The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, May 18, 1951. 'rY at 9:40 libre The Board met in the Special a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Eccles Szymczak Norton Powell Carpenter) Secretary Sherman, Assistant Secretary Murff, Assistant Secretary Kenyon, Assistant Secretary Thurston, Assistant to the Board Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Leonard, Director, Division of Bank Operations Vest, General Counsel Young, Director, Division of Research and Statistics Mr. Wayne: Acting Director, Division of Examinations Mr. Noyes, Director, Division of Selective Credit Regulation Mr. Sloan, Assistant Director, Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Before this meeting there had been submitted a memorandum covering to "ce to be discussed at a joint meeting of the Board and the Presidents of the 1, 'ederal Reserve Banks to be held today at 10:30 o'clock. The Board c°4414tered. vli__ e topics listed, and it was agreed that the views of the 11c)111d be stated substantially as recorded in the minutes of the joint Mr. 111 letter Norton presented a memorandum dated May 17, 1951 stating that dated May 16 the Housing and Home Finance Administrator advised 5/18/51 tli° 88 -2a result of a survey made by the Housing and Home Finance Agency it had been determined that an urgent need existed for 250 housing units to be located within reasonable commuting distance of Fort Leonard Wood, 4) Missouri that the Defense Production Administration had certified the a rea as a defense area for the purposes of special assistance, that the AA_ ttwainistrator had concluded that the area should be designated as a 604 area for the purpose of special action to assist in the production " 4 or lie cessarY housing, and that the Administrator recommended that if het (riation of the area was concurred in by the Board the schedule of credit terms under Regulation t44t X, Real Estate Credit, be the same as 11 011. a-,--0ved for Atomic Energy Commission installations in South Carolina, -4) and Idaho. The memorandum also stated that Mr. Norton concurred th 8 re commendation. Thereupon, upon motion by Mr. Norton, unanimous approval was given to a letter to Mr. Foley, Housing and Home Finance Administrator, as follows: is ,"In response to your letter of May 161 19)1, this 0 advise you that the Board of Governors concurs in ' aesignation of the Fort Leonard Wood Area, Rolla, credit te -s°1111, as an area for application of special Estate Real X, Regulation linder section 6 (P) of Orlelms for purposes of defense construction. Your 10‘ter states that there is a need for 250 units to be : Iated Within reasonable commuting distance of Fort Le previous ' d 1400d. It is our understanding, based on 15-6'er68.tion5 with representatives of your Agency, that ,its 141 are to be held for rental only, and the re, 4184 retZ'llg 100 units are to be offered for sale. Purchase and --81 of the entire 250 units will be controlled by the 5/18/>1 —3— commander of the post through the issuance of affidavits of e ligibil!ty. "In accordance with your suggestion, the relaxation o/ terms prescribed by Regulation X will be identical with that Previously announced for the Atomic Energy Commission Installations in South Carolina, Kentucky, and Idaho." t this point all of the members of the staff with the exception °f111°"rs. Carpenter, Sherman, Murff, and Kenyon withdrew and the action sta.te, Lk with reci-ect to each of the matters hereinafter referred to was take by the Board: MinUte0 of actions taken by the Board of Governors of the Federal 11E. ve aystem on May 17, 1951, were approved unanimously. Telegrams to the Federal Reserve Banks of Boston, New York, °11-)hia)tianta, Chicago,and St. Louis stating that the Board qProly the establishment without change by the Federal Reserve Banks " ' eIlt4 and St. Louis on May 16, by the Federal Reserve Banks of New 3ork, hiladelphia,and Chicago on May 17, and by the Federal Reserve 4nd of 11°"ten istin tolzy, of the rotes of discount and purchase in their s chedules. Approved unanimously. Me. morand= dated Muy 10, 1951, from Mr. Bethea, Director of the ision _ Qf Administrative Services, recommending the appointment of MI. Valeri., V. Fatna as a charwoman in that Division on a temporary ' blv aie for Der Nm- a Period of two months, with basic salary at the rate of -,21120 'effective as of the date upon which she enters upon the perOf her dutien after having passed the usual physical examination, 2lbe t to the completion of a satisfactory employment investigation. Approved unanimously. 5/18/51 -4- Letter to Mr. Bryan, President of the Federal Reserve Bank of Atlanta, reading as follows: "The Board of Governors approves the payment of salary to Mr. Melvin McIlwain as an officer of the Birmingham Branch with the title of Assistant Cashier at the rate of $6,000 per annum for the period June 1, 1951) through May 31, 1952. According to your letter (3f May 11, 1951, this is the rate which has been apProved by your Board of Directors." Approved unanimously. Letter to Mr. DeMoss, Vice President of the Federal Reserve Bank bal 4-Les, reading as follows: "Reurtel May 14, 1951, concerning application of Regulation W to $1,600 loan for moving owner's house to !different lot and for doing other necessary work in ;()11.4ection therewith, including sewer arid water connections. 