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1_390 A meeting of the Board of Governors of the Federal Reserve SYstem was held in Washington on Friday, October 10, 1941, at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak McKee 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: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on October 9, 1941, were approved unanimously. Telegrams to Messrs. Sanford and Hays, Secretaries of the Federal Reserve Banks of New York and Cleveland, respectively, Mr. Leach, President of the Federal Reserve Bank of Richmond, Messrs. Dillard, Stewart, and Powell, Secretaries of the Federal Reserve Banks of Chicago, St. Louis, and Minneapolis, respectively, Mr. Caldwell, Chairflari of the Federal Reserve Bank of Kansas City, Mr. Gilbert, President c)f the Federal Reserve Bank of Dallas, and Mr. West, Vice President of the Federal Reserve Bank of San Francisco, stating that the Board ap131 ' °ves the establishment without change by the Federal Reserve Bank °ft Kansas City on October 4, by the Federal Reserve Bank of San FranCO on October 7, and by the Federal Reserve Banks of New York, Cleveland, Richmond, Chicago, St. Louis, Minneapolis, and Dallas on 1391 10/10/41 -2- October 9, 1941, of the rates of discount and purchase in their ex'sting schedules. Approved unanimously. Letter to Mr. Hitt, First Vice President of the Federal Reserve Bank of St. Louis, reading as follows: "The Board of Governors approves the change in the Personnel classification plan of your Little Rock Branch as requested in your letter of October 7, 1941." Approved unanimously. Letter to the board of directors of the "Bank of Ste. Genevieve", Ste. Genevieve, Missouri, stating that, subject to conditions of mem, berthiP numbered 1 to 3 contained in the Board's Regulation H, the Board approves the bank's application for membership in the Federal Reserve System and for the appropriate amount of stock in the Federal Reserve tank of St. Louis. Approved unanimously for transmission through the Federal Reserve Bank of St. Louis. Letter to Mr. Curtiss, Chairman of the Federal Reserve Bank of reading as follows: "At the completion of the examination of the Federal Reserve Bank of Boston, made as of August 15, 1941, by the Board's examiners, a copy of the report of examination was left for your information and that of the dlrectors. A copy was also furnished President Young. "The report does not appear to contain any matters requiring further comment at this time. The Board will appreciate advice, however, that the report has been considered by the Board of Directors. Any comments you maY care to offer regarding discussions with respect to 1392. 10/10/41 -3- "the examination or as to action taken or to be taken as a result of the examination will also be appreciated." Approved unanimously. Telegram to the Presidents of all of the Federal Reserve Banks reading as follows: "Reg. W-92. A 24-month note for t650 secured by a second mortgage on a house is not subject to Regulation W if it is given by the purchaser to the seller as part of the purchase price of the house; and the note may be discounted by a bank under section 3(a)(2)(B). This Would be true even if plumbing fixtures and other listed articles had been incorporated in the house, because for the purposes of Regulation V; the sale would be regarded as the sale of a house and not as the sale of plumbing fixtures. "Similarly, the fact that a t1500 instalment loan is secured by a second mortgage on a house that was purchased within 45 days and which at the time of purchase contained plumbing fixtures or other listed articles previously installed, would not cause the loan to be subject to section 5(a) as a loan secured by a 'listed article Which has been purchased within 45 days'. The recent purchase is considered to be the purchase of a house rather than the purchase of a listed article, and the case would not be altered by the fact that the seller of the house might have purchased and installed the listed article only shortly before he sold the house and within 45 days prior to the loan. On the other hand, section 5(a) would apply if the mortgagor had owned the house for SOMB time and had purchased and installed the listed articles within 45 days prior to the loan, since in such a case the mortgagor's recent purchase would be a purchase of a listed article rather than the purchase of a house." Approved unanimously. Telegram to the Presidents of all of the Federal Reserve Banks l'eacling as follows: "Reg. W-93. The classification 'room-unit air conditioners includes portable units of one horse power or less." Approved unanimously. 