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9:3 3 A meeting of the Board of Governors of the Federal Reserve SYstem was held in Washington on Friday, May 15, 1942, at 11:30 a.m. 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 hereinafter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Pede—, Reserve System held on May 13, 1942, were approved unanimously. Telegram dated May 14, 1942, to Mr. Davis, President of the Peder,„ I'LL. Reserve Bank of St. Louis, reading as follows: _ "Retel May 12. Board has no objection to schedule of rates on advances and commitments under Section 13b proPosed for recomme ndation to your Board of Directors." Approved unanimously. Telegrams to Mr. Paddock, President of the Federal Reserve 13arlic of Boston, Messrs. Treiber, Post, Dillard, and Hale, Secretaries of the Federal Reserve Banks of New York, Philadelphia, Chicago, and 41114cisco, respectively, stating that the Board approves the establishment without change by the Federal Reserve Bank of San Francisco 12, by the Federal Reserve Banks of New York and Chicago on May '4'4 '192, and by the Federal Reserve Banks of Boston and Philadelphia 5/15/42 -2- today, of the rates of discount and purchase in their existing schedules. Approved unanimously. Telegram to Mr. Turman, Counsel of the Federal Reserve Bank Of Atlanta, stating that the Board of Governors approves for the Bank the follo,Lug rates on advances and commitments under Section 13b of the Federal Reserve Act and the establishment without change of the Other rates of discount and purchase in the Bank's existing schedule, effective May 161 1942: On alliances direct to industrial or commercial organizatl°na, including advances made in participation with Other financing institutions - 2i to 5 per cent. On .advances to financing institutions: 1. Portion for which financing institution is obligated - rate charged borrower less commitment rate. 2. • -emaining portion - rate charged borrower. On ?ommitments to make industrial advances: 1. Direct to industrial or commercial organizations 10 to 25 per cent of loan rate with minimum of per cent. 2. To financing institutions (provided that no commitment shall be given on a loan on which borrower is charged more than 5 per cent): (a) Undisbursed portion of loan per cent. (b) Disbursed portion of loan - 10 to 25 per cent of loan rate with minimum of per cent. Approved unanimously. Tel egrvull to Mr. Stewart, Secretary of the Federal Reserve Bank Of St. 14°Il18l stating that the Board of Governors approves for the Bank 5/15/42 the f,i, " ng rates —owi on advances and commitments under Section 13b of the Federal Reserve Act and the establishment without change of the Other rates of discount and purchase in the Bank's existing schedule, effective May 16, 1942: On advanc es made direct to established businesses,including advances made in participation with other financing institutions - 21 to 5 per cent. °fl on on ow.amitments to make advances direct to business enterprises - 10 to 25 per cent of loan rate with minimum of 1 per cent. advances to financing institutions: 1. Portion on which Reserve Bank assumes risk rate charged borrower. 2. Portion on which financing institution assumes risk - 1 to li per cent. cc:V tments to financing institutions - 10 to 25 per .of loan rate with minimu per cent, provided m of that no commit ment shall be given on a loan on which borrower is charged more than 5 per cent. 4 Approved unanimously. Telegram to Mr. Powell, Secretary of the Federal Reserve Bank tant eapolis, stating that the Board of Governors approves for the Bank th followi e ng rates on advances and commitments under Section 13b Of the Federal Reserve Act and the establishment without change of the other rates of discount and purchase in the Bank's existing schedule, " • teetive May 16, 1942: 1°11 advances made direct to established businesses, including advances made in participation with other financing in stitutions - 2 to 5 Per cent. On c ,. -Tnaltments to make advances direct to business entertc:/flelex; 25 per cent of loan rate with minimum Cent. 9:5;t; 5/15/42 —4— On advances to financing institutions: 1. Portion on which Reserve Bank assumes risk rate charged borrower. 