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659 A meeting of the Board of Governors of the Federal Reserve SYsterG Was held in Washington on Tuesday, May 4, 1943, at 11:00 a. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak McKee Draper Evans MT. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chailman The action stated with respect to each of the matters hereinatter r eferred to was taken by the Board: Federal The minutes of the meeting of the Board of Governors of the Reserve System held on May 3, 1943, were approved unanimously. Letter to the Presidents of all the Federal Reserve Banks, rez*'Lug as follows: . "Recently a question arose as to that contracts should included in determining adjustments ,under Section 6 of tie guarantee agreement. In order to avoid similEr ,:luesc 011s in the future and the necessity for the General AcIting Office to examine into the correctness of the data used in such calculations, the Tar Department,. ifirYkDePartment, and Maritime Commission will appreciate it tk4, -efOre any computations are mEee in connection with Alto ' adjustments under Section 5 or Section 6 of the old gula °f guarantee agreement, you will endeavor to have the entee par; areement amended by the insertion therein of cr aph (C) of Section 19 of the form of ,marantee agre-men in -i:,'ated April 6) 1943, changing the worth, 'Section 6(A)' "e paragraph to read 'Section 6'. Your c000eration in this respect All be appreciated." be 4 Approved unanimously. Mem— l'oandum dated May 4, 1943, addressed to the Tar Loans Cornrtiltteeb r, Smead, Acting Administrator for the Committee, referring 660 5/4/43 -2tO ti,e ' uelegram which was sent to the Presidents of all the Federal Reanks under date of Eay 1, 1943, with resrect to the proposal that ;4, 4". a financin- institution charged a borrower a commitment fee in c°1-Inec4-ion rith a loan guaranteed -ursuant to Executive Order No. 9112 of Llarch 26, 1942, the amount of such fee should not exceed 1/4 of 1 Per cent Per annum on the undisbursed portion of the loan, and also that n° termin-tion fee, service fee, or other fee of a similar character 'exce )t charges coverinc, out-of-oocket expmses of a financing institution, mitt be charged a borrower in connection with such a --liaranteed loan. The me orandu,n, after stFtin - that all of the Reserve ilanks e::cept Boston favored the proposal, reviewed the comments ma, e bY the Bank s in connection with it and suggested that the following 917°P°sed teleE,ram to the Presidents of all the Federal Reserve Banks be slIbmitted to the ':inr Department, Navy Department, and Maritime Confor rtlake: their approval or such suggestions they slight Nish to "Refe . merit rrinU our wire May 1, after consulting with War De'paANavY Department, Maritime Commission and Federal ReBank Board has decided that in any case in which a innallein institution charges a borrower a commitment fee ecj?nnection with a loan that is ,liaranteed f,ursuant to nix:ve °rder 9112, amount of such fee may not exceed 1/4 of 1 i)e th:tt* cent Per annum on undisbursed portion of loan; also ler no termination fee, service fee, or other fee of a simiof character, except charges coverins , out-of-rocket expenses r14.11mncing institution, may be charged a borrower in conthatl°n with such a ,Luaranteed loan. As experience shows case commitment fees are charged only in a relatively few .1,14-:?, Board is not issuing a press release in this matter ;p1)its transmittinv it to you for your -uidance in handling lcations for Regulation V lo-ans." Approved unanimously, with the understanding that if approved bf the services the wire would be sent oromptly to the Federr] Reserve Hanks. G61 5/4/43 Memorandum dated April 28, 1943, from Mr. Parry, Chief of the Division of Security Loans, and Mr. Thomas, Assistant Director of the Division of Research and Statistics, reading es follows: "Over the past few months we have received a number of letters and some verbal calments from industrial bankers ex— Pressing the view that the figures on consumer credit of in— ' 4.411 ,8trial banks, the collection of which was taken over by .11e Board from the Department of Commerce, do not reflect ?