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1628 nutes of actions taken by the Board of Governors of the Peder l- Reserve System on Friday, November 15, 1946. in the Board Room at 10:35 a.m. PRESENT: Mr. Mr. Mr. Mr. The Board met Eccles, Chairman Ransom, Vice Chairman Draper Evans Mr. Mr. Mr. Mr. Mr. Mr. r. nr. Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Chairman Smead, Director of the Division of Bank Operations Parry, Director of the Division of Security Loans Vest, General Counsel Nelson, Director of the Division of Personnel Administration Young, Assistant Director of the Division of Research and Statistics Brown, Assistant Director of the Division of Security Loans Townsend, Assistant General Counsel Solomon, Assistant Counsel stted in the minutes of October 30, 1946, Mr. Vardaman ikat on official business. Townsend reported that the National Labor Relations Board Pecieral Res:: ::1::: Bank of cleterlkirle on election by employees of the to be held on November 26, 1946, to ether the union represented a majority of the employees. e'43 eaid he had telephoned the officers of the Bank and they were PreParations for the election. There 1011 was a b-ief discussion of toe steps to be taken in conL n the election, and it was understood that Chairman Eccles 1629 11/15/46 w°1114 talk with Mr. Parten, Chairman, or Mr. Gilbert, President of the D has Bank concerning the procedure that would be followed. There were presented telegraas to Mr. Treiber, Secretary of the Federal Reserve Bank of New York; 1.1r. Blair, Secretary of the Federal Reserve Bank of Cleveland; Mr. Leach, President of the Fed— el'al Reserve Bank of Richmond; Mr. MoLarin, President of the Federal Ile erve Bank of Atlanta; Mr. Dillard, Vice President of the Federal Reserv e Bank of Chicago; Mr. Stewart, Secretary of the Federal Re— serve B Of St. Louis; Mr. Ziemer, Vice President of the Federal Reserve Bank Reserve BEalk of Minneapolis; Yr. Gilbert, President of the Federal of Dallas; and Mr. Volberg, Vice President of the Fed— erea. R eserve Bank the eata,_is of San Francisco, stating that the Board approves °I hment without change by the Federal Reserve Bank of San 4a4lei8c0 on November 12, the Federal Reserve Bank of Atlanta on 14°1/Qprber -3, RiAmoria, and the Federal aeserve Banks of New York, Cleveland, Chicago, St. Louis, Minneapolis, and Dallas on November 14 '1946, of the rates of discount and purchase in their existing Approved unanimously. qth Mr 'Raasom stated that a revision of Regulation together Pecier l'aft of a press release and a statement to be placed in the Regiater, had been prepared for consideration at this meeting cordce with the discussion at the meeting on November 12, 1946. 11/15/46 -3Chairman Eccles stated that he had discussed the proposed re11- on with Mr. Steelman, Director of the Office of War Mobilization and Reconversion, who stated over the telephone yesterday afternoon that he would raise no objection to the Board going ahead with the l'elti8icri, and that he would send a letter to the Board to that effect. Chairman Eccles stated that in his conversations he had informed Mr. 4"14ah that the executive order under which Regulation 1; had been c°414 be rescinded by the President, butthat the Board felt i:t11°111(ibe desirable to continue the regulation until Congress had : 4 c1)13cTttlaitY to pass on the question whether the authority should " Pt°11ided by Permanent legislation, that a revision such as that c °r1terap1ated would greatly simplify the Regulation and would be an effective means of discharging the Board's responsibility under the eellti-lre order until Congress had considered the matter, and that lit, 8 : hill teelillan had indicated that this course mould be satisfactory to Chairman Eccles also said that he told Mr. Steelman that he think the Board would want to make an effort to have permanent 111a4 i°11 enacted, that if an opportunity were afforded the Board Preset o bjectively the reasons for and against continuing the 41riot a stabilizing force, that it would be for Congress to 1111 14 : : the decision, ;d /-i that he would like the President to give him 4°1'. to say to Representative Wolcott, Aho 17ould be the new lbô 11/15/46 -4Chairman of the House Banking and Currency Committee and who had se'i(ihe would ask for the termination of consumer credit reulFltion, that there was no need for Congress to take such action for the N.son that the executive order would be rescinded if Congress made It clear that it did not v,ant the authority continued. Parry stated that conversations which he had had vith " 11 staff inenlbers of iLr. Steelman's_ office confirmed the advice received fNillir• Steelman that he had no objection to the revision of the Regulation. In response to Mr. Ransom's re,luest that he explain the geswhieh would be made by the revision, Jr.T Parry read the tiart f th e 'Proposed press release vihich outlined the changes. aeferen _ ue was made to the fact that under the revision (1) 4° article hav.Lr. a. cash price of less than '„50 would be considered : .14ted article, ( the maximum maturity of instament credits for ihould be 15 months, and (3) the reciuirement that influents be not less than ,5 per month or C71.25 per week 111 ri° 1°flgor bc in the 2egulation. Chairlazzi Eccles, u.Luestioned ,,hether the maximum maturity on listed Lrticles such as radios, ironer, and suction 811°1110 be as lon tettt° as retain the reuiremeln: ether it ;:ould not be ::nths and whether minimum instalment pay- This 'Point was discussed and it was agreed that the provision e thruininitua instalment q 00 should be continued. payment of,. 1_632 11/15/46 -5for a 4r. Ransom asked what the disadvantage would be of providing maximum maturity of longer than 15 months for automobile 411c1 3,1r. ' arrY replied that if that were done the Regulation no longer 11°1114 have a uniform maximum maturity which was necessary for simplificlkon of the more complicated portions of the Regulation, but that it 14°41(1 be expected that in due course the maximum maturity for automo- bile credits would have to be extended, and that he felt that should be done w en 11 the maximum maturity for all listed articles could be Placed at 18 months. At this point, Mr. Ransom read a telegram received by him h4ercle•Y fram the American Finance Conference requesting immediate liberalization of the terms and down payments on motor vehicles and clther dllrable goods. There was a discusson of the statement contained in the clrin' tlal report for the year 1945 with respect to the enactment 't legislation eh authorizing the regulation of consumer credit, and d. .ccles stated that, while the report indicated that the iv°144 favor such legislation, it did not mean that the Board klitlq4lake a vigorous effort to have legislation enacted, but rather tIl t the matter should be fully considered by the Congress, at which 44 4 