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i'llnutes of actions taken by the 3oard of Governors of the ede 4.61-1- Reserve System on Friday, October 13, 1950. in the _ Board Room at 10:00 a ra PRESENT: Mr. Mr. Mr. Mr. The Board met McCabe, Chairman Szymczak Norton Poaell Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Vest, General Counsel Young, Director, Division of Research and Statistics Solomon, Assistant General Counsel Noyes, Assistant Administrator, Office of Real Estate Credit Shay, Assistant Counsel Jones, Chief, Consumer Credit and Finances Section, Division of Research and Statistics Pawley, Economist, .Division of Research and Statistics Fauver, Administrative Assistant to the Chairman • Lowds, Assistant Vice President of the Federal Reserve r St. Louis, who was assisting in connection with the administrac) ReCulation N, Consumer Credit, also was present. Were presented telegrams to the Federal Reserve Banks ri HA41 Irelan,3 u Richmond, Chicago, St. Louis, Minneapolis, Kansas City, as, , San Francisco stating the Board approves the establishth0Ut ch,geFederal Reserve Bank of San Francisco on 1C) by the Fb ed.e::: Reserve Banks of Cleveland and Richmond on 148S 10/13/5o —2— ()et°ber 11, by the Federal Reserve Banks of St. Louis and Minneapolis cin October 12, and by the Federal Reserve Banks of Chicago, Kansas CitY3 and Dallas on October 13, 1950, of the rates of discount and 11‘eilase in their eydsting schedules. Approved unanimously. Chairman McCabe stated. that, in accordance with the under— at the meeting yesterday, he talked with Mr. Keyserling, of the Council of Economic Advisers, last night and again th4 41°111ing regarding the terms to be prescribed in the proposed kenetent to Regulation (11)111i°11, the Consumer Credit. It was Mr. Keyserlingts Chairman said, that it would be much better at this time to on l'ecitice Inaximum maturities to 15 months rather than to 18 months. -*e reas°11 given for his position was that if a maturity of 18 months Wete - Prescribed the trade would regard the action as preliminary to ecilleti0n to 1 months and. there would, be a rush to buy before the inaturity5b alic)rter effective, and that, therefore, it would be te rabi to k'ee prescribe terms which, in the absence of further devel— :: tt s, hat c o l. : d be expected to stand for some time. Chairman 1.1cCabe r Keyserling also felt very- strongly that fiscal and Ncilt 41easures should be used to the fullest extent practicable in Present inflationary situation as a means of avoiding, if possi— ths institution of price and wage and other direct controls. ti Chairman McCabe then said that he was inclined to take the 'Itiehirig of -terms step by step but that he ra.s coming to feel that 1.489 -34 the -elation was to be fully effective it probably would be IleeesearY to reduce the maturity at least to 15 months. If such a 4t4n,-az to become necessary he was inclined to think it best to take it at°11ce in an effort to avoid direct controls. He made the furt4ler statement that he had not been able to contact Mr. Symington as fas cont emplated at the meeting yesterday. Idr. Thurston stated that Mr. Evans called him on the telelast evening from Atlantic City and expressed a preference th4t, if the Board as going to go to a 15 months maturity, the action clefel'red until next week. term There ensued an extensive discussion of various possible sets and Solomon stated that a effective dates during which t ec,cal amendment to the regulation aith respect to section 6(4)(b c°11cerning seasonal income payments was also recommended by staff in order to remove certain unnecessary restrictions on its 114. Following a further discussion, Mr. Norton moved that, effective October 16, 1950, the Board adopt an amendment to Regulation J, Consumer Credit, as follows: %au HAMENDIENT NO. 1 TO REGULATION e jY. the Board of Governors of the Federal Reserve System ePeets-egulation A is hereby amended in the following re13 e ffective October 16, 1950: to BY changing 1 100t in part 1 of the Supplement 'ead Par.2 C1 BY changing 115 per cent' and 165 per cent' in t2s Group B of the Supplement to read, respectively, and t75 per cent'. 1 490 So -Ii- "3. By changing '10 per cent' and '90 per cent' :I Part 11 Group C of the Supplement to read, rePeetively, 115 per cent' and '85 per cent'. p lit. By changing the maximum maturity stated in of the Supplement for articles listed in ' 3111) 1 A from '21 months' to '15 months'. pa 5 4_. By changing the maximum maturity stated in Grrt, 2 of the Supplement for articles listed in L, , °111) B1 Group C and for Unclassified Instalment "rts, respectively, from 118 months' to '15 months'. 6 ,0„, 3 of' By changing the figure 1 20 to 118' in Part Supplement. , 7. By striking out that portion of section 6(a)(1) een the words 'flow of income' and 1; Mere as a discussion of Mr. Norton's motion during which ri LieCabe :rithdrew to make a telephone call to Mr. Keyserling C°1111cil of Economic Advisers, and in the course of the disCha. McCabe called the members of the Board into his otti ee for a Private consultation. 