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1513 Minutes of actions taken by the Board of Governors of the ?ederai Reserve System on Thursday, September 16, 1948. PRESENT: Mr. Mr. Mr. Mr. Szymczak, Chairman pro tern Draper Vardaman Clayton Mr. Sherman, Assistant Secretary Morrill, Special Adviser Minutes of actions taken by the Board of Governors of the 414eserve System on September 15, 1948, were approved unanimously. Memorandum dated September 13, 1948, from ifir. Thomas, Director t h t-elaivision of Aesearch and Statistics, recommending that the resig4t44orMr, Duncan McC. Holthausen, an economist in that Division, be to be effective, in accordance with his request, at the close otbilainess on September 17, 1948, and that a lump sum payment be made ktual leave remaining to his credit as of that date. Approved unanimously. Memorandum dated September 10, 1948, from Mr. Thomas, Director th ,x1leollpilrision of Research and Statistics, recommending that Miss Helena se be appointed as a clerk-stenographer in that Division on a tb, 1102, „ indefinite basis with basic salary at the rate of $2,724 per Ap. q, -4-Lect1ve as of the date upon which she enters upon the performance 4L 1, ilties after having passed the usual physical examination. The e41c41111 also stated that Miss Knouse would become a member of the 1514 9/16/0 -2- 4(leral fteserve retirement system. Approved unanimously. Memorandum dated beptember 15, 1948, from r. Van Fossen, esi8tant Director of the Division of Bank Operations, recommending hat Lir -80 Dorothy H. Ford, a clerk in that Division who has been on 14atern1ty leave since May 3, 1948, be granted additional leave without the Period September 20 to October 31, 1948, inclusive with the Idel'8tIncling that if she can return to duty at an earlier date an ap4°141ate recommendation will he made as to her reemployment. Approved unanimously. Letter to the board of directors of the "Citizens Trust Company", t4/ 'Ceorgia, stating that subject to conditions of membership bere4 ' 1 and 2 contained in the Board's Regulation H and the following Deciai conditi, on the Board approves the bank's application for membershi e Federal Reserve System, and for the appropriate amount of O ln the Federal Reserve Bank of Atlanta: 43 . At the time of admission to membership, such bank shall have a paid-up and unimpaired capital of not less than 4200,000." Approved unanimously, together with a letter to Mr. McLarin, President of the Federal Reserve Bank of Atlanta, reading as follows: Pr "The Board of Governors of the Federal Reserve System ap°vesth -e application of the Citizens Trust Company, Atlanta, to Ja, for membership in the Federal Reserve System, subject ren e conditions prescribed in the enclosed letter which you are : tiZ'ested to forward to the board of directors of the institu4. No copies of such letter are also enclosed, one of 1515 9h6/48 —3— is for your files and the other of which you are requested r7forward to the Superintendent of Banks for the State of mecTgia for his information. fo "Since the losses estimated in the report of examination o membership have since been charged off, the usual condition ' Membership requiring the elimination of losses has not been Prescribed. b "It is assumed that you will follow the matter of the th 8 bringing into conformity with the provisions of law and (1? Board's regulations the savings accounts listed on page 16 °f the report, and that you will also follow the matter of stallation of adequate records in its trust department. It is noted that steps have been taken to have the bank's Chart 14ner, which expired in 1941, revived. The resolution of the kt,'Z' of directors accepting the conditions of membership should yoi2e adopted until after the bank's charter is revived and caZi: Counsel has executed the certificate required by the appliot,,?h. In order to complete our records, please forward a copy '41e Counsel's certificate." Letter to the board of directors of "The Commercial Bank, Waynoka, (how Waynoka, Oklahoma, stating that, subject to conditions of memrahip umbered 1 and 2 contained in the Board's Regulation H, the Board l'"ea the bank's application for membership in the Federal Reserve kro. and for the appropriate amount of stock in the Federal Reserve it 4anSaS City. Approved unanimously, for transmission through the Federal Reserve Bank of Kansas City. Lett„ 011 to the Presidents of all Federal Reserve Banks reading as Printers' proof of the new Registration Statement for ?hoton connection with section 2(h) of Regulation A is enclosed. • 44t00ffset negatives were air mailed to you yesterday. The ' 1 41 (F.R.563-b) is designed for a sheet six inches by nine 1516 -14-.Laches, the same size as Regulation V4. Space has been left the top of the form for inserting the name of the Federal 4eserve Bank if desired. You may wish to use the attached ,,aterial 14 in the transmittal letter sending blank forms to : 1 mailing list. The Board will write to you at a later mailing clate regarding the data to be compiled from the Registration otatements. „. "Also enclosed is the text of a Registration Certificate 7,n1ch the Board has approved. For the sake of uniformity the ?arid would like all Reserve Banks to have the Registration IeOlficate reproduced on a sheet six inches by nine inches. ls suggested that each certificate issued be dated and ered consecutively and that the letter of the alphabet ;Ich identifies the Federal Reserve District be used as a 11,,nx to the number (for example, Boston would prefix its Z'ter series with "A"). The seal of the issuing