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C Minutes of actions taken by the Board of Governors of the Nieral Reserve System on Friday, May 25, 1951. PRESENT: Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Evans Vardaman Mr. Carpenter, Secretar3, Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Minutes of actions taken by the Board of Governors of the l'e4el'e1 Reserve System on May 23, 1951, were approved unanimously. Minutes of actions taken by the Board of Governors of the l'ed'el'al Reserve System on May 24, 1951 were approved and the actions Iseecrcled therein were ratified unanimously.. Telegrams to the Iederal Reserve Banks of New York, Philadelrhja, el"e141.4) Richmond, Chicago, St. Louis, Minneapolis, Kansas City, Dellas, 411 Francisco stating that the Board approves the establishment with1t 114111ge by the Federal Reserve Bank of San Francisco on May 22, by the l'4'el'41 Reserve Bank of St. Louis on May 23, end by the 2edera1 Reserve 414 ckittle Nev York, Philadelphia, Cleveland, Richmond, Chica;,;(31 Minneapolis, City - aud Dallas on May 24, 1951 of the rates of discount and purtheir existing schedules. Approved unanimously. Metacrandum dated May 18, 1951, from Mr. Noyes, Director of the 1141., "1-L01-1 or. 1 Selective Credit Regulation, recommending that Miss Betty J. 412*Ieri s, 'ellographer in the Division of Examinations, be transferred 5/25/)1 -2- to the Division of Selective Credit Regulation as a Stenographer, with rIci change in her present salary of $2,650 per annum, effective May 27, 1951. The memorandum also stated that the Division of Examinations was 4Aeable to this transfer. Approved unanimously. Memorandum dated May 21, 1951) from Mr. Bethea, Director of the 011 of Administrative Services, recommending the appointment of 'Janda H. Thompson as Operator, Tabulation Equipment, in that Divii4)11 011 a temporary indefinite basis, with basic salary at the rate of $2,87s ' Der annum, effective as of the date upon which she enters upon the ,neItermance of her duties after having passed the usual physical x44inatio and subject to the completion of a satisfactory euplo;plent itrvestiatio Approved unanimously. Memorandum dated May 22, 1951, from Mr. Young, Director of the vi 1144, : 11 of Research and Statistics, recommending the arilointment cf ittiervii:garet T. Notter as a Clerk in that Division, on a temporary errettivlte 11q. basis, with basic salary at the rate of $2,8l0 per annum e 46 of the date upon which she enters upon the performance of - after having passed the usual physical examination, z,nd s±t to he cciMPletion of a satisfactory employment investigation. Approved unanimously. 5125/)1 -3Letter for the signature of the Chairman to Mr. Felipe awes, 4"iaent, Banco Nacional de Cuba, Habana, Cuba, reading as follows: "This is to acknowledge your letters of May 4 and MaY 7 regarding the proposed Third Meeting of Technicians of Central Banks of the American Continent, to be held in Ilelarla about the end of 1951 or the beginning of 1952. "I am glad to inform you that the Board of Governors accepts your invitation to be represented at this meeting. 14 addition to representatives from the Board of Governors !Ilia from the Federal Reserve Bank of I;ew York, it is exPected that a representative of one of the other Federal lieserve Banks will also participate in our delegation. e will notify you at a later date as to the exact conPosition of the Federal Reserve delegation. 8. "It is also noted that you would like to receive lipliggestions by June 15 with respect to the agenda of the Members of our staff are studying this matter i"h 0. view to having our suggestions in your hands by 'Jute 15.1, t Approved unanimously. Letter to Mr. Russell G. Smith, Executive Vice President, Bank °r Amerie, o/0 Bank of America National Trust and Savings Association, 3e° Montgov, ---erY Street, an Francisco, California, reding as follovc: v4, "Thi3 will acknowledge your letter of May 16, 1951,_ t4 ' (7; 11 fUrther reference to the Board's letter of March 16 lairmun Gook transmitting copies of the report of exa2 ion of Bank of America, New York, New York, made ELs GoIL'aovember 13, 1950, by examiners for the Board of —"ors of the Federal Reserve System. reportt hau been noted that, since its receipt, the cf;ii; of examination has been carefully reviewed by the bizie s of the ecrporation and also by your Board of rtal—°r8. It has been noted also that you are giving exta heolicideration to the comments made in the report eiricave taken definite action to carry °tit the spe14 iil, calumendations and suggestions as referred. to Or the courd's letter and as set forth on pages 47-49 Port, The detailed comments with respect to the a. taken and contemplated are appreciated. "Ou 1-4G your viuit with. Governor Szymczak on April 3 5/25/51 -4- "in connection with another matter, you inquired if ell examinations of Bank of America made by examiners for the .Board of Governors would be as detailed as the first one, LOU will appreciate that it is difficult to Give a c?.teorical answer to E question of this kind, but, in general, is believed that it would be