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1.
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-522
WASHINGTON
ADDREBB Df"f"ICIAL CDRREBPDNDENCE
TD THE BOARD
July 1, 1942
Dear Sir:
In the Board 1 s letter of December 10, 1941 (S-40.3),
the request was made that aggregate par values of Government
securities as reported in the new left-hand column opposite
item 1 in Schedule B be included in the preliminary summaries of asset items submitted within three weeks after calls
are made.
Due to numerous apparent errors made by member
banks in showing par values of Government securities on the
December 31, 1941, reports of condition, you were notified
by wire on January 14 that the information requested in the
last paragraph of the letter need not be reported at all
for national banks and might be reported for State bank
members following verification.
Further consideration has been given this matter,
and unless and until otherwise advised it will be unnecessary for you to furnish the figures showing par values of
Government s~curities requested in the last paragraph of
the Board's letter of December 10.
Ver,y
truly yours,
~~~
L. P. Bethea,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDEFAL RESERVE BANKS
2
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-523
WASHINGTON
ADDRESS Of'f'ICIAL CORRESPONDENCE
TO THE BOARD
July 1, 1942
Dear Sir:
The War Production Board and the Office of Price Administration have indicated a need for monthly informatj.on regarding department
store stocks by departments. To provide such information, the Board
has been asked to chanr.r,e the present reporting cys!~em from a quarterly
to a monthly -basis. ivo should like to aid these agencies in obtaining
the desired information. It is contemplated that tho collection of
monthly data would begin with sales during June and stocks as of June
30. Instructions :relative to the collection of monthly data and the
·t-ransmittal of reports to the Board are attached.
Members of the Board's Division of Hesearch and Statistics
have met vd th representatives of the interested war agenciGs and have
discussed with them the neeri for such statistics, their use, and the
best methods of obtalning t.h~m. These agencies ha'.re the authority, as
a matter of law, to require such reports "-S they may need in the performAnce of their duties. They agree, ho\vever, with our view that it
is preferable to make use of the arrangements alr~ady established by the
Reserve Banks for collecting these data and believe that information
thus obtained will ade,luatel;y· serve their pre&ent purooses. Collection
of tbe data through the Reserve System would afford the reporting stores
an opportunity to continue making their reports on a Yoluntary basis
and thr0ugh the familiar channels of an agency that has had long experience with the problens of ~athering and interpreting this kind of information. All leading department stores should report these data and
it is believed that i f this situation is properly understood full cooperation will be obts.ined.
As in the past, it is contemplated that the information will
be made available out3ide the System only in such form as wtll not disclose the figures for indivLlual st.ores, and the System will not be
called upon to engage in any policing acttvities on the basis of the
department store inventory reports. The l'urpose of the monthly figures
is t,o provide responslble war agencies--particularly those concerned
with civilian supply and ;Jr·ice controls--v:ith more current and detailed
l:Y\IHTJ,r"'Tf"\DV
-2-
S-523
information for use in the formulation and administration of policies
which those agencies will be fully r8sponsible. If, in the future,
thG n~ed i'or individual store reports arises, the entir8 matter will
be reconsidered, particularJ.y· the question of Federal Reserve participation in such a collection system.
fo~:
In view of personnel losses and the j_ncrease in statistical
work at the Reserve Banks becaur:e of war conditions, it may well be
that clerical and perhaps other additions to t!1e Banks' statistical
staffs will be necessary. Inasmuch as this and other recentlJ inaugurc;.ted projects seem essential at this time, provision should be made
to wsure that they are carried out as promptly and as efficiently as
possible. If increases in the budeet for your statistical and analytical department are necessary, we shalJ. bG glad to consider them as soon
as thay are suomittcd.
f'uturG c:>rrespondence relating to thic: 1.r.quiry should be addressed to tbe Division of Resoarch and Statistics.
Very truly you:rs,
Chester Morrill,
,Secret'l.ry.
Enclosure
TO 'l'HE PR..i£.SI0ENTS OF ALL FEJJER.11.L RES&"?.VE BANKS
3
4
S-523-8.
DEPAR'l'JviENT STOftE SALES AHD STOCKS, BY DE?AHTM&"JTS
Instructions for Collection of Monthly Data
The iHar Production Board and the Office of Price Administration have decidE>d that for their fvork they will need to have figures
monthly that show both changes from a year ago and changes from the previous month. It ~;;eems to us that the most practicable way to meet these
requirements i<> to collect reports on an identical store b<1sis rather
than gettlng in as many reports as possible each time as has ueen done
in the pact. The v1ar agcncles have agreed to accept d:1te for a sma1.ler
m1'tlber of stores if necessa1·y in order t.o obtain the comparable monthto-month figures that they need. ThE;y would, .however, l.iki=> to have the
sample made as comprehensive as possible and feel that o.ll leading department stores should cooperate.
Collection cf reports on this ba:;is shouLl b'; begt:l1 to cover
sales during June and stocks at t!1e end of cTune. In regard to the data
to be requested from stores, we believe that it would be adeqqaLe to request only data for the current month and the corresponding month a year
ago, as after June figures for the previous month can presumably be ob··tc:d.ned from recorus previousl.f sent in.
The war agencies ha.v'3 agreed not to ask for J:V1ay data but they
would like to recei V<:: April figures compara.ble to those reported for
June. If, theref'·_)re, 3rour report for June doe~> not include all stores
that reported in April, will you please send us also a retc:,bulation of
April fignres covering only those store3 incl11ded in t 11e June re,c.'ort.
Or, i f additional stcn·es of importance can supply both April and J·L.ll1e
figures, we should like an April report including them.
Concerning the manner in vrhich data should be reported to us,
Form F.R. 576, that ae sent you prior to the April 30 survey, can still
be used. It 1s imperative, horrever, that the same <:1tores be included
each month.
Concerning the numb~r of departments to be covered, some Banks
have j_n the paJt been usinc; the shorter form of re!Jort used for reporting departmental sales only. This was satisfa.ctrny to the war agencies
when the quarterly survey ·was first begun but it no':r arpears that they
would like to have the longer fornt used in each d.istrict with figures
shown for as many: individual departments as is possibh", even th6ugh the
sample for some departments may appc;ar to be quite limited, In all totals und subtotals, however·, please inc:Lude figures for additional stores
that are not able to provicle departmental re~)orts in complete detail so
that we can continue publication of a monthly re)ort at least as detailed as that now cor.--..piled.
5
-2-
S-523-a
With the inauguration of this new report, there will, of
course, be no need for continuation of the separate re;port on sales by
departments sent to us formerl,y as we shall begin publication of a new
report based on the data received covering both sales and stocks.
Our letter of July 1, which is att3.ched, rr~EJ.y be taken as a
guide in infurming the stot·es in your district of the need for the above
cr~nges in the reports that are obtained from them.
•
6
S-524
•
•
TELEGRAM
July 2, 1942
•
(Addr~ssed
s~erve
to the Presidents of all Federal ReBanks)
Item 5 in Group A, section l3(a) of Reg-
ulation
'vV
includes batteries and accessories for
•
trucks and busses.
(Signed)
'
•
•
L. P. Bethea
•
f
S--525
TELEGRAM
July 3, 19/+2
(Addressed to the PresiJents of all Federal Heserve
Banks)
•
Boy Scouts of America and Y.i'LC.A. are exempted under section 8(1) of Regule.tion W•
•
(Si£ned)
.
L. P. Bethea
8
•
BOARD OF GOVERNORS
DF' THE
FEDERAL RESERVE SYSTEM
•
WASHINGTON
S-526
ACCRE•• DF'F'ICIAL CDAAE ...DNCENCE
TD THE BQARD
July 3, 1942
Dear Sir:
•
.'!!
Reference is made to the Board's lett.;rs of April 17, 19~.2
(R-975) and May 2, 1942 (R-981). There are enclosed copies of Forms
F. H. 577, 577a, and 579, which have been r'=lvised in the light of sugge.stions developed at recent conferences held between members of the
Board 1 s staff and representatives of the 1lar and i~av:r Departments and
the Maritime Commission. A supply of each form is being forward~d under separate cover •
Forms F. R. 277 (Msri time Commission) and F. R. 57?a ( Arrrw- and Naw Departments)
1. Guarantee numbers on Form F. fi.. 577 or 5?7a reports
should be the same as those a.ssi,g-ned to the corresponding
guarantees. Your Bank should assign the guarantee numbers to
guarantees executed on behalf of the War Department and the
M.aritime Conunission. The tJavy Department will assign guarantee numbers when issuing authorizations for guarantees. If
numbers heretofore used on Form F. R. '77 reports do not conform to the above-described procedure, please submit to the
Board in duplicate a separate list for each agency showing the
name of borrower, serial number on Form F. R. 577 o.s submitted,
and the number assigned to the corresponding· guarantee.
The
numbers of the guarantees will then be inserted by us on the
corresponding reports on Form F. R. 577.
2. A report on Form F. R. 577 or 577a should be submitted
for ecwh loan made by your Bank under Section 13b of the Federal
Reserve Act that is guaranteed by the War Departme11t, Navy Department, or the Maritime Commission. Only one report need be
made for each guarantee even though the loan is not to be advanced in full at one time.
•
3. Branch of eyervice chiefl'{ S(Oncerned. This item need
be filled in only on rt>ports of loans guaranteed ::,y the VJar Department and should show the branch of the service, such as
.
9
-. ,.
S-526
-2-
•
•
Ordnance, Chemical Warfare, etc. for Vihich, either as contractor
or subcontractor, the contractor· has the greatest dollar volume
of contracts. If the Bank has difficulty in obtaining such information, it will be. obtained for the Bank by the ltaison officer •
4. .Amount of loan. The amount of the loan should be re·ported as the maximum amount of credit that under the guarantee
agreement ITh:'lY be outstanding at any one time •
..
5. Final maturity of loan. In cas£ the final maturity of
the loan is indefinite because repayments thereof are to be made
out of payments to the borrower on the contract, a statement to
that effect should be substituted for final maturity date •
..
6. Commitment fee, if anv. This item on reports of loans
guaranteed by the War Department or Navy Department (Form 577::-..)
should show what commitmsnt fee, if any, is charged the borrower by the financing institution.
Form F. fl.. 579
•
•
l. Separate reports should be submitted for War Department, Navy Department, and Maritime Commission guarantees and
should include loans outstanding at the end of the preceding
month (column 6) even though no amount is outstanding at the
end of the report month (column 7).
2. Column 4. The amount in column 4 should be the amount
of credit in use by borrower on date of report plus any additional amount then available to borrower under the guarantee
agreement.
3. Columns 5 and 8. The amounts to be entered in columns
5 and 8 should be derived by multiplying the amounts in columns
h and 7 by the guarantee percentage (column 3) stated in the
guarantee agreement or by such percentage as modified by action
taken under Section 5 thereof.
Very truly yours,
·-......_~
~~7~--~-v
.
Jt"/{-1~_/. t't ..-
1. P. Bethea,
Assistant. Secretary.
Enclosures 3
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BAJ.\IKS
10
•
BOARD OF GOVERNORS
CF" THE
FEDERAL RESERVE SYSTEM
•
S-527
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
•
July 6, 1942
•
Dear Sir:
This refers to the Board's letter of May 28,
1942 (S-496) with regard to the program for enforce-ment of Regulation W.
In this connection, the Board
has been advised by the Federal Deposit Insurance Corporation and the Comptroller under dates of June 29
•
and
JO, 1942, respectively, that the two agencies will
cooperate in the enforcement program along the lines
suggested in the Board's letters to these two agencies
dated June 12, 1942, of which copies are enclosed.
.
Very truly yours,
•
..
Chester Morrill,
Secretary.
Enclosures 2
TO THE
PR.ESILl&~TS
OF ALL FEDERAL RESERVE BANKS.
11
•
S-527-a
June 12,
l9L~
Honorable Leo T. Crowley, Chairman,
Federal Deposit Insurance Corporation,
V:ashingtou, D. C.
Attention I'Jb:'. Francis C. Brovm
•
•
•
Dear Mr. Crowley:
The Board has recently adopted a comprehensive program for
the enforcement of Regulation VI uhich it issued pursuant to +.he authority contained in the Executi've Order issued by the President on
August 9, 194.1 (Federal Register, August 13, 1941, page 4035). For
your informatiop in this connection, there is enclosed a copy of a
letter dated i/1ay 28, 1942 v:hich the Board has forv;arded to the Presidents of all the Federal Reserve Banks, together with w_1 outline of
the enforcement program. In viev: of the interest of the Department
of Justice in matter::; of this kind, this program has been cleared by
the Board with that Department. In this connection~ there is enclosed
a copy of a lettar the Board. has received frow the Department of
,Justice, together with a copy of a circular rrhich that Department
has sent to all of its United Sto.tes Attorneys.
In order to avoid duplication of steps to discoV•3r violations of the regulation, the Board wot'-ld like to have the cooperation
of your Corporation with respoct to a..ty violations v<h:ich ma;r occur
in nonmember insured banks and Federal Credit Unions. SjJecifically,
we would like to have the coopor:::,tion of your Corporation along the
following lines~
•
•
l.
Take such steps as you deem appropriate in v.-w examination of such institutions ceo determine whether violations of Re~1lation W exist;
2.
If violations are discovered which in the oplnlon of
representatives of your Corporation are inadvertent,
take steps to obtain correction of the violations along
the lines nhich it is contemplated will be taken 1:lf the
Federal Reserve Banks in similar circumstances under
section IIA of the enclosed outline of enforcement program; and
3.
If violatibnS arc-. discovered w:ncn in the op1.n~on of
representatives of your Cor;)oration are apparentJ~y
willful and steps should be taken to determine v'ihether
•
•
12
•
S-527-a
-2-
•
penaltiEJs should be prescribed, report the facts in
the case to the Federal Reserve Bank of the district
in ~:hich the apparently willful violation occu:r·s.
•
In carrying out the abbve program, we would like to have
representatives of your Corporation and appropriate representatives
at the various Federal Reserve Banks maintain close informal contacts
in order that the Federal Reserve Bank representatives may be of all
possible assistance to you in your cooperation with us in this matter.
•
•
For your information, the Comptroller of the Currenc.,·y has
been requested to cooperate with the Board in the enforcenent of
Regulation V,J in so far a::> national bankn and Credit Unions subject
to his supervision are concerned. iiJe understand jnformally that the
Comptroller's cooperation will be along the lines of the above and
expect, to receive formal advice to that effect from the Comptroller •
•
Very
(Signed)
trul~r
you:r3,
CheGter Morrill
Chester Ivlorrill~
Secretary •
•
..
Enclosures
•
..
•
13
BOARD OF GOVERNORS
Of" THE
.
FEDERAL RESERVE SYSTEM
S-496
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 28, 1942
•
Dear Sir:
•
Unci.er date of October 10, 1941 {S-368), the Board wrote you
with regard to obtaining C')rrections of apparent violations of Regulation W. It was asswned that most violations were the result of inadvertence or misunderstanding as to the meaning of the provisions of the
regulation.
Since that tirne.rnan.v Registrants have ha.d an opportunity to
familiarize themselves vrith the regulation e.nd there may be instances
where violations are willful rather than the result of inadvertence or
ignorance. The Board feels that it has a responsibility to provide
such a program of enforcement ~s ~ill bring'about general complicmce
with th0 requirements of the regulation a.nd in some degree prevent willful violations. To this end, the: Board has approved a program of enforcement, a copy of an outline of ·which is onclosed. Certain parts
of the program call for action by the various Federal Reserve Banks,
and it is requested that your Bank proceed in accordance with this program.
•
After consultation with representatives of the Department of
Justice it has been decided that, for the present at least and in the
absence of exceptional circumstances, violations will not be reported
to the Department of Justice in the first instance. However, in cases
where the circumstances warrant, proceedings will be instituted, as
set forth in the outline, to determine Vihether or not the Registrant 1 s
license should be susp<:mded. The Board mey wish to bring some of the
cases in the latter catego~ to the attention of the Department of
Justice for possible prosecution by that Department. At tho present
time, however, it is desirable that every effort be made to sacure compliance on the part of persons having obligctions under the regulation,
and it is contemplated that crirninal action will be taken only in cases
involving willful and aggravated violations.
•
In connection with subdivision II(B) of the enclosed program
YICTORYrelating to proceedings for suspensioi1 of license in tbe case of will. ~~!ful violations, it is contemplated, of course, that if any case should
STATES
WAR
BONDS
•
•
S-496
-2-
"
•
•
14
be discovered where the failure ;of a person subject to Regulation W to
comply with tho registration requirements of the regulation is apparently willful, you will make a ful+ report of the facts in such case to the
Board in order that it may bring the case to the attention of tht3 Department of Justice.
With respect to subdi~ision I(A)(3) of the enclosed program
relating to solicitation of the cooperation of local supervisor/ agencies, ·it is suggested that your Bank not take stops to work out a. program with such agencies until the Board has reached agreement with the
Federal Deposit Insurance Corporation, the Comptroller of the Currency,
etc., with respect to their cooperation as mentioned under subdivision
I(A)(2). In this connection, it may be mentioned that it is contemplated that in our contact with the National Associc.tion of Supervisors
of State Banks we will solicit their cooperation at this time only as
to banks. Howeve;r, it is believed that in a nu.-·nber of States the bank
supervisory agency also supervises and examines other classes of lenders subject to Regulation TI. We will advise you as soon as practicable
as to the agreements we have roached with the Federal Deposit Insurance
Corporation, the Comptroller of the Currenoy, etc., and in the meantime
you may wish to contact the bank supervisor/ agencies and any oth<3r similar agencies in your. district to det~rmine what lenders subject to Regulation W other than banks come under their jurisdiction.
The Board desires to emphasize that the enclosed program of
enforcement is not intonded to diminish in ru~ way the educational activities of your Bru1k with regard to the requirements of Regulation W
through trade associations, Better Business Bureaus, the press, b,y furnishing speakers to interested groups, or b,y any other appropriate means.
Very truly yours,
•
~hi~
•
Chester Morrill,
Secretary.
Enclosure
•
TO THE
PRESIDE~NTS
..
•
Oli' ALL FEDERAL RESERVE BANKS
S-496-a
OUTLINE OF ENFORCEMENT PROGRAM UNDER REGULATION VV
•
I.
..
Detection of Violations
A.
Lenders:
1.
It shall be the primary responsibility of the Federal Heserve Banks to detect violations by State member banks
throuch the usual process of examination of such banks
and through spot checks to detEct violations by other
lenders not periodically examir.ed by reco~-nized State or
Federal supervisory agencies. Such opot-checkin5· shall
be conducted as outlined under I-B below •
2.
The Board will undertake to obtain the cooperation of
supervisory agencies having authority of national scope
in detecting violations by institutions under thr~ir examination and supervision, such agencies including--
•
•
•
•
•
a.
Federal Deposit Insurance Corporation
b.
Comptroller of the Currency
c.
National Housing Agency
d.
Farm Credit Administration
The Board will also undertake to obtain the cooperation
of the National Association of Supervisors of State Banks.
Any such cooperation will be solicited along the lines of
that which has been obtained with respect to violations
of the Board's Regulation U, with such modifications of
procedure as may be appropriate to conform to this program.
"'
•
3.
B.
The Federal Reserve Banks will solicit the cooperation of
supervisory agencies having authority of local scope in
detecting violations by institutions under their examination and supervision. Each Federal Reserve Bank, with
the assistance of its counsel, will ascertain the local
supervisOFJ agencies regularly exa~ining and supervising
those lenders subject to Regulation W•
Vendors:
l.
•
The various FE;!deral Reserve Banks will for the present
spot check extensions of credit by vendors, each Federal
15
•
-2-
S-496-a
•
Reserve Bank exerc1s1ng its ovm discretion as to the
number of checkers or investigators it will engage,
their qualifications and training, the size of sample
of vendors to be investigated, and the methods and
scope of investigation. The Board suggests, 'however,
that each Federal Reserve Bank make a real effort to
spot check a representative number of vendors that
may be subject to Regulation W. Any such investigator should be furnished with appropriate creden•
tials ~y the Federal Reserve Bank he represents. The
investigator's report should follovr such form as is
suggested by the following outline:
•
a • Name of the Federal Reserve Bank.
•
b.
Name, address, and character of the business investigated and whether registered.
c.
Date of investigation.
d.
Name of investigator.
e.
Scope of investigation (including procedure in
spot-checking, num'Qer and types of transactions
reviewed and for what calendar period, whether
there was a review of Statements of Borrower,
Statements of Transaction, and Statements of
Necessity, etc.).
f.
List of violations disclosed and as to each whether
in the investigator's opinion it was apparently
willful or inadvertent.
g.
A complete detailed statement of facts of each violation •
h.
Corrections, i f any, obtained as a result of the
investigation.
i.
The attitude of the business executives toward the
regulation in general and toward the alleged violation in particular.
j.
Other comments of the investigator.
•
•
•
II. Treatment 9f Vio1ations
•
aft~t
Detection
I
Consideration will be given in this section only to violations
discovered by the Federal Reserve Banks. In negotiations with
16
-3-
S-496--a
other supervisory agencies, an attempt will be ma.de to have
their treatment of violations conform genera.Uy to the treatment of violations discovered by the Federal Reserve Banks.
•
A.
Inadvertent violations:
1.
•
B.
•
1.
•
2.
•
a.
Take appropriate steps to bring about, if 9racti~
cable under all the circmnstances, a correction
of the contract in accordance V!ith the regulation;
b.
If the circumstances warrant, make further investigations from time to time to determine whether
other violations occur; and
c.
Furnish the Bc:>ard, ~·vhen requested to do .so, with
reports showing inadvertent violations and the corrections obtained.
Willful violations:
•
•
If in the opinion of the Federal Heserve Bank the violation was inadvertent, the Heserve Ba.nl:<: will--
If, in the opinion of the Federal Reserve r3c:nk, a violation was a.pparently ·NillfuJ. and proceedings should be
instituted to determinG whether the Registrant 1 s license
should be suspended., the Federel Reserve Bank will-a.
Prepare a full report ::>f the facts disclosed by its
investigation;
b.
Forward one copy of such report to the Board with
its recorrunendations; <'md
c.
Take no further action against the apparent violator until directed to do so by the Board •
If' the circumstance.s warrant, the Board of Governors will
direct that a hearing be held at the Federal Reserve; .dank
to determine whether or not the Hegistr::cnt 1 s liccmse
should be suspended. In connection wi tb any such direction, the Federal hesf.;rve Bank will be furnished with
full instructions as to the conduct of tha bea.ring. In
general, it is contemplated the.t the hearing will bo conducted by a trial examiner sel(c;cted for tiJ.l3 purpose but
independent of the Federal Heserve Bank anct that the evidence of the violation will be presented by counsel and
other representatives of the Federal Reserve Bank.
17
18
S-527-b
DEPARTM.i£NT OF JUSTICE
Washington, D. C.
M~r
27, 1942
Mr. Chester Morri]).,
Secretary, Board of Governors,
Federal Reserve System,
Washington, D. c.
Dear Mr. Morrill:
This will acknowledge your letter dated ~1ay 22, 1942~
with the enclosed documents, in which you ask to be advised
whether this Department has any objection to the proposed outline of enforcement of Regulation W, relating to Consumer Credit,
as set forth therein.
The Criminal Division is in accord with the proposals
set forth in your letter, and assures you of its cooperation in
your progr~~ to secure compliance from persons having obligations under the Regulation whenever possible without the institution of criminal proceedings.
A circular letter is being sent to all United States
Attorneys requesting that no proceedings should be instituted
i:.J cases involving violations of Regulation Vif without prior authority from the Department. In this connection, it is request~d
that there be furnished to the Criminal Division four hundred
copies of Regulation W, as revised effective M~ 6, 1942, for
distribution to the United States Attorneys and a similar number
of the Federal Reserve circular outlining the Board's proposed
policy with reference to the administration and enforcement of
the Regulation.
Respectfully,
For the Attorney General,
(Signed)
Wendell Berge
WENDELL BERGE~
Assistant Attorney General.
19
S·-52'7-·C
DEPART!Vl_EH'I' OF JUSTICE
•
\"ia.shington, D. C.
Mey
29, 1942
CIRCULAR .NO. 3567
Supplement No. 1
TO ALL UNITED STATES AT'l'ORNTI.'YS:
Subject:
Violations of the Regulations pertaining to Cons1.11ner Credit.
Section 95(a) 1 Title 12; United States Code (Section 5(b)
Act of October 6, 1917).
There are transmi ttec:
here~vi th
copies of Regulation W of the
Board of Governors of the Federal Reserve System, as revised effective
Ma.y 6, 1942, entitled "Consumer Credit" and promulgated in accordance
with Executive Order No. 8843 dated August 13, 1941 (Fed. Reg. August
13, 1941 p. 4035).
In view of the policy of the Federal Heserve Board as stated
in its "Outline of Enforcement under Regulation W" a copy of which is
enclosed herewith, it is requested that any
~tpparent
violations of Reg-
ulation Vi nhich come to your attentiou be submi ttcd to the Federal
Reserve Bank or branch in the district in which the a .lmarent
violation
J
occurs for disposition in accordance with the above program, and tha.t
no prosecutions for violations of these Regulations be instituted vlithout the pr :i.or au thor i ty of the Department •
•
FRANCIS BIDDLE
Attorney General
20
S-527-d
June 12, 1942
Honorable Preston Delano,
Comptroller of the Currency,
Washington, D. C.
Attention Mr. J. Louis Robertson
Dear Mr. Delano:
The Board has recent~ adopted a comprehensive program for
the enforcement of Regulation W which it issued pursuant to the authority contained in the Executive Order issued ~~ the President on
August 9, 1941 (Federal Register, August lJ, 19~1, page 4035). For
your information in this connection, there is enclosed a copy of a
letter dated May 28, 1942 which the Board has forwarded to the Presidents of all the Federal Reserve Banks, together with an outline of'
the enforcement program. In view of the interest of the Department
of Justice in matters of this kind, this program has been cleared qy
the Board with that Department. In this connection, there is enclosed a copy of a letter the Board has received from the Department
of Justice, together with a copy of a circular which that Department
has sent to all of its United States Attorneys.
In order to avoid duplication of steps to discover violations of the regulation, the Board would like to have the cooperation
of your office with respect to any violations which may occur in national banks and Credit Unions subject to your supervision. Specifically, we would like to have the cooperation of your office along the
following lines:
l.
Take such steps as you deem appropriate in the examination of such institutions to determine whether violations of Regulation W exist;
2.
If violations are discovered which in the opinion of
representatives of your office are inadvertent, take
steps to obtain correction of the violations along
'the lines which it is contemplated will be taken qy
the Federal Reserve Banks in similar circumstances
under section IIA of the enclosed outline of enforcement program; and
3.
If violations are discovered which in the opinion of
representatives of your office are apparent~y willful
"
2:1
S-527-d
-2;.;
and steps should be taken to determine whether penalties should be prescribed, report the facts in the
case to the Federal Reserve Bank of the district in
which the apparently willful violation occurs.
.
I
In carrying out the above progra~, we would like to have
representatives of your office' and. appropriate representatives at
the various Federal Reserve Banks maintain close informal contacts
in order that the Federal Reserve Bank representatives may be of all
possible assistance to you in your cooperation with us in this matter.
For your information, the Federal Deposit Insurance Corporation has been requested to cooperate with the Board in the enforcement of Regulation Win so far as nonmember-insured banks and Federal
Credit Unions are concerned. We understand informally that the Corporation's cooperation will be along the lines of the above and expect
to receive formal advice to that effect from the Corporation.
Very truly yours,
(Signed)
Chester Morrill
Che8ter Morrill,
Secretary.
Enclosures
(NOTE: The enclosures with this letter v1ere identical to those with
the letter to the Federal Deposit Insurance Corporation.)
22
S-528
TELEGRAM
July 6, 1942
(Addressed to the Presidents of all Federal Re3erve Banks)
Board has been asked whether under Regulation W a
Registrant may make an instalment loan with a maturity of'
twelve months to retire a chnrge account arising in whole or
in part from the sale of a listed article, if the Registrant
accepts a Statement of Necessity in accordance with the pro<rislons of section 10( d). Tt.e answer to this q_uestion is that
the lo(ln ;nay have a maxirmm. maturity of twelve months f'rom the
date of the loan whether or not tho charge account v:as in deI'ault under the proYisions of soction 5(c).
Board has also rocei VoJd an inauiry as to tho m~1ximum
maturity of 2 single-payment loan to retire o. charge account.
Such a loan must of course havG u maturity not in excess of 90
days, but, if a Statement of Necessity is taken from the obligor when the loan matures, "the Regist:~ant may renew tho entire
amount on en instalment basis under section 7( c)(l) for ns long
as twelve mont;hs from the date of renewal, or tho Registrant
may make ext;msions in the mnnner provided in section 7( c) (2)
if the maturity of the lant single-p::1yrncnt obligation is not
lster tho.n twelve months fro!!l the date of the fir:.>t one. See
footnote 5.
(Signed)
L. P. Bethea
23
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
S-529
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 7, 1942
Dear Sir:
There is enclosed a co:;_Jy of a letter dated
June 17, 191;2, to a Federal Reserve Bank regarding
the applicability of Regulation TN to trw resale of
an automobile by a financing institution which had a
lien upon tho automobile securing a loan. The letter
states that the automobile may not be resold i;o a
th5.rd person on t.erms which do not conform to the
requirements of the Ftegulation.
In thi3 connection, however, your attention
iG in vi ted to a differcmC·:J in wording betm.:en Sections
10(a)(l) and lO(a)(2). The latter exempts action
taken "for the Registrant's ovm protection", but the
former does not contain this limitation. Accordingly,
under Section lO(a)(l), th8 contract with the obligor
could be revised on any terms which the Registrant
deemed necessary to protect the interc~sts of the obligor.
Very truly yours,
~~~
L. P. Bethea,
Assistant Secretary .
•
Enclosure
'fO THE
PR~~SIDENTS
OT' AIJL FEDERAL RESERVE B.P.iJKS
24
S-529-a
June 17, 1942
Mr.
, Vice President,
Federal Reserve Bank of
---_
__ ____
,
Dear Mr.
In your letter of June 6, 191".2' you asked whether a credit
union, to which a member, who has been inducted into the armed forces,
owes a $200 balance on an automobile loan made prior to his induction,
may sell the automobile for such member for ~~600 and finance the entire
purchase price for the new purchaser without regard to the requirements
of Regulation W.
It is the Board's view that section lO(a)(l) would not per~
mit the unregulated financing of the automobile for the new purchasc;r,
since this clearly would be action by the Registrant "with respect to"
the obligation of the new purchaser~ rather than the obligation of the
credit union member. On several occasions the Board has stated that
an original extension of credit in similar circumstances to a subsequent purchaser would not be exempted from the regulation by section
l0(a)(2). Under either sections lO(a)(l) or lO(a)(2), the fact that
the resale to a new purchaser follows what ;,rou refer to as a bona fide
collection effort, rather than an ordinary "repossession" of the automobile would not, in the usual case, lead to a different result. ln
addition, it should be noted that the opposite result wo~1ld lead to
an anomalous competitive situation between dealers, finance companies,
and other financing institutions.
In this connection, it should be noted that the last paragraph of W-72 is merely intended to call attention to sections JD(a)O.)
and lO(a) (2) rather than to appl~r them to the transactions described
in the first three paragraphs of that interpretation.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
25
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-530
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
July 7, 1942
Dear Sir:
There is enclosed, for your information, a copy of a letter addressed to a
Federal Reserve Bank on July 6, ,1942, with
reference to Regulation W.
L. P. Bethea,
Assistant Secretary.
Enclosure
TO THE PRESIDEi:JTS OF ALL FEDE:a.AL rmSERVE BANKS
26
S-530-a
July 6, 1942
i'/;:c.
, Assis+,ant C:1shier,
Yed.eral R.eser-ve Dank o:
---·-.
YoL.Lr letter of ~.~ay ;;:.3 contains several inquiries l'egarding
Rt:.gula:tion W. TLose whicL h:we not already be:?.n ans~vered are discussed belovr.