bank, shadow v:liated in the center of the certificate, might improve its Pearance and the Board would have no objection to its use anY Reserve Bank wishes to do so." 3 Approved unanimously, with the understanding that the letter to San Francisco would contain a footnote saying: "A printers' proof, rather than an off-set negative, was air mailed to San Francisco yesterday." T elegram to Ir. Heath, Assistant Cashier of the Federal Reserve or ahicaEo, reading as follows*: Your letter 6eptember 9 regarding General Finance pr's under Regulation W. Statement of transaction under 1Zent regulation is a record keeping requirement and so as each item of information specified is in a written and somewhere in either the instrument or a separate 4,t ; I'd or records the requirement would be satisfied. We gnize enforcement problem but feel this is an amend- Approved unanimously. Letter to the Honorable Maple T. Han, Chairman, Federal Deposit ee Corporation, vashington, D. C.,reading as follows: 1517 9h6/48 -5- "The Board's RegulationWrelating to Consumer Instalment l'edit which was issued under the authority of Public Law 905, acted at the recent special session of Congress, becomes ef.rave 6eptember 20, 1948. Copies of the Regulation and of , ue Board's press release dated August 19, 1948, regarding the 4egulation are enclosed. 4, "It seems clear that effective and uniform enforcement of Regulation throughout the country is essential to accomp' 8h.the purposes of the law and in fairness to the consuming Pillale and to those subject to the Regulation.. e "To that end the Board seeks the cooperation of the Fedkl Deposit Insurance Corporation in the administration of the egillation with respect to the banks under its supervision. ,Zrernor Evans has reported to the Board his recent discussion toth Mr. Cook and members of your staff on this matter, and the ard appreciates the offer of cooperation then made. 0, "The Board would like to have the cooperation of your yrporation along the following lines: "1. Your examiners to take appropriate steps in the examination of institutions under your supervision to promote understanding of, and compliance with, Regulation IN, and to determine whether violations of the Regulation exist either as to credits originated by the institution or credits acquired by it from others. "2. If violations by institutions under your supervision are discovered which in the opinion of representatives of your Corporation are inadvertent, your representatives to take steps to obtain correction of the violations along the lines which it is contemplated will be taken by the Federal Reserve Banks in similar circumstances under section II-A of the enclosed Outline of Enforcement Program; and If violations by institutions under your supervision are discovered which in the opinion of representatives of your Corporation are apparently willful and steps should be taken to determine whether penalties should be prescribed, your representatives to report the facts in the case to the Federal Reserve Bank of the district in which the apparently " willful violation occurs or to the Board of Governors. pre, In carrying out the above program, we would like to have re" ntatives of your Corporation and appropriate representatives p j 1518 -6"at the various Federal Reserve Banks maintain close informal contacts in order that the Federal Reserve Bank representatives Ina,Y be of all possible assistance to your staff in your cooperaLpn with us in this matter. Needless to say, we contemplate 'he same close and informal relations between our staffs here in Washington. "The procedure regarding treatment of violations of the Imibegulation as stated in the attached Outline of the Enforcement ,70gram, which has been prepared for the Federal Reserve Banks, 'as been cleared with the Department of Justice. "We have received assurances from the Comptroller of the Cur rency of their cooperation along the lines suggested so far 'e Xational banks and other organizations under his supervision ! re concerned. ae also expect to receive the continuing co?eration of the National Association of Supervisors of State and of other agencies with responsibilities for supervilOn of concerns coming within the scope of the Regulation." "OUTLINE OF ENFORC jENT PhuGitki.1 WADER REGULATION Vi 1 1...a/aELLotion Procedure A. Vendors and Sales Finance Companies: 1. Investigations of vendors and sales finance companies will be conducted by representatives of the Federal Reserve Banks. 2. As a general rule, each investigation will include a survey of procedures affecting Regulation A compliance, a spot-check of a representative number of recent transactions, and an examination of indexes of general conformity--such as collection ratios and records of delinquencies. 3. Each investigation will be covered by a written report in such form as will enable the Federal Reserve Bank to obtain information needed for the required summary report to the Board and will provide sufficient information for subsequent use in case of continued violation. Special attention will be given to reports of reinvestigations in which disciplinary action may subsequently be required. L. Each Federal Reserve Bank will be responsible for the investigation of branches in its district of Registrants with head offices elsewhere, but the Federal Reserve Bank where the head office is located will be informed of any developments which may lead to disciplinary action. 