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7r4
Minutes Qf bct'ons taken by the Board of Governors of the
Pede
ralReserve Eystem on Tuesday, March 4, 19'12. The Board net in
exen4.
—lve session in the Board Room a ln:C'm a.m.
PR'EEENT:
At the
Mr.
Mr.
Mr.
Mr.
Yr.
Mr.
Mr.
Martin, Chalm-n
Lzymczak
Evans
Vardaman
Powell
Mills
Robertson
nclusion of the ,,xecut4 v
tJe fallowing members
"the staff
joined the meet1N -:
Carpenter, L:ecretary
Sherman, Assitant Fecretary
Kenyon, .;2issistant secretary
Thurston, Ass stant to the Board
Riefler, Itssistant to the Chairman
Vest, General Counsel
Noyes, Director, Division of Selective
Credit Regulation
Mr. Chase, Asistnt Solicitor
Mr. E:olomon, Assstant General Counsel_
Mr.
Mr.
Er.
Mr.
Mr.
Mr.
Mr.
It Was
Stated that consIdercVon had been given
Sion.
to
issuance by the Board of a ::ttenent along the lines cf a
PrelJared by Mr. Powell concern-In
to banhs of membertheSi
the
Pederal Reserve Fystem 1-ut that no co_clusion was reached
ths.t
the
matter would be considered further following Mr. Vardaman's
r'etIlril to
h1s office
frm a forthcoming trip.
4.11
012,1
1E3fl
At the
meeting or Tenucr e,. 1952, the Board decided that an order
he
--sued suspendinr the 7. "
- c-:-fl“ of H. Bartels, Inc., Philadelphia,
la
a recistrant under
' -
t.)mer Credit, with respect
3A/52
-2tointtalnent sales of all rtrticle,3 c
1)eri°(1- Of 3c days, and the LeLal B' json
lie"sEary order.
ulation for &'
fr iu-btecl_ to draw up the
Accordingl, there had Leon rent to each member of the
13°4"clbeforg, this meeting drafts of a E-,1),este,
'strAnment 0qFindinfrs
"
e.11 9111ion of the Board and a suggested order.
During a discussion of the drafts it was noted that Chairman
lilart.11 A„
-1111erlt
not sit with the other mom:'.2,ers of the Board when the oral
of
the
case was made 'before the Board, and that -t the time Mr.
liest was
ached to prepare the oninion and order Messrs. Mills and Robertson
l'ere riot menthe
rs
- of the Board. Nessrs. Martin, Milln, and Robertson stated
thEtt) f
°r the reasons above set forth, they would not particinate in the
act,toll on
order.
Or consideration of the Board's opinion and
Thereupon, upon motion 1-'y Mr. 7Cvans
and the affirmative votes of Messrs. vmczak,Evans, Vardaman, and Powell, the Board anProved the above-mentioned statement of FindlnEs and Opinion of the Board, ard the issuance
of an Order suspending the license of H. Bartels,
Inc. under Regulation W.
Secretary's Note: A copy of the Findins and
Opinion of the Board, dated March 4, 15)2, }1a5
been Placed in the :Board's files, and the Order,
iosued under date of March 4,
lows:
"UNITED FT= OF AMERICA
BOARD
01' covraEoRL OF TEE iil]DETT,
.;11 the
Matter of
-2
ARTELS, INC.
and Market
Streets,
--dladelnia Pa.
11Epo
'
111 L
47141.!)1
314/52
-3-
"ORDER SUSFE=G LICEULL ulna REGULAT7017
, the Board r-P Gn-iernors of the Federal
°11 May 26,
11:,,,sTe System
ordered that , hearing be held to deternine whethtL° not the license of H. 'ortels, Icc., (hereinafter called
''IRegiStrant) should be suspended, and
Hearings were held be -ore ;- Hearing 1Y-r_iner end oral
arglanients were
heard by the Board, and
The Board, having considered the record in the Tletter,
HEREBY ORDERr, under authority or :ieLulation P and the
tj cited therein, that:
1)y- Regulation
1. The license of said Registrant
w be and the same is herey suspended, P. 1 1 respects and as
all credits subject to the re, ulation, or 30 days, from
proarch 24, 1952, to April 22, Ag, 1)r-th
any
of
t
that this order does not .-)ro11 11- t the
, OX the
IPolaYments on obligations existing on liz;rch 23, 2
,s
taking of payments on any obligations, includir4employees for salaries and. wage;
, 2. Any terms used in thi order that are defired in
enlation W shall have the riosnirig therein given them.
