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Minutes of actions taken by the Board of Governors of the ral Reserve System on Thursday, May 17, 1951. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Evans Vardaman Norton Powell Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Minutes of actions taken by the Board of Governors of the ra.1 Reserve System on May 16, 1951, were approved unanimously. Memorandum dated May 7, 1951, from Mr. Sloan, Assistant Director 'r the D, 3-vision of Examinations) recommending an increase in the basic seae.r, Of James C. Smith, Federal Reserve Examiner in that Division, from $74r, v to T, tkA J,Liv0 per annum, effective May 27, 1951. Approved unanimously. Memorandum dated May 14, 1951, from Mr. Bethea, Director of the l°11. of Administrative Services, recommending an increase in the 'basic z€0.8.1, °I's Alfred W. Minutolo, Operator, Tabulating Equipment, in that tivt ! p .Lrorti 0,225 to $3,350 per annum effective May 27, 1951. Approved unanimously. Me morandum dated May 14, 1951, from Mr. Leonard, Director of the ilris14 °1" Bank Operations, recommending an increase in the basic salary Der Jewell B. Smith, Secretary to Mr. Leonard, from $4,325 to $41450 ''11141114, e ffective May 27, 1951. Approved unanimously. 5/17/51 -2Memorandum dated May 15, 1951, from Mr. Carpenter, Secretary (4 the Board, recommending an increase in the basdc salary of Madison doe, Senior Index Clerk in the Office of the Secretary, from $4,700 " 4,825 per annum, effective May 27, 1951. Approved unanimously. Memorandum dated May 11, 1951, from Mr. Powell, recommending that Nra A l'kt L. Holsten, of Sulomon Bros. & Hutzler, New York, New York be IIPI"ltea as alternate to Rudolf Smutny on the Voluntary Credit Restraint er)hiMittee. Approved, Mr. VardamAn not voting. Letter to Mr. Clarke, Secretary of the Federal Reserve Bank of York, reading as follows: ,a "Reference is made to your letter of May 10, 1951, vising that the International Monetary Fund has requested 4411? extension in the leave of absence without pay granted ,,Thomas J. Roche, Assistant Chief of the Foreign Operations " -”on, Foreign Department. The Board has no objection to Mr. Roche's leave being continuedt beyond August 31, 1951, on a month-to-month basis with Nne /11IderStanding that he will return to the Bank not later than -7ember 1, 1951." i Approved unanimously. chic Letter to Mr. Diercks, Vice President of the Federal Reserve Bank 4g0, reading as follows: 814 ."Reference is made to your letter of April 27, 1951, ltting the application of The Farmers State Bank, Brookston, III! for permission to exercise fiduciary powers. 5/17/51 -3- "In view of the Reserve Bank's recommendation and the information submitted, the Board of Governors of the Pederal Reserve System grants the applicant permission, under the provisions of its condition of membership numbered 1) to exercise the fiduciary powers now or hereafter authorized under the terms of its charter and the laws of the State of Indiana. "You are requested to advise The Farmers State Bank, l'ookston, Indiana, of the Board's action." Approved unanimously. Letter to the Honorable Wayne Morse, United States Senate, 141Eishi ngt°11, D. C., reading as follows: In our letter of May 4, 1951 in reply to your memoranof April 23 enclosing a letter from Mr. M. E. Woodcock, Forvallis, Oregon, we outlined generally the part Regulation e Consumer Credit is expected to play in the overall credit program. It is our understanding that additional correspondence in your office raises the particular question the possibilLty of longer maturities on later model used , , r8 than is presently provided by the regulation and that the '°Posals further suggest varying maturities according to the on.of the used car or the amount of the unpaid balance on the °1-lgation or both. to "The Board's staff has devoted considerable time and study the problem la, of split maturities in connection with the reguta;:lon of automobile instalment credit. There are, however, cer10 , 4 major difficulties in such an approach. In the first place eituger maturities for larger amounts of credit tend to force the ill°1111t o• f individual obligations into the upper bracket or