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2132 A meeting of the Board of Governors of the Federal Reserve Systern was held in Washington on Monday, November 91 1942, at 11:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans 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: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on November 7, 1942, were approved unanimously. Memorandum dated November 5, 1942, from Mr. Paulger, Chief of the Division of Examinations, recommending that Herbert H. Hagler, an Assiatant Federal Reserve Examiner, be granted leave of absence without Pay beginning November 9, 19421 so that he might enter active duty with the United States Navy, and that he be granted the benefits provided in the Policy adopted by the Board on November 14, 1940, and amended August 20, 19411 for all employees entering military service. Approved unanimously. Memorandum dated November 6, 1942, from Ur. Morrill, submitting the resignation of Daniel M. Derrick as a guard in the Secretary's Office, to become effective as of the close of business on November 11, 1942, and 21_33 11/9/42 recommending that the resignation be accepted as of that date. The resignation was accepted. In accordance with the action taken at the meeting of the Board on November 3, 1942, and the letter to Mr. McLarin, President of the Federal Reserve Bank of Atlanta, which was approved by the Board on November 4, 1942, the issuance of the following order was approved by unanimous vote: "THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, DISTRICT OF COLUMBIA Regulation W - In Relation to Chattanooga Tennessee Clark Brothers Store No. 1 ft Clark Brothers Store No. 2 If Clark Brothers Store No. 5 tl 21 Easy Furniture Co. Easy Furniture Co. Ellis Furniture Co. Dalton Georgia Clark Brothers Furniture Co. LaFayette Georgia Clark Brothers Furniture Co. ORDER SUSPENDING LICENSE "Otis Clark, Fred Clark and Mrs. Otis Clark, having appeared in connection with alleged violations of Regulation W of the Board of Governors of the Federal Reserve System (hereinafter called the 'Board?), and having waived notice and opportunity for hearing before the Board and consented to the issuance of this Order for the suspension of their license, and having agreed that: 1. They were at all times mentioned herein and now are partners engaged in the business of making instalment sales and charge sales of listed articles through furniture stores which they own and operate under the following trade names at the following places: Clark Brothers Store No. 1 1467 Market Street Chattanooga Tennessee ft Clark Brothers Store No. 2 613 Market Street If Clark Brothers Store No. 5 2421 Glass Street Easy Furniture Co. 920 Rossville Avenue " ft Easy Furniture Co. 45 E. Main Street Ellis Furniture co. 43 E. Main Street " Georgia Dalton Clark Brothers Furniture Co. LaFayette Georgia Clark Brothers Furniture Co. 2134 11/9/42 -3- "2. They duly filed the Registration Statement required by the Board's Regulation W and were at all times mentioned herein and now are subject to such Regulation. 3. Before and after May 30, 1942, and continuing through October 212 1942, they pursued a course of dealing in contravention of Regulation W and willfully or negligently failed to comply with same. Such willful or negligent violations included (a) failure to obtain down payments in amounts required by the Regulation; (b) impro.Der and inadequate preparation and delivery of Statements of Transaction by the omission from such statements of the deferred balance, cash price, finance charge, and interest, if any, and the time balance; (c) failure to schedule periodic payments in the amounts required by the Regulation; (d) agreeing with customer that payment of open charge accounts might be deferred beyond the tenth day of the second calendar month following the calendar month during which the article was sold; and (e) using open charge accounts as a means of evasion in selling articles on an instalment plan; and "The said Otis Clark, Fred Clark and Mrs. Otis Clark having further agreed and represented to the Board that, during the period Of suspension of their license under this Order, they will close all of the aforesaid stores and discontinue all sales including those for cash; that, upon resumption of business following the termination of this suspension period, they will conform their business to the requirements of the Regulation; and that they will not, in any manner, in their future solicitations or advertisements for business indicate or imply that they would grant terms which would be in contravention of the Regulation: "Accordingly, the Board having considered the consent, representations, and agreements of the parties named, and under authority of section 5(b) of the Act of October 6, 1917, as amended, and the Executive Order of the President No. 8843, hereby orders: 1. That the license of the said Otis Clark, Fred Clark and Mrs. Otis Clark issued purusant to the Board's Regulation Vi be and the same is hereby suspended for the period commencing at 12:01 a.m. November 22, 1942, and ending at 12:01 a.m. November 29, 1942, unless said period is sooner terminated by the Board: Provided, that this Order, during the suspension period, shall not prohibit (a) the carrying on of regular office and accounting work; (b) the receipt of any payments through the mails or through the normal and usual collection facilities which have heretofore been maintained off the premises of said stores; and (c) the making of payments on any obligations, incluaing obligations to employees for salaries or wages. 