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1044 A meeting of the Board of Governors of the Federal Reserve SYstera Was held in Washington on Tuesday, May 26, 1942, at 3:30 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Smead, Chief of the Division of Bank Operations Chairman Eccles stated that in accordance with the action taken at the meeting of the Board on May 22, 1942, in connection with theAlIrchase and sale of Government securities through the Continental 4.14nois National Bank and Trust Company by Frank J. Lewis, Chairman or the Federal Reserve Bank of Chicago, he (Chairman Eccles) called Plident Young of the Federal Reserve Bank of Chicago on the tele1)11cte and advised him what had occurred, and that Mr. Young's response 11'4 that he had no knowledge of Mr. Lewis having borrowed from the nattorlal bank, that he knew Mr. Lewis owned Government securities and 44(i bought them from time to time, but that Mr. Lewis had always given the 1111Pression that his purchases were strictly for investment and not 41' Nsale, and that Mr. Young would be glad to have Mr. Cagle, Assistant Chief of the D to ivision of Examinations, come to the Federal Reserve Bank r44ke an investigation and would lend him every assistance possible. Cha iraan Eccles also said that he talked to Secretary of the 1045 5dV42 -2Treas 1117 Morgenthau on the telephone and advised him of the Board's attittlde and the action it had taken,and that Secretary Morgenthau had stated he felt exactly the same as the members of the Board regarding the matter. Chairman Eccles went on to say that he tried several times on Sat"aY to reach Mr. Lewis by telephone at the Federal Reserve Bank of ekteag°, at his office, and at his residence, but without success, and that finally on May 23 he sent the following telegram to him at the Federal Reserve Bank of Chicago: "I have been ore nlei e trying to reach you all morning VIone but unable xt to do so. I desire see you Z11k as possible about matter which is very urgent. Could p, be in Washington Tuesday or Wednesday at latest kindly ' - 17iae.11 14 l'esPonse to this telegram, Chairman Eccles said, he received a wire trOm p l'esldent Young stating that he had been unable to contact Chairman Le r, Ifi Q3 but that the latter's office had advised it would endeavor to get Cha'irman Eccles' message to Mr. Lewis during the afternoon of May 23. 11()t having heard anything from Mr. Lewis this morning, Chairman Eccles el4Ititilled, he wired Mr. Young again asking him to try and get in touch th T aa and ascertain whether or not he would come to Washington Mr. Young replied that, although he had been endeavoring to et ttlet Jai touch with Mr. Lewis since May 23, he had been unable to con- ott clirect but that Mr. Lewis would be in Chicago for the meeting he board of directors of the Reserve Bank on Thursday, May 28. 1041; 5/26/42 -3- In accordance with the action taken at the meeting of the Board on May 22, Chairman Eccles stated, Mr. Cagle had reviewed all of the in.foritation available here, including such information as was in the rePo rts 'r examination of the Continental Illinois National Bank and elsewhere, and had left last night for Chicago where he expected to spend tw° or three days at the Federal Reserve Bank before undertaking to Intake an inve stigation at the Continental Illinois National Bank and Nst Company, and that he would not go to the national bank until he hai n Eccles) requested him to do so. Chairman Eccles made the further statement that, since Secretaryhad brought the matter to the Board's attention on May 21, 1942, the Board should get in touch with Mr. Lewis as promptly as pose and not wait until next Thursday, May 28, when he was expected to attend the meeting of the board of directors of the Federal Reserve ! rik or Chicago, and that in the circumstances it might be advisable to "ite hiM a letter setting forth the facts and stating that it was the aeh: h::::a : t" reeling that he should send in his resignation immediately as Director and Chairman and Federal Reserve Agent of the Federal Of Chicago. Upon motion by Mr. McKee and by unanimous vote, Chairman Eccles was authorized to have such a letter prepared and circulated for the approval of the Other members of the Board with a view O , sending it to Mr. Lewis tomorrow night 0Y air mail special delivery unless Mr. /,"ewls should get in touch with Chairman "u-ccles prior to that time. 1047 5/26/42 -4Chairman Eccles then stated that, at the invitation of the Secretal7 of the Treas , he and Mr. Goldenweiser had attended a rneeting Yesterday afternoon at the Treasury which was attended by Secxletal7Mbrgenthau, Under Secretary Bell, Mr. Harry White, Director or Monetary Research, and Mr. Frank A. Southard, of the Treasury; Mr. 