'
, BY order of the Board of Governors of t'le Federol Reserve
oYstem this 4th day of Larch
(LiiTod) E). R. Carpenter,
,ecretLry."
(EEAT.,)
At the
zc
request of Mr. Evans, Mr. Chase re -erred to ti)e uatter of
, Inc., 1:.) S. Frranklin Ftreet,
rizzi °IlliDanY
Pennsylvana,
en6age6 in the automaile rental busineor, which had declined to
reFiistration
111)ict to
statement on the grounds that its busineEs was not
Regulation W and which had also Ccclinel to na',,e its record—ds
Niaable for
ese
- ank
h rederll Hne
inspection by representatives of te
c't
l'hilmeiphia
whethera determination by appropriate L.,uthority of the
pending
N'qicn
it was subject to the reFulat:Lon. Iir. Chase recalled
tl4zt this illatter had been the subject of discussion at meetings of the
f)172
3/4/32
-4-
760ard on
December 4 and December 14, 1))1, and that in accordLnce with a
846estion which was appruve( at the earlier meetinc, representatives of
tS
-°1111D811,7 conferred with ni -Lero of the Board's staff on December 11, 1
the Durpose of
expTorinL; the possibility of some solution to the prObiwithout resort to litication.
D-2 went on to say that the comanv- had
11°11 faed
suit in the United :i,tctes Djstr I
- ct Court naming the Federal Re-411 _
B
Ve
rflk r
ashin for a declar.- tory
Philadelphia as deendant
'
Ir(11't that it
other relief.
uusluess vas net subect to Regulation
and for
Mr. Chase said th&-t the suit did not name the BoeT
c°1aseql-lently it
micht be possible to delay action by procedural
e's . 11.̀°tI ori. to
dismiss the suit and require the Board to ho made a
tlit that
the question of leasinr. arrangements under Regulat
that
;
have to be settled 311,', in the circumstances both he
the Board's 2o1icitor, v'th vbom the matter had been discussed
tieP1-4)tle) concurred in the recolurmadl:t7on of the Philadelphia Reserve
tIlat the &)ard
authorize filinF c-r a e''
t Company to rec,ister u-z-ter
-
qplaint askinL' thlt the court
r,
,n
permit inspection
'Q't/tE books
and records.
IsesDense to a question by Chairman
rtin, Mr. Vest said that
%1841 triclined to believe that the reccrirleration w,:ts proper since i
44" that the Issue was one which must be met and it mirlit be just as
the Board to join in the „)endinc suit rather than to file a motion
votad,
ha,ve the effect o i postponing the issue.
He added that a
3A/52
-5(leciBion on the
question (-2:1:: Mein
aatc was desirable for
trative reasonsand qt seemed on this account that it would be
better to
have a decision as seon a7; possible.
M. Vard_,
n said th.t
nasmuch as this point had not been adjudicate h
eretofore he wo1)1(-1 fr -..7or the taking of steps to 01. taaLa.
as this coulc7.. be done.
Thereupon, lir= motion by Mr. Evans,
the Office of the ;olicitor was authorized
by unanimous vote to j roceed with the filing
Of a cross comlfnt
anst T & E Company,
ted Sttes District
requestincjt t
Court order the C7 '
to register under
ReeulationV nd to .•,.Derl.iTt inspection of
lts books and records by representatives of
the Federal Reserve 'Panic of Philadelphia.
At this point all of the members of the staff with the exception
iviessrs.
