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1659 A meeting of the Board of Governors of the Federal Reserve $liatein was held in Washington on Friday, November 28, 1941, at 11:30 PRESENT: Mr. Eccles, Chairman Mr. Ransom, Vice Chairman 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: Telegrams to Mr. Young, President of the Federal Reserve Bank or Boston, Mr. Sanford, Secretary of the Federal Reserve Bank of New Y°rk3 111% Leach, President of the Federal Reserve Bank of Richmond, 14'e Bowman, Assistant Vice President of the Federal Reserve Bank of Atia'llta, Messrs. Dillard and Stewart, Secretaries of the Federal Re"I've Banks of Chicao.o and St. Louis, respectively, Mr. Ziemer, Vice Pr'esident of the Federal Reserve Bank of Minneapolis, Mr. Caldwell, Chat rman of the Federal Reserve Bank of Kansas City, Mr. Stroud, First Vice Pr esident of the Federal Reserve Bank of Dallas, and Mr. Hale, Secretaryof the Federal Reserve Bank of San Francisco, stating that the Board approves the establishment without change by the Federal Re"I've tanks of Kansas City and San Francisco on November 25, by the Pederal Reserve Banks of New York, Richmond, St. Louis, and Minneapolis Or November 27, 1941, and by the Federal Reserve Banks of Boston, At4Ilta.3 Chicago, and Dallas today, of the rates of discount and purchase 1660 11/28/41 -2- in their existing schedules. Approved unanimously. Memorandum dated November 27, 1941, from Mr. Nelson, Assistant Secretary, ernor recommending that Yrs. Lucy F. Hummer, stenographer in Gov- Draper's office, be granted leave of absence without pay for a Period of three months beginning January 1, 1942, with the understanding that during such period of leave she will continue to make her own contributions to the Retirement System and that the Board will continue its cont ributions on her behalf. Approved unanimously. Memorandum dated November 26, 1941, from Mr. Goldenweiser, Director of the Division of Research and Statistics, recommending that " sent be given by the Board to the examination and certification by the Civil Service Commission of Miss Mlellyn Morelle, a clerk in that DI ' Irlsic)n, for the position of junior professional assistant, administrat ve technician option. Approved unanimously. Letter to Mr. Gidney, Vice President of the Federal Reserve 13ank of New York, reading as follows: 11A 22, , 2tck nowledgment is made of your letter of November 1941,941) enclosing a copy of a letter dated November 21, xati from Mr. John J. Roe, Vice President of The First vit;:°nal Bank of North Bergen, North Bergen, New Jersey, r eference to the pending or application of that bank fiduc' lary powers. 1661 11/28/41 -3- "In view of Mr. Roe's statement that he had not been able to conclude arrangements for properly setting up a trust department, and that he would prefer for the present to withhold taking further action on their application, the Board will consider the application as having been withdrawn and will close its file on the case. "The bank may, of course, again take up the matter of obtaining fiduciary powers at a later date, without prejudice, but it would be expected to file a new application for that purpose. "Please advise Mr. Roe in accordance with the foregoing.n Approved unanimously. Letter dated November 27, 1941, to the Presidents of all of the Ped e-val Reserve Banks, reading as follows: "In addition to communications from the Federal Ret .s?rve Banks specifically requesting rulings, interpreta°ns, or Board alsoother action with respect to Regulation t, the receives letters from the Reserve Banks en.j e farsin l communications received by them and presumably smltted to the Board for its information and not for action. j of the Federal Reserve Banks forward with such lette;sSome copies of their own replies and these replies make it aPParent that the original letters have been courteously :and by satisfactorily answered and require no further action the Board. We, of course, are glad to have such inforrti(xl and particularly to know how the Federal Reserve her:nks are handling the questions raised. In some cases, r, Zear P1j uncertain whether the Reserve Bank has reto es and whether or not it is expected that we xp take some action with respect to them. It will ; e8 81st the Board in handling such correspondence if the erve Banks will and whether indicate plainly whether they have reor °Ur the correspondence is transmitted simply i nformation or for some other particular purpose. pol4 "At the same time, it appears best, in line with the as " eY. of dece that as many communications mag!ssible bentralization, given such answer by the Reserve Banks as ' no further correspondence by the Board necessary." Approved unanimously. 