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1.34
I
I 0
. •
Minutes of actions taken by the Board of Governors of the
-al Reserve
illthe
System on Tuesday, October 171 1950. The Board met
Board Room at 10:35 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
McCabe, Chairman
Eccles
Szymczak
Norton
Powell
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Of
Carpenter, Secretary
Sherman, Assistant Secretary
Kenyon, Assistant Secretary
Morrill, Special Adviser
Thurston, Assistant to the Board
Riefler, Assistant to the Chairman
Thomas, Economic Adviser to the Board
Vest, General Counsel
Nelson, Director, Division of Personnel
Administration
Solomon, Assistant General Counsel
Shay, Assistant Counsel
Jones, Chief, Consumer Credit and
Finances Section, Division of Research
and Statistics
Fawley, Economist, Division of Research
and Statistics
Allen, Personnel Assistant, Division
of Personnel Administration
Lewis, Assistant Vice President of the Federal Reserve
St. Louis, who was assisting in connection with the consumer
re
gulation, was also present.
Mr. Norton stated that Mr. Evans had mentioned to him that
Ilettliderst
ood in connection with the restrictions on real estate
linder
Regulation X, which became effective October 12, 1950,
that
offices of the Veterans Administration remained open all day on
4t1INay,
October
14, to
receive applications to be processed under
te/ta
available before the regulation became effective.
He raised
C4
1°117750
-2-
the question whether such action represented proper coordination of
the Program for restraining housing credit. Mr. Norton also stated
that the
action of Mr. Foley, Administrator of the Housing and Home
l'14111" Agency, in liberalizing the regulations applicable to loans
gliarexiteed by the Veterans Administration announced in the press
late Fri,
uay
afternoon, October 13, without consultation with the
at)arci) raised
the question of proper coordination of the program.
latter action, he said, lifted the
25 year maturity provision
that
re
had been
applicable to Veterans Administration loans under the
ati°n as announced effective October 12, to provide that any
Who indicated that he could not meet the payments imposed by
a 2n
c'r 25 year
maturity would be permitted to have a maturity of as
trIttQh a8
30 Years.
Mr. Vest stated that Mr. Noyes, Assistant Administrator of
the off.
lee of Real Estate Credit, and Mr. Baumann, Assistant General
0_
'
9141sel_
3 were
attending a meeting this morning arranged by the
_
dna
Home Finance Agency with the Veterans Administration, and
t
hat ani
c)ng other subjects he understood the two points mentioned by
Nc3rtan
were to be discussed.
There followed a discussion of the matter during which it
4greed that further consideration would be given to it in the
4()Ye
4' information developed at the meeting attended by Messrs.
arid
Baumann.
A
1°A7/so
-
C
_3_.
In accordance with the understanding at the meeting on
°QtDtxi,„
'13, 1950, there was a discussion of the question whether
char,.
0 accounts and single payment loans should be brought within
the.
'
Cope of Regulation W (Consumer Credit).
Mr. Lewis stated that Mr. Evans, who was unable to be
NNit
at this meeting because the hearings in connection with the
Clan() Act
proceeding against Transamerica Corporation, were in
'
Plestres
8, questioned very seriously the advisability of expanding
Cope of the Regulation in this manner, at this time.
Mr. Lewis and other members of the staff expressed the view
that i" all the circumstances and in view of the extremely strong
4action
to Amendment No. 1 of the Regulation announced last week,
it
be unwise to take such action now. It was Mr. Lewis' view
the action would
not only result in further impairment of public
4111)Port of
the Regulation, but that there were also technical- prob440 that
- would have to be given further consideration before the
'441510 Was
made.
t),0111
to
I/4ring the ensuing discussion, the view was expressed that,
justification
a 13111‘elY economic standpoint, there was little
of such credit under the Regulation, although there
0 ght be some
basis for regulating the use of charge accounts in
•
t° meet the possible criticism that the regulation of inellt credit was discriminatory against persons in lower income
1V17/50
-4-
grt°11Ps who were not likely to have charge account credit facilities.
It
-8 also stated that, except for its psychological effect, the
—4111 of charge account credit would have no restraining influe
nee during the forthcoming Christmas shopping season inasmuch
'ethe e
arliest possible effective date would be November 1, 1950
Ithich
"vtAld not result in freezing nonconforming charge accounts
January 10, 1951.
