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k
llinutes of actions talz,,n by the Board of Governors of the
Pe
11serve System on Thursday, November 30, 1950.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
hicCabe, Chairman
Szymczak
Evans
Vardaman
Norton
Mr. Carpenter, Secretary
Mr. Sherman, Assistant Secretary
Mr. Kenyon, Assistant Secretary
lanutes of the meeting of the Board of Governors of the
?edel'al 1 eser-7e System with the Presidents of the Federal Reserve
1141/C8 heid
on Novern
1950, were approved unanimously.
29,ber
'lnutes
Peri,
4" rteGerve
f actions taken by the Board of Governors of the
System on November 29, 1950, 4ere approved unani-
„
tot of, 1:er:1°randum dated November 29, 1950, from Ya-.. Dethea, arec- the bivison
of Administrative Services, recommendin the
al trItrilent
Of John Henry Battle as a laborer in that Division on
ter̀iPc)rari,
rate
basIs for a period of two months, with basic salary at
of
e/Iters
Upon
the
Us
2,12O per annum, effective as of the date upon which
the performance of his duties after having passeçl
PhYsical
Nr&
Of
exallination.
4pproved unanimously.
Let
ter to Mr. Kimball, Vice President of the Federal Reserve
iork, reading as follo7fs:
4elerence is made to ,,our letter of November
16 ,'
j
• which
-0503 In
you advised that it appears ex-
898
11/3o/50
-2-.1?ermes for certain functions at your head office
74111
exceed the 1950 budget estimates as follos:
Amount
Functions
-,-----General Overhead
.., 00,000
10,000
Securities
410,000
Federal Reserve note issues
rai4.4. qte
Board accepts the revised figures as subth'ed and aopropriate notations are being, made in
C
Beard's 'reco'rds."
Approved unanimously.
?ederal
Let
a ter to Er. Symms, Vice President and Cashier of the
eserve Bank of San Francisco, reading as follows:
195n "This refers to your letter of November 22,
,
regarding the question vthether a bank located
the ,
aska or any Territory or possession outside
cati -°ntinental United States may submit an appliap„1-.
°11 for a V-loan guarantee and, if so, how such
t-Q-cation
should be submitted.
thm. "The Defense Production Act of 1950 provides
Its provisions 'shall be applicable to the
the-ZI States, its Territories and possessions, and
sect7-Lstriet of Columbia'; and there is nothing in
1016°n 301 of the Act or in Executive Order No.
Of ,4*
Jould seem to preclude the submission
thelPlieations for guarantees by banks located in
an -Lerritories or possessions. Consequently, ahere
Ter lication is submitted by a bank located in a
aect rY or insular possession, the provision of
3(a) of Regulation V to the effect that a
'0
institution should submit its application
be ,"
- e Federal Reserve Bank of its district' should
Ilaw-c°11strued as referring to the Federal Reserve .
tuti?hich is most convenient to the lending insttby
Thus, an application for a V-loan guarantee
thein Alaska aould ordinarily be submitted to
Federal Reserve Bank of San Francisco."
Approved unanimously.
'ktw,
LettCr to
Honorable Victor Aickersham, House of Representatives,
'
4 4eton
D. C., reading as follows:
i499
11/30/50
—3x *4e appreciate the opportunity to comment
10,19_,
01
'ilade 4atsonis letter of November
t;*ell refers to a letter which you had received
rec
:
111113, Presumably our letter of November 2, 1950,
ll'arcling Regulation
In view of the fact that
ti
* ris aatson says - II note that it is acknowledged
t at theY violated the section of the law relative
s° the hearing...t, it appears that he has misunder4 our previous letter, and we are especially gratefor the opportunity to clarify the matter.
stated in our letter, the Board consulted
80 tY with trade representatives, including repre:
reZtives
of automobile dealers, before the original
Was issued effective September 18, 1950,
nd
lu also took those vies fully into account in
Zle_tien With both the original regulation and the
8'0-'4aent effective October 16, 1950, that .folloaed
or
'
T afterward. As further indicated in our letter
menVvember 2, the issuance of the October 16 amendaccordwithout further consultation was in complete
ortcl. e with all requirements of law.
'On August 10, 1950, Senator Sparkman gave a
Proci
'
l explanation of the provisions of the Defense
quoj
etion Act regarding consultation, and we are
Recordin it belo:c from page 12378 of the Congressional
, because it is of particular interest here:
PractiThparticulare bill would require consultation aherever
lylier
able. Of course, there will be some occasions
vari,: It wauld not be appropriate to consult in adsolli-`;! There may not be time, when speed is vital.
