Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, September 20, 1950, Volume 37, Part 3

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'
795

Minutes of actions taken by the Board of Governors of the
Nler.0
cu- Reserve System on Wednesday, September 20, 1950.
PRESENT:

Mr. McCabe, Chairman
Mr. Evans
Mr. Carpenter, Secretary
Mr. Sherman, Assistant Secretary
Mr. Kenyon, Assistant Secretary

Memorandum dated September 18, 1950, from Mr. Leonard, Di—
rector
Of the
Division of Bank Operations, recommending that the
resign .
tivisiation of Mrs.
Eileen I. Howard, a statistical clerk in that
be accepted to be effective, in accordance with her re—
cIllest
3 av

the close
of business September 29, 1950.
Approved unanimously.

Memorandum dated September 19, 1950, from Mr. Bethea, Di—
reet()r °f the Divis
ion of Administrative Services, recommending
that the re ,
8-Lgnation of Mrs. Miriam P. Jasper, printing clerk in
that
r 11418i°n, be accepted to be effective, in accordance with her
elL'est
'at the
close of business October 13, 1950.
Approved unanimously.
Meftranda from the heads of the Divisions indicated below
l'e(lkeild'ing i
ncreases in the basic annual salaries of the following
er4Ploye
es in
those Divisions, effective October 1, 1950:
9

kierao

Title

I cu"ningham




Stenographer

Salary Increase
To
From

$2,890

$2,970

2

9/20/50
-2-Date of
9 1 0 Memo

Title

Salary Increase
To
From

41•••••••••..411.•

ADiaNISTRATIVE SERVICES
Charles
9/19/50 V. Carey
Cafeteria Helper
48EARCH
STATISTICS
Jennie L.
Glass
Clerk
Virginia
9/20/50 E. Lean
am
Clerk-Stenographer
ToR
kre:riZices C.
Colvin Secretary to Mr.
Townsend

$21120

$2,190

2,810
3,195

2,890
3,275

4,075

4,200

Approved unanimously.
13411( of

T
elegram to Mr. McLarin, President of the Federal Reserve

Atlanta, stating that subject to conditions of membership
kallbered 1
and 2
contained in the Board's Regulation H and the
3Dej-8-1.
condition Specifically stated hereafter, the Board approves
the
aPplication of the
"Merchants Trust & Savings Bank", Kenner,
LelLisiana, for
membership in the Federal Reserve System and for
the
rate amount of
stock in the Federal Reserve Bank of
hlanta,
effective if
and when the bank is authorized to commence
1:111-11ese by
a
ppropriate State authorities. The special condition
reed as
follows:
43
ilzist the
time of admission to membership, such
• 4!nk
shall have a paid-up and unimpaired capstock of not less than $150,000 and other
capital
funds of not less than $50,000."
The tei
ittivi
egram also requested that the Federal Reserve Bank
se the ay, i
tl.04
'
D-Licant bank of the Board's approval of the applicaam
-ndltions of membership prescribed, together with nec-




tr,)Cir-/
,

9/20/50
-3"417 instructions

as to the procedure for accomplishing membersh_t_,
P and stated that
a letter containing detailed advice reSuch approval would be forwarded to the applicant bank
through the
Reserve Bank.
Approved unanimously.
Letter to the Federal Deposit Insurance Corporation,
lia811illgto 2
n 53 D. C., reading as follows:
of "Pursuant to the provisions of section 12B
e the P
m_ 'ederal Reserve Act, as amended, the Board
%/Tremors
of the Federal Reserve System hereby
coi
rtifles that the 'Arkansas Valley Bank', Pueblo,
sy °rad°,
became a member of the Federal Reserve
orstem on S
e_
eptember 16, 1950, and is now a member
the Q
The Board of Governors of the Fedi?oirlirels
eejlSystem further hereby certifies that,
with the admission of such bank to
a7
ership in
the Federal Reserve System, consider14:
I/abwas
l
given to the following factors enumerated
(g) of section 12B of the Federal Re8erve secti°n
Act:

c:

financial history and condition of the
ban
The adequacy of its capital structure,
Its future earnings prospects,
4. The
5. The general character of its management,
convenience and needs of the community
to be served by the bank, and
6.
Whether or not its corporate powers are
consistent with the purposes of section 12B
of the Federal Reserve
Act."
2.
3.