could be pointed out how fluctuations in the volume of con-Ilket' credit o utstanding may have adverse effects on the economic ti3.1'Ll.4y of the country, and that if provision were made for regu- : 1_633 11/15/46 latioh or -6- such credit it might be possible to limit the extent to vthich the economy was affected by such fluctuations. He also said that if the e Congress or the Banking and Currency committees were opPosed to 1 gislation, he did not think the Board should be in a posicif taking the other side, but should say only that it as felt that the matter should be studied and both sides of the question eareklaY considered. At Mr. Ransom's request, the Secretary read the draft of press .ateraent which was discussed and changed to read as follows: trp, has t Effective December 1, 1946, the Board of Governors taent °d-Y revised Regulation Vklby confining it to instalgood credit and centering it on purchases of major durable tol;:' If regulation in the field of consumer credit is tha— continued on a peacetime basis, the Board believes scot the regulation should in general be in the form and encP s, eOf i. this revision in order to be an effective influ;Zards stability in this sector of the economy. Au si.'"is regulation now rests on an Executive Order of acci.; 9) 1941, which is revocable by the President or by sholli; a °II Congress. The issue as to whether regulation ject ' or should not be continued in any form isa subby ii.°11 sharp controversy among various groups affected by The Board feels that the issue should be decided Pron,, Congress and that the present revision is an aptioW late means of bringing before the Congress the clueswi tlic'f whether the Executive Order should be vacated or by s er authority for such regulation should be continued lIcific legislation. toara In its Annual Report to Congress last June, the questirecommended that Congress give consideration to the be coh n of whether regulation of consumer credit should ,olltr-i ued on a peacetime basis as a subordinate but oilit : du corY factor in the maintenance of economic stae04 . 1 As the Report stated, 'Over the past 30 years Poztariter instalment financing has come to occupy an instrptegic TAJice in the national economy. 1634 11/15/46 —7— ' 11°/1 financing is essential to the mass distributioni and consequently to the mass production of consumers' durable goods. From time to time, however, the expansi°11 and subsequent contraction of consumer credit have gone so far as to accentuate the upswings and downsvlings of the business cycle. There is no way of preventing such excessive expansion and contraction except governriThtal regulation of the terms on which consumer credit suall be made available, such as the doihn payment reon instalment sales or financing and the length time permissible for instalment contracts.' fore "The regulation is now revised in the light of the 1,1 ,g°1ng considerations. Under this revision, the regl'i°n is focused on instalment credit, both instalment oils and instalment loans, including 12 major categories dol-rurable consumers' goods, which constitute the great bulk of credit subject to the widest expansion u. con traction. Charge accounts and single-payment ar : lis4 in Ithich fluctuations are comparatively small, reiminated from the scope of the regulation. The re n effects a substantial simplification of the tjrtlattan i s provisions and will make it administrae- more workable. This revision narrows the scone of the regulatio t° what the Board considers a minimum consistent ith are the exercise of a stabilizing influence in this the ' of the economy. In this form, the Board believes , , I egulation can be better understood and its merits ary defects better ap-)raised. then present inflationtionPressures tion have subsided, the terms of the regulaneed to be modified further. f he Principal changes made by the revision are i 1. The down list of consumers' durable goods to which on lYment and maturity rejuirements apply is reduced eoatt categories to 12, the remaining items including graph(pnbiIes, major household appliances, radios, phonofloor-$ sewing machines, furniture, and soft-surfaced ostill : °.1,rerings, but with an exemption for any article ' ess than ! , 50.00. Payr44: Restrictions on charge accounts and single3 :loans are eliminated. estab1i LA maximum maturity of 15 months is the , -sued for all new instalment credits), ;thether ari8e from sales or loans. 1635 11/15/46 -8"4. The provisions for refinancing, including c°nsolidations with new credits, are simplified, and efinancing have a maximum maturity of 15 months. credits may 5. Except for floor coverings which are transferret0 o the category calling for a 20 per cent down Payment, the items retained have the same down payment 7 Presently prescribed: 33-1/3 per cent for all articles other than furniture which is in the 20 per cent category. te, 6. Procedural rules are simplified in such matthe statement covering the transaction and the reat7ment obtained from the borrower. It is no longer t',A4red that a statement of the transaction be given uhe customer. with 7 8 ;hidinor changes reconcile the new provisions c requirements as are retained and certain tecb& sections are simplified. 8. The list of articles to which down payment ancl maturity • requirements apply is as follows: 33-1/3 Per cent down: Automobiles Refrigerators Cooking stoves and ranges Washing machines Ironers Dishwashers Air conditioners Radios ..nd phonographs Sewing machines Suction cleaners 20 Per cent down: Furniture Soft-surfaced floor coverings The text of the revised regulation is as follws:" Thereupon, on motion by Mr. Ransom and by unanimous vote, Regulation V was adopted in the following revised form to become effective on December 1, 1946, and the press statement was approved for release in the morning papers of Saturday, November 161 1946, it being understood that the press statement would be sent by wire to the 1636 11/15/46 -9Federal Reserve Banks this afternoon, that the text of the revised Regulation would be sent to them by airmail today, and that they would be asked to print the Regulation and distribute copies to interested persons in their respective districts: "REGULATION W "As revised effective December 1, 1946* "CONSUMER C,HDIT "SECTION 1. SCOP AND APPLICATION OF REGULATION 0,, "This regulation is issued by the Board of Governors 1 13 -1- the Federal Reserve System (hereinafter called the ocZardl) under authority of section 5(b) of the Act of daj ber 6, 1917, as amended, and Executive Order No. 8843, d AUgust 9, 1941 (hereinafter called the 'Executive 0rderl) who i"The regulation applies, in general, to any person stni : s engaged in the business of making extensions of inCredit in amounts of ;-1000 or less, or discountor Purchasing oblations arising out of such exten10 : of credit. It applies whether the person is a bank, eriga;!mPanY, or finance company, or a person who is so rnaiti e'in connection with any other business, such as by oth ' e g such extensions of credit as P. dealer, retailer, or dur... nn with the selling of consumers aoiPe e rson in connection goods. "SECTION 2. GENERAL REQUIREMENTS AND REGISTRATION \ bust ,\a) Peneral Requir.praents. - No person engaged in the , or e8s of .making instalment sale/ or instalment locns,2/ en-za „ ---t)e'-1 in the business of lending on the security of or !Lk feis revised regulation shall apply to transactions efheted on or after December 1, 1946, and the revision "1/IV- not affect any trnsaction prior to such date. in,8 to be noted that 'instalment sale' is defined to oi' 11de only instalment credit arising out of the sale ce article listed in the Supplement, hereinafter %'Bot ed a 'listed article'. t-'" ? instalment sale' and 'instalment loan' are defined o exclude credits in a rincipal;emount exceeding ;. 