1TP°n tie return of the members of the Board to the Board Room, Caoe raised the question whether, if instalment credit Pros . ,boed under Regulation were tightened in accordance with mc)tion, it would be desirable to extend the coverage of tion to include charge accounts and single payment loans. T . l'elas stated that he felt as he had stated at the meeting J, that if a maturity as short as 15 months were adopted for Ob 4Al1T 1 appliances, and furniture, it was probable that some com- klq t, 'vantage would be created for the instalment credit seller, "at s q be Ilch members of the trade would feel charge accounts also regulated to remove that discrimination. he also said that 1491 1V13/50 c -}- °Iithehasis of earlier comments of representatives of labor organIzati°113) it could be expected that they gould feel that such terns tor iristalment, credit :rould discriminate against the lower income Ns and that as a matter of equity charge accounts anu single pay411"°ahs also should be brought under the regulation. .fith refer- tO the timinp of action, Mr. Lewis felt that ;rhile the present covering instalment credit could be tightened effective ettob el" 16) it would not be practicable because of adninistrative ason to 'flake an announcement covering charge account credit or 8141e PaYllent loans before the latter part of next week and that, Itttle decided to tighten instalment credit terms and include 4ecolnits, it would be preferable to make both changes at the .kaetirrie3 tieel'I'ect in 7raich case he would suggest that an announcement be until the latter part of next week, making both changes ef- Noteorilionday, October 23, 1950. *. Kenneth D. Alliams, Acting Assistant Director, Division al'ch and Statistics, joined the meeting at this point. In r esponse to a question from Chairman McCabe, A . billiams 1 that at a meeting with representatives of labor organizations st in connection with the reinstitution of Regulation . they en the Eeneral position that regulation of instalment credit ,...tnated against the bier income groups and that, if there were eF:Allation of such credit, there should also be regulation of 1492 1°1W50 1 ch°geaccoluats e It was Yr. opinion that their opposition t°regIllation of instalment credit as such was stronger than their teelillg that charge accounts also should be regulated as a matter of eck4s In the ensuing discussion Chairman McCabe suggested that the be re quested to make a further study of the economic effects si 41claclininistrative problems of regulating charge accounts with the Ilkiel.48taliding that the matter would be considered again at a meeting IleXt wee, 4 It was also suggested that a telegram be sent to the l'I'N 'clerlts of all Federal Reserve Banks asking for their present views t° the desirability of extending the coverage of the regulation Charge accounts and single payment loans. This suggestion was approved unanimously. Cha ‘tfheth„ rit411 n McCabe went on to say that aside from the question harge account credit and single payment loans should be brought the c°verage of the regulation, he felt it would be desirable v.Lew all circumstances to tighten the terms of the present reg- 4 kCq Nkt el'lng instalment credit at this time. 'Jr , • ihurston stated that he had just received a telephone call var cLutan who said that as a courtesy to Mr. Evans he felt vi 1-th respect to amending the regulation should be deferred until cLY, October 17, when Mr. Evans would be present. Chat rITIan McCabe stated that inasmuch as Mr. Evans had been 1493 1°/13/50 -7i nt, at the meeting yesterday afternoon and had made a recommenda- 4"0r t iphtening of the regulation by reducing maturities to 18 41148 but had also stated that he would concur in a maturity of 15 1°148 if the Board so decided, and in view of the fact that Mr. V°(lairlan Previously had stated he would vote to approve whatever terms Irere N:o mmended by Mr. Evans, he (Chairman McCabe) felt that it would be Pl'erel 'able to tak action at this meeting. At the Chairman's sug!cotton, Mr. Thurston called Mr. Vardaman on the telephone to explain the Position Mr. Evans had taken and to ask whether he (Mr. Vardaman) ki.Q4 'AVISI1 to have a meeting this afternoon to consider the matter 44‘ther. 1114111all After talking aith him, Mr. Thurst on reported that Mr. I still felt that action should be deferred until next Tuesday 114414'1 Evans could be present and that if the matter were voted 114311 today he would wish to be recorded as voting "no". Thereupon, Mr. Norton's motion Was put by the Chair and approved unanimously, with the request that Mr. Thurston advise Messrs. Evans and Vardaman of the action and state that it was taken with the understanding that Mr. Evans would concur and that if that was not the case the motion would not become effective and the matter would be reconsidered by the Board. °I"liman or the ()11 qsa, McCabe then referred to the discussion at the meet- eXe CUtilje committee of the Federal Open Market Committee Wokici be 'Y$ October 11 1950, and to the understanding that a letter Prepared which he, as Chairman of the Federal Open Market 494 "A3/50 C°111nittee -8and of the Board could send to Secretary of the Treasury 4lec°11cerning policies of the Federal Open Market Committee and the 8°41'd