group rr order to benefit from the lower repayment schedule resulting OT the longer maturity. Such a tendency is, of course, directly Ilti • rary to the purpose of the regulation which is to reduce the 1Tt o• f credit in the instalment financing of a listed article. ciditi0n such split maturities provide a competitive advantage 0,• tween ago groups of cars and would, it is believed, result it : ,— artificial displacement of the market for the various used ca Models. "VerY often in requesting a split maturity provision in Regu1/041 , °11 W Petitioners will point out that incorporating the provision be little more than recognition of a trade practice which ed before the imposition of consumer credit controls and dum -4"continues to exist under the regulation. This is true to the extent that finance institutions may not be willing to grant the full 15 months credit permitted by Regulation W In connection with their financing of prewar model used cars. Placing a 12 months maturity limitation on such financIng in the regulation would not accomplish very much thet is not already being accomplished by present terms. Further it would tend to remove an area of creditor discretion that now exists by virtue of the difference between the 12 months generally adhered to in the trade and the 15 months permissible under Regulation W which is thereby left available for use in certain necessitous cases. "In this connection, it is interesting to note that income groups normally tend to purchase automobiles, new or used, according to their own income bracket and it appears that the present provisions of Regulation W are likely to Preserve this pattern while an adoption of the split maturities plan might serve to disrupt it. "We trust that the foregoing information will enable (0.1.1 to provide a satisfactory answer to the letters mentioned ln Mr. Adams' telephone conversation with Mr. Heath." Approved unanimously. Letter to the Securities and Exchange Commission, 425 Second Street, Washington, D. C., prepared pursuant to the action at the leetlng on May 10, 1951, reading as follows: m,, It is understood that informal arrangements have been e"le with you for the loan of the services of one of your violat4 aring of018 Examiners to direct a hearing on charges of of Regulation W consumer credit issued by the Board of G°Vernors. "We understand that Mr. Harold B. Teegarden, Hearing Ex 04Tiner, GS-13, will be available and we are, therefore, lY requesting that he be detailed to the Board of o 'rernors to conduct the Hearing above mentioned. The Board Ills Governors will reimburse the Securities and Exchange Com11.11r:on for Mr. Teegarden's salary and, any travel expenses ' ved for the period of time his services are utilized in tls.detail. _ "It will be appreciated if you will confirm this reinsable detail so that the necessary arrangements may be "for the hearing, probably in the week of June 25." 7 Z 5/17/51 Approved unanimously, together with the following letter to the United States Civil Service Commission, Washington, D. C.: "The Board of Governors desires to hold a hearin€, under Section 8 (b) of its Regulation WI consumer credit, issued pursuant to Section 601 of the Defense Production Act of 1950 with respect to a case involving the question Whether or not a registrant's license to do business of the kind which is subject to Regulation W should be suspended. The Board of Governors does not have any hearing examiners to hold such a hearing, and therefore asks the aPProval of your commission for the loan o: the services Harold B. Teegarden, a Hearing Examiner of Securities Tad Exchange Commission. We have already communicated with 11,e Securities and Exchange Commission and have been advised "that the loan of the services of Mr. Teegarden has been consented to by it. Copies of the letters which were exchanged are attached hereto." Letter to the Honorable Burnet R. Maybank, Chairman, Joint Corn- On Defense Production, United States Senate, Washington, D. C., reciAi as follows: "We are pleased to reply to your recent letter which ' uested our consideration of a telegram from Hind's County rm_tall Furniture Dealers Association of Jackson, Mississippi. V-te telegram had been referred to