1662 11/28/41 Letter to Mr. Hale, Vice President and Secretary of the Federal Reserve Bank of San Francisco, reading as follows: "Receipt is acknowledged of your letter of November 7 and enclosures regarding the practice of certain banks in your district of making instalment loans calling for repay of the principal in equal monthly instalments but for payment of interest quarterly or semi-annually on the diminishing balance. The question is whether this Practice is permissible in view of section 5(c)(2) which provides that no instalment shall be substantially greater in amount than any preceding instalment. "The principal purpose of section 5(c)(2) was to Prevent a balloon note at the end of the series, and obviously the practice to which you refer is not in conflict with +1,4 Purpose. Furthermore, where the difference in , I1,1e size of various monthly payments is the result of adding interest, the difference will usually be small as compared with a difference resulting from a larger payment of Principal. Of course extreme cases may be im4 g-1-fled, as where all of the interest on a 12-month loan Payable with the final instalment, which might result pzrl, a final instalment nearly double the amount of the ceding instalment. On the other hand, where the intele, terest on such a loan is payable quarterly, the arrange" r usually not be in conflict with the Regulation. 'It It is not possible to lay down a fixed rule, since the 0 ,, word 'substantially' must be interpreted in the light he facts of each case, but it is hoped the general l_llolples discussed above will enable you to handle parIeular inquiries." j Approved unanimously, with the understanding that copies of the letter would be sent to the Presidents of ll farleltIl s F eo e. cleral Reserve Banks except aSa Rep Letter to Mr. Phelan, Assistant Vice President of the Federal B ank of New York, reading as follows: i 111 of N "Ths 11 acknowledge receipt of Mr. Allen's letter 0vember 14, 1941 and your letter of November 25, 1941 1_663 11/28/0_ —5— "transmitting additional information regarding the purchase and resale of taxicabs by the Packard Federal Corporation under arrangements made prior to September 1, 1941, which were the subject of an interpretation of Regulation W contained in the Board's letter of September 30, 1941, as follows: 'The essential facts are that prior to September 1, 1941, the Corporation entered into a contract to purchase 400 taxicabs from a manufacturer. The taxicabs were being purchased for resale, and before entering into this contract with the manufacturer, the Corporation entered into a contract with a finance company by which the finance company agreed to purchase from the Corporation the instalment obligations arising out of the resale of the taxicabs by the Corporation. The contract with the finance company stated the terms upon which the Corporation would sell the taxicabs, and those terms do not conform to the requirements of section 4 of the Regulation. 'The question is whether the Corporation may sell these taxicabs on these terms to purchasers with whom it had no pre-September agreements. The Board is of the opinion that for the purposes of Regulation VI the contract with the manufacturer, the contract with the finance company and the sales of the cabs by the Corporamay be regarded as parts of a single transand therefore that such sales should be f;egarded as permitted by the Regulation.' there.This interpretation was based upon the facts stated credit4 1 and is not applicable to any sale or extension of to which the facts are substantially different. speci"yo be more specific, it applies only to the 400 to thal- Mew York type Packard taxicabs purchased pursuant addr„! cffer made by Packard Motor Car Company in a letter 13, ;,??d to Packard Federal Corporation under date of May 19L1 4-40-, and accepted by the latter under date of May 15, - " which is the ' .: to contract with 'a manufacturer' referred all the Board's letter of September 30, 1941. "Furt Nove„ hermore, as indicated in the Board's letter of p1ie7er 12p 1941 reaffirming this interpretation, it apatated°1Y to the sale of these 400 taxicabs on the terms in the offer pa,,,Lier contained in the letter addressed by Ochs Company under date of May 8, 1941 to Packard 1664 11/28/41 —6— “Federal Corporation and accepted by the