'lease Jones, Secretary of Commerce; Mr. Herbert Feis, Economic Adviser to the Se cretary of State, and Mr. Leo Pasvolsky, of the Department of State. and mr. Louis Bean and Mr. Frank Coe of the Board of Economic Wam At Chairman Eccles' request, Mr. Goldenweiser read the followin g letter dated May 20, 1942, which had been addressed to the Ohairm an by Secretary Morgenthau: am appending a the"' memorandum which I submitted to tirripresident with an enclosure which I think you will the-,r1f-eXplanatory. The President told MB to continue of the proposal in conjunction with the State Board of Economic Warfare and Export-Import Bar had and' and to speak to him again about the project after Progressed further in our study and after I had ob-wetandi the views of the State Department. I would very ike to have the Federal Reserve Board join us the in e study -would fou a it very much if you or someone p.14.- u-14 careappreciate to designate would meet with me at 300 °n Monday, may 25. if be,,The proposal is, of course, in the study stage and matt i°re the cusse121 Harry meeting you want more information on the White is available and will be glad to disIL at your convenience." Mr. ericloure Goldenweiser handed each member of the Board a copy of the which a or a ccompanied Secretary Morgenthau's letter and a copy raeatora nchlm Which he had written to Chairman Eccles under date of 1048 5)V42 5— Nr25, 1942, describing the material and stating that it contemplated that Plans for international financial reconstruction after the war Mould be studied now; that the Board of Economic Warfare, the Departinet of State, and the Board of Governors should cooperate with the Nasury in undertaking the studies at once; and that preliminary Plans for an international stabilization fund and for an international bark had been prepared and were being submitted as a basis of discusMr. Goldenweiser's memorandum also stated that the plans them,- 8ellres were not appended, but that he thought this was a subject of the very first order of importance and that the Board should particiPate in the study to the fullest extent. Mr. Ransom suggested that Mr. Goldenweiser make a digest of report on the preliminary studies for the information of the memhers of the Board, and it was understood that he would do SO. the Chairman Eccles said that Secretary Morgenthau opened the meet- 1.4e Stating that he had discussed with the President the need for allch st . udies and that, although Secretary Morgenthau had already had a 1)rel., IjillnarY study made, his letter of May 20 was the first notice 11111-ch, f ne lChairman Eccles) had received. He stated that all those Are 8ent at the meeting had agreed that this was a broad subject requirdiate consideration, that he had advised Secretary Morgenthau be , sllbject to the approval of the Board, this organization would g ad to Participat e in making such studies, and that he would deste that 3 • G°1denweiser to serve on the technical committee. He said 1049 5/26/42 -6that, in response to a question by Mr. White as to whether some mem- bers of the Board's staff would be available to assist in this work, he had said that the forei,m section of the Board's Division of Research 44"tatistios would be interested and that therefore such men as Messrs. qardn . Kindleberger, and Knapp would be available. He also said he had . QaIlled the impression that the Treasury wanted to get all possible 481-8tance from every source because of the magnitude of the problem arid, he surmised, that it also desired to have others share in the rethe st for any conclusions that might be reached as a result of Ildlee, Chairman Eccles added that Secretary Morgenthau had apP°111ted • Vihite as chairman of the technical committee and that Mr. Jorkes had a ppointed Mr. Will Clayton to serve as a member of the cora114bse, but that he had not been Of advised as to appointments on behalf the other organizations represented at the meeting. At the conclusion of Chairman Eccles' report, the