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1_644 A meeting of the Board of Governors of the Federal Rese rve System was held in Washington on Monday, November 24, 1941, at 12:30 P.m. PRESENT: Mr. Ransom, Vice Chairman Mr. McKee Mr. Draper Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters hereinafter referred to was taken by the Board: Memorandum dated November 17, 1941, from Mr. Smead, Chief of the Division of Bank Operations, recommending that, in connection with the e, 4 ' - -of-year call for cond ition reports, State member banks be recli ed to report their holdings of personal and retail instalment Paper in accordance with a proposed schedule attached to the memo randum, it being understood that the Comptroller of the Currency and the Federal-Deposit Insurance Corporation would call for slar data from nati°11a1 banks and insured nonm ember banks, respectively. The memorandum also recommended that the Division of Bank Operations be authorized to rnake any minor changes in the proposed schedule which might be agreed 11Pon by rep resen tatives of the Board, the Comptroller, and the Federal I3ePosit Insurance Corporation. or the Approved unanimously. Tel egram dated November 22, 1941, to Mr. West, Vice President p ederal Reserve Bank of San Francisco, reading as follows: 1645 11/24/41 -2- "Retel nineteenth Bank of Spanish Fork, Utah. Board vall interpose no objection to plan outli ned but advise bank that, after carrying value has been reduced to $15,000, depreciation must be continued at least at the maximum rate allowed for income tax purposes." Approved unanimously. Letter to Mr. Hitt, First Vice President of the Federal Reser ve Bank of St. Louis, reading as follows: "This refers to the application of 'The Southern Missouri Trust Company', Springfiel d, Missouri, for perto exercise fiduciary powers. "In view of the information submi tted by you, and in accordance with your recommendation, the Board of Governors of the Federal Reser ve System grants the applicant bank Permission under the provisions of its condition of membership numbered 1, to exerc ise the fiduciary powers authorized under its charter and the laws of the State f Missouri. The Board's approval is given subje ct to acceptance by the bank of the following standard conditions Prescribed in connection with the admission to membership of State banks exercising fiduciary powers: 1. Such bank shall not invest funds held by it as fiduciary in stock or obligation s of, or property acquired from, the bank or its directors, offic ers, or employees, or their interests, or in stock or obligations of, or property acquired from, affiliates of the bank. 2. Such bank, except as permitted in the case of national banks excer cising fiduciary Powers, shall not invest collectively funds held by the bank as fiduciary and shall keep the securities and investment s of each trust separate from those of all other trust s and separate also from the properties of the bank itself. 3. -If funds held by such bank as fiduciary are depos ited in its commercial or savings department or otherwise used in the conduct of its business, it shal depos l it with its trust department security in the same manner 1.64C 11/24/ 41 -3- "and to the same extent as is required of national banks exercising fiduciary powers. "You are requested to advise The Southern Missouri Tust Company, Springfield, Missouri, of the Board's acion and to obtain an appropriate resolution of the board 0! directors of the bank accepting the conditions listed aoove and forward a certified copy thereof to the Board." Approved unanimously. Letter to the Presidents of all of the Federal Reserve Banks, read;_ , - Lag as follows: "From the Board's point of view, the recent three-day SYstem conference on Regulation V; served a very useful pur13°8es In particular, the Board wishes to express its appreciati°fl of the opportunity afforded for members of the Board and its staff to become better acquainted with the men in atte ndance from the Reserve Banks and to obtain the views 01 the Reserve Banks on the various matters discussed. The a00perat1on of the Federal Reserve Bank representatives iacilitated the discussion of a long program of topics and r fer,!ulted in giving the Board and its staff much valuable in- mation and ' counsel. to someof these matters, such as the Statement of er the Statement of Necessity, you will have alfe'dY received by telegraph, or will soon receive, requests 11rther comment. A letter is now in preparation concernt ; e ata to be tabulated by the Reserve Banks from the regisai'40r1 statements. It is intended that System committees 3; sliZ-!I. soon be appointed on the following: enforcement; rebr,1°ns with national trade associations; participation of es; and the collection and organization of facts and etgle, s,. You will also be receiving shortly for comment sug,festions, developed in the light of the conference thocussi°n, fo2 Amendment No. 3 -- on which action before occl of December is contemplated. Were 'Among the suggestions made at the conference, there of l relating to the possibility of reconsideration the of th B°ard's interpretations of Regulation W in the light the d; exPerience and views of the Reserve Banks. Since pressscussion on this point may have left a confusing im" - )n, the Board wishes to state that it will continue r 1641 11/24/41 -4- "its present practice, consulting beforehand with one or more Reserve Banks when deemed necessary or appropriate, but that after any interpretation has been issued the Board uill amplify or modify the interpretation whenever good reason for doing so may appear. Consequently, criticisms and suggestions from the Reserve Banks will be in order at any time, either shortly after an interpretation has been issued or at any later time. They are in fact desired, and in case any given interpretation should turn cut to be wrong in any important particular the Board will not hesitate to correct it by issuing a subsequent interpretation. "It is contemplated that other System conferences on RegulationViwill be held from time to time, of which it is hoped that the next will be within sixty days or ninety days." Approved unanimously. Letter to Mr. Fry, Vice President of the Federal Reserve Bank of Rich 4m `" 1 °11(1, reading as follows: "Receipt is acknowledged of your letter of November 8 regarding a sample form of statement submitted by Congressman