211 Point out that removal of house is required because coudemnation proceedings covering original location of house "As you indicnte X-27 treats similar transactions as construction' under Regulation X if they involve an °11.11t in excess of $2,500. The transaction in question, Reliever) would be subject to the Group D requirements of „g4lation W as residential repairs, alterations, or im1Zove1ients to an existing structure and would not qualify ' 1 exemption under section 7(h)(1) of the regulation.' Z Approved unanimously. je Letter to the U. S. Appliance Company, 77 Main Street, South R:rer, reading as follows: to 4:This refers to your letter of May 9, 1951, pertaining 01.1,'Lle effects of Regulation W on instalment sales of thesell°1d appliances. It is suggested in your letter that to regulation be changed to allow trade-ins on such sales C1/11t against the down payment requirement as is permitted by ZI, regulation for instalment sales of automobiles. 5/18/51 "Present trade-in rules under the regulation have been in effect since Regulation W was first issued by the Board in 1941. For reasons that have seemed to be e°111De11ing, the approach to the regulation of automobile instalment credit has been and is different from the aPProach in the appliance and furniture areas. "In administering the regulation the Board makes everY practicable effort, consistent with the purposes of the regulation, to avoid disturbing established competitive relationships between sellers of the different regulated articles. To some extent all of the listed articles compete with each other for a share of the condisposable income. A major relaxation for one !_rcpul) of regulated articles would tend to create imporcant inequities unless there was also such an equivalent relaxation for competing articles. This would amount to !general relaxation that would tend to nullify the effecOkreness of the regulation. The consumer credit regulation must be restrictive, course, if it is to accomplish its major purpose of ielPing to restrain general inflationary forces by curbconsumer instalment credit. While the Board does not :"..sh to be excessively restrictive in the case of individual cles or industries, nevertheless in carrying out its atsPonsibilities under the Defense Production Act it must the same time consider the necessity of curbing the oft}ationary effect of instalment credit in the interests , country as a whole in this period of national emerPserleY. "Although the Board recognizes that there has been a rol;!eral softening in the markets for consumer durable goods zlevi°14ing the heavy buying wave of last December and January, co ertheless, in the light of general economic and credit th itions, the suggested relaxation of the regulation at tat,' time does not appear to be in the interest of the kiloal defense program. probl The Board is continuing to study the particular eills of the appliance dealers including those that kiRh; the rei-tii arise from the present down payment provisions of this in coh,ation, and we are glad to have your view -m'sction.” Approved unanimously. * 5118/51 -6Letter to the Honorable iliiam i. Knowland, United States Senate, 6.81112agton, D. C., reading as follows: "Thank you for referring to the Board of Governors Mr, Lovick B. Pearce's letter of March 26 concerning res trictions on real estate credit. As you knov, the rewere authorized by Congress in the Defense Production Act of 1950 for the purpose of combating inflation and conserving materials. In order to achieve these °I)jectives it has been necessary to place restrictions °4 the financing of houses built by individuals for their 1,!4 use as well as houses built for sale to others. Both ffie beefl important elements in the increased production ;JI and the regulation is equally restrictive in both cases housing, "The regulation requires that a certain proportion cg' the cost of a new house be met from the buyer's own : 11.rce5. Unfortunately, this requirement makes it diffifor seine persons to buy a new house, : Or impossiblem 1;' "' if this were not the case, the regulation would not ut achieving its objective. buil "It is our view that individuals who are buying or rpl ding more expensive houses should be required to make i',:ftively larger down payments than thoue buying or buildsMaller and less expensive houses. In Mr. Pearce's lic ance, based on the facts he stated, the regulation require a down payment of approximately $12,500. Th--d e th. regulation, however, would allow all or any part of e amount to be met from the proceeds of the sale of thl8 i4 securities which Mx. Pearce mentions, or from borrowa life insurance policy. "Mr. Pearce mentions a clipping from the Wall Street vo.17.1-411 which, in his mind at least, gives 'relief to the Thil°116 organizations that are doing so much building'. ceil liPPing was not attached to the letter when we reSee 4 it/ but it apparently referred to the addition of ;'°4 5(g) to the regulation. That amendment was equally .. i "`eable to individuals and large companies building multiek„" residential and nonresidential construction. It was to provide relief where substantial commitments or lkings had been made before the imposition of credit co0,; : Qls mad there was an inability to obtain credit to fin bo;;Ilcu the construction on the basis contemplated by the °I 'ler and lender prior to