19480902_minutes.pdf

flutes of actions taken by the Board of Governors of the

.1-Reserve System on Thursday, September 2, 1948.

PRESENT: Mr. Draper, Chairman pro tem.Mr. VardamanMr. Clayton

14e111°randum1)t the Division

e.lar e ssel)teniber

thlte

411411; tf• Laze

4114ICm"eY, Jr.41'le -eGeary

401,14, elark

41el1e L. &halt

8eott

Mr. Carpenter, Secretary

Mr. Sherman, Assistant Secretary

Mr. Morrill, Special Adviser

dated August 26, 1948, from Mr. Leonard, Director

Examinations, recommending

of the following employees in

5,

of increases in the basic

that Division, effec-

24

1948:

Designation

Salary Increase

From To

$7,432.20Federal Reserve Examiner $6,953.40Asst. Fed. Res. Examiner 4,855.8o 4,981.20

Asst. Fed. Res. Examiner 3,978.00 4,228.80



Secretary to Mr. Leonard 3,852.60 3,978.00

Secretary to Mr. Millard 3,476.40 3,601.80

Approved unanimously.

Tele,of 5.-&am to Mr. Neely, Chairman of the Federal ReserveAtittlit

reacling as follows:

!etel September 1. Board approves appointment

erltY B.

RoPpe as Federal Reserve Agent's Repre-

cl' $4 '11.e' New Orleans Branch, with salary at rater0,20 Per annum.

that1,1:111s aPProval is given with the understandinggeetli-p s 110PPe will be placed upon the Federal Reserve

au; PaY roll and will be solely responsible to hima vacancy in the office of the Federal Re-

to the Assistant Federal Reserve Agent,

Bank

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

ev4. 4,0

9/2/48-2-

,oaxd to tlornia„ he Board of Governors, for the proper per-pert.

Or lice of his duties. When not engaged in the

flCe of his duties as Federal Reserve Agent s

er'eolesentative he may, with the approval of the Fed-

et DR!serve Agent or, in his absence, of the Assist-elle;e0-eral Reserve Agent, and the Vice President intor of the New Orleans Branch, perform such work

Branch as will not be inconsistent with hises as Federal Reserve Agent's Representative.

flee:11r. Hoppe should execute the usual oath of of-aavi "Latch should be forwarded to Board together with

ce of effective date of appointment."


LettNticie

er to the Attorney General, for the attention of Mr.

t4 r M. Campbell, Assistant Attorney General in charge of

Division, reading as follows:

134/1- May 27, 1942 (WB:WHM:rh-146-17-012) your De--pleb+Irttlit - wrote to this Board that it was in accordtiottiA7e, Proposals regarding the enforcement of Regula-

krelating to: Consumer Credit) which the Board-et forth in its letter of May 22 to your Department.

Atove lll view of the enactment of Public Law 905, ap-t/lei'. AugUst 16, 1948, and the consequent reissue by

20,°f Relationgu W to become effective September

°(3 F.R. 4865-4877), the enforcement of the

is again a matter of interest. The authority

Law 905 for civil suits may have a bearing on1 Phases

of enforcement procedure, and it is possible.jsent circumstances that there may be greater need

ttitx Bcerd to refer cases to you for the possible in-of criminal proceedings. However, the arrange-

out in the previous correspondence would seemat the6e4erally appropriate as an enforcement procedure

"TPresent time.111d.el., t will be appreciated if you will confirm this



1426

9/2/48

lig aslollows:

—3—

Letter to the Presidents of all Federal Reserve Banks read-

1,48 "As indicated in the Boards wire of August 18,the ':,advising you of the adoption of Regulation W,

011 ,,-rect responsibility which the law has placedale'lleFederal Reserve System makes it essential thatre cIllate steps be taken to assure compliance with the

Nn "The June 30, 1949, Expiration Date -- The Board30,Tzes the difficulties that arise from the June905: 9) expiration date that appears in Public Lawelley i.Ala°ng other things, that date will have a tend-thE imPair compliance with the regulation beforeecitte "te, and the Board believes that a vigorous44kn°nal and enforcement program by all the Reservei

'1especially necessary in order to prevent such

.r41111erit.