2,000. 1637 11/15/46 -10"discounting or purchasing obligations arisil.g out of such extensions of credit, shall make or receive any payment Itich constitutes or arises directly or indirectly out of ( a ) ,y; x such extension of credit made by him or out of any such _v-Ligation lent on or discounted or purchased by him, ex"elpt on the following conditions: (1) He must be licensed pursuant to this section (any -person so licensed being hereinafter called a 'Registrant'); and (2) The extension of credit made, renewed, revised or consolidated by him, or giving rise to the obligation discounted or purchased by him O1 acquired by him as collateral, must comply with the,applicable requirements of this regulation. who , .: 1) ) Registration and General License. - Any person lie-- license is not suspended under section 8(b) may become br„nsed by filing, with the Federal Reserve Bank or any thereof in the district in which the main office of the ob, egistrant is located, a registration statement on forms tamable from any Federal Reserve Bank or branch. henperson viho was not formerly subject to section 2(a) gell es subject thereto, such person is hereby granted a '-cal license for 60 days. "szCTION 3. INSTALMENT SALES: GENERAL RULES inst,Exceptas otherwise permitted by this regulation, each -rent sale shall comply with the following requirements: (a) lIsTalayment and Maturity - There shall al be a down 134Ale thnt not less than that specified for the listed article ther : SuPPlement, such down payment to be calculated as spejf sPecified; and the maturity shall not exceed that Cl for the listed article in the Supplement. Permi,;_ b) Amounts and Intervals of Instalments. - Except as arice by section 6(a) for seasonal incomes, the time brastant, .hi e a-L1 be payable in instalments which shall be (1) subequal in amount or so arranged that no instalment payaiis,enticlly greater than any preceding instalment, (2) racnth e at aPproximately equal intervals not exceeding one Week' and (3) not less than $5.00 per month or f1.25 per to th°n the aggregate instalment indebtedness of one debtor salue creditor. shaia."(c 13 ) Ltatement of Transaction. - The instalment sale ah e evidenced by a written instrument or record which set forth the information specified in section 6(c). 1638 11/15/46 -11"SECTIOh 4. INSTALhILNT LOANS: GNEFerli RULES "Except as otherwise permitted by this regulation, each instalment loan shall comply vdth the following reoillirements: if Instalment Loans to Purchase Listed Articles. ''he Registrant knows or has reason to kno, that the '" )ceeds of an instalment loan are to be used to purchase anY listed article: (1) The principal amount lent (excluding anY interest or finance charges and the cost of allY insurance) shall not exceed the maximum loan value specified for the article in the Supplement, such loan value to be calculated as therein specified; and (2) The maturity shall not exceed the maximum maturity specified for the listed article in the Supplement. "(b) Unclassified Instalment Loans - In the case of Ln Lent loan which is not subject to section 4(a), the maturity shall not exceed the maximum maturity spe'le therefor in the Supplement. valetl (c) Amounts and Intervals of Instalments; Record. went : 1, er subject to section 4(a) or section 4(b), the instaltne ' , °an, except as permitted by section 6(a) for seasonal zuCTes, shall be payable in instalments which shell be (1) ments'iaritially equal in amount or so arranged that no instalinst i8 substantially greater in amount than any preceding excea!flt, (2) payable at approximately equal intervals not or g one month, and (3) not less than ..5.D0 per month Of 0' 25 Per Week on the aggregate instalment indebtedness by ane debtor to the same creditor. It shall be evidenced terra written instrument or record which shall set forth the StiCt)r , PaYment. /flake ku).Statement of the Borrower. - No Registrant shall 11114:1Y instalment loan subject to section 4(a) or 4(b) rtient he shall have accepted in good faith a signed Statetate°f the Borrov:er as to the purposes of the loan. Such the : 1 11t shall state whahor or not any of the proceeds of ehaee-a are to be used to Lake a dom payment on the pur14teclo 'a listed article or to be used to purchase any urticle, and if any of the proceeds of the loan are ed for axlci iti-111 listed the latter purpose such Statement shell identiarticle and shall state the cash price thereof good e value of any trade-in. If a Registrant relies in fajt on Inent the facts set out by the obligor in such Statethe shall be deemed to be correct for the purposes of Re 1639 11/15/46 -12"(e) Loans to make Down Payments Prohibited. - A Registrant shall not make any instalment loan if he knows ?r,, has reason to know that any part of the proceeds there°I.is to be used to make a down payment on the purchase price of anY listed article. "SECTION 5. RENEIvALS, REVISIONS AND ADDITILNS in 4_Gencral Requirements. - In the case of an instalor en,'' sale or instalment loan which results from a renewal rest-evision of any such credit already outstanding, or which 1,711 from the combination of any such outstanding credit rle, ;- an additional extension of instalment credit, the rererise or consolidated thed obligation shall comply -4ext -iecluirements of this regulation as if it were awithr new elision of credit except that: (1) The requirements as to Statement of Borrower and down payment or maximum loan value, if anYy shall not apply to the outstanding credit already held by the Registrant; and (2) The reneed, revised or consolidated obligation may, in so far as the maturity and instalmeritreare concerned, be treated as if it were a new credit with the maximum maturity calculated from the date of the renewal, revision or cons olidation. The payments on such renewed, re-,visedy or consolidated obligation shall not be 'esci than 0.00 per month or 431.25 per week on tdhe aggregate instalment indebtedness of one liebtor to the same creditor. Ertl, (b) Satement t of Changed Conditions. - Notwithstanding ce;t7sz Provision of this regulation, if a Registrant acvicied good faith a Statement of Changed Conditions as prothe or r;Lio_t i that following paragraph, an extension of instalment refinances any outstanding obligation (whether self such obligation is held by the Registrant or is itin instalments) may have a maturity not exceedto 8„„ at sPeoified in the Supplement for refinancing pursuant ch S tatements, but such maturity shall be applicable refill:, the credit refinanced. The payments on the credit Per ,."ced need not be as large as $5.00 per month qeek. or n.