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327 A meeting of the Board of Governors of the Federal Reserve was held in Washington on Friday, March 1, 1946, at 9:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Carpenter, Secretary Mr. Connell, General Assistant, Office of the Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman The action stated with respect to each of the matters hereinreferred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Federa. Reserve System held on February 28, 1946, were approved unanimously. The minutes of the meeting of the Board of Governors of the Fed' 141 -serve System with the Presidents of the Federal Reserve Banks 4140 /I February 28, 1946, were approved unanimously. Today Mr. Ransom received a telephone call from the Clerk of t4110 , 'se Judiciary Committee inviting him to appear Monday morning, h4 , ) 3-946, before a subcommittee to consider a further extension or the Second War Powers Act. Governor Ransom was unable to go be- of a Previous appointment and suggested that the Board request Vest to appear before the Committee and to offer for the record the n ote memorandum (with appropriate changes to bring it up to date) , the l'easons supporting the request that Title IV of the Second War rwera Act be extended, as was submitted on behalf of the Board to the J'Ildtet ar7 Committee of the Senate when it was considering the same 328 3/1/46 -2— silbieet in December of last year. The statement referred to by Mr. Rati scel was approved by the Board at a meeting on November 1, 1945, and WaR - Sent to Mr. Snyder, Director of the Office of War Mobilization and Ilec°417ers10n, with a letter of the same date. The procedure suggested by Mr. Ransom was approved unanimously. Telegrams to Messrs. Flanders and McLarin, Presidents of the ?ecier al Reserve Banks of Boston and Atlanta, respectively, Mr. Strathy, 4r1 St-n -wart, and Mr. Mangels, Secretaries of the Federal Reserve Banks or chill°11d, St. Louis, and San Francisco, respectively, Mr. Powell, Ptrat v-ice President of the Federal Reserve Bank of Minneapolis, Mr. 414 ell, Federal Reserve Agent at the Federal Reserve Bank of Kansas City —41 Mr- Coleman, Vice President of the Federal Reserve Bank of 11411a ' s et—lting that the Board approves the establishment without chatige by the Federal Reserve Bank of Boston on February 25, by the al Reserve Bank of San Francisco on February 26, by the Federal 408e1,11. e Banks of Atlanta and St. Louis on February 27, and by the Fed— R N4, 4 eeerve Banks of Richmond, Minneapolis, Kansas City, and Dallas on e4'117. 28, 1946, of the rates of discount and purchase in their exist— Approved unanimously. Me morandum dated February 26, 1946, from Mr. Paulger, Director of' the ry Iltkh lvision of Examinations, submitting the resignation of Edwin J. soti, 'Issistant Federal Reserve Examiner, and recommending that the 311/46 —3— l'esigaation be accepted as of the close of business February 17, 1946, allcithat a lump sum payment be made for the annual leave remaining to his credit at that time. The resignation was accepted as recommended. Memorandum dated February 25, 1946, from Mr. Bethea, Director q the ni --Lviion of Administrative Services, recommending that the teblo l'arY appointment of Mrs. Rose Lee Williams, cafeteria helper in that t ivision, be extended for a period of two months without change he r present salary of $1,440 per annum, effective March 1, 1946. T4 41. 171°randum stated that it is not contemplated that Mrs. Williams ' c become a member of the Retirement System during her temporary allPqntraent. Approved unanimously. Letter to Congressman Herman P. Eberharter reading as follows: r4. ela "This is in reply to your letter of February 6, 1946, vIng to the Board's Regulation W. The main contention of this letter, as it seems to that in present circumstances the regulation of a;:usumer credit serves no anti-inflationary purpose. We aoe unable to agree with that contention, feeling as we rile that President Truman put the matter correctly in his crseage on the State of the Union, submitted to the Conase88 under date of January 14, 1946, which reads in part follows: 118 cr2 'Even with maximum encouragement of production, cannot hope to remove scarcities within a short iime. The most serious deficiencies will persist -La the fields of residential housing, building materisa _, 3 and consumers' durable goods. The critical situation makes continued rent control, price 3/1/46 —4— "Control, and priorities, allocations, and inventory controls absolutely essential. Continued control of consumer credit will help to reduce, the ressure on 'rices of durable _oods and will also •rolon the eriod durin_ which the backlo demand will be effective.' Italics supplied. "The logic of this position seems to us to be unassailable. It stands to reason that upward pressure on the Prices of consumers' durable goods that is now being exerted by excessive demand, in relation to inadequate sup, 1, 24lies, will be lessened by dampening that demand. We do Ilat see how anyone can deny that Regulation W is one of 'he measures which help to dampen the demand for consumers' durable goods and thereby contributes to the Government's general stabilization program. th"We are also unable to agree with your statement at RegulationW has no effect on prices since prices are c°ntrolled by the Office of Price Administration, nor with asur contention that the administration of price ceilings not been influenced by the existence of Regulation W. Price ceilings are dikes keeping the flood of purchasing irailter from creating havoc in the economic system by bidg UP prices, but like all dikes they are strong enough ° stand only in case the pressure of the flood is not too ra?