Ca-laoenter, Merman, and Kenyon withdrew, and the action stated
VItli respect .0
t each of the nrAtrs hereinafter referred to was taken by
the T4oaria:
Minutes of
actions taken by the Board of Governors of
Re.A.
Ve
Q,
'
L Jstela on March
were approved unanimously.
'
Mem
orandum dated March 3, 19)2, from Mr. Marget, Director,
(itqc
In
ternatIonal Finance, recormendinG an increase in
ealar
, Y of Lawrence
Bestow, Economist in that Division,
v to
,
r ,10. per annum, effective March 1E, 19)2.
jprevcd
jrInirno.
.
tr
3A/52
-6Memorandum dated February 29, 1952, from Mr. Bethea, Director,
tivisi°11 of
Administrative Services, recorasenclinc, the appointment of
Ileleh AA .
''alr Golway as Cafeteria Helper in that Division, on a temporary
I.
a Period of two months, with basic salary at the rate of *2,420
Der Eitzi
iza) effective as of the date she enters upon the performance of
her
-eS after having passed the usual physical e7amination and sub,
'
ect. to the
completion of a satisfactory employment investiEation.
Approved unanimously.
Memorandum dated March 4, 1952, from hr. Bethea, Director,
1°11 of Administrative Services, recommendinz the reinstatement of
Thoza
8 N. Buckley, who had been on military leave, as Telegraph Operator
ill that
'I-vision, with basic salary at the rate of 0,01) per annuls,
eta.
- as of the date upon which he reports for duty.
Approved unanimously.
Letter to Mr. Hill, Vice President, Federal Reserve Brik of Philarp A4
-e-,J-ng as follows:
In accordance with the request contained in your
lia.Cer of February 27, 1952, the Board approves the desiFferi°11 of Joseph R. Campbell, an examiner who was transyoured to the Department of Selective Credit Control of
ex2: bank effective February 18, 1952, as a special ,
liner for the Federal Reserve Rank or Philadeli,hia.
'
Approved unanimously.
Tel
eCram to Mr. Pondrom, Vice President, Federal R,2;.3erve DnJc of
.adinc as follows:
OP,
3/4/52
-7or
"Relet February 26, 1952 Board approves appointment
14
„ Gec)rge A. Holder as an examiner for the Federal. Reserve
Dallas. Advise effective date.
It is understood that Mr. Holder will not be authorized t
() examine any banks to which he may be indebted.'
Approved unanimously.
Letter to Bank of America National Trust and Favings Association,
44 ps.
'axicisco, California, reading as follows:
tem "The Board of Governors of the Federal Rei:erve CysAs- atzthorizes Bank of America Notional Trust and L'avings
prs°ciation, S7:11 Francisco, California, Pursuant to the
eeTilsic)ns of Section 2) of the Federal Reserve Act, to
Ilv ablish a branch in Osaka, Japan, and to °perste and
ntain such branch subject to the provisions of such seces.
til,tn;
upon conditIon that unless the branch is actui_y
1.9:;bliehed and opened for 'business on or before Narch 1,
be-'3) all rights granted hereby shall be deemed to have
8;21 abandoned and the authority hereby granted shall
'
Lmatically terminate on such date.
fac3
,.
that 1:tin taking the foregoing action, the Bard notes
d_lol
eytenslon
tie,,he Proposed branch represents an
Net
:-'11 an area now served by a branch of Pank of Americo
1,(1.1e°flal Trust and Savings Association and does not contake/s such action to be a departure from the 2osition
11 in its letter of My 26, 1949."
Approved unanimously, for
transmittal through the Federal Reserve Bank of San Francisco.
-Letter to the Presidents of all Fodera
Reserve
Banks, reading
question has been presented concerning the ayDlic
credit ,or the
.011rn1°n of Regulation W to instalment
se or installation of a home kitchen ventilatin
ileir
e known as the 'Vent-A-Hood'. Briefly, the 'VentA.
