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5S11, Minutes of actions taken by the Board of Governors of the Pederal Reserve System on Thursday, March 27, 1952. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Evans Vardaman Powell Mills Robertson Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary ors of the Minutes of actions taken by the Board of Govern l'ederal Reserve System on March 26, 191)2, were approved unanimously. Title Guaranty Company, Telegram to Mr. Aksel Neilsen, President, Nnver, Colorado, reading as follows: Reserve -ystem "Board of Governors of the Federal of the FedBranch has appointed you director of Denver portion red unexpi for eral Reserve Bank of Kansas City d be please will and of term ending December 31, 1953, am. telegr t to have your acceptance by collec a director of a "It is understood that you are not office. Should cal politi bank and do not hold public or the tenure during change Your situation in these respects you will if iated apprec Of your appointment, it will be the of ors Direct advise the Chairman of the Board of Federal Reserve Lank of Kansas City." Approved unanimously. Division Counsel, Services, Letter to Mr. Jesse B. Messitte, n, ;iashington, D. C., 4Port-import Division, Office of Price Ftabilizatio l'ee.ding as follows: March 6, 1952, in "This refers to your letter of 27, 1951, regarding August reply to the Board's letter of tions of your regula under the procedure to be followed 374:1 3/27/52 -2- "Office when a bank desires to be added to the Federal Reserve par list and to substitute service charges for exchange charges previously made by such bank. Your letter indicates that you contemplate issuing supplementary reguy lations with respect to this matter and, while not entirel the mind in have clear, it is understood that you al.,o nation of bank establishment of procedures for the determi service charges generally. made by some "As you know, exchange charges are charges the holders against banks in a few sections of the country payment for ed present of checks drawn on such banks when charges are through the mails, and banks which make such service charges hand, other known as nonpar banks. On the deown their against are charges generally made by banks g the handlin in banks the positors for services rendered by t is it apparen ngly, Accordi of their depositors' accounts. nt from differe kind a of that service charges cover a service and it is suggested, that for which exchange charges are imposed charges in service utes substit therefore, that when a bank ng a as d renderi regarde be may lieu of exchange charges, it s your of Office' 6 section of new service within the meaning Regulation CPR 34. s letter, banks "As indicated in the Board's previou eligible for the Federal Which make exchange charges are not Federal Reserve Reserve par list or for membership in the interested in the adopEystem, and the Board is, therefore, would facilitate tion of any procedures by your Office which in lieu of charges the substitution of a system of service the par list. to added exchange charges by banks wishing to be of fair nation determi However, the Board believes that the the with establishion and equitable Price ceilings in connect might best be which ment of bank service charges is a matter s of ntative with represe worked out in consultation primarily At tion. Associa bank groups, such as the American Bankers BEnks Reserve will the same time, the Board and the Federal either by particihe glad to cooperate in any way possible, ntatives in disreprese pating with your Office and banker and commenting on ng cussions of the subject or in reviewi ions between your discuss regulations drafted as a result of Office and banker representatives. another case in which "We have recently been advised of is anxious to learn charges a bank desiring to institute service Other cases of this d. followe the procedure which should be hopes, Board therefore, that kind will undoubtedly arise. The "01-1 . C7.4„ -3- 3/27/52 "a determination of this matter may be reached at an early date." Approved unanimously, together with the following letters: Letter to Mr. Cook Vice President and Cashier Federal Reserve B nk of Dallas "This refers to your letter of March 6, 1952 concern lle, Texas Somervi Bank, ing the request of the Citizens State for assistance in securing a revision of its service charge of Price itabilischedule. For your information, the Office it intends to that 1952 zation advised the Board on March 6, ng for providi cally specifi issue supplementary regulations exfrom ions convers to ceiling price adjustments incident ed suggesrequest has and change charges to service charges drafting of such tions and cooperation with respect to the Board's reply the of copy regulations. We are enclosing a to this request. tances, we do not be"In view of these changed circums for interpretation to ns questio lieve it advisable to submit time, inasmuch as this at the office of Price Stabilization answer such questo ions