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M IN U T E S O F M E E T IN G O F T H E F E D E R A L A D V IS O R Y C O U N C IL May 13, 1945 The second statutory meeting of the Federal Advisory Council for 1945 was con vened in Room 336 of the Mayflower Hotel, Washington, D. C., on Sunday, May 13, 1945, at 2:00 P. M., the President, Mr. Brown, in the chair. Present: Mr. Thomas P. Beal (Alternate for Mr. Charles E. Spencer, Jr.) District No. 1 Mr. John C. Traphagen District No. 2 Mr. William Fulton Kurtz District No. 3 Mr. John H. McCoy District No. 4 Mr. Charles E. Rieman (Alternate for Mr. Robert V. Fleming) District No. 5 Mr. Keehn W. Berry District No. 6 Mr. Edward E. Brown District No. 7 Mr. Ralph C. Gifford District No. 8 Mr. Julian B. Baird District No. 9 Mr. A. E. Bradshaw District No. 10 Mr. Ed H. Winton District No. 11 Mr. George M. Wallace District No. 12 Mr. Walter Lichtenstein Secretary The Secretary of the Council stated Mr. Spencer had written him he would be unable to be present and Mr. Fleming was not well enough to attend meetings. The minutes of the meeting of February 18-19, 1945, copies of which had been sent previously to the members, were approved. A short discussion took place regarding the situation in reference to Regulation Q. The Secretary of the Council read the telegram which the President of the Council had sent to the Chairman of the Board of Governors under date of March 13, 1945. It should be noted that at the time the telegram was sent it had been impossible to get in touch with Messrs. McCoy and Fleming but both of these gentlemen subsequently expressed their complete approval of the telegram so that the members of the Federal Advisory Council are unanimously in favor of the position stated by the President of the Council on March 13, 1945: “All members of the Federal Advisory Council except Fleming who is still ill in bed and McCoy who is vacationing in Florida and therefore could not be reached have approved of the following resolution and have authorized me to forward it to you as Chairman of the Board of Governors of the Federal Reserve System: “The Federal Advisory Council considers it would be unfortunate and unwise at this time to require a 100 per cent margin on loans made for purchasing and carrying listed securities. The amount of credit now in use both by banks and brokers for such purpose is relatively small. Current purchases in the stock market are being made primarily for cash. A 100 per cent margin requirement at this time might affect the market for a short period, but once such a requirement was put into effect any restraining influence the Federal Reserve Board would have over the market through its control of margin requirements would be exhausted. 12 Furthermore, such a requirement would tend to restrict the use of venture capital in the development of business enterprises. It would also tend to upset confidence and it very probably would cause many people to sell government obligations and to buy less of forthcoming government issues so that they could be in a position to buy stocks for cash. The Council desires that this statement be published in the event the Board should decide on a 100 per cent margin requirement at the time such requirement is announced. There is no objection to its publication in advance of any decision by the Board.’ ” Mr. Wallace read a telegram which he had received indicating that the Board of Governors of the Federal Reserve System was seeking the extension of Regulation W so as to include mortgage loans and loans made for the purpose of repairing houses. There was general agreement that the Council was opposed to any increase at this time in margin requirements, any extension of Regulation W, and any raising of the capital gains tax. There was a feeling, however, that it should be required that securities be held for twelve months or longer before, in the event of sale, the securities would be regarded as having been held for a long term and so subject to the capital gains tax. The Holding Company Bill was discussed and the point of view was expressed that it would be well if the Council pointed out the danger in the bill due to lack of definition of terms. Mr. Winton submitted a suggestion that Federal Reserve banks be asked to give technological service to small business. The President of the Council summed up the feeling of the members that it would be undesirable to make any suggestions to the Board in that connection and that on the whole it was questionable whether such service ought to be performed by the Federal Reserve banks. There was discussion about the practice of banks giving certain detailed information about banks to large depositors. No conclusion was reached. The Secretary of the Council presented a letter from the Assistant Secretary of the Board of Governors, dated March 7, 1945, dealing with Bill S-795, which would amend the Servicemen’s Readjustment Act of 1944 so as to enable large banks to make loans to veterans without regard to limitations and restrictions of any other statute with respect to the ratio of such loans to the appraised value of the property or with respect to the maturity of the loan. The Council approved of the action of the Board of Governors in supporting this amendment. The meeting adjourned at 6:20 P. M. WALTER LICHTENSTEIN, Secretary. 13 M IN U T E S O F JO IN T C O N F E R E N C E O F T H E F E D E R A L A D V IS O R Y C O U N C IL AND TH E BO A RD OF GO VERNO RS OF TH E FED ER A L R ESER V E SY STEM May 14, 1945 At 10:30 A. M., a joint conference of the Federal Advisory Council and the Board of Governors of the Federal Reserve System was held in the Board Room of the Federal Reserve Building, Washington, D. C. Present: Members of the Board of Governors of the Federal Reserve System: Chairman Marriner S. Eccles; Vice Chairman Ronald Ransom; Governors M. S. Szymczak, John K. McKee, and R. M. Evans; Elliott Thurston, Special Assistant to the Chairman; Chester Morrill, Secretary of the Board of Governors; S. R. Carpenter and Bray Hammond, Assistant Secretaries to the Board of Governors; Walter Wyatt, General Counsel; George B. Vest, Assistant General Attorney; E. A. Goldenweiser, Economic Adviser; Woodlief Thomas, Director, Division of Research and Statistics; Leo H. Paulger, Director, Division of Examinations; Edward L. Smead, Director, Division of Bank Operations; Carl E. Parry, Director, Division of Security Loans; Robert F. Leonard, Director, Division of Personnel Administration, and Liston P. Bethea, Director, Division of Administrative Services. Present: Members of the Federal Advisory Council: Mr. Edward E. Brown, President; Messrs. Thomas P. Beal, John C. Traphagen, William Fulton Kurtz, John H. McCoy, Charles E. Rieman, Keehn W. Berry, Ralph C. Gifford, Julian B. Baird, A. E. Bradshaw, Ed H. Winton, George M. Wallace, and Walter Lichtenstein, Secretary. The President of the Council made the following statement: The Council believes military expenditures should be reduced as far as possible, consonant with the effective prosecution of the war against Japan, and the production of civilian goods and housing should be increased. The Council does not believe there has been any marked speculation in stocks and even in the case of farm and urban real estate, the stage has not been reached where any action is required. The Council thinks it inadvisable to put into effect a 100 per cent margin requirement