`,25 "The r equirements of a Statement of Changed Conditions tith e complied with only if the Registrant accepts in good corit.2 written statement signed by the obligor that the ‘411Plated refinancing is necessary in order to avoid undue 1640 4/15/46 -13- "hardship upon the obligor or his dependents resulting from r ncies that were unforeseen by him at the time of ob; -."-Lng the original extension of credit or which y,ere beti° ,11d his control, INhich statement also sets forth briefly the principal facts and circumstances (1) with respect to s,eL°riginal extension of credit and (2) with respect to .tillen co ntingencies, and specifically states in addition r't the contemplated refinacg is not pursuant to a preliceived plan or an intention to evade or circumvent the quirnements of this regulation. (c) _Bor. ic Fide e Collection Effort; Servicemen's Pre"tlon Debt. - liothing in this regulation shz.11 be con: to prevont any Registrant from any reneal renewal re essvision, or taking any action that he shall deem neeti,!"1-7 in good faith (1) for the Registrant's own protecan u in connection with any obligation which is in default Rsu.is the subject of bona fide collection effort by the ple.t8trc-nt, or (2) with respect to any obligation of any or former member of the armed forces of the United States es incurTed prior to his induction into such service. a 4 "SEJCTION 6. CERTPIN TECHNICAL PROVISIONS lf 4.1_"(a) S ecial Pa dent Schedules for Seasonal Incomes. or ive income received by an obligor from the :azin sources to ma's income customarily fluctuates materially from month be; , °111th or from season to season, the payment schedule may Within the applicable maximum maturity, to such 17 flow of income, provided the With" obligation complies at least or the other of the following requirements: (1) hear-ast half of the credit is to be repaid within the fir:t re(111 °f the applicable maximum maturity; or (2) payments are Ye rel ! cl °r omitted in not more than 4 months of any calendar stIch are othemise in equal monthly amounts. In all Prese2 ! s s, a statement of the facts relied upon shall be -"eu in the it.gistrant's files for the life of the cbl.lgat:on. eEllculn(b ) Calculatin hia.ximura llaturit of Contract. - In instaia _'ing the maximum maturity of an instalment sale or date 4-ment loan, a Registrant may, at his option, use any of the more than 15 days subsequent to the actual date 0(sle or loan. lecord c).Record of ,(e) evldencing anInstalment Sale. - The instrument or instalment sale pursuant to section tion:shall set forth (in any order) the following informa- 1641 11/15/46 -14(1) A brief description identifying the article purchased; (2) The cash price of the article; (3) The amount of the purchaser's down Payment (i) in cash and (ii) in goods accepted in trade, together with a brief description identifying such goods and stating the monetary value assigned thereto in good faith; (4) The amount of any insurance premium for Ithich credit is extended and of any finance charges or interest by way of discount included in the principal amount of the obligation, or the sum of these auounts; (5) The time balance (3v,ed by the purchaser, lhhich is the sum of items (2) and (4) minus item (3); and The in t (6) The terms of payment. it or record need not include a descri.p--Lion of erlf tsh.e .artsirumcle it is purchased by means of a coupon book or pizi almlar medium of instalment credit upon which a cash down maucCent of at least one-third of its purchase value has been forrument or record need not include the informiitthi.04Thieedinst by items (2) and (4) if the Registrant is one inciquotes to the /public a time price for the article which suchucles the finance charge if any, provided he sets forth he nbt ,inle Price in such -instrument or record, and provided as Iv -' ' e-ins a cash down payment which is at least as large arti° e111 , d be reevired if the percentage specified for the ' Le in the Supplement were applicable to the tine price. it(d) at ext._ --F-uens Lon of Credit for Mixed Purposes. - In case this 'ns on of credit is partly subject to one section of anio,,, regulation and partly subject to another section, the at and terms of such extension of credit shall be such Parjuld result if the credit were divided into two or more case- and each Dart ;,ere treated as if it stood alone. In latioan eztensl on of credit is partly subject to this reguarld tari , and Partly not subject to the regulation, the amount resilbrrals of such extension of credit shall be such as would the if the credit were divided and the part subject to ProOlaation Were treated according to the applicable teglei tcn8 of the regulation; the part not subject to the it(,\ may be treated as if the regulat]on did not exist. or cr417) 4,z—awayi Plans. - With respect to any extension stall, it involving a bona fide 'lay-away' plan, or other °4 an-Il Plan by which a purchaser makes one or more payments article before receiving delivery thereof, the Regis- 1642 11/15/46 -15- flay, for the purposes of this regulation, treat t,he extension of credit as not having been made until the %.tate of the delivery of the article to the purchaser. "(f) Mail Orders. - An instalment sale shall not be deemed to be in violation of the down payment requirement section 3(a) if the sale is made upon the receipt of a : 41 1 11-1 order for one or more articles and the cash deposit ireived with the order fails by less than 1..00 to epal fo :8111n of the dom payments required by this regulation ' 611 of the articles included in the order. g) Deliveryin Anticipation of Instalment Sale. In Ca"(g) a, a listed article is delivered in anticipation of (; -Instalment sale of that article or a similar article t! d ch as a delivery 'on aoproval,"on trial!, or as a 1..,:monstrator'), the hegistrant shell require, at or be•I'aZ I the time of such delivery, z1 deposit eclual to the seleePayment that would be re,uired on such an instalment wilet "(h) „Sets and Groups of rticles. - In determining clet er an article is a 'listed article', the word larticoill shall be deemed to include any set, group or assembly eonllY considered, sold or used as a single unit, if the tiaiinent Parts thereof are sold or delivered at substanthe same time. compli i) Evasive Side Ar,reements. -No extension of credit ttne : i 8 Vath the regurement of this regulation if at the der8t "i8 made there is 'any agreement, arrangement, or unrevi;nding (1) by ihhich the obligation is to be renewed or ferre : c1 on terms which would permit final payment to be deerect.' beYend the date permitted by this regulation for such be elt-l t,at its inception, or (2) by which the obligor is to 0:et:IL:led to make repayment on conditions inconsistent in or (3)'Tsr respect with those required by this regulation, or ez ,L'Y which there is to be any evasion or circumvention, reolg concealment of any evasion or circumvention, of any -41of this regulation. Ivement \ Th,a1 ‘J) Side Loan to Make Dom Payment. - A Registrant the ,make an extension of instalment credit to finance to 14141rehase of my listed article if he knows or has reason teri5i° 0 ' 1 that there is, or that there is to be, any other exOf theni f credit of any kind in connection with the purchase credit -.