18 constructed for attachment to the wall to the
and directly above a cooking stove, and is designed
to
4tch cooking heat, steam, and vapor which are ejected
'
frail
3/4/52
-8-
',from
the house by means of an eYhaust vit and (7.-uet ledin.L,
flue or to an opening in an outside wail.
0
The Board is of the view that the "Veut- _ood', if cold
delivered "hy the iieFistrant tc the custoaei t or about the
Lille of the sale or delivery of n, cookirv: stave, shoul.d. "Le re.'
'
alI cled as 'an accessory' under section (,)(() n.7 the roguliConsequently, the 'csh price' of the ctnve, aGro
Jtoharticle, would include the prce of the "veLt--1-jord'. (j,
, e Other hand, a 'Vent-A-Hood' sol seTatel: :,nd not in
:nnection with the sale or delivery of a cco
'
1")
stee shouldnc,
, regarded
nature
of itE
as a Group D art cle in v -lew of the
Inst
allation."
to a
Approved unanimously.
Letter to Mr. William L. Donohue, Pusiness ha
° aILt
z0tion, Don Allen Puildinc:„ 2:)F)) VEir Ltreet, 7
(
York,
Ineadi
as follows:
e, "This refers to your letter o" Februaryitc
le..1„ aad
e-L°slares, to Mr. Pawley concern i n
i
;
t,
prtfcularl:
Led
.
14 of automobiles by your orga.al:ation. v 1
i'cn to nrrn],Leni „ advice as to the apnlicdtion of ther,
Inc.
,roAtTce-"iall,
- s to lease automobiles to salesmen of
separate,
a
thnt
irlaj "Prom the above correspondence it r..1)-enrL,
eaci;vidUal lease of an automobile would be entered into with
of several Prentice-Hall s'31eEnen. Lach SUCH lease would
be
voul°r an initial term of one year End the rental i-..rment3
't)dic.it( further
thatel be made in monthly instalment,. You
prelq.Under a separate acreement with your or 5n1Zati°n,
1ce-Hall, Inc. would guarantee both payent and Performance
Of 4,
indi7idual leases executed by its salosrlen.
1,..te 'On the basis of the information uresc,nted, it is the*T-ro„,s
jecw
t that each of the Individual leases in question would be subthat some th - rd :arty, such
the t° the regulation. The fact
1)a.yremPloyer, Prentice-Hall in this cse, uzidert'-..es to f:uar,:,ntee
th4ent and performance in the raInner descrIbed would not ch; le
JO
Of
t. The essential nature n' eacho'
re
betveensla
non
uP
wo1,10 rtinf'.1v4idual
Your organization and the
ntairi
i,errertl-tio-.
form unaffected for the purposes of the
mcy
be
in
_,eo,
..-red
Ylr'ous
tricire of contracts, of course,
'inC, for exam-01e conveyances nf iroperty for security
r.711-.0p4
t
3A/52
-9-
-oses cr various types of surety undE.rtakInE„s. However,
:flether or not
an instalment contract is secured or unsecured
.L?. es not of itself relieve the transaction from the provisions of the
regulation.
"Nor is it of controlling siFnifricance that it is not
Your
practice to sell leased automobile, to your various
ssees. The Board has felt that nefther an adecivate nor
l
aem,
,f,eroPriate differentiation could le based on whether in
':uttlection
with particular leases there may or nay not be
el ultimate Passage of title or the lesed property to the
ressee. In those cases of leacjng arrangements subject to the
11411lation, the substance of the transaction, though perhaps
zci. ,
1ceLo
1-io irm, appears little if any different from ordinary
1 sales or chattel mortgage arrangements. In either
orse the customer obtains the continuous use of an automol-ile
°ther listed article.
To he effective and eTlitalle in its applicsL.tion, tue
aczation cannot properly disregard competitive Toms of transwhichwhich are of a character to add to the over-all .problem
the statute and regulation were designed to meet. However
ie r, as you know, the regulation does not prohibit instalment
eoTng. As is true also with ordinary instalment loans and
tr, it-tonal sales, the regulation merely requires that the
(Insactions subject to the regulation meet certain requirements.