on loans made for the purpose of carrying stocks and in the opinion of the Council it would be a mistake for the Board of Governors to extend Regu lation W so as to cover improvements in buildings. The Council, furthermore, is opposed to a heavy and punitive capital gains tax though it believes it might be well if gains from sales of securities held for less than twelve months were treated as gains from short term holdings rather than as gains from long term holdings; in other words, gains from the sale of securities held for less than twelve months should not be subject to the capital gains tax and should be treated as gains from short term holdings. Finally, the Council feels the tax exemption enjoyed by foreigners in this country should be investigated since apparently a considerable amount of refugee funds is escaping taxation. A long discussion followed, lead principally by the Chairman of the Board of Governors dealing with the topics suggested by the President of the Council. The Chairman of the Board of Governors suggested that the Council issue a state ment dealing especially with a reduction in the amount of goods made available to the Armed Services. The President of the Council stated that it is conceivable the Council would be willing to issue a statement if the Board of Governors would agree to concur publicly 14 in the views expressed in such a statement. The Chairman of the Board declined to commit himself in that respect. The President of the Council stated that the members of the Council felt the defini tion of holding companies in the bill now pending in the Congress ought to be clearer. As holding companies are defined in the bill at the present time, it would confer much too wide an authority on administrative bodies. The President of the Council stated that a majority of the members of the Council was opposed to the imposition of a prohibition upon banks preventing the giving of special information to some depositors as to the status of the bank. The meeting adjourned at 1:15 P. M. WALTER LICHTENSTEIN, Secretary. 15 M IN U T E S O F M E E T IN G O F T H E F E D E R A L A D V IS O R Y C O U N C IL May 14, 1945 At 2:45 P. M., the Federal Advisory Council reconvened in the Board Room of the Federal Reserve Building, Washington, D. C., the President, Mr. Brown, in the Chair. Present: Mr. Edward E. Brown, President; Messrs. Thomas P. Beal, John C. Trap hagen, William Fulton Kurtz, John H. McCoy, Charles E. Rieman, Keehn W. Berry, Ralph C. Gifford, Julian B. Baird, A. E. Bradshaw, Ed H. Winton, George M. Wallace, and Walter Lichtenstein, Secretary. There was a lengthy discussion as to whether the Council should issue a statement on the question of reduction of not immediately needed supplies for the Armed Forces in order to promote the production of goods for civilian consumption. Dr. Goldenweiser discussed, from 3:15 P. M. to 4:25 P. M., the question of inflation and deflation. After Dr. Goldenweiser left, the Council resumed the discussion as to whether it should issue a statement in reference to the matter previously mentioned. It was agreed that the Secretary of the Council should inform the Chairman of the Board of Governors that the Council had decided not to issue a statement at present of any kind. Furthermore, that the Council had authorized its Executive Committee to prepare a careful statement, if this seemed desirable at a later period, and to circulate such a statement among the members of the Council, not sitting on the Executive Com mittee, for suggestions and approval. The Secretary of the Council also was authorized to consult with the Board of Gov ernors as to the best time in June to hold a meeting of the Executive Council. The meeting adjourned at 5:00 P. M. WALTER LICHTENSTEIN, Secretary. 16 NOTE: This transcript of the S e c r e ta ry ^ notes is not to be regarded aa complete or necessarily entirely accurate. The transcript should be considered as h^incr strictly for the sole use of the members of the Federal Advirory Council. W. L • S e cre ta ry * b notes on meeting of the Federal Advisory Council on May 1 3 , 194.5* at 2 :0 0 P . M ., in Room 336 o f the Mayflower Hotel, Washington, D. C. A l l members of the Federal Advisory Council were present, except that Mr. Thomas P . Beal served as alternate for Mr. Charles S . Spencer, J r ., and M r. Charles E . Rieman served as alternate for Mr. Robert V . Fleming. The minutes of the meeting of February 18-19, 194-5# copies of which had been sent previously to the members, were approved. REGULATION Q G iffo rd said that the question had been submitted to the coun sel of each bank involved and i f he regarded the practice as il l e g a l , it should be disco n tin ued . A le tte r to this effect had been sent out by the Federal Reserve Banks but a ctu ally only 29 banks had received such a letter and a l l were in the Eighth D is t r ic t . He understood the 3o*ird of Governors had decided to enforce the law but would try to be in touch only with those banks which were notoriously vio latin g the regulation. Apparently, i t i s contemplated to base action on the exam inations of July 1 9 £ 4 . M r. Chester Davis came to Lo uisv ille and addressed the Clearing Hou:-e but at that time had l i t t l e comprehension of the com plete confusion p r e v a ilin g . As fa r as Gifford knew, only the banks in the Fighth D is t r ic t had received a letter so that a l l of this nigh t merely have been a kind o f t r ia l balloon o~ possibly Mr. Davis was a ctin g on h is own responsibility. ( Rieman said that banks in Baltimore did get l e t t e r s .) Gifford read the l e t t e r o f the counsel of hie bank, James W, S t i t e s , dated March 7 , 1945* and addressed to J . McF^rnon Barr, President of the First National Ban* o f L o u i s v il l e . HrovTi said that Hansom either had sent out letters or had the Comptroller of the Currency do i t but so far the Bonrd had re a lly not done anything. I t was decided to ask the Board at the end of the session to■orrow what is being done in connection with regulation Q. y^r.TH teXUIiEMSNTS AND TAXATION TO P3SVENT INFLATION Brown said Vinson and the S^C wanted a 100 per cent margin ytquireaent imposed in order, among other things* tc take care of the situation of floor traders on the Stock Exchange. In March it seemed as if action might be taken within a few days. Taft, in speaking of per cent tax on capital gains, said that there would be no sense in iaposing such a tax as long as the Board had not exhausted the powers it possessed, such as imposing a per cent margin requirement on loans made for the purpose of carrying stocks; only after the Board had sxhausted its powers and it was found it could not control the situation should a 90 per cent tax on capital gains be tried. 