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-25 September 16, Honorable Jamea F. Byrnes* Office of War Mobilization, l a s t fling of the White House, Washington, £• C» Dear Hr. Byrnesi Jou trill recall that soBft two w e k s ago I discussed briefly with you some aspects of the reconversion problem. Wo have been giving continuing thought to this aatter here at the Federal Reserve* As a result of recent sauting the Board of Governors and the Conference of Eeserve Bank Presidents, a aeaorandum #iich contains a brief statesent of the problem as viewed by the Federal Reserve Systasu I as transmitting & copy of the pstemoranduia herewithBecause of its broad responsibilities in the banking and credit field, the Federal Reserve System is particularly §onc@rned with the financial problgaa impending during the reconversion period* Sk>reover,rthe System1* e»^~ p@rlence in &dbdni sterlng industrial loans under Section 13b and war production loans under Regulation ¥, the System is in a position to assist in working out the financial part of a coordinated program suggested In the rr.esaorandu®. I should be glad to discuss this matter further with you if you should so desire* Xours very truly, H. S. Ecclee, Chairman. Enclosure LC:nsI( Need for a Coordinated Governmental Program Relating to the Reconversion of Industry As the war progresses, there Is a growing demand for the development of plans which will facilitate the reconversion of industry to civilian production* Business nrgH)1iit1OHl find local authorities ar® showing a growing concern over a variety of problems with which they will be faced lontediately when contracts are terminated* They realize that prosrpt soliations will be necessary if reconversion i s to proceed with a sdnlmum of delay and in an orderly manner. I t is believed that full production for war would be fftatly facilitated from DO* on If assurance isere given that the Government :1s working out • <MWH | diWltlM ;md coordinated py»gr— relating to reconversion of industry. This meraorariduo suggests such a program; i t Is not concerned with the MtBJ other postwar problems • Some of the '.ore important reconversion questions ares Will provision be Mdi promptly to clear priv&telyw o-;-:3nad plants of Govermtsnt-owied inventories and »ni1|Wit after termination of contracts? What plans are there for the disposition of surplus inventories held by the Government and by industry? In what eases may i t be desirable temporarily to continue production on Government contracts? What disposition will be Mutt of Govern&ent~onn«di plants and -nacMnery? Winch slants trill be operated, sold, or dosed? additional M l W H .:<ay be needed for the protection of subcontractors? Will there be adaqu&tts provision to tak© care of financial probleeus? How promptly will payment be reade on terminated contracts? Are existing f a c i l i t i e s adequate to provide prompt credit for the release of T?orking capital pending such payment? Are special provisions needed for capital and credit requirements, both for reconversion of war industries and for readaptation of civilian lines of activity, such M service industries, to peacetime conditions? How will problems which arts© out of demobilization from n i l i t a r y service -and the discharge of wrkers frosi the i«ar industries be handled? Drastic poptilation shifts will create serious problems for local business, real estate owners, and local Governments* -2- As things are now, each war producer finds that his situation depends on the solution of not one but several of these questions* He finds that Government agencies are individually working on specific reconversion Droblems. The procurement authorities are no*- giving active consideration to the r^any problems relating to contract termination, but, in general; thes© responsibilities cease ushen settlement of contracts i s co.es|>let®d, A related qu@sti.on i s the disposition of Government-owied plants and machinery, which represent about one-fifth of total manufacturing capacity. Agencies concerned Fith such matters ares the Array, the Navy, the Maritime Corral as I on, the Tar Production Board, and the Defense Plant Corporation. h variety of agencies i s concerned with the impending problems of uneiaployri^nt and reeisployiaent* Such problems will be of tremendous magnitude compared with those following the last war. The aggregate number of people ??ho will be seeking reenploynent during the course of the reconversion period may approach 20 millions. The situation will be especially acute in some sections of the country where war-built plants have created excess industrial capacity, A number of Government agencies ar« now isorklng on programs to spread out the demobilization process over a .period of time, to assist persons in finding nan employment in private industry, end to consider other ways of ; .eeting ::bny local problatis. Among the agencies particularly concerned with these questions eret th© Department of Labor, the "Ear Manpower Coisraission, «nd the Federal Security Agency, Financing of business during the reconversion period i s an essential part of any coordinated program. Adequate funds should be assured to deserving companies which cannot