,
..nere

Approved unanimously.
Lettpi
-r to Mr. w. n o
McLarin, Jr., President of the Federal
tank 0_

r Atlanta, reading as follows:
mhe
,
8, 1950 4.?rence is made to your letter of September
J-r1 which you advised that it appears ex-




-4„y'nses for the year 1950 in the Provision of Perinel function
at the New Orleans Branch will exc ed the
1950 budget estimates in the amount of
$18,.
300
"The Board accepts the revised figures as subappropriate notations are being made in
Board's records.”

T

read.

Approved unanimously.
Tel
egram to the Presidents of all Federal Reserve Banks,
as
follows:

"Questions have been received as to whether
d -"
411111ent
credit (1) for the construction of a
t
heached
garage on a lot already occupied by a
:
lee, or (2)
for repairs or alterations to such a
—rage previously
built, is subject to Regulation W.
ti, "A garage so
constructed would be in connrst'llAith an
existing structure and would not ?
Us !tile 'designed exclusively for
itr
ee,"4-k,hin the meaning of Group D of
noresidtalR the Supplement.
be:, the Board's view is that such a garage would
'other entire structure' within the meaning
Ofthe ex
emPtion in section 7(h)(1). Consequently,
0itlent credit
for the construction of the garage
--u ttnot be
subject to the regulation.
Pair,°11 the other hand, instalment credit for rebui
'
lt °r al
terations to such a garage previously
therppw°111d not be affected by section
7(h)(1) and,
the i'c're, in the
Board's view would be subject to
e applicable in the case of a Group D article.
Pend "nether or not a garage
is 'detached' must deUpon
the facts and circumstances of the particerete%?!
. For example, the mere fact that a cone rp -J-uewalk or fence may connect the house with
'
trornbarage
normally would not prevent the garage
entir,„eing a
detached garage and, therefore, an'other.
).
4 rie;r1structuret
within the meaning of section 7(h)(
encao-s— structural
however, such as an
gare ed Passagewayconnection,
or
breezeway
would prevent the
ge from ,
v .
'JsIng an 'other entire structure'."

Z




Approved unanimously.

4
(
)qt
-7)
?,.
I

9/2o/50
-5Telegram to the Presidents of all Federal Reserve Banks,
re
adillg as
follows:
,
"A question has been received concerning the
7
0 -oulation of the maximum maturity in the case
an instalment sale of an article listed in
D of the Supplement to Regulation W.
tiz "Under section 6 (b) of the regulation the maxmu
maturity in the case of an instalment sale must
14 calculated from 'the actual date of the * * * deaTrY of the article sold'. However, where there is
4.44
1 fide delay in the completed delivery of a
et°111P0 article
because of the time required for in4ation or construction, 'the actual date of the
*
!
4 deliveiy
of the listed article sold' for the
P°
H
!!
8
of
tillir
e
this provision is any date no later than
ticn--'! of completion of installation or construeIt is to be noted that the foregoing does not
pa:W with respect
to the time for obtaining the down
und:at required for an article listed in Group D.
in 6; section 3 (c) tin the case of an article listed
bef0;,°uP DI the down payment shall be obtained at or
alithe time of beginning the agreed upon repairs,
'
a°-°ns, or improvements'."
p

Approved unanimously.
Letter
dated September 18, 1950, to The Honorable, The
Attorlie
Y
General, Washington 25, D. C., reading as follows:
Your 011 May 27, 1942 (NB:NHM:rh-1)6-17-012),
ace 'ePartment
wrote to this Board that it was in
artpwITposals regarding the enforcement of
S
(relating to Consumer Credit) which the
to (1 hadset forth in its letter of May 22, 1942,
your
Department.
386, ilkfter its
expiration by virtue of Public Law
tier, wOth
granted
Congress, approved August 8, 1947, Regulathe 8"ra5
approved
authority
reissued pursuant to the
kgtthcil.ard by Public Law 905, 80th Congress,
to -,-041-21-16eP-94ber
2, 1948, the Board again wrote
DePartment with respect to the enforcement