Board authorized him to send the following _ letter to Secretary Morgenthau: " letter' have advised the Board of the contents of your of May 20 and the meeting in your office on May Stud Dr. Goldenweiser and I attended concerning a and tuL °f a Proposed stabilization fund for the United pesti:r= ritions and an international bank to meet opp0 , 4The Board has requested me to advise you that the Preei:linitY to participate in these studies is Featly aprese ed, that we have designated Dr. Goldenweiser to rephe h' the Board in connection with these studies, and that that! l been authorized to utilize any members of our staff ue may desire for this purpose." 1050 5/26/42 Chairman Eccles stated that last week Under Secretary of the irt.easurY Bell had mentioned two legislative proposals which he thought were Worthy of consideration, namely, (1) not to require member banks to maintain reserves against Government deposits, and (2) not to recillire member banks to pay the Federal Deposit Insurance Corporation asseesillent of 1/12 of 1 per cent on Government deposits. he He said that thought these proposals had originated with Mr. Aldrich, Chairman or The Chase National Bank, that both proposals were controversial and therefore ought not to be included in the proposed legislation to be Ntht by the Board at this time, and that following the meeting at the Treasury yesterday he had advised Secretary Morgenthau how he felt 41)014 them. Chat7man Eccles stated, however, that he would like to heaPproval of a letter, which he proposed to send to the Presidents °real Federal Reserve Banks after he had talked to Senator Wagner, Which would enclose a draft of a bill and a statement explaining the thre e legislative proposals which the members of the Board had heretot°re agreed to, He said that President Sproul of the Federal Reserve talik of tiew York was particularly anxious to have the Presidents advised detail regardinc, the proposed legislation before it was actually introd Ilced in tel„, Congress. Which was Chairman Eccles thereupon read the following let- approved unanimously: bill "There is R:4-4 in three enclosed herewith a draft of a proposed e Federal sel*ve Act. sections which would amend There is ' of also enclosed an explanation the Proposed amendment which develops the reasons for Proposals. I051 5/26/42 -8- It is the unanimous view of the Board of Governors that this legislation is now urgent to meet financial prob.}ems due to the war situation and it is therefore expected 1,0 have 0 tongressappropriate bills introduced in both Houses of in the near future. The Treasury concurs in the r°ard's views and believes that the proposals respecting eeerve requirements are particularly urgent. and"The Board wishes the Federal Reserve Bank directors officers to be informed of this proposed legislation and ,ci ip why the Board and the Treasury deem it of that the legislation be enacted at this time without delay is of on a "It . extreme importance that this matter be kept t nfidential basis until the bills are actually incor°duced.11 14r. McKee submitted for approval the following memorandum, adclres -ed to the Board by the Personnel Committee under date of May 21, 1942: Board is aware, some two weeks ago the quesdir of some wartime restriction upon annual leave was Theclissed and left to the Personnel Committee for action. tiorearter, the Personnel Committee considered the quesshol.further and agreed that the following restrictions inst d be Put into effect from that date forward. On the eructi°n8 of the Committee, Mr. Clayton communicated sionoMmittee's action informally and verbally to the DiviChiefs/ as follows: "As now obtains under the Board's leave 1;egulations, annual leave may be taken only with he approval of the appropriate Division Head at „-1,ch time or times as the employee can be spared. addition, the following restrictions will apf-Y until otherwise ordered in order to meet the war -time situation: , No annual leave to be taken in excess of tmo calendar weeks or fifteen calendar days at any one time; current. Any additional leave accrued during the year to be taken a day or two at a time; cillti,1 17/;47crued during prior years to be taiç T 1052 5/26/42 -9"4. nile the foregoing rules reflect the general policy, in unusual situations or to prevent undue hardship, exceptions to any of the foregoing restrictions will be considered on application of the employee to his or her Division Head, to be forwarded with the latter's recommendation to the Board's Personnel Committee for decision. th "Since the above action was taken, it has come to b e Committee's attention that the new leave policy has tood by a number of employees. In view of ttee met today with the Subcommittee of the of Employees (Messrs. Bonnar Brown, Bray Hammond, in tcl Miss Elizabeth Ford). The Subcommittee was asked for s comments and views respecting the above regulations. Thn unanimously expressed themselves as feeling that the ,4.r 3.