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Office Correspondenc

Chairman Eooles


M S. Szymozak


I 71



Alien Property Custodian and
the Federal Reserve System

After careful consideration of the question of whether
the Alien Property Custodian might take over the freezing powers
from the Treasury and administer them through the Board and the
Federal Reserve Banks, I have come to the conclusion that this
procedure would not be feasible or, if feasible, would not be
With regard to the question of whether it would be
possible for the Alien Property Custodian to take over the freezing
powers, the maze of Executive Orders and delegations of authority
which delimit the spheres of the Treasury's Foreign Funds Control
and the Alien Property Custodian, respectively, seem to admit a
technical argument that the A.P.C. could in effect take over most,
if not all, of the Treasury functions. These functions are performed, generally speaking, with respect to foreign property in
the United States which the A.P.C. is authorized to vest in
himself• Thus, if the A.P.C* exercised his vesting powers very
broadly, ihe Treasury's functions would largely lapse for want
of subject matter. In practice, however, it is expected that the
A.P.C* will limit his vesting orders to the property in this
country belonging to the Axis powers and their allies or pertiaps
to only business enterprises and patents caatrolled by such
countries. The few vesting orders which have been announced so
far have been confined to the latter field. In any case, very
few transactions have been permitted by the Treasury in the
frozen assets of the Axis countries and their allies, except
that ihe operation of business enterprises in the United States
controlled by such countries has in some cases been allowed to
proceed under the close supervision of the Treasury* The most
active blocked assets have been those of the enemy-occupied
countries, and it seems likely that these assets will not be
taken over by the Alien Property Custodian and will continue to
constitute the principal concern of the Treasury Foreign Funds
Control* Heading between the lines of the Executive Orders on
this subject leaves the clear impression that a continuing role
of this nature was envisaged for the Treasury*
In any case, even if a theoretical argument could be
made out to the effect that the Alien Property Custodian has power
to take over all Hie foreign property in -which the Treasury is

Chairman Eccles


interested, it would still seem impolitic for the Board to
encourage such a procedure• We would be encouraging it if we
undertook negotiations with the A«P#C. with a view to offering
him ihe services which tiie Federal Reserve Banks have hitherto
been performing as fiscal agents of the Treasury, The Treasury
naturally feels that it has a vested interest in this picture,
since it has been operating Foreign Funds Control for more than
two years, and it would no doubt resent an unreasonable encroachment upon its activities in this sphere•
One line of cooperation with the Alien Property Custodian
which the Board might consider is offering the services of the
Federal Reserve Banks in administering the filing of claims on
property which is vested by the A.P»C» On March 25 the A.P*C*
issued regulations for the filing of such claims which provide
til at they shall be prepared on a special form and sent direct
to the office of the Alien Property Custodian in Washington•
The regulations further establish a Vested Property Claims
Committee which is empowered to hold hearings on the claims
and to submit its findings and recommendations to the A.P^C,
who renders the final decision* These claims must relate
directly to the vested property, and since the amount of
property actually vested by the A.P.C. thus far has been rather
limited, the A.P«C.fs office has probably not been overburdened
with claims. If the A.P.C. extends his vesting orders over a
much wider sphere, however, it might be appropriate for the
filing of claims to be decentralized in the Federal Reserve
Banks, #10 would be able to assist in the technical problems
of preparing the claims. Presumably the foreiga property
control divisions in the Federal Reserve Banks could offer
e:xpert knowledge in this field.