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May 25, 1944.

Honorable Marriner S. Eccles,
Hotel Ben Lomond,
Ogden, Utah.
Dear Marriner:
I am enclosing herewith a copy of a letter which was
received last Monday from Allan Sproul with regard to the "bills
which were introduced in Congress to amend section 13b of the
Federal Reserve Act and a copy of the reply which I sent to Allan
Sproul today. When the letter was received a quorum of the Board
members was not present and, in view of your absence, it seemed
to me desirable that I should make reply, as promptly as possible,
as the other member of the War Loans Committee to which section
15b matters had been assigned. The reply was not sent until today,
however, after discussion at a meeting of the Board at which four
members were present and no objection was offered.
With my kind regards, I am
Sincerely yours,

Ernest G-, Draper.




May 25, 1944.
Mr. Allan Sproul, President,
Federal Reserve Bank of Ne% York,
New York 7, New York.
Lear Allan:
In tee absence of Chairman Eceies, your l e t t e r of ? * y 20,
1944, with reference to the b i l l s introduced iu Congress by Senator
Wagnar and Representative Spence to amend section 13b of the Federal
toimfH Act, nes been referred to me as the other aeaber of t i e Tfer
Lofinri Committee to which have been assigned scatters relating? to industrial loans by Federal .Reserve Banks.
Your l e t t e r has been carefully fie-cust-ed Tfith the ot* er
r>ers of the Board who are in WashingtoOcU^nis time. W wish, to ase
sure you not only that we welcome yatf^Vview^ is such matters but that
far froa discarding or putting th^ra«rde without discussion they a l ways receive, our most careful cjjja^r^^etion. This was true in t h i s
particular instance and you ragyT5\y tire that it will continue to be
Both Chairman IfcldD anc I reviewed the r e - l i e s received
from the Presidents to bj>^3^fter of April 29. In general, the comments made by the Presidents related to phases of the matter which -sre
had studied ^hen the plan end b i l l *ere being drafted. Nevertheless,
these points ^ere again carefully reviewed in the light of the comiaenta
of the Presidents. Upon consideration, however, i t did not appear to u»
to be desirable to incorporate the sustentions and, in view of conditions
then existing, i t was not pr&cticsble tc celay the submission of t h i s
matter to the Chairmen of the Banking and Currency Committees of the
Senate and the House u^til after wt hed had en opportunity of further
discussing it with the Presidents.
c of the principal suggestions was that the fund of approximately £139,000,000 might well be left with the Treasury Tepartmect or, in the alternative, paid over to the respective Jederal Reserve
Banks instead of being peid to and administered by the Board of Governors.
If the fund were left in the Treasury certain administrative and other
problems mic.*ht arise in the future, as they have in the past, with respect
to operations under the program. Moreover, i t see?n^ desirable that the
fund should be augmented from time to tine through earnings, as otherwise

. Allan Sproul


-« woul:: be no acana oi
. , . . • t£e fund to any ttti
incurr**1'.. Tfelfl w
be practicable i f the
• left
; reesur .
. ,
.?..•. iz« loBS«a .
... -it
be ootftorMM e t le&st. that tba:
- • ^ . -r.
-.usde in o.'-'er t o
;:ive b
- aay grMt«r eo&tf
;ici»s of the
'•^erve Banks t'.ar. ;*:.
|j# the cese.
In adciti^
t •. wtfeftrttj to
tn«r«iit--e loan.- ;:iv*»n in t
-posal, Ihi B#tt«fV< i^ass b« •oti.orized
i --ct ioens to basin*«i tni«r|Hris#B« It MM M I
Lt« 8dT«ctfcres -c, icx. t' i i proposal m
-T« ov«r other
rofc—li i s that i t tdttt«Bpl«t«« tb»t a l l loan* vo«14 be wt6t t^ r i T«t» bankitif: instltiitions, th\is tiToiding any DOSS^IM* competition ^ith
»ycb In - t i t u t i o n s . This, mn you know, I t | point th> t i;8S b««n emphasized saany t i a e s by <W*I t i l l bttalMI. - r--«ciror, tho abcencfc of nvich
io «void pre&surt- r-McK ri-i.t ctherwise ^je brou.'bt tpOB
th« B w u r a Panics to Mfc« G-uct t t r i l t LMUriMaithey srt rot aveileble
i a l i n s t i t a t i o c s , in JTMT.J S M I men tn©r© i s l i t t l e j u a t i f i M H
for then.
I HI : ' i t M rot faaill
;iT« *
<mta a
r tlMi f o r ta
.-*,ti'>n .
i MMMit raflftrilag t h e fTt>l 1 t j) p r o : - l . Ai
W9t tlM b i l l M • •. • ^
©nlar I
S a M l l e r Wai- *:'l»ntfe> C o r p o r a t i o n MM about t o b& i n t r o r i u c e a , the. T e f t B i l l and t) •
nee B i l l , 1»4 ua
l | « f tlMlt i f **? v^iahc?d ^n.y F«4«i«l «-• - r v I---.i•.;.-. !
•1 •
Meid©r«d i r
L e introduced
•without farther delay.
rave- no reaeoo t < expect ttuet Coigr«#a viill take
r>ropo8*"' •
—ailoai 13b at ao early <Jate.
. ,
. : r e , be ajkpis t i M to i
m i in
M i l . ?«rb«p» a full *!•«
': • Hoard Md t l
in«7;t;- tlM a#st tljM
in Washington w^
Mftt w i c .

: , I as
Mirsly y r a r s ,

Ernest G. Draper


of New York 7

May 20, 19Uh>
Board of Governors of the
F e d e r a l Reserve System,
Washington 25, D. C.
S i r s :
Recently the presses carried reports of the introduction in the
Senate and House of Representatives, by Senator "Wagner and Congressman Spence,
of a bill to amend Section 13(b) of the Federal Reserve Act. I have just received a copy of the amendment and I see that it is unchanged from the one
which was sent to the Presidents of the Federal Reserve 3anks with the Chairm a n ^ letter of April 29, 19Uh> requesting their comments, if any, by May 5«


I telegraphed my comments to reach the Board on that date, and I
assume some of the other Presidents did likewise, although this probably was
not possible for all of them since the Chairman^ letter of April 29, I9hk*
came to them while they were attending a meeting of the Board of Trustees of
the Retirement System in Chicago. I do not know what consideration the Board
gave to the views of the Presidents prior to recommending this amendment, but
I hope that views such as mine are not to be put aside without further consideration. The circumstances under which the Presidents were kept in ignorance of the actual legislation to be proposed until shortly before the Board
decided to recommend it, despite our formal request for information, had already created an undesirable situation which would only be worsened if the
views of the Presidents, when finally solicited and received, were to be discarded without discussion.
I understand that consideration of place on the legislative calendar
may have hastened final decision on the introduction of the proposed amendment
to Section 13(b) of the Act. I also understand that this does not preclude
consideration and possible suggestion of changes in the amendment, by the
Federal Reserve System, before the bill has gone further in the Congress. In
my opinion, this is most desirable.

Yours sincerely,


Allan Sproul

Allan Sproul,