29()
9/20/50
-6-

Hof
101 liegulation W., and by letter of September 9,
(AMC:MHH:rp-1)46-17-012), your Department inuleated that the arrangements agreed upon in conon with the 1942 correspondence appeared to
be ge
nerally appropriate as an enforcement procei
e tf
aZothe
il
reissued regulation. By virtue of the
in Public Law 905, the regulation exPired on June
30, 1949.
A .4. "Under
section 601 of the Defense Production
°f 1950, approved September 8, 1950, Congress
-,
ol1,,gain
authorized the Board to regulate consumer
vi'
44-t• This authorization, together with the procns of section 604 of that Act, is much the
same
8
as that contained in the 1948 legislation. Purixtlant to
such Act, the Board has adopted a new Reg,
1
W
similar in form to the previous one, and
has
er
:44-Led it with the Federal Register, to become
lective September 18,
1950.
The arrangements previously made with respect
to
to 4,ile enforcement of Regulation W would again seem
ce41 generally
appropriate as an enforcement proglad!at the present time, and the Board would be
follow a similar procedure if it would be
a
ni!feeable to
Your Department. There is enclosed a
4:orandum
ou.tlining the enforcement program which
14111.1,,,
n effect during the 1.948-1949 period and which
Used
'
i r°11j-de a general basis for the program to be
-b11 connection with the present regulation. It
riot
appreciated if you will advise us whether or
a 11,11r
" De
such
"
ccedurepartment would have any objection to

Ireti

ct

It A
Vroui'°

in the case of the previous regulations,
illarly n,!'' Of course, be happy to make available as
Illati — v'es as your Department might desire of Regthe r". and the enforcement program worked out for
collidegIllation. We would also appreciate it if you
eltrrent
st1P
,PlY us, as in the past, with copies of any
1 Lt„44.nstructions from your Department to the
siich 0tates
recille:Z Your Attorneys with respect to this mater,
circular letter of May 27, 1942, which
CaSes .ed that no proceedings should be instituted in
Ptior aZ
l
0
1.17
1,1Zg .,iolations of Regulation W without
Y rom your Department."




Approved unanimously.

291
9/20/so
-7Letter to The Secretary of Defense, Washington 25, D. C.,
leacting as
'
follows:
"This refers to Assistant Secretary McNeil's
letter of
September 15, 1950, addressed to Chairman
Ilec
re abe, setting forth the views of your Department
garding some of the more important aspects of the
inTam of guaranteed loans to finance defense pro
provided for by the Defense Production Act
°'
.p 950 and the President's Executive Order No. 10161
5,4 Se
ptember 9, 1950. Since the receipt of Mr. McNeil's
;letter,
the general outline of the proposed program
nv.as.,the
subject of profitable discussion at a luncheon
fing
' at Mr. McNeil's office attended by representatie
pove8 of the Departments of the Army, Navy and Air
lice and of
the Board of Governors.
teeli"The Board is in complete agreement with the
ity ng of your Department that there must be uniform
P°1icy and, so far as practicable, in the pro
whii-Les followed by the several guaranteeing agencies.
accord
detaTl it may require some time to work out all the
with-4.
-s of a permanent program, the Board is in
a.
6he
, suggestion made in Mr. McNeil's letter that
0114°aricable
arrangement should be adopted immediately
the interim
basis which will make it possible for
tees-sveral guaranteeing agencies to provide guarantion necessary for the financing of defense producmay eending such time as a more permanent procedure
developed.
With this end in view, we would like to lay betore,
ii
t°11
for your consideration the steps which would
seem
11, us to be necessary to put such an interim proDein i°
oral" t° effect. The program can be patterned gen
the J
. uPon the V-loan program which was in effect at
Of (1)"
0 of World War II and can include the adoption
egreenieba,.revised Regulation V, (2) a form of guarantee
°Perat;!', (3) a schedule of rates and fees, (4) an
to
acltxt::;s:nd (5) a definition of authority

T

respect to the revision of Regulation V, it
hroo-Lt
that,as in the past, it should be phrased in
iricie°L and
flexible language so that it will merely pro
bUt al.Z basic outline not only for the interim program,
—8° for the
program as it may finally be developed.