490 100 The Secretary of the Council re*id the telegram which Mr. Brown had sent to the C h ai^an of the Board of Governors under date of March 13, 194,5, It should be noted that at the time the telegram was sent it had bsen impossible to ret in touch with Messrs. McCoy and Fleming but both of these subsequently expressed their approval of the telegram. The telegram in question read as follower "All members of the is still i l l in bed therefore could not resolution and have man of the Board of Federal Advisory Council except Fleming who and McCoy who is vacationing in Florida and be reached have approved of the following authorised me to forward it to you as Chair Governors of the Federal Reserve System: * , The Federal Advisory Council considers it fould be unfortun ate and unwise at this tine to require a per cent margin on loans made for purchasing and carrying listed securities. The amount of credit now in use both by banks and brokers for such purp-ose is relatively small. Cu^-rent purchases in the stock mnrket are being ma.de primarily for cash. A 100 per cent margin requirement at this time might affect the market for a short period, but once such a requirement was put into effect any restraining influence the Federal Reserve Board would have over the market through its control of margin requirements would be exhausted, furthermore, such a requirement would tend to restrict the use of venture capital in the development of business enterprises. It would also tend to upset confidence and it very probAbly would cause many people to sell government obligations and to buy less of forthcoming government issues so that they could be in a position to buy stocks for cash. The Council desires that this statement be published in the event the Board should decide on a 100 per cent margin requirement at the time such requirement is announced. There • is no objection to its publication in advance of any decision by the Board*n. 100 Bro-*n went on to explain that as the price of stooks fell about •-hat tine nothing wan done but lately there has again b«en talk of imposing n 100 per cent margin requirement. It is generally admitted that this action wouldn’ t really a c c o m p l i a n y t h i n g but it mi*ht force Confess to place a s t if f tax on capital ^aine. The pressure comen from 8£C and fro® the Office of Economic Stabilization. He believes the Council uhould restate the position expreneed in its wire of March 13* There should be considered in this connection alr.o the desire to prevent inflationary developments in connection with farm and urban reel estate. Wallace reed a telegram which he had received stating that there was some talk of extending Regulation W so as to include mortgage loans and loans for the pur x>se of repairing houses. Traphaften expresses the opinion that with the change in admin istration and the end of the war in Europe pressure to do these various things may be lessened* Brovin stated he had been told by someone who had the necessary information and was qualified to express a judgment that war expenditures could probably be out per cent without decreasing; the efficiency of prosecuting the war against Japan. Of itself it is certain the Army will never do this. I f , however, there should be a greater production of goods for civilian consumption it would do more to check an inflationary oovement than could ever be accomplished by punitive taxes. The cormmid eation of March 13 should be reaffirmed and the Council should demand publication of the communication in case it is contemplated to carry out the plan of the 100 per cent margin requirement. 50 Trash a gen believes the Council should oppose any increase in the capital gains tax and also any extension of the requirement of time to hold securities in o^der for the holder to avail himself of the capital £aina tax. Kurtz does not agree as he believes there is too much specula tion. Traphagen says stocks are still Beilin? below the average of 1936-1937. Brown said the prices of farm lands are not yet up to what they vtre in 1913 though they ere higher than they were in 1933-35. In Chicago there is much speculation in certain types of commercial buildings %nd apartment house properties. Traohairen says unless we are to have another depression and business ia to furnish jobs, capital must be as free as possible and banks *ust be at liberty to lend froely to enterprises of every type. Brown said he understands tho Council to be opposed to increase of nargin requirem ents, any extension of Regulation F, and against stiffening -4* of the c a p i t a l g ain s tended to o n e y e a r tax. P o s sib ly in ste ad th© h o l d i n g o f h av in g t im e oufrht to th e r e q u i r e d h o l d i n g be to b e ex o n ly six iponths# Kurtz said that to s t a r t new p r o d u c t iv e e n te rp ris e s re q u ir e s lore than s i x m o n t h s a n d f o r tjhat m a t t e r m ore t h a n a y e a r a n d a s t i f f c a p it a l T a in s t a x a ifih t d i v e r t fun ds from s p e c u l a t io n to r e a l p ro d u c tiv e e n te rp ris es . M cCoy w a n t s a strong p r o t e s t m ade a g a i n s t any e x t e n s io n of R e g u la tio n W . W allace a sk s w h eth er V in so n has been in f o r m e d o f the re so lu tio n of the C o u n c i l . BroTTn th in k s he Vinson n o . l o n g e r head is o f the O f f i c e in of in to n the the of C o u n c il capital in i t s W in to n , c o m m u n ic a t io n that but, the and R e c o n v e r s io n of fac t, and W . H. D a v is oppose e x ten sio n o f R e g u la tio n W tax. on m o t io n m ade b y M r . C o u n c il re a ffir m o f M arch 1 3 , as a m atter s i n c e h e h a s b e e n m ad e S ta b iliza tio n . sh o uld p .ain s I t was u n a n im o u sly v o ted seconded by M r . it sta b iliza tio n the O f f i c e said in of o f War M o b iliza t io n has become t h e h e e d and a n y c h a n g e does know about charge 1 9 /* 5 , to th e the G iffo rd , p o sitio n end expressed Board. HOLDING COMPANY BILL Brovm u n d e r s t a n d s be c o n s i d e r e d lay take p la c e th is th is aaxe a t r a d e w i t h Foods an d b ill. year sum m er. the in r e tu r n So f a r of 1931 and Treasury sh o u ld no t been any 10 is alto geth er in to prevent tro u ble. C o rp o ratio n s been try in g B o ard*s h o ld in g thore to support B r e t t o n agreem ent. broad and in d u strial not co m pa ny The d e f i n i t i o n is another c o r p o r a t i o n s fro m s a v e d many b a n k s cla use sa v in g banks in thf> p e r i o d fo llo w in g . said h e per c e n t of the company w a s p u t in m erely ine co m pnniee b i l l though support the may It that h e a rin g s Boqrd has the Board w i l l d e fin ite too the b i l l . b e lie v e F e d e r a l Reserve the B a ird in g The opposed to how ever, T r e a s u r y by w h ic h w h ic h w o u l d "h en th e y r e t is Some, there h as of h o l d i n g c o m p a n i e s in the b i l l C row ley at a l l . th em selves th- re are thought stock for of the cla u se a bank trading do n o t h a v e is to stating purposes. any some c l a u s e s w h i c h that any be regarded cqncem to be h o ld a h o ld in g On t h e w h o l e , preat o b jec tio n ought as the b o l d to m o st o f the c la rifie d . Berry said he thought the Council had better wait u ntil the problem has d*v*loped further before doing anything. -5Bro*m feels tho Council minht well express its feelinr? about the i a n ^ r of the definition in tho bill* B^rrr says it is hard to make a definition v*hich '*ould pive the Board any freedom of action, sgJlVIC>: ON INDUSTRIAL AND TECHNOLOGICAL PKQBLKMS BY FHDK^AL HESrRV’- 3 AUKS Hinton p.rsrues that the Federal Reserve System should f»ive serv ice to local industry which could he done by channeling it through local ««Bb*r binks, Small industries need technological and othor services ccep'^able to those which bijy corporations have bat small business can not afford to establish the kind of research departments large corpor ations have. The Research Advisory Service has done this sort cf work for come tine but i t ought