-t. The part which Regulation W plays in the antiprogram is to keep consumer credit from adding knclulY to the flood of purchasing power. The OPA, as you , 1 12:63 is represented on the Consultative Committee with L:Lch the Board is required to consult in administering prgulation W, and OPA's own view on the subject is well ex19ed in, a press release issued by that agency on May 7, 44) which reads in part as follows: 'In the present emergency, buying power, already far in excess of goods available for purchase, should not be increased by the unnecessary Use of credit. Cash and credit alike are means of Purchasing goods. An important difference is that Use of credit greatly increases the amount of goods a person can buy at any one time, multiplying purchasing power by concentrating future earnings on Present purchases. It is practically the same whether the merchant extends the credit to his customer or the customer borrows cash with which t° pay. It is clear, therefore, that credit plays a formidable part in creating the pressures sought V ii -5"to be held in check by price ceilings, rationing, and other factors in the President's program.' "We have not overlooked thereerences in your letter to the special problems of individual returning veterans. The Board is mindful of these special problems, but has seen as yet no reason to depart from the view that for the great mass of returning veterans the vital thing is that the Government, with the cooperation of the public, should elleceed in its fight against inflation and the spiraling coat of living. The proposal that all veterans should be exempted from the regulation would seem to the Board to be ! i 104g step in the direction of nullifying the regulation '50re any such action is justified. A secondary but still ! lgnificant consideration is that it would not be to the Interest of the individual veteran to make it possible for Z;Illers to load him down with goods at wartime prices under e lure of easier credit terms. "As your letter indicates, you are well aware, as we are Y that no single measure is adequate to coping with the 115 danger of inflation which confronts the country at the ,present Present time. A coordinated set of policies is needed, appropriate wage-price policies as well as fiscal monetary measures. It is the earnest desire of the as well as its legal obligation, to see that concredit regulation is administered in the light of 21e controlling consideration. While this means that in resent circumstances consumer credit regulation should be 1931. the stern side, it means also that as time goes on and ns°cluotion increases such regulation will sooner or later be liberalized. It is our belief that the Board its Consultative Committee will be on the alert to recj , tlize when that time has come and to take such action as "4-1-1 then be in order." Approved unanimously. Letter Of phiaa to Mr. Williams, President of the Federal Reserve Bank clelPhia, reading as follows: aries "The Board of Governors approves the payment of salWhich to the following officers at the rates indicated, are the rates fixed by your Board of Directors, as Ported in your letter of February 23, 1946. 332 3/1/46 -6- "For the period March 1, 1946, to April 30, 1947, inclusive: W. J. Davis, First Vice President $17,000 Wm. G. McCreedy, Vice President 12,000 and Secretary "For the period May 1, 1946, to April 30, 1947, inclusive: C. A. Sienkiewicz, Vice President $16,000" Approved unanimously. Letter to Mr. Wiltse, Vice President of the Federal Reserve 4111cof Mew York, reading as follows: "Reference is made to your letter of February 19, 1;946, submitting the request of the Bank of Jamestown, . u amestown, New York, for permission to establish a branch In Sherman, New York. "In view of your recommendatilin, the Board of Goverriors approves the establishment and operation of a 1, u, r . j in Sherman, New York, by the Bank of Jamestown, me stown, New York. It is understood that Counsel for tr Reserve Bank will review and satisfy himself as to ue legality of all steps taken to establish the branch." j Approved unanimously. Letter to Mr. Rounds, First Vice President of the Federal Reserve t exlk of New. York, reading as follows: to t "In your letter of January 29, 1946, you refer he Com,, application for membership submitted by the Trust , e-vaxlY of New Jersey, Jersey City, New Jersey, and sugIlost that a discussion be had with representatives of the 130c?netruction Finance Corporation regarding the capital 0081tion of the Trust Company and the possibility of the pr:?.°r a tion accepting a settlement for its holdings of Butterred stock on the basis of the present value of en holdings. been "A discussion in line with your suggestion has dew,held, in which Governor McKee participated. It was awe. -Loped that the management of the Corporation is or 71,:e of the situation with respect to the Trust Company "ew Jersey as well as with several other institutions similar circumstances. However, the experience of the 3:3 3/1/46 -7- "Corporation has been very good with respect to a number of situations which, at times, were comparable t° that of the Trust Company. Because of this fact and because of the numerous cases in which the same or fiTilar circumstances exist, the Corporation is not at °I18 time disposed to enter into any negotiations with 8 4:,view to sale of its holdings of preferred stock of "le Trust Company at less than the amount of its investZent• n Approved unanimously. Letter to the Board of Directors of the "Citizens State Bank," 4 Bcw, Oklahoma, stating that, subject to conditions of member411, . numbered 1 to 3 contained in the Board's Regulation H, the kart' approves the bank's application for membership in the Federal 've SYstem and for the appropriate amount of stock in the Federal. -serve Bank of Dallas. Approved unanimously for transmission through the Federal Reserve Bank of Dallas. Thereupon the meeting adjourned. ApDrov Chairman.
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