One o£' your c_uest.ior.s relates t.o
";;itil ti1P urdars-c,anJ5_ng thB_t the coB.t '!::Guld.
and v:ou~.d be billed to the C'lst;)meT at the
the interim the item if> to bo car·ried in a
cou.'Ylt.
a '' i'ur coat. sold in June
be delivered :in November"
tir:l(') of d3liver:t. Durir.g
so-Galled memorandum ac-
The q:.1estion is whether this amounts to an s_greement to defer pa;y-rrent for a longer· l1eriod tl·jan permitted by J.:.he R.:~gulation, but.
the a.nsv,·er depenc_s upon whether tn·:; c:)at was "sold" in June cr is to
be sold i:-1 No-vember. It is :wt possible to give an .ms-,ver which would.
be applic'lble to all ca.ses beca·use the facts >.ill di:t:f.'er, but 1n some
cas,;s, as a leg:3.l matter, the (!oat Tiould not. be "sold" untiJ_ Nove•:J.ber
::;-nd the t.:.~ansac ;:,ton in June would merely be [t contrac-~ to mu.ke a sale
at a future Ja.te. In t.hat eve11t, the transaction wculd not violate
.Regulat5.on W since the artic:.e rrou:tci he charged to the customer's account !)l·omptly at the timo of tl1e sale. On the othe:.~ hand, if the
coat is "sold 11 in ,June (so that titl-s p<1.sses to tl'H: customer, and the
?eJderal to.x is due on the sale) rw.'1 ~;,;reemcnt to delay payment cmtil
Novcmter or later vvould v:i.olate the Regulation.
Cf cou:·se, no mc..tk'r r;-hen title passs:s to the custo:ner, the
Hegistrant ;nay always tak<.. adva~lb.ge of section 12 (d) relating to HLayn.way" Plans. U::1der the condi t.ions th~rein descrioed, he ma~r treat the
extc.msion of cr,~di t as not having been made 1mtil the date of delivery.
You also inq1~irc as to the sale of fu.rni ture which is maoe
tc> order and the i tcm is car.:dell in a memorandum :.::.ccount until the
ar'i:,j_cle is re1...d~r for· d0liver;; , ut which 'time t~1e charge is made -to the
eustom,~r 1 s regular cl:o.rge e.ccount.
You l'eel tlw.t suGh a transaction
_Lnvolv~;s o. bona fide delo.yed delivery and th<:,t the article neec1 not
be :;.~ega.rded as "sold" wi \:.hi a the meaning of section 5 (c) until the
article is ready for deliver.r.
. 2?
S-530-a
-2-
It is not possible to sell something which is not yet in
existence, and the transaction is, therefore, merely a contract to
make a sale at a future date. According·ly, the Board agrees with
your conclusion.
For the same reason, the Board believes that the same result should follow even i f the cost of the furniture is charged to
the customer's regular charge account at the time the order is taken,
since the difference is merely in the form of the bookkeeping entry.
In such a case if the account is in default on the date when the furniture is reaqy for delivery, the seller co1ud not make delivery unless the furniture were paid for in full on or before delivery, or
unless the default were cured.
Your other inquiries rela·te to materials used in connection
with rapairs, improvements and alterations of residential property.
In some cases a specific list of materials is decided upon, anq these
materials are delivered when called for over a period of time as the
job progresses. In other cases, the exact requireme.nts are not known
and the materials are ordered ru1d delivered as the job progresses.
The answers will depend upon the rights of the parties as
fixed by their contracts. If the articles are sold to the contractor,
the sales are exempt under section 8(f). See also W-43. On the
other hand, if the sales are made direct~y to the property owner and
not to the contractor, it is probable that there would b:e a series
of sales which would take place on the several delivery dates.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secreta.r-.r.
'
28
S-531
TELEGR.I\ih
July 14, 1942
{Addressed to the Presidents of all Federal Reserve Banks}
The Board has recently considered several cases thet relate
to the differences between (1) "instalment sale" (which, by def'inition,
relates only to listed articles), (2) instalment sale of an unlisted
article or a service, and (3) "instalment loan".
When list'.:ld 11rticles involved. - Sometimes the seller of a
listed o.rticl·3 does not tf'.ke a notB pcyable to himself, but instead,
according to arrungoments with a financial institution, takes a note
payable to the financial institution. Such e. t;re.nsaction involving a
listed article is an_ instaL'll.ent sale whether the note is made payr.:.ble
to the seller or to n finnncial institution, since section 2(e) specifico.lly states that, so long as the extension of credit is made "by any
. seller" of any listod article and 11 arisos cut of' the sc.le of such listed
article", the definition npplies whether the seller provides for the
credit "as principal, agent or broker". Such a transection does not constitute an inst~llm-;mt loan and hence does not require a Statement of
Borrower, since under section 2( h) n.n insto.lment locn includes only specified trnnso.ctions "other than an inst'"!lr.l<mt saleu.
When unli3ted article involved. - When such trnnsactions involve an unlisted article or a s:3rvicc (including an insurance policy}
instec.d of a listed nrticle, the rulo is somowhat different. If the
seller tc.kos a note payc.ble to himself the tr·ansaction is exempt from
the regulation as a sale of an unlisted article or a service, and the
note ~ay be purchasod by a bsnk or other financial institution without
regard to the requirements of the regulatj_on. On the other hand, when
the seller takes a note payable to a 1'inancir.l institution instead of
to hir.:.self, the trans~lCtion ( i.f for $1,500 or less) is subject to the
regulation as an instulmant loan and n. Statement of the Borrower is required. The controlling factor in such cases involving an unlisted article or a service :i.s whether the note is made payable to the seller, in
which cuse the trnnsaction is exempt, or is made payable to o financial
institution, in which cuso the transaction is subject to the regulation
c.s CJl instalment loan. Note, hov:ever, that the word "service" as used
herein, does not include uny service connected with the acquisition of
n. listed article.
of'
The dUferences between the status
transactions involving
listed articles and thos0 involving unlisted articles and services flows
from the fact that tbJ def'ini tion of ir..atc.lment saL:: in section 2( e) is
29
-2-
S-531
by its te:-ms specifically confined to transactions involving listed articles. When an unlisted article or a service is involved and the note
is riw.de pay!lole to a financial institution instead of to tho seller, the
transaction on its face is a lonn by the financial institution and (if
for $1,500 or less) is subject to the regulation as an instalment loan.
§tatement of certain other interpretations. - This covers the
considered in W-16, 119 end 124 and t2kes the place of those
interprct<':.tions.
~uestions
(Signed)
Chester Morrill.
30
BOARD OF' GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-532
ADDRESS DP'P'IDIAL DDAAI:SIIDNDENCE
1'D 1'HI: •DAAD
July 15, 1942
Dear Sir:
'I'he following is s.n excerpt from a letter recently written by
a member of the Board to a Registrant rega:cding the enforcement cf Regulation W. It is believ;:ld that this letter Ir.L8.Y ~e of some e.ssistonce to
your Bank in d.ealing i•li th similar problems:
"In re:rerriEg to the spirit ar~d intsnt of tho Regulation
I a:~sume that both of us have in mind its broau. objectives e.s
they are set out in the President's Executive Order and as
they have bean cxpounJod f~om time to time in various puhlic
stats:n.er.ts anc:. press releases. Tile lsst such statem"3nt is contained in tho May icsuo of tho Federal R0sc?ve Bulletin, a copy
of which is :mcloseu. I also enclose copy of a. talk that I
mado OP~Y a ::cw days ago to a convention of tht~ National Retail
Credit As::.;ocietion in New Orleans. I thought that yo'!.! might be
interested in 1Tf:/ ovm id.eu~, b&sed on many months study ol' the
Regulation and of the demr~nds presr:mt circumstances :lictate to
vendors, lenders, and consumers, as set out on pa6e 8.
"Those of us ;vorking on Regulation 1/i for the P.oard of Governors re;;ognize th.at the aecomplist.Jn.en.ts of the Regulation are,
in no sma:i.l measur.:;, attr5.bute.ble to the cooperat:i.on that the
Board. has rec.:~i ved gonerally from Reg~.strnnts ;ond to an eagerness oi' tho great majority o: them to do as much of the job as
possible by sclf-inposed :coquil·o:::.'lnauts. Along these Unos banks
o.re betng urged by the F~Hieral su:Jorvisory nuthoritie~ to exert
pressure •.;o has·~en the r.c:payment of presently outstanding loans
to individuals for nonproCl.uctive purposeo. Wa expect full coopcrc.ticn of the bt...nks of this country with this :progro..'n. Work
is elsa boi~ ion~ in u pr·eliminary way >>'i th the life insm•!:mce
companies looking to u program that will reduce policy loans
where possible. Iru1umerable groups of vendors and lenders and
trade &ssociations representing them have shown a comu.endable
willingness to cooperate lid th us in evorjr :phase or the undertaking to curi'J cut this part of the President's program.
31
-2As a result the Board has to date been able to avoid imposing some controls authorized by the Executive Order which
otherwise might have been necesso.ry. This is true v:i th respect
to the question of public solicitation despite the occurrence
of isolated and sporadic practices which, if they should become
gonernl or :JhOl..!ld be persisted in by an uninformed minority, un-·
willing to eooperate, might compel action. So far, however, the
necessity hus not arisen, and we hope, of course, thc.t it will
not.
11
"This, I trust, will explain our inte1·est in the subject
of advertisements. At the some time, I am sure that upon consideration you will understand the Boo.rd declining to pnss upon
th8 specific advertising matter which you submit, both becnuse
tho Regulation dooe not now proscribe rules upon the subject
und s:.lso b0crmse, €Von if it did, wo are not 0CJUi.ppod to pGss
upon l:ypotheticc~l c:J.ses or to offer to ::my Registr:..:1t jud,:;mt:mt
in c.JYc.n~e ~.s to the propriety of his or pc.:rt:cuJ.ro.r·l~r c competitor' 8 n:~ve:::·tiic;ine;. t'ie ha-;re h:.:td innumercble reques cs thut vve
e:xi:;reus upp:·oval or ;lisspp::.·oval of ad.vertisi:1g done by your
storeu. We prcfe:..· to r.v.:mdle t;his mc.tt0r dir0ct ~~dth you, rather
thnn by cor:;:-espond..:mce •,Ji tn your compt::t i tors. Spe2.icinz gonerully, I hope that Re&;lstrc.nts wi.ll keep theL.· o.dve:;:oti.sing consistEnt
vd th the (;.o,rermr.ent' :-: progrurr. as announced by the P:esident in
nis s::::ec:o.l MeGsar;c~ to Conc;re.:1s on April 27 and rtdio address on
the fol]_owing day.
11 Aside f'rom Hq:;ulation W <.•.nd in co1mection wi tl1 your comment
that such an adve::-tisemer..t would cssist in stimulating tho s::tle
of Savings BonJ.s or Stel,Ips, I enclos<~ a copy of T:rei.lnury Department Nevm Release #l(:II of' I:Iny 12, 1942, dealing in pn.rt 1vi th the
use of bonds or st<:mps as premiumn, discounts o:- gifts in connectlon with tr!c retail ::ale of merchandise.
"Referring to your c:.uestion of r:hether opening a t~hn.r·ge de-partment W0' 1 ld Viola~e the i.nten+; Of Tiegulution W, the question
itself ind.icate:s fOUr o.wnrr:mess of the· fa,~t thc:it the letter of
the Regulation does not prohibit such action. Nor do I know of
a:ay reasons v;hy rJona :liJ.c charge accounts sho'J.ld be singled out
a..'ld prohibited. It go,~s without saying, however, thut thc:ir use
as a :::ear..s to evade or nvoid the F:egulation is another matter. I
can visuelize Gircurwta:J.ccs t.tlut v~uul<i rcise n quesl:ilon as to a
violation not only of' the ;3pil'i t but as wall of tb:; letter of "!;he
Regulation."
Vcry truly yours,
.,.-· -·-r;
~
C::::-··--
·/~
4'
---··
~-<.-~
L. P. Bethea,
Assist:mt Secretary.
32
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-533
WASHINGTON
ADDREBB DF"I'"ICIAL DDRREBI"DNDENCE
TD THE BDARD
July 15, 1942
Dear Sir:
Ji:r. . closed for you:r infor·mation io a COJTJ of a r0vised list showing :i.n detail the au·t;oncbile b.pprai;:;eJ. e:tlides w:Cdcu are now desj_gnc-.ted by
the Board :or purposes of se<Jtion l3(c) of Regulation W (formerly Part
3(b) of tho Supplement to Ree;ulc.tion W).
'fhis liet differs in the :!'ollowi.ng respects f'rom the list that
was sent you on March 21:
1. Th:l.s list incoL'porat~s the designation of the N .A.D.A. Official used Car Guid.e 1 Dir~tr·ict L Er.li tion, i'o:r N•:J'ra•lo as to which yo~ wore
notifiod by tulegrmn on March 23, :±nd the dosigl1&t1.on of th0 Blue Book ND.tiorwl Usi)d Cctr Mnrket Re:oo:::-t--Exocutivo Edi tiou, for certain ad:Htional
tor1·Hory as to which yon ;,;e:.~L notified. by lettor on Apc:-il 9.
;z. The Official Blue Book New arFl Used Cor- Guide--B EdHior~,
the :Slue Book National Used Car Mc.l~ke~,; Rvport--It:xacuti ve Edi tion-- 11 retail
sales values" for Zone r~o. 3, and the Red Book Natione:.l Used Car M&rket
:Report, have been dedgnated for 10 counties in SouthL>rn 1Jichiean which
the Board b13.d originally GXcluded fl'Om the terri to:cy :.:·or which th0se publications i·rere designated.
J•
The
~~1c:rk0t
Rcc;;rd has discontinued pu.blicution.
L~.
The "Official Guide 11 published by Pacific Auto Guid•:, Inc.,
bns been consolidated v;J.(jb th8 Kelley Blue Book, published by J:\:clloy Kar
Company.
5. The "vfficicl Autolliobilo Gu:i.d.:.:", Pr-ice Edition, published by
Recording an<.:l S+;o.tisticcl Corf·or&.tion, has oeen included among the designntod publicettions, nnd hns bean desi,,-~n:J.ted for the terri toJ'Y indicnted on
the enclosed list.
33
S-533
-2-
It is not believed necessary for the Reserve 8nnl.w to notify
Hegi st:r:ants of these changes, except tn :Jnsvrer to inquirie~~.
Very tx·uly yours,
Chester r,[orrill,
Sec:::-etar-y.
Enclosure
TO THE PRESIDENTS OJ!' ALL
l:'~DERAL
REE:.>E1WE :SANKS
3-533-a.
34
July 15, l9h2.
AUTOMOBILE APPRAISAL GUIDES D£SIGNATLD BY
THE BOAHD OF GOVERNORS OF THE FEDERAL RESERVE SYSTE:r~ FOfi. PURPOSES
OF SECTION 13(c) OF REGULATION W
(Designations limited to quotations i'or used ca,rs of 1935 and later models)
Name of Guide
and Publisher
Territory for which publication
is designated
MARKBT ANALYSIS REPORT,
published by Used Car Statistical
Bureau, Inc.
Connecticut
Ifaine
Massachusetts
New Hampshire
Rhode Island
Vermont
AMERICAN AUTO APPRAISAL,
published by Automobi.le Reference
and Appraisal Bureau
}.,~ichigan
OFFICIAL 1NISCONSIN AUTOMOBILE VALUATION
GUIDE,
published by National Used Car Ma.rJ<et
Report, Inc., for Wisconsin AutoLotive
Trades Association
1Nioconsin
NEBRASKA OFFICIAL USED CAR SURVEY,
published by State of Nebraska, Motor
Vehicle Dealers Administration
Nebraska
KELLEY BLUE BOOK,
published by Kelley Kar Company
Arizona
California
Idaho
Nevada
Oregon
Utah
Washington
NORTIDmST USED CAR VALUES,
published by Northwest Publishing
Company
Idaho
Oregon
Washington
OFFICIAL AUTOMOBILE GUIDE, Price Edition,
published qy Recording & Statistical Corp.
Entire United States,
except the ~tates
of Arizona, California, Idaho, Nevada,
Oregon, Utah, and
VJashington.
-
Southern
Peninsula
Ohio
35
0--)33-::.
Name of Guide
Territory for which publication
pnd Puhl is:.;.h~e;;.:r'----------------------------=l;::...,"'"s-"'d~e"'s;.;i""g=n!a"".t:;;..e:;;.d=----OFi'ICiii.L DLUE LOOK N£,·; AND USED
C;-i.Jl. ;JUIDE,
publisl1ed by National Used Car
Marh:et Report, Inc.
A .i.SDITION
Entire United St:c:.tes
~_;:ccep_i the S tatcs
of Ari~ona, California; Id::.~.ho, Nevada,
Oregon, Utah, and
Hashington
B EDITION
Same c;.s territory designated for A Edition
BLU.S LCIOi:~ iiJATIOlJAL U:::ED
CAi, i>1AB.KET M[·'OB.T -- EXECUTIVE
i:DITION,
published by Nation3.l Used Car
~hrk8t Report, Inc.
!!Retail sales values" for
Zone No. l
Connecticut
Delaware
Di;;;trict of Columbia
I>A.aine
Mar;rland
Mr.:t~>sachusetts
l'L~~~r Hc~r:tpshire
New Jersey
Nc·:r York
Pennsylvania
Rhode IsL;.nd
Vermont
Virginia
11
Retcdl sales values"
Zone No. 2.
:~'or
Alabama
Arlwnsas
Geor.;·ia
Louisiana
Mississlppi
North Carolina
.3outh Carolina
T•.mncossee
S·-)33-a
-3-
36
Territory for which publication
is deaigtl§ted
Name of. Guide
and Publishor
DLU'E BOOK NATIONAL USED CAR
Mi.f~KET R~POrtT
- .h:XECUTIVE
EDITION (Continued)
"Retail sales values" for
Zone No. 3
Illinois
Indi::.na.
Kentucky
Michigan - Southern Peninsula
Ohio
West Virginia
"Retail sales v&l.uas" for
Zone No. 4
l!'loric.la
Iolva
Kansas
Uichiga.n - Northern Peninsula
Minnesota ( e.xce,;,.>t the 15 counties for
which 11 itetail sales values" for Zone
]o. 5 are designated)
l\!issouri
~iebraska
C¥..lahoma
TeL~s (except the 6 counties for vntich
11li.etail sales values" for Zone No. 5
ore designated)
Wisconsin
"Retail sales values" ft)r
Zone No. 5
11
Retail sales values" ior
Zone No. 6
Colorado
Following 15 counties in Minnesota:
Big Stone, Clay, Kittson, Lac qui
Parle, Lincoln, Jle;.rsha.U, Uorman,
?ennington, Pipestone> Polk, .Red
Lake, Rock, Traverse, 'V:ilkin, and
Yellowmedicine
hlontana
New Mexico
llorth Dakota
South .Uakota
Following 6 counties in Texas:
Brewster, CulberiJon, El Paso, Hudspeth,
Jeff Davis, Presidio
\;yoming
Arizona
Calif01'nia
Id.;.ho
Nevada
Oregon
Utah
~•a.:Jhington
-4-
~-533-a
Territory for
Name of Guide
and
publication
is desit;;:nate,!'i
Publisher
l~ATION.AL US"i.iD GAR
Mdilili""r 1.1EPORT,
published by National Used Car
Market Report, Inc.
<~ch
37
Rill BOOK
S&ne as territor,y designated for O£ficial Blue Book NeVI and Used Car Guide,
A Edition
N.A.D.A. OFFICIAL
U~ CAR GUIDE,
published by National Automobile
Dealers Association
DISTi".ICT B EDITION
Com1ecticut
.Qcl3."t:are
District of Columbia
.Mai"Jland
Massachusetts
New Harurshire
New Jersey
New York
Pennsy1vP-"lia
fihod.e Island
Vermont
Virginia
Wesc Virginia - following 8 counties:
!J.;.;rkley, Grant, Hampshire, Hardy,
Jei'f3rson,
DISTRICT EF EDITION
Min~ral,
Uorgan, Pendleton
Alabama
arkansas
Florida
Geor5"ia
Louisian~
Mississippi
Tennessee
rollo~r.ing
DISTRICT G EDITION
COUU1ty in
TeY~3
- Bowie
Illinois (except the southern sectiOn
for 1ddch the J EUitian is designated)
Indiana
1-'ollow:itng 4 counties in Iowa: Clinton,
Dubuque, Jackson, Scott
Kentucky
Michigan - Southern Peninsula (except
the 10 countie~ for ~hich the S.E.
i;!ichigan Etlition is designated)
l1crth C.:-:rolinr.
~outh
Cu.rolint.
Virginir. . (except tr;e 8 cnunties
for l'<hich the ilistrict B Edition is
derd.gnated)
~.eat
5-533-a
-5Name of Guide
ood Publisher
Territory for vJtJ.ch publication
is SWsimated
N.A.D.A. OFFICIAL USED
CAft GUIDE (Continued)
S.E. MICHIGAN EDITION
Following 10 co'Jilties in Michigan:
Genesee, Jackson, Lapeer, Li\rina-ston,
Macomb, Monroe, Oakland, St. Clair,
Washtenaw, Wayne
DISTRICT H EDITION
Michigan -Northern Peninsula
Uinnesota (except the 15 counties for
\vhich the District K Edition is
designated)
Wisconsin
DISTRICT J .t::DITIO!,
Illinois - Section south of and including following counties: Adams, Cass,
Champai~n, DeWitt, Logan, !Iflnard,
Piatt, Schuyler, Vermilion
Iowa (except the 4 counties tor \'.ilich
the District G Edition is desi&nated)
Kansas
Missouri
Nebraska (except the 11 counties for
which the District K Edition is
designated)
Oklahoma
Following 5 counties in South Dakota:
Bon Homme, Charles Mix, Clay, Union,
Yankton
Texas (except Bo-.tic County and the 6
counties for vlhich District K Edition is d•>Si.bflated)
DIS'raiCT K EDITION
Colorado
Follovdng 15 counties in Minnesota:
Big Ston6, Clay, Kittson, Lac «{Ui
Parle, Lincoln, Marshall, NnrtnFUl,
Pennington, Pipestone, Polk, Red
Lake, Rock, Traverse, \filkin, Yellowmedicine
l!ontw."l.S.
.
FolJ.owing 11 counties in N<:>braska:
Banner, hox Butte, Cheyenne, Dawes,
Deuel, Garden, KL~all, Morrill,
Sheridan, Scotts Bluff, cmd Sioux
39
-6-
S-5)3-a
Territory for which publication
·
· is desi;mated
Name of Guide
and Publisher
N.A.D.A. OFFICIAL US~
GAit GUIDE (Continued)
DISTRICT K EDITION
(Continued)
New Mexico
North Dakota
South Dakota (except the 5 counties
for which the District J Edition is
designated)
Follo·wing 6 counties in Te~::as: Brewster, Culberson, El P~;.so, Hudspeth,
Jeff Davis, Presidio
Utah
\"iyoming
uiSTftiCT L EDITIOli
Arizona
Follord.ng 11 coun.tiGs in California:
Im;:>erial, Inyo, Kern; Los Angeles,
Oranee, Uiv~rside, San Bernardino,
San Diego, San Luis Obispo, S<mta
Barbara, Ventura.
Nevada
DISTfuC~
CQ.li.fornia (except the ll counties for
which the Di~trict L Edition is
dG;:;ignated)
Idaho
Oregon
'!:a.shington
0 iDITION
40
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-534
WASHINGTON
ADDRESS DF"F"ICIAL CDRRES .. DNDENCE
TD THE BDARD
July 16, 1942
Dear Sir:
In order that we may have available information
showing the aggregate ffi:lount of funds a<.lvanced by financing
institutions on each loan guarc.nteed pursuant to the provisions of Executive Order No. 9112, it wHl be appreciated if
you will furnish the Board in duplicate separ:::J.te reports for
the War Department, Navy Department, and Maritime Commission
for the period March 26 to June JO, and for each month thereafter, sho'Ning the total amount advanced during the period on
each guaranteed loan.
The loan should be identified by the
number assigned to the guarantee agreement applicable there-
to.
L. P. Bethea,
Assistant Secreta17.
TO THE PRESIDENTS OJ!' ALL FEDERAL RESERVE BANKS
. - .,.
41
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-535
WASHINGTON
ADORE&& OF"F"ICIAL CDRREBPDNOENCE
TD THE BOARD
July 17, 191. . 2
Dear Sir:
Enclosed is a copy of a letter addressed
to the Federal Reserve Benk of Cleveland on July
16, 1942, concerning certain enforcer.;ent problems
arising out of possible violations of Regulation W.
, Very truly yours,
~~~.L. P. Bethea,
Assistant Secretc_ry.
Enclosure
TO THE PRESIDENT0 OJ!, ALL FEDERAL RESERVE BANKS
42
S-535-a
July 16, 1942
Mr. R.. B. riays ,
Vice President and Secretary,
Federal Reserve Bank of Cleveland,
Cleveland, Ohio.
Dear Mr.
J~ays:
This is in response to your letter of June 24, 1942, concerning
certain enforcement problems arising out of possible violations of Regulation W by a branch located in the Fifth Federal Ref!erve District which is
managed by an offHler located in the Fourth District, the parent company
being registered in the First District.
The Board agrees that each Federal Reserve Bank, in connection
with enforcement, should be responsible for all branches located in its
district, even though the main office may be registered in another district.
It also agrees that the enforceLJ.ent activities of each Federal Reserve
Bank should be confined to its district, and that each Federal Reserve
Bank should make any investigations which may be necessary in its district.
(See last paragraph of S-518).
Accordingly, it is suggested that you furnish the Federal Reserve Bank of Richl;lond with such information as you may have regarding
the possible violation, in order that it may proceed vri th the necessary
investigation~
It might also be desirable for you to inform the Federal
Reserve Bank of Boston in order that it may advise th~ parent company.
However, if you should feel, in this case or in any other case involving
more than one Federal Reserve J:Jistrict, that the Board could be of assistnne e i.n coordinating the efforts of the Federal Reserve Banks, the Board,
of course, would be glad to lend its services.
The foregoing applies to routine cases concerning which there
is no reason to think that the normal and usual informnl contacts will not
bring satisfactory results. If more drastic measures are necessary, or if
it appears likely that they will be, the Board would like the case to be
reported to it before any such action is taken. This suggestion is made
in order to enable the Board to coordinate an enforcement program, and applies to any case, whether or not it involves action outside a particul&r
district. In cases involving such action the Board will, of course, communicate with the proper Federal Reserve Bank through which appropriate
action can be taken.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
S-536
BOARD OF GOVERNORS
43
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDIIIEaa DF'F'ICIAL CDRRE8PDNDENCE
TD THE BDARD
July 22, 1942
Dear Sir:
. In preparing Form F.R. 581, semi-monthly report of
applications for loans and guarantees of loans under Executive
Order No. 9112, it will be appreciated if the follo~~ng procedure
is observeda
Item 4 should represent the number and amount of applications received and acted upon or under consideration. Increases
and decreases in amountsof applications made during the period
before approval or disapproval thereof, should be included in items
2 and 3. If a change is made after approval but before a guarantee
is issued, or if an executed guarantee is cancelled and reissued in
an increased or reduced amount, please indicate the amount of the
change against ari appropriate caption, such as "Other increases
(decreases) not covered by a. new application", to be interlined
under item 2 or 3. An application once withdrawn or rejected and
later resubmitted should be reported as a new application.
Section 5a should cover applications that do not go to
Washington, Section 5b should cover applications that go to Washington for approval. Inasmuch as the total of item 5 must agree
with item 4, applications must be entered in the "number" columns
only once when it is necessary to split the amount thereof, for
example, applications for guarantees approved in part. In such
cases the application should be entered in the "number'' columns on
the line on which the major portion of the loan is reported.
Item (1) under Sa and 5b should represent the total number and amount of loans approved on which guarantees have been
executed, regardless of the status of disbursements on the loans by
the financing institutions, and the total amount of disbursements
on any direct loans to borrowers approved by the War Department,
Navy Department, and Maritime Commission.
44
-2The amounts reported in item (2) under Sa and 5b should
represent the total of loans on which guarantees have been authorized,
with and without conditions, but not executed, plus any direct loans
to borrowers authorized, but not disbursed. Sub-item (a) under this
caption should include applications vii thdrawn in part or e>1tirely
and also applications on which authorizations to issue guar~ntees
have lapsed. Sub-item (b) under this caption should include applications for guarantees authorized and available to a financing institution, with or without conditions, but which have not yet been
executed. Thus, applications for guarantees of loans originally
reported opposite this item in the last two columns rr~y be subsequently transferred to sub-item (a) ''Wi thdra.wn" upon lapsing of the
authorization to guarantee or when the status of conditional approvals
is such as to indicate nonacceptance by the applicant.
Item (3) under Sa and Sb is intended to cover applications
for loE-.ns or guarantees rejected ar.d the rejected portion of applications approved in part.
Item (4) under Sa should cover applications under consideration or being investigated which vnll be handled locally. Item (4)
under Sb should consist of applications under consideration in Washington or under investigation or othervTise in process at the Federal
Reserve Bank which will be submitted to Washington for approval.
Very truly yours,
E. L, Smead, Chief,
Division of Bank Operations.
TO THE
Pfuo~SIDENTS
OF ALL FBDEiM.L RESERVB
B.PJ~KS
45
S-537
TELIDRAM
July
24, 1942
(Addressed to the Presidents of all Federal Reserve Banks)
The Board has received a number of inquiries regarding
a type of transaction which is not specifically covered either by
W-71 or by W-101 in which the seller takes back an article which
is not defective but which for some reason is unsatisfactory to
the customer, and allows the full original purchase price as a
credit against the purchase price of a new article of the same
type. The price of the new article is often higher than the
price of the first article. The exchange usually occurs within
a ver,y- short time after the original sale, and is made in good
faith pursuant to an express or implied guarantee of satisfaction
given in connection with the original sale.
The Board is of the opinion that, under these circumstances, if the seller allows the full original purchase price
as a credit against the price of the new article, the transaction
need not be treated as a trade-in (as described in W-71) and any
payments made on account of the original sale may be credited
against the down payment required on the new article.
Of course, if the price of the new article were in any
manner inflated to take care of depreciation in the original article,
the transaction would be an attempt to evade the down payment requirement and would not be permissible. Any long delay between
the original sale and the date of the exchange might likewise lay
the transaction open to suspicion as an attempt to evade.
(Signed)
Chester Morrill
46
S-538
TELEGRAM
July 30, 1942.
(Addressed to the Presidents of all Federal Reserve Banks)
Weekly reports of number of applications for loans
and guarantees on hand under Executive Order No. 9112 requested in Board's wire of May 2, 1942, S-468, may be discontinued.
(Signed)
E. L. Smead
47
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-5.39
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
August 1, 1942
Dear Sir:
There is quoted below, for your information, a letter addressed to a Federal Reserve Bank today with reference to Regulation
W:
"In your letter of .June 22, 19/.~2 (Inquiry No. 20), you
asked for our views regarding the applicability of Regulation V·i to charges by hotels to the accounts of guests or
tenants, including those arising from operations incidental
to the primary purposes of hotels.
"In the usual cases, and for the purposes of the Regulation, i t would not appear that hotels are 1 engaged in' any
of the businesses covered bj section 3.
"The Board agrees with your view that a charge solely
for room rent does not constitute a 'charge account' since
the transaction involves the sale of a service rather than
the sale of an 1 article, whether listed or 1.111listed. 1 The
same is true of charges for the sale of other services, e.g.,
barber, tailor, storage, etc., asswning that the value of
any material involved would be insignificant in comparison
vii th the total cost of the service.
"According to the facts disclosed in your letter, the
incidental articles or services sold by hotels, or to be
considered as sold by hotels although made available through
concessionaires or independent contractors, and which may
be charged to guests' hotel accounts ordinarily do not include listed articles. Accordingly'} it is the Board's view
that, unless it appears that a hotel is engaged in the business directly or indirectly of maldng charge sales of listed
articles, charges to guests' hotel accounts for such incidental articles should not be conJidered as affected qy
the restrictions of the Hegulation.
S-539
--2-
"You indicate that a hotel may make a cash advance to a
guest, pay on behalf of a guest for a C.O.D. delivery qy a
local merchant, or purchase theatre or railway accommodations
for a guest, the amounts thereof being charged to the guest's
account. However, it is doubtful whether hotels, as a practical matter, hold themselves ready to so accommodate all
guests in this manner or to such an extent that the hotels
should be considered as 'engaged in 1 the extension of the re-·
sulting credit as a business. It is the Board's view, therefore, thr:t such casual or incidental operations, alone, do
not constitute a business of the type covered by the Regulation.11
L. P. Bethea,
Assistant Secreta~J.
TO THE PRESIDEi'lTS OF ALL
F.~DEHAL
HESERVE BAi':-rKS
48
BOARD OF GOVERNORS
49
CF' THE
S-540.
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
August 6, 1942
Dear Sir:
For your information in case a similar questlon should arise in your district, there is enclosed
a cop.)T of a letter we have addressed to one of the Federal Reserve Banks with regaxd to the eligibility of
credit unions for membership in the Federal Reserve
System.