secure then through regular banking connections on the usual basis. Because of i t s broad responsibilities in the banking and credit field, the Federal ieaerve 8jr*t*n Is particularly concerned vita the financial problems* I t has had valuable experience with the guarantee of loans Md* by private financial institutions and will continue to be engaged in the fHiiiniitrttlfltn of Regulation V loans during the reconversion period. Each Government cogency attempting to study i t s owi special questions relating to reconversion finds i t s e l f handicapped by having limited knovdedge of or authority regarding other phases of the lsrobleau Mo one agency has responsibility or authority to deal with the full range of these problems* 16Mb T S could be accomplished during the war on the overall problem — with no disruption of the war effort — if the studies and planning of the various agencies were coordinated. To accomplish t h i s , i t is suggested that an official be appoint*! with responsibility for developing & program. This official should have authority to coordinate work in the various Government agencies on reconversion problems. He should have an advisory consaittee on which agencies with particular responsibilities in the field would be represented. -25 September Hr» Ben 7. Cohen, Office of War Vobill ration, Ihite House, Washington, D. C« Dear Ban? 1 sin enclosing herewith a copy of a letter of even date to Rr« Byrnes together with the accoroanying Tn rand\m relating to the probleae of reconversion. Sine* you and T have discussed this matter, I thought this would be of interest to you. lours sincerely, SU S, Eccles, Chairman. Enclosures LCimlo PY -25 16, 1943. \ Honorable Fred I* Vlnson, Oilice of Economic Stabilization, Washlegtan, D. C* Dear Freds I am enclosing herewith a copy of a l e t t e r of even date to Hr« Byrnes together with th« &ccorapanying ffie»o~ r£iG<Jaai relating to the problems of reconversion, Since you and I have discussed this s a t t e r , I thought this would be of interest to you. Sincerely yours, m S, Eccles, Chairmen. LC:mlo WAR PRODUCTION BOARD WASHINGTON. D. C. OFFICE OF c. E. WILSON October 19, 19h3 VICE CHAIRMAN Mr, M. S. Eccles, Chairman Board of Governors of the Federal Reserve System Washington 2£, D. C. Dear Mr* Eccles: This will acknowledge with appreciation your letter of October^l^ and attachments on the reconversion problem. This material has been turned over to our staff working on this problem. Sincerely yours, C. E. Wilson THE UNDER SECRETARY OF THE TREASURY WASHINGTON October 19, Dear Mr. Eccles: In Mr. Bell f s absence from the city I acknowledge receipt of your letter of October 15, 1943, and the enclosures therewith. I will call these to Mr. Bell's attention as soon as he returns and I know he will be pleased to have them. Very truly yours, Secretary to Mr. Bell Honorable Marriner b. Eccles, Chairman, Board of Governors of The Federal Reserve System, Washington 25, D. C. CTORY BUY UNITED STATES TAR INDS AND STAMPS THE SECRETARY OF THE NAVY WASH 1 NGTON October 20, 1943 My dear Mr. Chairman: Thanks for your thoughtfulness in sending me the copies of the letters to which you referred in your testimony "before the War Mobilization Committee. I shall take them home and read them with much care. Yours sincerely, Honorable Marriner S. Eccles Chairman, Board of Governors Federal Reserve System Washington 25, D. C. "WASHINGTON, D. C. THE CARLTON HOTEL Octobar 21, 1943 My dear Mr* Eooles: This will aoknowledge with thanks your letter of October 15th and the enclosures which you were good enough to send me* Sincerely yours, Mr* M. S. Eccles, Chairman Board of Governors Of The Federal Be serve System Washington (25), D. C* JONES & LAMSON MACHINE CO. SPRINGFIELD VERMONT RALPH E FLANDERS October 26, 1943 P R E S I D E N T Mr. Marriner Eccles, Chairman Board of Governors Federal Reserve System Washington, D. C. Dear Marriner: I have read with much interest your communication of Sept 16th to Justice Byrnes and, of course, find myself in full agreement with the idea that a coordinated Government program is essential. Mr. Byrnes has been so beset by a series of crises that he has had no opportunity for thought on the longerrange problems, which of themselves will develop new crises unless they are thought out now* Here's hoping he will have a go at them before too late. I was much interested in the research project on the ownership of demand deposits. One point which, it seems to me, very much needs to be taken into account in connection with these figures is an over-all estimate of the amount of the corporation deposits which can properly be credited as tax reserves. This thought comes automatically to mind in the case of my own company, which has bank deposits of fantastic volume as measured by any previous experience, and yet our quick ratio is only l,04. Not merely our millions of cash but our accounts receivable are all owed to the Government. Unless this factor is taken into account,rcerymistaken conclusions will be drawn from the interesting figures you have gotten together. Sincerely yours, REF:BB Cc: Mr. W. W. Paddock, President Federal Reserve Bank of Boston
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