Following the discussion, it was
agreed that no action would be taken
at this time and that the matter would
be given further consideration at a
meeting on Tuesday, October 24, 1950.
taee .
a.
Messrs. Lewis, Shay, Pawley, and Jones withdrew from the
at this point.
Mr. Carpenter stated that Mr. Evans felt that it would be
4stra,
°le at this meeting to discuss the question of an increase in
kkber
bank reserve requirements, as discussed at the meeting of the
Federal
°Pen Market Committee on October 11, 1950, and at earlier
ke
-se of the
Board.
It was the view of all members
of the Board who were present that the
question was one of timing, particularly
in relation to developments in the money
market in connection with actions authorized by the Federal Open Market Committee, and it was agreed that the matter would be taken up for further consideration at a meeting on Friday, October
20, 1950.
tfr.
Cherry, Assistant Counsel, joined the meeting at this
1°A7/5o
Point.
—5—
Mr. Szymczak referred to a report of the retirement committee
"IllaBoard of trustees of the Retirement System of the Federal Re—
serve
'las dated September 18, 1950, outlining a program for in—
tegt ,.
atang
the benefits of the Retirement System of the Federal Reserve
kite
with those provided in the amended Social Security Act which
144 b
j
e applicable to employees of the Federal Reserve Banks on
0444r3r1, 1951. He also referred to a memorandum from the Division
Administration dated September 25, 1950, with respect
te l'ers°rInel
the
Proposed integration and to a supplemental memorandum pre—
kred
crY the Division under date of October 6, 1950, presenting ad1
g4. information with respect to questions arising in connection
th the
Proposed integration. A copy of the memorandum dated
t°ber 6)1950 had been sent to each member of the Board before this
4ettte.
ret
The first question, Mr. Szymczak stated, had to do with a
ion by the Retirement Committee that members who attain
40 65 /14R41.1.
ing or subsequent to the month in which the new Social
Y 1aw
becomes effective for Federal Reserve Bank employees
(4414my
1 ,
- 951) and prior to July 1, 1952, be given the privilege
(tti
th
e discretion of the employing Bank) of remaining in active serv—
Illitjaj
nlY 1, 1952 in order that they may qualify for Social
a
ae
benefits. In a discussion, it was the consensus that this
1°/17/50
—6—
rec°4141enclation should be given favorable consideration except that
it should apply to employees only, and that the question whether
411 cifticer in the bank (except the President and First Vice Presi—
t
"rho serve statutory terms) should continue to serve beyond age
'uoUld be considered on the basis of the circumstances in each
—11al case, and that therefore the existing procedures with
'
leaPect
VU
retention of officers beyond age 65 should continue to
bee°110wed.
Another question which Mr. Szymczak presented was a recommendation
°f the Retirement Committee that the Board review its au-
thori
zaticm.s. (S-741 and S-905) to the Federal Reserve Banks to proNe
UPPlementary retirement benefits in cases of involuntary sep°ation,.
'rom service before age 65 with a view to permitting adjustkezta
4 cases where retirement earlier than age 65 is in the mutual
llttere
of the member and the employing Bank and the member elects
-4. service retirement. Mr. Szymczak stated that he would rec°41(111d thzi.
--- the Board not change the authorizations in S-741 and S-905
ttirlee
t llas felt that the Reserve Banks could take up with the Board
tIkti
al cases arw which were not adequately taken care of under
tiloa
t) letters.
141$ Szymczak then referred to the recommendation of the Re-
t,
‘erlierit
-ommittee with respect to a change in the active service
44th b
enefit under the Retirement System, which now provides for a
1°A7/5o
-7-
benev,
"equal to salary earned during the 12 months preceding death.
the chan
---ge proposed would provide that this benefit be increased
5
bY Per cent for each year of service after 16 years, with a maxbenefit equal to two years salary. This, Mr. Szymczak said,
11°111d be
4311 $25
accompanied by an increase in the maximum limit, which is
thousand, so that it would be possible for the beneficiaries
qa
Inelliber to receive a payment of as much as $50 thousand in the
elrelltof
death in active service.