If you should receive any indication in your
district of an interest in or need for membership by
credit unions in the Federal Reserve System, we shall
be glad to have you advise us for our information.
Very truly yours,
~~~~
L. P. Bethea,
\Assistant Secretary.
Enclosure
TO THE
PRESID&~TS
OF ALL FEDERAL RESERVE BANKS
S--540-a
August 6,
191~2
Mr. _____ , Vice President,
Federal Reserve Bank of Minneapolis,
Minneapqlis, ~:Unnesota.
Dear Mr.
This refers to your letter of .July J., 19/+2, and its enclosLlres, relating to the question whether credit unions organized under
th.e lavm of the State of' Minnesota arc; eligible for membership in the
Federal Reserve System.
Since no credit union has applied for membership and the
only inquiry on this subject which ha.s been received in recent years
was a very general one, the Board has not had occasion to rule upon
the eligibility of such institutions. It is not clear that you have
in mind a particular credit u..YJ.ion which is definitely interested in
membership and your Counsel i:J of the opinion that it would require
an amendment to the .State law to enable Minnesota credit unions to
become members of the Federal Reserve System. In the circumstances,
you will understand that vre are merely making certain observations for
your information and are not attempting to express a final conclusion.
It. is understood that credit unions organized under the laws
of the State of Minnesota are authorized to accept deposits (as well
as payments on shares), and that at least some of them do so. Referring to this power to accept deposits, the power to make loans, and
certain other powers, your Counsel expresses the view, with apparent
justification, that such credit unions are incorporated banking institutions. On this basis, he concludes that they might be admitted to
membersh.ip under the first paragraph of section 9 of the Federal Reserve Act, if the State law were amended to authorize them to purchase
Federal Re:3erve Bank stock.
Your Counsel states that such credit unions have capital
stock represented by shares issued to their members. Eowever, such
an institution has no fixed amount of capital stock, the a.rnount being
subject to daily fluctuations as members make payments into and withdrawals from their sl:'w.rc accounts. It does not have any charter requirement that i t maintain a stated minimum eapital and withdrawalsmay be made in any arnmmt e.t any time, subject only to the right to
require notice. Obviously, the crfJdi t u.nion capital stock is of a
different character from the capital .stock of national banks; and,
considering t~1e statutory provisions with respect to capital required
for adml.ssion to membership, withdrc.wal of capital by member banks,
determination of tho amount of federal Re:3erve Bank stock to be held
50
-2-
S-5L..O-a.
D:l m•:::mbsr banks and other pertin~mt matters, it might l;e urged that
the capital stock of such a crcdi t union is not of the kind v1hich it
is cont.:;mplated that banks admitted to membership under the first
paragraph of section 9 will have.
Generally spev.ldng, credit unions are more comps.rable to
mutual savings banks than to commercial banks with capital stock.
On the other hand, they do have a type of capital stock which carries
·w:l th it certain propri<:Jtary interests which differ from the rights at-~
tacl:dng to deposits. Exhaustivo consideration of the question whether
thc;;r could be udmitted r.s mutual savings ba~'k.:s probably is not worth
while since it is doubtful whether they could mGet the rc;quirement contained in paragraph 15 of section 9 that, in order to be eligible, a
mutual savings bank or similar institution must have surplus and undivided profits not leBS than the amount of capital required for the
o:r·ganization of a national bank in the same place. We do not have
information with respect to individual credit unio~s in Minnesota but
a statement issued by the State Co'nr,1iS~3ioner of banks giving consolidated information for all such institutions as of December JJ., 1941,
appears to support this conclusion.
While provision has been made in paragraph 15 of section 9
for the admission of' soee bankinc institutions organized on a coopera-·
tive basi:3, there is no indication that in enactinE; these provisions
Congress had credit unions in mind and, if it is desirable that such
institutions be admitted to the federal Eeserve System, it would seem
preferable that ..~n amendment be added to the Federal Reserve Act specifically providing fo:c their admission to membership which would conform more nearly to their orge..nizational requirements than do the
existing provisions.
As ;{ou know, the prov1s1on for admission to membe:cship of
mutual savings banks anci other cooperative institutions was enacted
in 1<)3.3 but up to this time t.he1·e has been very little active interest by such insti tutio:w in becoming members of the Federal He serve
System. As stated above, the Bo1].rd has received only one goneral inquiry with regard to Gligibility of credit un:i.OL1S for membership in
tho System and it is not apparent at this time that there would be any
substantial need for or interest in an amendment specifically making
such instit.utionJ eligible for memberGhii_). If you have received any
indication in yoUJ' district of suci1 e.n interest or need, YIO v;ould like
to be advised of it and if you have in mind (l. credit union vvhich dofinitely d::;sires to bE: a mer::ber we will be glad to concidor uny further
presentation which you or ymu· Couns:::l may wish to make with reference
to i t in the light of this Ltt,)r.
Vary truly yours,
(Signed). L. P. Bethea
L. P. Betheo.,
Assistant Secreta17.
51
52
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-541
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
August 12, 1942
Dear Sir:
For your information, the Board has made the following
changes in its Legal Division.
In order that ~qr • Wyatt, who has been General Counsel
since 1922, might have more time for the consideration of the broad
legal problems of the Federal Reserve System and for consultation
with the members of the Board, he has been relieved of administrative responsibilities and routine work and the functions of the
Legal Division have been reallocated.
iv'J.r. ·wyatt, in his capacity as General Counsel, will carry
out special assignments from the Board and be available to the Board,
its members, and staff for consultation and advice.
Mr. Dreibelbis, formerly Assistant General Counsel, has
been designated General Attorney and will have charge of the general legal work of the Board and the administration of the affairs
of the Legal Division.
Messrs. Vest and Wingfield, formerly Assistants General
Counsel, have been designated Assistant General Attorneys. Mr.
Vest will be in charge in the absence of Mr. Dreibelbis, and Mr.
Wingfield will be· in charge in the absence of both Mr. Dreibelbis
and ~vir. Vest.
All Assistant Counsel have been designated Assistant Attorneys.
Very truly yours,
~h~~
Chester V10rrill,
Secretary.
TO THE PRESIDENTS AHD CHAIRiv!EN
OF ALL FEDERAL RESERVE BANKS
53
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-542
AOORESS OFFICIAL CORRESPONDENCE
TO THE BOARD
August 20, 1942
Dear Sir:
You will recall that, at the suggestion of
the Board, the Presidents of the Federal Reserve Banks
discussed at their last Conference tile desirability of
discontim1ing the submission to the Beard of Governors
of the annual budgets of' the Federal Re::;erve Banks,
when it W<'s voted that the preparation of these budgets
should be discor:tinued for all functions other than statistical and am.lyti~a.l and bank exanli..nation, with the
understa:1di!lg that. e:'lch Be.nk would continue to exercise
prope·:' control over its operating expenses.
The B::>ard concurs in this action and, with
the two exceptions noted, approved the discontinuance
of the submission to it of the annual budgets of the
F'eder:il Res·~rve Banks until such time as it appears that
the matter should again be reviewed.
Very truly ;,-·ours,
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
54
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-543
AOOREBB OF"F"ICIAL CDRREBPDNOENCE
TD THE BDARO
August 20, 1942
Dear Sir:
Since September 1935, member firms of the New York Stock
Exchange that carry margin accounts for customers have been filing
with the Federal Reserve Banks month~ reports of their ledger balances on Form F.R. 240. In view of the inactivity that has existed
in the stock market for some time, the Board has now determined to
permit the filing of semiannual instead of monthly reports by all
of these firms with the exception of the 15 firms having the largest amount of customers' debit b9.lances.
Will you please send to the Board as soon as possible the
names of reporting firms (if any) in your district that had customers' debit balances (Item 5 of Form F.R. 240) exceeding $5,000,000
on J~~e 30, 1942, with their figures for this item. Out of such
firms, the Board will determine which are the 15 reporting the highest amounts, which will continue for the present to file monthly reports.
Please request semiannual reports, therefore, as of December 31, 1942 and each June 30 and Decerr~ber 31 thereafter, from all
firms which are now reporting to you monthly on Form F.R. 240 but
which reported customers' debit bala..~ces of less than $5,000,000 as
of June 30. It will not be necessa.r;:v for you to obtain any further
monthly reports from these firms for the present. As to any firms
in your district with customers• debit balances exceeding $5,000,000,
the Board will notify you which firms are to continue reporting
monthly and which are to report semiarmually.
All of the reporting firms that do not carry margin accounts for customers, or which are not :nembers of the New York Stock
Exchange but only of outside exchanges, are already reporting at
semiannual instead of monthly intervals, and the present action of
the Board will not affect these firms.
55
-2-
S-543
The Board has also authorized two minor changes in Forrr1
F.R. 240 as follows:
(1) The instruction as to the date when the report must
be filed, may be changed to read as follows:
"This report is to be sent to the ~~ederal Reserve Bank of
as soon as possible after the
end-of-month date to which it relates, and should
roach the Federal Reserve Bank in aqy event (except
qy special arrangement) not later than the lOth full
business dey of the following month. 11
(2)
The question 11 Is firm otherwise extending any credit
to customers?" mey- be deleted.
It is suggested that you continue to use the present forms tL~til your
·supply is exhausted, but that these changes be incorporated in a.eynew supply printed in the future.
·
Very truly yours,
~~
L. P. Bethea,
Assistant Secretary.
TO TaE PHESIDENTS OF ALL FEDERAL RESERVE BANKS
56
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-544
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE SOARD
August 21, 1942
Dear Sir:
Because of the Board's responsibility in fra.r:1ing policy with
respect to consumer crcdi t, it seems desirable to ce::ttralize, so far as
possible, the collection of the st~tistics of this field in the Reserve
System. Heretofore, most of the work in this field has been done by the
Bureau of F"o:~eign and Domestic Commerce in the Dcpa.rtment of Commerce.
At our request, thu Depa.rtm~mt of Cor:unerce has agreed to transfer this
statistical work to the Reserve S,Ystem. 'l'he basic steps in effecting
this transfer and the wa:y in which the work is to be done within the
Systeill a:re described in the accompanying Memorandum of .Arrangements.
This change will involve a considerable amount of added work
for the research department in yom· Bank. It is suggested that you review the personnel requirements of this departT.ent to be certain that
an adequate staff is provided, not only for the current maintenance, but
for work in the improvement, revision, and extension of these series.
The latter point is of particular importance because one of the prime
purposes to be served qy this trfu1Sfar is the improvement of under~ing
reports. The S',rstem is in a strategic position to make these improvements because of tho ~xperience accumulated in the administration of
Regulation W, and the data availablE: only at the Reserve Ba11ks, and because of the intimate contact of each Reserve Banl~ with the respondent
concerns in its district.
Further correspondence on this subject should be addressed
to ~oodlief Thomas, Assistant Director of the Division of Research and
Statistics.
Very truly y·ours,
~hi~
Chester Morrill,
Secretary.
TO THE PRESIDENTS OF" ALL FEDERAL RESEff'v"E BANKS
57
August 21, 1942.
lviEl!lORiu"'JDTJ1;l OF ARRANGEbF.J'fl'S J!'OR T.HE TRP.NSii'ER OF BUREAU OF FOREIGN
.AND OO.iv.!ESTIC CO..,Jv.IERCE CONSUMER CF.EDIT STJt"l:'ISTICS TO THE
:F'Em:RAL RESER\"'E :.:>Y:STEf);l
In accordance with an agreement reached between the Board of
Govm,nors and the Department of Coxmnerce, the statistical and research
work in the field of consumer credit formerly conducted by the Bureau of
l''oreign and Domestic Commerce is being trt.msf'erred to the Federal Reser;e
~)ystem.
By consolidating functions relating to consU1l"ier credit i:n one
agency, certain duplication of effort is avoided and the Board gains
prompt access to inforzHation needed in connection with the regulatjon of
consumer credit. i·1J.oreover, the Reserve Banks and branches provid.e effective machinery for the collection and tabulation of current data on the
trend of consumer debt.
Effective date of transfer
The transfer bec01nes effective as of September first. The cash
lending institutions and the retail trade groups furnishing monthly data
on volume of busin0ss, coll•,;ctions and receivables will be requested to
sencl Augut>t reports to the Reserve i3an.."ks. 'rhe Department of Conu:1erce vvill
send a letter to each respondent confirming tho transfer.
Report forrHs and liBts of respondents
A sufficient number of for·ms for the remainder of the year will
be printed by tlle Board. A supply of' these forms will be mailed to the
Heserve Banks by the end of AuVlst.
'l'he present mailing list of respondents of each type will be
supplied to the Reserve Banks in the next few days. A suggested draft of
a letter to responJents e:xplaintng the transfer and inviting their continued cooperation is attached. Since franked envelopes have been supplied
them in the past, strunped self' add1•essed envelopes should be included with
each request for monthly data.
Current reports f::t;:om cc.sll lend:ing institutions and retail trades
M.onthly reports are obtained from industrial bCJ.n.king companj.es,
personal finance companies, credit unions, jewelry stores, Gnd household
a.pplicmce stores. For the present these reports will be cont_lnued without
cho.nge either in the m.unber of respondents or the items reported. Any revision of the report f"orms or expansion of the sample to obtain more adequate coverase will bo postponed until the reportin;:~ system is working
mnoothly and the He serve Banks have had en opportunity to suggest desirable
changes.
-2-
8-5~4-a·
···
58
The siz.e o:t' each reporting group and th<3 data obtained currentJy
are as .follows:
Indur3tr:Lal baiJ:king companies. - Son1e 320 industrial bar1.1{s 1·eport
monthly tho following itGms: (1) volume of loans made during current
month, jncluding renewals; (2) outstandings at end o1' month. Respondents &re aslu;d to exclude from each item F .B.A. loans &nd instalment
puper pu:r·chased f:::-om retailers.
h1-'.!l£!tol fJnttn£.SL_companies. - Roportr. are received from nearly 1, 200
porsonel i'inmwe compantos on {1) volume of loans made during current
l'!lonth; (2) out.Atandings &t end of month. To eliminate the; effect of'
purchn:;,a or sale o1' receivables between companies respondents are
o.skcd to exclude from reported i toms loan bLlances purchased from other
c·)n~pani~J but to indicato the amount of such purchase i f any on the rev.;rso side c,f the schedule.
C:codl. t UVE.ili.• ·· Approxili•atcly 1, 300 crodi t unions report monthly on
( 1) vc.l'LTI'l<J of' loans me.dn to !llembors d.n.r:·in~ tho month; ( 2) outstendings
r.lt end of' nwnth. The reporting group is made up of moro than 600
13tatc chartorc;f.l cx·cdi t unions and nenrly 700 operatint; under Federal
charter. Se:p::Jl'ete tabuL:tions have been made of Stetc and Federal
c:::·edi t union8 and these vrLLl be eontinued.
~lry
End ho1.:l.sehold applianee. stores. - 'T'here are approximately 100
respondents from oach of these retcdl. trade groups. Duta are obtained
only for the instalment business of reporting firms. The i tetls reported
are (1) insts.lment accounts on the boolcs at end of' month (excluding
accounts sold to fl.nance companies, banks or others); (2) collections
dur5.ng the month on accounts outstanding at end of preceding period.
Reporting by multi-office respondents
Some of the reOIJOndents reportj.ng to the Department of Commerce
have branehes or subsidiaries oporatinc:; over wif).e areas and inclucUng several ReGerve districts. Du.ring the past few months Commerce has not been
rc1leasin.g regionr:.l suim:laries and these figures will not be resumed now. As
lo!J.G as district or regional totals are not rel8ased each Reserve Bcmk will
collect total f'igur8s i'or ~~espondents >vhose head offices are located in the
(iistrict.
'l'abuJ.e:t;lon of data
Except for the fj.rot month all data will be tabulated at the Reserve Banks. Aggregates oy Statns and by kinri of business for each reportud itt?m will be sant to ·the Board not later than the 22nd of the month
following that to 'Nhich tbe figures refer. Heretofore respondents have
-3-
S-544-a
59
been asked to file reports by the lOth ()f the month following the period
to which they relate. The sc.me tirao schedule will be followed under the
now arrangements.
For the .first month reports will be transmitted to the Board
and tabulations will be made by the Department of COlmnorce. August reports should be torwardod to the Board promptly. These reports Pill be
returned to the Reserve Banks as soon as the duta 11re compiled. Thereafter, t8.bulations as outlined a.bove will be macle at the Reserve Banl.:s.
August reports are handled as described because the Board cannot at this
time supply th0 back figm.•os necessary for comparisous with earlier periods. As soon as the authorizations from respondents noted later in this
memorandum are received, back schedules will be supplied the banks for futu.ro use in htmdling and revising the basic series.
Dopartme~l....ill!.1.
furni turc store eredi t statistics
Department and furniture store credit data are now collected by
the Rest;:.rve Brillks. For some time the Bureau of Foreign and Domestic Commerce has been l!ompiling report£1 of instalment and charge account outstandings and collections oasod on data furnished by the RvS<3rve Banks. These
reports present the information by geogr::-~phical regions combined into a
·weighted United. Statos total. The data will be compiled on this bc,sis until they can be reworked by Res•:3rve distrj.ct~; in accordance wlth the usur-~1
practices. Beginning with tho August r')port, it will be necessary for the
Res<;rve Banks to send the Board only one copy of the department store collections and receivables for individunl stores classHicd by States.
In aceordr.:.nce with a previous agreement with the Department of
Cormnerce, the ]'ederal Reserve statistics on furniture store credit are to
be substituted for those collected by the Department.
H•.'llee.se of' consumer debt estimates and indexes
Current releasee issued by ·the Department of Commerce will be
taken over by the Board and continued in approximately their present form
for the next few months. At present the followiw:s releases are published
r.1onthly:
1.
Consumer instalmont cash loans covering loan volume, repay!aents t1nd outsto.nuJ.ngs of :pt;rsonul finance compc.nios, credit unions and industrial banks.
2.
Ret nil instalment crecti t - carrying indexes o:r instnlrnent
receivables and instalment collec,tion ratios for furniture
stores, household o.:ppliance stor~s and jewelry stores.
-43.
S-544-a
60
D•3partment store credit - containing indexes of open and instnlment accounts receivables and collection percentage for
open uccounts and instnJlne:ut c.ccounts.
Copies of' the most recent releases are attached for your inform.at5.on.
The Boord will
cnti tled to receive them
of Commerce. A study of
trict totals of reported
:public~'.tion by districts
.is obtained.
send current releases to respondents r.nd others
using the present ~miling list of the Department
each repor·ting group will indicate whether dj.sitems should bo rolour;ed currently or whether
should. be deleyod until a more ~.:..dequate coverage
Other consumur debt statistics
In addition to :publishdd consumer debt statistics projected on
the basis of monthly reports, the Bonrd will t.<.lke OV(3r certain unpublished
debt series developed by the Departl!lent of Co:rmnerce. Theso unpublished
dnto. include clw.rge account recei vo.bles, instuJ.Ir.ent debt of "all other retail s·~ores", single pUJ-'1!lt;1nt commerci~l banlr loanG, F.H~A. Title I consumer
loans, unregulated and miscellaneous c~.wh 1ender:3, service de~t, pavmbrokor
loans, and mail order house recei 'rablos, collections and sal as. Many of
theee s..;:ries are e~-;:tromely roue:h but until such timo o.s more adequate informatlon. cnn be devd.oped tboy will be usud in arriving at all-inclusive
6stuw~tes of the trend of corisumur debt.
The~ trc.nsfor .:.~lso covers the Retail Credit Survey which has been
mnde an...""l.ually (>y the Dept~.rtment of Commerce. Plans us to how nnd on what
scr~le this survey will be continued have not us yet bc-3n formulated.
Authorizr~tion
to trc.nsfcr bnck reports
Because the r(~ports for pri o:r PQJ'loa.s W8re gi von to tho Credit
I?esec,l•eh unH of tnc~ Burcc. u of Fordgn end Domestic Corrun.orce in confiden.ce,
they ere not to be trcnsfGrrod to th<:} Systom wi tb.out tb. o nuthorizntion of
tho individual rospondents. Cardl:.l for this purpose will be provided and
will be collected with the first report. '.rhese authorizations should be
sent to the Bou.rd uncl br:,ck ro:oorts will thon be forwarded to the respective Reserve Bunks.
Attucb.mcllts
(Department of' Comnerce press staternnnts with addressed copies only.)
.,
.....
··-· 61
S-:541+-a
Page Five
Suggest2d iraft of lette1· to be: scmt b<J
the S:c;;scrvP. Brml<:s t:) the :':'esnc.;nct;mts
Dea:c Sir:
For some period now you have been reporting certain
consumer credit figures to the Buroau of Foreign a;nd Domestic
Commerce. The statistics compiled cy this agency havE:; been of
great use to th3 Raserve System in its administration of Regulation W. In view of the System's special interest in tl1e
field, arrangements have been made with the Department of Commerce to centralize the colloction of such statistics in the
Reserve System. A forlil for ::·eporting August figures and an
addressed and stamped return envelopJ arc: enclosed.
Your rc,·ports for prior periods were supplied in confidence to the Department of Co!l-:..11lerce. In view of the transfer
&'1d because tl1e back repol·ts arc necessary for the proper maintenance of the current series, we should appreciate your authorizing the Department of Commerce to transfer thc~se back reports
to the Federal Reserve System. This can be done tt;· signing the
enclosed ~ard and returr.ing it with your August report.
Your figures will be treated confidentiall:y- and the
data will not be published in a manner that reveals the operations of individual establisrun.ents. The purpose of these reports is to supply factual material needed for determining the
policies of consumer credit regulation as well as for the use
of cooperating business concerns and the general public. They
aro not for the surveillance or control of individual establishments.
Ver-t truly yours,
Enclosures
62
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
S-545
WASHINGTON
ADDRESS DF"F"ICIAL CORRESPONDENCE
TO THE BOARD
August Jl, 1942
Dear Sir:
19/~2,
The following is an excerpt from a letter dated Au[.,'11St 11,
sent to a l"ederal Reserve Bunk regarding Regulation W:
"This refers to your letters of June 1 and July 30,
19/~2, regarding the question whether, under Regulation W,
a Registrant may purchase or discount an instalment obligation arj.sing from the sale of an automobile on terms
more liberal than those prescribed in the Regulation, if
the obligation arose out of a bona fide transuetion between
two individuals not engaged in the business descdbed in
tho Rogulation and who were consequently not subject to
its r'3quirem<mts.
As your letter of June 1 indicates, the question is
one with respect to which there may be reasonable differences of op11non. As you know, ho;vever, section /.. provides
that 1 each instalment eale shall comply 1 with the specified
requirements applicable to tl1e described .9bli_lliions, and
section 3(a) describes the nerson§_ who must ob:o;erve these
requirements. A person not 'engaged in the business' mey
extend credit; without COlaplying with section /+ only because
he is exempt from section 3(a). Such exemption, however,
is personal to the person making the casual transaction and
it does not change the status of the pa.per or. cru·ry over
to a. subsequr-mt purchaser t:u.:reof. It is the Board's view,
therefore., that the fact that the credit 111.ras originally
grar,ted by- a person who enjoyed such a personal exemption
under section J(a) docs not alter the requirements that
apply to the obli,gation and that must be followed by a Registr·ant who subsequently purchases or discounts the obligation.
11
S-545
-2-
"On previous oc!casions when this question has been
presented t.o it, the Board has referred to the second paragraph of W-57 as showing, according to the foregoing reasoning, that the H.egistrant may not purchase or disconnt
the obligation if, at that time, it shows 1 on its face' arry
failure to comply with section 4 or if the Registrant knew
of any fact by reason of which it failed to comp~ with
that section."
Ve~J
truly yours,
\....__
.....
~~L. P.
Bethea.,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
63
64
S-546
TELEGRAM
September 3, 1942
(Addressed to the Presidents of all Federal Reserve Banks)
The following is an excerpt from a telegram sent
'
today to a Federal Reserve
Bap~:
"Section 8(m) of Regulation W does not exempt credit to finance the installation of a
stoker if same kind of coal is to be used.
Stoker installed in connection with change of
fuel, as from oil to soft coal or from hard coal
to soft coal, qualifies only when stoker is necessar,y for mechanical reasons to burn the type of
coal to be used."
(Signed)
L. P. Bethea
65
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
S-547
WASHINGTON
ADDRESS Of"f"ICIAL CORRESPONDENCE
TO THE BOARD
September 5, 1942.
Dear Sir:
The Board has received inquiries relative to the revision
of obligations arising out of credit extended to automobile salesmen for the purchase of demonstrators,which was formerly exempt under
old section 6(h) of Regulation W. It is understood that, because of
the unforeseen difficulties that have been Pncountered by the automobile trade, some salesmen are n?w unable to retire such obligations.
It is the Board 1 s view that if the credit was extended originally for less than 12 months, the maturity of the obligation may be
extended to 12 months from the date the credit was originally extended,
in view of section 10(a). It is the Board's view also that if the
Re~istrant accepts a Statement of Necessity in accordance with section
10\d), which, in view of the aforementioned difficulties, would seem
to be proper in many cases, the renewed obligation may provide for instalments running 12 months from the date of the renewal.
Of course, if the note was originally made before September
1, 1941, it may be renewed in accordance with the principles stated
in W-28.
Very truly yours,
~_;?q~*--·
L. P. Bethea,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
66
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-548
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE SOARD
September 15, 1942
Dear Sir:
The Board has received from the Vlar Department a memorandum dated September 10, 19h2, signed by Lieutenant Colonel Paul
Cleveland, regarding the cancellation of terminated guarantee agreements previously executed by the Federal Reserve Banks on behalf
of the War Department under Executive Order No. 9112. For your information· and guidance the statement regarding this matter C<Jntained in the War Department's memorandwn is set forth below:
11 1.
In a number of ca:.:;es, guarantee agreements executed by the Federal. He serve b~mks, as fiscal agents of
the United .States, have been terminated, eithc::r bccaus,;;
of payment of the lo:m, execution of a superseding gi.larantee agreement, surrender of the guarant-c;e agreement by the
financing institution, or for some other reason.
11 2.
In all these casus, all execute::d copies of the
terminated guarantee agreemenh; in the possession of the
Federal Reservl; be.mks and the financing institutions
should be physically cancelled, e!ithcr by stamping the
word 1 cancelled' over the signaturo of tlw Federa.l Rssorve
Bank, or by perforation of the signature of the; Federal ·
Reserve Bank.
11 3.
In any case where the guarantee agreement in
question has not .:1lready been physically cancellod, it is
suggested that the best procedure will be for each Fvderal Reserve Bank to write to the fin!lncing institutions,
requesting them to physically cancel the guarantee agreements in question, in the manner specified above, and to
advise the Federal Reserve Bank that this has been done.
The Federal Reser-ve Bank should then cancel its copies in
the same manner.
11 4.
It is requested that all the Federal Reserve
banks be asked to forward to the War Department at their
early convenience a list of all guarantee agreements that
-2-
S-548
uhave been so cancelled, and that thereafter they inform
the War Department each time an executed guarantee is
so cancelled."
In accordance with the fourth paragraph of the War Department 1 s memorandum, it will be appreciated if you >rill forwarci
to th.-~ Board at your early convenience for transmittal to the War
Department a list of all guarantee agreements executed by your
Bank on behalf of the War Department which have been cancelled
as the result of their termination. It will also be appreciated
if in the future you will advise the Board of each such cancellation of an executed guarantee agreement in order that we may
transmit advice thereof to tho War Department.
>-- - ----·<...t·.
Very truly yours,
~----··-- ~0,(.
f ; ~·v ... fl\
1. P. Bethea,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESEHV:E :SAW\S.
+·-·
68
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE SOARD
September 15, 1942.
Dear Sir:
Colonel Mechem of the War Department recently advised us infonnally that one or two of the Federal Reserve
Banks had requested reimbursement for the cost of furniture
purchased for use in connection with work performed for the
War Department purnuant to Executive Order 9112. He stated
that he would prefer not to have to maintain an inventory record of furniture and equipment purchased by the Reserve Banks
as fiscal agents of the War Department, and hoped that such
purchases could be avoided.
If your Bank finds that it does not have furniture
and equipment which i.t c<.m use on a rental basis in handling
work for the War Department or finds it impracticable to purchase furniture and equi.pment for its own acco1.mt to be used
on a rental ba.sis in connection vvi.th work performed for the ·
War Department, it will be appreciated if you will write us
with respect thereto giving full details. Upon receipt of·
your letter we will take the rr.atter up with the War Department to see what procedure can be worked out for acquiring
the necessary furniture and equipment.
L. P. Bethea,
Assistant Secretary.
TO THE PRESIDENTS OF ALL F1DERAL RESERVE BANKS.
69
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-550
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE SOARD
September 16, 19t..2.
Dear Sir:
Referring to the Board's letter S-521 of J1me 30,
1942,-- the revised fonn enclosed with that letter has been
modified b,y the following insertions and amendments:
9.(a)(6)
Nature of
9.(b)(l)
Amend to read: "Name and address of
concern issuing subcontract and signatory."
9.(b)(.3)
Amend to read: "Unit of government
for which products are being provided and prime contract number. 11
9.(b)(6)
Nature of product.
pro~ct.
In the case of Navy Department guarantees, where
the applicant for the loan is a subcontractor, it is desirable, whenever possible, to obtain from the company letting
the subcontract a letter relative to the subcontractor's /
ability to perfonn pursuant to the tenns of the subcontract.
Very truly yours,
'--~
----
~---·----1- -.,?~ ~"
{/
~,~4<-·-
L. P. Bethea,
Assistant SecretarJ.
TO THE PRESIDENTS OF ALL F'EDERAL RESERVE BANKS.
70
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-551
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
Septemb~
16, 1942
Dear Si.r:
The Board has received from the War Department a memorandum dated September 14, 1942, signed by Lieutenan.t Colonel
Paul Cleveland, regarding the necessity for including in guarantee agreements, in stnJtnary f'')rm, all of the terms und conditions
of the loan requirea by the War Department's instructions. A
copy of this memorandum is enclosed for your information and guidance.
We are·informed by the War Department that the word "substantially" as u::wd in paragraph 2 of the enclosF;d memorandum is to
be read in the light ol the mernorf;JndUJil from the War Department dated
August 1;.;, 1942, referred to in our letter of August 18, 1942, with
rogard to minor changes in condHions prescribed.
~yours,
~,::::-~ik~,.__
L. P. Bethea,
Assistant Secretary.
Enclosure
TO TJ:-lE
PRESID&~TS
OF ALL :&'EDERAI..
RES]~RVE
BAl'JKS
71
WAR DEPARTIVJENT
Headquarters, Services of Supply
Washington, D. C.
September 14, 1942
UEMORANUJ.M:
From the War Department to the Board of Governors of the
Federal Reserve System
SUBJECT:
Review of executed guarru1tee agreements: omission of
terms and conditions required by the War Department's
instructions to the Federal Reserve Banks
1. As the result of a review of a certain number of executed guarantee agreements, and of correspondence with some of the
Federal Reserve Banks on the subject, it has become apparent to the
War Department that there is some misunderstanding between it and the
Federal Reserve Banks about the procedure to be followed in executing
guarantee agreements that have been authorj.zed by the War Department.
It is hoped that this memorandum will serve to explain the position of
the War Department on this subject.
2. All of the terms and conditions of the loan substantially as specified in the War Department's instructions (which in almost
all cases are the terms and conditions recommended by the Federal Reserve Bank) should always be stated in sunnnary form in the guarantee
agreement or in some document expressly referred to in the guarantee
agreement. The reasons for this procedure are:
a.
The terms and conditions are a part of
the description of the kind of loan that the
War Department is willing to guarantee. They
thus constitute an important part of the contract of guarantee between the War Departlllent
and the financing institution, and they should
therefore appear in the for.nwl guarantee agreement, which·is the sole contract between the
War Department and the financing institution.
Otherwise, there may be some doubt whether they
constitute a part of the contract between the
War Department and the financing institution.
b.
In those cases where S0111e of the terms
and conditions are transmitted by the Federal
Reserve Bank to the financing institution, but
72
Page
MElViORANDill•l To Board of Governors
2
September 14, 1942
are not included in the formal guarantee agreement, it may always be possible for the financing institutions, without bad faith, to modify
or waive these conditions after the guar~ntee
agreement has been executed.
3. In those cases where a review of the guarantee agreement shows that sonte of the required terms and conditions have been
o.mitted, it is necessary for the War Department to ask the Federal
Reserve Bank whether or not the terms and conditions in question have
been covered outside of the guarantee agreement. The War Department
must always be prepared to respond to any request that may come to it
from the General Accounting Office for information as to the entire
guarantee transaction between the War Department and the financiilg institution.