to be done by a public body and if so th* Federal Reserve Bank could do this much better than an institution like the Smaller T’ar Plants Corporation* Baird says the Smaller ^far Plants Corporations has started rerion^l research o rganisatio ns. It has b«en trying it out in Buffalo and it i3 ccndidt*rin£ d iv id in g the country into ten regions. It will ask a capital subscription from industries and banks to carry on this roric* Kurt a said the Federal Reserve Bank of Philadelphia had at tines employed in d u s tria l sn^ineers and the like in connection with loans under 1 3 ( b ) . Baird said the Research Advisory Service does not undertake to solve the problems of in div id ual business but through bank distributes information about methods employed by other businesses and tells where information can be o btained, Bro^n said i t i s h is understanding that the Smaller War plants Cor for*tton is anxious to have some organisation i?hich would do for small business what the ^reat corporations are able to do by having large research s t a f f s . I t is a question whether it is desirable to have such Bervice placed under the control of the Federal Reserve System. It is c*rtainlv d i f f i c u l t to imagine that the Federal Reserve System would actually establish technological research institutions* Tflinton thinks that what is meant is a kind of clearing house or r®fe~ence bureau in order to send applicants to the riftht source for the particular information needed* Brown sums up the general feelinr of the Council that it does not desire to make any suggestion to the Board in this connection but on the oth^r hand fe e ls that this is not the business of the Federal Reserve Syatea* ^MCHTNG of kar s a v in g s bonds Winton said cashing o f E bonds in hia own bank in March was in relation to sales though the situation was somewhat bette** in A^ril* ornrht to be pointed o u t, however, that there was an aviation riant designated as a sales agency for E bonds but which did not cash bonds so that h is bank, perhaps, Hold less than it normally would but at the same time did the cash in g, rinton ?ives some figures showing that for the country as a ^hole cashings are increasing in relation to gales and in h is own area this percentage is somewhat hirher than it is for the country as a whole. Wallace suggests that an extension of Regulation W raitfht *rell cause people to cash in more bonds. As a matter of fact, the over-all picture is not very bad. Bro^n says the e ffe c t of a ll this has been to increase savings deposits and in so fa r as the money received for bonds is spent it will also increase commercial accounts. This causes the ratio of capital to deposits to decline s t i l l further but he does not see that there is any thing for the Council to do o r, for that matter, for the Board of Governors. INFORMATION GIViSN BY BANKS TO CERTAIN LARGE DEPOSITORS Brown c a lls attention to the fact that this topic was suggested by the Boird of Governors. There are a few corporations such as duPont, Ford, and some of the insurance companies which demand a breakdown of the bond account and the prices the bonds are carried a t . This is in opposi tion to Eccles* b e l i e f that banks should not carry bonds of B3 or higher rating at anything less than the purchase price while bonds poorer than B3 should be carried on a four year average. I f banks are allowed to carry bonds on an amortized basis or at a price lower than they are then they are not under any pressure to sell and this defeats the purpose for which the rules for bank examinations were changed. Traphagen thinks giving out information to some depositors favors these as against others. Brown said to deprive banks of the right to give out information is really an interference with the management of the bank and w ill lead to h*d banking p ra c tic es. He fe e ls that the Board of Governors should not prevent the practice by regulation nor should there be a law to pre vent it even thourrh probably most bankers do not like the practice. Winton thinks confidential information is not to be divulged for in times of depression this w ill creite di ficu lty . Traphagen think3 banka should be prohibited froa skiving out information other than that appearing in the published official state ment* A vote w^s tak^-n und it ^as ound that t~o of th© swashers of the Council ^ere in fevor of' prohibition being inposed upon hanks to ^ive out special in onaation *vhile eight wore opposed to any regu*. * on or law* The general sentiment of the members of the Council nas that the credit pools established on recommendation of the American Bankers A s s o c ia t io n have had a good effect but have had very little tc do. Hie Secretary of the Council presented the letter free the Assistant Secretary o f the Board of Governors, d*ted M-.rch 7 , 19A5, deal ing *ith B ill S* 7 9 5 , which would ar*end the Servicemen’ s Readjustment Act of 19^4 so as tc enable large banka to sake loans to veterans without regard to lim itations and restrictions of any other statute with respect to the ratio of such loans to the a praised value of the property or *dth respect to the maturity o f the lo*m. Hie Council approved of the action of the Board of Governors in su porting this amendment. The meeting adjourned at 6 f 20 P . It. On Sfey 14., 19A 5, at 1 0 :3 0 A . ft., the Council held a joint m e t i n g rith the Board of Gov ernors of the Federal Reserve Systea in the Board Room of the Federal Reserve Building. All Berbers o f the Council f?ere present ex cept that M r. Thoa?is P . Beal represented Mr. Charles E . Spencer, J r . , and Hr. Charles E . Riesan represented Mr. nohert 7 . Fleming. The follo w in g aerabers of the Board of Gov ernors *<ere present: Chnira&n Eccles; Vice Ghairnan Ransoaj Governors Szvaczak, McKee, and ^ r . s ; a l s o , Messrs. Thurston, M orrill, C \rpenter, Bray H&rsaond, Wyatt, Vest, Goldenweiser, Thomas, Psulger, Siaead, Parry, Leonard, and Bethea. ly^LiSMiSlTS AND TAXATION TO PREVENT IHFLATIOK >ro*m rsays C ou n cil fe e ls m ilitary expen diture* should be re duced ft? far as p ossible and the production of civ ilia n goods and housing should be increased. Araed services w i l l not of theaselves sake reductions unless forced to do s o . A certain gentleman in position to kno^ a ll of the facts has stated that ire no^ have ac~e tanks and ^hips than w ill be a»ed*U for the rest of the ^*,r and there could be a cutback of 5?0 b illio n without turting in the l e a s t the war e ffo r t against Japan. The Council dees not believe there is any a&rked speculation in stocks and even in the case of fare and urban r e a l e state a stage has not been reached where any action is required. To be su r e , there is some speculation in larger apartaeat buildings and h o te ls and certain types of commercial buildings but even in those cases p rice s paid have not as yet reached the replacesent ?slue. The Council things it inadvisable tc put into effect a 100 ;:er cent saargin requirement on loans made fo r the purpose of carrying stocks. There are reports that the Board o f Governors is considering putting under Regulation W such aatters as necessary improvements in buildings. In the opinion o f the Council this would also be a mistake. It is anxious to know what the situation is in regard to the 100 per cent tirein requirement end t h ' extension o f Regulation T h e Council further— lo^e is opposed to a h e