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A meeting of the Board of Governors of the Federal Reserve SYsterav was held in Washington on Thursday, September 18, 1941, at PRESENT: Mr. Mr. Mr. Mr. Ransom, Vice Chairman Szymczak McKee Draper Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Goldenweiser, Director of the Division of Research and Statistics Ransom stated that, at the invitation of the Secretary of the Tl 'easurY, he attended a luncheon meeting at the Treasury today, at 1741-ch there Were Nelson, Present, in addition to Secretary Morgenthau, Donald Executtve 13°arcl; *. the Director of the Supply Priorities and Allocations Galbraith representing the Office of Price Administration absence of Mr. Henderson; Under Secretary of the Treasury Bell; Haas and White of the Treasury staff; and Jacob Viner, Special 'er to the Secretary of the Treasury. He said that Secretary , °4etall stated at the beginning of the meeting that the Treasuryato% 1.11 an advisory position in relation to several agencies which tletraeci t0 have the same objective of getting the defense job done and tke tIte ame time preventing inflation so far as possible, and that he exPl°re the question of where the Treasury stood in that sit— _ n be Re aiso stated, 7Ar. Ransom said, that Messrs. Nelson and Bell en cliseussin the possible effects on the volume of credit and 1228 9118/4l the need neo for credit of a broad application of priorities, that Mr. Ilel8011 had taken the position that within a short time priorities 11,7oilifa b0 working so effectively and so completely that there would be n, - Possibility of credit expansion for the reason that no one would 4.1re eccasion to borrow for other than defense production, and that t48 . ralsed the question of the relationship of priorities and price cciltrois to the question of possible actions that had been under con— ' ation for the purpose of reducing the present volume of excess Mr. Ransom made the further statement that Mr. Nelson expressed the °Pinion during the meeting that there might be a reasonably good clearld for bank credit in connection with the production of defense 414tel'ia'18, but that there could be no substantial demand for credit of that field because of the reduction which would result from 13r)lication of priorities. In response to a suggestion of a pos— "ge lag in the effective institution of priorities, Mr. Nelson stated that a lag of more than a week and a half would be entirely inexcusable that there could be little or no housing activity not related to 4te"e 4S the labor was needed on defense jobs, and he indicated the l'eell.ng that in these circumstances there was no need for action to Nib the volume of credit, either by the use of over—all controls, 41ective controls, or otherwise. nlaring the discussion, Mr. Ransom said, Secretary Morgenthau r)29 9/18/41 —3— 8tated to the members of his staff that he wanted a recommendation fl'cm them not later than Monday, September 22, with respect to the lietions that should be taken in the field of bank reserves and selec— tive CI‘edit controls, and that he would like to have the same group tha't attended the luncheon meeting today and, in addition, Mr. Henderson, teet at the Treasury again on Wednesday, September 24, for a discus— the recommendations of members of the Treasury's staff and rep48entatives of the Board of Governors so that Messrs. Nelson and ReliderScil could be fully informed of the manner in which the problem (4 credit controls was related to prices and priorities. He added that tkere _ 8 wa o agreement with a suggestion made by Mr. Bell that repre— eerltati„3 from the Office of Price Administration and the Supply Pri— c*ities and Allocations Board meet with Mr. Goldenweiser and a member ()t the Treas 114-.Y staff for the purpose of informing the representatives In greater detail as to what had been considered in the recent discus— Iii°4abetween r epresentatives of the Board and the Treasury. Ransom concluded his statement with the comment that he gEttlied the definite impression from the meeting that the Treasury was 11(1 inclined to favor action in the field of priorities and prices 4ther thkr1 the field of credit control. At this point Mr. Williams, Vice President of the Federal Re— of New York joined the meeting and was informed of what had cee , "'red at the meeting at the Treasury. 