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1685 Minutes of actions taken by the Bw,rd. of Governors of the Pecierai Reserve System on Friday, November 22, 1946. PRESZ'IT: Mr. Eccles, Chairmen Draper 'Ir. Evans Mr. Er. Mr. Mr. A8 Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Chairman stated in the minutes of October 30, 1946, Mr. V;:rda.rian 114 abserit on officiLl business. -rams Teles to :Ix. ,Iiittemorc,, President of the Federal Reserve 1141k or .1! 80ston; Mr. Treiber, Secretary of the Federal Reserve Bank of 141"01'k; Mr. •slcCreedy, Secretary of the Federal Reserve Dank of ?litlacielPhia; Mr. Dillard, Vice President of the Federzl Reserve Bank or ag ; lir. Stewart, Secretary of the Federal Reserve Bank of Lotlia; Mr. Caldwell, Chairman of the Federal Reserve Bank of 411caa Ci tY; and Mr. Volberg, Vice President of the Federal Reserve knit. o fl F rL.neisco, stating that the Board ap)roves the establishChange by the Federal Reserve Bank of San Francisco on the? krici 19, the Federal Reserve Bank of St. LOUi3 oa November 20, eqeral Reserve Banks of New York, Philadelphia, Kansas City, 110qori Fraaciseo on November 21, and the Federal Reserve Banks of their Chicago today, of the rates of discount and purchase in eisting schedules. Approved unanimously. 168t " k2146 -2- lAemorandum dated November 21, 1946, from Mr. Smead, Director °t the n 4Jivis1on of Bank Operations, recommending that the following increases in the basic annual salaries of employees in that Division be a, vProved, effective December 1, 1946: ___Narne John *Hurley Margaret tluehlhaus N'ah L. uorothy Trott targaret erner C. k7 kin Griset uoris A, Chadik Jaziea P. Garrison 'Wooten Lialian F. Wopat Salary Increase To From Title “,275.00 .14,400.40 Statistical Analyst Secretary to Mr. 3,271.80 3,397.20 Van Fossen 3,271.80 Secretary to Er. Horbett 5,146.40 2,770.20 2,845.44 Clerk-Stenographer 2,770.20 2,694.96 Clerk-Stenographer 2,694.96 2,619.72 Clerk 2,619.72 Clerk 2,694.96 2,694.96 2,394.00 Accounting Clerk 2,394.00 2,469.24 Clerk Approved unanimously. aeaerve Letter to Mr. McCabe, Federal Reserve Agent of the Federal ank of Philadelphia, reaang as follows: Rill, "In accordance with the request contained in Mr. Gov -ert's letter of November 20, 1946,. the Board of pavThern°1's approves, effective November 1, 1946, the FeFent of salaries to the following members of the eral .i.eserve Agent's Staff at the rates indicated: t, __Naze Annual Salary Title -11.1 cod, Alt. Assistant Braker 3,089.13 F. R. Agent ,klargaret R. Newcomb Alt. Assistant 2,805.26 F. R. Agent j* ?rank R.ehfuss Alt. Assistant 6,985.00 F. R. Agent Richard G. 6,985.00" Agent F. R. Assistant Vvilgus Approved unanimously. 1_687 -3Letter to Mr. Berge, Secretary and Assistant Counsel of the FecierEl Res'crve Bacil, of Boston, reading as follows: "This refers to your letter of November 8, 1946, with further reference to the question whether section 32 Ot the Banking Act of 1933 is applicable to Messrs. Ayer, tItIllett and Rice, who are serving as directors of the f,lrst National Bank of Boston and as directors of Capital Atanagers, Inc. . c "Your letter and its enclosures indicated that General CPits1 Corporation, an investment company, with which 1:Pital Managers, Inc. has a contract and certain interprcking personnel (not including the above-named), is iteParing to offer a large number of its shares and that for that reason become engaged in the business described111 in section 32. However, there is nothing to itidicate that the relationship between the two corporaiS any different from what it was a year ago, and assumed from your letter and previous corresponde_r44e at you do not feel that the facts would justify erit " ,., eg,arcling the separate existence of the two corporate Boa -Les. Under the circumstances, the position of the une —h as stated in its letter of January 5, 1946, remains ' thi,alsd. In other words, the Board is not disposed at time to rzise objection to the interlocking relationfl cluestion, with the understanding that if there be any changes in the relationship of the two eon;°rations referred to or in their activities further lderation of the matter will be necessary." Approved unanimously. 11,14k or Letter -ver to Mr. Sheehan, Chief Examiner of the Federal Reserve New York, reading as follows: 1946 "Reference is made to your letter of November 15, TrIll submitting the application of The Continental Bank st Cc"Pany of New York for permission to create accePtAp, liability on drafts or bills of exchange to an otleZ' not exceeding at any one time in the aggregate ndred per centum of its capital stock and surplus. Otth.al,view of your recommendation, the Board of Governors tailk e rede ral Reserve System authorizes The Continental et Trust Company of New York, New York, New York, to "drafts or billsof exchange to an amount (141-Itch l 1688 4122/46 -4- amount shall include any draft3 or bills of exchange aceePted by other banks for its account) not exceediria. o a'f t any one time in the aggregate one hundred per centum Paid-up and unimpaired capital stock and surplus, Sub ti7JeCt to the provisions of the Federal tteserve Act and "e Board's Regulation C issued pursuant thereto. "Please advise the member bank of the Eorrd's action in the premises." Ap9roved unanimously. Telegram to Mr. Dawes, Vice President of the Federal Reserve of Chicago, readin as follows: "This refers to your letter of October 23 regarding cer+,. -u-In questions presented by the Chicago Stock Exchange -441er Regulation T. The first question is whether delivery and payment ier 4 section 4(f)(3) must be exactly simultaneous (such it 411 sight draft shipments), or ,hether it is sufficient in the v, Liroker-dealer customer, 'as promptly as practicable 0 , ' ecordance ,ith the ordinary usage of the trade', mails ..th ertise delivers to the creditor a check in settleints1.4" of the transaction, the check being accompanied by Th ' ructions for transfer or delivery of the security. 