of Governors with respect to the need for credit restricti°111 Re then presented a draft of letter which had been prepared f01-10Ars: ycm :Two weeks ago Mr. Sproul and I discussed with 4;4'he problems of the Treasury and the Federal Reserve ive n in the fields of debt management and credit polajl'e as Parts of the broader anti-inflationary policy elialPr ram of the Government. At that time, the Fedveysd°Pen Market Committee aas in session and we con1,A.174 to you its thinking on open market operations, as recw,i as the thinking of the Board of Governors on reserve yolCV'ements and selective controls. Your views, which kde; " 1 11 exPressed to us, were in turn conveyed to the t4la.C" Open Market Committee, as was your suggestion matt Y°11 would like a couple more days to think over the e s we had talked about. PIlle Federal Open Liarket Committee, in response to Corrinir i4eP,°rt , of our conference with you, asked its Executive 1111,-"iee to carry forward these discussions, and it was zoll :P°nse to this direction that Mr. Sproul and I again eciiii u a conference with you before a meeting of the Ex04 n-TYe Committee of the Federal Open Market Committee ,/?-Lober 5. In that conference, we told you of the lulazirno ' 3111 , 1,3 view of the Federal Open Market Committee, and t4lIten- zoard of Governors, that further action should be brake in the field of generpl credit control to put a tairc uPon the prevailing ease with which banks can obtold l'eserve funds for further credit expansion. You N41101,sOf g Your concern about the success of the forth'lave' avings Bond Campaign and of the discussions 'which ci: ' ole een started to put in motion voluntary action by the illeetircial banks to restrain credit expansion. At that ()Pizoril g You also said that you would like to have an ;;.tv.Inity to talk with me again on the following Monday. 11 and I have since talked two or three times on , the,eie u„ sU r,Ci of Phone and, in the light of these conversations '13erl/ °Ur earlier conferences, a meeting of the Federal -;arket Committee was called for ;iednesday, October ' t that meeting your views, as they had developed in 1495 ivivso —/— „ur talks, were given fully and frankly to the 4`Tirimittee. As you know, the Committee nlso expressed ;:3 w illingness to have you present these views in prr , sOn if You so desired. You decided, and I think cjPerlY, not to deviate from the established proWhich we have adopted for mutual consultation. Ids "After giving thoughtful consideration to your oI rs, the Committee again canvassed the business and ofeclit situation as developed by the reports and studies berits research staff and through the contacts of mem8 °f the Committee in various parts of the country. ei seemed clear to the Committee that, despite some pregils or prospects of moderate abatement of inflationary thesstlres which might be detected in certain fields, irlaunderlying forces in our economy are still strongly Qowati°hary and will be accelerated by increasing be ':rnment expenditures as the rearmament program really 81Z113 to bring its huge demands upon our. economy, unless krtill i fiscal policies such as you have advocated and credit restraints are adopted. ,The President announced the anti-inflationary poithe Government when, in the ilidyear Economic Re') he stated that: 'First of all, for the immediate situati°11, we should rely in major degree upon fiscal and credit measures. These general measures can be helpful not only in restraining inflationary Pressures, but also in reducing the civilian demand for some specific products, such as auto°1311es and housing, thus making available for '''cessary military use a larger proportion of an ?,"treadY short supply of some critical materials. 'ue more prompt and vigorous we are with these general measures, the less need there will be for all of the comprehensive direct controls which inv?Ive the consideration of thousands of individuals s-Ltuations and thus involve infinitely greater t administrative difficulties and much greater intheelrferenee rith individual choice and initiative.' ui44 -ight of this policy and of the statutory responsithat, ththe of Federal Open Market Committee, which provides t. tior , e tine, character, and volume of open market opera' keree s all ll be governed with a viea to accommodating cornhe and business and with regard to their bearing upon general credit situation of the country, the Committee 1496 1V13/50 -10- that it had no option but to proceed with the we had advised you orally, two weeks ago, that tnad in mind. Since the Treasury will have no reeundIng operations until December, the present is an ecially propitious time for the System to proceed evth this somewhat more restrictive open market policy, i en though the action results in a moderate increase en short-term rates. Any resultant increase in the m() anst3 of carrying the public debt will be directly saved, times over, if it helps to curb the rising costs pe• o °vernment procurement, and the benefits to the ' of the country, of course will be greatly multiPiled Z kge realize that the action we are taking in our n " market operations will need to be supplemented in ilder