4.111
"Civing advance notice of a proposed re8trn1
or ,-'
:- 10/1 would defeat the purpose of the restriction,
th:)11slating a few people in an industry would give
nfair advantage over the rest of the inIllsta
0
Z
Approved unanimously.
- Lett
le.
3
p
icai,
er
m
Lor the signature of the Chairman to Mr. Edgar F.
Frazer Corporation, Allo.a. Run, Michigan, reading
ehank You for your letter of November 18,
1§50 rl
have noted your
Mrding Regulation
900
11/30/50
-4-
:
views on the effect of the regulation and your
uggestion that the terms be relaxed.
sale "The data you have submitted on production,
!, and stocks have been helpful to us in rounding
0,7 ("he statistics available to us on current devel'''
rlents in the automobile fieldo
811111 11'1°U appreciate, I am sure, that, although
ievP-LY-demand conditions in markets for the specifc. regulated articles, including automobiles, have
a 5:
str 'tnite bearing on the appropriate level of re'ions in Regulation
o
these are not the sole
ahich the Board must consider in carrying
responsibility for administering the regula0011". The over-all purpose of the regulation, of
dear
.sel is to supplement other credit and fiscal measures
3-Cned to restrict general inflationary pressures and
to f
of
itate the defense program. The serious dancer
inflationary pressures in the defense emergency
te1
:
.11 e a primary consideration in establishing the
40f the regulation at this time.
and
assure you thatt, we alaays welcome information
probisuggestions which throw additional light on the
the l'‘,em and help us to administer this regulation in
est interests of the country. Your views All
reoj
() +1,:ve careful consideration in our continuing studies
vile
regulation."
Approved unanimously.
kittee,
Lett
er to L:r. Mart :anley, Chairman, National Affairs Com-
cull:11 Cleaner idanufacturers Association, 1070 East 152nd
Str,,e
t) pi
"eland 10, Ohio, reading as folloJs:
tlalulf"This refers to the request of Vacuum Cleaner
turers Association for an amendment to RegILIE
,
(311
,
4/lich would provide that the required dom
Payize°n vacuum cleaners could be obtained in the
thcl Cash, trade-in, or both, as is now provided
bY :
Of a.;'' re gulation in the case of the instalment sale
or t; TItomobile.lie appreciate receiving the copies
guides for vacuum cleaners submitted with
01,;:et ber of November 20 and the opportunity vie had
1:leetings on November 4 and November 21 to dis11.sia--4,
coll ,'"is problem with you and the members of your
I 901
11/30/50
-5"There are basic reasons for the differences
vreatment under Regulation ,U of trade-in allowallees in the case of automobiles and trade-in alloatres in the case of the other articles listed in
ise3uPplement to Regulation
Amonf7 others, there
of, an active market for individual buyers and sellers
;
e used automobiles :thich has been reflected in aidely
ita(p:nized retail values for the different models and
Reflecting this situation there are several
a,:.4acati0n3 of average retail sales values of used
irobiles by models and makes Jhich, as described
and. art )4 of the Supplement to Regulation I can be
are used to prevent widespread avoidance of the
to TPaYruent provisions of the regulation as they apply
zobiltensions of credit for the purchase of used autothe ree
These appraisal guides are not used under
r t gulation to establish the value of the trade-in
Q
new he amount of credit extended on the purchase of a
tracif„
all&lobile. Also it has been traditional in the
the ;',„;")
r many years to permit the oamer to transfer
11e of his used car as a part of the purchase
'
0Of and down payment for a replacement automobile.
raark,,This con4ition does not prevail in the appliance
pric-L'. There is no established pattern or retail sale
allt es for used appliances by models and makes.
apObiles are traded after relatively short periods,
for
ees are usually held by the original purchaser
/nark:
Isiderably loner periods, and a used appliance
as to which might result in definite price patterns .1
rnakes and models comparable to that for automobiles
tOr
-°es not exist. Normally, trade-in alloances
aPPliances are more in the nature of a sales
and are so regarded generally by the trade.
ty,
picc'J-nZ the differences in initial price and the
Creat
:
1 age at which they are first traded in, a much
trade :
1 value is involved in the case of automobile
view fls than in the case of appliance trade-ins. In
trade , the difference in the amounts involved, the
1Lieti n rule that applies to appliances under the regaPplir iS substantially less restrictive in the case of
eaao
sales than it would be if prescribed in the
I a
utomobile
sales.
HThp
a4t0111(11,4''
basic difference between the markets for used
II4eth„-„'"Lles
and those for used appliances, including
the --4 cleaners is reflected in differences betaeel.l. s
lieecial,11tornobile appraisal guides and the trade-in guides
appliancP manufacturers. The latter are desi,,
?
