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1.61.9 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Wednesday, October 27, 1948. zet Lathe Board Room at 10:30 a.m. PRESENT: The Board Mr. McCabe, Chairman Mr. Draper Mr. Evans Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Townsend, Associate General Counsel Solomon, Assistant General Counsel 11r. Evans stated that, in accordance with the action at the Zeeting on October 15, 1948, a draft of an amendment to Section 6(g) Of Regulation W, Consumer Instalment Credit, which would perhe delive-.L.T of listed articles on trial, on approval, or as deton strators i n:: ::p::::n of an instalment sale without a de13°84 ecitusa, to theent was sent to the Federal Reserve f°11 c°rnment, that eight of the Reserve Banks responded that 6.13131.*()Ved the proposed amendment, three doubted its need but 4(14° etr°11g o bjection to it, and one was reluctant to have an %IcIlileilt adoPted if it would weaken the down payment provisions 13t "e R ation. went on to say that, in view of those (1471ellts arid in the light the discussion at the meeting on OctIvalis qerls , he rec ommended adoption of the proposed amendment effectIve 1948- 10/27/48 •••,•11•D Following a discussion of the pro— posed amendment and of the comments made by the Federal Reserve Banks, Mr. Evans moved that the following amend— ment to Regulation W, Consumer Instal— ment Credit, be adopted, effective November 1, 1948: oisau "AMENDMENT NO. 1 TO REGULATION W ed bY the Board of Governors of the Federal Reserve System ti "Effective November 1, 1948, section 6(g) of Regula— W is amended to read as follows: 1(g) DeliverY in Anticipation of Instalment Sale. — ExcePt 1 as provided in the following paragraph, in case a ra4'eted article is delivered in anticipation of an instal— a dt sale of that article or a similar article (such as thsliverY "on approval", "on trial", or as a "demonstrator") dal4 egistrant shall reouire, at or before the time of such reoferY, a deposit eoual to the down payment that would be .'14.rt'ed on such an instalment sale. paragrin order to qualify as an exception to the preceding 8 thestityarticle must be an article listed in Group bO4 must be exclusively for the purpose of a str:!ids trial, approval, or demonstration, and the Regi— thlillet, within ten days after such delivery, obtain Ox' th-"" PaYment referred to in the preceding paragraph evide:?!turn of the article. Every such case shall be Parti;:e" by a written agreement signed by the respective paro : , of which a copy shall be given the prospective alaccssr at or before the delivery of the article, and that n*iNtten agreement shall clearly and prominently state bona the delivery is exclusively for the purpose of a pros "de trial, approval, or demonstration, and (2) the (theective Purchaser will make the required down payment araount of which shall be stated in the agreement) • t aPprowien days after delivery of the article for trial, artier, or demonstration or will return or release the te 'within such ten—day period. vith tIn c alculating the maximum maturity in aph 'ansactions under either of the two preceding conetigr para— he cos 'the date of delivery of the article sold shall nsidered the date of the sale.'" Mr. Evans' motion was put by the Chair and carried unanimously. "/27/48 -3Unanimous approval WRS also given to the following telegram to the Presidents of all Federal Reserve Banks: , "The Board has today adopted Amendment No. 1 to Regu 4.ation W, effective November 1, 1948, which, under certain conditions, permits delivery of Group B articles for trial, 8 .:13 Th,Pr°Iral or demonstration in anticipation of an instalment ;:'s without a prior down payment. Please print the amendnt and make appropriate distribution. en 4. "The Board is issuing the following press statement the text of the amendment for release in the -"Ing Papers of Thursday, October 28, 1948: t.