2. Portion on which financin institution assumes g risk - rate charged borrower less commitment rate °11 commitments to financing institutions - 10 to 25 per cent of loan rate with minimum of per cent, provided that no commitment shall be given on a loan on which borrower is charged more than 5 per cent. Approved unanimously. Telegram to Mr. Gilbert, President of the Federal Reserve Bank of rw,, stating that the Board of Governors approves for the Bank the f(4-1-Ong rates on advances and commitments under Section 13b of the Federal Other Reserve Act and the establishment without change of the rates of discount and purchase in the Bank's existing schedule, effective May 16, 1942: On advances direct to industrial or commercial organizations, advances made in participation with financing institutions - 21 to 5 per cent. On ad vances to financing institutions: 1. Portion for which financing institution is obligated - rate charged borrower less commitment rate. 2. Remaining portion - rate charged borrower. On c ommltments to make advances direct to established industrial or commercial businesses - 10 to 25 per cent of loan rate with minimum of per cent. On c • ommitments to financing institutions to make advances: 1. On 2. On undisbursed portion of loan - 4 per cent. disbursed portion of loan - 10 to 25 per cent of loan rate with minimum of 1 per cent. t elegram also stated that it was assumed no commitment mould be 9 5/15/42 given on a loan on which the borrower was charged more than 5 per Cent. Approved unanimously. Memorandum dated May 12, 1942, from Mr. Goldenweiser, Director °f the• . . Division of Research and Statistics, recommending that Victor M. Longst a Senior Economist in that Division, be granted leave of absence without pay beginning May 11, 1942, so that he might enter active duty with the United States Army, and that he be granted the benefits Provided in the policy adopted by the Board on November 14, 1940, and amended August 20, 1941, for al 1 employees entering military service. Approved unanimously. Letter to the board of directors of "The Central State Bank", Com,-rsle Indiana, stating that, subject to conditions of member— shit, "umbered 1 to 6 contain ed in the Board's Regulation H and the ng special condition, the Board approves the bank's application for mumbership in the Federal Reserve System and for the appropriate 414°Iint Of stock in the Federal Reserve Bank of Chicago: 117. Prior to admission to membership, such bank, if it has not already done so, shall charge off or otherwise eliminate estimated losses of $581.13 as shown in the report of examination of such bank as of April 4, 1942, made by an examiner for the Federal Reserve Bank of Chicago." The letter also contained the following special comment: 5/15/42 -6"It has been noted that the bank has outstanding ?.?]mmon capital of $100,000, which is in excess of the itplgure at which the stock is shown on the books of the ank- The Board feels that the bank should, as soon as pra n cticable, take such action within its power as may be ecessary to cause the common stock to be shown at its par valu.el and it is understood that full restoration of the capital during the current year is contemplated." Approved unanimously, together with a letter to Mr. Young, President of the Federal Reserve Bank of Chicago, reading as follows: "The Board of Governors of the Federal Reserve Systhe application of 'The Central State Bank', onnersville, Indiana, for membership in the Federal Reserve System, subject to the conditions prescribed in the Fdcaosed letter which you are requested to forward to the of Directors of the institution. Two copies of such aetter are also enclosed, one of which is for your files „sr.ld the other of which you are requested to forward to the l_ilrector, Department of Financial Institutions for the State ul Indiana, for his information. "It is assumed that the Reserve Bank will follow the m,er of the bank's bringing into conformity with the pro' 3 081°ns or law and the Board's regulations the savings acunt listed membership. on page 16 of the report of examination for ac "While the volume of trust business is small and the hac ,( , Tnts are reported to be efficiently administered, it re- ueen noted that there is no trust committee and no decc)rd in the minutes regarding supervision of the trust dirltment by the bank's board. There will probably be no ti flcultY in getting the bank to revise its trust operaSo that the collective judgment of the board or a 'mmittee will be obtained. tr "Since it is understood that in the State of Indiana „ : I18t funds deposited in the banking department of a bank jpreferred claims in the event of liquidation of the you are authorized, in accordance with the general wc4c1:41?/:ization previously granted by the Board, to waive 4 /2 :0 1 condition of membership numbered 6 until fUrZiertelee tein : 939 5/15/42 -7Letter to the board of directors of the "South Chicago Savings Bank!! Chicago, Illinois, stating that, subject to conditions of membershiP numbered 1 to 3 contained in the Board's Regulation H and the r°11"ing special condition, the Board approves the bank's application fO? membership in the Federal Reserve System and for the appropriate allic4Int of stock in the Federal Reserve Bank of Chicago: "4. Prior to admission to membership, such bank, if it has not already done so, shall charge off or otherWise eliminate estimated losses of 1t4,943.83 as shown in the report of examination of such bank as of April 13, 1942, made by an examiner for the Federal Reserve Bank of Chicago." Approved unanimously, together with a letter to Mr. Young, President of the Federal Reserve Bank of Chicago, reading as follows: "The Board of Governors of the Federal Reserve System 114 aPProves the application of the 'South Chicago Savings Chicago, serve System, Illinois, for membership in the Federal Resubject to the conditions prescribed in the litlelosed letter which you are requested to forward to the 'd of Directors of the institution. Two copies of such -k lette r are also enclosed, one of which is for your flies ,nd the other of which you are requested to forward to the , 4n1ditor of Public Accounts for the State of Illinois for Qis information. iteon "In approving the reduction of capital in 1940 from to 500,000, the F.D.I.C. suggested that the bank ad,:.'