"In the event that you may wish L'urther to discuss V-le
lp_asin
st g arrangements of your nrgrinization with the Regulat,on
,
i aff Members at the Buffalo /7q-anch of the Federal Reserve
,
Ba
lettcf Uew York, we are sendinj that office a co_dy of this
foreer in order that they may be fully informed and, therein a better position to 1-2e of such further essiEtance
a8
11 may desire."
7
Approved unanTmcusly, with
the understanding that the Presidents of all Federal :Leserve Banks
would he advised of the sll stance
of this interpretation by letter.
Letter to
Mr. Millard, Vice President, Federal Reserve Pank of
Prezeisco,
reading as follows:
This refers to your letter of 1-&- ruary 11, 19)2, and
:
its
to n-ncloaures, concerning the alTlication of Regulation
- proposed television rental and sales promotion plan
3A/32
-10”_.
6111foraitted for consideration by Video Peter, Inc.
Prancieco.
or
Fan
"From the above correspondence it appears that the
elstrant proposes to Install television sets under leases
for
Periods not exceeding 90 days and calling for specified
:
11thlY rentals payable in advance.
at or before the
a?iration of any such 90-day instalment lease, the lessee
,
ciaes to purchase a new television sot, it is understood
0
aEreed. y the parties that the lessee may haJO the rental
jraents Previously made applied to reduce the -urchase
,
31,,.
cul
t"' cf the new set, and an instalment sale would be 07_0cln the basis of the rice -r so reduced. Lhile the
—
'
01Tal set may
and there would be no legal
not be .JurchaLea
it 'Cation on the part of the lessee 60 lurchase a new set,
ho
clear from the above correspondence that the Registrant
14113
1 2 and anticipates that the temporary rental installation
result in the sale of a now television set.
On the basis of these facts as ,resented, the Board
1Ves with your conclusion t2.L,t the rentals in question
c14-Ld not be exempt under section'
1 (1)(1), and particularly
(ii) thereof. This view fellows the principles stated
you will
,er-vice
reca;1295 (U-138); Regulation
was
nestion
(
i
an arrangement similar to the plan in
In
relevant
be
ecl- in F-1214 Or-107) which also would
con
ring matters of this kind.
"11/111e not of controlling significance, an additional
reliZtantiating circumstance :is the eroposed use on the above
°- sets of a coin-meter operating device. The Board has
pre;.
raslit-°u'aY indicated that, in the case oh either an instalOr instalment sale, the use of L meter as a col°11 facility would not, of itself, constitute a viclatien
of j
re "e regulation if there were compliance with the applicable
tocluirelaents of the regulation. 'thus, the mere use of a meter
"the customer in accumulating funds with which to meet
theae.si
,
1118talMent payments would not be obc;ectionable. However,
t,
set "is case, the installation and use of & meter on the rental
lessee who rethcugh Installed at the option cf the
air !:
the owner of the meter accumulation, if any, further
'
"
o ee the rental to a subsequent sale of a new television,
sill
rIew e 8110h accumulation may be applied against the Price or cEet in the same way as the monthly rental pa.;ments.
,:In.connection with a television set leased on an instalIet '
that rsls for a period in excess of 90 days, we have noted
he Registrant proposes tc obtain an initial deposit of
15 '
Ier
cent of a 'presumed' or 'average' velue. Under H-13c?6
ea
irl. as
3A152
11
"(W-1-4)
C., and )).-1432-b (h-10) it was indi,—tec' that e ReLjstreo_t
MaY select 'any reasonable method for c,
w,lue' for the
T°8e8 of the regulation provided, of c, cse, that all al).Pr1ate items of cost DE3sed on to the cu_tomer are included
se.,the calculations under the regulation. If the television
se s so leased vary widely, whether j1'
ci cost price or
,
s,_ling price basis, the use of the nrc
od. 'overage' or 'preValue would clearly be improver
der the regulation.