the imposition of the controls, appi 114a 5/18/51 -7- ahd compliance with the regulation would cause a clear and substantial financial hardship. A similar provision applicable to persons building residential property was made in the regulation when first issued last October. "We hope this will help to explain the Board's position oh the matter. If we can be of further assistance, please do not hesitate to call upon us." Approved unanimously. Letter to the honorable Burnet R. Maybank, Chairman, Committee 'ang and Currency, United States Senate, Washington, D. C., prepared 1.1 t to action taken by the Board on April 23, 19)1, reading as follows: j "This is in response to Mr. McMurray's letter of teztlarY 25, 1951, requesting a report on S. )15, a bill o (mend the Reconstruction Finance Corporation Act. s. "The principal changes which would be effected by ) 1 )include the substitution of a single administrator (governor) for the five-man board of directors (This has orr.!adY been accomplished by Reorganization Plan No. 1 951, Prepared in accordance with the Reorganization Act 1919.); use of appropriated funds rather than funds Ix ;of 1949.); e24rewed directly from the Treasury; the Corporation to eaIablich bz interest rate on its loans calculated to pay exPenses as well as to provide an adequate reserve fer 10::es; and the maintenance of records and a system or reth " .e s which will Insure proper accounting controls and keep th Congress adequately informed as to operations. Under is be bill, as under existing law, the Corporation would .11t 1118';orized to make loans in four main categories: (a) to (olness enterprises, (b) to banks and insurance companies, Lict_ ?,TItlic agencies owl (d) catastrophe loans. report is confined to that portion of the bill Which relates to the lending functions of the RFC. The a rc1 aer telieves that any credit necessary for the national 1\Zise or other purposes should be made available to the /4 Jet extent possible through private credit channels. kay. e exceptional cases in which Government assistance e required, guarantees of loans made by private institu' tiorl %/az :,are more desirable than direct Government loans. This 'e Al basis of the V-lonn program which was so successful 24 5/18/51 -8- "during World War II and which has been reinstated during the present emergency. If the powers of the RFC to make direct loans are to be continued, they should be in such form as to require that loans may be made only in the exceptional cases in which credit is not available from other sources including the V-loan program. The RFC was established in 1932 as an emergency organization and the Board feels that the Corporation should continue to be es sentially so regarded. "In recent months the Government has found it neces!arY to adopt various measures in order to control dangerous flflationary pressures in our economy and to conserve mavital to national defense. In the face of these norts, therefore, it is difficult to perceive why the vernment should be making direct loans to business exPt as authorized by the Defense Production Act of 1950. ,, "The Bureau of the Budget has advised that it has no "oiection to the submission of this report." r Approved unanimously. Letter to Mr. Roger W. Jones, Assistant Director, Legislative tier uce, Bureau of the Budget, Washington, D. C., reading as follows: "This is in response to your communication of April 19, 1951 , 8 requesting an expression of the Board's views with reto a draft proposal of the Department of Agriculture to° further amend the Farm Credit Act of 1933 with respect 00 coMmissions on debentures sold by the Central Bunk for °P%atives, and for other purposes.' r;osallIILthe e explanatory letter accompanying the draft proDepartment of Agriculture states that the limited ,2°se of the bill is to grant permission to national b1.4 ,s and State member banks to accept commissions in con4e 0 4 e() 41°11 with the sale of debentures of the Central Bank for to°Peratives and that the draft is not designed generally t8414cempt Central Bank debentures from the requirements of Ta 5136 of the Revised Statutes (12 U.S.C. 24). 000 The letter further states that the Central Bank for thel ! r"ives is in an unfavorable position with respect to Fea:e•rketing of its securities as compared with that of the land banks and Federal intermediate credit banks e the latter are exempt from the requirements of Section 5136 ' 5/18/51 -9- are lt'ewicc rot subject to the requirements of the 'Investment Securities Regulation' promulg?ted by the Comptroller of the Currency. "The absence of a similar exemption for debentures Of the Central Bank fcr Cooperatives has been construed as Prohibiting national and State member hanks from ace_ePting such commissions with respect to Central Bank de,?satures purchased for the account of customers. Consequently, order to have the assistance and cooperation of national rilkE and State member banks, the Department of A6riculture asires that before the next offering of Central Bank dothis group of institutions be permitted to accept co mmissions on such purchases. "While the Board would have no objection to an amend;rat which would accomplish this limited purpose, it is s!lieved that the language of the draft may well be conas going much further than intended -- possibly ,, far as to remove all the limitations and restrictions action .5136. 