There followed a general discussion of the proposed plan
tc)r
egration of the Social Security System with the retirement
3Yett1
°f the Federal Reserve Banks and of the proposed changes dis-
('488eci
:
ti r
that
Szymczak. During this discussion it was the consensus
general plan proposed by the retirement committee for in"Irat' r,
1°- of the Social Security System with the Federal Reserve reti
6
(tateci s
the, eptember
outlined in the report of the retirement committee
15, 1950 was satisfactory and that the Chairman of
4.1°41t1 o
the 80ard f Trustees of the Retirement System should be informed that
would give favorable consideration to the necessary amendto
the Rules
and Regulations for effecting such integration.
wa3 '1180 the consensus that Mr. Gilbert should be informed that
t4
tth 8()4rd would
-.111°Yees
authorize the Federal Reserve Banks to continue
(but not officers) in active service until July 1, 1952, in
°Ilert° Permit them to
qualify for benefits under the Social Security
1 r;
i
44- ,.
1°A7/5o
-8-
even though they attained age 65 prior to that date. With re8Not to
the recommendation that Federal Reserve Banks be permitted
to nizip_
-" suPplemental contributions in the case of involuntary sep4tati0n before
attainment of age 65, it
WAS
felt that no change in
theexisting blanket authorization should be made. The proposed
cillnge in the active service death benefit was discussed at some
length
but no conclusion was reached and it was understood that furthal,
- c°neideration would be given to the matter at the meeting of the
1341‘ci0ri
Tuesday, October 24, 1950.
Mr. Evans and Mr. Townsend, Solicitor of the Board, joined
the lueeting at this time, and all of the members of the staff excePtillg Messrs. Carpenter, Morrill, and Townsend withdrew.
Mr. Townsend stated that he had been working with the Office
(4 the R,,„
-4-leitor General of the United States in the preparation of
thebr.
ler to be filed by the Solicitor General in connection with
the Pet
itione for writ of certiorari filed by Transamerica Corporaof America N. T. and S. A. to review the action of the
)11rt f A
,Ppeals for the Ninth Circuit with respect to the 22 banks
°- .
1114c14 t had
converted into branches contrary to the restraining
Net .
18311
"by that Court last June. After reviewing the traditional
&0
4shiP of the Solicitor General to the Supreme Court in cases
g the Government interest before the Supreme Court, Mr.
.
401Thaelicl
made a statement substantially as follows:
1°/17/5o
-9-
"In the very large majority of cases where
the Solicitor General recommends that certiorari
be not granted the Supreme Court denies the petition,
and the reverse
is generally true when the Solicitor
recommends that the petition be granted. In
these
circumstances the position taken in the brief
to
b° be filed by the Solicitor General in this case is
Of
verY great importance. In the preliminary dis,':ussions which I had with the representatives of the
't?licitor
General's office, they agreed that the peti101
should not be granted and a draft of brief in
s PPort of that position was undertaken. Subsequently,
although lawyers for the other side discussed the matter with
the Solicitor General and urged that he conut to
certiorari, he did not acquiesce. I learned
that the Treasury Department had written a letter to
the Solicitor General asking him to allow the
Department to file a separate brief amicus curiae in
.71111ch the Treasury would contend that the Board did
ot
have jurisdiction under the Clayton Act to superm.-e its judgment over that of the Comptroller of the
-urra,
in his decision to authorize the establishment
Of
the branches in question. I urged the Solicitor Geneto refuse to grant that request and he followed
tziat
course. A later request from the Treasury that
tie solicitor consent to certiorari on the single quesrer of the jurisdiction of the Comptroller of the CurG....
and the Board was also denied by the Solicitor
„erea.
r
th "Subsequently a suggestion was made directly to
wae solicitor that it would be appreciated if some
thY could
be found by which the Treasury could argue
Ge
:question before the Supreme Court. The Solicitor
m Ira' agrees with the definite position taken by the
thaIrs of his staff who are working on the case that
and ., ecision of the Circuit Court of Appeals was correct
;
15
Lhat certiorari should not be granted, but the
kie
sssure to permit the Treasury to intervene has made
Position a very difficult one.