appropriate to state that the scope of future examinations of Bank of America will, ?? course, depend on the facts and circumstances s develored "ring the course of the examination." Approved unanimously. Letter to Mr. DeMoss, Vice President of the .1,1 deral Resevve te,r1k Of Dallas, reading as follows: 'This refers to your letter of May 14 regarding the .aPPlieation of the appraisal guide provisions of Regulation w to automobiles equipped with air conditioning units. "Arter considerntion of the additional information submitted with your letter it is our opinion that the 0 8171) ,Pr4isal guide provisions would not apuly in the case su l&ed automobiles equipped with air conditioning systems that described which retails for $695 installed. ease, therefore, the maximum credit value would b: this UTthirds of the cash price. guia 14 general, it is the Board's view that the appraisal alit-° Provisions of the regulation do not apply to a used addc4T013i1e which has been so substantially altered by the me.C"ion of special equipment or by 'customizing' as to ple.t:jt, in effect, an automobile having specifications 1.4 i;,-LallY different from those of any automobile listed pr,'° appraisal guides. Of course, where there had been tht;44*Jor modification of the vehicle, as for example if the sPeeial equipment consisted of an evaporative cooler, aPpraisal guide provision would apply." • Approved unanimously. Letter a. Z. j avts 4. 11O5 for the signature of the Chairman to the honorable House of lipresentatives, Washington, D. C., reading 189 5/25/51 "Thank you for your letter of May 14 and for the comments on your reaction to the presentation nade to You by representatives of the television and electrical appliance industry regarding present conditions in those fields. The Board and its staff have also been having frequent meetings with representatives of these industries and we have studied carefully the facts which have been presented to us and the recommendations and suggestions which have been made. On the basis of its thorough review of the facts presented the Board has recently concluded that any relaxation in the terms of Regulation W at this time would not be in the interests Of the national defense program. "With regard to some of the specific points which have been made by representatives of the television and electrical appliance industries, you are undoubtedly amiliar with the fact, for example, that the present rede-in rules under the regulation have been in effect ever since Regulation IA was first issued by the Board in The regulation does not prohibit the acceptance n trade-in on television sets or appliances. Dealers free under the regulation to allow trado-ins and to 1/1:3 theM any valuation they wish as a deduction from : 1 price of the article being sold. The regulation does to°vide, however, that there must be a cash down payment maabe computed after allowance for the trade-in has been par!' An amendment that allowed trade-ins to count as 0.114tor all of the down payment for articles other than wpttobiles would constitute a material relaxation of the 4"gulation, the "In reaching its decision, the Board recognized that co,fe has been some general softening of demand in the b11::Umer durable goods markets compared with the heavy wave of last December and January. In the particaoubt ield of television, however, there is considerable the A that the restrictions of Regulation Tv. have been ' factor in the slackening of demand for such A 8ets ,°Xinant ' 8 You know, there has been a phenomenal expansion or to Levision sales and production in the relatively short epet4' there7 a few Years. This raises the questIon whether : .Y L now be a temporary condition of near saturation Of exilli ' ing major markets. Also there have been some priee-s reductions recently which have gained considerable t 5/25/51 -6- It attention In the press and through trade advertisements. This publicity may have resulted in many potential customers cleferring their purchases in anticipation of further price cuts. Then there are other factors such as the imminence Of ultra-high frequency television and the public discussion of whether color may eventually be used. A relaXation of the requirements of Regulation W could not feasonably be expected to solve all the problems of the 'elevision field where there are so many interplaying f actors. "The consumer credit regulation must be restrictive If it is to accomplish its major purpose of helping to train general inflationary forces by curbing consumer „ .446alment credit. While the Board does not wish to be : xcessively restrictive in the case of individual articles industries, nevertheless, in carrying out its respon:!bilitY under the Defense Production Act it must consider rteral economic and credit conditions and the necessity ' cl°11 curbing the inflationary effect of instalment credit uring this period. the,"We appreciate your interest and want to assure you re I's are continuously surveying the effects of the aation. As I indicated in my testimony before the 113118 Banking and Currency Committee on May 10, the Board ev.PrsPared either to tighten