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Minutes of actions taken by the Board of Governors of the
Federal Reserve System on Friday, November
PRESENT:

3, 1950.

Mr. Evans, Chairman pro tem.
Mr. Vardaman
Mr. Powell
Mr. Carpenter, Secretary
Mr. Sherman, Assistant Secretary
Mr. Kenyon, Assistant Secretary

Telegrams to the Federal Reserve Banks of Boston, New York,
Philadelphia, Atlanta, Chicago, St. Louis, Kansas City, and San
Francisco stating that the Board approves the establishment without
change by the Federal Reserve Bank of San Francisco on October 31,
by the Federal Reserve Banks of Atlanta and St. Louis on November
1, by the Federal Reserve Banks of New York, Philadelphia, and
Chicago on November 2, 1950, and by the Federal Reserve Banks of
Kansas City and Boston today, of the rates of discount and purchase
in their existing schedules.
Approved unanimously.
Memorandum dated November 1, 1950, from Mr. Boothe, Assistant
Director of the Division of Administrative Services, recommending
that the Board's action which granted leave of absence beginning
October 18, 1950, to Thomas V. Kopfman, clerk in that Division,
for the purpose of reporting for active duty with the United States
Marine Corps Reserves, be amended to read that Mr. Kopfman be placed
on military leave as of November 2, 1950.




Approved unanimously.

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11/3/50

-2Letter to Mr. Leach, President of the Federal Reserve Bank

of Richmond, reading as follows:
"Enclosed is a copy of a letter which we have
received from Mr. Camille Gutt, Managing Director
of the International Monetary Fund, in which he
states that the Minister of Finance of the Republic
of Paraguay has requested the Fund to make available
to the Government of Paraguay two technicians to
analyze the financial system of the country and
assist in the preparation of the budget, and requests
that the Federal Reserve System furnish a qualified
person to act as chief of the mission. The Fund
will undertake to provide an economist thoroughly
versed in Paraguayan financial affairs who will
act as assistant economist and translator.
"We understand that your Bank has agreed informally to make available Mr. J. Dewey Daane, an
economist on the staff of the Research Department,
for this purpose, and there is enclosed a proposed
reply to the International Monetary Fund to that
effect which will be dispatched to Mr. Gutt upon
receipt of advice from you that the arrangements
indicated are satisfactory.
"Your cooperation in enabling us to comply
with this request from the International Monetary
Fund is sincerely appreciated."
Approved unanimously.
Letter to The Poudre Valley National Bank of Fort Collins,
Fort Collins, Colorado, reading as follows:
"The Board of Governors of the Federal Reserve System
has given consideration to your supplemental application
for fiduciary powers, and grants you authority to act,
when not in contravention of State or local law, as
committee of estates of lunatics. The exercise of this
power, in addition to those heretofore granted to act
as trustee, executor, administrator, registrar of stocks
and bonds, guardian of estates, assignee, receiver or in
any other fiduciary capacity in which State banks,
trust companies, or other corporations which come into




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"competition with national banks are permitted
to act under the laws of the State of Colorado,
shall be subject to the provisions of the Federal
Reserve Act and the regulations of the Board of
Governors of the Federal Reserve System.
"This letter will be your authority to
exercise the fiduciary powers granted by the
Board pending the preparation of a formal certificate
covering such authorization, which will be forwarded
to you in due course."
Approved unanimously for
transmittal through the Federal
Reserve Bank of Kansas City.
Telegram to the Presidents of all Federal Reserve Banks,
reading as follows:
"The Board has considered certain questions
concerning instalment credits involving so-called
'balloon' notes or payments that were written or
arranged before September 18, 1950, the effective
date of Regulation 1. In a typical case of the
kind, there would be 11 notes followed by a 12th
'balloon' note which may be in an amount several
times the amount of each of the preceding notes.
"The Board expressed the view that unless
in the pre-September 18 contract between the parties
there is a valid and enforceable provision for an
extension of the 12th note for some specified period
when it falls due after September 18, the extension
may not now be carried out except on terms complying
with the present requirements of Regulation W.
The existence of valid and enforceable provisions
for such extensions would seem to be extremely rare.
In the usual case, there is no such valid and
enforceable provision and the extension, except
in certain specified instances, would be limited
under the regulation to a maximum maturity of 15
months."




Approved unanimously.

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Telegram to Mr. Slade, Vice President of the Federal Reserve
Bank of San Francisco, reading as follows:
"Reurlet October 14, 1950, and enclosure and
your wire October 30 concerning application Regulation W to financing of automobiles and trucks which
are purchased from franchise dealers by Transportation Lease Company and which are then delivered to
commercial users under lease with option to purchase.
"1. Board agrees that individual conditional
sales contracts in principal amounts of $5,000 or
less covering automobiles sold by franchise dealers
to Company constitute instalment sales subject to
,
regulation. Fact that the conditional sales contracts
are assigned to bank maintaining line of credit to
Company in maximum amount exceeding $5,000 is
immaterial on facts presented.
"2. Deliveries of automobiles subsequent to
September 18, 1950, by Company under lease with
option to purchase constitute instalment sales subject
to regulation. Board does not regard so-called
'master lease' as contract covering a given automobile
until that automobile has been made subject to master
lease. However, deliveries of automobiles prior to
September 18 are exempt even though option is not
exercised until after that date.
"3. Of course, motor vehicles other than
automobiles as defined in Group A of Supplement to
regulation are not listed articles. Therefore,
foregoing applies only to such automobiles."
Approved unanimously.
Telegram to Mr. Slade, Vice President of the Federal Reserve
Bank of San Francisco, reading as follows:
"Reurtel October 30 regarding Willys-Overland
4X 473 station wagon and similar vehicles. Interpretation (Regulation W Service 916.1) referred to in
Board's telegram S-1180 W-92 dated October 30 would
apply."