.°C4 to thr*a to restore the capital stock to not less pr4.4800,000 through conservation of earnings, and the to '-'-uent assured the F.D.I.C. that it was the intention rearlebuild the capital structure from earnings until. j.t The%es a figure which will be unquestionably adequate. if 11rvising examiner for the F.D.I.C. suggested that, p.o.yv Dank Is admitted to membership, the attitude of the with respect to the rebuilding of the capital acbe restated. It is assumed that the bank understands 94 ) 5/15/42 —8— "that, as a member bank, it will be expected to carry out any commitm ent to the F.D.I.C. with respect to increasing Its basic capital. L "It is assumed also that the Reserve Bank will follow am matter of the bank's bringin into conformity with the g ovIsions of law and the Board's regulations the savings mc e= 111-ed on page 16 of the report of examination for r Letter to the Federal Deposit Insurance Corporation, reading 48 follows: "Pursuant to the provisions of section 12B of the Federal Reserve Act, as amended, the Board of Governors ! c13 the Federal Reserve System hereby certifies that the Peoples Bank', Lakewood Village, California, became a mber of the Federal Reserve System on May 15, 1942 and ,! now a member of the System. The Board of Governo rs iLI the Federal Reserve System further hereby certifies mea,t, in connection with the admission of such bank to w_muership in the Federal Reserve System, consideration 8 given to the following factors enumerated in subsec— °n (g) of section 12B of the Federal Reserve Act: 1. The financial history and condition of the bank, 2. The adequacy of its capital struc— ture, 3. Its future earnings prospects, 4. The general character of its management, 5. The convenience and needs of the community to be served by the bank, and 6. Whether or not its corporate powers are consistent with the purposes of section 12B of the Federal Re— serve Act." r z 4 Approved unanimously. Letter ktrat0 to Mr. Kennel, Assistant Counsel of the Federal Reserve Boston, reading as follows: 941 5/15/42 -9- "This is with further reference to your letter of April 21 enclosing a copy of a letter of that date from the Boston Better Business Bureau. You suggested that the Board inform you as to whether there is any objection to the general distribution of the Bureau's statement rerF_ding misleading advertising. On April 24, Mr. Hodgson 'c4Inowledged receipt of your letter and advised you that re lations with the Better Business Bureaus was then a subject of study. "On May 8 the Board wrote the Chairman of the Defense Cotttmmiee of the National Association of Better Business ,ureaus expressing its appreciation of the cooperation of .?tter Businez Bureaus in helping to achieve the objec7es of Regulation W. A copy of this letter was forwarded 4.; Your bank on the same day and it is believed that in 'dne light of that letter you are now in a position to disee of the inquiry you have received from the Boston . tter Business Bureau. It is suggested, however, that :t_lel! last sentence of the proposed release by that Bureau ;_?ating to the Federal Reserve Bank of Boston be elimi4.!ted, since the implication may be drawn therefrom that Bureau is acting as the representative of the Federal Reserve Bank. Bu__ 7n the last sentence of the first paragraph of the e p,'au's statement, reference is made to '15' months. The -L-Lgure should now be changed to 112t.t, j r Approved unanimously. serve 8 Letter to Mr. Phelan, Assistant Vice President of the Federal Renk of New York, reading as follows: 110 "This refers to your letter of May 8, 1942 (Inquiry t * 17), suggesting the following procedure relative to vhe s tatement of transaction under section 4(d) of Regul : aml' er W where department stores sell coupon books or similar andla of credit and obtain a one-third down payment the/7n, eta require that the balance thereof be paid in monthly in4(cl-Tents meeting the requirements of sections 4(b) and 'In connection with the sale of a coupon b°04, or other similar medium of credit, the c°uPons or the booklet containing the coupons, ria,e1Z:ment furnished the purchaser conshould contain the following Z 942 5/15/42 -10"information: (1) the amount of the purchaser's down payment