regulat we expect the supplementary ent action." subsequ any tions. You will be advised of Merchants Bank, Wessington to Mr. F. W. Bunday, Cashier, Farmers & Springs, South Dakota letter of August 13, "With further reference to your we are enclosing for 1951 and our reply of August 27, 1951, between the Office ondence corresp Your information copies of rs concernGoverno of Board of Price Stabilization and the of procedures shment establi the ing proposed regulations for s." Lervice bank for s to determine the price ceiling Reserve Bunks, reading as Letter to the Presidents of all Federal tollews: 18, 1952, S-1430 (W-179) "The Board's letter of January for the Regulation W basis the as outlines certain principles Under paragraph 6, s. program compliance and enforcement toit,‘„ -4- 3/27/52 "reference is made to the possible creation of a revolving committee of Reserve Bank personnel to work out standards of general application. "This suggestion was discussed at each of the four Inter-Bank Conferences recently concluded and the reaction of most of the Reserve Banks was generally favorable to having such a committee established, at least on an experid in the mental basis. Although the committee was mentione Board's letter chiefly in connection with the particular of problem of first offenders, it seemed to he the feeling ng operati e most of the Reserve Banks that such a committe as a continuing organization could contribute toward more effective administration of the Regulation generally. with the "Accordingly, the question was discussed met with they Presidents of the Federal Reserve Banks when that each d indicate the Board on February 29, and it was to on serve tative represen Reserve Bank would appoint one a small select would such a committee. From this group, we further question ad hoc steering committee to consider the might receive that areas of committee organization, various Although a like. the the attention of the committee, and ment of enforce with majority of the problems having to do may be ion regulat credit and compliance with the selective is it W, ion Regulat expected to arise in connection with to r nt conside sufficie believed that one committee should be or ion Regulat that either matters that may develop under Regulation X. let us know who will "It will be appreciated if you will e may be escommitte hoc represent your bank so that the ad wish to conmay group tablished as soon as possible. This , but it is thereon ted represen sult with Reserve Banks not its ions suggest submit contemplated that initially it will you be will event, any to the Board for consideration. In ons you suggesti any te apprecia kept informed and we shall may care to make concerning the organization and possible usefulness of the proposed committee." Approved unanimously. United States Senate, Letter to the Honorable Milton R. Young, W481iington, D. C., reading as follows: MJ.reh 11, 192, addressed "This refers to your letter of the Board to give consideration ask to Chairman Martin in which you 3/27/52 -5- "to extending the maximum maturity provided under Regulation W--Consumer Credit--to 24 months for automobiles. You point out that a number of automobile dealers in North Dakota, in requesting this relaxation, claim that the present regulation penalizes those in the lower-income brackets because of their inability to stretch their payments over a longer period, "Although Regulation W naturally must have some restrictive effect on instalment credit if it is to be successful in helping to curb inflation, the Board's studies indicate that the regulation has not unduly limited instalment sales of automobiles or other articles. While we do not mean to question in any respect, the sincerity of the automobile dealer or finance companies that claim that Regulation VI discriminates against the lower-income groups, it must be remembered that they naturally are interested in expanding their credit business, particularly at a time like the present when increased prices add to the difficulty of expanding sales. "Very few complaints are received from the consumers who are said to be discriminated against. The Board's surveys have shown that most consumers who know about the regulower-income lation approve of it. It is, of course, the his savings in have and fixed-income consumer who tends to of which are all bonds, insurance, savings accounts, savings the by inmost hurt assets fixed in dollar amount, who is of instalexpansion flationary effects of the unrestrained ment credit. postwar periods "Surveys in pre-World War II as well as buy used cars typically show that people with lower incomes are now available cars used rather than new cars. Good postwar month under the a *50 for instalment payments of less than of more case the in Present terms-of Regulation W. Even can always payments t expensive cars, the monthly instalmen a few for savings e accumulat be reduced if the consumer will is It payment. clear, down months in order to make a larger the final cost beof course, that