-I-sted article which would bring the total amount of e, nded in connection with such purchase beyond the ot( -- Instalment credit permitted by this regulation; t/ erit if si„le Registrant accepts in good faith a written state-Lsts or -bb"ed by the e obligor that no such other extension exe0r, U-6 uo be made, "ct for / such statement shall be deemed to be the eurposes of the Registrant. 1643 11/15/46 —16— "(k) Purchase of Article in Lieu of Trade-in. - Any"_ 111g which the seller of a listed article buys, or arj r nges to have bought, from the purchaser at or about the e of the purchase of the listed article shell be.re' 6d•rded as a trade-in for the purposes of this regulation. 1) Misuse of Cou-oon Plans. - No coupon, ticket or medium of credit, rthether paid for in instalments h shall be accepted by any Eegistrant in payaet1t) in thole or in tart, for any listed article if such 2ce . ptance, in effect, would permit the article to be sold erms not complying with the re.;uirements of this regu4-alsl t.on. "SECTION 7. XI4PT CREDITS :3113t , 6 regulation shall not apply to any of the following: b -la) Business or A , ri cultural Loans. - Any loan for usiness Purposes to a business enterprise or for agriculturlon„ PurP°ses to a person engaged in agriculture, provided the — not for the e purpose of purchasing a listed article. teri;kb) Credit to -Dealers and Certain Salesmen. - Any exou, --1 3.°11- of credit to a wholesaler or retailer to finance the ;:chuase of any article for resale, or any e)ftens_on of credit e“ ; i8 Made to ;hlf. a bona fide salesman of automobiles in order prm •- ' ' 11 21ce the purchase of a new automobile to be used by him ' el t Pally as a demonstrator. tion T(c).Credit to Governmental Arencies fielicious Institu;Zt4-1. Any extension of credit to the Federal GovernState government, any political subdivison, or any ho'snTr .,.i.uillent, agency or establishment thereof, or to any church, , clinic, sanitarium, school, college, or other educational, charitable, or eleemosynary institution. Ustm,,\11) Credits Under Government Rehabilitation and ReadLarl,C;r1 u Pro rams. - Any extension of credit (1) made by the 001,,; -oank Commissioner on behalf of the Federal Farm Morti;age to' rc)ration or by any Federal land bank and found, pursurnt to m!qulations issued by the Conviscioner, to be necessary cortiraL ln .t in or increase production of essential agricultural 8traaUlties) (2) made or insured by the Farmers' Home AaminiSeer (3) made in a.ecord7tnce with the regulations of the hab4;i. a17 . of the Interior for the economic development or rel'ation—a'i°n of Indians, (4) made by the Disaster Loan CorpoPart(5) made, guaranteed or insured in vlole or in the 'Y. the Administrator of Veterans' Affairs pursuant to Act P of r();13-S10ns of Title III of the Servicemen's Readjustment leg4ia; : .1 914 0n 43 or by any State agency pursuant to similar State 1644 11/15/46 -17"(e) Loans to Pay Fire and Casualty Insurance Premiums. AnY loan to finance a nremium in excess of one year on a fire casualty insurance policy, if the loan is fully secured by (due unearned portion of such premium. "(f) Credit for Purchasing Securities. - Any extension ?If_ credit which is subject to the Board's regulations under the Sec urities Exchange Act of 1934 or which is otherwise for 4r Purpose of Purchasing or carryLn, , , stocks, bonds, or other 4-uvestment securities. tebn ,"(g) Real Estate and Home Imorovedtont Loans. - Any exi'i' of credit which is for the purpose of financing or I nelng (1) the constructim or ;mrchase of an entire al;luential building or other entire structure or (2) repairs, realratiens, ourban,imnrovements upon urn, suburban or rural to ,:Jroperty in connection 47th existing structures, except extent that such repairs, alterations, or improvements Porate any listed article. to ,"(h) Loans to Meet Medical Expenses, etc. - Any loan as inenvt`uich the Registrant accepts in good faith a written stateto 1;,signed by the borrower certifying that the proceeds are or I,- used for bona fide educat7onal,nrdical, hospital, dental, arid neral expenses, or to nay debts incurred for such expenses, for L4lat such proceeds (unless they are to be used exclusively educational expenses) are to be paid over in amounts specoco, d in auch statement to persons whose names, addresses, and sgPations are stated therein. 4anoe" ( .0 9 2.1.-aLLELtE_LI-21 1 . - Any extension of credit to acts a "e repair or replacement of property damaged or lost pede,4?sult of a flood or other similar disaster which the ocoll'al- Reserve Bank of the district in which the disaster tialrred finds has created an emergency affecting a substan811ch lirer,°f the inhabitants of the stricken area, provided 41ori-th e;i,--ens-Len is made prior to the end of the sixth calendar 4 atat ' °11ewing the ilionth in which the disaster occurred and R ,. ement describ 3 r, the damage or loss is pr3served in the e61 trant's "8CTION 8. liISCaLAIIOUS PROVISIONS; DEFINITIONS ft(aN istrar Preservation of Records; Inspections. - Every RegIlhich';hshall preserve, for the life of the obligation to papers ( 1 relate, such books of account, records, and other any statemeni,s re:luired by or obtained purthis regulation) ' lilleth are relevant to establihng4 -r or not an extension of credit within the scope of regulation was in conformity with the requirements 1645 11/15/46 -18- "thereof, provided, however, that the Registrant may pre--rye photogric reproductions in lieu of such books of account, records or papers. , 1 "For the purpose of determining whether or not there t tl'S been complibnce with the requirements of this regula1fl ( 2 31 every person required to be licensed under section bi)a) shall permit the Board or any Federal Reserve Bank 3itzs duly authorized representatives, to make such insoj e;'ions of his business operations as the Board or