in cash in respect of the coupon book; (2) the deferred balance; (3) the amount of insurance premiums (if any) and of any interest or finance charges, and (4) the terms of payment. At the time a coupon is used for the purchase of a listed article the purchaser should be furnished with a statement (presumably the customary sales check) setting forth (1) a brief description of the article purchased and (2) the cash price of the article.' The Board agrees with you that the foregoing procedure Would constitute compliance with section 4(d) since, upon the11e use of the coupons in the purchase of a listed article, purchaser would then come into possession of a comPlete dstatement of transaction. "This view is in accord with that part of W-84 stating that it be it is unnecessary for the statement of transaction to included on a single sheet of paper, but, in effect, such etew v is an exception to that part of W-84 stating that _Pies of all parts of the statement of transaction be glventIto the obligor together. her . The fact that department stores operating as outlined would be imposing terms in some cases more severe than ,tildn those required by the Regulation is immaterial in the 4-Ight of section 12(k)." Or Approved unanimously, together with a letter to the Presidents of all the Federal Reserve Banks transmitting copies of the above letter. Letter to Mr. Hays, Vice President of the Federal Reserve Bank Cleveland reading as follows: en, "This acknowledges receipt of your letter of May 11 mo;i1-L°s1lig a letter from Mr. Arthur S. Mode of the Leo S. ltay.euez.0ompany dated May 8 andMr. Harrell's reply of date,., mont1,1,44r. Harrell's letter points out that the 5 minimum stpiL"-Y Payment provision relates to the aggregate inindebtedness of the customer and not to individual ; In,en,"entaa es. Inis information will have clarified Mr. Mode's and ng of the provision, but, as you suggest, it n°t meet entirely the objection which he makes. Zrsti 94, 5/15/42 -11- "The 5 minimum does shorten the period of payment materially where the customer's aggregate purchases are small. It was the Board's view that in most cases the result would be a desirable one, since a 12 months' period .8 unduly long for the kind of purchases usually involved 1 1 these situations. You may assure Mr. Mode, however, that his views will be given earnest consideration." Approved unanimously. Letter to The Del Mar Company, Finance Division, Baltimore, liarYlAnd, reading as follows: "in your letter of May 11, 1942, you asked whether theinstalment financing of the premium on a three year fire insurance policy is exempted by section 8(g) of RegVlif, upon cancellation of the policy by the finoe company for default in an instalment payment on the loan contract, the unearned premium returnable by e insurance company on a short-rate cancellation basis nWould be only 60 per cent of the entire premium, whereas 4der the loan contract, the insured would owe the lender am,clunt equal to 66-2/3 per cent of such premium. ti Your inquiry requires a negative answer, since secapplies only in cases where the extension of 1.124-1-6 is at all times to be fully secured by the unearned "mium returnable by the insurer on cancellation of the Policy. r cell, "The administration of Regulation V; has been derelwralized, and, therefore, if you have further inquiries to ' att Iling thereto, it is suggested that you address them Ri Baltimore Branch of the Federal Reserve Bank of -c"mcnd.n Approved unanimously. Memorandum dated May 11, 1942, from Mr. Goldenweiser, Director °t the Di,,4 of Research and Statistics, reading as follows: "°r1 to cember 24, 1941, the Board authorized the staff vecroceedDe with negotiations for obtaining through the tureral Reserve Banks current statistics on retail furnie sales, inventories, and credit. These data are needed 94,4 5/15/42 -12- 0. 4.in connection with consumer credit because of the impor,ance of furniture stores in this field. The proposal has been discussed with the Reserve Banks and others, forms and plans have been prepared, and the project is now at a stage when negotiations with the stores that will be requested to report should be initiated. I recommend that the Board authorize us to put this project into operation s soon as possible along the lines indicated in the atached drafts of letters, with such changes of detail as may seem advisable. head 'Attached are drafts of a letter to be sent by us to s of research departments of the Federal Reserve Banks :uu of a proposed letter to be used by the Reserve Banks in ng information from retail furniture stores, and of the proposed form to be used in reporting atactai .fs "The Department of Commerce, the Bureau of the Census, and the National Retail Furniture Association, which are now collecting certain inadequate retail furniture statistics, have , , t Lons and informally agreed to discontinue their collecto Federal Reserve stern as a