-cY was fair, that it was important to have some elasticity wije Provided for in 4 above, and that the Board's policy " aPpropriate explanation be communicated to all em0.47e" bY circular, but on a confidential basis and not r signature of any particular staff official. sonn14ater further consideration of the matter, the Perbe Committee recommends that a circular by the Board witCsued, setting forth the foregoing war-time leave policy of .,118 4 . suitable explanation, and that mimeographed copies each Te,,circular be distributed in sufficient quantities to emall'Lvision Chief so that copies can be circulated through units of each Division and initialled by each emc),..1 the copies all to be returned to the Division t2 Z Approved unanimously. At this point, Messrs. Goldenweiser and Smead left the meeting, atict the rerer._ action stated with respect to each of the matters hereinafter 'ed to was taken by the Board: The nanutes of the meeting of the Board of Governors of the Reserve System held on May 25, 1942, were approved unanimously. Letter orlIsaa to Mr. Gilbert, President of the Federal Reserve Bank as, reading as follows: 1053 5126/42 —10-0_ "Referring to your letter of May 19, 1942, the Board Governors approves payment of salaries to the following -Llcers of the Officers Bank for the year beginning June 1, 1942, at the rates fixed by your Board of Directors: Annual , Name Salary Title a. R. P20,000 President E. B. Gilbert Stroud First Vice President and General Counsel 17,000 R. B. Coleman Vice President 12,000 111, J. Evans Vice President and 10,000 Secretary 17* °. Ford 9,500 Cashier E. B. Austin 7,200 Assistant Cashier L. G. Pondrom 6,600 Assistant Cashier °. V:ebb 6,000 Assistant Cashier ; - ae C. Smyth 4,800 Assistant Cashier H. Holloway 6,000 General Auditor 44—.11as B a c 0. L. Hermann 6,000 Managing Director Allen SaYles 4,200 Cashier H. j Gentry DeMoss L, COOk M. •\frump Managing Director Cashier Assistant Cashier 9,000 4,800 3,600 Managing Director Cashier Assistant Cashier 7,500 4,800 3,300" 0 likaaah W. H.g1e avis Approved unanimously. Letter , 'o Mr. Vest, Vice President of the Federal Reserve Bank ot uart pre._ c. CO, reading as follows: n lette 4"I accordance with the request contained in yourf Mr 15, the Hr Qf Jim Board approves the appointment o tank rt. Lyons as an examiner for the Federal Reserve wkici,c)f San Francisco. Please advise us of the date upon the a ppointment becomes effective." Approved unanimously. 1054 5/26/42 -11Letter to Mr. Mulroney, Vice President of the Federal Reserve Bank Of Chicago, reading as follows: ."Reference is made to your letter of May 19, 1942 'flitting the request of the Commonwealth Bank, Detroit, ehigan, for approval of the establishment of a branch 111 the City of Highland Park, Michigan. view of your recommendation and the information ;remitted, the Board approves the establishment andoperab,T,of branch in the City of Highland Park, Uichigan, the C ommonwealth Bank, Detroit, Michigan, subject to approval by the appropriate State authorities." Approved unanimously. Telegrdsm to the Presidents of all the Federal Reserve Banks, ream _ -4-ag as follows: t_ s "Several questions regarding WR-1 and related matCussed below. 