1102
1113o/50
-6Iths
determine the amount to be allowed for the used
iance as a trade-in on the purchase of a new aplance. On the other hand, the retail values quoted
tri
h the automobile appraisal guides are estimated on
ine basis of the actual sales value of the used car
the
retail market.
"The Board has therefore decided against approving 7c)ur request at this time. It is recognized that •
?, administration of any such measure as Regulat 0'
busit there are bound to be hardships to particular
the —esses and individuals. Nhile it is likely that
pur restraint on the continuous rapid expansion of
11asing Power imposed by present fiscal and credit
pob.
e,,
lir;"es will result in readjustments all along the
mad;'4.it would seem that once these readjustments are
0 a more sustainable level of expenditures and
the '
eral.Present inflationary spiral is checked, the genhand Public and business will benefit. On the other
ceedi if the inflationary spiral is not restrained exnati liglY serious consequences will accrue to the
-cin as a whole.n
r
Approved unanimously.
Lett
Or to Honorable ;. ;illiam K. Divers, Chairman, Home Loan
Nrik D. •
4Joar,
as roil
101
Indiana Avenue, N.
'Arashington, D. C., reading
°W5:
var.; "Vie have had preliminary discussions with
alicCus representatives of the Home Loan Bank Board
rei'
31.ave also .. rritten to you about Regulation X
nr, to residential real estate credit, and
the
enfo
rcement of the Regulation.
of
,° accomplish the purposes of the Regulation,
'
,•chiel,"T
1950- -Le authorized by the Defense Production Act
arici Executive Order No. 10161, there must be an
erre ,
thise'ive and uniform enforcement; and to realize
grani °b Jeotive we have prepared an Enforcement Proa copy of which is attached hereto, which was
N)nric,.
c'tto the Home Loan Bank Board in our letter
vle i°verriber 17, 1950. Concurrently with this letter
Pedsent copies of the Enforcement Program to all
eral supervisory agencies and the Federal Reserve
I 903
11/30/50
-7The State supervisory authorities will be
:qUested by the Federal Reserve Banks to cooperate
J.n the
Enforcement Program.
of "The Board aould like to have the cooperation
Agency in the enforcement of the Regulation
•
witYcurh
respect to institutions under its supervision
attaccordance aith the measures set forth in the
hed Outline. It is hoped that your representat
a,ves in the field will avail themselves of the assistwhich the Federal Reserve Banks can give them in
the
ti
:Enforcement Program and also in respect to quesof°11s which occur in connection aith the administration
the Regia:Urtion..
"It would be most helpful if each agency having
Super
t4
vision of lending institutions would make clear
theT s examiners that the effective enforcement of
mi ltegulation is a matter in which the agency has a
do Isline interest, and the Board hopes that you aill
°Ir n respect to your examiners.
110 _lie have had preliminary discussions with and
fore written to other agencies with responsibilities
141. supervision of banks and other financial in:
sti ,!
kch-''°ns coming aithin the scope of the Regulation.
gran agencies have concurred in the Enforcement Prond have given assurances of cooperation.
interest
ln theThe
T? Board is appreciative of the great
-egulation shown by your representatives, and
of
assurances of cooperation ahich your represen;
tati
be 0:
res have given. If there is any way that JO may
the;assistance to you in either the enforcement of
its ':gulation or with respect to questions affecting
nistration, we in be glad to cooperate with
You.H
Approved unanimously.
Tratis Letter to Mr. J. G. Korner, Jr., Blair, Korner, Doyle a Appel,
13(1rtati
Building, .gashinEton 6, D. C., reading as follows:
1950 "This refers to your letter of November 21,
nd enclosure, inquiring ahether Regulation X,
relaj
to ti,lng to residential real estate credit, applies
building or improvement of fraternity houses.
Whieh t t is the Board's opinion that a structure
;::"3 used, serving or designed as a fraternity
hollee
- -LS 'used, servinr, or designed for d4ellincr, pur-
I
I 904
11/3°/50
I
d P°BeSt; and, accordingly, if such structure
ire not
include more than two family units, it
2(ka''residence, within the meaning of section ,
)
it is recognized trthat
th °f Regulation X.
