studying the method usecl tn regulating margins. Mr. Clayton stated that Mr. Dearmont in-. la°114ed Mr. Carpenter at the recent Chairmen's Conference that the letter dated march 15 had not been received and that no action had been taken tow-, '4m. formation of such a committee. Mr. Clayton went on to say that 14 vi ev of the changes in the economic situation since the Board's letter - was written, the actions by the Board to reduce margin requirekentpt - since March 15, and the completion of the report by Mr. Parry, 6/7/49 -4- Ile felt the question of a Chairmen's committee might be reconsidered. Mr. Vardaman stated that he felt no committee should be formed as it might assume that it should be consulted before changes %late made in either Regulations T or U and that he considered this to a responsibility solely of the Board, but he would have no °b Jection to formation of a committee composed only of Class C directors who would study only the broader approach to changes in margin reqUirements, provided such a committee was asked to submit a report "the next Chairmen's Conference. Mr. Draper stated that he felt any study undertaken by a Chairlien's committee should be limited to a review of the function of margin requirements and that the committee should not consider the actual operation of the regulations in so far as they applied to levels of margin requirements. Following the discussion, upon motion by Mr. Clayton, unanimous approval was given to his suggestion that a new letter to Mr. Dearmont be prepared and submitted to the Board for approval. In connection with the above matter, Mr. Clayton stated that he, was working with the staff on further technical changes in Regula- tiotts T and U and expected to present these, together with suggestions 48 t° what further action, if any, should be taken to change the level or -'!:gin requirements, for consideration by the Board around the end or 4114e or first of July. 6/7/49 At this point Messrs. Parry, Shay, and Koch left the meet14 and Mr. Lewis, Chief of the Regulation W Section of the Division Bank Operations, entered. Mr. Clayton referred to the discussion at the meeting on May 19, 1949, stating that in view of the fact that Regulation W, Consumer Instalment Credit, would automatically expire in a little More than three weeks unless Congress acted to continue authority the Board to regulate consumer instalment credit, he would recommend that no change be made in the Regulation prior to June 30. A discussion ensued as to whether the Regulation should be (1) termi nated entirely, (2) terminated as to all items except auto41°biles (which would present a difficult problem with respect to 1111classified loans), or (3) continued unchanged until June 30. During the discussion, Mr. Young stated that preliminary esults of the Survey of Consumer Finances conducted in January, - uary, and March of this year would be released next week showthat consumer intentions to buy during the year 1949 were as at that time as a year ago. that He also expressed the opinion the economic situation would not justify a suspension of the lieetilation at this time. At the conclusion of the discussion, it was understood that 40 actiola would be taken. Reference was then made to a memorandum from Mr. Young dated 6/7/49 -6- June 2, 1949, which stated that Mr. Exter, an economist in the 1)1-vision of Research and Statistics presently assigned to assist the Government of Ceylon,had informed him by letter dated May 16, 1949, that the Ceylon Government expected to request an extension clt hie stay for a period of six months. Mr. Young's memorandum ec°11umended that he be authorized to advise Mr. Exter that the Board, 143°11 receipt of an appropriate request, would consider favorably xtension of Mr. Exter's assignment in Ceylon up to as much as three months,toa date not later than September 28, 1949. Mr. Vardaman stated that the memorandum had come to him for aPProv 1 that he was opposed to any extension of the time for which Mr, Eiter was authorized to assist the Government of Ceylon beyond the SIX months' period originally approved in November 1948, and that he Shed tc be recorded as voting against the extension as proposed. Thereupon, approval was given to the recommendation contained in Mr. Young's memorandum; Messrs. McCabe, Eccles, Draper, and Clayton voting "aye" and Mr. Vardaman voting "no". Mr. Szymczak previously had indicated he would favor the recommendation. Mr. Vardaman stated that Mr. Peyton, President of the Minneap- Reserve Bank, called him on the telephone yesterday to ask Vhethe -r the Board would look with favor upon the inclusion in the 1950 bUclfget of that Bank of an amount not to exceed $3,000 to be used in illlaction with contributions by other Minneapolis bFinks in support 6/7/49 -7- of the annual convention of the American Institute of Banking to be held in Minneapolis next year. Mr. Vardaman stated that he felt the educational activities of the American Institute of Banking iUstif Y support by the Reserve Banks in connection with their lieti°14a1 convention, and he would recommend that Mr. Peyton be inforzed that the Board would interpose no objection to inclusion of 411 item in the Bank's 1950 budget as proposed. Approved unanimously. At this time all members of the staff except Mr. Carpenter Vithdrew Y and the Board went into executive session. There was an informal discussion of a memorandum dated May '1949, from Mr. Young suggesting that he be authorized to accept 25 the , Invitation of the London Institute of Bankers to attend the tc)rthanw,4 ---m-Lng summer school of the Institute from September 3 to 17 at (4r°11, England. It was agreed nnsnimously that the matter should be considered by the Board at the first regular meeting next week at which Mr. Szymczak is present. Chairman McCabe read a letter which he received from Senator 14celellan Chairman of the Senate Committee on Expenditures, under (late ,. June 3, in which it was stated that at hearings on resolu- ttoA calling for,a reduction in the Federal budget for the year 1950 the Committee had attempted to develop estimates relative to the 1111Penai ng Federal deficit due to decreases in anticipated revenues, 6/7/49 -8- that the Treasury had been unable to supply figures as to current estimates: and that it was requested that the Chairman advise at hill earliest convenience whether it would be possible for the Board to suPPly the Committee