Approved unanimously.

11/3/50

-5Telegram to the Presidents of all Federal Reserve Banks,

reading as follows:
"The maturity provision in the Supplement to
Regulation X provides that no credit subject to
the regulation shall have a maturity of more than
20 years (or, in some cases, 25 years) from the date
such credit is extended. In trade practice, provision often is made for the payment of the first
instalment on a loan on the first day of the second
calendar month after the month in which the credit
was extended. For example, if the credit was extended on October 25, the first instalment would
become due on December 1.
"In order to permit this practice, in calculating
the maximum maturity of credit subject to the regulation, a Registrant may, at his option, use any date
not more than 32 days subsequent to the date such
credit is extended."
Approved unanimously.
Telegram to Mr. Slade, Vice President of the Federal Reserve
Bank of San Francisco, reading as follows:
"Retel October 27 concerning application of
section 6(b) of Regulation X to instances where
pre-October 12 commitments are in existence between
Registrant and builder covering first mortgages on
new construction and builder has followed practice
of taking, and expects in future to take, second
mortgages himself. On basis of these facts alone,
there is no commitment with respect to future second
mortgages taken by the builder and such mortgages are
not exempt under section 6(b). In absence of more
detailed information concerning claimed pre-October
arrangement for discount of such mortgages, we do
not feel that we should express any definite opinion
concerning effect of such arrangement, but it appears
very doubtful whether it would result in any exemption."
Approved unanimously.
Telegram to the Presidents of all Federal Reserve Banks,
reading as follows:




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"The Board has found the weekly spot survey of
supply-demand conditions in the consumers' goods
markets very helpful. We would like to have a
further report to arrive not later than November 9.
This report is necessary for Congressional Hearings
beginning November 13. The purpose is to determine
the state of supply-demand in consumer durable goods
markets. While general answers are anticipated, the
Board would also like to learn of the more significant
exceptions. This is in lieu of weekly report requested
in our telegram dated October 2 and further weekly
reports are not required until further notice.
"1. With respect to new passenger automobiles,
are the following items higher, lower, or unchanged
compared to a year ago? Compared to a month ago?
To what do ycu attribute changes that have occurred?
c. Trade-in allowances
a. Sales volume
in relation to market
b. Dealers stocks
prices of used cars
are the following
cars,
used
to
respect
"2. With
to a year
compared
unchanged
or
lower,
items higher,
you attribute
do
what
To
ago?
month
a
to
ago? Compared
occurred?
have
that
changes
a. Used car prices c. Dealers stocks
b. Sales volume
"3. In relation to sales, are retailers' inventories
of the following items higher, lower, or unchanged compared
to a year ago? Compared to a month ago? Is there evidence
of general shortages or shortages fcr 'articular brands?
a. Television sets
b. Radios, phonographs, or combinations
c. Other major household appliances
d. Household furniture
"4. In general, is the sales volume of the following
items higher, lower, or unchanged compared to a year ago?
Compared to a month ago?
a. Television sets
b. Radios, phonographs, or combinations
c. Other major household appliances
d. Household furniture
"5. Considering discounts, trade-in allowances, and
all other pertinent factors what has happened to prices
paid by consumers for the following items compared with
a year ago? Compared with August?
a. Television sets




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"b. Radios, phonographs, or combinations
c. Other major household appliances
d. Household furniture
"6. To what do you attribute changes that have
occurred with respect to sales, inventories, and
prices of durable consumer goods other than automobiles.
"Where changes are reported in the various items
mentioned above, it would be helpful to have quantitative
indications of the changes, if such are possible to obtain.
"Although you may not be able to develop information for every question asked, we would appreciate
brief comments on as many as possible. Please identify
by numbers indicated above. If you discover other
items which indicate the existence of inflationary or
deflationary pressures in the consumer goods field,
please report them also.
"It will also be appreciated if you will mail
as Promptly as possible the latest results of investigators' survey of terms pursuant to Division of Bank
Operations letter B-1648 dated September 29 and telegram
of October 18."
Approved unanimously.
Letter to Mr. Symms, Vice President of the Federal Reserve
13_1.nk of San Francisco, reading as follows:
"This refers to your letter of October 27 regarding the question whether the 'no set-off' clause which
is included in Army and Air Force contracts may also
be included in contracts executed by the Department
of the Navy and the four additional agencies of the
Government designated as guaranteeing agencies under
the provisions of Executive Order No. 10161.
"The Department of the Navy is expressly authorized
by the Assignment of Claims Act of 1940 to include
the no set-off clause in its contracts and we have
been informed that the policy of the Navy Department,
like that of the Army and Air Force, is to include
the no set-off provision in its contracts. In this
connection, we have been referred to section 12,305
of the Nnvy Procurement Directives.
"Under present law, there is no authority for the
inclusion of the no set-off clause in contracts entered




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"into by the Departments of Agriculture, Commerce
and Interior and the General Services Administration,
the other agencies designated as guaranteeing agencies
under Executive Order No. 10161."




Approved unanimously.

Secretary.