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COPY X-9400-a FEDERAL RESERVE BANK of New York November 6, 1935. Dear Governor Eccles: I am writing to confirm my telephone conversations with you regarding the question of bank credits to finance shipments of goods to belligerent nations. The proclamation of the President dated October 5, 1935, issued under the authority of Section 1 of the Joint Resolution approved August 31, 1935, (Public Resolution Ho. 67 of the 74th Congress) proclaimed the existence of war between Ethiopia and Italy, cud prohibited and made unlawful except under license the export of "arms, ammunition, or implements of war" as defined in the proclamation. Supplementing this procla- mation there has been published in the newspapers statements of thePresident dated, I think, October 5 and 30, 1935, and of the Secretary of State dated October 10 and 30, 1935, which, together with the newspaper comment.thereon, seem to indicate that they wore intended to discourage trade and transactions with the belligerent nations even beyond the prohibitions of the proclamation of October 5, 1935. In the light of the reported statements of the President and the Secretary of State, counsel for the ,. . L Bank (of New York) have called upon us to discuss the question of its policy with reference to granting credits to its customers to finance shipments of goods to Italy. This question does not relate to credits to finance the shipment of "arms, ammunition, or implements of war", the export of which is prohibited under the President's proclamation of October 5, 1935, nor does it relate to - 2 - X-9400-a outstanding irrevocable credits to cover the export of other goods* for the Counsel Bank (of New York) took the position, and I think cor- rectly, that the bank had no legal basis for cancelling such irrevocable credits. The question, therefore, concerns only outstanding revocable credits, or applications for new credits, for account of the customers of the bank to finance the shipment of goods other than "arms, ammunition, or implements of war", I am enclosing a copy of a letter which we received from the vice president of the . lm^ Bank under date of October 31, which raises specifically tho question of the propriety of financing a shipment of cotton to Italy for one of their regular customers. . • As long as there is no apparent question of law involved, but rather merely a question of propriety or judgment, I have thus far taken the position that we could not advise thorn what thoir policy should be, I do not feel that I cc:n with propriety urge or even advise individual member banks to decline to ex-tend credit Which is requested by customers to finance the shipment of goods not prohibited by law or by proclamation. To have them do so would only arouse the resentment of the customers of those individual banks and divert the business to other institutions so that no real purpose would have been served. If it is in fact desired that banks should refuse credits to finance the shipment of any goods to belligerent countries, some action would seem necessary which v/ould insure the universal adoption of this policy by all banks in the country. Without this it seems to me that it would be ineffective, and unfair to the individual shippers and banks concerned, to attempt to influence particular - 3 - X-9400-a institutions to refuse such credits. I should appreciate your advising me if you or the Board of Governors feel differently or if you think of any other course I should follow. Very truly yours, (Signed) George L. Harrison George L. Harrison, Governor. Hon. Marriner 5. Eccles, Chairman, Board of Governors of the Federal Reserve System, Washington, D. C. Enc.
@FedFRASER