04-1? rIlaY be exceptional cases in which, depending
ho '"e
facts involved, a fraternity
micht not be a 'residence', it is the Board's
ilo'lf.that the usual type of fraternity house does
fo_Include more than two family units and, therevIon would be subject to the provisions of Regula-
tio HIt should be noted, hoaever, that the reguladenn d°es not apply to credit with respect to resion which construction aas begun prior to
:
All
tio—
:
n v 3/ 1950, although it does apply to major addithat
:
,
°r major imoroveMents to residences built before
melt `'ate if the Cost of such additions or improve3 exceeds
beg,,
,i;2,500. In the case of construction
thir: after August
3 and before October 12, 1950,
re,
'
„ egulation does not apply with respect to any
- estate
construction credit extended prior to
4 13 1951.11
Approved unanimously.
Letter to Mr. Peyton, President of the Federal Reserve Bank
ntleapo 4_
1J-, reading as follows:
Noire 7his
refers to Lir. Strothman's letter of
fli
repr uer 24, 1950, concerning his discussions aith
1,41„-sentati1Tes of Northwest Bancorporation,
sta,
aP°1is, Minnesota, with respect to a form of
alabai.fnt which might
be used by that Corporation's
th,t-ck-Lary banks for the purpose of demonstrating
'41thicredit is not real estate construction credit
1;1„the meaning of Regulation X.
!lative e have no objection to the use of the alterf°11
'
1 of rubber stamp legend set forth in ..
the frothmanrs letter
as a method of complying
a)ad vlrst paragraph of section 4(c) of Regulation ,
11 may advise Northwest Bancorporation to this
elWeZ
tiori "In viea of the fact that Northwest BancorTaterthalso has subsidiary banks in the seventh ancopies
Federal Reserve Districts, we are sending
1905
11/30/50
-9-
"of idr.
Federal Strothmants letter and this reply to the
Federal
Reserve Reserve Bank of Chicago and the
Bank of Kansas City. It
Approved unanimously.
Telegrail'
-- to
the Presidents of all Federal Reserve Banks,
rea'clirig as
folio:is:
:
t 4 loan of the kind described in the second
se
be
e of section c(b) of Regulation A
cle
ee--ed to comply with the requirements of that
aZence in so far as maturity and amortization
thncerned if the terms of repayment are such
c°mmencinr on a date within 32 days from the
t‘i,..°f completion of construction, the loan wa.11
-after confora With the maturity and amortizare quirements set forth in the Supplement to
raar-,tion X.
Thus, in a case where the 20-year
tionili.r1tY limitation is applicable, the requireWill be satisfied if the terms of the loan
2h that, in the event construction is comp1ets11
7q for example, during the month of larch 1951,
e)
is to be fully repaid by equal monthly
Apri.T4s commencinr, on May 1, 1951, and ending on
tha47,t, 1971. The foregoing assumes, of course,
t )-I
'
Lle loan agreement provides that in any event
Illat"."°an will be brought into conformity with Reg1°11 X not later than 18 months after it is made."
Approved unanimously.
Lettev to 1.1r. Gilbert Chairman of the Board of Trustees
the
aN Re'rement System of the Federal Reserve Banks, Federal Re'
ellk of Dallas, reading as follows:
28, 1:71feronce is made to your letter of November
TrIls,;'-AJ3 advising the Board of Governors that the
of the Retirement System have voted to apP 0'
tierit-r,`'Ile Plan outlined in the report of tho Retiredated September 8, 1950, for intothe
-11.-;
benefits of the Retirement System of
1906
4X1/50
-10-
"the Federal
Reserve Banks with those of the
el.al Security Act, as amended. You request
'.;)al!
Ril Board to approve certain amendments to the
te,:s2nd Regulations made necessary by the inat,-.?.w.on plan and other minor changes of a
ar-LfYing nature.
'The Board approves the amendments to the
'
0
1 3 and Regulations as outlined in the enclosures
" Your letter of November 28.
c0.17
.
17he Board's feeling with respect to certain
n --larY features of the integration plan was exrressed
ln its letter to you dated October 26, 1950."
Approved unanimously.
1:e
morandum dated November 27, 1950, from Er. Betheal Director
°fthe Di
vision of Administrative Services, recommending that the
8°'41'dauthorize the removal of one tennis court from the Board's
134rkillE
lot, torether :rith the resetting of the fence and the
Pving Of thC,
area involved, and that the appropriate classification
ill tile
budEet of the Division of Administrative Services be increased
e°1Ter the
cost,
i.e.,i••)
approximately
Approved unanimously.
1
-J t1
norandum dated November 13, 1950 submitting for approval
T)„
‘ u of 0
,
- 4 oudset in the amount of a01850 covering the estimated
Pel
'
atinc the Office of Real Estate Credit for the year end,"
Der 31, 1950, inclusive.
Approved unanimously.
AwiLAANNaght
Secreta/j.
@FedFRASER