• 17° one can know whether the June 30, 1949, date13041,,i'e extended -- and that is true not only of thetrari't' atd the Reserve Banks, but also of such Regis-

tio/Ins as might be inclined to neglect their obliga-Ct ail linder the regulation. A realization on the part

aaldj, 14!egistrants that enforcement will begin early0rta;Iluinue vigorously should be one of the best means

• Taining respect for the regulation and compliance

4W9 s terms. The new enforcement powers in Publicshould be helpful in this connection.

DIr.(Geheral Program -- The Board believes that the(44-0a111 outlined in its letter (S-909, F.R.L.S. #8504)l'or T1 30, 1946, affords, in the main, a sound basisNr, enforcement of the present regulation. How-1:41ed Board believes that the activities there out-

n• su°1-11d be conducted on a more extensive scale and10/41.4; Mo e selective approach as outlined in the fol-

AParagraph.a new measure for minimum investigative work in

"taL-La- the Board requests that each Reserve Bank un-

a Program which would result in the completion

months of about the same amount of investigative

t/leive:Y as was requested by the Board in S-909 for a

Mollths' period. This would not, however, be


9/2/48-4-

1427

t --Led in terms of any set percentage of Registrantsv'hej.ipe investigated. A selective approach is suggestedt1:11 will concentrate the effort at those points where10 Most can be accomplished. Such an approach will1Ze considerable emphasis on the checking of purchased• at financial institutions, mainly banks and sales

comPanies, where paper from many sources can befeei-cted at one time. In this connection, the Board

that the Reserve Banks should take full responsi-NI —Y for the investigation of all sales finance com-sta;eris in their districts and should reach an under-

to that effect with any State authorities that

Peau„,sliPervisory responsibility for sales finance com-atte-s. The Reserve Banks will also need to give special

• 1111t,1O4 to Registrants who retain much of their paperappr:° are of a type that might have violations in some

-ciable amount.1.113":.ection II of the 'Outline of Enforcement ProgramVitII-11aation W', sent to the Federal Reserve BanksPrelli s'e Board's letter of April 30, 1946, mentionedset f°11slY in this letter, has been changed to read as

°rth in the attached enclosure.(I:LIT:Staffs

and Reports -- The Board is cognizant of theqatf-elaties

which may be involved in building adequate

uie investigators, particularly in view of the

to alosi;;,' 1949, expiration date. However, it is preparedIlsee-°ve whatever additional cost may be reasonablytield-alnY and would appreciate resumption of full scaletober 14c)rk among the Federal Reserve Banks by early Oc-

,It will also appreciate the resumption of reportsorp tul-Llied in the Board's letter (8-930, F.R.L.S. #850)4.11),

4eti t 27, 1948, the first report to cover enforcementrorlt.s"les for the month of October 1948. A supply of the

n11 be furnished to you in due course.1:1(41 :;'fective Administration -- The effective administra-4 1011:' Ilegulation W -- whether for a few months, or forforlaje,r Period -- requires an active two-way flow of in-holped.'")/1 between the Board and the Reserve Banks. It isOi :that You will keep the Board fully informed as to• Observation of how the regulation and its administra-1101; 11;re working in actual operation, and that you will

t:itate to advise it of any changes that you would

l'ecommend from time to time in the light of your:11Cen


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Approved unanimously, togetherWith the revision in the "OutlineOf Enforcement Program under Regu-lation W" referred to, reading asfollows:

s

coPe of ProgramReferring to such credit grantors asarein-

or Q-gate d in connection with the regular examinations

lIZIPervisory agencies, it is expected that under the-- Yearschedule all these will be covered at least once

by th"13. For such credit grantors as are investigated

tiiza;ePederal Reserve Banks' instalment creditinves-rs, each Federal Reserve Bank will maintain a

parlral which will result in all sales finance com-

eZbeing investigated in a nine-month period and,

(Alle.17-1.tiony investigations and reinvestigations of

the selected Registrants so that, in the aggregate,be :fl,ceme nt activity in a nine-month period willIi0,41,:r1 to the annual activity contemplated by thecloe 14 1946 as set forth in S-909. While the program1/1:1111(1),t require an equal amount of enforcement activityIgor ili month or quarter, it is expected that the field

4-- be reasonably continuous and will not be hand-Ifork--4 DY the use of the regular investigators for otherror b°17er any extended period. The investigations calledto .1,Y the Minimum standard will be of the type referred

1- gection 1-A-2.