„‘ :The Board of Governors of the Federal Reserve SysTa7aas adopted an amendment to Regulation W --Consumer orstalment Credit -- which will permit customer trials 8 aPPlianCeS without prior down payment under certain frtl2aeified conditions. The amendment, which becomes ef, November 1, 1948, is designed to reduce certain tt ec olul .ve --Leal difficulties experienced by instalment dealers subject uo the regulation, and is not intended to result 1 ! relaxing of the credit restrictions. ap 'It has been the custom for some dealers to deliver a4ria4ess and other articles subject to the customer's livZi/al or for demonstration purposes. When such dethe- s were made in anticipation of an instalment sale, or blgulation has heretofore required a dawn payment at that%:rs the time of delivery. The amendment provides selip: certain specified conditions are followed the day.8-.11117 allow a trial period of not more than ten without previously obtaining the down payment.tn The following statement for publication in the Federal Register was also approved unanimously: "Th liverv Purpose of the amendment is to permit the de certain 'listed articles' for a stated period cUtWalt, 'on trial', or as a 'demonstrator', withdown payment provided there is compliance affect7: aPecified conditions deemed necessary for the administration of this Part. slE'rectr** notice, Public participation, and deferred date described in section 4 of the AdministraP .a-r-n:e?dure Act are not followed in connection with --nument for the reasons and good cause found, as 10/2748 —4— “34., jT:,""eci in section 2(e) of the Board's Rules of Procedure 2 :lath this62.2(43 and especially because in connection permissive amendment such procedures are unneces_ as they would not aid the persons affected and would serve no other useful purpose." Reference was made to a draft of telegram to the Presidents °real Federal Reserve Banks establishing for the three-month period ellding Se ptember 30, 1948, the rate of interest per annum on the 8'14)134t of Federal Reserve notes of each Bank on which interest sh°111c1 be calculated to be paid to the United States. The proposed rate Provided for a deduction from earnings for the third Quarter Qf tt* year °r $10,000,000 to be added by the Federal Reserve Banks t°reserv'es for contingencies in accordance with the procedure outihted in the Board's wire to the Federal Reserve Banks on July 1, 1944. Chairman McCabe stated that he felt the amount of the dediletioa should be more than $10,000,000 in view of the large amounts (4 1°4-term bonds that the Federal Reserve Banks had been purchas- 111"8 a ' l esult of the policy of supporting the 2* per cent rate "1°11g-tem fl,„ Verr1eflt securities, that recently he mentioned the Such a change to Mr. Fiscal Assistant SecP°88ibilitYBartelt, or the telt sure Conterelice Treasury and found no unfavorable reaction, and that that, in the light of the discussion at the Presidents' " 1 '4 this month, such action would be favored by the of all Federal Reserve Banks. He also pointed out that 18'413 10/27/48 -5- the members of the Board had indicated at the meeting with the Presidents on October 5, 1948, that they would be favorable to such action. There was a discussion of Chairman McCabe's suggestion, following which, Upon motion by Mr. Evans, it was voted unanimously that (1) $15,000,000 instead of $10,000,000 be deducted from earnings during the three months ended September 30, 1948, for addition to the contingent reserves of the Federal Reserve Banks, (2) that rates of interest on Federal Reserve notes for the third quarter be established which mould provide for the larger deduction, (3) that Mr. Smead be reauested to call Mr. Bartelt on the telephone and inform him of what the Board intended to do, and that the Secretary be recuested to advise the members of the Board who were not at this meeting and Mr. Davis, Chairman of the Presidents' Conference, of the above actions, and (4) that, in the absence of objection from the absent members of the Board, an amended wire be sent to the Federal Reserve Banks advising them of the established rates of interest and payments to be made to the Treasury for the third quarter. Seereta..—. ellasm 14 "S Note: Following the meeting, Mr. Smead .11e t above matter by telephone with Mr. Bartelt, the -"Led that he thought the decision of the Board was rrle.et one, and that the Treasury would have no ob,iecti e°n °„"° 'llairm Mr. Carpenter talked to Mr. Davis as he 1,ret ---.• of the Presidents' Conference, who stated that llEhtlasatisfied that all of the Presidents would be dedecision of the Board, particularly since be 1"not anticipated that the amount deducted would -easad before the deduction for the first quarter c't h,„„ Eceie 'L Year. Mr. Carpenter also talked with Messrs. 84Ymozak, Vardaman, and Clayton, all of whom atats.711, tele 6hat they were in agreement with the action. The nt to the Federal Reserve Banks on October 29 14 eo c--4allee with the above action read as follows: 181;,.4 3 10/27/48 -6Board of Governors of the Federal Reserve SysrIalMder authority of the fourth paragraph of Section 16 ' 6 of the Federal Reserve Act hereby establishes for the three months' period ending September 30, 1948, the rate o t!