4. Kindly transmit the foregoing to all of' the Federal Reserve Banks.
War Department of the United States
By:
(Signed) P&ul Cleveland
PAUL CIJ:VELAND
Lt. Colonel, A.u.s.
Chief, Loan Section.
Advance Payment and Loan Branch
73
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-552
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 17, 1942
Dear Sir:
The Bureau of the Budget began on August 31, 1942, to
assign approval numbers and e:xpi:cation dates to all the report
forms of Federal agencies whi<.:h have boen reviewed anci approved·
by the Division of Statistical Stanriard.s.
The appearance oi' an approval number on a report form
will indicate to respondents that the form and the plans and procedures for tho inquiry of' wnich it is a part .h<we been rt>viewed
for technical adertuacy, possible cJ.uplicntion, coordination with
related work of other agencies, and the need for the inquir-,Y in
the light of the burden and cost both to l'(:.-Spondents and to the
Federal Government. Prior to the inauguration of the C:tpproval
numbers, the Division of Statistical Standards of. the Bureau,
and its predecessor· the Central Gtatistical Board made no provision to have an indication upon a form that i t was .iuly reviewed and cleared.
The assignment of approval nrunbers will assist in more
aclequat0 control over report forms. 'rhe step wt.:.s taken at the
req1.~est of Federal agencies and business o:::.-·gnnizations because
of the increasing burden on resr.)ondento resulting from the deluge of questionnaires mainly in connection with the war effort.
We believe that for nrunerous reasons it would be beneficial for the: Banks, as well as tho Board of Governors, to coo.perate with the Bureau of' tho Budget in thin undertaking. As
you know, tho Federal Reserve Systom hns been cooperating with
the Bureau of the Budget by furnishing_ it vri th a q_uarterly statement pertaining to report forms used by the Board of Governors
and the Federal Reserve Bar~s.
There is enclosed e:x:plc.mttory material consisting of
copies of Budget Circular No. J60, E~Ul:'Pler.·"ent 1 to this circular,
.•
74
-2-
and a memorandum from Stuart A. Rice, Assistant Director in
Charge of Statistical Standards, to the heads of executive departments, independent establishments and other Govermaent agencies, including corporations. We are also sending you five copies
of DSS forms No. 63 and. 63a. Please fill these in in accordancG
with the instructions contained in the explanatory material and
return four of them to reach the Board not le1ter than September
25, 1942, together with four copies of each questionnaire or report mentioned in the forr::., so that we can transmit them to the
Bureau of the Budget before October 1.
Ploase note that with the inauguration of this report
Budget Circular No. 351 (see F.H.L.L.S. #3945) which requires
each Federal E'gency to report quarterly on all new forms, revised
forms, and discontinued forms to the Division of Statistical Standards of the Bu.:;:-eau of the Budget, has been .suspended untn fui'ther
notice. However, it will be necessary for you to send us any proposed new or reYised form be:t'ore its use is begun so that an approval nurilber and an expiration date for the for·m may be obtained
from the Division of Sts.tistie;aJ. Standards,
Very truly yours,
Chester liiorrill,
Secretary.
Enclosures 15
TO THE PRESIDENTS OF ALL FEDERAL' :RE0Ji:RVE B.fl.Niffi
75
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-553
ADDRESS OFFICIAL CORRESPONDENCE
'
TO THE BOARD
September 19, 1942.
Dear Sir:
There is enclosed for your information a copy of General Order No. 54 Revised adopted by the Maritime
Corr~nission
on
August 25, 1942, and received by the Board with a letter of
transmittal from the Maritime Commission dated September 12, 1942,
relating to the delegation of authority by the Maritime Corrunission
to guarantee loans under Executive Order No. 9112.
Your particu-
lar attention is directed to paragraphs 1) and 2) of the General
Order which, of course, affect the instructions of the United
States Maritime Commission to all Federal Reserve Banks dated May
7, 1942.
~;r'{,~?L
Very truly yours,
'-
L. P. Bethea,
Assistant Secretary.
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
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76
UNITED STATES MARITIME COMMISSION
Washington
At a regular session of the United States
Maritime Commission held in its office in
Wa~hington, D. C., on the 25th day of
August, 1942
GENERAL ORDER NO. 54 REVISED
Delegation of authority to guarantee loans by the
United ;:>tates Maritime Corrunission under the provisions of Executive Order 9112
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idHEREAS, the Commission, pursuant to the provisions of Section l
of Executive Order 9112, dated March 26, 1942, is authorized, vdthout
regard to the provisions of law relating to the making, performance,
amendment or modification of contracts, (a) to enter into contracts
vdth .my Federal Reserve Bank, the Reconstruction Finance Corporation
or with any other financing institution guaranteeing such Reserve Bank,
Reconstruction Finance Corporation or other financing institution against
loss of t)rincipal or interest in connection v<lith loans which may be made
for the purpose of financing any contractor, subcontractor or oth6r engaged in any business or operation which is demted by the Corrunission to
be necessary, appropriate or convenient for the prosecution of the war,
and to pay out f1mds in accordance vdth the terms of any such contract
so entered into, ~td (b) to enter into contracts to make, or to participate ~~th any Federal Reserve Ba~k, the Reconstruction Finance Corporation, or other fina11cing institution in making loans, discounts or advances, or commitments in connection therewith, for the purpose of financing any contrador, subcontractor or others engag_ed in any business
or operation which is deemed by the Corrunission to be necessary, appropriate or convenient for the prosecution of the war, and to pay out
funds in accordance vdth the tc:rrns of any such contract so entered into;
WHEREAS, pursuant to Section 2 of said Executive Order, it is provided that the authority conferred by Section 1 thereof may be ex~rcised
by the Commission or may also be exercised in its discretion ar1d by its
direction through any officer or officers of the Commission, and that in
the discretion and qy the direction of the Commission, power may be conferred upon any such officer or officers to make further delegvtions of
such powers within .the Corrunission; and
WHEHEAS, in order to facilitate the exercise of the Corn.-nission 1 s
powerG pursuant to Executive Order 9112, it is necessary that the Commission delegate its authority thereunder to appropriate officers of the
Commission for the performance and functions of the activities authorized
by said Executive Order.
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l). Authority is hereby delegated to the Director and the Assistant Directors of Finance to exercise on behalf of the Commission the
powers conferred by Executive Order 9112 and to make such further and
other delegations of the said authority to other officers and employees
of the Commission as they shall d~em necessary and proper with respect
to guarantees not in excess of One Hundred Thousand Dollars ($100,000.00)
for any one loan; frovided, t)1at the approval of the Commission shall be
first had and obtained as to (a) guarantees o.f loans in excess of Two
Hundred and Fifty Thousand Dollars ($250,000.00); (b) guarantees of more
than ninety percentum (9~) of the amount of any loan; and (c) purchase
orders and all other contracts of whatsoever type providing for an advance payment qy the Commission.
2). All acts performed by the Director of Finance or Assistant
Directors of Finru1ce in accordance with the intent and purpose of said
Executive Order 9112 are here~i ratified and approved.
By Order of the
United States Maritime Commission
(Sgd.)
August 25, 1942 .
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W. C. PEET, Jr.
Secretary
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78
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-554
ADORE • • Of"f"ICIAL CORRE ... ONDENCE
TO THE BOARD
September 21, 1942 •
..
Dear Sir:
The Board of Gmremors has amended its Regulation A, effective immediately, by adding the following sentence at the end of
subsection (h) of section 1 thereof:
"The requirement of this section of the Regulation
that a note, draft or bill of exchange be negotiable
shall not be applicable with respect to any note,
draft or bill of exchange evidencing a loan wh:i.ch is
in whole or in part the subject of a guarantee or
commitment b'J the War Department, Navy Department,
or United States Maritime Commission pursuant to
Executive Order No. 9112."
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Please have the necessary copies of the
bution in your district.
amen~ent
printed for distri-
In connection with notes evidencing loans guaranteed under
Executive Order No. 9112, the question has been raised whether such a
note which is otherwise eligible for discount or as collateral for
advances by a Federal H.eserve Bank under section 13 of the Federal
Reserve Act is rendered ineligible by t.he fact that the note incorporates by reference the terms of the standard form of guarantee
agreement used by the War Department, Navy Department and Maritime
Commission, providing for sw:;pension of maturity of a part or all of
the guaranteed loan in the case of cancellation or termination of onefourth or more of the borrower's war production contracts.
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JY\I:nn.rvw...nv
Although by reason of this provision the note is subject to
a contingency in which maturity may be suspended, the maturity stated
on the fact: of the note will not be more than 90 de.ys at the time of
acquisition by the Federal Reserve Bank, and, pending the cancellations of one-fourth or more of the borrower's war production contracts, which may or may not occur in the future, the note will in
all cases be payable at its expressed maturity. AccordinglY, the
Board is of the opinion that the fact that the suspension of maturity
orovisions of the standard form of guarantee agreement are incorporated in the note does not render it ineligible for discount or
as collateral for adv:1.nces by a Federal Reserve Bank under section 13
of the Federal Reserve Act.. However, when cancellation or termination of one-fourth or more of the borrower's war production contracts
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in the manner indicated in the standard form of guarantee agreement
has occurred, suspension of maturity is no longer dependent upon a
contingency but may be effected merely ·at the will of the borrower
and, accordingly, in the Board's opinion, such notes if then offered
for discount may not be consiq.ered eligible. As a pract:tcal matter,
if, when such notes are offered, the Federal Reserve Bank has reason
to believe that cancellations in such amount are ~runinent, the notes
should not be acquired by the Reserve Bank under section 13 of the
Federal Reserve Act,
Another question which has been raised in this connection
is whether a note evidencing a loan guaranteed pursuant to Executive
Order No. 9112 which is othe!'l4iise eligible for discount by a Federal
Reserve Bank is rendered ineligible by the fact that the note is
issued under a revolving fund arrangement whereby the financing institution is obligated to extend credit up to a specified maximum
amount over a specified period of months or years. Upon the maturity
of the 90-d~ note the financing institution can be required qy the
borrower to lend the same amount for another 90 days, and the proceeds of the second note can be used to pay off the first. This
commitment, however, does not affect the Federal Reserve Bank, and
it is assumed that the Reserve Bank in discounting such note or accepting it as security for an advance will have no obligation or
commitment to extend or renew the credit at ma.turity or to accept
other notes in lieu thereof. The Federa.l Reserve Bank is, therefore,
legally entitled to require payment at the end of the 90-day period.
Accordingly, in the Board's opinion, the fact that such a note may
be a part of a revolving fund arrangement of the kind ·described does
not prevent its being eligible for discount or as security for an
advance m1der section 13 of the Federal Reserve Act.
Ver1 truly yours,
,
L. P. Bethea,
Assistant Secretary.
TO TI*: PRESIDENTS OF ALL
.
FEDEP~
RESERVE BANKS
80
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-555
ADDRESS Of"f"ICIAL CORRESPONDENCE
TO THE BOARD
•
September 22, 1942 .
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Dear Sir:
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There is attached hereto a copy of a letter from the
Comrnissi.pner of Internal Revenue dated September 9, 1942, which
sets forth the requirement;;; necessary in order to avoid the application of the first-in, first-out rule with regard to the taxation
of dividends on Federal Reserve Bank stock •
You will n0te that the letter suggests that the member
bank in making application for cancellation of Federal Reser;ve Bank
stock specify the shares which i t desires to have cancelled. Accordingly, forms F. R. 56 and 56a (appli(:!ati.ons for adjustments in holdings of Federal Reserve Bank stock) have been amended so that the
member banl-.: may signify the shares desired to be cancelled. A copy
of the draft of revised f::>rm 56 is attached, and a cupply of bot.h
forms will be sent to you under separate cover .
In order to make it clear that the intention of the member
bank wa:3 carried out in the matter of surrendering Federal Heserve
Bu.nk stock, you will note that thfJ Commissioner of Internal Revenue
has suggested that the Federal ReservG Bank show on the stocl<: certificate the number of shn.res issued .md paid for prior to March 28,
1942, and the number of share~':> issued and paid for on or after that
d~,te.
To meet this .:mggestion, Federal Reserve Bank stock certificates issued by your Bank on or after March 28, 1942, may be endorsed on the reverse sid·3 in the following manner, tho endorsement
to ,be signed preferably by one of the officers whose signature app~.:;ars on the face of the certificate:
"This certificate represents
shares of Federal
Reserye Bank stock which were purchased and paid for prior
to March 28, 1942, and
Dhares of Federal Re8erve
Bank stock purchased and paid for on or after March 28, 1942 .
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Signature
II
Title of Officer
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If desired, arrangements will be made with the Bureau of Engraving
a."'ld PrintiniS in Wasrd.ngton to have this endorsement printed on the
reve!'se side oi' 3.ll future issues of the Federal Reserve Bani~ stock
certificates. Meantime, the; endorsement may be applied by rubber
stamp or in some other manner.
In the next to the last paragraph of the letter from the
Commissioner of Internal Revenue, he indicates that if it is
feasible to have two certificates of Federal Reserve Bank stock outstanding, one representing stock purchased and paid for prior to
March 28, 1942, and the other stock purchased and paid for on or
after that date, it would facilitate identification for the purpose
of determining taxability on shares of Federal Reserv0 Bank stock.
In the circumstances, any Federal Reserve Bank that so desires is
authorized to have not more than two certificates of stoc:k outstanding in the case of each member bank, one to represent stock purchased
and paid for prior to March 28, 1942, and tho other to represent
stock purchased and paid for on or after that date. This may be done
without regard to the provis:i.o.1:1 of Regulation I that no more than
one certificate shall be outstanding in the case of any one member
bank, and nn appropriate revision of Regulation I vd.ll be made when
that regulation is reprinted. If this procedure is adopted it vd.ll
be necessary, of course, for the Fedm~al Reserve Bank to make an
appropriate endorsement on any certificate issued on or after March 28,
1942, but representing stock purchased and paid for prior to that
date. This vdll come about, for example, if a member bank reduces
its capital and surplus a~d, as a cm1sequence, is required to surrender
some of its Federal Reserve Bank stock. The endorsement in such cases
should read "This certificatl: represents share:s of Federal Reserve
Bank stock which were purchased a...'1d paid for prior to March 28, 1942. 11
No endorsement would be required, of course, on certificates representing stock purchased and paid for on or after March 28, 1942 •
The alternative procedure outlined in the preceding paragraph may be preferred by some of the Reserve Bankt>, if they a...YJ.tidpate that relatively few member banks vd.ll have occasiqn to surrender
Federal Reserve Bank stock purchased before March 28, 1942. Particular care, however, would have to b•3 taken that the occasional endorsements on stock certificates which would be required U!1der such a
procedure are not overlooked.
The Board will appreciate it if you will advis'e it, in
response to this letter, whether your Ba.~k decides (1) to have only
one Federal Reserve Bank stoc:k certificate outstanding in the case of
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each member bank, as outlined in the third paragraph of this letter,
or (2) to have two certificates outstanding in accordance with the
alternative plan outlined in the fourth paragraph.
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It is suggested that, if any circular h:ttcr is ::wnt to
the member banks on this subject, their attention be called to the
subject matter of the last paragraph of the,letter of the Commissioner
of Internal hevenuc •
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Enclosures
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TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
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83
TREASURY DEPJill'l'.i'.:iENT
Washington
Office of
Commissj_onor of Irrternul Hevanue
September 9, 1942
Board of Governors,
Federal Heserve System,
Washinston, D. c.
Atten-tion l<ir. L. P. Bethea, Assistant Secretary.
Sirs:
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Pef'erence is made to your letter of August LH 1942, ree;arding the
application of section 6 of the Public Debt Act of 1942, approved March
28, FJ42 {IntE,rnal Revenue Bulletin 1942-16, p. 3?.), u.nd 'rreesury
Decisic,n :;H,o (I.H.B. 1942-28, ;;~), as relating to the taxability of
tii vidende on shart:~~ o:t' Federel T-Ie serve Bank stock •
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Your inquiry con(!erns the &.scertainilttmt of whetllo:· the dividends
are on shurec purchased Gnd paict for prior to, or on or e,fter,
1942 (the effective di..Lte of section 6, sv.prn.).
Mar·c11
28,
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In cormection wi1:h such ar:;cr:;:ctaimnent, you ref'er to the "first-in,
fi:cst-out" rule, which is appli(;able, inter~, in aE;cortoinine: v;l12t
particular shares of stoek :in a corporation a!'o dispor.;:;d ot, in the o.bsence of positive :.dent i.f'icution thereof, vvherfl the seller has severc...l
lots of' .such stoc·!~ p1u·ch.:.Ged at different dr:tes. Section l9.22(a)-8 of
Regulations 103; TIE)l·~~~~hfl~'; v-=-1~.~- Ra]:!_~_.~n (1935, 295, U.S. 123, Ct.
D. 966, C.B. XIV-1, 160); Jo:tm !L :.:>nyder v. Coumi.ssioner (1935, 295 U.S.
134, Ct. D. 96?, C.B. X.L"'l-1, l6if)~
.
.
You state that, by virtue of your Board's Hegulation I, a :menber
bank may not have more than one:. stock certificate evidencing its hol6.ings
of Federal Reserve Bank stock, and that H is possible for a certificate
(issued on or after 1VJarch 28, 1942) to represent ~hares purchnsed und
paid for prior to as well as on or after March 28, 1942.
You request advic-e, {1) whether the "t'irst-in, first-out" rule will
be inapplicable, in ascertaining the particular shares of Federal Reserve
Bank stock on which di viclends have been received, if, when a w.ember bank
surrenders ::Jome of its shares of' Federal Reserve Bank stock in reduction
of its aggregate holdings, it identifies, by reference to the date they
were purchased and paid for, the shares fJUrrendered. You are advised
that the "first-in, first-out" rule 1s inapplicable in such ascortainment
where the particular shares on which dividends are rrlcei ved are positively
identified as having been purchaGed and paid for eithor pr:ior to or on or
after March 28, 19/;.2. See G.C.ii1. 11743.. (1933, C.B. XII-2, 31); Louis G.
Neville (1933, 29 B.'r.A. l.f50); H. H. Franklin {1938, 37 B.'l'.A •.!..?~, acq_.
C.B. 1938-2, 12). It is, of course, impracticable to outline comprehensively
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Board of Governors
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the proof or evidence which will be required or accepted as satisfactorily shov1ing or constituting such identification in twery case. Cf.
Henry C. Heinz v. Commissioner (1934, CCA-5, 70 F. (2d) 461); Guo. i~avi!£
V."comm:isBioner (1936, CCA-10, 83 F. (2d) 11, Ct. D. 1193, C.B. 17~7-l,
i34, certiorari denied 299 U.C>. 573); S.B. Kraus v. Comaissioner (l9J7,
CCA-2, 88 F. (2d) 616, Ct. D. 1273, C.B. 1937-2, 249).
In the event the answer to question ( l) is in tlw affirmative, you
request further advice, (2) whether there is sufficient identification
i'or the purposes of the ascertainment here concerned, if, '!Jhen a member
bank ao surrenders shares of Federe.l Hescrve Bank stock, it i:Jentifies
the shares sur·rendered by reference, on .hPPLICA'I'ION i!'O.R ADJUS'::'11ilili'r IN
HOLDINGS OF F.KDJ~fu'l. RESERVE BANK STOCK (Federal Reserve System Form 56,
Hcvised 1936), to the date they were purcha.sed and paid for. You are
advised that such identification will be accepted as satisfac+.or;r, for
the purposes of the ascertair:ment here concerned, provide;~ that, also,
tho (single) stock certificate representing the shares on which the dividends are received shm;s the number of shtir-es pur·chased and pai·J :t'or
prior to March 28, 19L.2, and the ~1UI11ber of shares, if any, purchased <md
paid for on or after that date. After all, tho certificate is the bost
evtdence of tho shares a membc.n• b<Jnk holds, in tho absence of' clec.r and
convincing evidence ol' error therein. See J. E. Davidson v. Commissioner
(1938, 305 U.S. 44, Ct. D. 1366, C.B. 1938-2, 227); I~ •.r. ')420 (C.B. 1940-2,
41); A. F. hlack (1935, 31 B.T.A. 1149) •
It was contemplated in section 19.22(b)(4)-2 of Regulations 103, as
amended by T. D. 5160 ( 13Upra) , that it was feasible to arrange f'or :i.ssuance by the Federal Reserve Banks of two certificates outstanding ut one
time to a particular member bank Wht:)re it is tbe holder of some }federal
Reserve Bank stock purchased and paid for prior to March 28, 1942, and
of some such stock purchased ancl pttid for on or after that date. It is
believed that if this be done, with each certificate showing tho respdctive
holdings accordingly, it would greatly facilitate ident:i.f lcation for the
purposes here concerned •
It may be added that before a member bank surrenders a certificate
or certificates which shows such respective holdings, it should make,
and retain in its files for convenient reference and as permanent evidence in this connection, a photostatic or certified copy of the certificate or certificates.
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Respectfully,
(Signed) Guy T. Helvering
Connnissioner •
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BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
S-556
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
Dear Sir:
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In its letter of March 6, 1942, the Board advised you that
it had decided n0t to amend Regulation R so as to permit interlocking
relationships between member banks and open-end investment companies.
Accordingly, in administering tho Hegulat:Lon, it will be necessar.f to
determine from tir~-.e to time whether particular open-end investment
companies are "primarily engaged" in the issue or distribution of
their own stock (see 1941 Federal Reserve Bulletin, page .399; letter
of May 26, 1941, S-269, F.R.:L.S. #7610; and letter of October 26,
1934, X-8097) •
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An open-end investment company is defined in section 5(a)(l)
of the Investment Company Act of 1940 as a company "which is offering
for sale or has outstanding any redeemable security of which it is the
issuer." Section 2( a)( 31) of said Act provides that a "redeemable security" means "any security, other than short-term paper, under the
terms of which the holder, upon its presentation to the issuer or to
a person de;.:ignated by the is suer, is entitlod (whether absolutely
or only out of surplus) to receive approxi.rnately his proportionate
sharE: of the isst:er' s current net asset::;, or the cash equivalent
thereof."
It is customary for such companies to have but one class
of securities, namely, capital stock, and it is apparent that the
more or less continued process of redemption of the stock issued by
such a. company would restrict a..11d contract its activities if it did
not continue to issue its stock. Thus, the issuance and sale of its
stock is essential to the maintenance of the company's size and to
the continuance of operations without substantial contraction, and
therefore the issue and sale of its stock constitutes one of the
primary activities of such a compa~y .
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Accordingly, it is the opinion of the Board that if such a
company is issuing or offering its redeemabl~;; stock for sale, it is
"primarily engaged in the issue -~-:H~o public sale, or distribution,
IC10RY
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S-556
of securities 11 and that section 32 of the Banking Act of 1933,
as amended, prohibits an officer, director or employee of any such
company from serving at the same time as an officer, director or
employee of any member bank. It is the Board's view that this is
true even though the shares are sold to the public through- independent
organizations with the result that the investment company does not
derive any direct profit from the sales.
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If, however, the company has ceased to issue or offer any
of its stock for sale, the company would not be engaged in the issue
or di::rtribution of its stcick and, therefore, the prohibition contained
in ::~ection 32 would be inapplicable unless the company 1vere primarily
engaged in the underwriting, public sale or distribution of securities
other than its o·wn stock .
.
TO THE
PRESIDE.~TS
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OF ALL FEDERAL RESERVE BANKS
85
86
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
S-557
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 22, 1942.
Dear Sir:
Your attention is directed to the modification
.
of the
Bo~rd 1 s
policy with respect to the resppointment
of Class C directors vvho have completed six year:J of continuous
~::ervic e,
except in the c,::,se of' tbe ChF.:.i.. rmen of
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the Federal Reserve Be.nks, 9opy of Y<hich i::: enclosed for
your ready reference.
This ::;tatement
w;:;.f;
published. in
the Federal Re:3erve Bulletin for September 191+2 on pn.ge
881.
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Ver,y truly yours,
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Chester Morrill,
EncJ.,;sure
'1'0 'THE CHAIRi\IEN OF ALL FEDEhAL fiJ;B.Eh.V.I:: bANKS
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87
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TEP..MS OF DIRECTORS OF THE !"EDERAL RESERVE BANKS AND BRAIJCHLS
Directors of a Federal Reserve Banl..: are elected or appointed
for terms of three years.
The Board of Directors of each Federal RrJ-
serve Bank consists of nine directors, three oi' whom arc
de::;i;~nated
as Class A directors, three as Class B directors, a..'"ld three
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C directors.
Claso
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The six Class A and Class B directors are elected by the
member banks of the district, while the three Class C direetors are
appointed by tho Board of Governors of the F.::deral Ror;:;rvo System.
The
Class A directors are chosen as representative:, of the n.Gmbcr oanks .::mel.,
as a matter of practiec, are act:lvo officer:.> o!: m•;mb0r ba.Ylks.
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B directors ;nay not, under the law, be officers, directors, o:c om.ployees
of ba.11ks.
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The Class
At the time of their election they
in their district in
pursuit.
Gornr:.~crce,
1~ust
be actively engaged
agriculture, or some other industrial
The Class C directora may not, under the law, bu Gither oi'-
ficers, directors, employees, or stockholdurs of banl-:s.
They ar•J ap-
pointed by the Board of Governors as reprasentatives not of ·'l.ny
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particular group or interest, but of tho public int.:.:Jrest as n whole .
Since the; Federal Rcserve Banks aro public institutions
,.
operated in the puhlie intere;st and not for priv.1.tc profit, the Board
has felt that a certain degree of rotation in thu :r:':mborship o.f the
dirc1ctorate:'J of V.1e Hosorve Bm1ks is d<.;:5irablc in order to gain the
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adva."ltagos of broader represc:1tation over a
against a possible
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crystalli~.·.1tion
pc:rioc~
of tine and insure
of the influc::ce of in..Ji viduals,
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groups, or interests which might not be; in tho public int,:;r.;:::;t.
Accordingly, in 1<,135 th,; Board announced that, a.s a mat tor of broad
polit-:y, it would not reappoint directors -Nho had
comr~lctr;;d s~Lx
of continuous service, except Chairmen of the Federal Ecscrvc
ycarro
dank::.~.
It was hoped that the same policy would. ix: followed in the
elections by- member banks of Claos A anci Class B directors.
This ha.s
been true <Jnly to a limited r;xtent.
thE~
Thu.3' in raost instances
effect
of the general rule laid down ir:: 1935 has been to plac0 a liraitation
upon the length of sorvicc of
direct,or:~
G.):>point,;d by the Board withcut
di1~ectorcJ.
a corresponding limitation upon th; terms of the clectd
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The Bor:1rd has accordingly concluded
dispense at this
fixed rule as to thu length of sorvice
()f
r~ime
Cl:J.ss C dj_ructJrs and wlll be
governed b;:t the situG.tion at the p-'lrticular lte::;crvo Bank.
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vrith nny
The Doard,
howeve!', ·will adhere g';;;r:orally to tho polie;r of rotr:"tirin i:..-1 th3 service
of CJa.ss C directors.
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The situation at the branches of the Federal Reserve Banks
is somewhat different.
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Pursuant to s::-'1tutory ::mthority, the Board of
Governors hr1s issu..;d rcgulatic;ns governing the
operati~m
of th0 brrmches,
under which a br:;.nch director (except th(~ mn.r.::tging d.ircctc•r whc; L:; also
the chief op~:;rating officer of the branch) is
i1()t
eligibl~
for ro:tppoint-
ment i;mnerliately following siz or rn.ore yu:trs of ce>ntinuom;; <5'Jrvice.
This policy vnll be continued since it applies tc all dirc:c·;:,ors uf a
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branch (ether tha."1 the managjng ::~irr.:ctor) :J <:mel nc:;t, r:..o:r0ly
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trj
r:me :::;roup .
89
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTE;M
WASHINGTON
S-558
ADORES& OFFICIAL CORRESPONDENCE
TO THE BOARD
September 25, 1942
Dear Sir:
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There is enclosed a copy of the Board's letter of this
date to Mr. W. J. Evans, Vice President of the Federal Reserve Bank
of Dallas, referring to a proposed standard caption to appoar at the
top of form F. R. 105e when that form is used for joint publication
of condition reports rendered by State member banks to State banking
departments and Federal Reserve Banks, respectively •
For some time Mr. Joh.11 Q. McAdams, Comrnissioner of Banking
in the State of Texas, a£ the request of the President of the Naticmal
Association of Supervisors of State Banks and in cmsult'ltion with
officers of the Federal Reserve Bank of Dallas, has been endeavoring
to formulate a standard caption which would be acceptable both to the
State banking authorities of the various States and to the Board of
Governors. The Board is now informed that supervisors in 37 States
have approved the proposed caption, which had previously been approved by the Board. A list of these States appears in the enclosed
copy cf Mr. McAdams' letter of August 24.
The Board has decided to print two different editions of
form F. R. 105e, one for use in States where joint publicati,)n is
made and the other for use where reports made to Federal Reserve
Banks are published separately from those subrnitted to State banking
authorities. Copies of the draft of each form (F. R. l05e and F. R.
105e-l) are enclosed •
It will be appreciated if you will advise the Board as soon
as practicable how many copies of forms F. R. 105e and F. R.. l05e-l
will be needed for the next call and how many copies, if any, of form
F. R. 105e should be sent direct to each State banking department in
your district •
•
Enclosures 4
TO THE PRESIDENTS
OF ALL FEDERAL RESERVE BANKS
90
BOARD OF GO\TERNORS
OF~
THE
FEDERAL RESERVE SYSTEM
Washington
Mr. W. J. Evans, Vice President,
Federal Reserve Bank of Dallas,
Dallas, Texas.
Dear Mr. Evans:
...
•
This refers to your letters of August 25, August 31, and
September 10, l9l~2, and to the letter dat.ed August 24, 191~2, from
Mr. John Q. McAdams, Comrrd.ssioner of Banking of the State of Texas,
concerning the proposed standard caption to appear at the top of
form F. R. l05e when that form is used for joint publication of
condition reports rendered by State member banks to State ba.t"lking
departments and Federal Reserve Banks, rec>pecti vely.
The revised caption, as approved by the bank supervisory
authorities in 37 States, is as follows:
REPORT OF CONDITION OF
•
11 _ _ _ _ _ _ _ _ __
II
of
---·'
at the close of businesE;
, a State
banking institution organized and operating under the banking laws of this Stnte and a member of the Federal Reserve
System. Published in accordance with ::l call made by the
State Banking Authorities and by the Federal Re::.1crve Bank
of this District.
The revJ.sJ.on on the back of the form provides that the certificate
of publication shall be signed and sworn to by an officer o.f the
newspaper, thus replacing the present requirement that the certificate be signed (but not sworn to) by an officer either of the ·bank
or of the newspaper.
•
According to our record.s, there are now 39 State:3 with
which arrangements have been made for joint publication of condition
reports. This does not mean, as you doubtless know, that all of
these States use the Board's form F. R. l05o and a standard caption
pertaining to joint publication. Som<:l StateJs use their ovm forms
for nonmember banks but accept from State m0mber banks statements
published in accordance with the Board' G form F. IL 105e, while a few
Mr. W. J. .F.:Vans
-2-
S-558-.::.
use a special form that meets their mm as well as the Board's requirements. It is noted that Mr. McAdams lists Massachusetts c.tnd
Connecticut as approving the standard caption. Arrangements have
not previously been made in these States for joint publication because of the departmental banking forms used. Of the remaining seven
States, Illinois, California, and Louisiana may bt~ unable to adopt
the proposed standard form because of certain State laws; Maine, New
Hampshire, and Vermont (which has no State member ba11.ks) do not require the publication of condition reports; and North D.:1kotGJ. has no
State nember baDks.
A review of our files also indicates that the certificate
of publication is signr>d by an officer of the newapaper in 32 States
now cooperating and by an officer of the bank in four States. In
the three other States in which joint publication is made there seems
to be no uniformity on this point.
..
In the abcve circumstances it has been decided to prin·;:, two
different editions of the publisher's copy, one (form F. R. 105e) for
use in States where joint publication is made and the other (form
F. R. 105e-l) for use where reports ~~de to Federal Reserve Banks are
published separately from those submitted to State banking authori ....
ties. Two copies of the draft of each forn1 are enclosed. On the
first form (F. R. 105e) ,jurats are provided on the .face and reverse
sides, and on the reverse side provision has been made for tho execution of the certificate of publication by an officer o.f the newspaper.
On the second form (F. R. 105e-l) no notary's jurat appears on either
the face or reverse side. No provision has been made on 0ither form
for showing the State c!1arter number in the upper right-hand corner,
and in the few States where the charter number is required to be shown
the forms may be appropriately stamped.