:
while this question is pending I have a copy of a
stat
:fent submitted by the Treasury for inclusion verbati
po,,:; in the Solicitor General's brief. Even this pr?ti."Places the Solicitor General in a difficult posiSoi s, It contains not only a legal position that the
altor General has rejected but also substantial misata;
'ements of fact (some of which Mr. Townsend read).
A
'
1 117/5o
-10-
"I called these statements to the attention of Mr.
Stern of the Solicitor General's office with whom I
12ave been working and I understand that the Treasury
'las been called to the Department of Justice to discuss the matter. I also told Mr. Stern that, if the
dr.aft of brief should be changed in such a way as to
Include material which was factually false or clearly
ilwarranted, it would be my duty to recommend to the
4°°ard that it consider what action it should take to
ljevent that from happening particularly in view. of
11.? unanimous opinion of the representatives of the
icitor General's office that the question was not
a valid
one.
b
"I don't know what the outcome will be. I am
t nging the matter to the attention of the Board at
time so that it will know what the developments
are
a.and
that it may be necessary for it to take some
etlon in connection with it."
T
F
ollowing Mr. Townsendls statement there was some discussion
(4
s--im
P03 4-s steps that might be taken by the Board and Mr. Townsend
114e3ted
that nothing be done until further information was available
a3 t° what might be proposed for inclusion in the brief at
)fl h tim
--s he would report to the Board again.
At this point all of the members of the staff with the ex4Dtiori
°f Mr. Carpenter withdrew and the action stated with respect
,ach
tc1,4,4:
Of the matters hereinafter referred to was taken by the
?qderai inutes of actions taken by the Board of Governors of the
Reserve System on October 16, 1950, were approved unanimously.
Mem
orandum dated October 9, 1950, from Mr. Horbett, Assistof the Division of Bank Operations, recommending that
tilaryj
0 Harrington, a clerk in that Division, be separated from
r-i-or-'4
W17/50
-11-
8411ce, effective October
9, 1950.
Approved unanimously.
Memorandum dated October 162 1950, from Mr. Boothe, Assistant nir
ector of the Division of Administrative Services, recommending
'Wointment of Arthur S. Myers as Operating Engineer in that
sio
n3 on a temporary indefinite basis, with basic salary at the
rate
Of 0,225 per annum, effective as of the date upon which he
kters
Upon the
performance of his duties after having passed the
14141
PhYsioal examination and subject to a satisfactory investigation
uf
references.
Approved unanimously.
talik
Letter to Mr. Latham, Vice President of the Federal Reserve
Or ,Ju10_
ston2 reading as follows:
ye "In accordance with the request contained in
thIlr letter of
October 11, 19502 the Board approves
sp
: esignation of the following individuals as
13,21a1 assistant examiners for the Federal Reserve
-utc of
Boston:
Horace Schermerhorn, Jr.
George C. Underwood, II
Arnold Blackmur"
Approved unanimously.
Or
Letter to Mr. Young,
President of the Federal Reserve Bank
Chicago
3 reading as follows:
6 :
10 Reference is made to your letter of October
tIlat'f°3 addressed to Governor Szymczak advising
eich Ole Board of Directors has authorized an e)ctenSel
;
°f the leave of absence of Mr. George W. Mitchell,
-'°r Economist, to
March 1, 19512 in order that he
15 .
10/17/50
-12-
"Inight continue as Director of Finance for the
State of Illinois.
"The Board will interpose no objection to the
.?4"tension of Mr. Mitchell's leave of absence with
understanding that during his leave of absence
he will
not be engaged in any political activity
would be incompatible with his official status
at the
Reserve Bank."
Approved unanimously.
Letter to Mr. Earhart, President of the Federal Reserve
kikP
(3.4
San Francisco, reading as follows:
"Reference is made to your letter of July 11,
10,'A
m,advising that the Board of Directors at its
eeting on June 27, 1950, voted to appoint Mr. E. R.
ard as a Vice President at a salary of $15,000
. annum, to be effective whenever agreeable and
14, table arrangements could be consummated at the
Z
"It is understood that arrangements have now
made whereby Mr. Millard may take up his new
?ties about December 1, 1950. Accordingly, the
11°.,rd approves the payment of salary to Mr. E. R.