to exercise effective restraint on the mounting inopev, pressures that threaten the economy. Conse04 7, we are unanimous in the conviction that we can we Y meet our responsibilities by going ahead with the re Pc)ns at our command, including increases in reserve allrrements, application of real estate credit controls, sin 6ightening up of consumer credit regulations. eerelY believe that the combination of these restraints er• feredit expansion will have a profound effect in the N,°11t to hold the line until the heavier taxation promised Ilrct year begins to bite into incomes. feet °Ie can assure you that these actions will not afout tthe maintenance of the 2 1/2 per cent rate for the c(Zi anding longest term Government bonds, and we are to i nced that this further evidence of a resolute will Of ti;ght inflation and to protect the purchasing power 130"e dollar will promote, not discourage, the sale of bonds. No one knows better than you that confidence in 04 ends) as well as all other types of savings, is based (Tfldence in the purchasing power of the dollar. brin : Altbough in this instance we have not been able to With' 4bout a complete meeting of minds in our discussions both resPect to System policy and debt management, we have tie," l!,horoughly considered all of the aspects of the difto Problems confronting us and we have earnestly sought we ' ciohl-eve e that accord which I know you desire as much as eorNm,]-4 meeting our respective responsibilities. At your eZole we would like to sit down with you to explore f al the problems for which we both seek solutions that in the best interests of this country." Approved unanimously with the understanding that it would be sent to the Secretary of the Treasury A 10/13/50 ig(limy Lir, it -11when it had been approved by all members of the executive ccmnittee of the Federal Open Market Committee. The meeting then recessed and reconvened at 4 p.m.. with the 3;te attendance as at the close of the morning session, except that 141eR-81 Evans and Vardaman were present. Chairnan McCabe stated that inasmuch as word was received Nuvr ' 41% Evans after the morning session that he would feel forced tc) Irote 'gainst the action taken at the morning session to reduce to 15 inoriths . he maximum maturity prescribed under Regulation for 41.1t°111°13iles, appliances, furniture, and unclassified loans, and in (3r MI% Vardaman's statement that he would concur in whatever Icc)Ilinlerldation Mr. Evans made, the meeting had been reconvened to con%the matter further. The Chairman then reviewed the discussion 41: le 111°rning session and his conversations with fdr. Symington on be 5 and with Mr. Keyserling yesterday and today. He stated t altholigh Mr. Symington had not been available when he tried to ti tonh With him yesterday, he had strongly urged at a meeting (3etober 5 : :7 substantial tightening of terms under the Regula11,1 tha thatix it Keyserling stated over the telephone this morning Were left to him he would set terms of 1/3 down and 15 InatilritY on automobiles and that he did not care particularly Illaturities for appliances and furniture were 15 or 18 months. MI% Evans stated that he had spent last evening and this 1498 10/13/50 -12- "g attending the Tri-State Convention of automobile dealers tl atLantic City, New Jersey, that the dealers felt strongly that the present terms of the Regulation were having an effect in reducing tlifor automobiles, and that he had informed them that they could eNt that the Regulation would be tightened although he did not 4.3'.17}leh or by how much. Er. Evans added that, for reasons which he stated 'he Was still in favor of an 18 months maturity if the Regula4°11 were to be amended at this time, inasmuch as he felt that the )alshoUld have additional facts to show the present Regulation /faellcrt, having sufficient effect before adopting more restrictive , He also stated that the automobile dealers with whom he dis- the matter felt that they had supported the Regulation and that he was somewhat concerned that there would be substantially less 'vett fo, -tt if the terms were tightened too drastically at one tirae. Mr* Vardaman said that he still thought it would be extremely ‘Q.sed to reduce the maturity to 15 months at one step, especially 1411"a the &)oard were to move simultaneously in other directions such flclusion of charge accounts and single payment loans. ttl_ Chairman McCabe responded that there had been an extensive .Lon at the morning session of the possibility of including ' ' Q ce°1-Int3 and single payment loans, that it was felt there might 50111e c °mPetitive disadvantage if instalment credit terms were severelY and charge account credit not brought within the 1499 10/W50 -13- se Of the regulation, and that he had suggested that the staff stAitt-the matter further with a view to ascertaining the economic effects and administrative problems of including charge accounts obta 1 in n8 the current views of the Federal Reserve Banks as to a 111°11e and that it be considered by the Board at a meeting next week, At the conclusion of the discussion, Mr. Norton renewed the motion made by him at the morning session. This motion was put by