latter under date of May 9, 1941, which is the contract with 'a finance company' referred to in the Board's letter of September 30, 1941. It does not justify the making of sales on more liberal terms than those provided for in such contract. "It now appears from your letter of November 25, 1941 and the analysis of sales enclosed therewith that, as of November 19, 19/11, the books and records of Packard Federal Corporation disclosed orders for the sale of 415 taxicabs and that some of these orders, dated as late as November 17 and 18, 1941, provide for the sale of taxicabs at the price of q,585 with down payments of only "This would appear to go beyond the purpose and intent of the interp retation contained in the Board's letter of September 30, 1941 in at least two respects: 1. It appears to involve the sale of taxicabs in addition to the 400 covered by the above mentioned con!'ract with Packard Motor Car Company on terms not complylng with the requir ements of Regulation 'W; and Although the down payments do not appear to be less, s, and the maturi ties do not appear to be greater, than those armerprovided for in the above mentio ned contract with & Ochs Company, the amount of credit extended ap4 P ar4e, in many instances to be substantially greater than e tt]..,100 provid ed for in such contract. the absence of more definite information as to .4te sZt e and legal effect of the 'orders' referred 1,, the Board is not in a position to determine whether ' ad7 involve actual violations of Regulation 16; but you , r requested to bring the contents of this letter promptly aethe attention of Packard Federal Corporation, either no , a?!ilY or through their counse l, and to advise the Cor,''ilo _11 n that, inasmuch as alread it y has orders for more the 400 cabs which were the subject of the Board's the r apretation of September 30, the Board would regard w as rill not:Pte of orders for the sale of additional cabs c'n tece complying with the requirements of Regulation invol T?ing beyond the scope of that interpretation and as 1±11g possible violat ions of Regulation W. 1'i-ease advise the Board of the result of your nego1,1 1°fle with repres entatives of the Packard Federal Cor--ration.” Z i Approved unanimously. 1665 11/28/41 -7- Telegram dated November 27, 1941, to Mr. Leedy, President of the Federal Reserve Bank of Kansas City, reading as follows: "Replying your telegram November 26 re registration c ertificates under Regulation V. Your proposal to number certificates is approved. Certificates may be manually elgned or objection facsimile signature used as you prefer. No to facsimile signature of president with assistant cashier countersigning or attesting." Approved unanimously. Letter to Mr. Irving A. J. Lawres, Secretary of the National A.88—• 'alation of Supervisors of State Banks, New York, New York, reading ae follows: "Please accept our thanks for your letter of November le and the copies of the resolution adopted by the National Association of Supervisors of State Banks at its convention held at St. Paul, Minnesota, in which the association expressed its willingness to cooperate with the Board of Governorsin relation to Regulation W. 'For your information, we addressed a letter on Octob i n er 9, following your convention, to President Starley a regard to the matter of cooperation to which we received careply t on October 14 stating that Mr. White would communiie _e with us and work out the necessary details. The subis one which the Board will be glad to work out with eat his convenience." Approved unanimously. Lett Letter to Mr. Myron R. Bone, Executive Secretary of the American 4- bankers Association, Fort 'Wayne, Indiana, reading as follows: in t his acknowledges your letter of November 21 concernlaphe booklet that you are thinking of preparing on Regusubl°11 17 for the guidance of your members, and also your ecii!!quent letter of November 24 inquiring about a revised 1.1. of Regulation L. teripo4e have occasion from time to time to pass upon ma' for publication, and, while it would not be possible 1_666 11/28/41 -8- "for the Board to give official approval to your booklet, we nevertheless should be glad to look over the material You plan to use and to offer you any helpful suggestions that seem called for. We suggest that since administration of the regulation is decentralized and you are in the Chicago Federal Reserve District, it might be well for You first to consult Mr. Dillard or Mr. Hodge of the Federal Reserve Bank of Chicago. This arrangement, it seems