134-L_lard as a Vice President of the Federal Reserve
.nk of San Francisco at the rate of $15,000 per
TZ11111 for the period beginning with the date on which
rePorts for duty and ending April 30, 1951."
been
Approved unanimously.
Letter to The First National Bank of Anniston, Anniston,
„
- .
r-aulng
as follows:
sy "The Board of Governors of the Federal Reserve
ahn" has given consideration to your supplemental
4Vcation for additional fiduciary powers, and, in
aa !:tion to the authority heretofore granted to act
at l'llstee, executor, administrator, registrar of
c:ek3 and bonds, guardian of estates, assignee, reand committee of estates of lunatics, grants
.,authority to act, when not in contravention of
sta''e or local law, in any other fiduciary capacity in
529
1°1(17/50
-13-
"Which State banks, trust companies or other corPorations which come into competition with national
banks are permitted to act under the laws of the
State of Alabama, the exercise of all such rights
c be subject to the provisions of the Federal Reserve
Act and
the regulations of the Board of Governors of
the Federal Reserve
System.
the 7his letter will be your authority to exercise
fiduciary powers granted by the Board pending the
Preparation of a formal certificate covering such auIho
rization, which will be forwarded to you in due
c°urse.n
I
Approved unanimously, for
transmittal through the Federal
Reserve Bank of Atlanta.
Letter to Mr. Stetzelberger, Vice President of the Federal
Re
I've Bank of Cleveland,
reading as follows:
9
"Reference is made to your letter of October
T;n1950, submitting the request of 'The Cleveland
e-szs"
,
.t, Compat,
ny
Cleveland, Ohio, for approval of the
ohi:uslishment of an additional branch in Euclid,
,
"It is noted that the establishment of the proed branch has been approved by the appropriate
th te authorities and in view of your recommendation,
0 e Board of Governors approves the establishment and
b1
.,%ation
3
of an additional branch in Euclid, Ohio,
vld'.he Cleveland Trust Company, Cleveland, Ohio, pro-0,
theed such branch is established within six months of
date of this letter and with the understanding that
hi 3e1 for the Reserve Bank will review and satisfy
traZ”lf
a
s to the legality of all steps taken to esuJash the branch."
C
Approved unanimously.
tit
Letter to Mr. Sproul, President of the Federal Reserve Bank
el'fZ)ric, reading as follows:
1950 "This refers to your letter dated September 15,
the 3 containing a recommendation that the Board take
action necessary to grant the request of the
1530
10/17/50
-14-
!
ILafayette National Bank of Brooklyn in New York!,
New York, New York, for permission to maintain the
reserves required to be maintained by 'country' banks,
14stead of the reserves it is now required to carry
as a reserve city bank.
"Pursuant to the provisions of Section 19 of the
Federal Reserve Act, the Board has taken the following
!
ction, effective with the first semi-monthly reserve
;
°mPutation period beginning after the date of this
letter.
t ,_.(1) The Board's rulings of February 8, 1950 per,a"lg to reserve requirements of member banks located
411 the boroughs of Brooklyn and the Bronx has been
mended so that a member bank having its head office
1. either of these boroughs, and having no branch in
Borough of Manhattan, will be eligible for permisn to maintain the reserves required to be maintained
Y banks located outside of central reserve and reserve
Cities.
J
r
(2) In view of its location and the character
ib
l usiness transacted by it, as described in your letZ'r,
the Lafayette National Bank of Brooklyn in New
torIc has been given permission to maintain the reserves
be
maintained by banks located outside of central
reserve
and reserve cities.
cal., "Please advise the Bank of the Board's action,
ia '4'ing its attention to the fact that such permission
t subject to revocation by the Board of Governors of
he
Federal Reserve System."
Approved unanimously.
Letter to Mr. Peyton, Chairman of the Conference of PresiFederal Reserve Bank of Minneapolis, reading as follows:
"At the meeting of the Board of Governors and
the
Presidents on June 15, 1950, it was agreed that
the ,
of',°eoretary of the Board and Mr. Stead, Chairman
he Subcommittee on Relations of the Federal ReSystem with Schools and Colleges, would work
tem a suggested program for the distribution of Systr;, ublications to teachers of money and banking for
et;:4- in two Federal Reserve Districts with the underte-iling that the proposed program would be submitted
-Le Presidents and the Board for approval.
