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Minutes of actions taken by the Board of Governors of the 41 Reserve System on Wednesday, October 4, 1950. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Szymczak Evans Vardaman Norton Powell Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary NI Re 33 Ilinutee of the meeting of the Board of Governors of the Fed- 8erve System with the Federal Advisory Council held on October 195°3 were approved unanimously. Minutes of actions taken by the Board of Governors of the Reserve System on October 3, 1950, were approved unanimously. 111". Carpenter reported that the Comptroller of the Currency issue a call on October 6, 1950, on all national banks for : : 1P rte Cif co ndition as of the close of business on October 41 1950, in accordance with the usual practice and the Board's letter Seketber 19, 1.95o, a call would be made on October 6 on behalf t the 13°ard of Governors of the Federal Reserve System on all State b '411111:8 for reports of condition as of October 4, 1950. The call to be made on behalf of the Board on October 6, 1950, was approved unanimously. blNqo Memo randa dated October 2, 1950, from Mr. Boothe, Assistant f the Division of Administrative Services, recommending I 8V5 1W11/50 -2increases in the basic annual salaries of the following employees 41 that, D ivision, effective October 15, 1950: It Name 'tra. J";"3"-ce Iturner krs. Dorothy S. Hurst Title Stenographer Clerk-Stenographer Salary Increase To From $2,970 2,810 $3,67 2,955 Approved unanimously. Memorandum dated September 30, 1950, from Mr. Leonard, Directc" the Division of Bank Operations, recommending an increase in the basic salary of Lee W. Langham, an analyst in that Division, tr011' $3,825 to $4,075 per annum, effective October 15, 1950. Approved unanimously. liern°randum dated October 2, 1950, from Mr. Bethea, Director or the b. 1.7ision of Administrative Services, recommending increases the Nion basic annual salaries of the following employees in that Di) t effective October 15, 1950: Naze Itobearnlichaei rt 4guy Title Supvr., Pub. Sec. Printing Clerk Salary Increase To From $4,97 )7,1775 3,475 3,350 Approved unanimously. ot New ,Letter to Mr. Sproul, President of the Federal Reserve Bank rk, reading as follows: be -"ce again Are are asking whether you would "ork "g to lend Mr. John Grant of your staff to tor jith the Board's staff on Regulation 01 matters Period of about a month. -41'. Grant has worked with us on Regulation W 1 406. ICN50 -3flatters on previous occasions and that experience '0'nether with the ability he demonstrated on those ecasi°ns would make his assistance most helpful. „ w "In view of the short period for which Mr. Grant be on this special assignment it is assumed that as td, ' , .in 1948, it would be agreeable for your Bank Ai "Y Ills salary and expenses incident to the as- Approved unanimously. Letter to Mr. Gilbert, President of the Federal Reserve tanit or tal las, reading as follows: The copy of the report of examination of yoil alif , Bank as of November 3, 1949 shows that a pendia; °f $10.29 on account of deficiencies in reserves litalng the period ending November 30, 1948 was waived Gol:r the provisions of Paragraph D of the Board of ca-Illors' letter of March 5, 1946 (S-902) In the 11. : 1 the Muleshoe State Bank, Muleshoe, Texas. itm.„-44miner's comments noted that this penalty was clar; ecrli in error since the bank had previously inPenalty within the prescribed two-year period. to ' 11. view of the fact that the deficiency amounted about one per cent of the member bank's re(11.11:"?d -LYreserves and the penalty to about twice the thorl:Tzt which the Federal Reserve Banks now have auYolarll to waive, the Board ratifies the action of a'ank in waiving the penalty." 1. Approved unanimously. Letter to Mr. S. C. Beise, Executive Vice President, Bank °41-erica National -Ir°1'&143 reading Trust and Savings Association, San Francisco 20, as follows: 19503"This refers to your letter of September 20 the Boaddre ssed to Mr. Brayton Wilbur, Chairman of 14 arc ' ik of the Federal Reserve Bank of San Francisco, a You request that Bank of America National ' Id Savings Association be supplied with the I 4.1? 1%/50 llecess., — ..-Ly formal papers to enable it to participate 11 , the .1 forthcoming election of Class A and Class B dlrectors of the Federal Reserve Bank of San Francisco. Your "As you know, the question of the eligibility of "2:11r bank to participate in such elections was conaBoardldered by the Board in 1947 and again reviewed by the din 1949, as indicated in letters to your bank heaued October 17, 1947 and October 3, 1949. The Board again considered this matter and, on the basis of re'Pertinent information now before it, sees no . I. to reach a conclusion different from that inu, ed youa s in the letters referred to above, namely, that , oank is affiliated with Transamerica Corporation the meaning of that provision of section 4 of "e Federal Reserve Act which provides that 