1.11 00:-' With the exception of sales finance companiesod, Ighich should be investigated in a nine-month

i

pen-a108 distribution of the investigations among the

111, classes of Registrants and by geographic areastEtshi'e dete rmined by each Federal Reserve Bank n such2icier, as to obtain the most effective coverage, con-NrClig that in certain classes and areas the problem

Con-

'be Zore

serious than in others."

Tele—'6'am to the Presidents of all Federal Reserve Banks

S follows:

414)ea e following interpretation of Regulation W will14 the Federal Reserve Bulletin and we suggest


1429

9/2A8t?

6-You

Els circulate it to interested persons as promptly

14ssible:!Tnr.,, eBoard has been asked about the application of

41:t 2 of the Supplement to Regulation W which spec-c.rflec%zLIlaximum maturity of 15 =laths for extensions

of $1,000 or less and a maximum maturity4 18

months for extensions of credit of more than

l'1

1:000 with the exception that for credits of more3:11. $1,000 the instalment payments shall not be

isss,than $70 per month. The particular questionWhether the $70 figure applies to the total

onth1J payment or only to the amount of that pay-et aPPlicable to the principal of the obligation

„rr,l, including interest or finance charge.i;"e instalment payment referred to in the $70 clause

the total monthly payment. An example of its use," connection with the purchase of an automobile is°L8 follows:

$1,500.00 Purchase price

500.00 Down payment

1,000.00 Balance of purchase price

90.00 Insurance (15-18 months)

1,090.00 Unpaid balance (principal amount)

98.10 Finance charge at 6% for 18 months

1,188.10 Amount of total obligation

As this 66.01 Monthly payment at 18 months

the amount of monthly payment is less than $70,el31 Ilia/Tiber of months over which the contract is pay-thie lirust be reduced. The longest term available for

16 :ticZ% sEcstion with equal monthly payments would beat

shown by the following calculation:

$1,090.00 Unpaid balance as above

87.20 Finance charge at 6% for 16 months

1411122 Amount of total obligation

4.4 the 73.58 Monthly payment at 16 monthsthrcp, Usual case, the Registrant will not need to go

"gh these calculations in detail as he will have


9hA8-7

appropriate payment chart which will give him'rle necessary figures directly.:!he Board has also been asked about the applicationvi Part 2 in cases where the insurance and financeo,he'rge are not separated and it is not possible torermine the exact 'principal amount'. These arefslIallY cases in which the obligation is purchased:°111 a dealer by a financial institution which fur-

s the dealer with charts showing the payments

a!eearY for various balances (purchase price less

Payment), the cost of insurance and the financevrgs being included in the payments. The balances

ich can be financed at various maturities can betha'ermined from the charts by following the principlemo t a balance can be financed at 18 months, at 17

ells, or at 16 months if the payments specified intie chart applicable to the transaction for the par-INzeilli,ar maturity desired are at least $70 per month.eci.'s Principle is illustrated by the following pro-t:'e. The Registrant can ascertain from the chartor r‘sMallest balance which requires monthly paymentsball'70 or more with an 18-months' maturity. Thato4 nee and all larger balances may be written withfor"1°-Illonths maturity. If the chart shows paymentstai 17-monthsf maturity, the Registrant can ascer-

kemrti the smallest balance which requires monthly pay-of $70 or more with a 17-months' maturity. That,

17 and all larger balances may be written with a

10;nriths t maturity. A similar procedure can be fol-t4t-' if the chart shows payments for a 16-months'

413 itY. The charts will in many instances be setY the financial institutions to show these break-

and it is of course optional with the fi-tra-al institution whether or not it will take con-easee's with 16-months' or 17 months' maturities. Forfer in handling, the financial institution may pre-

Omit the 16-months' and 17-months' maturities,Whic ch case no balance smaller than the balance

18 requires monthly payments of $70 or more witht4r, -months' maturity could be written with a ma-lty of

more than 15 months."