It will be appreciated :if you will advise the Board as soon
as practicable how many copies of forms F. R. 105c and F. R. 105e-l
will be needed for the next call and how many copies, if any, of form
F. R. 105e should be sent direct to each State banking department in
your district.
...
A copy of this letter is being sent to the Presidents of
all other Federal Reserve Banks •
Very truly yours,
(Signed) S. R. Carpenter
•
S. R. Carpenter,
Assistant Secretary.
Enclosures
92
S-558-b
DEP P.RTMENT OF B.AJ~KING
.Jno. Q. Mc:Adams, Commissioner
Austin
August 24, 1942.
Mr. W. J. Evans, Vice President
Federal Heserve BD-ni:c of Dallas
Dallas, Texas
Dear Joe:
Enclosing Federal Reserve Form 105e, modified or changed
according to our version of the wishes of the Banking Departments we
have contacted over the Countl:'Y· We have pasted a slip of paper over
the printed heading provided by the Federal Reserve Board and ho.ve
modifier.~ the jurat on the reverse side to require the signature of tho
publisher to the elimination of affirmation by ~.1. bank official.
As I told you when I was in the office some of the Corrunissioners have presented arguments concerning various and sundry phases
of this situation, but c:.s a. goodly number have approved the caption we
suggested, the proper course just now would seem to be to supply the
Banking Departments which are,in agreement and adjust our differences
¥d.th the other departments as quickly as possible. The follovring is a
list of the states whose ba."lking commissioners are in agreement:
•
Alabama
Arizona
Arkansas
Connecticut
Delaware
Florida
Georgia
Idaho
Iowa
•
Kansas
Kentucky
Maine
Massachusetts
Minnesota
Mississippi
Missouri
New Iv1oxico
Nebrask~
North Dakota
Ohio
Oklahoma
Orogor:..
Rhode Island
South Carolina
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Nevada
Colorado·:~
Indiana·:~
Ne·~·v
Jersey::-
Again we thank you for the very prompt and intelligent rrJanner in which you have assisted us in this undertaking, and with b0st
wishes and personal regards, we arc
Cordially and sincerely,
(Signed) .Jno. Q. HcAdams
.
Corarnissioncr
,
-:~Added
in accordance vdth Mr. Evans' letter of September 10.
93
'
BOARD OF GOVERNORS
.
CF" THE
FEDERAL RESERVE SYSTEM
S-559
WASHINGTON
ADDRESS OF'F'ICIAL CORRESPONDENCE
TO THE BOARD
September 26, 1942.
Dear Sir:
For your information there is enclosed a copy of a
letter which tho Board
ha~>
received from the Maritime Commis-
sian, dated September 22, 1942, signed by R. E. Anderson,
Director of Finance, suggesting tha.t we call your attention
•
to the following questions which have ari3en in connection
with the various applications received .from financing institu-
..
tions for Regulation V loans:
l.
2.
3.
4.
•
Dividend policy of the borrower.
ExeGutive salary poliey of the borrmver.
Tax liability poJicy of the borrow8r.
Financial arrangements for additional
business.
Very
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL HESERVE .BANKS.
94
UNITED S'l'ATES MAli.ITIME COlvllvliSSION
~·
.
'
S-559-a
WASHINGTON
...
Mr. K. R. Cravens
War Loans Administrator
Board of Governors of the
Federal R.eserve System
Washington, D. C.
September 22; lC)L;2
Dear Mr. Cravens:
Without in any way desiring to restrict the judgment of' the Federal Reserve Banks, who are agents for the Maritime Commission in executing loans guaranteed under Executive Order No. 9112, it is suggested that
you bring to the attention of all Federal Reserve Banks the following
questions which have arisen in connection with the various applications
received from financi.t'Ig institutions for Regulation V loans:
.,_
•
.•.
,.;.
l. Dividend policy of the borrower. Ordinarily, it is appropriate to require that there be no payment of dividends during the existence of the guarantee. However, there In·'3.Y be conditions where the continm.tion of a regularly established
·
dividend policy is proper, or where other special considerations
may govern the matter of dividend policy.
2. Executive salary polic4' of the borrovrer. It is frequently approprhte to examine the IIL::J"tter of salaries paid. Obviously, there can be no fixed rule, but considerable judgment
should be exercised to insure thnt such salaries are reasonable
and not disproportionate to the volume and character of the
business and responsibility of the individuals, and particularly
to safeguard against any extraordinary increases of sal:irles
incident to the taking on of Government business.
3. Tax liability policy of the borrower. Since it is the
policy of the Commission to consider Regulation V loans for
E,"11arantee onl.y for workine capital purposes, the provision of
funds for taxes based upon profits growing out of the contracts
being financed by such loans is ordim.rily o.utomc'.tically cared
for; howevt.:r, tax liabilities existing at the time of the loan,
and arising from other business, should be tnken into consider.::tion, :J.nd great care should be taken tr""1.t profits subject to
tax are not used for fixed asset purposes or otherwise made unavailable for discharge of tax liabilities, thus imperiling a
loan.·
4. Financial arrangements for additional business. The
necessity of seeing to it that any ~:~dd:Ltional business taken on
aft·,~r the negotiation of guaranteed loans is otherwi:;e adequBt€-ly
financed sometimes calls for special attention, pe,rticularly,
when the ~1dditional business i.s r81atively substantial in amount.
,,
VerJ tru1;r yours,
(Signed)
R. E. Andnr-son
H. E. Anderson
Director of Fi~ance.
95
BOARD OF GOVERNORS
OF" THE
S-560
FEDERAL RESERVE SYSTEM
WASHINGTON
ADORES& OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
September 30, 1942.
Dear Sir:
.
The War Department, the Navy Department, a.nd the United
States Mari Ume Cor.11nission have adopted instructions in substantially similar forn for the guidance of the Federal Reserve Banks
in arranging guarantees and in servicing gua.ranteed loans pursuant
to Executive Order No. 911.2. 'I'he l.nstructions are contP-ined in
the following letters to e.ll Federal Raserve Banks, copies of
which are transmitted herewith:
(l)
Letter from the Navy Department to all Federal Reserve Banks, dated September 17,
1942, signed by Mr. S. A. Mitchell,. Chief
of Finance Section;
(2)
Letter from the War Department to all Federal Heserve banks, dated September 21,
1942, signed by the Honorable Robert P •
Patterson, Under Secretary of We.r; and
(3)
Letter from the United States Maritime Commission to all Federe>.l Reserve Banks, dated
September 23, 1942, signed by Mr. R. E.
Anderson, Director of Finance.
•
•
•
Very truly
..
..
Enclosure 3
TO 'I' HE; PRESIDENTS OF' ALL F'.EDEltAL RESERVE BANKS
96
S-560-a
NAVY DEPARTMENT
WASHINGTON
September 17, 1942
TO ALL FEDERAL RESERVE BANKS:
The Federal Reserve Banks are requested to observe the following instructions in arranging and closing guarantees pursuant to Executive Order No. 9112 on behalf of the Navy Department and in following
the progress of loans which have been guaranteed. The Navy Department
does not deem it practicable to proscribe rigid instructions governing the question whether a Federal Reserve Bank should ascertain the
information or take the actions herein indicated through its own efforts
or should rely upon the financing institution to do so, as this matter
is one which should be governed by the circumstances of particular cases.
W'nile the Navy Department does however expect the Federal Reserve Banks
to use their best banking judgment in these matters, it will not hold a
Federal Reserve Bank responsible if it exercises a discretion in good
faith in accordance with the instructions herein given.
Arranging Guarantees
•
..
..
..
In arrangi.."lg, executing and completing guarantees a Federal
Reserve Bank should exercise its discretion as to the steps to be taken
to see that the conditions of the authorization for the guarantee and
the instructions of the Navy Department are observed. The Reserve Bank
·should, of course, carefully prepare the guarantee agreement in accordance with the standard form and such 2pecial provisions as may be approved or required in the particular case by the r~avy Department. The
Reserve Bank may make minor changes in the terms and conditiol)s of the
loan prescribed by the Navy Department in authorizing the guarantee without obtaining the prior approval of the Navy Department provided such
changes in the terms are considered by the Reserve Bt1nk in its discretion
not to make any :i.1nportant or substantial alteration. All the terms and
conditions prescribed by the Navy Department either in ~he identical
form prescribed or as modified by such minor changes, should be included
in summary form :in the guarantee agreement. When the Reserve Bank has
received the authorization from the Navy Department, :it should transmit
to the financing institution the guarantee agreement with such written
advice of the conditions which are required in cormection vd.th the
guarantee and such other information as it may deem appropriate. The
H.eserve Bank should ascertain, or, if it deems it safe to do. so, rely
upon the financing institution to see, that the conditions prescribed
by the Navy Department in authorizing the loan are fulfilled and that
the loan agreement, if any, assignments of contracts or other collateral,
•
-2-
S-560-·a
and any standby or subordination agreements or other similar documents
unless such documents have been previously passed upon by the Navy
Department do not contain provisions which conflict with any provision
of the guarantee agreement or with a-;.1y condition prescribed by the
Navy Department in authorizing the guarantee in question. For example,
if among the; terms of the authorizD.tion :ls a provision that the pro·:::ccds
of the lonn be used only for expenditures in connection with contracts
assigned as security for the loan, the Federal Re:3erve Bank should satisfy itself that mechanics reason:J.bly calculated to assure this r0sul.t
have been set up. 'Where feasible, copies of loan agreements and the
form of the notes should be obtained from the financing institution and
one copy forwarded to the Navy Depa.rtraent through the Board of Governors.
Th,~ Foderal Heserve Banl-:: should exercise it.s discretion as
to whether to e~:amine into the lr.::gal sufficiency of mortgages, deeds of
trust and other similar collateral. In some c;•.ses it may find it desirable to d" this before the guarantoe r.tgreemcnt i:3 executed, but in ma:ny
cases, that mr:..y be impra.cticc.blc, und reliance may then be placed upon
<:! statement of the financing institution.
In the latt,:;r event the
Federal Reserve Bank may deem it to be in the interests of the Navy Department that these matturs be looked into after the execution of the
guarantee agreer.K;nt. Th;:; Federal Res~'-;rve Bank vrill not be cxpocted to
ox:unine ,into questions of legal incorporo.tion of the:; borrovrer or other
party, or of the authority of the Gigning officers of the borrower or
other p.:1.rty, unless there are special circumstn.nces v1b.ich make the
Federal Reserve Banlt feel that this is nucc"ssary in the particnlar case.
•
The Federal Heserve 3an£;: must Ratisfy itself that the ve:1rious
matters menticned above have been properly cxamin•.)d int~). It may
<lccomplish this result by making the examino.tion itself, o:::-, in the
exercise of its discretion, T11ay rely upon the financing institution to
do so. However, it should not rely upon the financin~ institution if
by reason of the size or chara~ter of the financing institution, or the
quality of its management, the percentage~ of .~arantec, or other considerations, it ho.s re::;.son to believe th:"t the financing institution will
not checl{ all the appropriat8 mLltters or th.9.t the information obtained
from the financing in.sti tutic;n on this sub.jc:d m'ly not be entirely adequate. The question as to the circumstancr";3 in which the Federal Reserve Bank is justified in relying on tho fj_n 1.ncing institution is left
to the determination of the Rcserv(: B<mk in it,., d:Lscrdtion, in the
absence of spec:ific instruction:~ in the particular c~1se frnm the Na:vy
Department.
·
Servicin;; Guaranteed Vxms
In conneetion with each loan guaranteed pursuant to ExGcutive
Order No. 9112, the Federal R.Bservc Bank should, in the absence of
special circumstances, require :r·eports from the financing institution
•
•
97
-3-
S-560-a
98
showing the da:i..ly net outstanding amounts of each guaranteed loan and
such other pertinent infor:nation as the Reserve Ba.11k may deem necessary·.
Such reports should be required at such times and in such form as the
Reserve Bank d.H:ms appropriate. The Reserve Bank r:my require such other
r<-;ports, expl:.mations and infor:11ation from the financing institution or
the borrower, make such visits to the fina.'1cing institution or the
borrower, and take such uther steps as in its judgment may bo desirable
in this connection or as are request(~d by thE: Navy Department. The Rc;scrvc Bank vvill be expected to furnish the in.formaticn requested in the
l0tte:r addressed to you by thE. Board of Governors of the Federal Rr;;~>erve
Syst3m U.'1der dat~ of Ju.'1c 30, 1942 (S-520).
The question as to the extent to which the Federal Reserve
Bank should follow the progress of guarantt-:ed loans or rely upon the
fimmcing institution to do so is left to the determination of the Reserve: B•1nk in its discretion, in tho absence of specific instructions
in the particular ca.se from the Navy Department. Ir' this conneetion,
consideration should be given the circumstances ()f the particular case,
including the n.monnt and nature 0f the loan and of the collatera.l, the
size ru1d character of the financing in3titution and the quality of its
management, tho purc•::mtaz,e of guarantGe _, inform:1tion received with respect to tho prosress of the loan, <:md other considerations.
In the usuo.l c."!ses the FedDral Reserve Bank will not be expected to make or undertake t0 enforce any requir0ment vrith respect to
the obt:.lining or mai<itenance of insur:-kncc by the borrower. In the
absence of special instructions fr()ffi the Navy Department, thi:::; may be
l0ft to the financing institution. ThcrG is no objectL,n, however, to
the Reserve Bank's taking such st'-'ps as it deems necessary with respect
to the maintenance of insurance if f0r any reason it fo~~ls that it is
desirabL; to d·:> s~:' in any particular case.
In the absence of specific instructions from the lJavy Department, the ResGrve Ba11k l:lEt.:/, ir1 cases wl1ertj it deonts it apprDpriate in
order tu cnfo:cce compli;mce vd. th cond.i tL)n~'> of the loan a;;reement, sugr,;est tu the financing institution such :;,ctir)n as a.pJ?C"J.rs necessary· in
·my particular e<J.:c;c-; regn.rdint?: salaries of executive officers of the
borrower, pa;y-ment of dividvndc; bJ the borrower, incurring of indebtedness by the borrower, the m<:.king ::f ~a_[Jit::ll expenditurc:s by the borrower,
or o·(,hef' similar matters, and in the cvt.:nt thn.t the He; serve Ban'-: and the
financing institution cannot agree on a basis which the Hcserve Bank belh;ves tr; be in the best interests of the; Governr.tent, the matter should
be reported to the l';avy Departmo1t.
It is possible that the Navy Department may .find it necessary
at a latc'r date, in the li.7,ht of Bxpcricnce with guaranteed loans, to
issue additional ~)r supplementary instructions with rcgn.rd to the responsibilities of the Federal Reserve:: Banks with respect tc the matters disc,~sseJ. abov:;:;.
•
NAVY DEPARTlriE~'l' OF THE UNITED STATES
By ~Signee.) S. A. Mitch.e;:.;·'l:;,;:l;....._._ __
S. A. Mitchell
Chief of Finance Section
99
S-560-b
September 21, 1942
'I'O ALL FEDERAL RESERVE BANKS:
The Federal Reserve Banks are requested to observe the following im•tructiono in arranging and closing guarantees pursuant to Executive Order No. 9112 on bohalf of the War Department and in following the
progress of loans which have been guarante2d. The War Department does
not doem it practicable to prescribe rigid instructions governing the
question whether a Federal Reserve Bank should ascertain the information
or take the actions herein indicated through its own efforts or should
rely upon the financing institution to do so, as this matter is one which
should be governed by the circumstances of particular cases. While the
War Department does however expect ti1e Federal Reserve Banke to usc their
best banking judgment :i.n those matter~.:~, it v::Ll.l not hold a Federal Reserve Bank responsil>le if it excrcisec; a discretion in good faith in accordance with the instructions herein given.
Arranging
'
•·
•
Guaran~
In arranging, executing and complcti..11g guarantees a Federal
Reserve Bank should exercise its discretion as to the steps to be taken
to see that the conditions of the authorization for the guarantee and
the instructions of the War Department are observed. The Reserve Bank
should, of course, carefully prepare the guarantee agreement in accordance with the standard form and such special provisions as may be approved or required in the particular case by the War Department. The
Reserve Bank may make minor changes in the terms and conditions of the
loan prescribed by the War Department in authorizing the guarantee without obtaining the prior approval of the Viar Department provided such
changf.:S are considered by the Reserve Bank in its discretion not to make
any important or substantial alteration (in the terms or conditions pre-scribed). All the terms and conditions prescribed by the War Department either in the identical form prescribed or as modified by_such
minor changes, should be included in summary form in the guarantee agreement. When the Reserve Bank has received the authorization from the
War Department (or is prepared to ex\3cute the: guarantee if the case is
one in which no adv1mce approval from the War Department is necessary),
it should transmit to the financing institution the guarantee agreement with such written advice of the conditions which are required in
connection with the guarantee and such other information as it may deem
appropriate. The Reserve Bank should ascertain, or if it deems it safe
to do so, rely upo.u the financing institution to see, that the conditions prescribed by the War Department in authorizing the loan are fulfilled and that the lonn agreement, if a11y, assignments of contracts or
other collateral, and any standby or subordination agreements or other
similar documents unless such documents have been previously passed
100
-2-
S-560-b
upon by the War Department do not contain prov1s1ons which conflict with
any provision of the guarantee agreement or with any condition prescribed by the War Department in authorizing the guarantee in question.
For example if among tho terms of the authorization is a provision that
the proceeds of the loan be used only for expenditures in connection with
contracts assigned as security for the lo<m, the Federal Heserve Bank
should satisfy itself that mochanics reasonably calculated to assure this
re:::ult have been set up. Hhere feasible, copies of loan agreements and
thu form of the notes should be obtained .from the financing L.1stitution
n.'1d one copy forwarded to the War Department through the Board of G0vcrnors.
The Federal Reserve Bank should exercise its discretion as to
whether to examine into the legal sufficiency of mortgages, deeds of
trust and other similar collateral. In some cases it may find it desirable to do this before the guarantee agreement is executed, but in
many cP.ses, that m~y be impractico..ble ·' and reliance may then be placed
upon a statemr,mt of the financing institution. In the latter event the
Federal Fl.esorve B'lnk mo.y d(~Gm it to be in the interest::> of the Wo.r Department L"l sc,mo eases that these matters be looked into utter the execution :)f the guarantee agreement. The Federal Reserve Bani<: will not
bi) ex:pected to examine into questions o.f legal incorporation of the
borrower or other pa.rty, or of the authority of the signing officers of
the borrower or other party, unless there are special circumstances which
make the Fedcr3.l R0serve Bank feel that this is necvss:J.ry in the particular case.
The Federal Reserve Bank must satisfy itself that the various
matters mentioned above have been properly oxarnined intu. It may accomplish this result by making tho examination itself, or, in. the ext;;rdse
of itsdiscretion, may rely upon the financing institution to do so.
HO'm-Ner, it should not rely upon the financing institution if by re,..tsnn
of the size or character of the financing institution or the quality of
its management, the percent:1.ge of gunrantoe, or r,the1· considerations, it
h~s reu.son to believe that the financing institution will not check all
the appr0pri1.1.te matters or that the in..formn.tion obtained from the financing institution on this .:;ubject rnay not be entirely n.dcquate. The
qu•::stion as to tho circumstances in which the Fed(,ral Reserve Bank is
ju..>tified in relying on the financing institution is left to the detGrP."inntirm uf the Heservc Bank in itu discretion, in the absence or
specific instructions in th:. particul<lr caso .from the War Department.
-Servicing Guaranteed Loo.n:3·•
•
In connection with eac:h lo;ln guar:J.nteed pursu'.mt to Executive
Order No. 9112, the Federal Reserve Rmk should, in the absence of
special circumstances, require reports from the financing institution
sl1'W.Jing the daily net outstanding o!Illounts :)f each guc::.ranteed loan and
-3-
S-560-b
:f.01
such other pertinent information as the Reserve Bank may deem necessary .
.Such reports should be required at sueh tirnes and i.Yl such form as the
Reserve Bank deems approprictte. The Reserve Bcmk rr. ay require such other
reports, ;:;xplanutions and information from tho finc.ncing institution or
thd borrower, make such visits to the financing institution or the
borrower, and take such other steps as in its jud3ment may be desirable
in this connection or as are requested by the V'lar Department. The Reserve Bank will be expected to furnish the information requested in the
letter addreosed tc' you by the Board of Governors c,f the Federal Reserve
System QYlder date of jtmc 30, 1942 (S-520).
The question a~ to tho eA~ent to which the Federal Reserve
Bank should follow· the prcgrt:ss of guaranteed loans :)r rely upon the
finn...Y1dng institution to do so is left tc· the determination of the iieserve Bank in its discretion, in the absence of specific instructions
in the particu.b.r co.se from the War Department. In this connection, consid,:r::..tirm should be givon the circumstances of the particular case, including the amount nnd nature 0f the loan and of the collateral, the
size and ch~1.ractcr of the fina."lcing institution and the quality :lf its
mc-1.Il<".geMent, the percent age of guarantee, in.formatL.:..n received vd.th reGpect to the. pr;)gress of the loan, and oth0r c:msidern.tions.
In the usual cases the Federal Reserve Bank will not be expected to make or undertake to enforce any requireme~t vdth respect
to the obtaining or mainten<J.nce of insurance by the borrower. In the
c.bsenc(~ of special instru.ctions from the ~hr Department, this may be
left to the financing institution. There is no objection, however, to
the Reserve Bank 1 s taking such :":teps as it deems nGcessary ·with respect
to the maintenance of insurance if for any reason it ft:els that it is
desirable to do so in any particQLar case.
In the absence of spocific jnstructions from the War Department, the Reserve Bank may, in cases whore it deems it appropriate in
order to enf·~~rce COP.'.pli::mce with cunditions of the loa.."l agreement, suggest to the financing institution sueh action as appears necessarJ in
any particular case reg:lrding salaries of executive officers '.)f tho
borr0v.rer, payment of dividends by the borrower, incurring of indebtedness by the borrower, the making of capital expenditures by the borrower,
or other similar matters, and in the event that the R~serve Bank and
the financing institution cannot agree vn a basis which the Reserve Bank
believes to be in the best interests of the Goverrur.ent, the matter should
be reported to the War Department.
•
It is possible th<lt the War Department may find it necessary at
a latcr date, in the light of ex~erience with guaranteed loa~s, to issue
addi.tional or supplementary instructions with regard to the responsibilities of the Federal Reserve Banks with respect to the matters discussed above.
Sincerely yours,
(Signed) Rubert P. Patterson
Under Secretary of War
•
S-560-c
September 2}, 1942
The Federal Rerlerve Banks are requested to ohserve the following instructions in arranging and closing guarantees pursuant to
Executive Order No. 9112 on behalf of the Maritime Comrnist>ion and in
following the progress of' loans which have been guar<:<nteed. The Maritime Commission does not desire to prescribe rigid instructions governing the question whether a Federal Reserve Bi.ll1k should ascertain
the information or ti:tke the actions herein indicated through its own
efforts or should rely upon the financing instituti,:m to do so, as
this matter is one which may well be treated differently at the dif-·
ferent Federal Reserve Banks and v,ill be governed by the circumstances
of particular cases. A Federal Reserve Bank, however, Vlrill not be
held responsible by the Maritime Comm:L2,sion if it exercises a discretion in good faith in accordance v\ith the im;tructions herein given.
In arranging, executing and completing guarantees, a Federal Reserve B<mk should exercise its discretion as to the steps to
be taken to see that the conditions of the authorize.tion for the
guarantee and the instructions of the Maritime Commission are observed. The Res·:::rve Ba..'1k should, of course, carefully prepare the
guarantee agreement in accordance vri.tb the standard form and such
special provisions a~o may be approved or requir:;.d in "the particular
case by the Maritime Commission. All the terms and conditions prescribed by the Maritime Commission either in the identical form prescribed or as modified by the Commission, should be included in summary form in the guarantee agreement. \Hwn the He serve Bank has rec;eived the authorization fro;n the Maritime Commission (or is prepared
to execute the guarantee, if the ca:>e i.s one in which no GdvMce ap-prove.l from the Maritim.<:. Commission is neces3<3.ry-); :i.t should tran3mit
to the fim;ncing institutJ.on the guarantee agreement vr.:Lth such written
advice of the conditions which are required in connection with the
guarantee and such other information as it mD.y deem apprvpriate. 'I'he
Reserve Bank should ascertain, or rely upon the fina.'1.cing institution
to see, that the conditiom' prescribed by the Maritime Conun:Lssion in
authorizing the loa."1 are fulfilled and that the loan agreemtmt, if
any, assignments of contracts or other collateral, and any stand.by or
subordinaton agreem0nts or other similnr documents unless such documents have been previously pB.ssed upon by the Maritime Commission do
not contc:.in provision.s which conflict vdth any provision of the guar-antee agreement or with any condition prescribed by the Maritime Commission in authorizing the guccrantee in question. Howeve:r·, where
•
102
103
-2-
S-560-c
feasitle, copies of lom1 agreemeuts ond noteo should bP obta~_ned from
the financing institution and one copy foi"t:arded to tho Mo.riti,T,0 CJmmiss:l.on throue~h the Board of Governors.
The Federal .Reserve Bank should exercise its di.scretion as to
•vhether to c;xamine into the L\:ga1 suffici-..;r:cy of mo!"t 1_s-ag\JS, dc;;ds of
trust and other similar co:l..l:'lter<:il. In some ca~;os i.t :•Jay find i.t ctcsirahle to Cio this bcf-=n·e tte gun.rantec :u;reecent is executed, but in
many coBes, porh~.:.ps usu1.1lly, tlnt :1:ay bt; i.EtJr<: . ct:i..cnh1e, and reLi;:mc.:e
mc..y then be p:;.ncdd -,.lpon L statement of t[l'3 f7 r1a.ncing :i_nstitution. In
the latter event the Fecler<:>l Res.,rv:_; B~1nk may d·Je:m it to be in the hlterests of the ~nritime Cou.111i:.::sion ~-n ...,omc c&c;es ti"mt those matters oe
looted into aft~r the execution of' thd guarantee a,f_;ruen;,mt. The Fed-cru.l Reserve B;;m]_.;; w:tll not be expe~ted t•.~ examine iLto questions of
legaJ.. incorporation of the borr":J\Ycr cr other party_, or of th"" Dut~or
ity of the signing officers of the borrowc'r or othr;r ~art;y·, unLt.:ss
there <'i.re special circumsttnccs whlch nw.k':' the ?odera:. R-2-serve :Dnnk
.:feel tbat this :Ls nec,ss[:ary in the particular c::Lse.
The Feder:1l Reserve Bwk may itself ascertu.in t be vr.rious
mt,tters mentioned above, or, in th-3 exercise of its d:Lscretion, m::~.:r
rely upon the fim:ncing institution to ::J.scertnin them. However, it
should not rely cntirei.y upon tho f::i.nancin::; in~titution j_f by rcr:..:on
of the size or cht.racter of the firF.1lcing institution or the quc•.lity
of its ma..-.ul.gement, the p.:lrcenta.c:e of gU!.E'tlltt,e, or other considerations, it has reD.son tc bQlicve that tt1e finr..r::.;ln,::t institution wiJ.l
not check oll the appropricte matters or tlnt t~lc information obtb.lned from the fin<.J.ncing institution on this subjeGt mc..y not be entirely adequate. The qU'::lstion ;~s to the circumst;:;.!lCc;s in whi..ch the
Fedural RGservc B<:.nk is justified in relying on th'.' firu:mcing institution is left to the dct•:;rmi.n:.J.tion of tho Hoserve B<}nk in its dic>cretion, in the E:bsence of spE:;cif'i~ :inst:::·uctions :Ln the particular
co.se from the Maritime: Cor:;.'lliosion.
In connection with each J.oan i;'J.c...ra.nteed pursuant to Executive Order No. 9112, the Federal Res•;rve Bn.nk should, in the absence
of specill..l circwnsttmccs, re11uire reports from the f'i.na.ncing institution sho'Ning t·he daily net outste.nding araounts of each ga-:trfmteed
loan and 1mch other pertinent information as the Reserve B<.l!ik may de(,ffi
necessary. Such reports should be required u.t such times mid in such
form as the Reserve Bank deems ?..f.ljJropriate. The .Hescrve Ba1k rrwy require such other reports, explannt:i.on:~ and Lnformation fro1:1 the financing institution or the borrower, mc:ke such vi.s2.t s to th<J finnncing institution or the.: borrower, m1d tak;:; DUch oti1e~· steps as in its judgmmlt
may be desirabL:! in this cormcction. The Rosen·e Bm1Y. Yiill be expected
•
S--560-c
-3-
104
to f'urnL>h the i.nfor1aation requested in the letter addressed to you by
the Board. of Gov~rnors of the Federal Reserve System under date of June
30, 1942 (S-520).
The question "l.S to the extent to which the Federe.l Resorve
Bank :should f'ol.low the progress of guaranteed loans or rely upon the
fi--rwncing institution to do so is left to the determination of the Reserve Bank in its discretion, i.n the absence of specific instructions
in the particular case from the M&ritime Comrn:.ssion. In thi.s connection, consideration should be gi.Yen the circumstanC•3S of the partic-ular case, including the [l.ffiOU..l1t and rwture of the lo<Jn [1nd of the collater.:;l, th•..; size and character of the financing institution und the
qu&.J.it.y of its management, the perc<3ntag6 of guar&ntee, info:mmtion
rc!ccived with respect to the progress of the loan, r.nd other considernt~ons.
In the usual cnses the Feder.:il Rf;serve E3.nk v.rill not be expected to make or undertnke to enforee My requirf;ment with r0spect to
the •Jbtaining r,r Hlc~intenonce of insurance by the borrower. In the absence of Bpecis.l instructions fr·;:>m the Maritime Cormn:i.ssion, this may
be left to the fin;,.ncing institution. There is no objection, however,
to thA Reserve Bank 1 s teking such steps as it deems necessary with respect to tl:w maintenc:u1Ce of in::>uran~e if for My reason it f~'?els th0t
i t is desir.:..bl\:) to do so in nny partic~J.ar case. In the absence of
specific instructions from the Maritime Commission, the Reoerve Bank
may, in cases v1here it deems it appropriate in order to enforce compliance with conditions of the loan agr<:ement, suggest to the finoncing instj_tution such c.ction as H[rpears necessary in any pr,rt.icular
case regr~rding salar.Les of executive officers of the borrower, payment of divider:cds by the bo.rr::.wer, incurring of :i.r.debteclness by the
borrm•er, the making of cqxi..ta'. eY..penditures hy tb<'J borrow8r, or
other similar matters, ar.d in the event th::t the hec.;er.re Bank and the
fin<:ncine institut:Lon C(':Imot ~~gr•Jt: or•.: :_ b<:.::is wn:_ch the R'Jserve B<::nk
bJlieves to be in the b\·)st intcrcH>ts of the: ~~.iov0rnment, the mrttter
should be reported to the l:~<.:rl.timE: Com:•1i<Bivn.
It is possible that the Maritime C,:wur,L:~sion may find tt necessa.ry at :1 later d.c~te, in the light of experi.enr.:e ;rlth guaranteed
loans, to issue adclitionc.l or supplementar,y i.n~:tructions vri.th regard
to th'2 rAspon:::d.biJ_itLes of tht:: .F"ed.erc-.1 Resc:r'lc "Bank3 -vv:i.th respect to
trF~ matters di;:;cu.:>sed above.
Very truly your•>,
(Signed)
ft • .B~. Anderson
R. E. Anderson
Director of Finance
•
105
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
S-561
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
Oe:tobor 1, 19/+2.
Dear Sir:
It has been brought to our attentton that some of the Reserve
Bs.nks m·e not reporting amounts properly in Column 1, on Form F. R. 579.
'rhe umount to be reported in Column 4 should be the awn of ( 1)
the 8Jnount outstanding on the lo&n and ( ;d nny addi tionnl amount available to the bon·owor en datu of the report. The followj.ng will nerve for
purposes of illus-tr&tion:
1. If a straight loan has been advanced in full the
amount to be entered in Colur,m I.;. will be thn same ns the
amount outstanding, reported in Column 7·
2. If a straight lo<:m is being advanced 1n instalments
and the tot2.l arn.ou.nt has not been advuncecl and. no repnynl\;nts
have been made, the m1ount to be onteced. j_n Column L1• will be
the totul amount euthorized to be advanc(~d under the gua.r&ntee agreement.