the Joint Committee by Senafr Eastland. The Association is concerned about the effect at Regulations W and X on the retail furniture business and the tY of people in the Jackson area to purchase homes and h,ie urnishings under the terms of the regulations. la+, 'One of the major problems involved in administering regut117°ns such as these is to make them restrictive enough that th!Y will be effective in accomplishing their purposes and at pe`; same time to keep them from being an excessive burden on the ti°Ple who are subject to them. The Board has felt that relatively orpt terms for instalment credit are required at present in 'to help restrain the strong inflationary pressures that ttreel tending to raise the prices of all goods and services. 11 know) a major purpose of the regulation is to curb the 111 1.,:ased purchasing power that results from the expansion of 'stalment credit. 4q r F 5/17/31 -6- "The possibility that some purchases of furniture might not be readily deferrable was recognized by the Board when it provided more lenient terms under Regulation W for furniture than for appliances and automobiles. As against the down payment requirement of 33 1/3 per cent for automobiles and 25 per cent for aPPliances, radios and television sets, the minimum d°wn payment required under the rerulation for furniture is 15 per cent. Furthermore, the down payment is not required by the regulation where the price of the article is less than *50. The Board has felt that terms raOre lenient than these would be inconsistent with the Purposes of the regulation in this period of national emergency. "You inquire in your letter about the retail invent() situation of consumer durable goods. There has been me reductIon 4 11 demand for these goods from the excepthigh levels of December and January end invent°1 or-es have increased. Inventories of consumer durable Mods have increased in value largely because output has Pnerally been maintained in excess of consumer buying, 'tlt also because of a rise in prices. "Retatl inventories of household durable goodq hrAc en about two-thirds or more above their value a year a E!°) with the increase in stocks of television much. greater 1:11 of furniture somewhat less. New passenger car stocks d bY dealers are above the very low levels of a year e) and in relation to sales are not high judging by hisurical crea.2ed.relationships. Stocks of used cars have also inbel "Currently sales of most durable goods are not far effc)w the advanced levels of a year ago. With the direct Ettaects of large-scale defense expenditures closer at hand, be with important declines in output for civilian purposes 14'413-lag to appear, a reduction in inventories of consumer ( able goods can be expected in coming months. 1 The staff is continually studying the effects of the zaatioations and is glad to receive for consideration inforRetn ,!,1 e.t.a views such as those submitted by the Hind's County heW411 Dealers Association. While a relaxing of the terms appeared to be appropriate at this time the flexible " 11 hiati, r „e of Regulation W will allow the Board to relax or tighten the-. /14t,cerms if and when such action is in the interests of the r 01 defense. We are returning the Association's telefor your files." Approved unanimously. 5/17/51 -7Memorandum dated May 16, 1951, from Mr. Chase, Assistant 84311citor, stating that the Federal Reserve Bank of Richmond had retecl apparent violations of Regulation W, Consumer Credit, by Herbert Se r'en and Arnold L. Schwartz, a partnership doing business as Arnold 41" CMPanY, 2038 West North Avenue, Baltimore, Maryland, consisting of r41111,re to receive the required down payment in a number of sales, eZten,4 of other credit in violation of the provisions of the Regu- latio 4) and failure to maintain records in conformity with the require- ets - of the Regulation; and recommending that in accordance with the %nlilendation of the Reserve Bank, the Board adopt an order for investie.ti011 as follows with a view to obtaining an injunction: "UNITED STATES OF AMERICA 1:001D-n, 414 THE BOARD OF GOVERNORS OF THE IEDERAL RESERVE BYSTEM It a. umsting of the Board of Governors of the Fcderal Reserve System held at its offices in the City of Washington, D. C., on the 17th day of May, A. D., 1951. the Matter of aERBERT SWEREN and ARNOLD L. SCHWARTZ, 4 Partnership, d. b. a., kRNOLD SALES COMPANY ORDER DIRECTING INVESTIGATION AND DESIGNATING OIFICERS TO TAI E TESTIMONY. re Members of the staff of the Federal Reserve Bank of Richmond he 1(?