1430


448

teaclize

fOilows

1431

-8-

Te legram to the Presidents of all Federal Reserve Banks

the;Re Regulation W. The Board has realized that

Banks would be asked questions concerningvhe status under Regulation W of extensions of creditteflre.ngements of some kind are made prior to Sep-

1948, but the transaction is not actuallyted until after that date. Since there are many

arts: relit circumstances under which these questions can8111 since almost any ruling might be more of an

lati-ement to than a restraint on avoidance of the regu-h°111 bY such means, the Board has believed it inad-

Drio;-"! to Publish any interpretation on this subject'0 September 20. In the meantime, it may beto

You in dealing with inquiries for us toOrest certain aspects which might be kept in mind:Irithrille regulation does not contain any such provisionillthresPect to pre-existing contracts as was containedapplie 1941 version. (2) The regulation by its termsSelyt,ee to all extensions of credit made on or afterheri Mber 20.

(3) For an extension of credit to havecoz4)11114de before September 20, the contract must beqleci: e in all details including an obligation in a

amount setting forth the specific payments toeare and the dates thereof. The article involved

Ne ainstalment sale must be a specific item. A bonatiltissib- very after the effective date would be per-

Provided all the other conditions are met.Nsiv- extension of credit may be the subject of an

side agreement such as is referred to in sec-'cola(tL Any arrangement after August 20 where itthe ated that the article will not be delivered

'Jet 2, 'unds will not be disbursed until after Septem-tNIs' would be subject to serious question unless the1111d.erTi°n is of such a nature as commonly handled1,''1lich an arrangement according to the customary'v011141:8 Practices of the vendor. (5) The burdeneN)1: on the Registrant to show that a transactionN111::%1 after September 20 was not subject to thes4.



1432

9hA8-9-

Telegram to the Presidents of all Federal Reserve Banks(11.4

a8 fOliows

4terr,:1 connection with publication in Federal Regis-get' proposed changes in Regulation W we would sug-c11:- that) if you have not already done so, you dis-ri-8 subject with national associations the head of-eee °f which are in your district.'


bc,1 Letter to Mr. H. L. Combs, C. & B. Electric, Inc., 116,Etliare s

treet, Walton, New York, reading as follows:

t.eist"This refers to your letter of August 23, 1948,etrelve to the Board's Regulation W which becomes

;ive on September 20.tericie',As a consequence of detailed studies and ex- d

tLu. testimony the Congress and the Board concurred

editbelief that uncontrolled consumer instalment

to

l

r .t) While not the only nor even the primary fac-eXert-111 °lir Present economic dilemma, was nonethelesstett ;11,113 undue upward pressure on prices to the ex-

the structure of terms had deteriorated un-N°i171Y. It was recognized that consumer instalment1 Ets Etrising out of the sale of consumers' durables4114;e4°f the more volatile elements in the economytract': 'MPortant factor in contributing toward or de-

from reasonable economic stability. In recog-tcperof these principles the present regulation seekstope4it and to encourage consumer instalment creditor e rm its traditional function in the distribution

to cIL:unlere i durables while at the same time it seeksof th—°11rage its over-expansion. From the majority/0k0.d.e c°rnments about which we have been informed itzf4/1, apPear that most of the trades affected by the

o:!lation agree that its provisions will not'41e.t 'Y interfere with normal trading activity and

-); will provide for a sounder structure of terms.

.*c "t r -,11 may be certain that the Board recognizes-1-1°flsibilities for enforcement of the regulation,


1433

-10-it

srYou Y -ma rest assured that the several Federal Re-theirBatks will vigorously enforce its provisions in

- respective districts."

Letter to Mr.