a v y and punitive c ap ita l gains tax although i t be lieves it might be d es ir a b le to extend the holding period froa six months to * year. It fe e ls tax exemption enjoyed by foreijmers our?fct to be i n v e s t t e d since apparently considerable refuges funds are ^scaping taxakion. McK*e asked whether the present margin requirements are regarded adequate. -9- w 3ro - n s t a t e s t h a t r a i s i n g o r l o w e r i n g the m argin re q u ir em e n ts t a n w r cent, -would n o t h a v e a n y e f f e c t on*' w*.y or a n o t h e r , fiv e o r Eccles s a y s a l l -rovemrrient a g e n c i e s co n ce rn e d f e e l som ething oopht to b e do n e i n o r d e r t o h o l d t h e l i n e a g a i n s t i n f l a t i o n * The O . P . A . finds b l a c k m a r k e t s e x t e n d i n g e v e r y w h e r e and the T r e a s u r y f in d s an Increase i n e v a s i o n o f t a x a t i o n * T h e r e h a s b e en a g r ^ t exp ansio n o f -urrency i n c i r c u l a t i o n a s t h e r e h a s b e e n i n ban k d e p o s i t s , bend h o l d i n g s , ani the l i k e * P e o p l e a r e u s i n g u p w h a t e v e r r e s e r v e s o f goods t h e y m y h&ve M i a n d p r e s s u r e u p o n p r i c e s I s b e c o m in g v e r y g r e a t * The m i l i t a r y snist he b r o u g h t f a c e t o f a c e w i t h th e n e c e s s i t y o f h a v i n g r e a l c u t b a c k s . It i? p l a n n e d t o h a v e 1 1 m i l l i o n r>en f i ^ h t i n c J a p a n . J a p a n i s no l o n g e r % 5 n s c e t o t h i s c o u n t r y I n t h e s e n s e t h a t i t can attack; nn and isore i s b e in ' asfcsd t h a n pressure to h e l p i s b e in g ; n e e d e d f o r t h e ® a r e f f o r t * There i s also great r e l i e v e t h e E u r o p e a n s i t u a t i o n and i t i s u n q u e s t io n a b l y necessary f o r u s t o d o s o m e t h i n g , o t h e r w i s e t h e r e w i l l b e chaos in G^rsany a n d u n l e s s vie d o h e l p R u s s i a w i l l ju s t t a k e o v e r the w h ole o f lurope* C o n s e q u e n t l y , r e m u s t b e p r e p a r e d to se n d e v e r a l o t o f h e l p i f ire w ish to atop R u s s i a * It is proposed to a p p r o p r i a t e $ 7 0 b i l l i o n f o r the *a r a g a i n s t J a p a n i n t h e c o m in g f i s c a l y e a r . I t may be b e t t e r to r ig h t a war o f a t t r i t i o n a n d t h u s b e a b l e t o h e l p w in p e a c e i n Europe in the n e x t twelve m o n th s* T h e F o o d S i t u a t i o n w i l l b e more than e v e r b e f o r e . c r itic a l te x tile s u ffe r e d a situ a tio n lo ss Is 7 -S of u n believ ably m illio n BU?t be e q u i p p e d wi-tti c o t t o n tig h t, non and at slo th in g for The t e x t i l e in d u s t r y h a s the game tim e the w h ole army the war a g a i n s t J a p a n , so th e civ ilia n s it u a t i o n f & l l be the ^ o r s t e v e r . T r a n sp o rta tio n o f a l l k in d s is bad a n d t h e r e i s a s h o r t a g e o f p a r t s f o r a g r i c u l t u r a l m ac h in e ry . People o u g h t to r e a l i s e that a la n d in g nent m eans h u g e c a su a ltie s. A s i a , and re g io n s those ire a u s t h a v e u n c o n d i g enerally . io n al in R u ssia w i l l If Japanese J a p a n a n d on the A s i a t i c c o n t i d o m in a t e K o r e a , the c o n t in e n t o f t h e A m e ric a n p u b l i c d e c id e s that s u r r e n d e r t h e n p r o b a b l y we r i l l n e e d 11 <ai l l io n s e n a n d t h e e x p e n d i t u r e o f $ 7 0 b i l l i o n i n 1 9 4 5 - ^ 6 . T h i s w ould se-n a h u g e l o s s o f l i f e a n d a g r e a t d a n g e r o f i n f l a t i o n * In r e a l i t y jj* 0R3 i s ^ d a n g e r t o R u s s i a a n d n o t t o u s * T h e r e i s p r e s s u r e t h a t sone— thing be d o n e about c h ec k in g sp ecu latio n on t h e s t o c k m ark et a n d in far® and u r b a n r e a l e s t a t e . c r e d it a s w a s d o n e w i t h The only p o s s i b l e c u r b i s by m eans o f r e g u l a t i n g as k e e p in g d o v n the sale n e t h o d . rentals The E x e c u tiv e O r d e r in stalm ent sales Board o f Governors and if the b y B e a n s o f R e g u l a t i o n W* As f a r r e g u l a t i o n s h a v e b e e n evaded by a k in d o f Board can be d i r e c t e d w i l l not act the S . to do som eth in g by E. C. m ig h t take o v e r the m a tte r o f m a r g i n r e q u i r e m e n t s , t h e Farm C r e d i t A d m i n i s t r a t i o n the co ntrol o f r u r a l ?’ e a l e s t a t e , a n d the F e d e r a l H o u s i n g A d m in is t r a t i o n the co n tro l o f u r b a n real estato* It is far better to h a v e th e F e d e r a l Pe- sarve S y ste m h a n d l e t h e s e n a t t e r s t h a n t h e s e o t h e r a g e n c i e s . A capital g% in s t a x i s a b e t t e r I n s t r u m e n t t h a n c r e d i t c o n t r o l , as c r e d i t c o n t r o l does n o t t o u c h p e o p l e p a y i n g c a s h a n d c r e d i t c o n t r o l cu rbs th e l e g i t i m a t e buyers and t h e l e g i t i m a t e f a r m e r . A c a p i t a l g a in s tax w il l get a fte r everyb ody a n d * o u l d b e b y f a r t h e b * s t w ay tc c u r b s p e c u l a t i v e a c t i v i t i e s . -10McKce aefcs why the Council wif^ht not ^ub ait n resolution to be p u b lis h ^. Eccles a g r e e s . Bro~'n asks w hether lish ed a s t a t e m e n t w i t h w h ic h th^ the jjjjprer to t h i s in q u iry . He * e n t should u s e h i s in flu e n c e to b r i n r Board > o u ld 3oard was on to in state about concur i f th o C o u n c i l agreem ent but that pub th e re ^ a s no in h i s o p in io n everyone cutbacks. Eccles says G e n e r a l M a r s h a l l is the man to convince. Adm iral Kins *n ) G e n e r a l Arnold ^o u id probably not raind hav in g the numbers in the srsy cut dow n *h ile Mac A rthur wants a huge l«nd a rs y . 3 ro~=n q u e stio n s K^.cArthur d o e s want E c cles enornourly a n d h a s sore s h i p s . the Navy has c o m p a rativ e ly refused nay ccji r e a l l y answer the the that in c re a sin g recentlv its issu ed the Navy p r io r it y for sh ips for BO fo r m a te ria ls or stopped. that G e n e ral M arshall C o u n cil and desand co n t r a c t s the be a s k e d Board a s h e is to d is c u s s these t h e o n l y m an ^ h o q u e stio n s. F ccles M cKee to ^ i v e been the Navy r a s suggests c a tter s f r a n k l y w i t h the in fo r m a t io n he h a s r e c e iv e d array. says that Ransom by lan d o nly Byrnes aanpo^er a n d i n ju d g in g a huge M cKee a g a in both suggests threw that c o ld w a t e r on th e C o u n c il th is p u b lish id e a . a statem ent. Protv-R s a id the C oun cil presumably ?»ould i f the Board *?ould agree to concur p u b l i c l y . K ccles O ri^r h a s b e e n subject to says that fo rb id d en th is to /jtnsoii said that p eo p le is in a ^ e e n e n t w o u ld there Eccles says Tor o x u a p l e , Th*re i s o b v io u s ly no in ^ _ i t * of 3c not k a v ^ o ffic ia ls be no the there in h is of in te n tio n tl?e A rm e d £ ccle« th is the in ten tio n m an to a p u b lic feels reason agency ^h ic h th by E x e c u tiv e C o u n c il the that is the v a r io u s that p u b lic peo p le f o r an array o f c h a n g in g shortage m ig h t b e w e l l the d e c i s i o n s to h a v e any dem and of it t o m ake cu ttin g . S e rv ic e s are. o p in io n p o lic y o f is the d e s p e r a t e out t * r w h i l