_rted information to that Bank, which that Bank has transmitted -4ra, which tends to show that: lasrbert Sweren and Arnold L. Schwartz, a partnership a°1/1 business as Arnold S,.les Company, 2038 West North Avenue, 5117/51 -6"Baltimore, Md., have made instalment sales of television sets subject to Regulation W, consumer credit, Issued by the Board of Governors of the Federal Reserve System 1. Without obtaining the down payment required by Regulation tv; 2. hen they, or those acting on their behalf, knew or had reason to know that other credit was, or was to be, extended in violation of the provisions of Regulation W; 3. Without maintaining and preserving such books of account, records and other papers as are relevant to establishing whether or not credit extended by it is in conformity with the requirements of said Regulation. II The Board, having considered the aforesaid report by members cf the ,4. sk aff of the Federal Reserve Bank of Richmond, and for the purpose °f (1) determining whether Herbert Sweren and Arnold L. Schwartz 8.1 1d Sales Company) have violated the provisions of Regulation W, 4z4 (2) aiding in the enforcement of said Regulation, deems it necessary aert:13Pl'oPriate that an investigation be made to determine whether t Sweren and Arnold L. Schwartz have engaged in the acts and pracj or a.-'eee set forth in paragraph I hereof, or any acts and practices 111111ar Purport or object. III IT IS ORDERED, pursuant to Section 604 of the Defense Producttr fAct Of 1950 that an investigation be made to determine the matters orth in paragraph II hereof. or the IT IS FURTHER ORDERED, pursuant to the provisions of Section Co4 11€Ati Defense Production Act of 1950 that for the purpose of such inveshtreC°n) G. Howland Chase and Aubrey N. Heflin, and each of them, is o4th designated an officer of the Board and empowered to administer talte ana affirmations, subpoena witnesses, compel their attendance, Dordel, evidence, and require the production of any books, papers, corres-ce, memoranda, or other records deemed relevant or material to the INIAir and to perform all other duties in connection therewith as '17r by law. JoY the Board. (signed) S. R. Carpenter Secretary." 5/17/51 Approved unanimously, with the understanding that if circumstances should warrant taking other action, a further recommendation would be presented to the Board. Memorandum dated May 16, 1951, from Mr. Chase, Assistant °11eitor, stating that the Federal Reserve Bank of Richmond had rePorted. apparent violations of Regulation W, Consumer Credit, by kietalider Max, doing business as National Clothing and Furniture eNlarr7 -,,, 933 Pennsylvania Avenue, Baltimore, Maryland, consisting of "e to receive the required down payment in a number of cases, e%teA.4 --Lon of other credit in violation of the provisions of the Regu- latio 4) and failure to maintain records in conformity with the re- -eats of the Regulation; and recommending that in accordance th-e recommendation of the Reserve Bank, the Board adopt an order ror1. nvestigation as follows with a view to obtaining an injunction: 1ZPorn, "UNITED STATES OF AMERICA 111E BOARD OF GOVERNORS OF TBE FEDERAL RESERVE SYSTEM Ille ! tiag of the Board of Governors of the Federal Reserve System neld at its offices in the City of Washington, D. C., on the 17th day of May, A. D., 1951. theMatter of ALE XANDER MAX, d.b.a., NATIONAL CLOMING AND COVIANY, Bank of Richmond have ed. l'abers of the staff of the Federal Reserve 4formation to that Bank, which that Bank has transmitted to the "filch tends to show that: hkrt to ORDER DIRECTING INVESTIGATION AND DESIGNATING OFFICERS TO TAKE TESTIMONY. 