or relax credit terms when. 0 -r such action would be consistent with the objectives the Defense Production Act." e Approved unanimously. ScUth G Letter to Mr. A. C. Burger, Andy Burger Motors, Inc., 3654 r4I4 Boulevard, St. Louis, Missouri, reading as follows: 4114 This is to acknowledge your letter of May 15, 1951, as , 1 al8o the letters bearing the same date signed by you sident of the corporations listed below: ABC Motors, Inc., St. Louis, Missouri Community Motors, Inc., St. Louis, Missouri Burger Motors, Inc., Rock Island, Illinois CaPital City Motors, Inc., Springfield, Illinois SPringfield Motors, Inc., Springfield, Illinois 118 5/25/51 -7- "All of the above mentioned letters relate to the effects of the provisions of Regulation W on the instalment sales of automobiles and in each you express the °Pinion that the maximum maturity should be changed from 15 to 24 months on all new cars and on used cars in cases are the deferred balance amounts to $800 or more. One of the major problems involved in administering e regulation such as this is to make it restrictive enough 80 that it will be effective in accomplishing its purPoses / and at the same time to keep it from being an oxa burden on the individuals who are subject to it. Provisions of the regulation are constantly under study !, the Board's staff with a view toward keeping them euliPted to current economic and credit conditions. "Although the Board recognizes that there has been a neral softening in the markets for consumer durable goods J911°14ing the heavy buying wave of last December and ITa4u7y, nevertheless, in the light of general economic credit conditions, a relaxation of the regulation at _nis time does not appear to be in the interest of the natioal defense program. to , We aPPreciate your interest in writing us, and wish fili seure you that the views you expressed will be care'Y the reconsidered in our continuing study of the effects of gulation in the markets for regulated articles." r Approved unanimously. 1114 _ Letter to Mr. J. M. Sanders, Vice President, Hill & Tibbitts, Inc., 1Vermont Avenue, N. W., Washington, D. C., reading as follows: Re 1"This refers to your letter of May 10, 1951, regarding ch,ftti°n W. In your letter you state that the purrec ' i- of foreign built automobiles 'has the effect of rorueing the demand for American built cars and is, therefore) definitely counter-inflationary.' In view of the ezZ,ing You ask that the Board give consideration to an Of ;r1CM of foreign made automobiles from the requirements -"e regulation. 5/25/51 -8- "It is possible that the exemption of foreign built automobiles from the requirements of Regulation W might to some small degree lessen the demand for American built cars. However, we doubt that such a transfer of demand would have important anti-inflationary effects. Expansion of that part of the instalment credit to purchase foreign cars which represents the dealers' gross profit in itself tend to be inflationary. "Moreover to the extent that there was a diversion of demand from American to foreign cars as a result of sUch an exemption the regulation would be placing American !!..rs at a competitive disadvantage. On balance, it seems us that such discrimination between sellers would not ue Justified. "We appreciate your interest in writing us, since always glad to have the benefit of the views of the tram de in our continuing study of the regulation." Approved unanimously. Letter to the Honorable Hugh J. Addonizio, House of Representatives, 14811111gton, D. C., reading as follows: "In your letter of May 15 you quote from corresnoe with a constituent citing an example of what he Stateiders to be wasteful spending. Your constituent i s that he is the Assistant Office Manager of a small - company and 'has seen three revisions of Regulation W .7 f%,1"-nce it went into effect September 19)0'. He states the that he has therefore found it necessary to deall his forms and use the 'new revised ones'. eoulA We are unable to understand how your constituent have interpreted the amendments to Regulation lv in Y which would have necessitated destruction of , beel7s i and the use of 'new revised' forms. There have sti;hree amendments to Regulation W. The first of these, from-e'lve October 16, 1950, reduced maximum maturities tkelli.21 to 15 months and increased down payment requireth respect to appliances (Group B articles) listed 1 as the constituent regU A latiOn. It is possible that your to 7rres1114- of this amendment may have found it desirable °Iliae a new list of articles and terms for his office .r4.0yees as an operating matter but any such change he po „ 5/25/31 H_ made in office forms would have been done as a matter of his own convenience and not as a requirement under Regulation W. "Amendments Nos. 2 and 3, effective February 26 and MaY 15, 1951, respectively, should not have required any change in office procedure or forms. These amendments, lihich were highly specialized in application, dealt with the leasing of listed articles and with designations of clisaster areas by Federal Reserve Banks. They were both designed to simplify either the