9
/20/50

-8A draft
of such a revision of the regulation is enclosed.

"As to the form of guarantee agreement, it is
Thbelieved that the form of 1944 V-Loan Guarantee Agree;
e nt which was in use at the close of the World Aar II
1
"
rall may well be utilized, with a few minor changes,
connection with the making of guarantees pursuant
to the
Defense Production Act of 1950, at least until
iller consideration may indicate the desirability of
ges in that form. There is enclosed a printed copy
Of the
su
form of 1944 V-Loan Guarantee Agreement with
ggTed modifications indicated.
soh d For the time being, the Board feels that a
of guarantee fees identical with that which
effect at the close of World War II might be
:r1 consideration. This schedule is as follows:
Guarantee Fee
10 -22.13-1-121
aranteed
(Per cent of interest payable by
borrower on guaranteed portion of
loan)
10
15
20

X

30
°17er 95
50
_
the r. 4' cases in which a commitment fee is charged by
neing institution, it would seem desirable that
any
age s
ec" fee should be shared with the guaranteeing
In other words, a financing institution imposing
Per Ztment fee would pay to the guaranteeing agency a
or Z-;''age of such fee based on the guaranteed portion
ter h _ credit,
percentage of the inequal to
same
the
s Payable on
to etIit
the loan which is required to be paid
slIge e guarantor as a guarantee fee. However, it is
by tted that any commitment fees which may be charged
1/2 (-);4r,leing institutions be limited to a maximum of
the -' ..1 Per cent
per annum. It is also suggested that
l
ate of
interest charged by financing institutions
inniz riesPect to
guaranteed loans be limited to a max?If 5 per

cent.
would 1
1,t should be
emphasized that the rates and
teriza ue

fees
es
Of.
tablished only for the purposes of the in-

e411
Z4
clie ri




Would

t=ct to change in the light
ss
re

-9"In the handling of applications for guarantees,
the de
termination of the relation of the contract to
be financed to the necessities of national defense, the
Processing and approval of guarantees, and other procedural matters, it is suggested that the corresponding
Pirocedures which were followed during Viorld War II be
ci;L,IcrIlse followed, as nearly as may be practicable,
,11..ing the period of the interim program. Thus, appli;a6i(ms for guarantees would contain substantially the
in
on formation as was required by the form of applifor guarantees of production loans which was in
Use
during the previous V-loan program.
ti "Finally, it is essential that appropriate dele'11 --°fls and redelegations of authority be provided with01,44ch guaranteeing agency in order that designated
pro
'
esrs of each agency may have clear authority to apacj
e aPPlications for guarantees and take such other
Forlf.T as may be necessary in connection therewith.
'
time s Purpose, it is hoped that at the appropriate
sicp,.,
Y°1-1 will be able to advise the Board, for transmisspe-.60 the Federal
Reserve Banks, of the names and
whol
la,
en signatures of the officers within your agency
Possess such authority.
in t1,448 Previously indicated, the program outlined
onii-J-.8 letter is
intended to be of an interim nature
and and it is our thought that procedures, forms,
side
es of a more permanent nature can be conput
fncearly
.
date after the interim program is
Intto e
t
rnatte In order
that prompt action may be taken in this
4.1,11:34the Board will appreciate receiving, at your

;V
!

c°nvenience, your views and comments, on behalf
Noy, Department of
the Army, the Department of the
to3 theatd the Department of the Air Force, with respect
ProposeciTarious features of the interim program here
ifige
SYstem _211sh to assure you that the Fedex-al Reserve
agencie'll cooperate with your agency and the other
akillisZri
arZ
nve
oi
cl. t(t
t,1)Iis,h;rf
ol;tlV
a , extent possible in the

.
Approved unanimously, with
similar letters to the Secretary of
Commerce, Secretary of Agriculture,
Secretary
of the Interior, and General
Services Administrator, and the following