2135 11/9/42 -4"2. Any terms used in this Order that are defined in Regulation W shall have the meaning therein given them. "By order of the Board of Governors of the Federal Reserve System this 9th day of November, 1942. (Signed) Chester Morrill (Seal) Secretary whel the undersigned, Otis Clark, Fred Clark and Mrs. Otis Clark, do hereby confirm the agreements and representations set out in the aforesaid Order, and consent to its issuance. (Signed) Otis Clark (Signed) Mrs. Otis Clark (bigned) Fred Clark" In connection with the above action, unanimous approval was also given to the following statement, with the understanding that it would be handed to the press tomorrow morning for immediate release and that it would be wired to the Presidents of all the Federal Reserve Banks and the Managing Directors of all Branches with the statement that they were at liberty to give the release such local publicity as appeared to be desirable: "The Board of Governors of the Federal Reserve System has suspended for one week from November 22 to November 28, both dates inclusive, the license of Otis Clark, Fred Clark, and Mrs. Otis Clark, registrants under the Board's Regulation W, who operate eight furniture stores, six of which are in Chattanooga, Tennessee, one in Dalton, Georgia, and one in LaFayette, Georgia. The registrants do business under the names of Clark Brothers Store, Easy Furniture Company, Ellis Furniture Company, and Clark Brothers Furniture Company. "The Board, acting under authority of section 5(b) of the Act of October 6, 1917, and the President's Executive Order No. 8843, ordered the suspension of the license because of failure to comply with the provisions of Regulation W with respect to credit sales of furniture. All the terms of the Order were agreed to by the Registrants who have given their assurance that they will hereafter comply with all the provisions of the regulation. "The violations consisted of failure to obtain required down payments, to deliver proper Statements of Transaction to the customer, to schedule periodic payments in the required amounts, and to require customers to agree to pay their charge 2136 11/9/42 -5- accounts before the 10th day of the second calendar month following the sale; and using charge accounts as a means of evasion in selling articles on the instalment plan. "Under the order, the doors of the several stores will be Closed for business during the period of suspension of the license, but the terms of the order do not prevent payment of Obligations, including salaries and wages to employees, and normal accounting operations and collections." Telegram to Mr. Raisty, Manger of Consumer Credit Control at the Fedeml Reserve Bank of Atlanta, reading as follows: "Members of Board's staff have reviewed draft of speech you forwarded me and have made following suggestions which, in view of time element, we are wiring you without attempting to explain reasons for each suggestiOn. If you should have any questions regarding them, it is suggested that you telephone US. "Page 1, paragraph 3. Omit language beginning 'You know' and ending 'On the contrary'. Page 1, paragraph 3. Date of Executive Order is August 9, 1941. Page 2, paragraph 2 should include specific mention of fact that Executive Order specifically authorizes Board to utilize services of Federal Reserve Banks. At top of page 3 sentence beginning 'Making allowances' Should be eliminated. Second sentence in first paragraph commencing on page 3 should be omitted. At top of page 4 eliminate comparison with Atlanta District. Eliminate second paragraph commencing on page 6. At top of page 7 eliminate 'It may be for credit sales only'. In second paragraph commencing on page 7 eliminate statement of number of investigations made. Ransom suggests that in connection with reference on Page 8 to Clark's suspension of license that he thinks it advisable to omit any mention of this in your text, leaving any discussion to develop from questions following your speech." Approved unanimously. Letter to Mr. Leslie M. Johnston, President of the Insul-Mastic Corporation of America, New York, New York, reading as follows: "This will acknowledge your letter of November 2, 1942, following up on Mr. Taylor's visit to us on October 5, in which you suggest that the Board's Regulation Wwhich deals with consumer credit be amended so that it would not apply to credit extended in connection with the application of your product. 2137 11/9/42 -6- "You base your request upon the fact that the application of your product results in a substantial saving of fuel because Of the prevention of heat losses through infiltration. "You are of course aware, as we explained to Mr. Taylor, that the purpose of the regulation is to bring about an overall curtailment of consumer credit. It is one of the steps taken in support of the program outlined by the President in his message to Congress on April 271 1942 when he said: 'To keep the cost of living from spiraling upward, we must discourage credit and installment buying, and encourage the paying off of debts, mortgages and other obligations; for this Promotes savings, retards excessive buying and adds to the amount available to the creditors for the purchase of War Bonds.' "You will understand also, as we also explained to Mr. Taylor, that any broad scale relaxation of the restrictions of the regulation would interfere greatly with the regulation's objective. In considering what could be done when the acute shortage of transportation facilities for fuel developed, the Board felt that it could provide exemptions only for those materials which are used wholly or mainly as insulation rather than as structural parts or exterior finish. There are a large number of materials which in greater or less degree contribute to fuel saving, many of which have been the subject of requests similar to your own, but if the Board were to exempt them all a substantial amount of credit would be left uncontrolled. There seemed on the whole to be good technical grounds for drawing the line at the point where it is now drawn by Amendment No. 6. "It is for these reasons that the Board has granted none of the requests that the Board has received for broadening the scope of Amendment No. 6. It should be understood that this reflects in no way on the value of your particular product or that of other products in similar position, or denies the proposition that their application brings about saving in fuel. Mr. Parry's suggestion to Mr. Taylor that you present your proposal in writing was designed, as Mr. Taylor doubtless explained to you, to make sure that your product would not be overlooked in case the general question should have to be reopened for any reason in the future, and you may be assured that your letter will serve this purpose very well. It seems to us to present the question very neatly." Approved unanimously. 2138 11/9/42 -7Thereupon the meeting adjourned. _f(*;AZEi-ecrotary. Chairrnn •
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