84J°ard is of the opinion that the latter method of the transaction is permissible. second question is, in effect, whether the a c ions of section 4(c)(8) apply to the account of etreUstomer who is himself a broker or dealer. The anace :is that the provision applies to any 'special cash untt, regardless of the type of customer. Chase 'Lie third question is, in effect, vthether a purj id a scle of m unissued security under section 4(f)(,a eacil" )) nacY be offset against each other, or whether to Tust be settled separately by what Lould amount % .ivery of the security to settle one transaction re-delivery to settle the other. The answer 1.5 agE4na ' it is permissible to offset the transactions deli _st each other without physical delivery and re'eY Of the security." Z Approved unanimously. 1_689 11/22/46 -5Letter to Mr. L. E. Shuck, L. E. Shuck Realty Co., 1101 iiirapa 11 at Olympic, Los Angeles 6, California, reading ES follows: A "This refers to your letter of October 17, 1946, adureSSeu to Chairman Eccles relative to margin requirements for security market credit. 'You state that, as a consequence of increased a,rgin requirements which became effective early in : 11 e Year, investors withdrew stocks which they had carryinr, with brokers and placed them with banks 78 collateral for loans and that subsequently, follow.the September market decline, the banks requested -8--,ational margin which if it were not forthcoming ree ited in forced liquidation of the loans. You indi: m s.t'e that investors whose loans were handled in this 1,, Iler are now unable to repurchase and for that ' re s°n You presumably urge this Board to consider e-Laxation of the present mnrgin rules. enf. "Mille the implications of your letter are not vli elY clear we assume that the stocks which were , -,ravIn from brokerage offices were securities which 111 e.owned 'free' and which were not being carried on 1-4 " /1 111- As we are certain you are aware, the Board's requirements are contained in two regulations egulation T and Regulation U. The former is apte c` ...tbley in general, to brokerage concerns, the letuo banks. In respect of credit extended for the 04 Pe e of Purchasing or carrying stocks registered national securities exchange the major requirepu L8 , contained in the tl,o regulations are identical. tiL- r, in accordance with the provisions of Regulaof-4 u a bank is not permitted to accept the transfer ccount from a broker without following the oe'rezents of that regulation governing the making tora an. For that reason it is clear that the cuscolcY type of 'margin account' carried by brokerage des;e ns could not be transferred in the manner you vioirlbe unless the provisions of Regulation U were bankated ' Again, as you are undoubtedly aware, a bor,maY rely on a written statement signed by the 17itil°1ver or by an officer of the bank in connection Proe 1°ans secured by stocks to the effect that the cnaXd8 of the loan are for purposes other than pursecu::g or carrying stocks registered on a national -lties exchange. Reports reaching us have led t n 1690 11/22/46 , -60 us to believe that fraudulent statements on the part otf obligor° do not constitute a serious problem. Cer,!jr4 our statistical studies do not indicate that 17 substantial volume of customers' debits carried by ?pkerage concerns prior to January 21 have been i quidated and absorbed by the lenks. v. "Therefore, it would appear that you are concerned 81-th an investor's ability to borrow against 'free' ieeurities for purposes other than purchasing or carrysecurities. This he may now do either at a hank or plf°11gh a brokerage concern subject to the epplicable -"isions of Regulation U and Regulation T, respectively. "Finaly, it would not appear that a restoration wo Targin trading for the purpose of security purchases pr14d help the situation ehich you describe. Had credit li°vicions been more liberal in this regard forced 8 quidation of holdings would have been much more eiderread. One of the basic purposes of the present margin inc111 4.irements has been to prevent excessive forced selling uhe event of a serious market decline." Approved unanimously. reacting Letter to the Presidents of all the Federal Reserve Banks, as follows: the "A Summary of Regulation V, Enforcement Reports for ftnth of October 1946 is enclosed. sto,"4011se-to-house peddlers, furniture stores, jewelry colt:es, clothing stores, and state-licensed small loan fbrip , anies continue to represent the areas in which encement problems have been most severe. the "It is likely that considerable trade reaction to lattrevised regulation will be manifested during the Beriker Part of November and it is suggested that the as illaY ihish to incorporate a summery of such reaction Part of their November reports." Approved unanimous Secretery. Chairman.
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