1519 -7"B. Lenders: 1. It is the general plan of the enforcement program that investigations of the various classes of lenders will be conducted by the following agencies: a. National banks--National bank examiners b. Dtate member banks*--Federal Reserve Bank examiners c. Non-member insured banks*--F.D.I.C. bank examiners d. Non-insured banks*--State bank examiners e. Industrial loan companies--State supervisors f. State-licensed small loan companies--State supervisors Credit unions--Federal Credit Union Federal E. examiners h. Other credit unions--State supervisors i. Federal savings and loan associations--Home Loan Bank Board examiners j. Insured savings and loan associations--State supervisors savings and loan associations-Non-insured k. State supervisors 1. Federal land banks and associated institutions-FCA examiners m. Lenders not specified above--Federal Reserve Bank investigators 2. The Board will maintain contact with the head offices of the Federal agencies involved but the Federal Reserve Banks will maintain contact with the local offices of these Federal agencies in their districts in the interest of continuing cooperation in the program. To the same end the Federal Heserve Banks will also maintain contact with the State agencies referred to in section I-B-1. 3. Investigations of lenders will be conducted by the various agencies in the course of their regular examinations of the subject lending institutions according to such procedure as they deem appropriate. It is expected that the procedure will include a discussion with lending officers to ascertain their familiarity with the regulation and a spot-check of loans. Treatment of Violators "A. when discovered by a Federal Reserve Bank: 'e I "e-Luding industrial banks. 1520 -8"1. Inadvertent violators: a. The Federal Reserve Bank, either through the investigator in the field or through communication from the Bank's office, will take appropriate steps to bring about, if practicable under all the circumstances, a correction of any contract found to have violated the regulation. b. The Federal Reserve Bank will undertake to obtain, either orally or in writing as may appear appropriate in the particular case, assurance of future compliance. c. Reinvestigations will be scheduled where warranted by the circumstances. 2. Apparently willful violators: a. When a violator is first classified as apparently willful, the Federal deserve Bank will ordinarily hold a disciplinary conference with the violator. The conference will ordinarily be at one of the offices of the Federal Reserve Bank and be attended by counsel for the Federal Reserve Bank as well as counsel for the degistrant if he wishes to be so represented. A reinvestigation will be scheduled for an early date. b. If on any reinvestigation after such a disciplinary conference further violations are discovered, the Federal heserve Dank will make the determination as to whether to hold an additional disciplinary conference or refer the case to the Board for action. c. If the case is referred to the Board for action, the Federal deserve Bank will prepare and send to the Board a full report of the history of the case with copies of all investigation reports and supporting documents. The Federal Reserve Bank will ordinarily make a recommendation to the Board as to the action to be taken. d. In every case in which a second disciplinary conference with the hegistrant has been held but the case has not been referred to the Board for action, the Federal heserve Bank will send to the Board, as soon as possible after the conclusion of the conference, a full report of the history of the case with copies of all investigation reports and supporting documents. 1521 9116/its -9"e. If the Registrant has offices in more than one Federal Reserve District, the Federal Reserve Bank where the head office is located will be kept informed and will be in charge of any disciplinary action. "B. When discovered by a cooperating supervisory agency: 1. Inadvertent violators: a. The cooperating agency will be expected to take steps along the lines to be taken in similar cases by the Federal Reserve Banks under section II-A-1. 2. Apparently willful violators: a. The cooperating agency will be expected to report the facts in the case to the Federal Reserve Bank of the district in which the violation occurred or to the Board of Governors. b. The Federal Reserve Bank will determine what steps should be taken in the particular case along the lines to be taken in similar cases where the violation was discovered by the Federal Reserve Bank, as outlined in section II-A-2. "C. When discovered by the Department of Justice: 1. Apparent violations will be reported to the Federal Reserve Bank in the district where the violation occurs. 2. The Federal Reserve Bank will handle the case along the lines taken in similar cases when discovered by the Federal Reserve Bank." Approved unanimously, together with a similar letter to Comptroller of the Currency Delano. Letter to 1Zr. Richard Rapport, President, National Association of Nervi c'rs of State Banks, 241 State Office Building, Hartford l51 Conreading as follows: er ."The Board's Regulation Vi relating to Consumer Instalment which was issued under the authority of Public Law 905, te'eted at the recent special session of Congress, becomes efth!tive September 20, 1948. Copies of the Regulation and of . Board's press release dated August 19, 1948, regarding the itj elllation are enclosed. 