1294
9/20/50
-10letter to the Comptroller of the
Currency:
As you know, under the Defense Production Act
c41, 1950 and the President's Executive Order
No. 10161
%8
11:1:tember 9, 1950, certai design
ated 'guaranteeing
n
8.-en:'esi of the Government are authorized to guarantee
lofaii.made by financing institutions for the purpose
;
o;
1 1-18ncing contracts and other operations relating
-Le__rocurement of materials and performance of
eervip
_
us for the nation
al defense. The Federal Reserve
have been designated as fiscal agents of the
anIted States
to act on behalf of the guaranteeing
eies in making such guarantees and the Board of
tOhors of the
Federal Reserve System has been auto-;:zsd, after consIllting the guaranteeing agencies,
the';secribe regulations governing the operations of
tee
rederal Reserve Banks as such agents, rates and
andS to be
charged with respect to guaranteed loans,
withfc)rme and procedures to be utilized in connection
making of such guarantees.
Prop, In order that the contemplated guaranteed loan
may be put
into operation at the earliest practh s moment, the Board of Governors has suggested
to'
step e several guaranteeing agencies an outline of
inte!,which might be taken to establish immediately an
perni'4111 Program
pending such time as the details of a
the rnt Program may
be developed. Among such steps,
an intard has suggested that, for the purposes of suchf
gliaratt
erim Program, guarantees be executed on a form o
wobld e agreement which, with a few minor changes,
G1
identical with the standard form of 1944 V-Loan
WorLie
Agreement which was in use at the close of
grara-rvioa.r ji
in connection with the similar V-loan pror guaran
teeing loans to finance war production
'acts,
the :
c It will be
recalled that from time to time during
kard ,
;" of the V-loan program of World War II the
1111
Governors submitted to your Office standard
'
. guarantee agreem
%Lion
ents, with a request for an
(
,i1.11iremen
:
s to whether such forms complied with the reTu„:1-04.3.11-8 of Your definition of the term luncondij-ted ste,,used in Exception 10 to section 5200 of the
'`
,141.1.tati c"
,es Revised Statutes relating to the loan
'
vat'ied s-c)Ils applicable to national banks. In a letter
Ptem.er
1,
25, 1944, your Office expressed the

Z

Z




gt
;
i,s4
,•
y

9/20/50
-11)Pinion that guarantees executed on the 194h V-Loan
EGuara.ntee Agreement would come within the purview of
,
,
11ceePtion 10 to section 5200 of the Revised Statutes
,
the
therein.definition of the term 'unconditional' as used
"There is enclosed a copy of the form of 1944
Loan
„4.0an
Guarantee Agreement with suggested changes in"ted thereon
to make the form appropriate for use
th lng the interim program of guaranteed loans under
ane Defense Production Act of 1950. We will appreciate
as exPression of
your opinion as to whether this form
tics° m°dified would come within Exception 10 to secor :
11 5200 of
term the Revised Statutes and the definition
'unconditional'.
be„
Since it is hoped that the interim program can
aLlIp;"'d into
operation within a few days, it will be
i iated if this matter can be given prompt atten
tione?
LY,Y your
Office."

r

tea.ctiz

Letter to the
Presidents of all Federal Reserve Banks,

g 48 f011ows,

"As You
know, under the Defense Production 13
A(cI, 1
of i'
el! and the
President's Executive Order No.
a g:eTber 9, 1950 certain designated 'guaranteeing
ltla-Z!' of the Government are authorized to guarantee
4e by financing institutions for the purpose
to th'alleing
contracts and other operations relating
seryie Procurement
of materials and performance of
;
!
e 8 for the national defense. The Federal Reserve
kit" "ave been
age .I States to designated as fiscal agents of the
act on behalf of the guaranteeing
of
Goveze,,1
n,
e,
8 in making such guarantees and the Board
thori:7.38 of the
Federal Reserve System has been autoafter
theTscrib_
consulting the guaranteeing agencies
of
and
tees Zeral regulations governing the operations
Reserve Banks as such agents, rates
and for„te charged
with respect to guaranteed loans,
114478 and procedures to be utilized in connection
4Ti
el la
:
r,king of such guarantees.
respect -00ard
has received numerous inquiries with
ah bo the
contemplated program of guarantee
agelleiZd we understand
that some of the guaranteeing
as well as
the Federal Reserve Banks, have




