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THE WHITE HOUSE WASHINGTON June 17, 1943. Honorable. Marriner S. Eccles, Chairman, Board of Governors, Federal Reserve System, Washington, D. C. Dear Marriner: The attached plan for financing conversion operations was worked out by Mr. Rockwell Kent, Vice President of the Manhattan Company. It was sent to me with the hope that I might bring it to your attention. Sincerely, Lauchlin Currie INDUSTRY REHABILITATION ADMINISTRATION A governmental agency under the supervision of the Treasury Department, set up roughly on a basis siailar to the F.H.A. with authority to guarantee loans for the rehabilitation of postwar industry, and to pay cash or issue three-year negotiable government bond© in settlement of losses, guarantee fee to accumulate as an insurance fund* GUAR1MTEI a "subordinated guarantee" and not a •put1. A guarantee against "loss", »loss" being the amount of the loan unpaid either (1) at the time of bankruptcy, or (2) any tiae within two and one-half years after bankruptcy (at the option of tne noteholder - option to be decided upori by noteholder at the tiae of bankruptcy). not to exceed 50% of the original amount of the loan, I loans loans loans loans aMTOR'S with with with with maturities maturities maturities maturities up up up up Percentage of guarantee 50 40 30 20 10 to to to to 3 years, not exceeding $ years, not exceeding 7 years, not exceeding 10 years, not exceeding Fee expressed in .percentage of interest taken i ;,he Guarantor 60 55 50 40 25 « repayable in e^ual quarterly or monthly instalments (option of the lender) with first instalment due no later than fifteen months after date and maturity within ten years. r APPLICATION I.R.A. to appoint one or sore liaison officers domiciled at each Federal Reserve Bank who will determine only whether or not prospective borrower has need for the money. Application to be made by lending bank about same as \inder present set-up for Regulation V loan© and t® be made at the Federal Reserve Bank in the district where either the borrower or the bank is located. Federal Reserve Sank to have no final authority to approve but 11 shall recommend "yes" or "no11. Application must have favorable recommendation from Federal Reserve Bank and the approval as to its necessity by the liaison officer. It shall then be gent to the head office of I.E.A, for final approval (preferably several head offices). (1) Organize this agency now and let it commit in advance, based on maintenance of the financial condition of the borrower. (2) Federal Reserve should make paper eligible. June 18, 19U3- Dr. Lauchlln Currie, Administrative Assistant, The White House, Tfashing-ton, D. C. Dear Lauoh: As t h e Chairman i s away, l o t me acknowledge your note of June 17 enclosing Mr. Rockwell Kent*s plan f o r financing eonTorsion operations. I w i l l see t h a t the Chairman gets i t on his return next week. Sincerely, (Si, ET:b • ott ThurstoH June 30, 19U3' Dr. Lauchlin Currie, Administrative Assistant, The White House, Washington, D, C. Dear Lauch: Tour brief note of June 17 reached me 3ust after my return fro® the West, and I have been badly covered up with accusrulated business and a number of meetings. Hence the delay in this acknowledge— With your note you enclosed a one-page outline of an "Industry Rehabilitation Administration,11 submitted by Mr. Rockwell Kent, ?ice President of the Manhattan Company. Evidently Mr. Kent suggested that you bring this plan to my attention, but I hardly think it appropriate for me to express any opinion as to the merits of this particular plan. It is essentially a plan to partially guarantee loans made by private institutions for the rehabilitation of post-war industry and would place the supervision of such administration under the Treasury Department. The whole question of financing the necessary reconversion of war industry to civilian production, as well as facilitating the resumption of civilian industries which were shut down or damaged by the war effort, is under consideration by a number of agencies, as you know. The necessary survey of the problem has hardly begun, so that I doubt that any plan can be intelligently conceived at this stage. It seems quite likely, however, that as a part of a broad program, there will have to be some degree of Government guarantee of loans made by private credit institutions for reconversion or rehabilitation where the risk is great. Since the Federal Reserve System has acquired considerable experience both under Section 13-b and under Regulation ¥, it may well be that its decentralised organization, comprising the Reserve Banks and their Branches, would be an effective administrative agency for the financial phase of the post-war production problem. I note that Mr. Kent gives some recognition to this thought. With best wishes, I am Sincerely, LC . • M. S. I c d e a , Chairman.
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