:
s taddition, in the case of such , lease of a new televs-lon
the'there would appear to be no justication for calculating
required,
initial deposit on 9 value less 20 per cent for
beTciation, althouLh, of course, depreciation properly could
leasaken into account in the case of a second or su'osequent
e °f a television or other listed article:, nsindicated
Ap:,roved
-TelpCram
to Mr. Cook,
4,/114 of p
ide,it and Cashier, 1,ederal Reserve
'-°-18.8) reading as follows:
19152 Meurlet January 1C, 192 and your telegran
3,
bleoc°ncerning proposed fillyncinu, Flans
tive
and Refining Company.
e agree w:th you,.
of
viol,t
•
1-15ion that Plans — and C would not be in
R
b4ation y e
As for Plan B, we understand N bord.z would lend the owiier:
less
Per cent of the cost of constructing a fil1in3 stetion
• tiland take a
note for that anount s(cured by an Clf;L"ibillIC:ilt
othe
ii„IVIe would pn:; the
rentals to be paid by iunile.
5° Per cent of the station's cost undEr a lense contract
to that used in Plans A and C. In our opinion, the
be tet by Humble should not be consderecl credit which must
'
e en into consideration in determining the clicuni, the .
balll
how%.°°uld lend. As stated in footnote 1c:a_ er the rerli•Itl.on,
tho%er, and explained more full; in
a lease such as
D1111';,question remains 'subject to' the reLu:ntIon for.
Of section /1(a)(Aand the leLsec must have deposited
•
---T-Int at least equal to
lea,
per cent of the value of the
Prope
ieuor
rty before a lic.,L.Antnt may purchase, discount
7°n such a lease
extel
alms, tae bank 4 s. prohibited from
secured
by an ass 4 j,ment of rentals unles:
credit
any
--lng
P-1.40
3A/52
-12e nas deposited 30 per cent of the value o" the prof,!!_q. It is not clear whether tlits would be done in the
"('')010osed Plan B, or whether it would be '30 per cent o2 the
evst of construction exclusive of land. In any event, howleer) if Humble advances ,0 per cent of the value of the
il ed proper%) or '.)0 per cent of the cost of construction
'he case of a major additicn, (Ind the credit extended by
bank does not exceed p0_Der cent of the value of the
.116rert-d, we believe that Plan B also would be permissible
"sr the regulation.
It is expected that an interpretation coverinL this
,
questions will soon be issued and, although the
yo lusions in regard to Plans
and C will be the same as
is quite possible that our reasoning will differ.
Approved unanimously.
elet>ram to Mr. Everson, Assistant Vice 1-resident, Federal Reserve
tan',
of
Q,
11
2rancisco, reading es follows:
lette"Reur]et of January 7, 1972, enclosing a coly of a
PrilA r from the Northern California Regional Office of
thelia ,
Insurance Company of America. In answer to the
an ,,, l()/1 Whether a prepayment of rent should be consideren
furt
-4
1,terisj
-uu of credit by the lessee to the lessor, on
the ier analysis we believe the answer depends upon whether
t
5ctjOfl
(c) "se is 'credit' as that term is defined in
prepay
of
men
RegUlation Y. If the lease is 'credit', a
if 4nt should not be considered an extension of credit, "tut
5hould be
cons4 le4se is not 'credit', then the prepayment
the lessor.
to
--red an extension of credit by the lessee
your
with
"In
answer to the specific inqujry enclosed
letter
i
L,Lestion
lere ; we do not know whether the lease in
flzrtl,it' within the meaning of the regulation. If, after
to '6'er investigation, it appears that it is, then the .
Payment by the lessee to finance the7'3,00 major
by t°17ement should not be considered an extension of credit
perrar lessee to
1)eor
the lessor and, accordinL;l, jt would (2
Of .
0
bie for e Registrant to lend the remainint.;*
-e cost.
"It is
expected that an interpretation will soon be
eoveri g this and. other similar questions which will
exe in more detail the reasons underlying this conclusion."
rl‘
Secre
@FedFRASER