FedBank may deem necessary or appropriate, inteuding insoections of books of account, contracts, letsur ! e or other relevant papers wherever located, and, for th " Purpose, shall furnish such reports as the Board or soebFederal Reserve Bank may require. When ordered to do oatjthe Board, every such person shall furnish, under act ' :or otherwise, such information relative to any transm, 1°11 within the scope of the Executive Order as the Board 4. ' 7Y deem the necessary or anoropriate for such purpose, includduc oterPr°tion of books of account, contracts, letters papers in the custody or control of such person. Regist(b) Suspension of License./- The license of any for h rant may, after reasonable notice and opportunity or a earing, be suspended by the Board, in its entirety for s to Particular activities or particular offices or sPecified periods, on any of the following grounds: (1) Any material misstatPment or omission willfully or ne,:;ligently made in the registratton statement; (2) Any willful or negligent failure to Comply with any provision of this regulation or any requirement of the Board pursuant thereto. In addition, any Registrant who -dlfully violates ! r Knowingly participates in a violation of this :'egulation is subject to the penalties prescribed : 14 section t 50) of the Act of October 6, 1917, as ' J" 1 I'deci, which reds in part FS follows: 'Whoever vilfu olates any of the provisions of this r vision or of any license, order, rule, or t;Gulation is.ued thereunder, shall, upon convicc°11, be fined not more than a0,000, or, if a ltural Person, may be imprisoned for not more . oran ten years, or both; and any officer, director, pats-gent of any corporation who knowingly partLcifi'es in such violation may be puniched by a like imprisorunent, or both.' j 164E6 "/15/46 -19- , "A license which is suspended for a specified period 14i-L1 again become effective upon the expiration of such Period. A license which is suspended indefinitely may be restored by the Board, in its discretion, if the Board is satisfied that its restoration would not lead to further !iolations of this regulation and would not be otherwise Incompatible with the public interest. "(0 Enforceability of Contracts. - Except as may subsequently be otherwise provided, all provisions of this ,regtaation are designated, pursuant to section 2(d) of the (771It1ve Order, as being 'for administrative purosest the meaning of said section 2(d), which provides noncompliance with provisions of the regulation so 'slgnated shall not affect the right to enforce contr,.ctJ. thi "(d) Clerical Errors. - Any failure to comply withoasj!guln resulting from a mistake in determining, teh ting, or recording any price, down payment, or excon ' 1.04 of credit, or other similar matter, shall not be Re ,trued to be a violation of this regulation if the thrtrant establishes that such failure to comply was a „reault of excusable error and was not occasioned by 'Vllar course of dealing. tit \ Xriori 0) Non-Com liance Due to Facts Outside Rec-istrant's - The prohibitions of this regulation shall not with'° a Registrant with respect to any failure to comply crectit thie regulation in connection with (1) an extension of khow Macle by him if, at the time he made it, he did not exte r have reason to know any fact by reason of which such disc;:si°11 failed to comply; (2) an obligation purchased, ell: ss Inted or acquired as collateral by him if, when he pur4ter:lor discounted the obligation or acquired it as colt° the obligation did not show on its face any failure the fTlY and he did not know any fact by reason of which to o-^6ension of credit giving rise to the obligation failed 800131Y; or (3) an obligation renewed, revised, or conor c0 (ated by himi at the time when he renewed, revised aJrly r118°1idated it, he did not know or have reason to know 8 idn bY reason of which such renewal, revision or cono1 8:'lon failed the to comply. With respect to any loan El tensi:urit of an obligation which arises out of an exCredit subject to this regulation, the prohito 04 this regulation snail be deemed to apply only PaY14ell• Pa.,Irrnerits tsarisa_ng out of the obligation rather than to arising out of the loan. t 1647 11/15/46 -20- Transactions Outside United States. - Nothing in sl th' -ls regulation shall apply with respect to any exten:,:-°n Of credit made in Alaska, the Panama Canal Zone, or c-iq territory or possession outside the continental United States. "(g) Ri ht of Registrant to Im ose Stricter RecuireillentS Any Registrant has the right to refuse to extend or to extend less credit than the amount permitted by '".is regulation, or to require that repayment be made qth in a shorter period than the maximum permitted by this reg ti "(h) Definitions. - For the purposes of this regula-°n, unless the context otherwise requires: (1) 'Person' means an individual, partnershiP, association, or corporation. (2) 'degistrant' moans a person who is licensed pursuant to section 2(b). (3) 'Extension of Credit' has the meaning given it in the Executive Order..4/ (4) 'Instalment Credit' means an extension °I' credit which the obligor undertakes to repay in tv;0 or more scheduled payments or as to which the obligor undertakes to make two or more scheduled payments or deposits usable to lietuidate the credit, or which has a similar puroose or effect. tI T he pertinent part of the Executive Order reads as fol'Extension of credit' means any loan or mortgage; `;'Y instalment purchase contract, any conditional sales , °11trc,ct, or any sale or contrect of sale under which li-t14!t or all of the price is payable subsequent to the ca'lng of such sale or contract; any rental-purchase ortract, or eny contract for the bailment or leasing „ Property under which the bailee or lessee either has ' il?e option of becoming the owner thereof or obligates at sclf to pay as compensation a sum substLntiolly equivorent to or in excess of the value thereof; any contract St:any lien or siiilar claim or property to be ed by the payment of money; any purchase, disor other acquisition of, or any extension of ar?(It upon the security of, eny obligatL)n or claim zi.c Ing out of any of the foregoing; and any trans"Lon or series of transactions having a similar PrPoe or effect. 1648 11/15/46 -21(5) 'InctaLyamt Sale' mer-''..ns an instalment credit in a principal amount of k,,21000 or less 'ihich is made as principal, az. nt or broker, by any seller of any consumers' durable good listed in the SupplJment to this regulation (herein called a 'listed article') and which arises out of a sale of such listed article. For this purpose, 'sale' includes a lease, bailment, or other transaction -Ahlch is similar in purpose or effect to a sale. (6) 'Instalment Loan' means an instalment credit, other than an instalment sale, in the form of a loan which is in a principal amount ; . 