13r, 260 Plymouthte''Iirig as

follows:

"We have read with great interest your letter of4.,:q 26,Kiat . 1948, to Chairman McCabe in which you suggest.4.111, With the view of halting black and gray markettl e;ss.ctions in steel, the use of bank credit for such14actions should be prevented through action by the

ItsUPervisory authorities.

kiperT.Ile question whether the Board or other bankls°rY authorities should be granted the authority.

-sarY to effectively regulate the use of bank credit

eorls idich Purposes is one which would require careful

Qte: T4ti0

n. As an indirect approach to the problemyttir -rolling prices of commodities in short supply,

t/woisUggestion raises the basic questions of policyranvea in any price control program. In addition,

41,01.1e-Y be doubted whether regulation of bank credit1411ch Mould be sufficient to accomplish the results

YOU contemplate in view of the other methods%lad be used to finance such transactions.

steel:If the use of credit in transactions involvings1Iflh

laIgere to be regulated, presumably there would bebee

trealsr authority to regulate the use of credit in

°rth,cti°ns involving other commodities. The exerciseblal.cle-ks authority would place a great administrativethe a.11,1

e

11Pon the bank supervisory authorities; and, in

i ter::(81 llee of a general price control program admin-l'ortriax7 bY another agency, it would require the per-

of duties which are beyond the scope of the

e -1111ctions of such authorities and for which they?t presently prepared.lit

regret that we are unable to make a more favor-

but assure you that we sincerely appreciate

written to us."


W. E. Stremel, Stremel Bros. Manufacturing

Avenue, North, Minneapolis 11, Minnesota,



1434

9/2/48-11-

Letter to Mr. Earhart, President of the Federal Reserve

f Sari Francisco, reading as follows:

Au "Reference is made to Mr. Mangels' letter of

4st 14) 1948, transmitting final plans and out-sPecifications for the proposed Portland BranchBranch

411th and requesting the Board's approval including(3V-tY to procure firm bids for the construction.

the It is noted that the architect estimates thatarch st of the building, including contractor's andexci;ect's fees and allowances for contingencies but

vaults, will be approximately $1,882,000,+,4rIci that%/alas cost of a two-level vault with 30-inch

i elld 20-inch doors will approximate Wo,000.letter 11 view of the considerations outlined in yourDroc; the Board will interpose no objection to theblaiacil lflg of firm bids for the construction of aOt ior-lig to house the Portland Branch on the basistteill-a-c).P°sed plans and specifications, with the under-f(4, -111g that the bids will be submitted to the BoardOf jIPProval before a contract for the construction

"e building is entered into by your Bank."

* Approved unanimously.

'Jett41t er to Mr. Frank H. Neely, Chairman, Federal Reserve

tl()1'allta, reading as follows:

nt e have cleared with the American Bar Associa-k14)ra'"e matter of further distribution of Mr. Frederic()Irlill°11's article, which is the subject of your letter

tobegit 2. Your suggestion regarding the distributioncoris 1°-(-yen the article has been discussed, and afterthe

sting With Mr. Solomon it has been decided that

°I-It 1;111'4 should not undertake the primary distribution04..Ve it to the American Bar Association. The arti-tIle'fi cellent as it is, seems clearly to lie outside

of material for which the Bulletin is intended.tisto 7i7r Board, however, is in agreement with your view

he value of the paper and is having it printed'atel,J. When copies are ready, we shall be glad to


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912/48-12-

.as -FJ-Y the Federal Reserve Banks with such numberIllaY wish to have for distribution in their

i:'4districts. Thank you for your letter and with414dest regards, I am."


1/4keri 14

-rianual, Inc., 369 Pine Street, San Francisco 4, Cali-ortiitt

l'eading as follows:

Letter to Mr. Lewis B. Reynolds, Editor and Publisher,

pien:RePlying to your letter of August 30, 1948,

advised that, with respect to any pro-tite,111-gs which the Board might institute at anye.

O11 the Clayton Act, the Board has adopted

by that all such proceedings will be treatedeo

letezi' as confidential until such time as a full andjeti 4 record may have been made. At the present

'oeke here are no Clayton Act cases on the Board'sin which such a record has been made."

. Approved unanimously.

Secretary.

airman pro tem.


19480902_minutes.pdf

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