the Chair and carried, Messrs. McCabe, zymczak, Norton, and Powell voting "Aye" and -Messrs. Evans and Vardaman voting "No" for the reasons previously expressed. By the same votes, approval was then given to the following telegram to the Presidents of all Federal Reserve Banks and Managing Officers in charge of all Federal Reserve Bank Branches: Re "The Board has today adopted Amendment No. 1 to ati°n a, effective October 16, 1950, and it al ll be ilyV eciated if you will print and distribute copies to erested persons in your district. re", "The press release which the Board is issuing for texiase in morning papers of October 14, 1950, and the of the amendment, are as follows: No The Board of Governors announced today amendment r(41I:-.t0 RegulationV, effective Monday, October 16, rjr.ol g the maximum maturity on instalment credits to 15 months for automobiles and from 18 to c),ITILhs for appliances and furniture. at ohe minimum down payment on automobiles remains ere third; the down payments on appliances are infrom 15 per cent to 25 per cent and on furniture 01 : 3 0 Per cent to 15 per cent. The maximum maturity th.,„ 'e improvement credits remains at 30 months and 'illmum down payment at 10 per cent. Down payments 15(K) 1043/50, -14- now be required on all articles costing 450 °r more instead of 4100 or more. 4The terms which will be required under Regulation are as follows: Down Payments Maturities 15 months 33-1/3;6 down Automobiles Television sets, radios and other major durables 15 months 25% down Furniture 15 months 157,; down Home improvements 10; down 30 months Unclassified loans 15 months ch . In commenting on today's revision of the Regulation, rman McCabe said: of IThe Board's action was based upon consideration in l'ePorts from Federal Reserve Banks and other sources c;e field in all parts of the country which reflect ' ai lnued upward pressures on prices in the five weeks sZe the reissuance of the Regulation was announced on -s 113er 6, 1950. :thile the intensity of these pressiii;" t6 on the market varies somewhat from time to time ' ar 4act remains that the underlying inflationary forces ere Unabated and have been augmented by the continuing areas of bank credit as well as credit in specific pl.'s, including instalment credit. More vigorous ap4 , ation of regulation of instalment credit, coincident ia :Lthe imposition of the real estate credit controls, illea'"erefore in order so that these and other credit may most effectively serve in the effort to hold the sitelne until further fiscal measures, as nearly as poscred%°n a pay-as-you-go basis, and such additional measures as may be necessary can be brought into .This is in accordance with the President's Mid-Year N:."'mle Report of July 26 in which he stated that first alIct ee should be placed upon fiscal and credit measures cont'at this would make less necessary resort to direct, Ineritr°1s. Like:rise, the action is pursuant to the stateNr ,°f August 18 in which the Reserve System declared its tlalVe to use all the means at its command to restrain expansion of bank credit. Power Prospective pressures on productive capacity, mansuPPlies, and the price structure arising out of cre "cl defense and military aid programs will be inof ZT,11161Y heavy. Today's action was taken in the light e SYstem's statutory responsibilities, lopth under the Ped ' eral Reserve Act and under the Defense Production Act, -Tr 1.501 1V13/50 -15- : Ito reduce inflationary forces particularly in ;arious credit areas; to help maintain the purchasing Power of the dollar; and to assist other agencies in -811ring that the needs of the defense program are a*Mately met.' "The text of the amendment is attached." By the same votes, approval was also given to the following statement for publication in the Federal Register: 195„, "Section 709 of the Defense Production Act of Provides that the functions exercised under such shall be excluded from the operations of the Adtohlstratiye Procedure Act (60 Stat. 237) except as the requirements of section 3 thereof. and "Special circumstances have rendered, impracticable co c ontrary to the interest of the national defense tr1:11tation with industry representatives, including association representatives, in the formulation Of by e above amendment; and, therefore, as authorized is t"e aforesaid section 709, the amendment has been ' lied without such consultation." At tl°11 thi point all of the members of the staff with the excep- C)r Llessrs. Carpenter, Sherman, and Kenyon withdrew, and the 4eti°4 stated 'aith respect to each of the matters hereinafter re- t0 was taken by the Board: 4nute5 of actions taken by the Board of Governors of the 1 Res erve System on October 12, 1950, were approved unanimously. °.t the llemorandum dated October 11, 1950, from Mr. Young, Director th Division of Research and Statistics, recommending an increase ba eic saary of •l Miss Gretchen L. Geigenmueller, a clerk4teriore.pher in that Division, from 42,610 to 4qive October l, 195" 2,810 per annum, ef- S 2 1°/13/5o -16Approved unanimously. Memorandum dated October 12, 1950, from Mr. Millard, Director the Division of Examinations, recommending increases in theb . 