2,000 or less; but the definition does not include any loan upon the security of any obligation which arises out of any instalment sale or instalment loan. (7) 'Cash Price' means the bona fide cash Purchase price of an article, including the b(xla fide cash /wrchase price of any accessories, 130/1 fide delivery, installation and service cuarges (other than interest, finance or insurance charges), and any applicable sales taxes. "SUPPLEALNT TO LEGULATION "Effective December 1, 1946 Lo 1. Listed Articles, Maturities, Down Payments, - For the purposes of aegulation T;,, the follovi,ng folte-", vihether new or used, are 'listed articles', and the ktra r-ng maximum maturities, reuired down payments and m.xiirea,, °an waues are prescribed (such down payments and loan Sup;,r to be calculated as specified in Parts 4 and 5 of this O'n(Tnent); but no article having a cash price of less than shall be considered a listed article: Gr. 1 months maximum maturity, 33-1/3 per cent minimum /per /2 cent maximum loan value: 1. Automobiles (passenger cars designed for the Purpose of transporting less than 10 passengers, including taxicabs). G1 , 0 B_ 15 months maximum maturity, 3:=-1/3 per cent minimum nent 66-2/ -)er cent maximum loan value: 1_649 11/15/46 Cookinc: stoves and ranges, designed for household use. <• Dishwashers, mechanical, desizned for household use. 3. Ironers designed for household use. 4. Refrigerators, mechanical, of less than 12 cubic feet rated stor,ge capacity (including food freezers). 5.ashing machines designed for household use. 6. Combination units incorporting any listed article in the foregoing classifications , of this Group B. 7. Air conditioners, room unit. 8. Radio receiving sets, phonographs, or combinations. 9. Sevang machines designed for household use. 10. Suction cleaners designed for household use. Gro-Lin c -1 down ls 20 Der cent minimum months maximum maturit 80 per cent maximum loan value: Furniture, household, (including ice refrigerators, bed springs, mattresses and lamps); and floor coverings, soft surface. n Part 2. Unclassified Inst3lAient Loans. - The maximum it be 15 Y of any instalment loan subject to section 4(b) shall months. 5(10 RefinancinK Pursuant to Statement of Changed - The maximum maturity or any refinancing pursuant atement of Changed Conditions as specified in section shall be 18 months. _ Iri th tip -404LittCalculation of Down Payments for Automobiles. maxi : case of new automobile, the required down payment and , /,11 11 11°an v me shall be the specified percentage of the of-c ; and such down payment may be obtained in the form ;',L41 ! trade-in, or both. exce 4.,Lie same rule shall apply in the case of a used automobile, be that after January 1, 1947, the maximum loan value shall specified percentage of the cash price or of the tappraist, alichever is lo,er, and the re uired do= payment Ft-ii& difference between the cash price and the maximum "alue as so calculated. w1e APPraisal guide value' means the estimated average retail as stated in such edition of any regularly published to- the 1..I.,,,. l6tiO 11/15/46 -23- mobile appraisal guide as the Board may designate for this Pur?ose for use in the territory in which such used autobile is sold, plus any applicable sales taxes. Information ms to the guide or guides designated for any given territory may be obtained from any Federal Reserve Bank or branch. r . Calculation of Down Payments for Articles in Gelrl°11° B or Group C. - If any article is traded in by the pur, ser on an article listed in Group B or Group CI the rerired down payment and the maximum loan value shall be the elfied percentage of the net price of the article after t;":teting from the cash rice the amount allowed for the . aaytT7in; and such down payment shall be obtained in cash In lon to the trade-in." X In connection with the above action, unanimous approval was also given to the follovring statement for publication in the Federal Register in accordance with the provisions of the Administrative Procedure Act: STATEMENT FOR FEDERAL REGISTER "lth respect to all transactions effected on or after December 1946, Regulation W is hereby amended to read as tomows /Ieg1.1111) This amendment to Regulation like the original is issued by the Board of Governors of the Federal Oct i3v e SYstem under authority of section 5(b) of the Act of er 6, 1917, as amended (40 Stat. 415; 12 U.S.C. 95a), and 11-V/re Order io.8343, dated August 9, 1941. aoimi .The Purpose of the amendment is to make the regulation stabli tmtively more workable without materially weakening its rew7-'zing and anti-inflationary effects. The regulation as Ord;ed is intended to carry out the purposes of the Executive aittl:jn the light of present conditions and the general credit of the country. 4(e) 13) The notice and public procedure described in sections 1 4(b) ( iay of the Administrative Procedure Act, and the thirty pr'e:'°r Publication described in section 4(c) of such Act, are t4 coleicable, unnecessary and contrary to the public interest good Zection with this amendment for the following reasons and reqr.r1 , 1se found: (1) the amendment is essentially one that eases --e'i°ns of the regulation, (2) for the reasons stated in 1631 11/15/46 -2411— .ection 2(e) of the Rules of Procedure of the Board of j G iferllors of the Federal Reserve System, a large part of , subject-matter of the amendment is not adapted to ns"eucn procedure or nrior Tmblication, and (3) any changes ,13t by (1) or(2), or both, are minor amendments a technicl character." Messrs. Thurston, Parry, Brown, and Solomon left the meet• atthls Point. Reference was then made to a memorandum from the Division °r Personnel stration dated October 161 1946, recommending for thereasons Admini stted In the memorandum that Dorothy N. Rogers and Ida 14' 8each be Paid 00 18 and ra(311et i value $168.46, respectively, representing the of the annual leave standing to their credit at the of their resignations from the Board, that these amounts be ehat'ged to the Miscellaneous Account of the budget of the Division orAdillinistrative Services, Building Functions, and that the budget be E-, ccordinkay. Approved unanimously. 4t". Evans presented a draft of a lettc-,. to 1r. Grady, Chair°I' the Federal. Reserve Brik of San Francisco, which would state, ie131Y to hi „ letter of November 7, 1946, that the Board approved the '13Poiritr11ent of H. N. Mangels as First Vice President of the 114k of increased sr laries to Liessrs. Slade, Leisner, 11°Ibel'g 'artj SYThrns e.