4el*Ve t 4 f)30 9/18/41 -4In the discussion that ensued, Mr. Clayton stated that he had talked to Chairman Eccles over the telephone last night and that the Chaj 'Imaxi had stated that he favored the two amendments to existing IsIv 'referred to by Mr. Goldenweiser at the meeting yesterday, with respect to (1) counting vault cash as reserves, and (2) higher reserves on i„ -"6er-bank balances, but that he was still of the opinion that the Naing plan should not be suggested by the Board as an alternative tc4r the present percentage basis for determining reserve requirements or the reason that at present there was a great deal of banker and other Support for the present basis and if a new basis were suggested there wc)uld be serious danger of loss of that support. The Chairman tavor ed 'Mr. Clayton stated, a program under which reserve require14e/Ita -Li-Ld be increased to the limit of existing authority, and a general -Istatement would be made to the effect that additional authority ove eeerves would be requested which would give time for further study the form the authority should take, it being contemplated that the 4111e:t 404 0 84°Pted under the new authority should be one of definite restricto triezef credit expansion with the understanding that, if the reduction ees reserves that might be determined upon to carry out that 13°14Y 4441e : 0 ere round to be too great, the situation would be eased by °Pen market operations. There was a discussion of the possible effects on the volume 4cti t. 111-3r 4nd employment of a broad application of priorities and 1231 9/18/41 —5— Controls and what the situation would be if excess reserves were increased to the limit of the present authority without reference to 844'furtAler actions that might be taken. In response to an inquiry from Mr. Goldenweiser as to the effect of the meeting at the Treasury today on the discussions which were being held with Treasury representatives, it was agreed unanimously that, pending clarification of the situation, no purpose would be served in continuing the discussions, that Mr. Goldenweiser should complete the memorandum which he had in preparation for use as a basis for further discussions, but that he should withhold submitting it to the representatives of the Treasury for the time being. The suggestion was made that some Progress might be made in clarifying the situation if someone from the Board would confer with Under Secretary of the Treasury Bell, and it was agreed unanimously that Mr. Ransom should confer with Mr. Bell for the purpose of determining the procedure to be followed from this point. At this point Messrs. Thurston, Goldenweiser, and Williams th Meeting and the action stated with respect to each of the 8 her referred to was then taken by the Board: • mlnutes of the meeting of the Board of Governors of the steral TheReserve System held on September 17, 1941, were approved unani- ktter e tierrio_ vandura dated Septemb er 16, 1941, from Mr. Nelson, Assist411t 8ecreta 17, submitting the resignation of Julia McRobie as a 1232 9/418/41 —6— ellarwOman in the Building Operations and Maintenance Section of the Sec retarY i s Office, to become effective as of the close of business on SePtember 30, 1941, and recommending that the resignation be ac— as of that date. The resignation was accepted. Memorandum dated September 16, 1941, from Mr. Goldenweiser, bireet or of the Division of Research and Statistics, submitting the re8i. griation of Mrs. Franc S. Valentine as a clerk—stenographer in the pivi8. lOn, to become effective as of the close of business on September 14,6/ '4-1, and recommending that the resignation be accepted as of that date, The resignation was accepted. elegram to the Presidents of all of the Federal Reserve Banks kEotlin g as follows: tr "Reg. (-65. Regulation 1: does not require a Regis0 obtain down payment or otherwise to increase lt received through previous payments when a three re li8 credit conforming to section 6(f) rtiol is renewed or —"sed in good faith as described in W-49." Approved unanimously. Tele gram to the Presidents of all of the Federal Reserve Banks Itig as follows arly Ivbeg. 17-66. Pressure cookers are not included in wle classifications of listed articles." Approved unanimously. 