°rrectly the changes in consumer instalment credit at their flst itutions. It is contended that the fiL-ures reported are not r estricted wholly to consumer credit but include other Ills, so that the large decline in the instalment part is obscured by smaller declines or actual increases in the ,,re71nder. For this reason the effect of regulatory policy r outstanding credit is not accurately reflected in the Several exhibits supporting this point are at— ., tached1.4 "Representatives of the two trade associations in the e-Leld have for some time urged a change in the reporting g:" t I em* Mr. Richard Stout, President of the Morris Plan Bankers, Association and Mr. Myron Bone, Executive Secre— lirY of the American Industrial Bankers Association both be— th: "the figures are inadequate and have said informally irwill support a revision of reporting practices theY the members." he specific objections raised to the present series qet.not wholly justified, but the industrial bankers are fr!"t in asserting that the existing figures taken over teuji.the Department of Commerce are, in some respects, de— Figures reuorted by individual respondents do not staM in a great many instances with the consumer credit out— of sho-im on condition reports or registration statements ca '"ese firms, and they also show random variations which a T-1°t be explained. Furthermore, retorts re collected heerger number of respondents than would be necessary, if fro:t ,Ilrrent reporting basis were sound and dependable' ren Although mindful of the responsibility not to make the of statistics any more burdensome in times such qui as'i"lese, and of the public criticism that stntistical in— series are likely to arouse, we believe that the present should be amended so as to correct the faults men— prZi,above. We recommend, therefore, that the Board ap— Bai":; tthe plan outlined in the attached memorandum from :Ass andr;' and Mr. Robinson, including the a:tached table forms sub,'etters, and authorize the staff to out it into effect, dect t0 such minor revisions as may prove to be desirable. 662 5/4/43 -4"AnY substantial changes from the basic plan outlined here, leveloping for unanticipated reasons, will be referred to the Bonrd for further action." Approved unanimously, together with the following letter to the Presidents of all the Federal Reserve Banks: c reliability of our current figures on consumer credit of industrial banking companies has been questioned recent months by respondents and by officers of the trade de-s?ciations to which many belong. When the consumer credit was first transferred, several Reserve Banks found tieiries 1.. at industrial banks were reporting incorrectly, but it had vsen decided to continue the series taken over from the DeOf Commerce without change until the need forrea 81°11 was clearly evident. On the basis of our experience i the information furnished by respondents, we are reasonvi Y certain that such need has now been established. The rep ls supported by the heads of the two trade associations r7senting these institutions." co„ In view of this, a plan has been worked up covering the fo-Llection of current figures and provision of back figures comparative purposes. The reasons for the change and the 4: Proposed forms are shown in the enclosed staff memoranbest; .1% should appreciate having your comments on the plan be. 1 ln general and in detail. Since this proposal is also sent to the trade associations for comment you are at ertY to consult industrial bankers or others who might have or i elPful ideas. We shouldrrefer, of course, that notice '7' 4 8 proposal not get into the press as yet." dre Future correspondence on this subject should be adtose Woodliei Thomas, Division of Research and Statistics." Z Unanimous a: proval was also given to letters to Mr. Richard H. Stout, President of the Morris Plan Bankers Association, Washington, D. C., and to Mr. Myron R. Bone, Executive Secretary of the American Industrial Bankers Association, Fort Wayne, Indiana, enclosing copies of the memorandum prepared by Miss Baird and Mr. Robinson and requesting any observations they might make about the practicability of the plan as proposed. 663 /4/43 -5Letter to the Comptroller of the Currency, reading as follows: wit 7t is respectfully requested that you place an order theh the Bureau of Engraving and Printing, supplementing order of June 17, 1942, for printing of $24,000,000 of !ederal Reserve notes of the 1934 Series for the Federal Reserve Bank of Atlanta in the ''20 denomination." Approved unanimously. Thereupon the meeting adjourned. aadk-a,117) OAAA-ALOO Secretary. Chairman.
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