J. If a credit is betng advanced as needed and repayments are made in the interim, the amount to be entered ln
Column !.; will be the :Jrnount outst::::nding- as shown in Column 7
plus the difference, if any, between the total amount <:1.Utllorized to b o advanced and the tot2.l of wnounts aetually advancE:.d.
4. .In the case of a simple rcvol ving line of credit the
amount to bo reported in Column 4 will be tho aggregr<te WT1otmt
which under the guarantee agreement mcy be outstanding c.d~ anyone
time regardless of wh<o;ther any a"'il.ount is outstCJ.nding at tho
time.
5. In case a revolving line of credit hau a condition
attached limiting the totnl amount that may bo &dvanced under
the agreement, tho amount to be entered in ColuiTl.l1 4 will be
the maxirmun. which mey bt: outstanding nt ~:.ny one t.i.mG or the
..
106
-2-
S--561
surr. of the amount actually outst&nding and the arnount which
may still be advanced under the agreement, whichever is smaller.
6. In case a revolving line of credit has a condition
stipulating that the amount outstanding at any time shall not
exceed a designated percentage of the runount of monies due or
to become due under the contract or contracts assigned to secure the loan, the amount to be entered in Column l, will be the
amount of the line of cred.i t or, if smaller, an amount equal to
the designated percentage of the remaining assigned payments
under the assigned contract or contracts. It is asm.uned that
this latter information will be obtained from financing instituti.ons at the end of each month.
If a loan has been paid and the guarnntee agrnement terminated
at the report date, but the J.onn is listed on Form F. H. 5'79 inasmuch as
there waa an amount outstanding at the end of tho preceding month, nothing will be reported in Column 4· In this connection it hl:s been suggested the.t final liquidations of loans under a gua1·c.ntee ag:r.eerrwnt or
other terminations be explained in tho "Comments" column.
Assistc:nt Secretary.
TO 'r:E1E PRESIDENTS OF ALL FEDERP.L RESERVE BliNKS,
EXC:E:P'l' HICI:L,lOND
..
107
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
·s-562
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October l, 1942.
Dear Sir:
For your information the follov-.'ing letter has been sent in
response to an inquiry received from one of the Federal H.eserve Bank~:
"Heference is made to your letter of Septen1ber 21, 1942,
in which certain questions are raised as to guarantee fees accrued or collected on behalf of the War Department, Navy Department; and Maritime Coiil!l"J..ssion.
The quarterly period for computation of the guarantee •
fee should begin with the date of the first advance made in
contemplation of the guarantee agreement. If the financing
institution makes an advance prior to the actual execution
of the guarantee agr•3ement but. such advance is madr3 after
the approval of the guarantee, the fee would acCi:'Ue fron·, the
date of such advance rather than tho date of the guara...'1tee
agreement.
11
"Wi.th respect to wa1v::a..ng the collection of nominal amounts of interest or guarantee fees, or disregarding oYerpayments, in connection with loans that have been eepaid in
full, it is quite possible that the Federal Reserve Banks may
be asked to furnish detailed data as to how the a•nount of the
fees is· arrived at, and, ii' so, it is doubtful whether the
General Accounting Office would accept anything less than the
exact amount due. Whether you wish to take up with financing
institutions nominal differences in amounts due is a matter
for determination by your Bank, but in any case it is suggested that the Government be credited with the exact amount of
fees d~e on each guaranteed loan. On an outstanding loan
there is, as you a.ssu'Ile, no objection to carrying forward
from one period for adjustment in the next period a small
difference between the a.'Uount due and the amount remitted by
the financing institution."
TO THE PRESIDENTS OF ALL
FEDEH.AL RESEaVE BANKS,
EXCEPT ATLk'JTA •
•
S. R. Carpenter,
Assistant SecretalJT.
108
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-563
ADDRESS Of"F"ICIAL CORRESPONDENCE
TO THE SOARD
October 2, 1942.
Dear Sir:
The Board has received several inquiries regarding the
status under Regulation W of a charge account in which the balance
remaining unpaid bey·ond the tenth day of the second calendar month
represents the. sale of an artiele which the buyer has refused to
pay for on the ground that the article is defective. In answering
this question, three classes of cases need to be distinguished.
In the first place, if the Registrant takes the position
that the article is not defective, he should consider the account
to be in default.
·
In the second place, if the article is defective so that
the Registrant must correct the defect or replace the article in
order to fulfill his obligations under the contract of sale, the
regulation doos not require him to consider the account to be in default, pending such correction or repl~cement.
In the third place, if on the tenth day of the second calendar month after the date of sale the question as to whether or not
the article is defective has not yet been determined, the Registrant
should consider the account to be in default. Of course, if it is
subsequently determined that the article is defective, the rule
sta.ted in the previous pn.ragraph is applicable.
Whether a particular case falls within cme or another of
these clP.sses is a question of fact to be d~termined in the light
of all of the surrounding circumstances. If the He gist rant has
taken the article back, this would ordinaril;r be an indication that
he expects to correct the defect or replace the article. If the
article is still in the possession of the customer, however, this
would be an indication, in the absence of other evidence, that the
article is not defective or that the matter has not yet be0n determinf;d.
..
..
In any case where the accolmt 1..s considered by the Registrant to be not in defa.ult, there would be n question 1:1.s to whether
S-563
109
-2-
the parties are acting in good faith and with no intent to evade
or circumvent the regulation, and therefore in any such case the
Registrant for his own protection should see that his records contain an adequate statement of tte relev;.mt facts.
Very truly yours,
. ~iA,
h}r/l~
Chester Morrill,
SecretBry.
TO THE PRESIDENTS OF ALL fi'EDEHAL RESERVE BANKS
110
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-564
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
October 8, 1942
Dear Sir:
In connection with the execution of guarantee agreements
pursuant to Executive Order No. 9112, a question recently arose at
one of the Federal Reserve Banks as to whether mortgages may be ·'
taken as sGcurity for guaranteed loans where there is a possibility
of conflict between the Government's rights under section 14 of tpe
standard supply contract and the rights of the financing instittJ-:tion under the mortgage. The question was referred to the War Department by the Board of Governors, and the Board has now received
a memorandum from the War Department dated October 5, 1942, containing the following statement of the War Department's views with
respect to this question:
2. It is not contrary to the policy of the War
Department for mortgages to be taken on matE:rials purchased with th~ proceeds of a ~~aranteed loan provided
that assignment of the contract is also taken as security. Payments under Article 14 would thus flow to the
bank in full or partial satisfaction of the mortgage.
If such payments did not constitute full satisfaction
nevertheless the mortgagee should have the right to foreclose. If the Government desires to protect itself from
the so-called 'spreader' clause to be inserted in new
guarantee agreements it would have to exercise its right
of taking over the loan under Section 7 of the guarantee
agreement.
11
rt3, In the normal case, it is beli"eved that any
conflict that may exist can be ironed out by negotiations.
"4. Nothing in the above is intended to indicate
that mortgages should be taken as a general practice.
In cases other than that of weak contractors the War
Department in general prefers open lines of credit
secured only by assignments of contracts and the usual
covenants in loan agreements or by covenants to assign
•
111
-2at the demand of the guarantor in the case of larger
credits to sound concerns where because of the number
of contracts .<tnd purchase orders involved assignment
is administratively cumbersome. 11
Very
S. R.
Assistant Secretary.
TO THE PRESIJJ.G.IJTS OF ALL fl<.,l;EHAL RESERVE
..
BAi~KS
112·
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
S-565
WASHINGTON
ADORES& DF'F'ICIAL CDRREBPDNOENCE
TD THE I!IDARO
October 8, 1942
Dear Sir:
For your information and guidance in connection with
the execution of guarantees on behalf of the United States Maritime Commission, there is enclosed a copy of a letter received
by the Board from one of the Federal Reserve Banks raising certain questions as to the interpretation of the Mariti1ne Com-mission's General Order No. 54 Revised dated August 25, 19'-t-2,
together with a copy of the Board's reply thereto.
In this connection, there is also enclosed a copy of
a letter received from the United States Maritime Commission
dated October 5, 1942, stating that the Board' s letter in reply
to the Federal Reserve Bank's inqui:rJ contains a correct interpretat:i.on of the Maritime Commission's General Order No. 54
Revised.
J<.llclosures 3
TO THE PRESIDETIJTS OF ALL FEDERAL RESERVE BANKS
S-565-a
FEDERAL RESERVE BANK OF
---Septombet· 24, 19/-+2.
Board of Governors of the
Feder8l Eescrvo System,
Wa.shington_, D. C.
Attention:
Mr. 1. P. Bethea,
Assistant Sec.reta.z:y.
Gentlemen:
Receipt is a.cknoNledged oi.' tl1e Board 1 s letter S-553 dated
September 19, 19i+2, addressed to Preoident
and enclosing
United States Maritime Commission General Ordur rJo. 54 Revised.
This order is not clear to us, D.nd we would therefore appreciate your interpretation of t..b.e questions which h'.W(:; ~.risen.
(l) Paragraph 1) reads :i.n part as follows:
"Authority is he:retnJ delegat13d. to the Director and
the Assistant Direetors of F:.mmce to exercise on behalf
of the Commission the powers conferred by Executive Order
9112 and to make such further and other delegations of the
said authority to other officers and employees of tho Commission as they shall deem necessary and proper with respect
to guarantees not in excess . of One Hundred rrhousand Dollars
($100,000.00) for ;:my on8 loan;"
Does this mean that a guarantee ce.n· be issued for as much a.s
$100,000 regardless of the a.mount of the loan, provided, of course,
this does not exceed 90% of the loan, or does it mean tha.t we'
are authorized to issue guarantees up to 90% on any one loan not
8Xceeding $100,000, and, in this connection, i.f several loans of
$100,000 each are made to the same borrower, could we issue guarantees up to 90% on the several loans?
(2) The remainder of the paragraph quoted above rends as
follows:
"Providt:d, that the approval of the Cormnission shall
be first had Emd obts.ined as to (a) gucirHntcos of loans in
excess of Two Hundred and Fifty Thousu.nd Dolh.rs ($250,000.00);
(b) guarantees of more than ninety p<':rcentum ( 90%) of the
amount of any loan; and (c) purchase orders and all other
113
114
S-565-a
-2contracts of whatsoever type providing for an advance payment by the Commission."
Does the above language reading "Provided that the approval of the
Commission shall be first had and obtained as to (a) guarantees of
loans in excess of Two Hundred and Fifty Thousand Dollars
($250,000.00) 11 mean that we are n.uthorized to make loans up to
$250,000 whcsn the lo2!1 has been approved by one of the persons named
in the Maritime Commission's letter to all Federal Reserve Banks
d.'J.tod May 28, 1942, or does it me2.n that we can make these loans
with the approval of these individuals up to $100,00; that loans
from $100,000 to $250,000 must be submitted to Washington where they
can be acted upon by the Director.or AsJistant Director of Finance
without submission to the Maritime Commission?
(3) Does paragraph (c) o.f the proviso quoted above mean
that wo are not entitled to issue a guarantee on any loan to a
borrower vrho has received an advance payment by the Commission without subm:itting it to W:1shington for approval of the Maritime Commission?
D.S
We would greatly appreciate prompt advice on these questions
frankly we are very confused.
V0ry truly yours,
·(Signed)
First Vice President, Federal Reoerve Bank of
•
115
S-565-b
October 3, 1942
Mr. - - - - - - - ' .First ITice President
a11d General Counsel,
Federal Reserve Bank of
___, _
---
Dear M.r.
'lds refer:s to your letter of Sept.ember
certa.in questions regarding the i,.nterpretaticm of
5L, Revised, which was issued by the United States
under date of August 25, 1942, and transmitted to
letter of September 19, l9L~2 ( S-553).
24, l%.2, r~nslng
General Order No.
Maritime Commission,
you with the l3oard's
}iith respect to your fi::.·st question, it is our understanding,
based upon informal Gdvice received from the Maritime Commission, that
the '.'mrds "with respcc:ct to guarantees not in excess of One Hundred Thousand Dollars (~,:lOO,GuO) for 3ny one loZ:tn 11 , contained in par<:J.graph l of
the General Order in question, have ref.::rence to ti1fJ amou.l'"Jt of the guarantee rather than t~J the amount of th.:: .loan. In othr.r words, the Director
and Assistar:t Dir8ctors of Finance arc authoriz~;d to make delegations of
authority to other officers and mitploy:;;es of the Corrunission with respect
to g1:t11rnntevd loans :;here the <;mount o.f thr.; guarantee docs not exc:;ed
$lCJO,OOO, irresp:.:;ctivc~ of the: amourri:. of the loan; exc2pt. tlv:t, as hc:reafter noted, ti·!c .::.mount of the loan ma;r no+. . exceed :;•21)0,000. The limit.::.tion refers to the individual loan, and, accordingly, perlliits the
issuance of gm•.rantees ai th respect to ~everal loanf> t·o the same borrower where e~lCh lo:!n is g·u.aranteed not more than n1ner,y per cent, and
whsre the amount of the ~uar:mtee in each instanc'... l5 not more than
$100,000.
On the other hilnd, the languagt:. of the proviso requ1nng the
approval of the Maritime Com.mi&sion for guar'l.nteec; of lo~ms in excess
of ~·250,000 refcrs to the E:lnount of tbs loc-.n ::nd not to the ~uuount of
the guar;:~,ntee. This 1·>roviso mc..kc.s it D(,c;:,ssa:ry to obtain the approval
of the Cor:~nission in any c;::.se in ·uhidi th~~ <;mount of the loan to be
guaranteed is in ,.;:xce:::s of :fS250,000. The Dir::;ctor or Assist::cnt Dir('Ctors
of Finance mA.y deleg::te to oth-.::r •.Jfficc:rs of -she Commi:s<>ion authority to
approvf; gu:'l.r.<mtces o.f lotmt~ in amounts of .p250 ,000 or less, vvher'2 tho
?mount of the guar<.J.nrJce do,.:s not oxc~;ed :jlt)O,OOO; and such gllrtrantees
mu.y be execut·2d by the F.c,der~:.l R.:::serv(; Ds.nk withot.~.t submitting the rn::tttc:r
to o.ny officer or <~g·::..nt of the M.ari time Commission for prior H.pprov;:;.l,
subject of courst: to the n;quirements of the Commission 1 s instructions
S-565-b
-2of May 7, 1942, and provided the usual production certificate is obtained. ~·!her2 the amount of the guarantee exceeds ~SlOU, CJOO, the guarantee must be submitted to Vlashington for approval by the Director or
Assistant Directors of Finance or, if the amount of the loan exceeds
~~250,000, for the approval of th8 Commission.
Paragraph (c) of the proviso, requiring the approval of tbe
Corrunission for "purchase orders and all other contracts of
whatsoever type providing for an advance payment by the Commission'', · h>
not intended to r-::qu.ire that a guarantee must first be submitted to
\'Vashington for the .Maritime Commission 1 s approval mt::rely because the
borrm:er has received an advance payment from the Cm:~mission. However,
it is understood that the Iv1aritime Commission must h(:r~C;afte;r 8.pprovc
any now advance payment rd.adc by the Con1mission to the borrower.
M~tri tim~~
Vcry truly yours,
(Signed) S. R. Carpentc;r
S. R. Carperrter,
Assisti.lnt Secre+J<l.rJ.
116
117
...
S-565-c
UNITED STATES MARITIME COUMISSION
WASHINGTON
October 5, 1942
Mr. K. R.. Cravens
War Lo3.11s Administrator
Board of Governors of the
Federal Reserve System
Washington, D. C.
Dear Mr. Cravens:
'l'be letter addressed by Mr • .S. R. Carpenter,
Assistant Secretary, Board of Governors of the Federal
Reserve System, to Mr.
, First Vice President and General Counsel of the Federal Reserve Bank of
___ , _ _ , replying to Mr. -----~· s inquiry r•;)la.tive to the Cormnis.sion' s General Order No. 51-+ Revised~
as of August 25, 1942, is a correct interpretation
thereof.
It will be appreciated if you will send copies
of Mr. Carpenter's letter to all Federal R.:;serve Banks.
Vory truly yours,
(SignGd) W. C. Peet, Jr.
w.
C.
Pl~et,
Secret~•Ft
Jr.,
118
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-566
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
October 9, 1942.
Dear Sir:
In order to comply with a request from Mr. B.
B. Griffith, Assistant to Director of Finance, United
States Maritime Commission, it will be appreciated if
hereafter your Bank will use Form No. 1 ( Treasu:r; Department form for deposits not subject to check) in depositing guarantee fees due the Maritime Commission from
Regulation V loans,· instead of Form CD 6599 as requested ,
in our wire of July 20, 19i+2.
S. R. ·rpenter,
Assistant Secretar,y.
TO Ttlli PRESIDENTS OF ALL FEDERAL RESERVE BANKS
119
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
S-567
WASHINI3TDN
ADDREBB DF"F"ICIAL CDRREBPDNDENCE
TD THE BOARD
October 10, 1942.
Dear Sir:
The Board has received from the War Department a
memorandurn dated October 5, 1942, signed by Lieutenant Colonel
Paul Cleveland, regarding the amendment of contracts for the
purpose of inserting Article 14 of the standard supply contract. A copy of this memorandu.11 is enclosed herewith for
your information and guidance in connection with the execution
of guarantee agreements purnuant to Executive OrO.er 9112.
In accordance with the War Department's request that
advice regarding this matter be transmitted to the liaison of'· ricers, there is enclosed an extra copy of the War Department's
memorandum, and it will be appreciated if you will transmit
this copy to the lia.ison officer of the War Departr.1ent in your
district.
VerJ truly
Y~}l·
fs )
//
~
"tfh~
i
.
[\~r
enter, C\)
Assistant Secretary.
I~
$.
Enclosures 2
TO THE PRESIDENTS OF ALL FEDEB.AL RESERVE BANKS
120
WAR DEP ARTMEN'r
Headquarters, Services of Supply
Washington, D. C.
S-567-a
October 5, 1942
~~~ORANDUM
SUBJECT:
For the Board of Governors of the Federal Reserve System
Amendment of contracts to insert Article 14 of standard
supply contract.
1. Reference is made to report of liaison officer,
Federal Reserve Bank Building, Kansas City, Missouri dated September
24, 1942, paragraph (3) of which raises the question as to whether
contracting officers are empowered to extend to the priine contractor
the benefits of the standard termination clause (Article 14) by
issuing a supplemental contract in the form of a letter or other
document and whether it would be in order for liaison officers and
the Federal Reserve Banks to insist that this be done when, in
their opinion, omission of the cancellation clause has a material
effect on the goodness of the credit risk.
2. It is the view of the Legal Branch of the Office
of the Director of Procurement that such a change is legal without
additional consideration.
3. It is the view of this office that the insertion
of this clause in existing contracts may, in many cases, be desirable and liaison officers and the Federal Reserve Banks are hereby
authorized, in their discretion, to insist on contractors endeavoring to have this done. Also, liaison officers should endeavor to
smooth the way for an amendment by contacting the proper contracting officers.
4. It is also the view of this office that subcontrac·tors should in many cases insist, nt the time the subcontract is
executed, on the inclusion of a clause in the subcontract no less
favorable than Article 14 if the prime contractor has an Article 14
in his contract.
5. Kindly transmit advice of the foregoing to all
Federal Reserve Banks and the liaison officers.
(Signed) Paul Cleveland
Paul Cleveland
Lt. Colonel, A. U. S.
Acting Chief
Advance Payment and Loan Branch
121
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-568
ADDRESS DF"P"ICIAL CDRREBPDNDENCE
TD THE BDARD
October 12, 1942.
Dear Sir:
There are enclosed photostats of letters received from
the War Department and the Navy Department addressed to all Federal Reserve Banks, both dated October 9, 1942, regarding the insertion of certain special conditions in guarantee agreements
executed pursuant to Executive Order No. 9112. We have in our
records the special conditions enclosed with the above-mentioned
letters from the War Department and the Navy Department du~ authenticated by Lieutenant Colonel Paul Cleveland of the War Department and by Mr. s. A. Mitchell of the Navy Department. It will be
observed that the special conditions enclosed with the War Department's letter are identical with those enclosed with the Navy Department's letter. It is understood that similar conditions are
under consideration by the United States Maritime Commission.
As indicated in the enclosed letters, consideration is
now being given to a revision of the standard form of guarantee
agreement dated May 14, 1942. Accordingly, it will be appreciated
if you will submit to the Board, not later than October 31, 1942,
such suggestions as you may have, in the light of your experience
in this connection, for the clarification and improvement of the
standard form of guarantee agreement, including any suggestions
you may have regarding the new special conditions which have been
authorized for inclusion by the enclosed letters from the Services.
It will be very helpful to us if you will suggest specific language
to carr,y out your suggestions wherever this is practicable.
Enclosures
•
122
BOARD OF' GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
•
S-569
WASHINGTON
ADDIUtBB QP',"ICIIAL DQRRIESPQNDIENCIE
..
TQ THIE BQARD
October 14, 1942.
I
J•
'
Dear Sir:
•
·....
It will be recalled that at t~e Presidents' Conference held during the latter part of September 1942, it
was voted that any Federal Reserve Bank should be permitted
during the war to hold in safekeeping for nonmember banks
Treas~y bills and certificates of indebtedness.
The Board has given consideration to this matter
and, in view of the authority of ·Federal Reserve Banks to
make advances to nonmember banks on the security of obligations of the United States, the press· statement issued
by the Board on September 1, 1939, relating to this subject,
and other circumstances now prevailing, the Board will·offer no objection to a Federal Reserve Bank's holding in
safekeeping Treasury bills and certificates of indebtedness for the duration of the war in accordance with action
taken at the Presidents' Conference referred to above.
Very truly yours,
..
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
•
123
BOARD OF GOVERNORS
CF" THE
FEDERAL RESERVE SYSTEM
S-570
WASHINGTON
ADDRESS OFFICIAL CORREBPONDENCE
..
TO THE BOARD
October 15,
191~.
Dear Sir:
Feder~l
The following is a copy of a letter dated today sent to a
Reserve Bank regarding Regulation W:
"Yo·ur letter of September 15 raises a question under
Regulation Wwhich has recently been considered by the
Board in connection with credit cards issued by gasoline
companies and others. The question relates to the status
of a charge account.where the buyer has given the seller
a note for the amount due 1md the seller has transferred
the note to another Registrnnt.
..
·--'
...
-·
.
.•
"The previous inquiries arose: out of a regular course
of de:1ling based on contracts between the various independent dealers and the issuer of the credit cards under
which the issuer agrees to purchase all accounts receivable
arising out of sales made by the dealers to the holders of
the credit cards. The accounts are purchased without recourse (except in the case of fraud, etc.) and in the normal course of events the dealer receives his money inunediately and hears nothing further regarding the acco1mt.
"The Board took the position that the dealer was the
C3eller, and thc1.t consequently he was the 1Reeistrant 1
within the meaning of section 5(b). Consequently, if a
customer did not pay his bill for articles purchased through
a dealer, he could nevertheless purchase listed articles with
his credit card from another dealer, and furthermore the issuer of the credit card would not be prevented by the Regulation from purchasing the account arising from the latter
sale .
"On the other hand, if the dealer contemplated making
further sales of listt;!d articles on credit to the holder of
the credit card, he would not be safe in so doing unless he
found out from the issuer of the card whether the holder was
in default on accolli!t of previous purchases from him •
124
-2"In these cases there was no promissory note·, but
the results would be the sarne if there were a promissory
note, in view of the definitions of 'charge sale' and
'charge account' in sections 2(f) and 2(g). Consequently,
•if the note were not paid (whether because it had been renevved or for any other reason) within the time prescribed
in section 5( c), the account would be in default, lmless
t . he note had been renewed under such conditions an to constitute a 'cure' under section 5(d).
"With respect to your second question., the seller
could take a renewal noto v.rithout limitation as to maturity, since he would in effect be merely GXti:mding the time
of payment of the account. The account would remain in
default pending payment. On the other hand, if the bank
accepted a renewal noroo payable to itself, it would in effect be making a loa:.'1 the proceeds o.f which it kr1<.~w would
be· used to rc)tire a char2;<0! acc01.mt, and the remn"fal would
be subject to tl.e restrictions applicable to 3UCh loans."
Very truly
7?-o,rs,
-~/h
.~a~W
..
.
S. R. Carpenter,
Assistant Secretary .
.
TO THE PRESID:t'NTS OF ALL FEDERAL RESERVE BANZS
•
•
I
125
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-571
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
October 16, 1942.
Dear Sir:
'
,
This refers to the last paragraph of the
War Depal'tmenti' s letter to all Federal Reserve
Ba1~s dated October 9, 1942, with respect to the
execution by the Federal Reserve Banks of supplemental agreements to existing guarantee agreements.
In a memorandum to the Board of Governors
duted October 9, 1942, the War Department has req_uested that upon any such modification of an existing guarantee ae;Teemont, the supplemental agre~:;ment
executed by a Federal Reserve Bank on behalf of the
War Department should be entitled: "Supplement No.
-- to Contract W-- F.C.--".
Very truly yours,
l
...
--::::;;?
.....
~-(1;?~~
L. P. Bethea,
Assistant Secretary.
,.
...
....
TO THE PRESIDENTS 01!., ALL FEDERAL RESERVE BANKS
126
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-572.
WASHINGTON
ADDRESS OrriCIAL CORRESPONDENCE
TO THE BOARD
October 22, 1942.
•'
Dear Sir:
The Board has received frorri the War Department a memorandurn dated October 19, 1942, signed by Lieutenant Colonel
Paul Cleveland, relating to the inclusion in loan agreements of
provisions relating to the acceptance
o~
advance payments and
Government loa.ns by borrowers whose loans have been guaranteed;
and a copy of the War Department's memorandum is enclosed here-
•
with.
It will be noted that this memorandum supplements and
modifies the War Department's memorandum of September 7, 1942,
a copy of which was enclosed with the Board's letter of September 12, 1942.
Very truly· yours,
~~'~
L. P. Bethea,
Assistant Secretary.
Enclosure
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
..
:127
cc
..
p
y
S-572-a
>·&.T< LEPJ.i.RTi.v.E!.'iT
3i;F:V l CE.S J.., SUPI-'LY
.il-.Blil:l\J.'l'ON, L.. C•
hi.ADG,_~JiillT1· 1=\S,
SPB:rJ
....
October 19, 1942
;.;..E..-.Oh'JJ."'D~i.l:!:
SUNECT:
•
..
.i!·::.·om tte 1:,'•w .Je:part:·;ent to the Board of Governors of
the .E'ederal Reserv(-' ·system.
Revie;; of guert.ntee ~mel let'ln a.g:reemE>nts; -provisions
prohH.i ting the borro>"er rrom undertaking addi. ticnal
'ft!ar contracts, trcm consenting to the modificr-!ticn of'
~·.'ar O:!ontracts, and from e:.ceepting ad·:ance payments.
1. RefeJ·ence is l':ade to the '.ia::- f:E>partm~nt' 3 mer.;o. :r.·anclur.t of .Septel"l.ber 7, lS42 or! tho above subject.
2. !'arc.graph 4 ..,f the abov0
hereby chan€•ed to read as i'ollo~··s:
mention~=d
r:emorandum is
"4. As to aclvcmce pa:{ments, the foll01.'!ina. requireare prescribed by the {ar t•epartment, end tile Fed•.~ral
Reserve B::mks are rnc:u~sted to se.:> that all loa.n agrel!'>mE'::r.ts
a.nd othnr similar .Lnstrulllflnts b.eroa1'ter submitted to the War
Departl!l~nt arf! in contormi ty ~d th the8e :reqni!'8fi!Pllts:
~ents
against thP ac~eptance ·
loano in rc:.sp·'?ct of
1:,iar production cont·racts •vtll b:::- r- ccepta1ll<-· t.o thf., ~:ar
Departr,,ent only if' they nrP ;rord·"<.l su'bstantially as
follows:
"a.
F~estrictions
oi' advance payrr.ents or
•
..
..
•
~\OVornmc:•t
"' l. ·n.e borro·.·mr will not, t-;i th out
thP. prior •:rritton co'l.sf"n.t of th(' financin£ institution, accept r:.n:r edv(mce payments or governI:l·~·nt loans; provided, however, that vlithout such
<'onsAnt the bcrro'·'r·~r may acct':nt advance 'Payments
1"ro1;1 the gOVf)l".Cllllent or goverr.ment loans in respect
of Har nroduction contracts if (1) thA entirE\ credit
provided tor h~reunder is at the ti:r.-:8 boing used
anc' the financing institution bes not, a1't0r rMsonacJ.r-- cpportuni ty to do so, sup:11ied additiona.l D8C0Ssary c:rodi t to tb' borro~·.rer on substantially the
saw:> t~n!'ls and conditions as are provincd in thls
Agrc~ment ( othsr than chang0s l~it~dA necessary by tho
e.djustment -1f th" f>Prcr·ntage of guarantn<> as provided in Section 1~) { ) or thA guarantee agreem8nt) ,
•
128
-2and if, in addition, (2) such advance payments
or loans have been approved by a Financial
Contracting Officer assigned to the Servi cas of
Supply, \ 'ashington, D.c., as being necessary
under all the circumstances.'
"b. When the above clause is used in loan
agreements the-Federal Reserve Banks shall, if requested
by the Financing Institution, insert a special condition
in the Gu arontee Agreement reading substantially as follows:
.,
•
-·
II
••
.:·
"' If at any time the entire aggregate
principal amount of the borrower's indebtedness incurred for moneys borrowed (includine funded debt
but excluding moneys advanced on Defense Plant Corporo.tion leases or borrowod upon Erlorguncy Plant
Facilities Contro.cts), plus advance payments and
loans, if any, from tho United States, shall excoed 0
, then upon written request of
the Finnn cing Institution from time to tire 1 the
porc<mto.ge of lof'..n specifiud in Section 1 will be
adjusted to such percentage us the Guarantor and
tho Finuncing Institution mutually consider fair
and equitable under tho circumsto.ncos, and if the
Guarn.ntor o.r-1d the Financing Insti tut~.on cunnot
agree upon such pyrcont~go within thirty (30) days
after each such ~equost, and such ~ggrocate ~mount
of indebtedness and advance payments and loans shall
exceed $
1 then such percentage of guc.ranteo
shr:..ll be
%~ and, if such n.ggr0 gc. to amount sha 11
excood $ - - ,
such porce11tago of gu.arontee shall
be
%, and i f su oh aggrogn.te E·.mount shall exceed
$
, such porcontugo of guo.rc.ntoo shc.ll be 100%.
Any such higher porcontuge of guG.runteo shall continue
in effect notwi thsto.nding any subsequent reduction in
the u.ggrogn.to amount of such indebtrJdness o.nd advo.nce
payments Md loans; n.nd in thd event of a prior adjustment, pursuant to section 5, of tho porcontugo of loan
specified in section 1, tho !lbove percentages shr~ll be
increased proportionr,toly to rofloot such adju~tmont •
.
129
-3-
••
•·
"'Unless otherwise agreed by the Guarentor
and the F'ine.ncing Institution, the rercentage of guarantee fee to be paid b:,r the Financing Institution in case
of an adjustment under this subsection shall be 3Q; of
the loan interest rate on the portion of the loan which
the War Departr1ent is obligated to purchase if the percentage of the Guarantee is in excess of 90,~ and less
than 95;~; 35/s of the loan interest rate on the portion
of the loan which the Har Department is oblir;ated to
purchase if the percentage of the Luarantee is 95;~ and
less than 100)~. and 4o;; of the loan interest rate if
the guarantee is increased to 100~-~.
"'For the purpose of increasing the protection of the financing institution under this subsection the proceeds of e.ny security or of any right
or priority (from whatever source realized) accruing
in respect of any advance payments or loans by the
United States shall be shared by the United Stutes
ratably with the loan guaranteed hereunder; except that
the foregoing shall not apply to any pledge, purchase
money mortgage, or lien taken by the Uni t6d States
upon the bulanco of such advance payments or loan, and
upon specifie materials, work in proct:ss, finished
goods or facilities upon which such advance payments
or loans have b<',en expended."
11 c.
H.estrictions against incurring additional
indebtedness-should always contain an upJ:-'ropriat•.:: exception
in favor of advance paymf:nts or governmLnt lo~::.ns in respect
of wa.r production contracts.
·
-·
•
nd. Restrictions against encumbrances of the
borrower's nss<:;ts should always contnin an appropriate exception
in favor of liens or encumbrru1ccs arising in connection with
advance payments or gov~rruncnt loans in respect of wnr production
contracts.
"e, Th~ r:ar Departine:nt has no objection to
a loan agreement provision restricting the acceptance by
the borrowE;r of nd\ro.ncE; po.ymonts on subcontracts.-"
~
'
.
130
-4-
..