5/17b1 -10"Alexander Max, doing business as National Clothing and Furniture Company, 933 Pennsylvania Avenue, Baltimore, Maryland, has made instalment sales of clothing and furniture subject to Regulation W, consumer credit, issued by the Board of Governors of the Federal Reserve System 1. Without obtaining the down payment required by Regulation W; 2. Kien he, or those acting on his behalf, knew or had reason to know that other credit was, or was to be, extended in violation of the provisions of Regulation W; 3. lidthout maintaining and preserving such books of account, records and other papers as are relevant to establishing whether or not credit extended by it is in conformity with the requirements of said Regulation. II The Board, having considered the aforesaid report by members of staff of Ithe , the Federal Reserve Bank of Richmond, and for the purpose of letti`-tetermining whether Alexander Max has violated the provisions of Regu811 W and (2) aiding in the enforcement of said Regulation, deems it liece° Alez sarY and appropriate that an investigation be made to determine whether rcier Max has engaged in the acts and practices set forth in paragraph I 0li herea 'Or any acts and practices of similar purport or object. tIII IS ORDERED, pursuant o Section 601 of the Defense Production 1950 that an investigation be made to determine the matters set forth . graPh II hereof. °rthe IT IS FURTHER ORDERED, pursuant to the provisions of Section 6o4 4.?fense Production Act of 1950 that for the purpose of such in°1,4tipt„1) G. Howland Chase and Aubrey N. Heflin, and each of them, is 414 eWesignated an officer of the Board and empowered to administer oaths !tre'ciirmations, subpoena witnesses, compel their attendance, take evidence, "I oth:Ilire the production of any books, papers, correspondence, memoranda, : 411 0 records deemed relevant or material to the inquiry, and to perform duties in connection therewith as authorized by law. BY the Board, (signed) S. R. Carpenter, Secretary." kt or Approved unanimously, with the understanding that if circumstances should warrant taking other action, a further recommendation would be presented to the Board. 5/17/51 -11Memorandum dated May 16, 1951, from Mr. Chase, Assistant Sqteitor, stating that the Federal Reserve Bank of Richmond had reported apparent violations of Regulation W, Consumer Credit, by Rosen Rome Equipment Company, Inc., 729 North Gay Street, Baltimore, Maryconsisting of failure to receive the required down payment in a lttrge litIber of instances and failure to keep records in conformity with the re of the Regulation; and recommending that in accordance with 44e re commendation of the Reserve Bank, the Board adopt an order for ilivestipA+4 as follows with a view to obtaining an injunctior.: "UEITED STATES OF AMERICA BI:PC)RE TEE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ! e ting of the Board of Governors of the Federal Reserve System Lleld at its offices in the City of Washington, D. C., on thi3 17th day of May, A. D., 19:51. Matter R°44. tiOME EIPMNT COMFANY, 729 krorth Gu:r Street) Baltimore Murl lid ORDER DIRECTING INVESIIGATION A.111) DESIGNATING OFFICERS TO TAEL Metaberc, of the staff of the Federal Reserve BtInk of Richmond 110p, or the Boted information to that Bank, which that Bank has transmitted W4c1) which tends to show that: 2 e 1 Rome Equipment Company, Inc., has made instalme, Sales of articles subject to Regulation W, cone - eder credit, issued by the Board of Governors of the 1 1"6.1 Reserve System ' Without obtaining the down payment required by 2, Regulation W; Without maintaining and preserving such books of account, records and other papers as are relevant to establishing whether or not credit extended by it 0 /1n. conformity with the requirements of said Regu- Isat1 -12II "The Board, having considered the aforesaid report by members of the 04.__ (1\ : 1 w111 of the Federal Reserve Bank of Richmond, and for the purpose of Qetermining whether Rosen Home Equipment Company, Inc., has violated :Provisions of Regulation W and (2) aiding in the enforcement of said rOatl°11, deems it necessary and appropriate that an investigation be determine whether Rosen Home Equipment Company, Inc., has engaged 11 :e acts and practices set forth in paragraph I hereof, or any acts and "ices of similar purport or object. III ORDERED, pursuant to Section 6o4 of the Defense Produc8etpAct °f 1950 that an investigation be made to determine the matters .Lerth in paragraph II hereof. °e the DIT IS FURTHER ORDERED, pursuant to the provisions of Section 6o4 efense Production Act of 19)0 that for the purpose of such investidesi; 'G. Howland Chase and Aubrey N. Heflin, and each of them, is hereby atri,na!ed an officer of the Board and empowered to administer oaths and 411(1 1. 