_-111_. per cent interest per annum on that amount of 4e Federal Reserve notes of your Bank which equals the !rerage daily amount of its outstanding Federal Reserve 40..tes due._ -Lug such period less the average daily amount :.,gold certificates held during such period by the Fedincta Reserve Agent as collateral security for such notes. the rate in an amount calculated in the manner and at specified above shall be paid to the United Statee on October 29, 1948. dan 2According to daily balance sheets, the average tl,:' amount of outstanding notes of your Bank during third esvi,-...quarter of 1948 not covered by gold certifiIA' the Federal Reserve Agent was $ (2) . At rate specified payment to Treasury for third qUarter via, u above, , A be 0 (3) . Payment should be credited -4. 0 Trsyrab rsurer's General Account as Miscellaneous Receipts, eerv° ' 1841-Interest Collected, Section 16 Federal Re— A;, A2t as amended. Your Bank's share of deduction Of it "sv00,000 for second and third Quarters of year aceord b . ance with October 27 wire is $ (4) . No stateInelat be .g given to press with respect to this action. Bosto4 (1) (4) (2) (3) Nevr v. $1,641,663 $2,445,237.74 $1,021,180,522 .95 6,136,413 Phil"rk 893,551,732 8,851,303.13 , -edelphia 3.93 1,822,059 2,7211591.46 1,136,591,398 .95 ir."land 553.01 2,439,228 c;:z --ch1orld Atlazta eshleago 1,4. Louis x lIneaPolie 1)t 118118 Ci 7 _alias .99 .89 1.04 1.10 .96 1,43815012153 1,067,139,569 689,150,486 1,874,676,016 3,5891 2,393,901.04 1,806,518.32 5,197,731.86 10591,331 1,219,820 3,534,670 809,056,930 1,957,696.11 1.02 433,999,649 673,881,653 470,791,262 594,872,049 1,115,795.26 1,681,565.51 1,673,179.25 3,343,669.85 1,318,608 752,120 .99 1.41 S" Francisco 2.23 1,134,825 1,124,092 2,285,171" Chai...m an McCabe made an informal report of his discussion in lioatiz)4 0:estara --aY with Mr. Creighton, Chairman of the Federal Reserve clirect B°8t04, with respect to the consideration being given by the ()list° the selection of a President to succeed Mr. Whittemore. 10/27/48 _7— At this point Messrs. Riefler, Townsend, and Solomon withd11191from the meeting and the action stated with respect to each f the matters hereinafter referred to was taken by the Board: Memoranda from the heads of the divisions indicated below recommend-b, ---g appointments to the staff in those divisions, effectiven ' s of the dates upon which the appointees enter upon the Perst°1"mance of their duties after having passed the usual physical Date or AMt 10 2 Title OP THE SECRETARY Earle J. Wade AND Secretary to Mr. Sherman STATISTICS Harrison Parker Mrs, June E. Crawley Salary $2,974.80 Research Asst. 3,351.00 Clerk 2,498.28 Duration of Appointment Temporary Temporary Indefinite Temporary Indefinite Approved unanimously. lleraorandum dated October 25, 1948, from Mr. Thomas, Direct" or ni the --vision of Research and Statistics, recommending that the rest of Otto G. Kiehn, a research assistant in that kvistolaIrlatic)11 h 2 -9 accepted cIllest, at 4 to be effective, in accordance with his re- "he close of business October 31, 1948, with the under- a that n rerattini - 4-11m13 sum payment would be made for annual leave 14 to his credit as of that date. Approved unanimously. 11e14()randuin dated October 25, 1948, from Mr. Millard, Direc- to °I' 1141 th 6 sion of Examinations, recommending that the tempo- 41:13°341traent of J. V. Fisler, an Assistant Federal Reserve 1_826 1(31'27/48 -8- 4aralter in that Division who had been loaned to the Board by the Iral Reserve Bank of Kansas City on April 1, 1947, be made Permanent, with no change in his official designation, and with c:rease in his basic salary from $3,840 to $3,852.60 per 41111/44s effective October 31, 1948. The memorandum also recomtaellded that Mr. Fisler be given credit on the Board's records for 13 5.3r of annual leave, the amount standing to his credit atua Federal Reserve Bank of Kansas City when he joined the Board's road force. Approved unanimously. 