Bulwinkle. "You are correct in your understanding that the last !entence of our letter mentioned the bedroom suite merely as an example, and that any suite sold as a unit may be regarded as a single article." Approved unanimously. Letter to Mr. Stroud, First Vice President of the Federal Reserve -,, ofDaa.l as, reading as follows: "This will acknowledge receipt of your letter of November 12 hi , 1941, asking whether water pumps having ratings i;gner than those referred to in the Board's Ruling W-21 are included within the scope of RegulationW if such pumps :7 actually put to household use. The answer to this sstion is in the negative. The purpose of Ruling W-21 and others which made ' -- 1-ar distinctions was to make it possible for dealers, 1648 11/24/41 -5- "finance companies, and enforcement agencies to determine Whether a given article is or is not subject to the regulation by reference to the design without any necessity for tracing the article to its ultimate use. The technical descriptions of items designed for household use were chosen so as to include most of such articles used in homes and exclude larger types used for commercial, industrial, or agricu ltural purposes. This was an arbitrary rule of thumb considered necessary for ease in observation and administration of the regulation. "Your letter of November 12 also asked whether a windbr.1111 designed to pump water into a tank from which water 15 piped for household use would be included in the classification 'water pumps designed for household use'. It is ”sumed that this windmill pump would have not a capac ity larger than the sizes referred to in Ruling t-21. In ef;?ct) the windmill is equivalent to the elect ric or gaso. -ne engine which forms a part of motor operated systems. would seem that it would not make any difference that the Power comes from another source. Nevertheless, it is 1 cognized that there 7 may be some distinction to be made because of the fact that the pump itself is a relatively au-nor, porti on of the system. 4_ l would be appreciated if you would expre ulIt ss an opin: "aas to what course you think the Board shod follow, ' E'er such study and inves tigation as you deem appropriate." Approved unanimously. Letter dated Novem ber 22, 1941, to Mr. Theodore Feinstein, ExDirector of the National Supply Association of America, Inc., 1138toll ) Mas sachusetts, reading as follows: ecutVe ; tc)bA "This will acknowledge receipt of your letter of0cconf 29, 1941, in which you present certain information of—erning the effect of Regulation IV upon the business matY°1.1r membership , which deals in plumbing and heating 11be r"1" You have asked consideration of a possible th era lization of Regulation 17 to permit credit sales of tile rr t.materials with lower down payments and longer ma+4 „,,. on lee than are at present possible under the regula"There is no quest ion but what the raw materials gog into the produ cts in which your membership deals are 1649 11/441 -6- "critical materials the supply of which is insufficient to provide for both defense and civilian needs. Under such circumstances civilian needs cannot all be satisfied and it has been considered inevitable that the plumbing and heating industries will not be able to produce all of the articles which could be sold. This situation calls for measures to restrain demand in order to avoid a 'sellers' market'. One of these measures is control over instalment credit. "You have indicated that the Office of Production Uanagement is developing procedures which will have the effect of allocating certain amounts of the critical materials for use in producing plumbing and heating supplies and that 0.P.M. has stated there will be an adequate allocation for repairs, maintenance, remodelling and rehabilitation, %hen the Board you have additional information on this subject would be glad to have it made available to the Board's staff. At the same time it would be helpful if you Provided more specific statistics on the character and vol, 11111e of business in your field, the proportion financed by Instalment credit, and the distribution of the instalment contracts by sizes and maturities." Approved unanimously. Letter to Mr. R. B. Wood, President of the Adams County State Adams, tisconsin, reading as follows: "Your letter of October 25 to Secretary Morgenthau, 7.g Reation W, has been referred to the Board Governor and has received our careful consideration. ."It is certainly not the intent of the Board's Regatl°n1V to interfere with any bank's sound lending poi : rc. e and we regret that you feel it does so. The regulation diJ-at?s, vl course, only to instalment paper and this orIs not a large part of a bank's portfolio. Furnot all loans that are liquidated by partial 2rx:ient, are 1.ri subject to the regulation. On this point an 1,s/.*pretation of the regulation (w-107) adlng as has been issued, follows: An ordinary bank loan evidenced by a promis8°rY note repayable in full at maturity is not 1_650 11/24/41 -7-- subject to P.egulation IN, even though the bank may anticipate that at the maturity of the note it may accent a partial payment and a renewal note for the balance; provided the bank makes no comaitment to do so and the transaction is entered into in good faith and not as a means of avoiding or evading the Regulation.' "It is also to be pointed out that under Amendment 2 (Section 6(1) page 4) business loans are exempted from the regulation. A copy of the amendment is enclosed. "In the preparation of the regulation and of the amendments to it, the Board has taken pains to consult as fully as possible the representatives of the businesses affected flcl in particular it has availed itself of the help of the American Bankers Association. It is regretted that the reg. ation unavoidably imposes additional requirements upon banks as well as upon dealers and others who extend instalnt credit; and the Board and its staff are earnestly endeavoring to achieve greater simplicity in the regulation. Hike are sendi ng copies of your letter and of this reply tO al, j • . H. Dillard, Vice President of the Federal Reserve cf LI.On r Chicago, who is in charge of that Bank's administra01 ttegulationW in the distr ict in which your bank is located.” r Approved unanimously. Thereupon the meeting adjourned. Secretary. Appr oved: dif 4.4440144 Vice Chair man.
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