e a l t e r n a t iv e s is statem ents w h ile who have ^ny of Board is not order. a ll the p r o b l e m s w i t h Guram. the p u b lish in The m any r e g i o n s . o p in io n to if already w e ll 11 m illio n m en. reg u latio n s T h e Array a n d o^ Patterson and p u b lic w ants has never heard d isc u ss everyone statenant. the p r e s e n t d r a f t t h e A m e r ic a n p u b lic is first and as Navy other sn to w h a t all the -11SfcKee says he b e lie v es brlnr o ut th e o +h * r Kurtg G iffo rd th in k s Berry ask F c c I^s 3 body the c a p i t a l j m i a s to to e n tire tax. rsiuch e f f e c t * have a re so lu tio n even -rould h « v e much e f f e c t . ■shat *?ould b e the e ffe c t if th*> B o ard t r i e d to in statem ent. know b e lie v es in it a n d m ade a w ants H in to n t h e C o u n c i l m ig h t ^ e l l w hether fluence the s i t u a t i o n is th e o b v i o u s d o u b t s w h e th e r a C o u n c il r e s o l u t io n rou ld have tfcoust* he » 1 p o d o u b t s it needs and th e C o u n c il i s sid e . t o *h o m the C o u n c il agreem ent H e w o uld su ch ?. s t a t e m e n t s h o u l d sh o uld w ith lik e g iv e th e B o a r d t h e support o n a l l mntters e x c e p t the Board to h a v e an be m ade. o p p o rtu n ity o f m e etin g General Marshall a n d A d m i r a l K i n g t o d i s c u s s t h e s i t u a t i o n . gcK-i-e a s k y or s t r o n g e r a f t e r h ird there o u g h t to is ft d a n g e r t h n t '“ l i e v ^ s that a th iriK g be sigh t w a l l g i v e w hether such w h ic h d e leg a tio n s? th in k s in it a He the Council s h o u l d is by n * " n R Fccles •’ ■ all b u t 1 0 0 F urtherm ore, a yet r e a l l y u s e d an Board why, the cent tho he o f the C o u n c i l . He to a p p r o a c h not eq ually and asked w hether is it su g g es tio n Congress and it too l i t t l e to is ou^ht check that to u s e the the in not favo r be the in flu e n c e situ a tio n try oth< ^ m ethods. sp ecu latio n a c t u a l am ount o f m a r g in r e q u i r e m e n t w o uld it has i t *o u ld approach so a n x i o u s to c u r b The in for h e r . T ru m sn m i g h t n o t b e the w ay to see n o t s p e n d men a n d rill bankers have see the C o u n c il im p o rta n t tc He doubts w h e th er a body l i k e sin ce then, fe e lin r pow ers there situ a tio n C o u n c il w ar a g a in st Japan th in k s a lte rn ativ e , present the the P resid en t. the the to h a v e B e r b e r s o f is co n v in c e d R u ssia fig h t re so lu tio n If per the id e a It the E n v y says is feels of of cutbacks, t r o llin g c r e d i t for case the th e b o y s horse a n d Re b e l i e v e s th e h a n d s is -whether P r e s i d e n t issu e o p in io n . tie it wonders to a p p r o a c h to h a : e o p in io n . c&m o to d i s c i i ' ; w ould good seabere o f t h e H o u s e . to the C o u n c i l ’ s h a n d s . Congress. know tro ll. on p u b lic p u b lic go a b o u t the S e n a t o r ? T?hcm t h e y p o ss ib le C o u n c il w ould be w e a k e r w ould l i k e p u b lic way to aoney i f we a r e w i l l i n g th e the in fo rm a tio n Eccles of w h ic h m i^h t t i e G e n e ra l M arshall the b e s t of a c u t b a c k i n p o sitio n soee w ay to aro use if their r e s p e c t i v e the co nference by m eans o f credit con in v o lv e d flo o r t r a d e r s . Board h a s these before not a?? sus-rgest- other m eth o d s. Traph-igen Powers n m and th^n v o u ld not have be sorry any to left. see th^ The p ric es Tosrd of e x e r c is e stocks all of its present -12- still re ally 15 p e r c*»nt belo w ;o n o t h in ,r e l s e a t io n s . is jmy be t h a t thf' A r s e d by m kin? th*'m opposed 1935- 37. The present v a lu es th^ to a statem ent by the C o u n c il a t t h is are that there a of represent Force? ’^ lie v e nn-1 thus b r i n g a b o u t t h o h ir ;h than q u ic k e r iap ~ o v*»aent i n v a r i o u s c o r p o r s im p ly p la y in g ?cin-r< are end to p o k er w ith tim e . to be hurre f o r c e s the w * r . T h e '"h o l e It th e J a p a n e s e a v a ila b le situ a tio n a ir f it riiiJt i t s e l f , ^syacaak used to suggests s h o ^ t o V i n :* o n M cK e e a n d V>. H , suggests vh ©never t h e r i g h t tia e T r a o h a fr ^ n h av in g a a statem ent «h ic h t c m ak e u s e th in &e it co uld be D a v is, p re p a rin g cane s t a em ent p r e p a r e d v h i c h better of w o u ld be a v a i l a b l e it, to a p p r o a c h Senators rather than have a n y s t a t e a e n t . Eccles agrees that there w o u l d b e a d a n g e r i n makint? a p u b l i c s tate m e nt, Bradshaw M cC o y is opposed belie v es Board to be u s e d -»hen t h e Eccles as to i t s a p r o l o n g a t io n to asks v ie w s. the "in to n in c lu d e E ccles * il i not change there at the p r e s o n t Beal the ■ a r t e t . bcndn partly the in thing to maste i t s R leaan •hole i s cent u n d e r the q u e stio n of cap ital there For su ch a exam ple, common of th e stocks. He it tax. w o u ld be a m i s t a k e trains t a x . fo r there are shortage there is so lv in g a great that cu tb ack s such a s h o r t a g e o f the h o u s in g s i t u a t i o n so ‘"a r h a s m eant an in has been a r e a l sp e c u la tiv e r is e able are statem ent power. there fun ds t h e B o a rd a 7 ? ill n o t h e l p is s p e n d in g m oney i s n f t to t h e C o u n c i l re c o m s e n d c a p i t a l g a in s t h a t m oney c r e a te d in trust to h av e but b e lie v e s not b e lie v e In v e s t m e n t bon is s o liie E ccles *iiic h says s t a t e m e n t tc- b e £ iv e n th e C o u n c il g iv e any p o s s ib il it y He does cor o ra te the be a com es. cutbacks alo n e of isn ’t crease o f /„00- 5GQ p e r tim e v e r y m uch situ atio n . tim e . sho uld h o ld in g ; p e r i o d says the statem ent. why d o e s n ’ t a g r e e s w ith es.ny p - ia a r y p r o d u c t s luaber t h a t ri^h t a statem en t in ther^ Ke w o uld of to & to o b tain a bein#? i n v e s t e d b e lie v es s u f f i c i e n t am ount o f p a r t l y in g overn m ent th e C o u n c i l s h o u l d do some vi--«ws k n o > n . b e lie v es ill- in fo rm e d . He the p u b lic does not -^rants t h e w a r th in k there i s to be o v e r b u t o n th e a n y n « e d w o r r y in g a b o u t stock aar*c«t r i s « . Brown **t t e r 0 f states that isH uin fr «. s t a t e m e n t . in the C o u n cil * i l l m eet l a t e r to c o n s i d e r the -13- P^ n T V G COMPANY B I L L Sroy-n. a b i l l s h o u ld bo C o u n cil h a d n ’ t in tro d u c e d at tak en any p o sitio n th is % freestin^ o r a d e a t h s e n t e n c e d r u s e . d e fin it io n o f h o l d i n g ■\r i n i ‘-ion. xt i n -ny a d m i n i s t r a t i v e held l * r g e b lo cks assoc!.'1t io n isp ie , stock of stock in C a l i f o r n i a in th e and *.nd, in c o n s e q u e n c e , a ho ldin g c o m p a n y . in e sp ec ia lly such in c lu d e to th e to p a r t b o f th e though these s o a p a n ie s tc lik e the U n i t e d States fa m ily , sho uld States The be stock Steel a h o ld in g through an Then, fo r ex- fa m ily w h ic h h o lds b lo c k s the U n it e d or the noted of S t a te ® N a t i o n a l estate, th at in nigh t the in th at were in p r e s u m a b l y w < m ld f i v e to Lever be w i l l i n g to run know w h e t h e r im- p e r m is s io n to s t i l l no c o rp o r a tio n th e s l i g h t e s t c o m p a n y a n