1_393 10/10/41 -4- Telegram to the Presidents of all of the Federal Reserve Banks reading as follows: "Reg. Vi-94. In the case of a home improvement that is carried out as a single job totaling .",995, of which t550 is for a furnace and other Group D items while !.445 1 is for Group E items, the question has been asked whether a Registrant financing the entire job may divide the financing into P445 on an instalment basis subject to the requirements of RegulationW and t550 on a single-payment basis not subject to the regulation. "This is a single transaction and may not be divided by the Registrant in this manner." Approved unanimously. Telegram to Mr. Hays, Vice President of the Federal Reserve Bank of Cleveland, reading as follows: "Your mire October 6. Both questions covered by W-54. See also W-19 and W-28. Original lender could have renewed Pre-September credit once on any terms which it would have granted in good faith in the absence of the Regulation, and the other lender is in no worse position." Approved unanimously. Telegram to Mr. Stroud, First Vice President of the Federal Reserve Bank of Dallas, reading as follows: "Your wire referring to W-55. Regulation does not limit price which dealer may charge for an automobile but Prohibits extending credit in excess of two-thirds of bona fide cash purchase price or of total of items 1 through 4, whichever is less. Therefore, in your example, credit is limited to two-thirds of t900 even if dealer sells car for higher price, and this limit cannot be met by adding Pack to price and increasing trade in allowance. Regarding Your second question, effect of adding pack to finance Charges would apparently be to transfer part of purchase Price to finance charges and thus decrease amount of down Payment below one-third of purchase price. We would appreciate being informed if it should appear that substantial avoidance is occurring by this method." Approved unanimously. 1394 10/10/41 -5- Letter to the Presidents of all of the Federal Reserve Banks reading as follows: "The Board has received a small amount of correspondence indicating possible violations of Regulation Viand has no doubt that you have received a somewhat greater amount of such correspondence. SOMB of the Federal Reserve Banks have asked for advice as to the policy that Should be followed in dealing with such matters. "It has been felt that the most important thing to do at first was to get the purposes and provisions of the executive order and of the regulation understood and at the same time to bring about the correction of defects in the regulation through amendment as soon as possible. It has been only a little over a month since the regulation became effective and the trade and financial organizations generally have shown their desire to cooperate With the Board and the Federal Reserve Banks to the best of their ability. It seems very likely, therefore, that most of the instances which appear to be violations have occurred through inadvertence or through ignorance and in the circumstances that they have been remarkably few. "With these considerations in mind and recognizing the fact that some at least of the Reserve Banks have been Proceeding along these lines, the Board suggests that, When instances of apparent violations of Regulation VT of sufficient importance to warrant attention are brought to the attention of a Reserve Bank, the matter be taken up With the person involved, either orally or by letter as may seem best, proceeding on the assumption that the apparent violation was the result of inadvertence or of misunderstanding as to the meaning of the provisions of the regulation. It seems probable that in most cases this Will result in satisfactory assurances being received that there will be no repetition. If in any particular instance, however, after every reasonable effort along these lines haS been made, this result should not come about, and the instance appears to warrant Board consideration, it will be appreciated if you will give the Board all the facts in detail with your suggestions, including the advice of your counsel, as to the course of procedure that would seem to be advisable. "In your acknowledgment of this letter, any comments that you may have to offer will be welcome." Approved unanimously. 1.395 10/10/41 -6- Letter to Mr. Elmer J. Hertel, Manager of the Better Business Bureau of Oakland, Inc., Oakland, California, reading as follows: "Thank you very much for your letter of September 30, addressed to Dr. Carl E. Parry, regarding false and misleading advertising of terms of instalment sales which, if made, would violate the provisions of the Board's Regulation W. "Your request that the regulation be amended to include the regulation of advertising of instalment credit terms will be given consideration. "In the meantime, the Board wishes to express its appreciation of your cooperation with the Federal Reserve System in seeking to obtain compliance with the provisions of Regulation W." Approved unanimously, together with a letter to the Federal Reserve Bank of San Francisco transmitting copies of the Board's correspondence with Mr. Hertel. Mr. Clayton suggested that the Board authorize the payment of the cost of luncheon served in the Board's dining room today to Mr. Albert M. Creighton, Defense Contract Coordinator, Boston. Approved unanimously. Thereupon the meeting adjourned. /tNe.-earuk, oitAA_Qp Secretary.
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