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1816 Minutes of actions taken by the Board of Governors of the al- Reserve System on Tuesday, October 26, 1948. PRESENT: Mr. Eccles, Chairman pro tem. Mr. Draper Mr. Evans Mr. Mr. Mr. Mr. tor. or Meyer, Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Memorandum dated October 21, 1948, from Mr. Millard, Directhe Division of Examinations, recommending that Harry J. e'lleXamin.r for the Federal Reserve Bank of New York, be Oited --. examiner by the Board of Governors for the purpose or +4 Partlc '1"-Lng in the forthcoming examination of The Chase Bank, y °Isk New York. Approved unanimously. Letter to Mr. Arthur M. Hill, Chairman, National Security cl*Irees Board, reading as follows: Chail,:In compliance with your request of October 8, as n McCabe has designated Mr. Frank R. Garfield the -e staff representative of the Board to serve on eremmittee composed of representatives of the sevtionlilgenciee cooperating in the revised study on NaChi4"- Resources and Foreign Aid. Mr. Garfield is pivi'.°f the Business Conditions Section of the Board's 81°11 of Research and Statistics." Approved unanimously. elegram to Mr. Leedy, President of the Federal Reserve Bank (31' 411se's CitY, reading as follows: 1817 10/26/48 -2"Your letters October 12, 1948 regarding discount Or 10 ;notes of producers under Commodity Credit Corporation °Rraill) Board is today sending to other Federal Reserve B_ .:4_114S following telegram requesting views as to proposed ' uendment to Regulation A. 'One of Federal Reserve Banks has suggested consideration of amendment to Regulation A to make negotiability requirement inapplicable to notes evidencing loans to producers subject to commitraent by Commodity Credit Corporation under price support program. Such amendment might be made by inserting in subsection (h) of section 1 language ,.t,0 effect that negotiability requirement shall not applicable to "any note evidencing a loan made to a producer of agricultural commodities which is subject to a commitment to purchase by the Commodity Credit Corporation." Will appreciate views of your bank as soon as possible with respect to desirability Proposed amendment.' Inerits we shall of course be glad to have any further camYour bank may wish to make regarding this matter." Approved unanimously, with the understanding that the other Federal Reserve Banks would be asked to comment on the proposed amendment. t -0 rill-. Clark, Manager, Consumer Instalment Credit 1)1h.- Letter tfle 'Federal Reserve Bank of St. Louis, reading as follows: th.g "This refers to your letter of September 28 regardUiry under Regulation W submitted by the Mis.-43J. Valley Trust Company of St. Louis. iazt;IpiZtT01:11 Company asks, in effect, whether a $3600 ana. subject to Regulation W may be scheduled a ti ment in 11 monthly instalments of $200 each appea,--"41 'balloon' payment of $1400. The Trust Company the lealltlY recognizes that this is not. permitted under Rests ilguage of section 4(c) of the regulation. It sugeritL1 , 2 1 wever, that the purpose of 4(c) is merely toTeto paTents m being scheduled at a rate that would fail lilat14. : 3 4°I'f the obligation within the applicable maximum l'Y, and that if that is the only purpose of the 1818 10/26/48 -3section, then the payment schedule outlined might perhaps be pe rmissible, since the first eleven instalments are at !rate which, if continued, would pay off the obligation within the 18 months. As you indicate, the ruling under the old regulation lmaarized under the heading of 'Balloon Note' in S-10-a 44 cloes not really authorize balloon notes, because in that Case there was an express agreement which in effect changed seemed to be a balloon note into what was really a '")Pefily amortized obligation. se It is perhaps a sufficient answer to the inquiry that 4(c) of the regulation expressly requires that the th'aiments be 'substantially equal in amount or so arranged that no instalment is substantially greater in amount than iVreceding instalment.' It may be helpful, however, to tiolcate briefly the relationship of section 4(c) to secdent 5 of the regulation in order that it may be more evi0 , whY the Purpose of 4(c) is not as narrow as the Trust 'JZPanY suggests. . tax. "Although section 5 permits loans to be renewed with sioll" maturities dating from the renewal, this permsAn le included chiefly for reasons of administration. bicZe?ment in advance to make such a renewal is formerit— 'by section 6(i) relating to evasive side agreetexid : and other provisions of the regulation are not inlug (-I- to encourage the making of such renewals. The fallenco-ue °f a large balloon note might tend to invite and hibitie"ge such a revision and is one reason for the pro11 in section 4(c) against such balloon notes. ruelits tl,e regulation, of course, does not prevent agreed-oes lt"at Permit the obligor to anticipate payments, nor revent various so-called 'acceleration clauses' ,;,! -that.i xlote ;',:wit the lender to accelerate the maturity of a sots Under certain circumstances. It is possible that whsjUl_sch a.r ran.gements might be used to solve the problem the Trust Company is interested." 1 Approved unanimously. C hairman Ac pro tem.
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