'slo annual salaries of the following employees in that Divi16311) effective October 15, 1950: N 11.14.1.e tett "e 11. Clark j* I -Laugher Salary Increase From To $2,677 2,450 2,b50 Title Stenographer Stenographer Approved unanimously. • recto_ Llemorandum dated October 12, 1950, from Mr. Millard, Div Of the Division of Examinations, recommending that the temPerarij , "finite appointment of Mrs. Louise S. Anderson, stenographer, bee ) (tended °I1 a permanent basis, and that her salary be increased ()In t? '65° tO $2,875 per annum, all being effective October 15, 1950. Approved unanimously. Mem 4vet,e4. orandum dated October 13, 1950, from Mr. Carpenter, 'iary to v-L the Board, recommending increases in the basic annual the following employees in the Office of the Secretary, ye O ctober 15, 1950: a Le e • t0 ticShane ' 211 cIntosh Title RecordsClerk File Clerk File Clerk Salary Increase To From $3,37 $3,275 2,810 2,730 2,810 2,730 Approved unanimously. -"r -171Jemorancium dated October 13, 1950, from Lir. Carpenter, aecretarY of the Board, recommending increases in the basic annual 3alaries of the following employees in the Office of the Secretary, effective October 15, 1950: b a rt", Agadjanian 'Lea 411zabeth E. Van 'vagner .e Title File Clerk File Clerk File Clerk Salary Increase From To u2,97o 4;77To 2,610 2,45o 2,610 2,45o Approved unanimously. Letter to Er. Lewis N. Dembitz, Board of Governors of the R eserve System, .ashington, D. C., reading as follows: part. "Pursuant to a request from the U. S. Deto Prof State, the Board has authorized you ti,vn oceed to London for a period of approximately thisni+cmths, beginning October 14, 1950. During Ge you will serve as principal adviser on debt problems with the U. S. delegation, bY Ambassador Douglas, which will begin con1.8812ti° 1s with the British and French to discuss : fel s, including German economic problems, re0 them by the three Foreign Anisters. ton It is understood that the Board will continue thEn Your salary during the period involved, but and - the Department of State will bear all travel se °ther expenses connected with the loan of your plis," - I?es, upon the terms of travel regulations ap-%le to the oersonnel of that organization. Of ti,41t is requested that you retain the original laleletter, and that the file copy, after being d by You, be returned to the Board's files." Approved unanimously. Letter to Mr. 4illiams, President of the Federal Reserve 44k (1.1 Philadelphia, reading as follows: I54 4)/13/so -18- 5 an-(1"Reference is made to your letters of October October 10, 1950, submitting recent market data and requesting the Board to approve an increase of 0 4J:p' x 0 1mately 8-1/3 per cent in the salary structure the Federal Reserve Bank of Philadelphia and in-1-dent thereto to raise the salaries of four junior 17ficers and to increase certain employees above the azzimilms of their salary grades. mi . "The Board of Governors approves the follosing tsr lum and maximum salAries for the respective grades Nur the Federal Reserve Bank of Philadelphia, effective ember 1, 1950: Minimum Laximum Grade Salar Salary y_ 1 $1260 a680-2 1440 1960 3 1680 2280 4 5 6 1980 2270 2580 7 8 9 10 11 2940 3300 3700 4100 4500 12 13 5000 5500 14 15 6100 6700 7400 2680 3060 3520 4020 4500 5000 5500 6loo 6800 7500 8200 9100 9900 16 eraloi "The Board approves the payment of salaries to the ti;r1Tes, other than officers, within the limits specizN-4-10r the grades in which the positions of the realle'dj-ve employees are classified. It is assumed that thOlPloyees whose salaries are below the minimum of be ) 1--; grades as a result of the structure increase will ticught within the appropriate range as soon as prac' - -ie and not later than December 31, 1950. ot !:The Board of Governors also approves the payment cl'arY to the following employees at the rates inaNC.;ed; which in the case of Messrs. Mactague, Rodgers, 2ederickson are above the maximums of the grades '110h their positions are classified. Salary ,. 11.2119_ Title 4111-S. Magee ;04333.00 * Medical Director Ca therine Bellas 1482.00 * ,iaitress L. F. Lohmuller 1462.00 * i;aitress 15O5 1M-3/50 -19"Name Reba L. McLaughlin Samuel G. Lactague G. C. Rodgers Title Sala 2.00 * Waitress 3256.11 Batch Clerk Registered Mail 2780.28 Clerk Recordak Operator 2328.04 A. H. Frederickson art-time basis of "The Board of Governors also approves the payment di 8alarY to the following officers at the rates inWhich, which, according to your letter of October 5, :19 are the rates which were fixed by the directors, the period November 1, 1950, through April 30, 1951: Name Title Annual Salary RoY Hetherington Assistant Cashier 47,500.00 Henry J. Nelson 6,700.00 Assistant Cashier Edward A. Aff 5,960.00 Assistant Cashier Ralph E. Haas 5,960.00" Assistant Cashier *p Approved unanimously. esel,:_sett,er to Mr. Whittier, Federal Reserve Agent of the Federal O. Philadelphia, reading as follows: To "In accordance with the request contained in ' ap letter of October 5, 1950, the Board of Governors ser3ves, effective November 1, 1950, the payment of ser rle8 to the following members of the Federal Revegent's Department at the rates indicated: Title Annual Salary .urank-Rehfuss Assistant Federal Re,000 serve Agent J. Brake Alternate Assistant 4,160 Federal Reserve Agent Glendon M. Burr Alternate Assistant 5,5)42" Federal Reserve Agent J. Approved unanimously. Lotter to Mr. Meyer, Assistant Vice President of the Fed-4.ve -Jan of Chic::ro, readinp: as follos: 1950 "Reference is made to your letter of October 5, Ncni 3 and to Mr. Chalfont's letter of October 2, 1950, -estinE the Board of Governors to approve an increase 1506 1°/13/so -20- .1 °.CaPproximately seven per cent in the salary strucpure of the Federal Reserve Bank of Chicago and the etrdit Branch. , "The Board of Governors approves the following f In:41111M and maximum salaries for the respective grades 11°r tho Head Office and Detroit Branch of the Federal serve Bank of Chicago, effective November 1, 1950: Minimum Maximum Grade Sala Salary 1 1.20 42160 2 1800 2400 3 1980 2700 14 2220 3000 5 6 7 8 9 10 11 12 13 14 15 2460 2760 3100 31400 3800 4200 4600 5loo 5700 6300 6900 7500 3300 3700 14200 460o 5100 5600 6200 6900 7700 8500 9300 loam 16 e/11101 "The Board approves the payment of salaries to the %ees, other than officers, within the limits speci-41or the grades in which the positions of the re: ive employees are classified. It is assumed that tileif131°Yees whose salaries are below the minimum of ' be -13 grades as a result of the structure increase will ticiaght within the appropriate range as soon as prac-'.'-e and not later than December 31, 1950." Approved unanimously. Letter to Mr. Jiltse, Vice President of the Federal Reserve • Or N York, reading as follows: " "There is enclosed, for your information and of the report of examination of the 4a of--Lice of The Chase Bank, New York, New made qtir : 411gust 15 1950, by examiners for the Board of Dolt and a copy of the letter transmitting the reMr, Winthrop W. Aldrich, Chairman df the Board 44143k4 copy 150'7 10/13/50 -21- of L Directors arectors of The Chase Bank." Approved unanimously. ot New. Letter to Mr. Sproul, President of the Federal Reserve Bank tork, reading as follows: "This refers to your letter of July 7, 1950, with bir its enclosures, regarding the proposal made ly: ) 'he President and the Chairman of the Board of firtee+t17s of French American Banking Corporation tia Corporation be relieved from the restricss°2.re8pecting the making of loans contained in 8 e.;:ln3(f) of the Board's Regulation L and at the 130 ;,,I'dme be permitted to retain as members of its bo,';' of directors persons who are directors of mem-- oanks 0 pr "It is our understanding that the Corporation's tol sal has been made because it wisheS to be able ill flake call loans and loans to brokers and dealers ma.:°vernment securities and acceptances so that it tC)btain a higher rate of interest on such loans e:t, it does on short-term Government securities and, is the same time, preserve its liquid condition. It neeStated that such a higher level of earnings is abinarY to the Corporation in order that, it may be aa Pay the same rates of interest on time accounts Paid by its competitors on such accounts. thi Ihe Board has given careful consideration to the Matter and feels that it should not further relax r,Pro hibitions of the law with respect to interlockby an amendment to its Regulation L whie ire aa ;7°111d permit directors of member banks to serve alle:-rectors of French American Banking Corporation dora at the same time, permit the Corporation to make estic loans. exce , ! il As You kno:r, Congress expressly authorized an res'"1°n to the prohibitions of the Clayton Act with bartet to interlocking directorates between member tor2 and corporations engaged in international or banking which have entered into agreements with Pecie, ° ,al'd of Governors pursuant to section 25 of the that Reserve Act; and it may reasonably be supposed cc:e it 7fas not the intent of Congress to permit such Pti°11s in cases in which foreign banking corpora- 1508 10/13/50 -22- : ti, iens are not restricted as to their operations and ;4'.2ect -' to certain supervision by the Board of Governors A-7er pursuant to section 25(a) of the Federal Reserve , s' or by reason of an agreement with the Board under --c' acn 25 of that Act. Am .4When the agreement under section 25 between French theriean Banking Corporation and the Board was cancelled, p e BC)ard, as you know, amended its Regulation L in 1946 ths purpose of permitting interlocking directorates rn4 Ileen member banks and the Corporation; but, bearing in ;'-end.that foreign banking corporations organized under tret1c)n 25(a) of the Federal Reserve Act are prohibited St°n1 carrYing on any part of their business within the United orates f except as may be incidental to their international to -T?reign business, the Board felt that it was desirable ii-0-1.11i.t the exception granted by the amendment to cases loa lhioh the corporation 'does not receive deposits or make ln the United States except as maybe incidental to clam flternational or foreign business.' In all the cira fisZces, the Board feels that it cannot properly approve thi --'"er amendment to Regulation L which would eliminate Z '8 restriction." Approved unanimously. Letter