longer maturities add to they increase charges; cause they involve larger finance ation. e transport automobil rather than reduce the cost of in decline the that "The Board's studies indicate reflected primarily has automobile demand in the past year regulation has curbed a reduction in cash sales and that the ing repayments accelerat outstanding instalment credit by The total sales. credit rather than by unduly restricting both including new sales, number of automobile instalment 1950; for new in than cars and used cars, was larger in 1951 -6- 3/27bre alone, cash sales declined more in 1951 than did instalment sales. While new automobile sales decreased about 20 per cent in 1951, compared with 1950, the proportion of sales made on a credit basis increased from 46 per cent in 1970 to 48 Per cent in 1951; in the five months, August through 6o per December 1951, the proportion has averaged nearly prewar years. cent, which is higher than the ratio in most s the measure of "Regulation W, as you know, is but one the of dollar power directed toward protecting the purchasing the low and which, as previously noted, helps particularly been a has y recentl fixed-income groups. Although there onary deflati and comparative balance between inflationary a heavy for t prospec forces in the economy as a whole, the of lity possibi Federal deficit later this year, and the Board's opinion, renewed waves of inflationary buying, in the nts in restrai credit require the maintenance of effective the public interest at this time. on "We appreciate having this opportunity to comment with people the es penaliz the claim that the regulation terms of Regulasmaller incomes. You may be sure that the continuBoard's the in ly careful tion W will be considered ion." credit regulat r consume ing study of the effects of Approved unanimously, with a copy to the Honorable William Langer, ton, United States Senate, Washing D. C. e, United States Senate, Letter to the Honorable Guy M. Gillett Washington, D. C., reading as 11, 1952, ad"This refers to your letter of March the Beard to request you dressed to the Chairman, in which r instalile consume automob re-examine its limitations on current the of view in W, ment credit under Regulation market situation. in the markets for "The Board is watching developments closely and goods durable automobile and other consumer decline in rable conside recognizes that there has been a peaks reached high the with demand in these markets compared easing of some been has there :1 year ago, at the same time and m lead, aluminu steel, materials supplies, especially 3/27/2 -7- "although the continuing shortage of copper still seems likely to be a limiting factor on automobile output for some time to come. Some major appliances are now selling at prices which compare favorably with pre-Korean levels but automobiles have continued to increase in price. If we consider the Price of a typical low price sedan in 1940 as 102, the price in 1950 was 196 and the price today is 22). "Meanwhile, it appears that automobile sales generally have been more or less in balance with production, since dealers' inventories of new automobiles, as a whole, have remained at comparatively low levels in recent months. Some seasonal increase in automobile demand normally occurs in the spring. With production still curtailed by material shortages and heavy defense expenditures expected to maintain Purchasing power at high levels, there would seem to be relatively little prospect of any considerable deflation developing in the automobile field over the immediate future. "The Board's studies indicate that the decline in automobile demand in the past year has reflected primarily a reduction in cash sales and that the regulation has curbed outstanding instalment credit by accelerating repayments rather than by unduly restricting credit sales. The total number of automobile, instalment sales, including both new and used cars, was larger in 1951 than in 1950; for new cars alone, cash sales declined hi1e new automobile more in 1951 than did instalment sales. compared with 19)0, 19)1, in cent per 20 sales decreased about basis increased from credit a on made the proportion of sales five months, in the 19)1; in cent 46 per cent in 1950 to 40 per averaged has proportion nearly the AUgust through December 1951, in most prewar ratio the 60 per cent, which is higher than years. "Regulation 14, as you know, is but one of the measures directed toward protecting the purchasing power of the dollar. Although there recently has been a comparative balance 'between economy as a whole, inflationary and deflationary forces in the later this deficit Federal there is the prospect for a heavy are possible. buying ry inflationa Year, and renewed waves of to comment on the y opportunit "We appreciate having this of terms \. Regulation the that Points you raise and assure you contin , study Board's Will be considered carefully in the of the effects of consumer credit regulation." Approved unanimously. Secretary.