1.210, IT explained in an made e t WR-1, la —..6 May be renewed more than once. Furthermore, 10Q-11---Y -°rr°71er may pay a portion of the loan at the time of bay...such renewal, or the loan may be put on an instalment without regard to the requirements of section 6(b) no,nr other provision of the Regulation. It isto be st171..however, that the absence from Regulation Vi of revern?'17e provisions with respect to such renewals or concori ns is not intended to encourage them, but must be the'luered in the light of the joint statement made for tcar1, 3 ' 11 ess on May 7 by the Comptroller of the Currency, the por-a;4°f Directors of the Federal Deposit Insurance CorSyst. ' ;°n, and the Board of Governors of the Federal Reserve Pede;,; n This joint statement will be published in the Reserve Bulletin for June. "A loa of DA2is not subject to the Regulaillzwhethel; the loan is single-payment or instalment, ebem=befo e or after May 6, or whether all or part isasmt° to pay off a previous indebtedness with the oblN;ender or another lender. On the other hand, if the r a n.,000 note borrows another f'800 from the arate ' -11 er as a evidenced by a se?note, the separate transaction new 300 loan is subject to the Regulation. 1055 5126/11.2 -12"If instead of renewing or revising a single-payment 1°an ala..__e_aztor_to d May _6, the obligor makes one loan (of -1))00 or less) part of which is to be used to pay off the :)1 single-payment loan and part of which represents new ""money, only the Dart of the new loan representing new money subject to the requirements of the Regulation. However, sfl an such case it would ordinarily be better practice andfor the lending institution to keep the credits separate not to combine them in a single obligation since otherforse it might be difficult for the lending institution and the of the examiners to be sure that there was no violation Regulation. la,;;ee . 3 wal or revision of a loan which was originally Ore r s' ugh the '500 is not subject to the Regulation even balance at the time of the renewal or revision less than q,500." l Approved unanimously. Tel egram to the Presidents of all the Federal Reserve Banks, g as follows: "Cla an ssification 'Jewelry (including precious stones o,costume jewelry)', Group A-19 of Regulation V, inthr" such articles as cigarette cases and compacts when or :9.cle is made of or ornamented with precious metals ineV,!°-Lous or semi-precious stones. Classification also 7ss such articles as men's and women's belt buckles, voiv ains, tie clips and collar fasteners. Principle inis that classification includes all articles which traci ' °und to be customarily classified as jewelry by the fair' I?„?rtioularly when in addition the a7ticlecomet ref o ' l -Lthin the dictionary definition which ers es of personal adornment. "The Reserve Cat. Banks are requested to note for applithe fn to other questions concerning listed articles that Ireeti°r!g°inL interpretation is based primarily upon inand al801 6ion into the facts of prevailing trade usage iriclu at it follows a studied pattern in stressing the eXcl 7e aspect of the classification and leaving the InatterlIre aspect to implication. Board would like as a °f policy to avoid hereafter as far as possible 1056 5/26/42 -13rulings that will either (1) state categorically that a qlven article is not a listed article or (2) appear by Ping into small details to countenance efforts to search uut possible gaps in the list." Approved unanimously. Letter to Mr. Baker, Manager of the Consumer Credit Department of the Federal Reserve Bank of Minneapolis, reading as follows: und "There are set forth below the first two questions er ,7 Regulation V: contained in your letter to Mr. Hodgson laY 1 1942, followed in each instance by our answers unereto: '1. Would it be permissible under section 7(0(1) to renew a single-payment loan by means of an instalment loan which was divided into nine equal payments, the first of which matured one month after date of renewal?' vid This question may be answered in the affirmative pro'at the ,s not fall last of the nine equal monthly instalments due later than 12 months after the date on lch the original single-payment loan was made. 2. Vihen a single-payment loan is renewed under section 7(c)(2), is it necessary to pay onefourth of the obligation at the time of the first renewal and each subseauent renewal thereafter or mar the first one-fourth payment be made at the )(piration date of the first renewal?' time .1,9-3- such one-fourth payments must be obtained at the each renewal so that the last one-fourth payment the 0 e due upon the aturity of the last renewal, since tthan 7,!,r-a maturitym1 of the indebtedness shall not be more p m 4-4 months from the date on which the original singleayt loan was made. Of course, any payment may be larger thenen more °ne-fourth, and section 7(c)(2) contemplates one or Ment renewals of a single-payment loan, and not an instalcontract. "With or ce - respect to both the foregoing answers, you will and 71(lr” understand that the footnote to sections 7(c)(1) in e_e)k2) provides for other maturities of the renewals „ uln eases. to assi , °rder that you may receive more prompt replies and -.8 L us in the filing of matters according to subject, 4 1057 5IV42 -1411•4. lu will be appreciated if future inquiries be limited to -11g1e or related points. You Will note that the questions .n Your letter of May 12 are being answered separately or in groups.” V Approved unanimously. Letter to Mr. Baker, Manager of the Consumer Credit Department °I' the Federal Reserve Bank of Minneapolis, reading as follows: b_ "There is set forth below the fifth question under agl-Ilation V; contained in your letter to Ur. Hodgson of Y 12, 1942, followed by our answer thereto: '5. Section 8(b) exempts any extension of credit for the purpose of purchasing or carryInd stocks, bonds, or other investment securities, The bank is not clear on what is meant by "carryine stocks. Does it mean secured by stooks, or does it mean refinancing of a loan Which originated for the purpose of purchasing the stocks in the first instance, or does it 11r-lie some other meaning?' or The word 'carrying' in the next to the last line suj lection 8(b) has the same general meaning given to In pi, °1'd in section 3(b) of the Board's Regulation U. 8(b)'ect, this confines 'carrying' as so used in section to the refinancing of indebtedness which was origiflail otlj±Y for the purpose of purchasing any stocks, bonds or inZr investment securities, including such indebtedness his red by a broker, dealer or other agent on behalf of is l'"r-Lncipal. The mere fact that the extension of credit ia cured by stocks, bonds or other investment securities It talnlaterial in determining exemption under 8(b), unless . e purpose of purchasing or of carrying .r est lichs8a eZ l if7 r Approved unanimously. Letter tam, Of sari to 1r Clerk, First Vice President of the Federal Reserve rancisco, reading as follows: "This cerri,_ refers to your telegram of May 20, 1942, conthe application of Regulation W to the use of 1058 5/26/42 -15- credit cards by oil companies. You ask whether consideration is being given to providing an alternative for the calendar month in determining defaults on charge accounts. "We have received a number of comments about the calendar month period and the problem it raises for those erchants who have billing periods which do not coincide hadwith the calendar month. It appears that after merchants t !ome time to study the problem most of them were able aujust their operations to the regulation in one way another without serious inconvenience. The pressure for a change in the regulation has materially eased although 4 the matter is still under study and an amendment nOt foreclosed. be :It occurs to us that even though the period might c"anged to the fiscal month, a change which would in, ° , 11ce many difficulties of administration, the oil com-"'ss will still not be able to operate the credit card il-tLem under the regulation without considerable diffito The forwarding of information on frozen accounts ,, J- outlets and control over the sale of listed art4u-Les to persons in default would seem to present almost i: 4-"s urmountable problems. prima view of the fact that the credit card system was r-L-LY designed to cover sales of gasoline and oil and tiZ-Lar unlisted articles, we are inclined to believe that iem r11°st s atisfactory solution of the oil companies' probticill°111d be to confine the credit card system to such ar0,„_”: Present and impending controls over automobile would seem to suggest that such a procedure c,L 46( not result vto7e:tlont° in serious hardships for either the oil '14110anies or their customers." g j Approved unanimously. Letter Je e prepared for the signature of Chairman Eccles to Mr. j. F. ield, President j of the Commercial Trust Company of New ' el seY City, New Jersey, reading as follows: t"This refers to your letter of May 13, 1942, relator th° the joint statement by this Board, the Comptroller bepos%Cl , Irrenoy, and the Board of Directors of the Federal 44surance Corporation, urging that banks further v urri "u Ol e the Principle of amortization, particularly to the of single -payment loans to individuals for non- 1059 51V42 -16- "Productive purposes presently outstanding. "I regret to note that, while you are in accord with °ur recommendation and would like to collect payments on real estate mortgage loans in accordance therewith, you state that the tax rate and the basis of assessment of Property in Jersey City are such that banks in that city lnd it almost impossible to obtain reasonable payments On real estate mortgage loans and that, unless the Fedv eral Government 'cleans up this local situation,' it °uld seem impossible to comply with our reconunendation. ind "Ifully appreciate the difficulties which you face 44 ealing with real estate mortgage loans. As you know, en t:.