to Mr. J. J. McGuire, First State Bank, ,Jebster City, 3 ding as follows: Main : This refers to your letter of July 26, 1950, the 'Sreferred to the Board by the Comptroller of clisel : UrrencY on September 1, 1950, regarding a cashier's 1300 ; - returned by the Federal Reserve Bank of Chicago to n-14.1ece the national bank which issued the check wished tor e an exchange charge when the check was presented P?Yraent. ex„, "Under section 13 of the Federal Reserve Act no 14t 114ance charge can lawfully be made against a Federal Iri4rve Bank; and the courts have interpreted this proas meaning that a drawee bank is not entitled ;to even exchange charge against a Federal Reserve Bank eheci though the Reserve Bank is not the owner of the ? ,,ederc.,-1-11 , t only an agent for collection. Accordingly, a c)1, serve Bank allich receives a cashier's check is d;°'-lection and which finds that the bank on which it a4n will charge exchange upon payment of the check 1.509 10/13/5o -23- “hm- no alternative but to return the check unpaid to 8 forwarding bank. dr "Apart from the fact that a check on which the alwee bank charges exchange cannot lawfully be collected thr gh the Federal Reserve Banks, there is no provision irarederal law which specifically prohibits any bank from alriP°8ing an exchange charge. However, as you are doubtless thare, section 528.63 of the Code of Ioaa (1946) requires : I checks dramn on any bank or trust company organized pa, e, the laws of the State of Iowa shall be cleared at °Y* the bank or trust company on which they are drawn; 1Z this statute should, of course, be considered by you cid1ng whether or not it would be legal for your 4: to charge exchange on cashier's checks which are -sued by it.” Approved unanimously. ktlicof: elegram to Mr. hnoke, Vice President of the Federal Reserve ew York, reading as follows: Apr, "Board approves extension of expiration date to 1951 of existing credit arrangement by your 8,17141-th the Commonwealth Bank of Australia under the ore terms and conditions outlined in our wire to you ia October ,, 1949. It is understood that the amount or :” to exceed 415,000,000 in the aggregate at any outstanding, against gold held under earmark slicnir Bank. It is further understood that if any be ;;,toarl or loans be made, the usual participation will -4-1.ered to the other Federal Reserve Banks. 13arfl„ "The Board notes that in advising the Commonwealth ar ; of the extension of the expiration date of this a:gement you propose to simultaneously point out that Ikest for further reneaal beyond April 30, 1951, t not receive favorable consideration. "State Department notified." 13,,,,t3 ' Approved unanimously. -gl'am to the Presidents of all Federal Reserve Banks, gas follo-vq: °A loan to a doctor or daatist to purchase medical 141/113/50 -2)4- to dental equipment is a 'loan for business purposes f a business enterprise' within the meaning of sec(311 7(b) of Regulation .J if the doctor or dentist is 4'gaged in performing services for various patients for Vjdual fees. However, a doctor or dentist perform: services only on a regular salary basis cannot be Ilsidered a 'business enterprise' under section 7(b)." Approved unanimously. rea. Telegram to the Presidents of all Federal Reserve Banks 3 cr as follows: loan "Question has been received concerning instalment 01,, of more than $2500 but not in excess of 'i)5,000 'ained from a lender to pay off an obligation previ'84 incurred for the purchase of an automobile. the "Unless the loan is reasonably separated from by Previous obligation in the sense of being separated : 1)1 reasonable period of time and unrelated by any 111;ia' ,, l rangement, the loan would be subject to the regto'on L as one 'the proceeds of which are to be used proPurchasel an automobile. However, if the loan can aetP .erlY be treated as separate from the earlier transthe loan would be exempted under section 7(a). It is recognized that this may present some 3) (,i:tzlibility of evasion but it seems preferable, at t 0r he present, as a comparatively simpler rule to s rti!: t°-L-Loa than some others that might require complete and-tE of original purposes of credits in this case idell°vuers. However, Board would be interested in evt e of evasion developing in this connection, par'Y advertising directed at exploiting the rule, deveit would appreciate being kept advised of any such side °Pments in order that the matter might be reconot , red if that should seem to be desirable in the light qeve lopments." Approved unanimously. 14e111°randum dated Seotember 2, 1950, from Ur. Carpenter, Of the Board, recommending that $275 be added to the ap- PI'late L'Ildget account of the Office of the Secretary to cover es- 1°/13/50 —25— tifliaf -"eu necessary expenditures for stationery and supplies during the 1, c"" four months of 1950. Approved unanimously. i ,T emorandum dated October 11, 1950, from Mr. Vest, General 04311risei 3 , 195° bud recommending that the books and subscriptions item of the get for the Legal Division be increased by'41600 to cover the 'eased cost of books and subscriptions required in order to 144.h.t. 1""airl the Law Library. Approved unanimously. •
@FedFRASER