1_233 9/18/41 —7— Telegram to the Presidents of all of the Federal Reserve Banks l'eaciing as follows: "Reg. W-67. The classification 'mechanical refrigeratorst does not include an electrically operated portable unit for cooling and dispensing drinking water." Approved unanimously. Telegram to the Presidents of all of the Federal Reserve Banks rear , "ne. as follows: a "Reg W-68. An inquiry has been received regarding sZ instalment sale contract of a musical instrument which Ill ates a single sum in payment of purchase price of instru,nt and lessons in playing thereof and carrying charge on eierred balance. In such case must amount allocable to le nes!?ns be regarded as being for services rendered in conI'dth acquisition of article under section 4(f)(2)? "AnY sum actually allocated to music lessons is of COUr, in not to be regarded as the cost of services rendered c°11necti0n with acquisition of musical instruments." Approved unanimously. Tel egrdal to the Presidents of all of the Federal Reserve Banks as follows: , t ' g 1,-69. Obligor who has received credit conim 'orr4 , 1e ° section 6(j) (Regulation W) and who subsequently at instalment sale credit on listed article priced p111,,,,'' is not required to make down payment on transaction." original The 6(j) credit remains a separate Approved unanimously. Tele, 5"tim to the Presidents of all of the Federal Reserve Banks s follows: 914 9/18/u. -8- "Reg. W-70. Question has been asked whether Section ' /03) of Regulation 17 permits first instalment to fall due days after date of contract or note, assuming such date date of sale, even though the result is that the obligalcm may show on its face that credit was extended for -L3-112 months. Answer is in the affirmative." Approved unanimously. Telegraln to the Presidents of all of the Federal Reserve Banks read4,_ as follows: "Reg. 1%-7l. A question which may be stated as fol4ws has been received under Regulation A Registrant sells a 1.00 radio, receiving in trade or exchange a used radio which he has previously sold to the customer and on which the customer owes the Registrant an unpaid balance. The Registrant allows the customer15 for his equity. What is the basis price, the maximum credit value and the down-payment requirement of the new radio? How should the max:Limn maturity be calculated for such a transaction? of t Under Part 2 of the Supplement, the basis price tractile new radio would be ft85 (100 minus the 1 1 5. equity vab ed in by the customer). Hence the maximum credit pa -le would be 68 (80% of 85) and the required downwould be l7, which would be in addition to the matuatlowance for the customer's equity. The maximum of tirltir, would be 18 months from the date of the sale 9(b)1° )100 radio, with the usual option under section sect,1°f making the 15-day adjustment permitted by that °4 for calculating the maximum maturity." Approved unanimously. tarik Tel-6;rara to Mr. Hodge, Assistant Counsel of the Federal Reserve Of Chic , -go, stating that the Board agrees with the opinion axecl In • hi , 8 wire of September 16, 1941, that in the absence of a '035 9/18/u —9— Provision in a collateral trust agreement under which a trustee holds inst-alment sales paper, the trustee has no responsibility under RegulaJ40 , n to see that the underlying collateral complies with provisions Reguiati Approved unanimously. Telegram to Mr. Orause, Director of the Instalment Credit DiAls; "On of the Federal Reserve Bank of St. Louis, reading as fol1.0178: "Your wire September 15 re two notes used in lieu fcirmer 24 months practice. On basis of facts stated 81,1J°ur wire Board not only agrees that if there was 4'usequent renewal relevant circumstances would indicate ent to go beyond 18 months period, but goes further ls of the opinion that a single transaction such as the Purchase of a listed article may not be divided into isZtalrlent and noninstalment portions in the manner Regio, rnt proposes in your case. Hence Board is of °pinti- tiat the proposed transaction would violate regulaif°n egulation 1.,-) because of 19 month maturity even not renewed." r Approved unanimously. Te legram to Mr. Crause, Director of the Instalment Credit n of the Federal Reserve Bank of St. Louis, reading as follows: ove "Yelur wire September 16 re deferred balance and t:".011 deferred balance. Latter term as used. in secref,6(b) does not include finance charges but ndmerlya ' s to the deferred balance that includes both listed ap11:11-isted articles. Finance charges are excluded in ilng Group E or in applying section 6(b) or 6(j)." Approved unanimously. 1236 9/18/a -10Telegram to Mr. Swanson, Vice President of the Federal Reserve klik of Minn eapolis, reading as follows: t "Your wires September 16 and 17. Section 6(d) (Regula°11 W) applies to bona fide medical, hospital, dental or luneral expenses even though previously incurred." Approved unanimously. Thereupon the meeting adjourned. A Al3Pr Vice Chairman. istant Secretary.
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