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\ Kapllee to Board's H\T* of August 25 Regarding Discount atea PHIL4DBLPBIA Tteply r e f e r s te action of board of d i r e c t o r s on April 2 1 , MM reported In l e t t e r to Chairmen I c e l e s from Mr. S i n c l a i r , of t h a t d a t e . l a sufestacca, t h a t l e t t e r s t a t e d that the following actions were authorised in the event t h a t disturbed oondltions should a r i s e in the money markets due to war or the lnmeditiey of 1. LOCKS to member banks on t h e s e c u r i t y of d i r e c t end such f u l l y guaranteed GoTeranent o b l i g a t i o n s ©2 naybe e l i g i b l e for c o l l a t e r a l purposes «t par a t current discount r a t e . 2. Loans to non-member banks on the s e c u r i t y of d i r e c t Government o b l i g a t i o n s &% par at the then current discount r a t e s . 3. Loans to i n d i v i d u a l s , p a r t n e r s h i p s and corporations o t h e r than banks on d i r e c t Government o b l i g a t i o n s at if. in excess of t h e current diseonnt r a t e and on such c o l l a t e r a l b e s i s as the bank Key froFt tiste to time p r e s c r i b e or r e q u i r e . The P r e s i d e n t of the Bank was authorized, to make such loan p o l i c i e s e f f e c t i v e a f t e r consultation with the Board of Governors o r i t s r e p r e s e n t a t i v e i f such disturbed conditions be a n t i c i p a t e d . In such event i t would be necessary for Boerc! of Governor© to approve r a t e s on types of loans referred to in preceding paragraphs numbered Z and ! CLKViLAKP Peply r e f e r s to action of board of d i r e c t o r s of April £7 as set forth in bank's l e t t e r of April S8. In t h a t l e t t e r i t MM s t a t e d t h a t i t *&« vot©<! that the discount e o m l t t e e of t h e bsnk was ®ytcori2ecl to make loens on Government s e e u r i t l e s to sember banks at per, to non-se^ber banks a t PBT, &nfi to o t h e r s at 9S$ of msrket value but not more than per, &t 1 1/2$ for member and nonmember banks; to o t h e r lenders at I 1/2$; to i n d i v i d u a l s , p a r t n e r ships m% eorporatlons (except non-mesiber banks ssd other leoders) a t 5 l / H l . However, t h i s action mould become e f f e c t i v e "provided n o t i f i c a t i o n of an outbreak of h o s t i l i t i e s sbroatf has been received by Federal Ke^erv© Bank of Cleveland fro^ Board of Governors*. The bank's telegram of August £6 s t o t e s **If t h i s i s not s a t i s f a c t o r y , please CHICAGO Bank's wire r e f e r s to a c t i o n t&:*en by boerd of d i r e c t o r s on J u l y £7, 19S9, in «Hleh i t w^s provided t h a t "when end i f t h e Botrd of Governor* r e q u e s t s due t o e r u d i t i o n s above o u t l i n e d ( i n the event of ditturbano«& resulting: from p o l i t i c a l developments abroad) t o e s t a b l i s h a discount rat© of 1% t o nessber and non-p.esber b&nks OR loans secured by Governmert o b l i g a t i o n s up to t h e par r e l y * of such c o l l a t e r a l * . I n a telephone* coifiFmnieation, P r e s i d e n t Informed I t f liijf Merrill that the expression "up to per* intended to mean that tr^e loan would be granted is any amount by the applicant up to par; im other words that ttee hmk -womld lead par if deeired, and in tbe bunk's tclefra^ of August £5 referring to this action, i t i s stated that i t i s "to b© effective upon r of Boarc of Governors*. Bank*a reply refers to Powell's l e t t e r of April t t infonsing Bosrd that •xeeutiTu oomsiittee tbi« bank set rete of ?$ to indlTiduals, pertnersliipe BB<1 eorporitions other tssn non*meaiber basks and 1 l/S$ %9 corporations •when they w#r® aon-a^ber beaks on their pro&leaory notes secured by GoT#'njments if, as and Kfeen the President of this baak deeded i t advisable to put those rat^s into effect, subject only to Boerd's reoueated ®pprovi»l. The wire concludes leith the following staterant: *I hsve aseused you mould approve this ret© ^hen emergency arose, without further word from Be. I now dees: i t advle&ble to put such rates Into effect and r©^\i#st your approval.* TALUS Bank.1 s reply r«f«rt to bank's l e t t e r to Board dated April £6, 1939, i*hereiii Bourd wa« advised of resolution parsed that date fey board of directors of bank, fixing rate on loan® to non-member b&nks at 8ore.# rate as going rate then in effect for loans to member banks scoured by Government securities if $t any tiwe ic the future the Board of Governors for any reason should deers i t fedviseble find give its. approval. Bank'® wire states th»t ttotjr beli«v® this resolution sufficient to fix their rata or. loan© to Rom«-m«f?ib#r bank© at the s&me rate fixed by the executive eon«ittee for loans to member banks tsecured by Governsieuts sad th«r@for« no additional action needed except Board's approval. August 25, 1939 Replies received from Federal Reserve Banks to telegram sent by the Board yesterday: BOSTON "While we interpose no objection to issuance at this time of statement referred to your wire twenty fourth there is some feeling it would be desirable to await actual outbreak of hostilities." MINNEAPOLIS "Retel 24 and supplemental Ransom telephone conversation this bank is in full accord with such action as Board of Governors outlines concurring in the Board1s opinion the emergency exists."
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