--1-relY apart from the present program to obtain reducb 2 of individual indebtedness incurred for nonproductive ' 0i.',t) .°ses, the tax situation and other unfavorable aspects he real ;'n1 continueestate problem in Jersey City have long been to be matters of much concern to this Board 13', 1 to other agencies responsible for bank supervision r7ause of the effect upon the value of real estate and : n c estate mortgage loans held as bank assets and the eTtY for providing for large losses therein. • azi However, the responsibility for solving local finanproblems, including the determination of tax rates and ssessment policies, rests primarily with the State invi"al authorities and the citizens of the communities mi,° 11:7ved. I do not know whether any Federal action which effect the situation in your city would be in order. thia srlY event, any such action is outside the province of and it would not be appropriate for me to undert. Be'ard' rouralce to pass judgment upon the financial policies of of Fep alor r actLzpress any opinion as to the propriety tion 113In view of your reference to a reported investiga- a co Y the Federal Bureau of Investigation, I am sending PY of your letter to the Attorney General." Approved unanimously, with the understanding that a copy of the incoming letter and the reply would be sent to the AttAttorneyGeneral. Letter to Messrs. T. R. and W. S. Freeman, Tashington, D. C., g as follows: "Reference is made to your letters of May 20 and 1060 5hV42 -17'Nay 22 1942, which relate to the same subject matter as.Your earlier letters of May 6, to which the Board rePlied in some detail on May 19. . "This whole correspondence has now been carefully reyiewed. The review serves only to confirm what was sa1. c1 in the Board's letter of May 19. The kind of translesns in '_1?re not furniture that you would like to have exempted brought under the regulation through any over: or any failure to recognize that hardship will be in some cases. taurd It was the intention of the Board 4.,.'revent transactions of this description from being _,tected on credit terms less restrictive than those apv'Lled to furniture transactions of any other type. th4 "1.011 will nqs tends to understand that in the view of the Board further the broad purpose of the regulation, Your letter of May 20 suggests) to defeat it. That Purpose, as stated in the President's Message to il'ingress of April 27, 1942, is 'to keep the cost of livofg from Spiraling upward'. To do this, in the language t P men.t,he resident, 'we must discourage credit and instaland buYing, and encourage the payment of debts, mortgages, other obligations'." Approved unanimously. Let ter to Mr. G. A. Nelid car Leukhart, General Manager of the National Market Report, Inc., Chicago, Illinois, reading as follows: 21 vii"Reference is made to the Board's letter of March respect to the designation of automobile apBoard has-sa-L guides for purposes of Regulation T. The noW included the following publications Blue Book National Used Car Market Report Executive Edition -- 'Retail Sales Values' for zone No. 3 Official Blue Book New and Used Car Guide B Edition Red Book National Used Car Market Report arri()11c' th 130 e ,e automobile guides designated forp11rstori, Regulation Viappraisal in Genesee, Jackson, Lapeer, Livi:ngeouriti:ac°11110, Monroe, Oakland, St. Clair, 7;ashtenaw, tayne - 8 in the ' State of Michigan, in addition to the 1061 5/26/42 -18- "territories set forth in the Board's letter of March 21." Approved unanimously. Memorandum dated May 25, 1942, from Mr. Szymczak, reading as s, toUlow "On April 7, 1942, the Board considered certain memo" da ten by Mr. Smead with respect to the paying out of the existing stocks of Federal Reserve Bank notes, and of Federal emption Reserve notes of the 1928 