10/17/50
-15-
"As stated in the fourth progress report of
!r. Stead's subcommittee, it was suggested that the
tollowing program be tried out in the New York and
?t. Louis Federal Reserve Districts with the thought
that should the trial program prove successful it
?°11.1d be put into effect in all Federal Reserve dis°714t5:
(1) Teachers of Money and banking are to receive
copies of
(a) the Monthly Review of the Federal Reserve
district bank,
(b) the current issue of the Federal Reserve
Bulletin,
(c) the current issue of the monthly Chart
Book, and
(d) the Historical Chart Book.
(2) The Federal Reserve banks distributing this material will accompany the mailing with a letter
describing the availability of this and other System material to college and university libraries
Upon application. The teacher also is to be informed that he can receive regularly at no charge
the Monthly Review, the Bulletin, and future revisions of the Historical Chart Book. A teacher
Who would have special need for regular issues of
the monthly Chart Book is to make known such need.
(3) Each Federal Reserve bank is to cover the cost of
the initial mailing, but subsequent requests for
regular receipt of the Bulletin and revisions of
the Historical Chart Book are to be covered by
adding to the free distribution list for such
Publications.
s
"Mr. Stead informs me that at a recent meeting of the
ticluoommittee, which was attended by representatives of
m,! New York Bank, it was agreed that the New York Bank
its contacts with teachers of money and banking
i!,'°ugh bank relations visitors who will use a kit of pubIn this way the trial program will be coned as part of a program already under way at that
I understand that this change was approved infor--"Y by the Conference of Presidents.
I._ "The Board has been advised that the Presidents' Connce approved the trial program at its recent meeting
80!t0n and the purpose of this letter is to advise
at it also meets with the approval of the Board."
1(3/17/50
-16Approved unanimously.
Letter to Honorable Frederick J. Lawton, Director of the
krea
U of the Budget, Washington 25, D. C., reading as follows:
"This refers to your memorandum to the Heads
of Executive Departments and Establishments dated
October 4 1950, requesting a list of statutes with
Which the Board is concerned that would be affected
by the
termination of the existence of a state of
war or emergency.
"The only such statute which is of direct inter
terest
,
to the Board of Governors is section 5(b) of
he
Trading with the Enemy Act of 1917, as amended
r0 Stat.
415; 40 Stat. 966; 48 Stat. 2; 54 Stat.
.'
,
,
791; and 55 Stat. 839. U.S.C., Title 12, sec. 95a).
;
rule section is operative only 'during the time of
Aar or during any other period of national emergency
declared by the President' and
is the basis for the
authority of the Treasury Department in the field of
Control of foreign funds and for the operations of
he Office of Alien Property. This section also cona
t
,me authority relating to transfers of credit or
vaPnents between banking institutions.
"This section was the basis for the President's
x
eeutive Order No. 8843 of August 9, 1941, under
Which the Board of Governors was given authority to
,
egulate consumer credit. This authority is incororated by reference in section 601 of the Defense
ar°duction Act of 1950, Public Law 774, 81st Congress,
?Proved September 8, 1950, which is now the basis
2r the Board's Regulation 1.
A suspension or tersection 5(b) of the Trading with the
i mY Actofrne of 1917 may raise serious questions of law
rlelic°nnection with the enforcement of Regulation W
e_ ating to consumer credit. Moreover, since ExOrder No. 8843 refers to the national emerr
ancY declared by the President on May 27, 1941, it
t,also desirable that action should not be taken
t terminate that emergency for the purposes of sect/ell 5(b) of the Trading with the Enemy Act. We
aunt also
point out that the Joint Resolution to
or''horize the temporary continuation of regulation
9Di c°nsumer credit, approved August 8, 1947 (61 Stat.
`4-; U.S.C., Title 12, sec. 2)48 (Note)), provides
l
is
"Avso
-17-
"that the Board of Governors shall not exercise conn,er credit controls pursuant to Executive Order No.
4143 l and no such consumer credit controls shall be
exercised after such date (November 1, 1947) except
(
luring the time of war beginning after the date of the
'flactment of this joint resolution or any national
ergency declared by the President after the date of
'
flactment of this joint resolution."
n
Approved unanimously.