• recomiended by the Board of Directors of the EOnk. 141r. Evans suggested that, inasmuch as Mr. Grady would be in Washington next week when the matter could be discussed with him, no action be 1652 11/15/46 -25taken by the Board until Chairman Eccles had talked with Mr. Grady, after Which the matter would be presented to the Board again. Mr. Evans' suggestion was ap— proved unanimously. &Tans brought to the attention of the Board a copy of letter written on his on initiative by Mr. Bailey, Vice President 14 charge of the Little Rock Branch of the Federal Reserve Bank of 8t. Louis, under date of vembel- 8, 1946, to Lir. Brasfield, LsEist— axid Treasurer of the Commodity Credit Corporation, making a vigorous re,-,Ilest that the Corporation rescind a directive which it had issued tr-4h.sferring the Little Rock lon activities of the Corporation to W'elliPhis, Ten nessec Mr. Evans stated that IL-. Brasfield had tele— .11°11e(1111.. 8 mead and called his attention to the letter, stating the apparehtly at the Little Rock Branch had also inspired 60111'3°11(3 of a telegran, by senator McClellan to the President of Credit Corporation protesting the transfer. He also that Smead telephoned the Federal Reserve Bank of :2t. Louis ri the absence of Messrs. Davis and Hitt, President and First Ill'eePl'ezideht, he had discussed the matter with Ir. /Jetebary, Vice subsequently sent a telegram to Mr. Bailey asking that the 13zsirich to St. Louis copies of all correspondence originating .ith or or -1. 4J-Ispired by it having to do with the proposed trmsfer `-ctivities of the Colaodity Credit Corporation to the xu,"C';.3 11/15/46 -26- Melthis Branch. The wire also suggested no further activity by the Bre/Ich in this connection. All members of the Board present agreed that Mr. Bailey's action was improper, and the staff was re(luested to prepare for considerat'on a draft of letter to the Federal i:eserve Bank of St. Louis setting forth the Board's views on the matter. Censiderat'on was also given to a memorandum dated Novell-03er 14'1946) from the Division of Personnel Administration stetinF that the ileserve Board Club planned to hold the annual Club Christmas Party °11 Decelliber 19 between the hours of 5:15 and 8:15 p.m., provided the teciiitiee of the cafeteria were made available for the use of Club 11141bers for dancing and serving refreskeeents. The memorandum recomletIcteci (1) that the Reserve Board Club be permitted to hold its an11141 Chl'iatmas Party as planned, (2) that the Board authorize the of a Christmas dinner without charge to the employees of the '444'cll Staff end to the few employees of other Government agencies ee 8till occunying space in the building, the serving of the t° be scheduled for a date just prior to Christmas and during Pertod that would be convenient to the Division of Administrative vices 'and (3) that the Division of Personnel Administration 4140 led to appoint a committee of employees of the Board's qart) e "'4ed by a chairman, to arrange to he.ve community singing on t,y0 d'YC, lickr.cli 6 i'rior to Christmas and that all employees of the st ff be invited to take part. Qr 01, 1654 —27— The Board unanimously agreed to approve the first and the third recommendations. For reasons con— sidered during a discuss.on, it was also agreed that the second recom— mendat'.on should not be af:'proved. At this point Messrs. bmead, Vest, Nelson, Young, and T°/\118erlidzithdrew from the meeting - nd the action stated with r4Pect to each of the matters hereinafter set forth was then takeli by the Board: 14inutes of actions taken by the Board of Governors of the Pederai Reserve System on NovJmber 14, 1946, ;el.e apr,roved unanimously. Meal°randum dated Nov:mber 13, 1946, from Mr. Vest, General (31111e.13 recommending that an increase in the basic annual salary °t.41wa.licl Hergett, a messenger in the Legal Divis'on, from ;2,1 .0.40 to 12168•28 be approved, effective November 17, 1946. Approved unanimously. Letter ot elev. , ed.arirl to 0 Lir. Mr. Gidney, President of the Federal Reserve Bank reading as follows: Stl, "The Board of Governors approves the payment of Rj sgrY tO 14r. C. F. Ehninger as Auditor of the Federal 19Pe BP'nk of Cleveland for the period November 1, Per :hrcugh April 30, 1947, at the rate of i',7,(100 ' Oct01-3 11m, which is the rate stated in your letter of at ro : r 10, 1946, and fixed by the Board of Directors ' - °Istod in your telegram of November 14, 1946." Lpproved unanimously. tette ot r to Mr. McLarin, President of the Federal Re:.:erve Bank Ataallta reA: clu-Lrig as follows: 1655 11/15/46 "This refers to your letter of October 31) 1946). Plementing your letter of October 10, 1946, regarding results of the general review made by your bank of eases in 14hich member banks in your district have ern granted authority to accept drafts or bills of exctriEe up to 100 per cent of their capital and surplus authority to accept drafts or bills drawn to furnish exchnge. " In etter, accordance with the recommendation made in your the Board has today rescinded the authority of of member banks named below to accept drafts and bills pl,!xchauge up to 100 per cent of their capital and sur', such rescission to become effective March 1, 1947: The Henderson National Bank of Huntsville, Huntsville, Alabama The First National Bank of Montgo.dery, Montgomery, Alabama National American Bank of New Orleans, New Orleans, Louisiana The Merchants National Bank and Trust Company of Vicksburg, Vicksburg, Mississippi The Hamilton National Bank of Chattanooga, Chattanooga, Tennessee thes„"The b re are enclosed letters addressed by the Board to preei4.anks with respect to this matter; and it Will be apffes e, ' a ecl if you will promptly transmit them to the banks or For your records, there is ,,lco enclosed a copy ch such letter." r il.pproved unanimously. Letter to . °oil ey, Vice President and C:, - shier of the Re ' erve Bank of KansEs City, reading as follo-As: viatn"This refers to your letter of October 30/ 1946,'d8 /1k of the results of the general made by your ', r e all cases in which member banks in your district e chan, , -en grantee authority to acceipt drafts or bills of or awe uP to 100 Der cent of their capital and surplus Y to Accent drafts or bills dram to furnish "Lel ' it exchi, inZe• lette ' accordance -71th the recommendation made in your ' Is Board has today rescinded the authority of 16561 11/15/46 —29— "the member banks named belov to accept drafts and bills of exchange up to 100 Der cent of their canitd and surPlus, such resciss'Lon to become effective March 1, 1947: The First National Bank of St. Joseph, St. Joseph, Missouri The First National Bank of Hutchinson, Hutchinson, Kms-s The First National Bank of Kansas city/ , Kansas City, Missouri Commerce Trust Company, Kansas City, Missouri The Lav,,rc,nce National Bank, Lawrence, Kansas The Denver National B-nk, Denver, Colorado The First National Bank and Trust Company of Oklahoma City, Oklahoma City, Oklahoma H are enclosed letters addressed by the Board to nr-s? IDLIaks with resoect to this matter; and it will be apf eelated if you wili promptly transmit them to the ect0d. For your records, there is also enclosed baa nksof copy eEch such letter." Approved unanimously. Thereupon the meeting adjo / Secretary.
@FedFRASER