'whenever aa R r two or more member banks within the same Federal co; prie district are affiliated with the same holding in=Y affiliate, participation by such member banks to ;,7 such nomination or election shall be confined ' krn a of such banks, which may be designated for the bY such holding company affiliate'. Accordsince Transamerica Corporation has designated the as National Bank of Arizona, Phoenix, Arizona, andti he the affiliated bank to participate in nominations ped'-Lections of Class A and Class B directors of the BoXal Reserve Bank of San Francisco, Group One, the Frar,"4.has instructed the Federal Reserve Bank of San So-incise° that the Bank of America National Trust and elig Association should be considered to be inerld' cA4-l e to participate in the forthcoming nomination 'ection.fl CT - Approved unanimously for transmittal through the Federal Reserve Bank of San Francisco. tkIllt Letter to Mr. Hult, Vice President of the Federal Reserve t Boston reading as follows: ors "This will acknowledge receipt of your letter a ieePtember 21, with which you enclosed a copy of 810:er dated September 20 from Mr. Rutherford E. 14 31 State Street, Boston, Massachusetts. 4r. Smith suggests that the limitations ap- -5"1,11-cable to Group D of the supplement to the regulation be amended 'so that loans may be made for Ndxlential purposes on which banks hold a first ' X ilal tgagel, and from the balance of his letter we ' s 811M that he has in mind some exemption for unlecured loans for home improvement purposes when the beZler holds the first mortgage on the property being .11-lei?ved. He also mentions a previous exemption Permitted such loans and suggests that it be "0*.nstated in the regulation. co "The exemption referred to eliminated from the tsverage of the previous Regulation W all credits home improvement when listed articles were not laj illied• One of the purposes of the present Reguered,'". W. as issued September 18 is to bring such 4.te within the scope of the regulation and the (101N uatione initially established call for a minimum or ibPaYment of 10 per cent and a maximum maturity "Iaty months. pro "Under the circumstances it does not seem apthiate that a special exemption be written into Holivegulation at this time for credits as described. as: Irer, with respect to Mr. Smith's recommendation are 1110ted above, it is to be noted that such loans ,,, °, .t Prohibited. They can be made within the down Paytill tiori : and maturity limitations written in Regulae Of course, if a home improvement credit is obl! ..8 ,8 of $2,500, or is combined into a single thatta.on with any other non-automobile credit so exceervir single obligation is in a principal amount j1g $2,500, it is exempted from Regulation W. view "e have not written to Mr. Smith but the Board's 8 are as stated above." ig Approved unanimously. Lettel 'to Honorable Edwin C. Johnson, United States Senate, aeon, D. C., reading as follows: thesmEnclosed are telegrams dated September 24 from berlii,:tark Motor Company and the Scotty Motor Company, trola'r, Colorado and a letter dated September 23 oryttr.,he Aladdin Auto Sales of Denver, Colorado, all . --ch were received with your letter of September 2..5 1K/50 -6"ach of the communications recommends strongly against any further tightening of the provisions of t ahi8 Board's consumer credit Regulation W and report cir°P in sales since the date the regulation became effective. of "Apparently your constituents are apprehensive aljersietent rumors that the Board is planning an 0 1.1 t immediate tightening of the provisions of Reg : ear °n W. Some of those rumors may have arisen be te- e of the opinions many have expressed that the ' of the regulation were too easy. In deciding 4 the initial terms of the regulation, the Board gait° , nd ,;:areful consideration to all the relevant facts ; 1- ..„'Re various points of view, although it recognized eh' whatever terms it adopted might have to be arlged from time to time. appol,,:tV41ile there has been only a limited time for an bese;Zsal of the effects of the regulation which just tadaT;e operative on September 18, the Board is obfieg information relating to the consumer credit u. On almost a constant basis from the twelve Fed 8014:eserve Banks and their branches and from other not ;:ess The Board is studying developments and will tea.8" ve_eitate to alter the regulation when it appears ule and desirable to do so. or as expressed by your constituents are tor erest to us in this connection and we thank you making them available to us." Z eree Approved unanimously. Letter to Mr. Morris B. Canning, Attorney at Law, First NaBank B uilding, Bridgeport, Connecticut, reading as follows: that :34 Your letter of September 27, 1950, you state and Lon ..f°u are attorney for The Bridgeport Savings tleCtici."