Telegram for the signature of the Chairman to the Chairmen
-4-4
Federal Reserve Banks, reading as follows:
the "The Board has received from the President of
United States a letter requesting that the Board
81411it (a) a statement of subjects which it would
Propose for inclusion in the State of the Union
Message and
the Economic Report to be presented to
lax
:
tigress in January 1951, and (b) a report on legisilre Proposals of interest to the Federal Reserve
SYstem.
pr
"In accordance with procedures followed in
evicms years in connection with similar requests
r,
c;Q71. the President, I would appreciate receiving any
tolnments or suggestions that you may wish to make as
id what the Board might say in response to the Pres1:tts request. It is believed that areas of legislve proposals might include the following:
l) Regulation of bank holding companies.
(2) Capital requirements for admission of
State banks to membership and for outof-town branches of State member banks.
(3) Consideration of changes in the law with
respect to reserves of member banks, including the question of extending authority to cover nonmember banks.
It4:Vition, consideration may also be given to rept p 2f proposal for modifying limitation on cost
whe4le_ueral Reserve branch buildings depending upon
po,'"er economic conditions are such as to make pro'
41 timely.
be ,71°u will not that the requested material is to
be nomitted by December 1. In order that there may
61- 1e for consideration of your comments before the
c
10/17/50
-18-
reports requested of the Board are due, it will
be ve.cy
-helpful if your comments could reach the
Board by mail or by wire not later than November 6,
1950.
"A copy of this wire is being sent to the
President of your Bank.
"The text of the President's letter is as follows:
You are requested to submit to me by December 1,
95°, the subjects which you propose for inclusion
the State of the Union Message and the Economic
ItePort of the President to be presented to the Conin January 1951, together with a brief exkahation of each subject, its relationship to your
current
activities and plans, and the relative emPhasis
Which you would recommend. You should inany views which you may care to present at
tdhat time concerning special Presidenti
al messages
ollring the forthcoming session of the Eighty-second
.hgress. The original and nine copies of your ret4-. Y should be forwarded directly to me at the White
&louse
1
10, You are also requested to submit by December 1,
a report on your final legislative program
the first session of the Eighty-second Congress.
report should re-state and bring up to date the
Ze
1 liminary legislative program submitted to the
'rector of the Bureau of the Budget in accordance
;
1th the Call for Estimates for Fiscal Year 1952.
a°11r report should include all legislation which you
pe
rsire to have considered at the forthcoming session.
re(
1.
313°sals should be grouped according to their
ative importance and urgency from your standpoint.
0
;
i addition
to the information requested in the
for Estimates, your report should include your
view
ro
!
ws on the timing of Congressional consideration
ti!.: each item. If a proposal contained in your
'al
grajz Program did not appear in the preliminary pro1,4
Your report should state the circumstances
Zen have led to the addition. The original and
pi:, Copies of this final report of your legislative
me
'
:
44 8 for the next session should be forwarded to
It'
Illvugh the Director of the Bureau of the Budget.
mi will not, of course, replace the individual subrequired by Budget Circular No. A-19, al°ugh you may, if you desire, present legislative
1
'w17/50
-19-
"drafts for clearance in connection with your
Program submission.
The information requested is desired for consideration in connection with the new Congress conon January 3, 1951. Information concerning
41V proposals to be made to the present Congress,
1Pon conclusion of the current recess, will be
nandled separately through usual channels.
. "The Nhite House staff, the Council of Economic
"
tclvlsers, or the Bureau of the Budget may make addinal requests for material or arrange for discusns with your representatives to whatever extent
-.LY be required."
Approved unanimously.
Telegram to the Presidents of all Federal Reserve Banks,
rea.di vs
--"g as follows:
"The principle applicable under section 8(h)
,_-sgulationW with respect to contracts entered
nLo before September 18, 1950, applies to conj
sa?ts entered into September 18 through October 15
'
Ols terms then effective under the regulation."
Or 14
i
Approved unanimously.