• ·1
3. l:'or the bf'ormation of thf-' Federal Reserve Banks
and financing institutions, it may be pointf'd out t:r.at at th•·
present time there nre only £'our Einancial Contracting Of':ticsrs,
one of wbom L; the Dlr<'ctor of the .fi'tsca.l Division, Services of
Supply, Washington, D.C. , 8nd th0 oth:'r tl'.re·? of whom ar'' assigned
to the Advance Payment and Loan Branch, Fiscr;.l Division, Services ·
o:f' Supply, Washington, D. c.
4.
Federal
:Res~rv2
K~indly
tra.nSJni t the foregoing to all of tl1e
Banl::s.
V;:Ar Departmnnt of the United States
By:
(Signed)
PE>.ul C1Pvelanc1.
Paul Cleveland
Lt. Colon~l, A. U. S.
Chief, Loan Section
AdvancP Paym"'nt and Loan Branch
-·
....
•
•
131
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
S-573
WASHINGTON
ADDRESS Of"f"ICIAL CORRESPONDENCE
TO .THE BOARD
October 22, 1942.
'.
Dear Sir:
For your information there is enclosed copy of
•·
a letter written in response to an inquiiJ· from a Federal
Reserve Bank with respect to th8 treatment in earnings
and expense reports of Federal
Hes~:.orve
Banks of guarantee
fees paid on loans guaranteed pursuant to Executive Order
9112.
Very truly yours,
\.--...,--~~
~-,~~.,_,__
-·
~
---·~·
L. P. Bethea,
Assistant Secretary.
..
Enclosure
TO THE PHESIDEN'llS OF ALL FBDERAL HESEHVE BANKS.'
0
132
,
S-573-a
o·ctober 20,
19~2
------
Mr.
First Vice President,
:Federal Reserve Bank of
------
Dea:c lEr.
..
.•
This is in further reference to your letter of August 18, 1942, inquiring as to whether·guarantee fees paid by
Federal Reserve Banks on advances made by them under Section
13b of the Federal Reserve Act and guaranteed by the War Department, Navy Department, or Maritime Commission should be
included with expenses or deducted from gross earnings.
After further· reviGwing this matter, it seems to us
on the whole that iJUch fees should be deducted from gross
earnings a11d it will be appreciatea if you will have them so
deducted in reports submitted to the Board by your Bank.
Very truly yours,
E. L. Smead, Chief,
Division of Bur.k Operations.
I
•
133
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
J
S-574
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
•
October 23, 1942
...
Dear Sir:
In connection with the execution of guarantee agreements pursuant
to Executive Order No. 9112, certain questions have recently arisen as to
the interpretation of the words "original maturity" appearing in section 1
of the standard form of guarnntee agreement. The Board has now recoived from
the War Depart,nent a rnemorandtun dated October 5, 1942, setting forth the War
Department's views with respect to these questions •
•
•
With respect to whether the words "original maturity", as here u~;ed,
refer to an accelerated maturity, the War Department in this memorandum takes
the view that these words "were intended to refer to the expressed maturity of
a loan and were not intended to refer to accelerated maturity whether automatic
or optional."
With respect to whether, in the case of a revolving credit, the words
"original. maturity" refer to the mr:_turity of a note representing a particular
advance under the revolving credit or to the date of final maturity of the
credit agreement, the vlar Department 1 f.l m,;morandum contains the following statement,.:
"The €;'1larantee agreement was originally drafted
with a term loan in mind rath·2r than a revolving credit.
Consequently, ther.::.: is some ambiguity in the casG of revolving credit as to whether the 60-day period starts
running from the date of maturity of the note representing a particular advance rather than from the date of
final maturity of the revolving crcdi t as express,::d in
the loan agreeilllent. l< ><- '"
•
•
"Consequently, the v1ar Department has aL·rays held
th(..: vt,~w, in which i t is beli.evod the; Navy Department
concurs, thr1t the words 1 original m.a.turi ty' in section l
of the guarantee agreement as applied to a re;volving
credit JllGr'ns the d1.1.te expressed in the loan agreement
for the tc·rmination of the credit rather than the date
of any particular not(; issued in accord·mce with that
•
134
-.
•
-2"credit. It is beli8ved that this is the only interpretation consister::t -d tb the last sentence of section
1 of the guarantee ar,reement which reads as follows:
•-•. here the loan is pay?.t.le in t-:m or
more amcw1ts or in:.>talments maturing at differ-en·~. times .• the maturity ol' the loan shall
be the maturity of the amount or instr,l.mcnt
whieh j_s last due.'H
...
•
In this connection, the Yar Department points out that to inter-orct
t:O.r:: i'mrcis "original maturity" as referring to thG date of maturity of r.t note
rcprc;,;en·~.ing .". particular advanc,:: would m:;;:::.n that n finr.ncing institution in
c;:;..~e of a r~wolving credit would have to "put" within 60 r.iays after the: expiration of the d~·.te at whlch a particular noto became due even thougb the
fim::.ncing institution is obligat<.'d to extend. aaditiona-L credit; and that this
woulJ incr.,_,asG th"3 likelihood of "puts" and would. seem umksirablc to the ·dar
Dcp.':lrtment. 'l'h~, 1i;r1:l.I' Department has gi v·::n con~idt::r'ltion to thE' inclusion in
guc.cr::mtec agre,Jut;nts of a special condi tio!l clarifying this question, but has
concluded th2t such .J.ction is unncc~:~;sary in visw of the intcrprt:;tation '.lbovo
expresseci. In this connoction, tt~·:; i'ar D:::.partment' ~' m:::Juor·.•:ndwn states:
"It 'N-'W c::.lso f·~~lt T..hJ.t such 2.n interprc.~t<lti ve
provision might throvr some~ doubt on e~:ist:l.ng gut.;.rantccs
of rcvolvlnt:.: cre;di t~: and th, . ., it :wuld be better simply
to notify all Fcdcrr.1l. ll.e::.srv<; Ba.nks of this intcrprE;ta-tion rdth authority +,o ;;iv<; any fimtncing institution
having doubt as to the interpretation :::. letter expressing tl-:e views of the guarantor."
•
Very truly yours,
•
L. P. Bethea,
AssistC:mt Secretary .
•
'l\J THE PHESIDEJJTS OF ALL FEDER:....L HESEEVL; BANKS
•
•
135
BOARD OF GOVERNORS
OF' THE
_,
FEDERAL RESERVE .SYSTEM
S-5 75
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
•
October 29, 1942 •
••
•
Dear Sir:
For the information of your Bank in connection with
guarantees pursuant to Executive Order No. 9112, there is enclosed a copy of a letter dated October 28, 1942, received by
•
the Board from the Comptroller of the Currency with respect to
the compliance of guaranteed loans with the requirements of ex-
..
ception (10) to section 5200, U.S.H.S.
This matter was also the
subjeet of the Comptroller's letter of June 18, 1942, a copy of
which was transmitted to you vvi.th our letter of June 24, 1942.
-
Very truly yours,
\'--·;:;:>'"
~--~~
•
7/
--- -. .
y-·t'_. L...-/.A__ .
1. P. Bethea,
Assistant Secretary.
Enclosure
TO
Till~
•
•
PRESIDENTS OF ALL FEDE}:.AL RbSEhVB BANKS •
•
136
S-575-a
TREASURY DEPARTMENT
COMPTROLLEH OF THE CURRENCY
WASHINGTON
October 28,
•
19l~2 .
Board of Governors,
Federal Reserve System,
Washington, D. C.
Dear Sirs:
0'
This is in reply to your letter dated October 23, presenting two inquiries with respect to loans covered by so-called gllarantees executed pursuant to Executive Order No. 9112 •
•
•
•
•
The first inquiry is whether the Guara..'1tee Agreement constituting Exhibit D of the General Motors Corporation Credit Agreement dated October 15, 1942, complies vdth tne requirements of exception 10 to section 5200 of Rev. Stat. of 1873, as amended (U.S.C.
title 12, sec. 84). It is the opinion of this office that this
Guarantee Agreement comes within the purview of exception 10 ~~d
the definition of the term "unconditional" as used therein.
The second inquiry is whether guarantee agreements in the
standard form of May 14, 1942, to which have been added Conditions
(A) to (0), inclusive, in the form accompanying the War Department's
letter of October 9, 1942, a copy of which you enclosed, would comply vdth the requirements of exception 10 to section 5200. It is
the opinion of this office that such guarantee agreements would come
within the purview of exception 10 and the definition of the term
11 uncondi tional" an used therein.
Although this question is not presented in your letter,
it is appropriate to mention that in any case in which a guarantee
agreement required the proceeds of the loan to bG used for one or
more specified purposes, uncertainty would exist regarding the applicabi.lity of exception 10, unless the guarantee agreement also
included Optional Condition (N) or a substantially equivalent
provision.
Very truly yours,
( Signed ) Preston Delano
Preston Delano,
Comptroller of the Currency .
•
137
BOARD OF GOVERNORS
Of' THE
FEDERAL RESERVE SYSTEM
·-·
WASHINGTON
S-576
ADDRESS DF"P"ICIAL CDAAEBPDNDENCE
TD THE BDAAD
•
October 30, 1942 .
•
Dear Sir:
•
•
•
•
There is enclosed a photostat of a letter dated
October 27, 1942, which the Board has received from the United States Maritime Corm:nis:oion addressed to all Federal Reserve Banks, regarding the insertion of certain special conditions in guarru1tee agreements executad pursuant to Executive
Order No. 9112. We have in our records the special conditions
enclosed with the above-mentioned letter from the·Maritime
Commission duly authenticated by Mr. W. C..Peet, Jr., Secretar.y, United States Maritime Commission; m1d a mimeographed
copy of these special conditions is enclosed herewith. It
will be observed that the special conditions enclosed with
the Maritime Conunission 1 s letter arc identical with those
which were enclosed with letters addressed to all Federal Reserve Banks under date of October 9, 1942, by the War Department m1d the Navy Department .
Your attention is called to the fact that, while
the Maritime Commission's letter ~s substantially the same as
the letters addressed by the War and Navy Departments to the
Federal Reserve Banks on October 9, 1942, the last paragraph
of the Maritime Commission's letter authorizes the Federal Reserve Banks to execute supplemental agreements containing the
special conditions without further submission of the matter to
the Maritime Co.mrnission for approval, "provided that the inclusion of such conditions in no way alters the original intent of any executed guarantee agr0ements. 11 We have had informal discussions with a representative of the Maritime Commission as to the meaning of this limitation; and we have been
•
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•
138
. ..
-2-
S-576
advised that the language above quoted is intended to.have no
application except with respect to a particular case in the
I~inth Federal Reserve District' and may therefore be disregarded
qy all Federal Reserve Banks except by the Federal Reserve
Bank of Minneapolis in connection with that particular case.
We are furnishing a copy of this letter to the Maritime
Con~ission.
Ver.t truly yours,
~-~.
f'CA~At---L. P. Bethea,
Assistant Secretary .
•
Enclosures 2
•
TO THE PRESIDENTS OF ALL FEDEJ;I.AL H.ESERVE BANKS
(Enclosures with addressed copies only.)
•
•
139
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-577
WASHINGTON
ADDRESS Of"F'ICIAL CORRESPONDENCE
TO THE BOARD
•
November 3, 1942.
Dear Sir:
The following is a copy of a letter sent toda;:r to a Federal Reserve Bank regarding Regulation W:
,
•
"This refers to your letter of October 20, 19h2 asking four questions in connection with sections It( e) a.-·1d
5(h) of Regulation W added by Amend1nent No. 9. The questions arise out of a c~:we where three coats are sent on
approval to a customer with the understanding that the
customer will select one '~oat and :return the other·s.
"Your first question is whetb.er the store .should ascertain at the t:Lmc the article is c:ent out v;hether the
customer expc,cts tc) pay cash, or expects to charge the coat,
or exp'3cts to pay for it in instaJ~rnents. You have informed
the store that lt should do E>O, and the Board agrues.
"Your second q11estion is what down payment should be
obtained if the coats are delivered in anticipation of an
instalment sale. The answer is that the customer expects
to buy only one coat, and therefore, only one coat is
delivered 'in anticipation' of a .sale. Therefore, the
customer is required to deposit only an <:Lmount equal to
the down payment which would be rcq:uired on the most c!Xpensivo of the three coats.
·-
"Your third question deals with the case where the
three coats are delivered on approval and the customer
states that she expects to charge the coat which she
selects. While the usual practice would probably be to
charge aLl three coats to the customer's account at the
time of delivery and to cancel the charge on two of them
when returned to tho store, sc:ctlon 5(h) only requir,~s
thr.: store to charge one of them to the account for the
reason discussr:;d in the preceding paragraph. However,
when the customer makes her selection and decides to keep
140
S-577
-2-
the coat, she states that she wishes to place the sale
on an instalment basis, and you ask whether a down payment should be obtained.
•
•
"In such a case, the customer does not carry out the
anticipation contemplated b,y section 5(h) ru1d her failure
to do so operates as a cancellation of the transaction
there covered. Consequently, there is a new transaction,
namely, a.i.1 instalment sale, which is subject to all of
the provisions of the Regulation applicable to such a
sale, including the requirement that a dovm payment be
obtained. Of course, the original delivery on approval
without a down payment would have been a violation of
sections h(e), 5(a) and ll(a) j_f ther0 had been any
agreement or understanding, express or implied, that the
coat would eventually be sold on instaL~eLts.
"Your fourth question relates to a case where the
customer, mving selected one of the three coats which
were delivered on approval, returns it for alteration.
Your question is whether the date of sale for default
purposes is the date of delivery on approval or the date
on which the coat is retu..'Y'rled to the customer after
alteration. This appears to be the srune kind of a case
as the second case discussed in S-56), and consequently
the date of sale for purposes of determining whether or
not the account is in default is the date on which tne
article is returned to the customer after alteration."
Ver-J truly yours,
~~~-
•
L. P. Bethea,
Assistant Secretary .
.
TO THE PRESIDEl"'JTS OF ALL FEDERAL R.ESEHVE BAIJICS
•
•
141
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-578
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE SOARD
•
Novembrr 3, 1942
Dear Sir:
.. There is enclo::;ed for your information and guidance a
copy of a letter which the Board has received from the Navy Department dated October 31, 1942, identified by the number
J40PM10311008, signed by Mr. S. A. Mitchell, Chief of Finance
Section, regarding the insertion of Optional Condition (N) and
.of Optional Condition (L) in guarantee agreements executed on
behalf of th~~ Navy Department, and vri.th re,spect to a modification in the standa::. d form of authorization.
1
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In this connection, the Navy Department has requested
thr:; Board to advise the Fedoral Reserve Banl{s that on anu after
October 31, 1942, and until :I.nstructed to tho contrary by the
Navy Department, authorizations for the execution of guarantee
agreem.'mts will include a footnote, rnferring to the words "standard form dated May 14, l9L~2" wher:: they occur in the form of authorization, in the follov1ing language:
HSubjcct to thr: instruct:i.onG contG.ined in the
let tcr· of October 31, 19!,2. from the Navy iJf. pn.rt;ac:nt to
tb.e F<.;dc:ral £{;.;;serve Be.nks, Y/.lPMlOJll008. 11
Very truly yours,
•
L. F. Bethea,
Asi>istant Sc:cretary.
Enclosure
·
•
142
S-578-a
-·
NAVY DEPARTMENT
WASHINGTON
..
No. 340PM10311008
October 31, 1942
From:
To:
E. L. Smead
S. A• Mitch ell
Subject:
Standard Form of Authorization
The Comptroller of the Currency has suggested that
optional condition (N) be included in all guarantee agreements
where the proceeds of the loan ·covered by the guarantee are to be
used for one or more specified purposes. Since the use of the
proceeds of loans guaranteed by the Navy DepartrrHmt is restricted
in practically ever-y instance, the Navy Department requests that
optional condi t:Lon (N) be included in all f:o"U'lrantee agreements,
alon1~ with the mandoto:rJ conditions.
Tl'\e Federal R.eserve Bank8 are requested not to include optional condition (L) unlest> the loan has been recommended
by the Federal Heserve Bank as being sound from a eredit standpoint, and unlE,ss the includon of such condition has had the
prior approval of the Navy Department. The Federal Reserve Banks,
as authorized on October 9, l%2, may include in the guarantee
agreement nny of tho:: optional conditions other than (L) which
may be desired ty the fi.nancinl~ institution.
The Federal heserve Banks are requested not to agree
to the inclt:.sion of language other than that which is substantially
contained in the ma.ndatory and optional conditions in the guarante<; agreement, as it is the desire of the Navy Department for the
g>larant1:.:;e agreements to be standard insofar as possible.
•
The Navy Department l.s discontinuing the insertion
of instruction:3 with respect to the use or mandD.tory and optional
conditions in e.uthorizations as of this date. This letter is to
be included in future A-uthorizations to the Federal Reserve Banks
to guarantee in behalf of tho Navy Department, by reference.
(Signed) S. A. Mitchell
S. A. Mitchell
Chief of Finance Section
143
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-579
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE SOARD
•
Dear Sir:
The 'Board has received from the War Department a
memorandum dated October 31, 1942, sie;ned by I,ieuteno.nt Colonel
•
Paul Cleveland, Chief, Loan Section, Advance Payment and Loan
Branch, regarding the use of Optional Condition (N), in view of
the position taken by the COJaptroller of the Currency in his
letter of October 2i1, l9l.2, a copy of which VIas t:i:·onsmitted to
you with our letter of October 29, 1942 (S-575).
J; copy of the
11\'a.r Department's memorandum is enclosed for y01n· information
•
and
g"~lidance
•
Ve;I"J truly yours,
L. P. Bethea,
Assistant Secretary •
•
Enclosure
TO THE
.
PR~SIDENTS
OF ALL :FEDEHAL RESEH\TE !3.AN1{S
•
144
J
S-579-a
WAR DEPARTNili:NT
SERVICES OF SUPPLY
V:.P.SHINGTON I D. c.
HEJ~.Dr~UA1~'I'EHi:3,
'
October 31, 1942
lJlEMORANDtJM:
SUBJECT:
From the War Department to the Board of Gov·ernors
of the Federal Reserve System
Optional Condition "N"
In view of' the recent decision of the Comptroller
of' the Currency .in reviewing the Genern.l Motors Loan, H
is
recommended tbat in all cases where a limit is place(1 on the
•
use of funds by th13 War Department optional cowH tion "N" be
used.
(signed) Paul Clevc·land
Paul Cleveland
Lt. Colonel, A. U. S.
Chief, Loan Gection
Advance Payment and Loan Branch
•
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•
145
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-580
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
November 4, 1942
•
•
•
•
•
Dear Sir:
The Board has received several inquiries regarding the
retention by Registrants of records and papers relating to credits
within the scope of the Executive Order of August 9, 194l,and Regulation -·W. These inquiries concern the records and papers which
should be preserved and the date when they may be destroyed, and
bring into question what action the Board expects to take under
sections l2(h) and 12(i) of the Hegu.lation and the sufficiency of
those sections in their present form.
In studying this matter, consideration was given to the
preparation of a letter to all Federal Reserve Banks setting forth
a general rule sufficiently flexible to cover all of the many
classes of businesses affected, since it was deemed inadvisable to
attGmpt to specify in detail all of the records and papers that
should be preserved. However, the disposition of this problem and
the security of the enforcement progrrun in general made it appear
desirable th<1t sections l2(h) nnd l2(i) be runended. Accordingly,
there is c;nclosed herewith n. proposed Amendment No. 10 to the Regulation on which the Board would like your views and comments.
Your promptnt::ss in forwa:cding replies will be much appreciated •
•
•
•
Briefly, you will not0 that the proposed section l2(h)
prescribes a general rule requiring every Registro.nt to preserve,
for a period of two yeB.rs after the dette of the last pnyment received on :1n;y credit within the scope of the Executive Order, such
records and papers as are relevant to estabUshing whether or not
the credit was in conformity with the Regul:;.tion. The two-year
period, vvhich is new, conforms with ,'l sim.il;cr re-luirc;ment in the
sm<J.ll lo:ln l.'lws of m::my States and would seem to be adequatE: for an
effective enforeement progr:un. Otherwise, such general rule merely
clarifies whnt m:J.y be reg:1rded n.s the substnnce, in this connection,
of present sections l?(h) 'lnd 12(i).
The proposed section l2(i) retnins the prov~s~on now in
section l2(h) for such st.:ctistic:J.l reports as tho Board mn.y cetll
..
S-580
1.46
-2-
'
for. In addition, however, such proposal spells out in mOI.'e
detail than present sectton l~~(i) the R.eg-i:~trant 1 s obligation
to perr.d_t :Lncpecti.ons of his business operations, including
his i~ecords and paper~, by representatives of the Board or the
Federal Resr;;rve Banks, :1nd the Board 1 s authority to require
testimon;;- and the production of i'ecords and papecs in determining whether or- not a Regisl:.rant he.s complied with the provisions cf the Regulation.
Very truly yours,
"~----·
•
~ .....----·
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.• A • - ·
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/
/ 'I'"
h'¥/4(
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L. P. Bothea,
Assj_st:'l.nt .Secretary.
•
Enclosure
•
TO THE PRESIDENTS OF ALL F'EDEHAL RESEHVE BANKS
•
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I
147
PEOPOSED AMENDMENT NO. 10 TO REGULATION W.
Regulation W is hereby amended, effective - - - - - - - - - - -
•
by striking out subsections (h) and (i) of section 12 and substituting
the following:
"(h) Preservati_on of Records. - Every Registrant shall
pr(~--
serve, for a period of two years after the date of the last pa.vment
received on any extension of credit v:ithin the
scop~:
of the Executive
Order, such books, accounts, r·ecords, and other papers (including any
..
statements required by or obtained pursuant to this Regulation) as are
relevant to establishing whether· or not such extension of cr·cdit was
in conformity v:ith the requirements of this Regulation, except that the
Hegistrant may pr·eserve photographic reproductions in lieu of such
books, accounts, recordG, or papers.
"(i)
Reports, Inspections and. Production o:f Records.- Every
Registrant shall make such reports as the Board may' f.:-om ti:no to tima
require as necessary or appropriate for enabling it to perform its function3 undel' the Executive Order.
Every Registrant shall permit the
Board or any Federal Reserve Bank, by its duly authorized representatives, to make inspections of the H.eg:Lstrant 1 s business operations, in-
..
eluding inspections of the books, ac:counts, records, and other papers
described in section l2(h), for the purpose of detcrrnining whether or
not the Hegistrant has complied with the requirements of thi::::; Regula-
•
tion; and, when ordered to do so by the Board, every Registrant shall
furnish such information, under oath or othervri.se, including the pro-
..
duction of the books, accounts, records, and other papers described in
section 12(h), as the Board may deern necessary or c.tppropriate for such
• for FRASER
Digitized
purpose, 11
148
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
S-581
WASHINGTON
ADDREBB OFFICIAL CDRREBPDNDENCE
TD THE 8DARD
•
Novemb~r
5, 19424
Dear Sir:
•
•
The following is a copy of a letter sent today to a Federal
Reserve Bank regarding Regulation W:
"Receipt is acknowledged of your letter of October 30
enclosing copy of a letter from l~J.r.
, Supervisor of
the Credit Union Division of the
~Jtat0 Banking
Department, together ¥nth an article entitled 'A Cushion of
Cash--How to Get it' referred to therein.
The article presents the question whether section
8(b) of Regulation W exempts a loa.n made by a credit union,
secured by .its shares, to enable the borrower to purchase
such shares, if therG is an understanding that the borrower will be permitted to withdraw any portion of the share
account, vdthout making an equivalent payment on the loan,
if the credit union should feel that such action was warranted by the circumstances, as, for example, where the
loan was othend. se adequately secured.
11
•
•
....
"The Board agrees with you that an arrangement of
the type described would be a violation of tho Regulation.
In view of the dual purpose of the loan it could not properly be considered as n loan 'for the purpose of purchasing' the shares ~~thin the meaning of section 8(b), and if
it was originally made for the purpose of purchasing such
shares but with an understanding that it might later be
used for other purposes, the arrangement would violate
section ll(a). 11
Very truly yours,
,_ ?;r--r::::'
•
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-~
;f?t.AL JA..- ..
L, P. Bethea,
Assistant Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
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.
149
'
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-582
WASHINGTON
ADDRESS OF'F'ICIAL CORRESPONDENCE
,.
TO THE BOARD
Novembc r 10, l9L;2.
C• •
I.') •c:ar o1r:
Sever~l questions ha.ve been raised l:.:y 'F'edera1 RE:serve
Banks reg::l rdinE the extension to employee::; entering various serv- .
ice~> o'i,, act:Lv:ities 0f the benefits 1111der the prCfTi:lm £'or unifor-m
treatment c,f employees of tho ?r:;deral Heserve Banlw who are called
ir:to rni.1it:J.ry .')ervice. The~ Boa:rd'~J views v:itt~ rc·gard to tl1e vurJous qvest:l.un.s e.re summariz(~d 2.s fo11ows:
•
•
l. M(;mber 3 ci' the WAVES and V:/AACS are eonsidered a[' being. on
aeti ve m1l:L k·.ry :3c:: rv:l c.e. Women who le<,ve the employm<mt. of a Heserve B:mk or the B,·)ard to ,join the WAVES or the WAACS are entitled
to the same b·'mofi t s under the uniform progra.m e,s -'"tr·::o extended to
male empJ oyeos enter·inc{ active military service.
Whi.lo the WAAl;~) are not Dt this t:Lme authorized to purehase
NationaJ .Service L:Lfe Insur.:mce, the Huserve Bnnl<s and the Board
should r;te.nd ready· t.o reimburse them to tlw extent provided in the
uniform program U' the vvAACS should be authorized to purchase such
:lnSUl'3TlCE' •
•
•
•
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2. a. E:mployeet-> of tho Ecserve Fhnks and the Board leaving t'J
enlbt in Cla::>s V-1 of the Unj.ted States Neval hfst:Crve or in the
Arll\Y' Enlisted Rt;::>ervc Corps to pursue i;, co] lege cdueati on at their
own cxncnse while on a.n inor.:tiv.;, military stt.J,tus in Classes V-1,
V-5, or V·-7 oZ the Naval Reservt:' or :in the Army Enlisted he.::~ervt:·,
arc not t3ntitlcd to my of th1:: b-:mefits extended under· the uniform
program to employees leaving to enter upon 'letive mil:Ltar·y duty.
b. Employ0es who, while in an in:wt:Lve mi1itary status in
Cla.sses V-1, V-5, o:!' V-·7 of the United States NaV,'l} Rcf>erve or :in
the Arrrry Jt:nlistc~d Reserve, continue in thu employment of a Heservo
fl1~.nk or the Bor.rd unt1l G~illcd into active rniJitary s..::rvice arc, of
course;, entitled, when called into active military service, to the
usu:J.l 0enefits extended unclc::r the prop'.3Jn to employees leaving to
enter U))Oll activo m:Uit.sry duty.
3.
•
Bec,'luse of Uw hazB.rds of the M-:::rchant M.Jrin<'.: and :i.tc:: con-·
tribut.ion to the
w·.~.r
effort, th·:: He serve Banks are authorized to
150
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S-582
-t::.-
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extend to an employee entering the United States Maritime Service
of the War Shi.pping Administrr-ttion or the United States Merchant
Marine, such of the benefits under the progrom as the Eeserve Bank
feels justified in the cireumstances. (One employee of the Board
was recently enrolled in the United States Maritime Service of the
War Shippint:: Administration. In that case, the Board extended to
him all of the benefits under the uniform program except reimbursement for premiums on National Service Life Insurance. Members oi'
the United States Maritime Service or the HerchA.nt £,larino are not
authorh;ed to uurchase National Service Life Insurance, but the
op,;rato:rs of the ships take out War Risk Insurance on the lives of
the crew Et no cost to the employees.)
4. Benefits under the progr<J.m do not extend to employees leaving to serve with the Red Cross or comparable agencies.
It i.e~ hoped thnt the above interpretations nnd <mthori::.ations cov(;:r t.he situation. If they do not, however, the Board will
be glad to have: your vit:~ws.
Very truly yours,
~r,:;...:;.?
,.,---...
~~---··.
•
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I
. ---/
·/.1~1
...r-r~ ·.
L. P. Bethea,
Assistant Secretary.
"
TO THE PR.ESIDE:t\TTS OF· ALL F1i:DERAL hESE:RVE; .31\NKS •
•
•
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Pl.A·~-.-
151
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
3-583
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
November 1;.:, 1%2 •
•
Dear Sir:
The Board has received several inq1.1iries reg&rdine sor-tion 10(.'1)(2) of Hef;ulation W, and these inquiries are discussed
below.
•
The first inquiry is whether a hei~ir3trant nay discount
and receive payments upon an oblit.~·ation wrtl.ch prior to d:isemmting has been renewed or revised pursuent to the provj.sions of S0Ction lO(a)(?) cw as Lo have a. maturity which w0ulcl not have b•:en
perni.E3Sible under the Hop-ulc1.tion in th<c~ f:Lr[·rt instance •
The Don.rd i3 of the opinion th·tt :v:;ction 3( a) ( 3) would
not prevent such action by tbe Registrant, since the renewal or
revision is one which is expr•:1ssly authorized l:.1y the Reeulation •
•
•
•
•
..
The second ~-nquiry rela.tes to the terms on which a Registrant me.y make a loe.n to e debtor- to retire bis instaJioont indebtedness to another cr.::-ditor vvhcre the maturit~,r of the lmkbt<:.;dneGs has already bL3Gn extended by the other creditor undr.:)r .seetion
l0(a)(2).
Tht:~ Board L:J of the opinion that the Hcgistrant may mako
such a loa.n on the same terms as the obligation being retired. The
obligation being retired is in conformity 'Nith sectl.on 10(a)(2);
and section lO(c) permit::: a 1ender, in making a loan to rct.Lcu a
regul.e,ted insttllment credit, to extend terms as liberal m' the
terms of the credit being retired if tho:Jc terrrw are in conformity
with the Hc";ulation.
The third incruiry is vvhether a Registrant who has purchased a delinquent instalment obligation and ha:3 exercis<~d s. bon~
fide collection effort, may then revise th,:.· obligation tmder :.::ection 10(a)(2) on tbr'lns not initially f;errn..i.s::::Lble.
The Board h> of the optnlon .tha.t Ulis may be done, but
it should be errrphas:Lzed thHt. the change in ownership of the pEi.p0r
152
S-583
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does not c:hange the rer3ponsibi.1ity of the holdBr to rrw.ke every effort to collect it in accordance with its terms. Furthermore, the
revision must not be made on terms lonp-er than are neeessary in
good faith for the Registra.nt 1 s own protection.
The theory of section 10(a)(2) is that an adjustment w.i.tl1
the customer should not be prevented if that is the only feasible
way in which the credit can be collected. Any ::;uch adjustment must
be the last resort (except, of course, litigc:.tion) and a meP.sure
to b(-l taken only after other means 0f collection have been exhausted.
•
•
Each of the foregoing points with respect to section
10( a) ( 2) is consistent with the principle of that section, name;'1y,
that it. may be applied only for the protection of tht:! H.egistrant
who holds the obligation which is in default and who is makinr, the
ad,justment. If section 10( a) ( 2) is applj ed in accord;:,nc'; with the
principles heroin expressed, it is not believed that any undur~
weakening of the; Hegulation will result. On the other hand, :Lf
you should <;;Jncounter any evidence suggestint;:: tl1a.t Registre.nts m!?:.y
be using this section improperly, we shall appreciate~ information
D.S to such si tuatil"~ns <~.s well r1s :mgg(:;stions e.s to mw c:,ction, including an amendme:nt, that ;you may eonsider desirobl0; •
Very truJ..Y· yours,
\. . _ =-
~-':::'"'"-r
--·
- ..
. /,.A
.· ~t.-tf-H.-
•
1. P. Bethea,
Ass.h:tant Secretary •
•
TO 'I' HE PR!!.;SID.ENTS OF ALL FEDERAL RESERVE llA..l\!KS •
•
..
•
153
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
WASHINGTON
S-58h
ADDRESS DF"I'"ICIAL CDRREBPDNDENCE
TD THE BDARD
November 12, 19h2.
Dear Sir:
As you were advised in the wires from Secreta.ry (Jlorgenthau
and from me dated November 11, i t is contem.pl.<:~tt;d that tbe activities
of the Victory Fund Committees will be greatly expanded.
•
•
•
...