12P

-12"received similar inquiries.
"With the objective of putting the program into
rration
at the earliest practicable moment, the
n has addressed letters to the Secretary of De„d
the Secretary of Commerce, the Secretary of
.culture and the Secretary of the Interior, and
ti
:Administrator of the General Services Administrayin suggesting for their consideration certain steps
st;ce" might be taken to provide for the immediate inof an interim program which would enable the
riec:*1-1- guaranteeing agencies to provide guarantees
tr -ssarY for the financing of defense production conpeacts_
„
'F'lng
nu
such time as the details of a more
aplt program may be worked out. There is enClosed
dres ,-or your information a copy of the letter adby the Board to the Secretary of Defense, todrep.er with its
enclosures. Similar letters were ad'eV to the
other guaranteeing agencies.
respe
Your bank should have any comments with
.
tc) any of the aspects of the proposed interim
0111:17, Please let us have them by wire since it is
a fewoPe that the
program may be put into effect within
*4117 cf.
laYse As indicated in the letter to the Secrecorisic,44 Defense, it is the thought of the Board that
forms''eration
will be given to the various procedures,
progr and Policies which are to govern a permanent
Pixt i;t114.1_at an early date after the interim program is
effects!,
Approved unanimously.
Letter to Mr.
Roger W. Jones, Assistant Director, Legislative
,
aeference
krIg
1 Bureau of the Budget, Washington 25, D. C., readfollows.
Illitta.7h.
,
1_3 is in response to enrolled bill trans1950 - Sheet
received by the Board on September 18,
eterliclosing a
facsimile of enrolled bill S. 2T,
(1J.S:.31(13‘inn(
1.
12t
,h:eF
c.
ede
2z35.Deposit Insurance Act
object.Tha Board
is in agreement with the general. .
Which lves
vi
of this bill, but it opposes the provision
C0/1001,;°.uld authorize
the Federal Deposit Insurance
--'i°n to make
special examinations of State




9/20/50
-13nmEmther banks whenev
er in the judgment of the Board
°t Directors
of the Federal Deposit Insurance Corlc
on such special examination is necessary to
"'ertine the condition of any such bank for insurance
Purposes. We feel that this change is wholly
„i7oul?cessary
and may ultimately lead to confusion and
az.lnereased overlapping and duplication in the exand supervision of banks. As you know, a
otter
dated February 10, 1950, from the Director
Pedt
e, lle,Bureau of the Budget to the Chairman of the
subZat Deposit Insurance Corporation discussed this
thi"eb and reflected the views of the President on
matter. A copy of such letter is enclosed herePr /11:11 view of the desirability of certain other.
of the bill, the Board recommends that it
81raPproved by the President in spite of this uncleweable
feature. In the circumstances, however,
ab.l11?-gge5t that consid
eration be given to the advistine/i,
tY °f the President issuing a statement, at the
aPProves the bill, to the effect that the
Corion
-11
„at
,iOn Power of the Federal Deposit Insurance
ext1;a6ion referred to above should be used only in
lat''°11clillarY situations involving an emergency rea slng to
a particular bank. It is believed that such
ardn'ement might help to reduce misunderstandings
"sconcepti
ons regarding the provision."
Approved unanimously.
Memora
ndum dated September 19, 1950, from Mr. Vest, Gen0
oUtss,
4'3 statin
g that he and Mr. Millard, Director of the
xam
kemorarcum inations, recommended for the reasons stated in
II 3 that the
Board make no representation in the proRs h
19sr, 0 -erc)re the
Federal Power Commission on September 22,
r
--Lse
of °uJection to the Commission's Order No. 152 issued
this
Year requiring competitive bidding with respect
448 inad
e by banks to
utility companies where the loans have




1

9/20/50

-14-

,laturuies

in excess of five years.




Approved unanimotisly.

•