with information relative to indicated clittliges in estimates of probable 1950 budget receipts in the light Of c hanged business and economic conditions. The matter was discussed, and it was agreed unanimously that Chairman McCabe should call Senator McClellan on the telephone and advise him in effect that the Board was not in a position to furnish the information which he requested, that estimates of budget receipts were prepared primarily by the Treasury Department, and that since the matter is within the field of Treasury responsibility, the Board did not feel it would be appropriate for it to undertake to supply material which the Treasury stated it was unable to furnish. The action stated with respect to each of the matters hereinreferred to was taken by the Board: Minutes of actions taken by the Board of Governors of the ?ea._ 4.411 Reserve System on June 6, 1949, were approved unanimously. Letter to Mr. Robert L. Shepherd, Assistant Federal Reserve Agezrt at the Federal Reserve Bank of Richmond, reading as follows: , "In accordAnce with the request contained in your -Letter of June 2, 19490 the Board of Governors approves the appointment of Mr. Winfred W. Keller as Federal Re:"ve Agent's Representative at the Charlotte Branch with p4IlarY at the rate of $3,960 per annum, to succeed Mr. aul D. Gilliam. "This approval is given with the understanding that 1007 6/7/49 -9mr. Keller will be placed upon the Federal Reserve Agent's Pay roll and will be solely responsible to him or, during a vacancy in the office of the Federal Reserve Agent, to the Assistant Federal Reserve Agent, And to the Board of Governors, for the proper performance of his duties. When not engaged in the performance of his duties as Federal Reserve Agent's Representative he may, with the approval of the Federal Reserve Agent or, in his absence, of the Assistant Federal Reserve Agent, and the Vice President in charge of the Charlotte Branch, perform such work for the Branch as wIii not be inconsistent with his duties as Federal Reserve Agent's Representative. "It is noted from your letter that Mr. Keller's appointment will become effective when he executes the usual oath of office, which will be forwarded to the Board of Go vernors." Approved unanimously. Letter prepared for Chairman McCabe's signature to the Honorable Carl Albert, House of Representatives, reading as follows: "I received your letter of May 28, 1949, in which , rou state that you had received complaints from people 14 southeastern Oklahoma about the location of that rea in the Eleventh Federal Reserve District while the : r7mmunities involved deal primarily with Oklahoma City 4ancial organizations which are located in the Tenth 4rederal Reserve District. "I matter beeau.— . appreciate your writing me on this lt has not been brought to our attention from any .7_Ller source and we have not known of any dissatisfaction ewith respect to the existing district lines. The neces:1J' investigation will be made promptly and I will write u again as soon as the results of the investigation are ava ilable." Approved unanimously. Letter to The Capital National Bank in Austin, Austin, Texas, 4g as follows: "The Board of Governors of the Federal Reserve Syshas given consideration to your supplemental application 1008 6/7/49 -10- "for fiduciary powers, and grants you authority to act, When not in contravention of State or local law, as assignee, committee of estates of lunatics, or in any Other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with national banks are permitted to act under the laws of the State of Texas. The exercise of these Powers, in addition to those heretofore granted to act as trustee,executor, administrator, registrar of stocks and bonds, guardian of estates, and receiver, shall be subject to the provisions of the Federal Reserve Act and the regulations of the Board of Governors of the Federal Reserve System. "This letter will be your authority to exercise the fiduciary powers granted by the Board pending the preparation of a formal certificate covering such authorization, which will be forwarded to you in due course." Approved unanimously, for transmission through the Federal Reserve Bank of Dallas. Letter to Mr. johns, Vice President and General Counsel, of the Pederal Reserve Bank of Kansas City, reading as follows: "This refers to your letter of May 24, 1949, enclosin2aa copy of a letter dated May 12, 1949, to the OklaCity Branch of your Bank from Mr. F. M. Overstreet, v(Ii_ca President, First National Bank at Ponca, Ponca City, m4-ahoma, concerning alleged violations of Regulation W by Paul V. Rives in connection with the operation of a sed car business in that city. LOU indicate that according to information obtained by Your Oklahoma City Branch, Yr. Rives is no longer enaged in the automobile business, and may not be engaged en anY business at the present time. We agree with your s c 8e tion that steps should be taken to ascertain whether : not he is now engaged in any business affected by the 1 1irements of Regulation W. However, to investigate no further would seem inappropriate, particularly since Mr. Overstreet has requested an investigation and has offered furnish all the information he has. The situation would seem to be one involving bank relations as well as enforcemen l t of Regulation W. 1009 6/7/49 -11- "We recognize that Mr. Overstreet's primary interest may well be the redressing of certain alleged wrongs which he states he has suffered at the hands of Mr. Rives, and that these alleged wrongs, no matter how reprehensible in other respects, may have failed to involve any violation of Regulation W. For example, Mr. Overstreet States he was sold a note which was supposed to represent the sale of an automobile, but that no such automobile existed. We also recognize, as you indicate, that a criminal prosecution would be the only effective remedy against Mr. Rives for violating Regulation W if he is no longer engaged in any business. In the circumstances, it would seem reasonable to defer at this time a sweeping insuch as would involve, for example, extensive customer contacts. Nevertheless, it would seem advisable to afford Mr. Overstreet every opportunity to make available to your Oklahoma City Branch such information as he maY have with respect to possible violations of the regulation:, Approved unanimously. Chairman.
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