to us, might be convenient and also expeditious. Then, When you have the manuscript in the form that seems satisfactory to you, you could send it on to us, and we could 111f°rm You if we had any suggestions to make and also as to When you might come here to talk with us if a special appeared to be advisable. We are sending a copy of Fils letter to the Federal Reserve Bank of Chicago for its in formation. Zihrespect to the revised edition of Regulation W :bout you inquire in your letter of November 24, we °uld like to get out a new edition as soon as possible after the first of the year. The desirability of having 1:1?eunendments incorporated in the regulation is obvious, ° cut it has so far been impossible to set any date for the ompletion of the work." Approved unanimously. Letter to Mr. C. K. Suderman, President of The Newton Finance 'lent Company, Newton, Kansas, reading as follows: "Your letter of November 10 to Dr. Parry on the subject °f Regulation Vi has been read with interest and is !eknowledged with thanks. The Board and its staff are rnstantly engaged in studying the effects of Regulation 2n the businesses subject to its provisions with a view t4ch wangi ne the regulation if the facts and circumstances t1,4rant. The views of those in the trade are helpful in ''4-8 Study. 4 "The dzie. primary purpose of the provision governing tradeof which you mention particularly, is to prevent evasion the down Price 1,ee and -payment requirement by inflating both the selling the trade-in value. are :Y?ur courtesy and interest in presenting your views muchappreciated." Approved unanimously. 1_667 11/28/41 —9- Letter dated November 27, 1941, to Captain F. W. Hoover, General Manager of the Welfare and Recreational Association, Washington, ) reading as follows: "Recently we learned that on May 2, 1941 approximately 23 gallons of Coca Cola syrup, valued at /3 1 4.96, were lost in your storeroom in the Federal Reserve Building due to the negligence of one of your employees in failing to turn off the spigot when obtaining syrup for use in the cafeteria. The cost of the syrup was charged to our cafeteria over a period of several days. "This matter was discussed with Mr. Lewis recently, and he contended that the loss should be borne by our cafeteria. He said that any similar loss occurring in another cafeteria operated by your Association would be charged to that cafeteria. However the two cases are not comparable. 11 the case of the other cafeterias your Association takes the profit or loss resulting from operations, and would naturally charge a loss of this kind to the account of the fedesrtt where it occurred, since there would be no reason sh between a loss which should be borne by the 'feteriagu ai and a loss which should be borne by the Association. -11.7_ question would be simply one of bookkeeping. A differtYPe of question is presented where, as in our case, s cafeteria is being operated for another party, on a „nagement basis, under an 1,147 Agreement which provides that Association will operate the cafeteria for the Board economical and efficient a manner as possible, and :LT, the Association shall have the exclusive power to ap21:1t) discipline and discharge the employees utilized by -",lnithe performance of the Agreement. loss 'These provisions seem to us to make it clear that any o r damage or to supplies or equipment which is negligently caused by any employee of the Association should fully b stren e borne by - the Association; and this conclusion is Agthened by the limitation contained in paragraph 4 of the be regreement which provides that the Association will not from sPonsible for loss or damage to equipment resulting theAosrsdir.lary wear and tear or from circumstances over which purp ' ose ?lotion has no control, because there would be no Aes— a..n having such a provision in the Agreement if the ci. „ .n11 tlon were not to be responsible for any loss or Z g 4 1668 -10"Therefore we feel that the Association should bear the loss of the Coca Cola syrup which was clearly brought about by the negligence of your employee, and will appreciate advice as to what adjustment will be made of this matter." Approved unanimously. Memorandum dated November 25, 1941 from Mr. Parry, Chief of the Division of Security Loans, recommending that the sum of .1,500 be added to the item of Traveling Expenses in the 1941 non-personal budget of the Division of Security Loans. Approved unanimously. Thereupon the meeting adjourned.
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