d bainf? f o r b i d d e n w o uld l i k e d istress, Gary, b i l l s i g h t m ake such h e l p fro m y e a r to y e a r , w ould be d e c l a r e d p a s t ,i n d u s t r i a l S t e e l C o rp o ra tio n d id in present the B o ard h o ld H ie C o u n c i l the H e ilm a n banks an d h elp ed banks etc. they act K e rc h a n ts* a n d F a r m e r s R a t i o n a l o f L o s A n g e l e s , it u p new and as to b e h o l d in g co m p a n ie s. the B ellm an Brothers i n H a m m o n d , cf b in?? d e c l a r e d h ill Sen F r a n c is c o , the the U n ite d possible b e c a u s e s h o u ld The C o u n c il does o b je c t the Boston ban ks, is in Then, set fcr exam p le, st**el. of thsre •- eils- T, r g o ccapanies b a r e in it o p p o s e d t o a n y s u c h d r a g n e t a u t h o r i t y b e i n g ftiven to body. F o r e x a m p l e , in B o s t o n , m utual s a v in g s ban ks t h e y mi^fct be? h e l d Po rtland, O r e g o n , as, co m p a n ie s e.s to w h e t h e r t im e a n d A e t h e r there risk to m an ufactu re are to be h e a r i n g s , and s h e a , a n d w h e t h e r t h e h i l l i s b e i n g s u p p o r t e d b y t h e F . D . I . C * and the C om p tro llers O f f i c e . Eccles. Im m e d ia te h e a r in g s le g isla tio n h a v i n g ha? been c l e a r e d precedence through the ?h* T r e a s u r y ^ s n t e & aent -hen t h e b i l l com es u p . b*nk group i n 5.eath F lo rid *, is not i n c o r p o r a t e d m anagem ent company. As f o r h i m s e l f , %cKee 'c a s e n u e n c e e . d is c r e t io n is says ^rcup. H - doubts n^<*ded to question o f the d efin itio n . IM C h V A T IQ a GIVi.N 3ro- n a tion to ‘ he states isn ’ t of fact, stocks i»oin g w s D. in it c e rta in I. a is m uch The b ill C ., and B u d g e t . su ch group l i k e a n am endt h e M e l- sentence sin c e the I n d i v i d u a l ban ks acts to t r y e x a c tly lik e to push p ut in w ith a h o ld in g th e b i l l full it but at a l l . know ledge o f its th e p o w e r g i v e n but to h av e an o p p o r t u n it y to d i s c u s s the situ a tio n s. T O C E R T A IN that there surest by a death e itfh t o f L A R G S D E P O S IT O R S t h e m em bers o f of a p ro h ib itio n on ban ks some d e o s i t o r n ; tw o h a d v o t e d in F. and r i l l be a f f e c t e d w ould l ik e BANKS im p o s itio n As a m atter not fo r w h e t h e r a n y b o a r d w ould a b u r e m oet says h e p o s e . to cla u se d e fin itio n Brow n 3Y S .K .C ., N everth eless, he the not lik e ly C om ptroller, d o e s n o t own is ju ?t " are t h e holding- co m pa ny b i l l . sentence w o uld and over the C o u n cil w ere op to ^iv e sp e cia l in fo r- f^vo r o f such a rro h ib itio n . -u- HcKoe r « a d furnis^f* to toftnScs* th«v r e g u l a t i o n c o v e r i n g t h * u s e o f re p o rts o f eTCRBiIners ^crniT POOLS 3ro *m pools hs-v® h*id a s t *v t *s t h a t , ^cod in t h » o p i n i o n o f this C o u n c i l , i f f ® c t tent not. nu ch ui-?e h a d b ^ « n rsa?$® o f T h e n e e t i n ? : a d J o ir r n ^ d a t 1 : 1 5 P . M. the c r e d i t -15The C o u n c il reconvened in of the P. M. A ll Federal th e B o ard Room Reserve B u ild in g at 2 :4 5 on Ma;y 1 4 , 1945. m em bers oi* t h e C o u n cil w er* p re se n t e x c e p t t h a t M r . T hom as P . B e a l r e p r e s e n t e d M r . C h a r l e s E . S p e n c e r , J r . , a n d M r . Chftrl^s E. Bro'^n Rieraan r e p r e s e n t e d lir. R o b e r t V . said the q u e s t io n before F le m in g . t h e m e e t i n g i s w h e t h e r th e Council w i s h e d to m ake a n y s t a t e m e n t on t h e q u e s t i o n o f r e d u c e d m i l i t a r y o p eration s i n o r d e r t o p r o m o t e p r o d u c t i o n o f goods f o r c i v i l i a n con sumption. let E v id e n tly no one is b u t h e 'renders w h e t h e r a a ~ k in £ t h e C o u n c i l to make a p u b l i c p riv a te statem ent w il l state do much g o o d . He asks: 1. Do^s . Berry. exten sio n o f anyone .Sho uld a If a R eg ulatio n W , allace says July, aa d priv ate s t a t e m e n t for or try in r that if there sooner W allace savB the that telep h o n e. backs t'-ke p l a c e the TTjnton the -Thole C o u n c i l »ould n o t w a n t a the C o u n c i l co uld T h a t w o uld be should show that w illin g B sird affo rd says the to as d ire c tio n . s is p ly a s s u r e d Ih e re pro blem m ay b e ju st M r. is is tim e . d a n g e r o f m a k in g a p o ssib le before to i m m e d i a t e l y im m in e n t . to take a poll of fr o m th" E ccles ta k in g any a c t io n . o f statem ent. to m ake support some be it came fr o m He su g g e s te d and doub ted A e t h e r On in if ^ jc e cu tiv e C o m m it t e e . to a t t a c k dangerous. the se e w h a t a c t u a l c u t d e p e n d s on n a tu re C o u n c i l w ould of that m ig h t l e a k o u t . H e t*ould l i k e appear too the Chairman it Co m m ittee w i l l h o l d a s t a t e m e n t w o u l d h a v e more e f f e c t than to go a.8? f a r is tax ev e ry th in g rather it by taxatio n m ig h t be a v a i l a b l e a t 5* it ne:-:t f e w w e e k s says B o a rd ? be a m e e tin g o f th e E x e c u t iv e on J u l y or later C ouncil by m e a n s o f says the E x e c u t iv e sh o uld perhaps b e lie v es Berry opposed. to p r e v e n t i n f l a t i o n b e t t -r i n f o r m '5t i o n G iffo rd in A ll be d e s i r a b l e , or J u ly rjr<ysn s t a t e s Ccaai". tee i n statem ent? s t a t e m e n t b e n & d e to t h e P t a t e m e n t w o u l d p r e v e n t su ch t h i n g s a s t h e th n the s t iteraent m i ^ h t **etin£f i n J u n e w ant a p u b lic p riv a te th e w a r e f f o r t even th« o th e r h an d the C o u n c il by i n statem ent. on h is stronger f^rrund i f i t attempts to b rin g about -16- cu tback e. A s t a t e m e n t a i g h t be p r e p a r e d and i t c o u ld be l e f t to the d e cis io n o f t h e E x e c u t i v e Coranittee w h en th e tirae w ould bp opportune to p i^ e it aader the to th e Board. capital doesn’ t t h i n k it ru in s has nuch Tr- phagen. the a a t t e r o f At In m ? The 3 :1 5 M. P. but re d u c tio n . and I9& 4, sh a r p drop probably w o u l d sh o w has that Tlie c h a r t the n e x t of c i v i l i a n goods. in d ica te s very h ig h fie * it of to l o * e r a n y o f restrain ts before 1 9 4 6 . It e n t i r e l y c o n f in e d that Probably In the program prop osed does not some o f the n e x t is six In m n y to t h a t as a m a tte r o f a c t u a l In to the t a lk o Be ssonths csp loyr.ent and incom e w i l l there i s a v r y is o r d e r to h a v e an o r d e r l y e a s i n g o f H is not d e sira b le and it I s a lso d e sira b le It is p o ss ib le W. w i l l b e 9Q£ o f im p o rta n t that a th e ir present to m ount to 123 s i s c , b ut t h a t does p e rio d o f t r a n s itio n r i l l to b e a r th is b illio n . He "7ar i s alw ay s «as not- v e r y r e a l i s t i c , bound to c o n t i n u e to t h i s group, is suggest' So w a w a r for soae that it sho uld tim e . is be H is not the fought. to k ee p up t h a t in a y e a r from in a i n d . feels s t a r t lo n g *'cr the l a s t y e n r s we h^re b e e n s p e n d i n g a b o u t * 1 0 0 b i l l i o n on the w ar e f f o r t . lik ely tig h t situ a tio n . a n y c a s i n g t a k e s p l a c e , we sh o u ld k e e p p r e s e n t c o n t r o l s i n o p e r a t io n co ntro ls now, b e lie