4ctor Mezorandum dated October 25, 1948, from Mr. Millard, Di- of the Division of Examinations, recommending that, effective as of the date upon which he enters upon the performance : Les after having passed the usual physical examination, I Rachfard be appointed as an Assistant Federal Reserve ,Tith et, vith basic salary at the rate of $3,351 per annum, and Official headauarters at Nashville, Tennessee. BY unanimous vote, Philip C. Rachford was appointed an examiner to examine Federal Reserve Banks, member banks of the Federal Reserve System, and corporations operating under the provisions of sections 25 and 25(a) of the Federal Reserve Act, for all Purposes of the Federal Reserve Act and of all other acts of Congress pertaining to examinations made by, for, or under the direction of the Board of Governors of the Federal Reserve oystem, and was designated as an 1827 10/27/48 -9Assistant Federal Reserve Examiner, with official headquarters at Nashville, Tennessee, and with basic salary at the rate of $3,35l per annum, all effective as of the date upon which he enters upon the performance of his duties after having Passed the usual physical examination. Letter to the Presidents of all Federal Reserve Banks readfolaows: "Some manufacturing concerns and other business orniganiezations that are not otherwise engaged in the instalilint credit business have arrangements for making certain asiectalment loans to their employees. Questions have been from time to time as to whether or not companies Iqth co such in arrangements are subject to Regulation siretion with such activities. If the companies are tc feet J to the regulation they are, of course, required tic °110w the recuirements of the regulation in connecti2'with the loans, and also to file a simple registrareva st atement as specified in section 2(b) of the oues+71As indicated in section 2(a) of the regulation, the regta —fl of whether or not a company is subject to the the b i°n depends on whether or not it is 'engaged in ezel, , rer essl that is covered by the regulation. e ticul uepends upon all the relevant facts of the parM IZ: 8 :4:1tr tion, and in the case of organizations with corporations, the status of each subsidPossijuld depend on the facts relevant to it. It is ere a,'? tc state some general principles, however, that beela lticable to such situations. These principles have tton 81 ' , ''ted before in other connections under the regula' 11;ut it may be helpful to restate them here. the r -Ln the first place, e company may be subject to t° it:T"ion even though the making of instalment loans or the ' 111Ployees is a small or almost insignificant part . (311113anY's total operations. Nor is a company companyIEx, Purpos' r°m the regulation merely because the s making such loans may be chiefly or even exsea.rd.J4Y to help its employees rather than to obtain "from the loans. 4 ci.,2:4Q 10/2 / 3 4 8 -10"On the other hand, if a company's loans were conned exclusively to those exempted by section 7 of the regulation, the comp would not be subject to the regulation. It should be noted, however, that loans are not exempted unless they fall sauarely within the erme of one of the exemptions. For example, medical 'c'elle referred to in section 7(h) would not be exempt Ilnlese the lender accepted in good faith the statement ':eferred to in the provision. In other words, the %ecific requirements of the particular exemption must tet in each case of the loan is to be exempted." Approved unanimously. Letter to the Honorable James O. Eastland, United States Senate, reading as follows: t4 "In the absence of Governor Vardaman we are replyt° Your letter of October 13, 1948, concerning a ter of October 8 from Mr. E. C. Polk of Hattiesburg, a: 8 10 ,:21131: 3 14 in which Mr. Polk voiced an objection to th---vveed amendment to Regulation W which would have roe effeet of making unenforceable contracts not con111,,,gi_vith requirements of the Regulation. lue proposed amendment which has been made the of careful study is still under review, but we er t7i've it might be helpful to Mr. Polk in his considas,,c2n of this matter if we clarified the particular which seems to have given him the most concern. vow,e',8 aPParentl,y assumed that the proposed amendment ine7c1L1 reader unenforceable contracts which, through "41a1Z..tenee2 might not conform strictly to the procont1-37: of the Regulation. The Regulation has always takes 4ed a Provision to the effect that clerical mise()ri,e;resulting from 'excusable error' need not be Iloilid ' ered to be violations and the proposed amendment °t be intended to change that provision. o aPPreciete your correspondent's point of .0 You may be certain that it will not be over1°01tp-A-11 -4 ln our final decision." 4 Approved unanimous( . 4/ / / AL Se retarY. /2 ) Chairman.
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