operation of Registrants 1-.1.11der the regulation or the administration of the regulaIion by the Federal Reserve Banks. _ It is possible that your constituent has misunder;toed. these amendments. If this is the case, he might il.nd it helpful to discuss his particular problem with Z'e Federal Reserve Bank of New York which serves the oevark and Orange, New Jersey, area." Approved unanimously. Telegram to the Presidents of all Federal Reserve Banks, reading a.8 rojaows. htio "Section 5(b) of Regulation X exempts from the prob21-ons of Regulation X certain construction loans havi;e a maturity of not more than eighteen months. The al* in its telegram addressed to the Presidents of 195 "deral Reserve Banks (S-1189, X-13) on November 8, , stated that a note evidencing such a construction tan,l4hich has a maturity of less than eighteen months cicti:e renewed pending completion of construction if the za0,: of maturity of the renewal is not more than eighteen , after the date the credit originally was extended. a 4 It is the opinion of the Board, however, that such having a maturity of less than eighteen months may not eve ue renewed after the construction has been completed, " of maturity of the renewal is not more than ej the date months after the date the credit originally Approved unanimously. 5/25/51 -10Letter to the Honorable Raymond M. Foley, Administrator, Housing 811c1 Home Finance Agency, Washington, D. C., reading as follows: "The Board's letter to you on March 1, 19)1 indicated its concurrence in the designation of the Savannah River, South Carolina area for the purpose of a relaxation of terms of Regulation X, Real Estate Credit, for constructicm of housing in that area, the program for which was given in your letter of February 27, 19)1. It is understood that you now wish to authorize an additional 500 Units of the 3600 total mentioned in your letter of ! ebruarY 27, which stated that not more than 500 units fuld be provided until such time as additional community tacilities could be constructed. The Board understands 'that the greater part of the units so far approved for construction were in sections where the shortage of ,!0111munity facilities is not too severe so that it has ueen found possible to program the additional units. 2 , In view of the statement in your letter of February 41, 19)1 that you had concluded that there was urgent s"d for approximAtely 3600 new housing units in the AZvannah River area to serve defense workers of the 14,c, /rilic Energy commission installation in that area, " in viof the certification of the area by the t1al) rProPriate Defense Mobilization authorities as an 4 f°r Purposes of special assistance in the productie , at 4 of necessary housing, the Board of Governors authorizes r eah liteation of terms different from those prescribed by rer4-6ttion X for a total of 3600 units, including the 500 01-0erred to in your letter of February 27, the additional 5O timewhich we understand you propose to specify at this 'and such additional units within the total of 3600 unite as you may specify from time to time." Approved unanimously. Letter to the Presidents of all Federal Reserve Banks and the 14N1.4g O reading as 1'040118: fficers of all Federal Reserve Bank Branches, 5h5/51 -al- "For your information, there are enclosed three copies of the Act approved by the President on May 15, 1951 (Public Lay No. 30, 82nd Cong.), amending the Assignment of Claims Act of 1940. 'The principal changes in existing law made by this amendment are the following: 1. It removes the requirement that copies of assignments be filed with the General Accounting Office. 2. It relieves assignee financing institutions of anY liability to repay amounts received by them after JulY 1, 1950 under any assignment. 3. Authority for inclusion of the 'no set-off' clause is extended to the Department of Defense, the General Services Administration, Atomic Energy Commission, and such other departments or agencies as the President may de signate. 4. where the no set-off clause is included in a contract, the assignee financing Institution is protected, rtl?t cmlY against set-off on account of claims arising oIndependently of the contract', but also against set-off ellY claims of the Government against the assignor on oount of renegotiation, fines, penalties, or taxes or arc,ial Security contributions, whether or not such claims 'se from or independently of the assigned contract. "In view of the importance of this legislation to the r;lense financing program and in view of the fact that many t43—ficing institutions have heretofore refused to make loans der"efense contractors on the security of assignments of their ft:me contracts, it is suggested that it might be desirable ot Y°ur Bank to bring this legislation to the attention all financing institutions in your district. issu "At the time of his approval of this Act, the President brief statement and, while it seems unnecessary to of that statement to financing institutions, a copy CO Of the statement is enclosed for your information. Approved unanimously. Secreta y•
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