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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON ERNEST G. DRAPER MEMBER OF THE BOARD 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, <2 Ernest G-, Draper. Enclosures BDARD DF GOVERNORS DF THE FEDERAL RESERVE SYSTEM WASHINQTQN 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 ?»*ay 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. We wish, to assure 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 true. 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 er:, incurr**1'.. Tfelfl wo be practicable i f the l\.-n. • left ; reesur . . , , • .?..•. iz« loBS«a -. ... -it be ootftorMM e t le&st. that tba: Ml - • ^ . -r. | -.usde in o.'-'er t o ;:ive b -d aay grMt«r eo&tf I ;ici»s of the '•^erve Banks t'.ar. ;*:. |j# the cese. Anatt • l 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 MM 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 m.!t:on 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 SMMHI men tn©r© i s l i t t l e j u a t i f i for then. I HI : ' i t MM 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 I tfe« 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 • fcYiftl loaij Meid©r«d i r Ld e introduced •without farther delay. rave- no reaeoo t < ; expect ttuet Coigr«#a viill take v ietl«a 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 *!•« I ••^pocsl I ^ia ': • Hoard Md t l in«7;t;- tlM a#st tljM ideate in Washington w:^ helyftai* Mftt w i c . : , I as Mirsly y r a r s , (Signed) Ernest G. Draper «ner. 5/24/44 FEDERAL RESERVE BANK of New York 7 P Y 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, (Signed) Allan Sproul Allan Sproul, President.
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