°CiatiOn, 900 Barnum Avenue, Bridgeport, Conioegand you inquire as to how the present R Nti-u W treats the credits that were exempted y becA,,,°n 7(g)(2) of the version of Regulation 4 that 7e effective September 20, 1948. That 1948 pro(2) On, which you correctly cite as 12 CFR 222.7 (g) 3 eXernPted: repairs, alterations, or improvements upon 10/11/50 -7- "Urban, suburban or rural real property in connection with existing structures, exce t to the extent that such repairs, alterations, or improvements incorporate any listed article'. That exemption has been removed from the present :gulation, and certain repairs, alterations and imral‘:\Tements have been added to the regulation as listed ‘ioles in Group D of section 222.9, with a required 131111-PaYment of 10% and a maximum maturity of 30 months. lat he present exemption in section 222.7(h)(2) re— flm "to a somewhat different subject. It is derived th-aTa Phrase at the end of the old section 222.7(h)(1) Itnity exempted house trailers, cooperative apartment resi !and similar entire units that are designed for eta;,tantial occupancy but are not technically 'entire exEg&ree l. As you noted, in its present form the tromil'u-Lon applies only 'if such unit does not result iej_rePairs, alterations, or improvements upon an exs tructure'. the,We are not entirely certain what provisions of at e.vl'evious regulation you have reference to when you Ilet: that: 'Another provision in the earlier act also by wIts a lending institution to loan additional amounts °f refinancing the original loan and issuing a secer loan for the original loan plus the amount subbe aerl,, tlY requested. The refinance was considered to 11.4°115r new loan even though it paid off an ex1 an sEle °wever, if a home improvement credit is in exWith °L42,500, or is combined into a single obligation oblio-':Y other non-automobile credit so that the single it dr222ui0n is in a principal amount exceeding $2,500, tic, exempted from the present Regulation Vi under sect' 1 "R basiegillation 4is adminstered on a decentralized thei ;through the twelve Federal Reserve Banks and °rthetwentY-four branches located in strategic parts Nrip.„country, and if you should have further inLhey in the regulation it is suggested that lork be regardg referred to the Federal Reserve Bank of New 3 ivew York 45, New York." Approved unanimously. 1411 Tele gram to the Presidents of all Federal Reserve Banks and g °fficers of all Federal Reserve Bank branches, reading as follows. lat. "Refer confidential wire yesterday re I?.egu1°11 X. Nothing further to report on issuance o , br ''egulation. So that Federal Reserve Banks and pg-111.,?1178 may have copies of latest confidential c0,741-LnarY draft of regulation available for study, vles are being mailed to banks and branches today." Approved unanimously. n• Lett. to Mr. J. L. Robertson, Deputy Comptroller of the `'llrrennir -4 3 Treasury Department, 4ashington 25, D. Q., reading as t'llows. 1.950 This refers to your letter of September 20, whei.l_and enclosures, requesting a ruling as to cir Paragraph numbered (II) of section 6 of the Du n Act is applicable to the service of Paul L. Icit s7 t1re as director of the Farmers National Bank of Arnist anning, Pennsylvania, and as director of the v.a.nia. 1.°hg County Trust Company, Kittanning, PennsylJakragraph nurabered (Li.) excepts from the proLions of P between section 6 an interlocking relationI A bank, banking association, savings bank, or trust company, more than 50 per cent= Of the common stock of which is . owned directly indirectly by persons who own directly or indirectly more than 50 per centuin of the etit°111mon , stock of such member bank.' it an ' rorrl the information submitted in your letter, of trIPears that the same shareholders owning 1192 ztrorie 2000 shares of the common stock of the Aim()Iltetg,9°11114 Trust Company own 509 of the 1000 shares of the common stock of the Farmers Na3000 Bank. The trust company also has outstanding , ,,, g shares of Class A preferred stock held theviartin ztock "I'L; and 500 voting shares of Class B preferred held locally. The shareholders who ovm. 1192 1412 -9,2dres of common stock of the trust company also shares of the Class B preferred stock. th The statute refers to 'common stock' and on ci! basis of the figures mentioned above, it is oi'ar that more than 50 per cent of the common stock !the Armstrong County Trust Company is owned directly i by persons who own directly or indirectly o 'endirectly than. 50 per cent of the common stock of the nat bank. When the statute was amended in 1935 one or th vue Principal objects was to avoid ambiguities and 1,8 simPlify administration of its provisions. Thereto1; reference to 'common stock' was designed to frclude preferred stock owned by the RFC and others _.°It the computation since the owners of a majority common stock usually control the policies of the it .uank affecting competition. In the circumstances, is 18 the Board's view that the exception quoted above ieta tPPlicable to the situation described in your 404 el', and therefore the service of Mr. Dunmire is 'Prohibited." "1175 Approved unanimously.
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