v es fu rth er huge in s im p ly in t e n d e d as a p a r t o f lin es end b e fo r e R egulatio n fo re as to i n d u s t r i a l s u b s t a n t i a l i n c r e a s e in p r o d u c t io n c o n s u m p t io n go o d s becom es no rm a l. by The ch a rt does t h e s e w ere i n c l u d e d , i t g o o d s b y A u g u s t w i l l be l a r g e r and p r o d u c t io n necessary t h e : ;e not? o u r f i g h t i n g is tra n sitio n . is im p e d e d not s e e s l i k e l y . If m o n th s a n y lev els. nave a r a t h e r a b r u p t the ch nnge s i n c e . o f w ar m a te ria ls the J a p a n e s e "*iar w a r ® u n til p r o d u c t io n o f goods fo r c i v i l i a n c o n s u m p t io n h a s r e a l l y n e t gone d e c lin e civ ilia n p ro d u c tio n 11 i s s i t u a t i o n , the c iv ilia n three p sy ch o lo g ical w a r f a r e . r e a&in e v id e n tly i s s t i l l d e c lin in g . beer; l i t t l e for -s-ar p u r p o s e s r e d u c e d . If T o t a l p r o d u c t io n reached i t ? and in a p p e a r e d be fo re the C o u n c il N e v e r t h e le s s , he b e lie v es fa c t th e o u t p u t o f c rea ses i n th e problem b e in g d i s c u s s e d . c o n f u s e s the i s s u e . and s e r v ic e s . thr-t t h e e n v isa g e i n H o ld in g p e r io d n o t o u t o f h an d and b r in g in g in tax ae re ly situ a tio n . in there w ith D r . G o ld e n f»e l3e r present r e n t down net i n c l u d e a g r i c u l t u r e ic *n a t a l l , m arket i s g a in s til e r e ^ras a c o n su m p tio n , c o n n e c tio n capital and d i s e u s s e a t h e peak in 1 9 4 .3 , He p e r s o n a l l y b e l i e v e s th* t a x m i g h t w e l l b e e x t e n d e d to n. y e a r , b u t he The c u tb a c k is the d i s c u s s i o n t h i s m orning in fla tio n a ry and th e e f f e c t is v i e w , e x p r e s s e d i n s t r i c t c o n f id e n c e b u s i n e s s o f f i n a n c i a l a u t h o r i t i e s to The b u s in e ss o f fin a n c ia l a u th o ritie s is to s c c e t t h e f a c t s a s d e c i d e d u p o n b y m i l i t a r y a u t h o r i t i e s and then a d ju J t f i s c a l a n d f i n a n c i a l p r o g r a m s a s f a r as p o s s i b l e to the met s itu a tio n . 1* d o n o t kno** w h a t t h e r e a l f a c t s a r t 'tra -h “ r e .o r e n o t in a p o s i t i o n t o p a s s u p o n t h e e . T h e r e I s a s e r i o u s d a n g e r o : -jrulatloa *rA e v e r y a t t e a p t ' s h o u l d b e m ad e t o h o l d t h e l i n e a s f a r a s t h i s i s o ssib le . foods. Is The root the fie ld of of the w a it e r cred it, is th e f l o w o f money and the g r e a t exp ansion sh o r ta g e o* that has tmcen p l a c e -17- is , o'1 c o u r s e , i n c o n n e c t i o n '/ i t h goverm a en t f i n a n c e . The r e s t r i c t i o n of ocssuRcr c r e d i t a n d h i g h e r m a r g i n r e q u ir e m e n t s are a i l i n c i d e n t a l * faxes -re n o t im p o s e d b y f i n a n c i a l a u t h o r i t i e s , b u t by C o n g r e s s , fin*n©5.a l a u t h o r i t i e s m i g h t m i c e not fa v o r a 1 0 0 por cont w argin re c o m m en d a tio n s ms to t a x e s . r e q u ir e m e n t a n d , does not recom m end a n y i n c r e a s e s in f a c t , a t o f t h e m a r g in r e q u ir e m e n t s . He does t h is prep en t t im e , The only reason he » i g h t s u g g e s t in i n c r e a s e o f 1 0 - 2 0 p e r c e n t w o uld be to show t h a t the F e d e r a l R e s e r v e S y r t e a , w i t h i n i t s own f i e l d , i s w i l l i n g to a c t . C re d it controls s h o u l d to 'Ic- re--*;rdin;: th re;d be kept, no rm ally . le sin ab ility ist . * e . lodged in But i f the situ a tio n s as there Federal been ’ i v e n ought e sta b lis h in g to be to then i t h a d b e t t e r be h a s more k n o w le d g e o f these As i t i s , a num ber o f b e m a n a g e d b y t h e F e d e r a l R ese rv e S y st e m , have If over r e a l e s t a t e sh o u ld i'or o p e r a t io n the F e d e r a l unemployment i n it governm ental body. the O f f i c e , o f slig h tly , c o n t r o l s o ver farm s n l u rb an su c h c o n t r o l , System , as to cta-*> a g e n c i e s . tc am i u n t i l such tim e as s*oods b e g in is Reconversion a n d in fla t io n present, of Reserve than a n y o th e r controls w h i c h at lie d o e s n o t h a v e a n y d e f i n i t e o p in io n a t the moment be Tie t h e 0 f f 5 .e e o f F a r M o b i l i z a t i o n and F e o n o m ie S t a b i l i z a t i o n d e c id e d th at c o n t r o ls in stitu te d , ..re lik e ly so^e p l a c e s then th e se R eserv e System , and a sho uld be h an d ed c v i r Such a c t io n m ight slow up t o h a v e « a n y s p o t t y s i t u a t i o n s w it h shortage o f l a b o r in o t h e r s so th a t i n f l a t i o n a r y a n d d e f l a t i o n a r y m o v e s e n t r s i g h t be g o in g on a t the same Use, In the n e x t few and too s?ueh a o n e ; % have such m onths we a re Ee in fla tio n . a change i n m arg in been c h a n g e d som e Measure a s o n e Dr. shall From a n e c o n o m ic re q u ir e m e n t. t im e for tax ago. read It stan d p o in t, *e lo n o t t h e r e i s no r e a so n fo r c a p i t a l g a i n s ta x m ight w e l l h a v e The is sh o rtag e o f l a b o r a f t e r th e ^ r , not ;?c much an a n t i - i n f l a t i o n a r y purposes. G o ld e n w e ise r Brcrn l i k e l y to h a v e a be v e ry lu c k y i f , a th e m e e t i n g a t 1 :25* left sta te m e n t on i n f l a t i o n and means o f c h e c k in g i t that he p r e p a r e d , T r a .;h a g .e n B a ird of anv .<ind m oves statem ent. and Traphagen seconds t h a t t h e r e be no statem ent m e m b er s v o t e d that there be no s t a t e m e n t . F o u r v oted in statem ent. On m o t io n m ade ▼oted to l e to an y issued. Six favor o f a o b jec ts ve to to bo ‘subraitte 1 to approval. the by M r, E x e cu tiv e o th o r m oabers 'W inton C o m m itt e e and seco nded by M r , B a i r d , i t was t h e p r e p a r a t io n o f a statem ent o f the C o u n cil f o r s u g g e s t io n s and -18- of was Th^ Secretary th e C o u n c il i n s t r u c t e d to in fo r o the t h e B o a r d o*' G overn o r** t h a t th e C o u n c il h a d d e c id e d n o t to issue ft stHt«**«nt a t p r e s t m t o f a n y k i n d a s th e re r e s too rmt*h d^n ^e r i t w o u ld Lr* s o n e w a y o r o t h e r r e a c h th*> p u b l i c . F u r t h e r , th at the Chairman o f C o un cil h a d a u t h o r i s e d th e E x e c u t i v e Com m ittee to p re p a r e a c a r e f u l stitesent i f i t s e e m e d d e s i r a b l e at. l a t e r p e r io d to c i r c u l a t e such a s t a t e m e n t am ong t h « o t h e r members o f the C o u n c il s u g g e s tio n s & and for and a p p r o v a l* The Secretary of t h e C o u n c i l a l s o was a u t h o r i s e d to c o n s u l t •sith the S e c r e t a r y o f t h e B o a r d o f G o v e r n o r s as tc a see tins- o f t h o 'E x e c u t i v e C o m m it te e i n J u n e . The a e e t in g KOTB: ad jo u rn ed at It n igh t the b e s t t i s e to h o l d 5:00 P . 83« be sta te d here th a t i t w as sc reed th a t t h e n e e t i n g o f t h e E x e c u t iv e Com m ittee be c a l l e d t o o r d e r i n the F e d e r a l R e s e r v e B u i l d i n g at 1 1 :0 0 19-45. o ’ c l o c k or. Wedner*d&7 n o r n i n g , June 1 3 ,
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