Telegram
to the Presidents of all Federal Reserve Banks,
N4clillg as follows:
"The prohibitions of section 4(a)(5) of Reguati°11 X with respect to a Registrant purchasing,
di
de,
sc?unting, or lending on credit instruments evit"
,
f c-ing real estate construction credit apply only
8,e.redit instruments evidencing credit which is
ssttuject toand not exempt from Relation
X. Under
gu
s otion
4f,1/4o) of the regulation, credit extended pur"to firm commitments made prior to the effect111
th ve date of the regulation is exempt. Accordingly,
clien'
l e is no prohibition with respect to purchasing,
?!.nting, or lending on credit instruments evi--Lug such credit."
Approved unanimously.
10/11/50
-20-
Telegram to the Presidents of all Federal Reserve Banks,
Nadi.
---"g as follows:
4., "Question has been raised as to what con!
44-tutes compliance with provisions of first sen%,e.nee of
section 4(c) of Regulation X. This pro/Ides that no Registrant shall extend any credit
Unless he is satisfied, and maintains records which
reasonably demonstrate on their face, whether such
sdit is or is not real estate construction credit.
4
'
4 the
Registrant is satisfied that the credit is
not real estate construction credit, the provisions
this sentence may be met by the retention by the
tnk of any of the following: (1) A statement of
2Le borrower, on the form now available at the Fedn'al Reserve Banks or contained in a loan applica'°n or any letter or other writing, which is signed
5"e: the borrower and states the facts indicated in
r second sentence of section 4(c); (2) any cordesPondence, memoranda, loan applications or other
i"uments of any kind, whether or not originating
connection with the credit in question, which on
basis of a reasonable interpretation show that
the
0
,,credit is not real estate construction credit;
0) a written endorsement or rubber stamp legend,
aced upon the credit instrument or upon other
1Pers in connection with the credit and signed by
in
:Registrant or a responsible officer of the Reg1"ant, stating that he is satisfied that the credit
" question is not real estate construction credit."
r
Z
pi
p
4
Approved unanimously.
Telegram
to the Presidents of all Federal Reserve Banks,
Nac
as follows:
thA "Section 6(b) of Regulation X provides that
'
to Provisions of the regulation shall not apply
ti °r affect any credit extended pursuant to any
er11:1111 commitment to extend credit made prior to the
te ive date of the regulation. Inquiries have
be2
received concerning the application of this
Section to
agreements entered into by a Registrant
'
a builder prior to the effective date of the
1V1715o
-21-
,regulation under which the Registrant agreed to
-Lend a stated amount on stated terms to any purchaser of particular residences built or to be
built by the builder if the purchaser has a credit
standing satisfactory to the Registrant and if the
residence
has been constructed according to prescribed plans and specifications.
t • "Section 6(b) defines a firm commitment as
either (1) a written agreement under which the Reg:
1-_trant is required without option or discretion on
Las part to extend credit upon demand by the borrower
°r uPon compliance by the borrower with one or more
conditions referred to in such agreement; or (2)
ahY other agreement to extend credit which has been
entered into in good faith by the parties and in
eliance upon which the prospective borrower has
ken specific action prior to the effective date
()f the regulation, if the Registrant within 30 days
atter the effective date of this regulation shall
have sent to the Federal Reserve Bank of the distrlct in which he does business a letter or other
statement
reciting the facts with respect to such
agreement and the specific action taken by the prosPective borrower prior to the effective date of the
re
guiation.'
. "If an agreement of the kind described above
'? In writing, it constitutes a firm commitment
1 in the meaning of clause (1) of the definition
;Lthat term and the fact that the borrower (pur.C
:
1 4ser) must have a credit standing satisfactory to
Registrant is merely one of the conditions with
"
ni"
. 3-ch the borrower must comply. If such an agreeis not in writing, it constitutes a firm coral'.. ment within the meaning of clause (2) of the defril lon if the builder has taken specific action in
as-Liance upon the agreement prior to the effective
te of the regulation and the Registrant furnishes
Rue required information to the appropriate Federal
,!serve Bank within 30 days after the effective date
;
4 the
regulation. For this purpose, the term tproi!ec,tive borrower' in clause (2) of the definition
fllueemed to include the builder to whom the commitent was
made."
f
j
Approved unanim.u/ .
ddidi-40
/_44,
Secretary.
@FedFRASER