series which bear the in gold clause, and agreed that the matter be referred to me for such further consideration might deem desirable. It was understood that if, in ,-L-L the circumstances action by the Board appeared to be s dtjf ed,.I would discuss the matter with the Treasury eratiZg it to the Board's attention for further consid- T g ta "I discussed this matter with Mr. Bell, Under Secrewia of the Treasury, and this morning had a conference and"ul_lill in his office at which Mr. Barnes, Mr. Bernstein ilfr.t z.Blunlfinger of his office, Mr. Hall, Director of Engravin, , and Printing, and Mr. Vest and severalSme were present. After reviewing the matter from the angles, including the savings to be effected and tentnlie's reaction to paying out the notes, it was greed that the paying out of the notes would t: d'a1)Tea, provided an adequate press statement could PrePared, stei,"In this connection, it was understood that Mr. BernTree. " would draft a press statement to be issued by the revi:IirY and take it up with Mr. Vest, in which he would kb the whole currency and coin problem and urge the rilighte lI , t° turn in all gold coin and gold certificates it exce "avey and also all other coin and currency held in out Z181. °f current needs. The press statement would point into_. e need for conserving metal, paper and labor going a ti the minting of coin and the printing of currency at 41)07 when every effort should be made to conserve both arj rial in the defense effort; that a substantial Po two-thirds, of the materials needed for Nrea ng PaPr currency is imported from abroad; that the in obta,; -41graving and Printing is having great difficulty ' flIng personnel with adequate skill to produce the 1062 5/26/42 -19"large volumes of the various types of securities now needed by the Treasury and the increasing volume of paper currency needed to meet the demands of the public, and that in the circumstances the Treasury is asking the nne Board of Governors to authorize the Federal Reserve fmfanks to pay out the existing stocks of Federal Reserve an notes and Federal Reserve notes of the 1928 series." Noted with approval. Memorandum dated May 25, 1942, from Mr. Szymczak, reading as follows: st "Mr. Barnes, Assistant to the Treasurer of the United mi es, called on us a few days ago and stated that the ' et ltarY and civil authorities in Hawaii are anxious that laejs be taken to withdraw all paper currency now in circuha 34n in Hawaii and to replace it by currency which would ve distinct markings. The Treasury has considered the rggestion and proposes to over-print the word 'Hawaii' letters across the reverse side of the currency, thu. the word 'Hawaii' in bold face type at each end on face of the currency. Should any of the over-printed ej, of : :encY fall into the hands of the enemy, as a result menInvasion or otherwise, the problem of ultimate settlewould be less involved than would be the vi;lith regular currency. . It is proposed to print approximately 3,000,000 in wo_llver certificates and Mr. Barnes asked whether we b Reserve agreeable to printing 69,000,000 in 5 Federal te notes, t6 ,000,000 in P10 Federal Reserve notes and in :120 Federal Reserve notes of the Federal Re te.11,7 ve Bank of San Francisco for this purpose. V.e have arVd with Mr. Clerk of San Francisco on the telephone not ue concurs in the printing of the San Francisco Bank's pr4s for this purpose. The notes would be shipped to San at Government expenses. Presumably it will be lie cosi ssarY for the San Francisco Bank to pay the printing a sT, although an attempt will be made to have the Treasury 11r17, this cost also. Of formal action appears to be necessary on the part if the the Board with respect to the proposed printings, but obje e '°ard has any objection thereto the reasons for its cti-°ns should be promptly communicated to the Treasury. 1063 5/26/42 -20- R "A sample of a ?10 Federal Reserve note of the Federal ieserve Bank of San Francisco with the proposed over-print:ngs is now in my possession and I shall be glad to show it 0 interested members of the Board. a The military authorities in Hawaii are particularly eZxl-ous that this proposed exchange of currency be kept rIetlY confidential until the exchange is actually made." Noted without objection. Thereupon the meeting adjourned. Secretary. Chairman.
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