centralize this task in the logical extension of its work in the collec°n of department store and other trade statistics. "The additional work can be carried on by the Board's Xi be Sting staff, including such appointments as have already en made or proposed." Z thrs- a Approved unanimously. Letter to Mr. Walter A. O'Brien, Trust Officer of the LaSalle National Bank, Chicago, Illinois, reading as follows: tta "This refers to your letter of May 8, 1942, transmitireeLcopies of documents entitled 'Universal Common Ini ---ent Fund' and 'Universal Trust Agreement' and request"C craments with respect to them. ,,,, 'We regret that it is impractical for the Board to .F1:1:200nexamine and comment upon proposed plans for of common trust funds which are prepared by reeln28.individuals and individual institutions, and the any --81bilitY for determining, prior to the adoption of I' such plan Regui ation r , whether the plan complies with the Board's must rest with the institution adopting the 5/15/42 -13- plan and its counsel. You are already familiar with the Elan prepared by the Committee on Common Trust Funds of the rrust Division of the American Bankers Association as a guide for institutions interested in starting common trust funds. In view of the nature of the undertaking, the Board e°nlinented upon tentative drafts of this plan and advised the Committee that the final draft did not conflict with Regaation F. It was felt that this action would be of considerable assistance to all institutions formulating Plans for the operation of common trust funds and that, !iside from rulings upon specific questions concerning the interpretation of its regulation, the Board could not unct,rt.ake to do more. Rulings interpreting pertinent pro181°ns of the regulation have been published from time _o time in the Federal Reserve Bulletin, citations being as follows: 1938 Bulletin, page 762; 1940 Bulletin, page 393; 1941 Bulletin, page 618; and 1942 Bulletin, page 7. "In the foreword to its plan, the Committee on Common Trust Funds states that it will be glad to offer such suggest; as it can in the development of any proposed plan and suggests that any bank developing a plan and having questions or desiring assistance communicate with its heretary. It is understood that your bank is a member of yo! American Bankers Association and it is suggested that tvu may wish to consult the Committee on Common Trust ,unds. Z Z with "Also, you may wish to discuss your proposal informally if officials of the Federal Reserve Bank of Chicago and A suggest that you get in touch with Vice President i* tl- Mulroney, to whom we are forwarding a copy of your ettr and this reply. The documents enclosed with your letter are being retained for our files." Approved unanimously, together with 8 letter to Mr. Mulroney, Vice President of the Federal Reserve Bank of Chicago, In the following form: let "For your information there is enclosed a copy of a Offl'er °f MaY S, 1942, from Mr. Walter A. O'Brien, Trust qu.'?er, La Salle National Bank, Chicago, Illinois, ree).,:ing the Board's comments with respect to documents -,ust A 'Universal Common Investment Fund' and 'Universal greement'. There also is enclosed a copy of our t; 5115/42 -14- II reply of this date which is self-explanatory. We wish to retain for our files the documents submitted by Mr. O'Brien and we are not having copies made since they are quite engthy and undoubtedly Mr. O'Brien can furnish you copies if he desires to discuss this matter with you. "As you will note from our letter to Mr. O'Brien, we did not attempt to comment upon the documents which he submitted. However, we believe that it will be apparent to You that the merits of some parts thereof are subject to a ctlolubt. Also, it may be stated for your own information n at/ in view of the information which the Committee on .0ramon Trust Funds of the Trust Division of the American has made available through its booklet entitled 'Common Common Trust Funds' and otherwise, it would seem is no real need for the dissemination of docuofnts , such as those prepared by Mr. O'Brien for the assistance L:anks that may be interest ed in common trust funds and 4' L'a , in fact, the distribution of such documents for use giclo trtction with the establishment of common trust funds confusing." Z Letter to the Comptrol ler of the Currency, reading as follows: "It is z.ith the 114 respectfully requested that you place an order Bureau of Engraving and Printing, supplementing 8 e order of June 14, 1941, for printing of Federal Reriervs notes of the 1934 Series in the amounts and denomiations s trdaifor the Federal Reserve Bank of Boston: Number of nation sheets Amount t10t1. 6,800,000 140,000 20 12,000,000 50,000 50 3,000,000 5,000 100 6,000,000" 5,000 Approved unanimously. Thereupon the meeting adjourned. -COPeALit,1-Y)cfriALte APPr'clrec ( Chairman. Secretary.
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