1_522 '9/16/48 -10- "It seems clear that effective and uniform enforcement of the Regulation throughout the country is essential to accomplish the purposes of the law and in fairness to the consuming Public and to those subject to the Regulation. "To that end and in order to avoid duplication of investitions, the Board is seeking the cooperation of the State and ederal banking agencies in the enforcement program, an outline which is attached. The Board has received assurances of c)operation from the Comptroller of the Currency, the Federal ueposit Insurance Corporation, and other Federal agencies having 811Pervision of lenders subject to the Regulation. "Under this program the Board would like to have the co?Peration of the various State bank supervisors with respect non-insured banks and other institutions under their superas suggested in section I-B-1 of the attached outline. Board suggests that this cooperation be along the following r "1. The State examiners to take appropriate steps in their examinations to promote understanding of, and compliance with, Regulation W, and to determine whether violations of the Regulation exist either as to credits originated by the institution or credits acquired by it from others. "2. If violations by institutions under State supervision are discovered, which in the opinion of representatives of the State supervisor are inadvertent, State representatives to take steps to obtain correction of the violations along the lines which it is contemplated will be taken by the Federal Reserve Banks in similar circumstances under section II-A of the enclosed Outline of Enforcement Program; and "3. If violations by institutions under State supervision are discovered, which in the opinion of representatives of the State supervisor are apparently willful and steps should be taken to determine whether penalties should be prescribed, State representatives to report the facts in the case to the Federal Reserve Bank of the district in which the apparently willful violation occurs or to the Board of Governors. to "Vihile the procedure referred to above relates particularly pean°n-insured banks and other credit agencies not also under proeral supervision, the Hoard would appreciate it if similar edures would be followed in the case of any violations disered in the course of independent examinations by State 1523 9/16/ -11examiners of insured member and non-member State banks. "The procedure regarding treatment of violations of the Regulation as stated in the attached Outline of the Enforcement )1"ogram, which has been prepared for the Federal Reserve Banks, nas been cleared with the Department of Justice. "Vie shall appreciate it if you will bring this request to the attention of the National iissociation of Supervisors of State Banks. In carrying out the program, we would like to have representatives of the various State bank supervisors and appropriate representatives at the various Federal Reserve Banks maintain !lose informal contacts in order that the Federal Reserve Bank elzesentatives may be of all possible assistance to the State °ank supervisors in their cooperation with us in this matter. "Needless to say, the Board desires to maintain close co„?,Peration with the National Association of Supervisors of State t'anks and will welcome any opportunities, formal or informal, further our mutual interest in promoting and maintaining und banking and credit conditions.” Approved unanimously. Letter to the Honorable V.ingate Lucas, House of Representatives, ngt°n, D. C., reading as follows: lyik, "This refers to your letter of September 2, 1948, with ag-Leh you enclosed a letter from jr. J. V. Butcher, Secretary stltd Treasurer, Oliver H. Ross Piano Company, 316 Houston r reet, Fort florth, Texas, in which r. lutcher expressed aegret that pianos had not been included under Regulation W in which he inquired why they had been omitted and whether eY might be included at some future date. pi "The Board has received a number of communications from clano manufacturers and dealers concerning the possible inj slon of pianos, and the trade is Quite divided on the subThe reason why they have been omitted is that the inlaalment credit generated in their distribution is not of th e magnitude and at the present time it would not appear in- the application of Regulation -tN would contribute enough 'he tat way of restraint on inflation to justify the adminisot ive work which would be required. aile there are a few m21!er items on the list about which the same thing could poso r be said if they were regarded as separate classes of el°c153 these were included because they are in a group of °eelY related items. "As requested, we are returning Mr. Butcher's letter." 1.524 9h6/48 —12— Approved unanimously. 4ck_ Letter to uir. Davis, Chairman of the Conference of Presidents, zral Reserve Bank of St. Louis, reading as follow-s: "In connection with the increase in reserve requirements IIT.member banks effective September 16 and oeptember 24 of .111.8 month, there has been some discussion of its possible ef4,ect on membership in the Federal Reserve System, either as a deterrent to obtaining new members or as a factor which might eause present members to withdraw. The Board mould appreciate Y,e111" having included on the agenda for the forthcoming Presi— uent51 Conference a discussion of this question." Approved unanimously. , _ Telegram to Mr. Carstarphen, Secretary and General Counsel of . A - F„ '"eral Heserve Bank of St. Louis, reading as follows: ' t "Relet September 10, Board will interpose no objection expenditure of not to exceed 575,765 on basis outlined in ,iJ °11r letter for conversion of generating equipment authorized ' 11 Board's letter of July 22, 1948." Approved unanimously. ADth.,
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