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435 A meeting of the Board of Governors of the Federal Reserve 878tell was held in Washington on Saturday, March 18, 1944, at 11:00 PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters herein— referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the "al Reserve System held on March 17, 1944, were approved unani— Letter to Mr. Rice, Vice President of the Federal Reserve Bank e* York, reading as follows: "In view of the circumstances described in your let— ter of March 15, 1944, the Board of Governors approves the continuation of the payment of a salary to Mr. James 'elllnan as an Assistant Shipping Clerk, Cancelling and , /ltting Section, Sorting and Counting Division, Cash De— vertment, until he retires, at the rate of $2,800 per tt a.1 , 121114, which is $100 in excess of the maximum annual sal— Provided in the personnel classification plan for the position to which he is assigned." Approved unanimously. ehie4 Letter to Mr. Young, President of the Federal Reserve Bank of g°, reading as follows: 43G 3118/44 —2— "In accordance with your request, the Board approves the appointment of Otis B. Coppedge, at present an assist— ant examiner, as an examiner for the Federal Reserve Bank 01* Chicago. Please advise us of the date upon which the aPpointment becomes effective." Approved unanimously. Letter to the board of directors of "The Hermann Bank", Hermann, • -rly stating that, subject to conditions of membership numbered 1 to , -) contained in the Board's Regulation H, the Board approves the bank, 8 aPPlication for membership in the Federal Reserve System and tc)r the appropriate amount of stock in the Federal Reserve Bank of St. 14(41 . 1.8. Approved unanimously, for transmis— sion through the Federal Reserve Bank of St. Louis. Letter to Mr. Hays, First Vice President of the Federal Reserve 4rat of Cleveland, reading as follows: „ "The long delay in answering your letter of January -1--L has been due in part to circumstances beyond our con— li01 and in part to the difficulty of the questions. following facts: A "The first question arose out of the follong fil,customer is indebted to two loan companies and is de— to both. One of them wishes to enforce its ob— ation '— LT legal action. The other wishes to extend the . 7114s of its obligation but in order to protect itself be— t;1-eves that it must take over the delinquent obligation tl"t is owing to the other Registrant. It wishes to do by advancing to the customer the amount necessary to 4.!tire that obligation. It will then have two loans to ir customer, one representing this advance (which would for the number of months remaining on the old contract, which would not be in default because it is a new ob41-11gati0n) and the other representing the loan which it readY had, and which was already in default. After the elf loan has itself gone into default, the company proposes 1 437 3/18/44 -3-- "to revise both loans under section 10(a)(2) and consolidate them, without having to observe any limitation on the length of the contract. "In its letter of December 14, the Board stated that this could not be done, although it had stated in S-583 that where a Registrant has 'purchased' a delinquent instalment obligation and has exercised a bona fide collection effort, he may then revise the obligation under section 10(a)(2). You point out that some Registrants are not permitted to purchase obligations and you suggest that there is not much difference from a practical standpoint between the purchase of an obligation and a loan to retire the obligation. "As was pointed out in the Board's letter of December 14, the policy objection to liberal rulings in cases under ration 10(a)(2) is that they would enlarge the opportunity or using that section as a means of evasion. It was Pointed out in that letter, as has been stated on several ?ccasions, that section 10(a)(2) as it stands, is loose. In the case which you describe, the Registrant would be 111 king a loan with full knowledge at the time of making ! : that the loan would not be repaid according to its 4erma and that it would in fact go into default. He ,uld be expecting by this means to obtain the privilege ) , ( : 1 revising it on terms which would not have been pertted by the regulation otherwise. As stated in the °ard's letter of December 14, the regulation should not Prevent a Registrant from taking anything he can get where 4.1.1e debtor is not able to pay the obligation according L° its terms; but this principle applies to an obligation . , leld by the Registrant himself and not to an obligation 4eld by another. Therefore, as stated in the Board's leter of December 14, it appears that the answer given in 583 goes as far as is desirable in this connection. "Your second inquiry relates to a creditor who, as a Matter of policy, does not wish to repossess or sell the 2 • Pr°Perty 1-y lo which the obligation is secured. You have ex3 es5ed the tentative opinion that a secured creditor may 1! i?vise an obligation under section 10(a)(2), without utic ing the security, only if (1) the security is not suffi.1 ?nt to liquidate the account or (2) repossessing without i1 40-gation is not feasible. This position would seem to ; : correct. A creditor who does not repossess merely bethe e it is against his policy to do so would not have met requirements of section 10(a)(2), which permits an r 4 438 3/1e/44 —4-- auNstment only as a last resort and as a measure to be taken for the Registrant's protection after all other means of collection (except litigation) have been exhausted Approved unanimously. Letter to Mr. Dillard, Vice President of the Federal Reserve 411at of Chicago, reading as follows: "This refers to your letter of March 9, 1944, en10eing a copy of a resolution which was adopted by the 4xecutive Committee of the board of directors of your Bank for the purpose of indemnifying the officers, diand employees of your Bank against personal liability in connection with your Bank's entering into and °Perating under the proposed share-the-loss agreement of the Federal Reserve Banks. "In view of the position which the Board has taken, as expressed in its letter of December 14, 1943, it has 110 objection to the proposed resolution which you enc losed." Approved unanimously. Thereupon the meeting adjourned. Chairman.
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