1 In this connection it is suggested that ataver language is finally decided upon might more appropri4,!e1Y be in the form of an amendment to that section rather ' 41/111 to the Farm Credit Act of 1933." Approved unanimously. Letter to Mr. Charles A. Quattlebaum, Library of Congress Annex 4g, W ashington, D. C., reading as follows: se "With reference to the questionnaire which you recently /011z,! t° Mr. Bethea concerning a study for the use of the cei.7e Committee on Education and Labor with regard to edup' o c)nal projects and activities and to our subsequent telerotilla conversation concerning it, this letter is to inform glin,,,tilat the Board of Governors does not have specific pro"s of educational activities of the type covered by your 41.8eVeral activities at the Board, however, are directed tow : tr" educational objectives in the broad sense of prokotw rig understanding by the public of the functions of money scredit Th; and of the Federal Reserve System in our economy. e activities center around the publications of the Board theiX distribution. In some publications, such as the 5h8/51 -10- monthly Federal Reserve Bulletin and the monthly Federal 1121trve Charts on Bank Credit Mone Rates and Business, il:Iformation on and analyses of the business and credit sltuation which have been prepared to enable the Board to f tulfill its statutory responsibilities are made available ° the public in order to promote a wider understanding e'r money and credit developments and of the System's credit Policies. a list of the Board's publications appears on es 478-79 of the Bulletin for April, a copy of which is ' 11closed "In other publications, such as The Federal Reserve -- Its Purposes and Functions and Bankine, Stvlies, ?,4 effort is made to provide explanatory material on the .Vderal Reserve and commercial banking system for the allsinessman, the banker, the labor leader, and the stu,,,ent. These publications are also a by-product of the 4_egular work of the System's staff, but they are made t°7ailable in special form for distribution to interested Persons. "Educational activities are also directly affected bY the Board's policy in distributing its publications. Publications, especially the book on the System and Lints of Bulletin articles, are available without charge. e co raries of educational institutions are furnished free Re.Pies of all publications upon request. In some Federal oriserve districts certain publications have been provided te oemplimentary basis to the college and university ?rs of money and banking. On occasions the Board has cooperated with individual pea et! ral Reserve Banks in conducting short seminar sessions Banks and the Board, through which college and univerto teachers of money and banking are given an opportunity ecome more familiar with the economic and financial th'ecrMation developed, or in process of development, by ob8e8Ystemi s research staff and also an opportunity to or +rare and discuss first hand the functions and operations eas"Lie Federal Reserve Banks and the Board. These seminars lio?Dhave the indirect objective of broadening the pubnien,' understanding of the economy's monetary and credit re,„"These various activities are integrated with the ellrr duties and assignments of the staff of the Board Banks, and as a consequence no special budget is -71"7 AL, /' 1 -11ft maintained or could be maintained to cever them. All exPenses of the Reserve Banks are covered by the income earned by their operations, and the expenses of the Board of Governors, which has statutory supervisory responsibility with respect to the Banks, are assessed against the Banks alad carried by them as expenses. No funds appropriated by the Congress are involved in defraying any of the expenses C)f the Federal Reserve System. 'Still another form of educational activity which may 11°t fall in the categories for which you are seeking infor1114,111tion is the preparation of films with respect to the Federal 'eserve System. The Federal Reserve Bank of Minneapolis 0 .er°Pared a film covering certain aspects of the operations ,1 'a Federal Reserve Bank designed for use particularly 44 high school classes, and the Board paid half the cost c)f tile film or somewhrt less than *10,000. Distribution () 1 f the film is handled entirely by the Foderal Reserve cank of Minneapolis. The Board also paid a portion of the 11(3 r1st of preparing a film on the Federal Reserve System by vicYcloPaedia Britannica Films, Inc., and assisted in reOfJ the script for the film. This was a project of reeYeloPaedia Britannical Inc. for which they assumed full st81°40ibility, including distribution within the United tori'es and foreign countries. The contribution by.the .t1,!rcl of $17,750 was to assist in defraying a portion of oF i al 'out of pocket' costs of the actual filming th, project. am :The Board provides for reimbursement of the tuition its Incidental expenses incurred by a limited number of Gr..staff for attendance at the two-week course at the tC School of Banking given at Rutgers University ir the auspices of the American Bankers Association c.nd it grants the necessary leave to the indivi-i for whom reimbursement is approved. 'We hope this information will be of some use to you the Study you are making." Z Approved unanimously. ,41111' 0001 Il 11 1 / AA oecretary.
@FedFRASER