0 11s, subpoena witnesses, compel their attendance, take evidence, e ;' ' 1 e the production of books, papers, correspondence, memoranda, ealotothe,'c records deemed naterial to the inquiry, and to perform relevant or ler duties in connection therewith as authorized by law. By the Board, (signed) S. R. Carpenter, Secretary. tion IT IS Approved unanimously, with the understanding that if circumstances should warrant taking other action, a further recommendation would be presented to the Board. Mem orandum dated May 16, 1951, from Mr. Chase, Assistant Dortea 'Stating that the Federal Reserve Bank of Richmond had rerent violations of Regulation WI Consumer Credit, by R. B. 4411, doing business as Sylvan Radio and Television Company, 21115 1. , Yille'llia Avenue, N. W., Washington, D. C., consisting of failure °I'eeeive the required down payment; and recommending that in accordence ritlIthe , eserve Bank, the Board adopt an order for : rsof ult:aR att4Ve tt gation as recommendi view to obtaining an injunction: foll: 5/17/51 -13- "UNITED STATES OF AMERICA 13111FORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM At a meeting of the Board of Governors of the Federal Reserve System held at its offices in the City of Washington, D. C., on the 17th day of May, A. D., 1951. Illthe Matter of R. B. BROWN, d. b. a., S Ivan Radio and Television Company ORDER DIRECTING INVESTIGATION AND DESIGNATING OFFICERS TO TAKE TESTIMONY. reporte,Merabers of the Staff of the Federal Reserve Bank of Richmond have toard, Q information to that Bank, which that Bank has transmitted to the which tends to show that: R. B. Brown, doing business as Sylvan Radio and Television Company, 2415 Pennsylvania Avenue, N. W., Washington, D. C., has made instalment sales of articles Bub ject to Regulation W, consumer credit, issued by the of Governors of the Federal Reserve System 1. obtaining theFedralWithou down payment required by Regulation W; 2. When he, or those acting on his behalf, knew or had reason to know that other credit was, or was to be, extended in violation of the provisions of Regulation W. 11 Th Limbers of e -40-rd, having considered the aforesaid report by purpose of the for deet ' t0 (Dr the Federal Reserve Bank of Richmond, and of Regulaprovisions thing whether R. B. Brown has violated the *41 it deems Regulation, 11,cessia?'(2) aiding in the enforcement of said determine and aPpropriate that an investigation be made to 1341ragra,' B. Brown has engaged in the acts and practices set forth in 4'" I hereof) or any acts and practices of similar purport or object. the t, Et pp III ORDERED pursuant to Section 6o4 of the Defense Production 1;`()0 that an Investigation be made to determine the matters set IparaCraPh II hereof. IR Wn,,, 1, IT xut1THER ORDERED, pursuant to the provisions of Section 6c4 tOfu flse Production Act of 1950 that for the purpose of such 40w1and Chase and Aubrey N. Heflin, and each of them, is hereby rted an officer of the Board and empowered to administer oaths and — reclui°118/ subpoena witnesses, compel their attendance, take evidence, -re the production of any books, papers, correspondence, memoranda, 44,et 'Qrth IT IS 5/17/51 -14tc_ iv5re other records deemed relevant or material to the inquiry, and to 11°1131 all other duties in connection therewith as authorized by law. By the Board. (signed) S. R. Carpenter, Secretary." Approved unanimously, with the understanding that if circumstances should warrant taking other action, a further recommendation would be presented to the Board. Counsel, Memorandum dated May 16, 1951, from Mr. Hoof1, Assistant l'ect)intleriding that there be published in the Law Department of the May issue "he Federal Reserve Bulletin Amendment No. 3 to Regulation W, Consumer el'ecitt, together with an introductory statement in the form attached. Approved unanimously. Secretary.
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