L1. connectlon with th.~.s expanded prograr.1 I should like to
call attention to the meeting held i~ith the PreddGnts of the Federal
Reserve Banks at the Carlton EotcJ. on September 2;:3 to discuss activities
of the Victory Fund Comrrd.tteef3. At that meeting .r discu3sP-d at som~
length the progro?.rn of the Comrnittees and expressed the opinion. thBt
since the System is vitally int.::rested in the :>ttccess of the selling
program the Federa.l Reset'Ve Bar..ks would be jus·t:.ified in assuming certain
expenses :i.n connection with the progra.11. It i.s contemplated that expenses of the kind referred to in the letter from ~/ir. Bell, LTnde!' Secretary of the Treasury, dated Septeinbcr 19, 1942, will be reimbursed by
the Treasury Department although it now appears that to reimburse the
Federal Heserve Banks in full for the expanded activities it vdJ.l be
necessa.ry to obtain a deficiency appropriation. It is understood this
will be asked for in due course.
There are, howev~r, certain expenses whieh do not come within
the terms of Mr. Bell's letter. In thif-3 connection, I refarred, at the
meeting at the Carlton Hotel, to the faCt that th,:; Federal Re,;erve hanks
had been able to f8cilitate the work of the CornaJ:i.ttees by providing
luncheons and dinners at meetings and conferences at the Federal Re:::erve
Banks and Brtmches and at other points ·Lhroughout their districts. The
Board concurs in :11y statement that the Federal Reserve Banks a.re justified :in assuming the expenses connected with sueh meetings <Yhc,n in the
opinion of the Presidents to do so would hc"lP to make the GovernmE·nt' s
progra.~ a SUCC8SS,
It was intended follov-ring the meeting at the Carlton Hotel to
""''""'""'"'..,.;;rve a committee: review the rp.wr:;tion of expenses connected with the
Digitized
• for FRASER
..
... .
-2-
.$'.
..
It will be appreciated if you will l<:eep the Board advised C1lrrontly of important developments in connection with the expanded Victryry
Fund program •
TO 'l'HE PRF.E;IDENTS OF ALL FEDERAL RESEHVE bANKS
...
..
154
Victory Fund program and to make suggestions vri th re::>pect tO' E.xpenses
that might be absorbed by the Federal Reserve Banks. In view of the urgency of the expanded program, however, ar1d of the di.ffictllty of getting
the committee together, it has been tho1.:1.ght best to get a letter out to
you promptly so that you would be informed of the views of the board at
the beginning of the expanded program •
•
•
S-52:1.~
,,
'
155
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-585
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
November 13, l9h2.
I'
Dear Sir:
For your information and
~::_'Uidsnce
there are enclosed copies
of a memorandum dated November ? , 191.,:2, received b;y the Board of Governors from Lieutenant Colonel Paul Cleveland, of the War Department,
"
vvi.th reference to the use of' ont:Lonal eondition (1).
In accordance
with Colonel Cleveland's request, it. will be appreciated if' you will
furnish a copy of this to the liaison officer of the War Department
in your di.str:t.ct.
We are also informal].;,' advised by a representative of the
•
Maritime Commission that optional condition (L) should not be used in
'
connection with guarantees executed on behalf of the Comrn..i..ssion without first submitting the matter to Washington for. 3.pproval.
Very truly yours .•
~
~---- r;?~~?-.
L. P. Bethea,
Assist;mt Seeretary.
Enclosures _,
TO THE PfiliSIDENTS Of' ALL FtDEHAL RESERVE BANKS.
156
S-5f~5-a
WAR DiPARTMENT
Headquarter.:;, Services of Supply
Vl!:_,shington, D. C.
November
7, 1942
•
iliF'~iiriOHANDU.>.l.:
..
SUBJECT:
From the V'!s.r Department to the Board of Governors of
the Federal Reserve System
Use of Optional Condition
11
1 11 •
l.. f~eference is ifta'~;e to telegrau1 dated November 6,
1942 to the Board of Governors from the Federal Reserve bank of
Chieago vl"hich reads
•
•
~.n
part as follows:
"Is it necessary to subliiit recommenda.tions to the
War Department wi.th respect to oDtional condition (L) in
instance:> where loan is les~; than ~-100 ,000'? 11
2. Optional Condition 11 L11 may not be used without
the prior approval of a financial contracting officer whether the
loan is abOV·3 or belorv $100,000 .
3. In general, it is the poll.cy of the War Department
not. to a.pprove thG use o.f Optional Condition 11 1 11 E:xcept in the case
of very large loans to very sotmd crcdlts where there is little likelihood of a disagreement subsequently- <:'.rising between the War .OE':p;;.rt-n.ent and the borrower.
•
4. In view of the fact that. this condition has
appeared in several loans guaranteed 1.mder del eRa ted authority,
H is requc-sted ths.t a copy of this memorandum be forwarded to
all Fcdt>ral Heserve Banks and liaison officers.
•
Har
Depart1~1ent
of the Unitf:d States
By: (Signed) Paul Cleveland
..
Paul Clevt;land
Lt. Colonel, A. U. S.
Chief, Lo:1n Section
Adv,·ncF: 1-':::t?ment & Loan Br::tnch
...
157
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
•
S-586
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO. THE BOARD
November 14, 1942
Dear Sir:
'rhe Board has received an inquiry from one of the Federal
Reserve Banks stating that memorandums from the Navy Department, in
connection with Regulatlon V loans, signed by Herman Jones, Jr. and
...
Robert 1. L. McCormick have been accepted as official communications
although no official advice has been received that these individuals
•
have been authorized to sign on behalf of the Navy Department •
You vdl1 find enclosed a copy of a letter, dated November
....
9, 1942, addressed to the Board by Mr. Sidney A. Mitchell, Chief o.f
Finance Section, Navy Department, advising that Mr. Jones and Ensign
McCormick are attached to the Finance Section and that although they
•
have not been delegated by the Navy Department to issue authorizations for guaranteed loans, in all other matters, comrmmications
from them should be accepted as being from the Finance Section,
L. P. Bethea_,
Assistant Seeretary.
Enclosure
•
158
S-586-a
•
NAVY DEPARTlv.EJ.J'l'
Washington
•
November 9, 1942
Dear tir. Bethea:
•·
•
•
This vdll a.cknovrledge your letter oi' November 7, l9h2.
Mr. Herman Jones, Jr. ha~ been attached to the Finance
Section of the Office of Proeurernent and Material of the Navy Department for so;;:te 1uonths. Ensign Robert L. 1. k~cCormick is also
on duty with th'? sa.o.lt: ~)ection.
So far authority has not been delegated to them to author1ze
guarantees of lo2..ns .!f1-'.'l.de pursu~:.nt to Execut. i ve Order No. 9112 but in
all matters other th<m such a d~~legation communications from them
[~hould be accepted a.s being from this office.
Y ourr; very truly·'
(Signed) S. A. 1:i tchcll
S. A. !Aitchdl
•
•
Chief
1Vlr. L. P. Beth~~.;;,, Assistant Secreta.ry
Board of Govflrnors of tiw
Federal Reserve S,vstem
Washington, D. C•
•
o;~
Finance Section
159
BOARD OF GOVERNORS
OF THE
S--587
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS DF"f"ICIAL CDRRE&PDNDENCE
TD THE &DARD
-·
November ll;., 1942
•
·-
Dear
S~.r:
Upon request of the Federal Reserve Bank of
DQllas, the Board of Governors of the Federal Reserve
System has approved the following change in the Interdistrict Time Schedule for cash itruns:
El Paso to
Los Angeles
2 days
3 days
Very truly yours,
L. P. Bethea,
Assistant Secretary.
•
TO THE PRESIDENTS OF ALL FEDEB.AL HESERVE BANKS
·-·
Digitized
• for FRASER
•
160
BOARD OF GOVERNORS
CF' THE
FEDERAL RESERVE SYSTEM
-·
S-588
WASHINGTON
ADDRESS DF"F"ICIAL CDRREBPDNDENCE
TD THE BOARD
-
November 17, 191+2 •
•
...
Dear Sir:
Reference is made to the third parae;ruph of
the Board's letter S-521 dated June ?0, 19h2, regarding
applications for guarantees by the Navy Department under
the provisions of Regulation v.
It will be helpful to us if letters transmitting
the first copies of applications for loans are forNarded
in duplicate and if they contain a·list of any documents
accorrpanying the applic~tion. It will also ba helpful if
when you forward tho second copy of o.n e.pplica tion, togeth::::r
with your investigation report, recolllln3ndation, etc., you
will re~er to your provious letter with which you forwarded
the first copy of the application.
V·3ry truly yours,
~~--··
~/..(~.~
L. P. Bethea,
Assistant Socrstary •
-
./
•
•
•
TO
TF·; FR':";SIDE!-'TS OF' ALL FEDBRA.L RESERVE BAI KS
161
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
S-589
WASHINGTON
ADDREBII DF"F"ICIAL CDRREBPDNDENCE
TD THE BOARD
November 20, 1942 •
.,
Dear Sir:
'•
The discussions that have been had with the
presidents of most of the Federal Reserve'Banks with
branches relative to the desirability of increasing the
powers and functions of the more important branches indicate that in some cases the Banks may wish to have a
vice president or other officer of the Federal Reserve
Bank in charge of a branch instead of a managing director. In order to make possible such an arrangement the
Board has revised its regulations relating to branches
of Federal Reserve Banks and a copy of the amendment is
enclosed herewith.
The above-mentioned amend~ent will be incorporated in the regulations relating to branches which
will be reprinted for inclusion in the Federal Reserve ·
Uoose-Leaf Service.
Very truly yours,
-----·_. .- ·'l?kt ?.LA--·
\....._
;;>'
~h .
?/"'.~-··-··
•
L. P. Bethea,
Assistant Secretary •
..
Enclosure •
....
TO THE PRESIDENTS OF ALL FEDERAL H.ESERVE BANKS •
.
162
S-589-a
PROPOSED AMENDMENT TO REGULATION HELATING TO
BRANCHES OF FFDEHAL RESERVE BANKS
l. The first sentence of paragraph (c) of section 3 is amended
to read as follows:
11 Wnere a Vice President or other officer ('who is not a
Director) has not been appointed as active manager of a branch,
one of the directors appointed by the Federal Reserve Bank
shall be designated by it as the active manager of the branch."
•
2. The last sentence of paragraph (d) of section 3 is amended
to read as follows:
In order to make practicable an orderly rotation of
b!·anch directorships, the terms of directors, other than the
Managing Director, shall be so arranged that the term of one
director appointed by the Board of Governors shall expire at
the end of each year and the term of at least one director
appointed by the Federal Reserve Bank shall expire at the end
of each year. 11
11
•
•
3. The following new
paragraph of section l;.:
paragl~:~.ph
is inserted before the existing
"(a) Vice President or Other Officer in Charge of
Branch.--Subject to the approval of the Board of Governors,
a Federal Reserve Bank may discontinue the office of Managing Director of a branch and, in lieu thereof, rnn.y designate from time to time a Vice President or other officer of
the Federal Reserve Bank as the active 1nanagcr of the branch.
Such Vice Presldent or other officer shall not be a member of
the Board of Directors of the branch. The discontinuance of
the office of Managing Director shall not of itself have the
effect of reducing the number of' directors of suc:h branch."
'
•
•
4· The existing paragraph of section 4 is designated as paragraph ''(b) 11 and the first two sentences thereof amended to read as follows:
"Other Officers.--The Federal Rcserve Bank shall appoint
such officers for each branch, in addition to the active
manager of the branch, as the bank from ti:ne to tim·;; deerr:s
necessary. Such officers sh<tll perform such duties as may
be prescribed, with the approval of the Federal Reserve Bank,
by the Board of Directors of the branch or by the Managing
Director or Vice President or other officer in charge."
•
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-590
WASHINGTON
ADDREBB DF'F'ICIAL CDRREBPDNDENCE
TD THE BDARD
November 23, l9h2.
•
Dear Sir:
For your information, there is enclosed a copy of a letter received by the Board from Mr. C. B. Upham, Deputy Comptroller
of the Currency, dated November 19, 19h2, enclosing a copy of' a
letter from Mr. L. H. Sedlacek, Deputy
•
Comptroller~
to Mr. Gibbs
Lyons, District Chief &nk Examiner, New York City, dated November
12, 1942, regarding the applicability of Exception 10 to Section
5200 of the Revised Statutes to participations in loans covered by
guarantees or take-over
•
con~itments
pursuant to
F~ecutive
Order
No. 9112 •
Very truly yours,
--····
F~
....- o·~·~.,.._
•
L. P. Bethea,
Assistant Secretary.
Enclosures 2
•
•
TO THE Pfr.ESIDENTS OF ALL F'EbEfiJ\L tiliSERVE BANKS •
•
164
S-590-a
TREASURY DEPARTMENT
COMPTROLL!ili OF THE CURRENCY
WD.shington
•
Addres3 Reply to
"Comptroller of the Currency"
•
November 19, 1942
Board of Governors
Federal Reserve System
Washington, D. C.
Attention: lv1r.
'
.
Gl~crge
Vest
Dear Sirs:
Pursuant. to the conversation bet·I'Jeen you and our
.Robertson with respect to loans covered by governmental
..
guaranties or take-over committr.ents, there is attached hereto
for :rour informs.tion a copy of' a letter directed to ivir. Gibbs
•
Lyons, District Chief National Bank Examiner, New York City •
Yours very truly,
(Signed) C. B. Upha.rrl
•
Deputy Comptroller
Enclosure
.
•
165
S-590-b
November 12, 1.942.
•
Mr. Gibbs Lyons,
District Chief National Bank F:x:am:iner,
525 Federal Heserve Bank BuU.ding,
Nr:-,:r York, New York.
•
Dear Mr. Lyons:
•
This is in reply to your letter dated October 22, relating to
participations in loans covered by governmental guaranties or take-over
commiti1ients. In the situation you present, "the participating bank would
not be numaging the lo<m and would not be the bank to whom the guarantae
·was iF>sued 11 , but ·would merely rec.eive from the managing bank a letter
certifying that it has a specified participation in the loan.
•
'
•
•
•
..
•
Exception 10 to section 5200 of Rev. Stat. of 1873, as amended
(U. S. C. title 12, sec. 84), is based upon the principle that to the extent that a loan is covered by a take-ov-er commitment vfhich cannot be nullified by any contingency not within the control of the lending bank, the
loan i3 freed from the usual risk elelMnt, an¢ therefore need not be subjected to the ordinary 10% limitation. As stated in paragraph (b) of the
definition of the term "unconditional", the bank "must be in a position,
at any time dur:i.ng the life of the loan, to demand performance of the
agreement and to receive payment in cash, in full, within sixty days . 11
Consequently., it is esr:;entia.l that the participating bank have the ~
pendent power to require take-over of the guar~mtied. part of its portion
of the loan, at any time. In the absence of this power, the guaranty
would not meet the requirements of exception 10, as far as the participatingbank is concerned.
In our opinion, th•3 guar[l.nty would also be defective, from tho
point of' view of exception 10, if its continuance in effE=;ct were to depend
upon action or inaction by the Itwnaging bank, beyond the control of the
participating bank. For example, v;here there is no participation problem,
the inclusion of a provision that the guaranty will torminat.e if' the bank
sues th(~ borrower without prior consent of the guarantor, would not prevent
the guaranty from being unconditional. (S£.Je example (5) in definition of
"unconditional".) On the other hand, if a participating bank's protection
through the guar:.nty would be wholly or partially lost in the event the
managing bank, sol0ly of its own volition, wr-::re to sue the borrower without
having obtained the required prior consant of' the guarantor, the protection
to the participatinp bgnk would be sub;j cct to defeasance by a contingvncy
not ..,..,ithin its control, and consequently the guaranty would not be uncond:itional as to tha.t bank.
It is belicvt:d that problems of this sort can be worked out in
most cases through comparatively simple modifications in procedure. Under
S·-590-b
-2-
.
-
•
the General tJ1otors Corporation Credit Agree;itent. and Guarantee Agreement,
for example, the borrower's obligations are to be evidenced by notes in
varying amounts ru.1'1ning to the parU.cipating bank~; individuall..,v, and tho
guaranty also runs to the in(ii vidunl banks Bnd consequently may be exercised by each, independent]_;;," of any action b;y otlv'"rs. Further;r1ore, the
Corarnittee ·which was set up in that case to f:>Xpedite operations WEtS given
no pm;r,)rs which could result in loss of gua:r·nnty protection to any particip,o.Ung bank through acts or occurrences beyond i.ts ovm control.
Yours very truly,
•
(Signed) L. H. Sedlacek
Deputy Comptroller
•
•
fl
•
•
•
•
•
1S6
167
BOARD OF GOVERNORS
..
OF" THE
FEDERAL RESERVE SYSTEM
S-591
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
November 24.l 19t.2 •
•
Dear Sir:
•
•
•
Future reports on Forms F. H. L.l? and 417 a, applications for industrial advances and commitments, may be submitted
as of the end of each month instead of weekly as at present.
Until further notice, however, please wi.re as of the 15th of each
month figures for number and amount of app1:i.ca.tions for advances
and commitrnents combined received and approved by the Reserve
Bank since date of the last monthly report. 'l'he forms will not
be revised at this time, and, acc:ordingly, it will be appreciated
if the headings on the forms, and the 11 Current Week" column on
Form F. R. hl7, are appropriately amended when submitting reports •
In the first monthly report, as of November 30, plc~<H3e enter in
the current columns of Form F. R. l~l7 figures for the period betwl3en the last weekly report submitted, e.g., November 18, and
the end of the month.
Reports on Form F. R. 508a, the report of action taken
on applic.ations, submitted in accordance with the Board's letter
of October 17, 1.939 (S-1.87), may be discontinued. The list of
industrial advances and cormnitments outDtanding, now submitted
quarterly, may be submitted semiannually hereafter as of the end
of March and September •
•
Very trul.y yours,
•
<....
<
--:-~
- ..
.?,-;< ·y/Jt;~_
L. P. Bethea,
Assistant Secretary.
•
TO THE PRESIDENTS {)F ALL FE.DEh.AL ld:.Scl'i.V:t; BANKS •
•
168
'
S-592
.
November
•
25, 1942 .
(Addressed to the Presidents of all Federal Reserve Banks)
Tb.e Board has received several inquiries with reference to the application of
It.egulation W to credit sales of toys and games •
•
The question concerning toys arises
whE~re
the toy is a copy on
of an article wh:Leh is li.sted in section 13( a).
•
b. sm~.ller
seale
The Boa.rd has ruled tha.t, such
a toy would be a listed article only if it is a working model of practical use
and differentiated from a r':::gul2.r article chtefly by its smaller siz.e, as in
the case of a small phonograph capable of play:Lng regular records.
Doll fur-
niture would not be subject to the regulation while sma11 furniture for ac-
•
tual use by children v'lOuld be.
A small bicycle aL3o would be sub,ject to the
regulation whereas a tricycle, not being listed at all, would not be so tmbjcct.
The question concerning garnet> is whether ehildren 1 s games are included
in item 33 of section l3(a)
ment".
•
"Sports', athletic, outlng, and games' equip-
The Board has ruled that a game designed principally for acl.ults would
be so included even though sometimes purchased for children.
On the oth0r
hand, games designed princioally for children would not be included.
On this
basis, chess, playing cards, and such items as the regular larger sizes of
croquet sets would be subject to the regulation ..
(Si£~ed)
•
•
1 •. P. Bethea
169
BOARD OF GOVERNORS
OF' THE
-.
FEDERAL RESERVE SYSTEM
WASHINI3TCN
S-593
ADDREBB DP"P"ICIAL CDRREBPDNDENCE
TD THE BOARD
November 27, 1942.
Dear Sir:
'!'his refers to the Board's letter of October 1, 1942, (S-562),
with respect to the computation of guarantee .fees payable to the Guarantor ln cases V'rhere the· first advance is made by the Financing Institution prior to the.actua.l execution of the guarantee agreement. A
question has arisen as to the interpretation of the Board's letter in
view of the provisions of section 11 of the standa.rd form of guarantee
agreement dated May 14, 191+2•
•
•
Under the provisions of the stands.rd form of guarantee agreement, the Financing Institution 1 s obligation for the payment of guarantee fees would not ordinarily begin before the datf~ of exE:cution of
the guarant0e ·",grr~ement. In cases where for any reason it is necessary
to make an advance e day or two r,>rior to the m:ecution of the guarantee
agreern.ent aud thi3 advance is to be covered by the terms of the guarantee, it may be possible to provide by o.ppropriate language in the
guarantee agreement either that the effective date of the agreemAnt
she,ll be the da.te of the advance or that tho advance .in question t1hal1
be covered by the guarantee e.greement, in vrhich event the computation
of the guarantee fee would begin with the dr::.t.e o.f the advance. Unless
this is done, howev0r, the guarantee fee should not eover any period
prior to the date on which the Guarantor becomes oblig:1ted to purchase
the specified purcentage of tho 1oe_n, which ordinarily will be the date
of exeoution of the guarantee agreement.
We have conferred vvi th the War Department, Navy DepHrtment,
and Mnritime Commission with respect to this matter, and they are in
agreement with the views expressed above.
Very truly yours,
~;?-. 7 / .JC--1".-/d4f.-.·
L. P. Bethea,
Assistant Secr'3t ary •
•
BANKS.
..
170
BOARD OF GOVERNORS
OF' THE
FEDERAL RESERVE SYSTEM
S-594
WASHINGTON
ADDRESS CF"F"ICIAL CCRRESPCNDENCE
TC THE BCARD
December 3, 1942
Dear Sir:
•
In response to the Board's letter of September 17, 1942 (S-552),
a.ll of the Ft:lderal Reserve Banks forwa.rded lists of forms used by them
for submission to the Division of Statisticu.l Standards of the BUreau of
the Budget. Some of these lists included forms of the Board of Governors, and in two cases forms of the Treasury, which are sent out by the
Federal Reserve Banks.
•
Advice of the numbe~s assigned by the Budget Bureau to forms of
the Boctrd of Governors and the Reserve Banks has be~?.n received, and a
list o.f. the forms submitted by your Bank, exclusive of any Board or
Treasury forms, and the app~oval numbers assigned is being sent to you
with this letter. A list of' the forms of the Board of Governors and the
ap;lroval numbers assigned thereto is also enclosed; this list includes
forms which are printed by the fLescrvc Banks in accordance with a standard .form prescribed by the Board.
The approval numbers assigned to the forms shown on both of
these lists are ¥~ithout +3x.plration dates, and the ~reau of the Budget
has suggested that the approv.s.l numbers be placed in the upper righthand corner of the ap~)l).eable forms in accordance with the .following pattern:
Form Approved
lmdget Bureau No.
•
All of the forms printed by the Board har€=after Vvi.ll carry the
. appropriate approval number in this manner, and it is suggested that
the Federal Reserv"3 Banks follow the same procedure with respect to
thoir own forms as well as the forms prescribed by the Board but which
arG printed by your Bank.
Very truly yours,
Chester Morrill,
Secretary.
Enclosures 2
TO THE Phl~SIDENI'S
OF ALL FEDERAL RESEHVE BANKS.
171'
S-594-a ·
•
•
Form Number
437
F.R.563-a
AnnuaJ Heport--Holding Company Affiliates to
Board of Governors of the F';"jderal Reserve
System
Registration Statement (under Hegulation
W)
55-ROOl-42
55-R002-42
Heport of Member Firm o.f National Securities
Exchange
55-R.003-42
F.R.105
Report of Condition of State Bank Member
55-R004-42
F.R.l05e
Report of Condition of State B<J.nk Member
(Publisher's Copy)
55-ROOh-42
F.R.l05b
Report of Loans and Advances to Affiliates
55-R.00?-42
F.H.lO?
Eepcrt of Earnings and Dividends of State
Bank Member
55-ROl0-42
Report of Affiliate or Holding Company Affiliate
55-FlOll-42
Tieport of Affiliate or Holding Company Affilia.te (Publisher' G Copy)
55-ROll-42
Debits to Deposit Accounts Except Interb<:t.nk
Accounts
55-R013-42
Report of Condition of Member Banks in Selective Cities
55-H014-42
F.R.240
F.R.220
F.R.220a
...
Budget Bureau
Approva.l Number
Title of Form
F.R.573
F.R.416
F .R. 467
Interest Hates Charged on Commercial and Industrial Loans
F.R.585
Industrial Banking Company Heport
55-R016-42
F.R.585a
Personal Finance Company R.eport
55-ROl?-42
...
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-2T5.tle of Form
•
F.R.585b
Federal Credjt Union Report
5)-R018-42
F .n. 585c
State Credit Union Report
55-H019-42
F.H.585d
Retail Instalment Credit Eeport
55-H020-42
F .n. 571
Commercial Bank Report of Consumer Instalmr-mt
r:redit
55-R022-1-~-2
F .H. ~J.h
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Budget Bureau
Approved Number
Computation of Reserve to be CCI.rried with the
Feder&l Reserve Be.nk by Mf;mber Banks
173
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
.r
S-595
WASHINGTON
ADORES& OF"I'"ICIAL CORRESPONDENCE
TD THE SDARO
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Dear Sir:
Enclo(>ed h•:!rewlth is a copy of a letter wri tt~:m by
the Treasury Department to a State member bank with respect to
the establishment of a banking faeil.:i.ty at a 1lili.tary reservation by the member bank under its cie:3ignation by the Treasury
as a. Depositary and FinanciAl Agent of the Govermnent.
It is under:->tood that the letter to the State member
bank in this case :Ls typical of letters writt.en to b<mks es-
t'3.blishing these facilities but that in o>ome caseG there may
be other points covered.
•
The Board's Division of Examinatiom; will 1\e,c.p the
F'edera1 Heserve Banks currently infonned as to the esta:)J.ishment of these facilities by State ncember banks i.:n their re-spective districts and vdll pass on any information recoived
from the Treasury Department wi.th resped to speeia1 points
covered in the agreements between the State member hsnk D.nd the
Treasury Dc~partment.
v ••~ry truly yours'
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L. P. Bethea,
Assistant Secreb. ry.
Enclosure
TO Tllli PRESIDENTS OF ALL FEDEli.AL RbSEHVE BANKS·
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Dear Mr •
Reference is mrtde to the recent conference in your bank at
whieh Mr.
of this Deoa.rtment and Maior
of the War Department were present rclati~e to the need for limited banking facHities at Camp
It L:> 1.mderstood that your bank is -v;'illing to
render this essentio:,l banking facility provided a satisfactory arrangement hi perfected to of.f.set costs of operatj.on.
The Treasury is rJcsirow:: of having the ~~---:~--~--~-~
-.::---' under its designation as a Depositary and Financial Agent of the
Government, perform the following functions: (l), provide paying and
receiving facilities for Arm.,y p~>rsonnel, including custodians of Post
Exch<mgc funds, Company funds and other similar unit funds; (2) furnish
the cash requirements of Finance Officers except cash for month-end pay·rolls; ( 3) accept deposits from Fin.<:mee Officer:> for credit to the account of the Treasurer of the United States; (h) sell iVar Savings Bonds
and Stamps; and ( 5) sell cashi::r' ~3 c:hocks ;:u·ld bank money orders. All of
the foregoing services should lY~ rendered without charg•;) to the Arrey
personnel t:~xcopt for the sale of cashier's ehecks a.nd bank money orders.
Authorization to perform thc~se functions ::tt Camp
:Ls contingent
upon the mil:i.tary authorities providlng adequate quarters at the Post
and military proteetlon to the extent neces~mr.J •
Confirming the a.rrangm::t\.mt agreect to at the conference, you are
o.dviseri tho.t. the Treasury, as a. b<O c::is for your providing limited banking
.facilities ~t Cnmp
, b wilUng to place c.>.n initial balance of
$
with your ba.nk, with the privilege of investing such b2.lance in
a 2% Depos:itar; Bond. The Treasury is 'fVi.lling, also, to permit your
bank to purcha.se w:i. th its ow1:1 i\n1ds a ?% Dep0si:Lary Bond in the amount
of $
, makinc a total of ~'--- invest<!d in these bonds. The
arrangement vrill be reviewed monthly for the purpose of mHking such adjustments as maJ be warranted. I wish to assure you that sufficient
2% Depositary Bonds wiJ.l be ,"lllott.cd to your b:mk- to o.f.t'set the costs
involvud in providing banking facilities at Camp_ _ •
It will be nBeessarJ for your bank to exocute and return to the
Treasury the original and two coo:ie;s o.f Form No. 3f'?, Subscription Form
for 2% Depositary· B~md. Thu amount of yot~r subscription on Form No. 387
~•hould be $
;:md vou ahou1ci i.ndicate that Methods A and C, as outlined on the r'CV\:;:se or' t.he form, are to be usod in making paymc~nt for
the 2% Depositary Bond .
175
S-595-a
-2-
In order thc.t the TY"easur',r may nroceed with the mattsr, it is
requested that you for~Nard your d;cch: ~n: d·:-aft for $
payable to
the Treas,u·er of the Unit~Jd States in pal~t payment for a 2% Depositary
Bond. WU.h respect to the rcm.aLning ~~
, y-ou are advised that .funds
in that amount will b:~ ph.ceri to the:: cre~oi your b<:mh: by the Treasurer
of the United Stl'.tes and. used in making payment for 11 deposit3.ry bond.
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It shc•uld be und<:T~;~ood tlv:t the fac:l.lity at Camp_ _ will be
in no Z>ense n branch bank but will he a function which your bank ha;:; been
requested to pcrJ'o.rm. by virtue of its de::oigna.tior1 :1~> a Deposita.ry :.md
Financial Jl.gent nf the Government.
Upon receipt of Form No. 387, cornplet'Jly executed, tog::th•ar wi tb
,your check or draft fm· $
, naya.IJle to th.:: Trcn;.sur·~;r o.f the United
States, irmnediat~.~ step:-> w'iTfh'"e tat~ en to cc.mplcte the arran;~ement an<1 ;you
will be advised •
Very truJ.y your.9,
(S:Lrrned)
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Under
Seeret~:~.ry
D. W. Bell
of the Treasury
BOARD OF GOVERNORS
176
Of" THE
FEDERAL RESERVE SYSTEM
S-596
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
Deeenib•~r
1, 191.,2 •
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DeHr Sir:
Sections 5(i.i) and 5( e) of Reg·ulation W refer
to payments to be mar:k on the tenth day of' th2 c::1lend.:=tr month, o.nd since this day falls on n Sunday Jn
,January next., the question has been .'!rsked 'rhuther payment ma,y be de.f•.?rred until the l.'ol1:Jwi.ng ct.:r.y.
In accordanc~ with th& general ru1e in sueh
cases, where the~ tenth day of tho Ci:J.Jendar month falls
on Sunday, the final day for the purposes of ::::ect:i0ns
•
5(a) ::md 5( c) :Lr the E.·leventh,
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L. P. Bethea.,
It
A~>sistant
TO
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THE~
Secretary.·
PRESIDENTS OF AIL FEDEHAL HiLSERVE BANKS.
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
177
S-597
ADORES& DF"F"ICIAL CDRRE&PDNOENCE
TD THE BOARD
Decem.ber 3, 1942.
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Dear S:Lr:
In v1ew of the increas1ng difficulties of obtaining and
retaining adequate staffs during the period of the war emergency,
the Bo~rd cancels letters X--9798 dated January 21, 1937 and S·-2'/5
dated July 17., 1941 !'elating to the retention in serYiee o1· reemployment of officers and employees after attainment of age 65,
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V'l1lenever· by reason of the employment situation it would
be to the advantage of your Bank to retain the services of an officer or employee after he reaches nge 65, the Boa:cd will offer no
objection to his retention ('11 a temporary basis, whethtC)r or not his
retirement is deferred pursua.nt to the resolution of the Hetirement
Committee dated November 28, 1942, with the understanding on his
part that :;;uch tempor<''l.ry employment may be terminated at any time,
The Board Hkewise will offer no objeetion to the temporary rec:mlploym.ont, with the s::une understanding, of former officers or employees who are over 65.
Each such case of retention or reemployment should be
reviewed not less frequently than once a year and a record made
of the action taken.
This letter of course does not modify the existing procedure wtth respect to the approval of salaries of officers nor
apply to the PresidentJs and First Vice Presidents.
Very truly yours,
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Chester Morrill,
Secretary •
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
..
178
OF" THE
FEDERAL RESERVE SYSTEM
S-598
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 11, 1942
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Dear Sir:
It is understood that several Federal Reserve Banks
have received inquiries regarding the application of Regulation W
to advance.s made by general agents of insurance companies to their
..
sub-agents for living expenses and the like.
not been submitted to the Board .:md therefore the Board does not
know all the facts upon which they are based.
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The inquiries havo
HQwever, in the
usual ca.se it would seem that the answer to such questions would
depend upon whether or not the general agent was
11
engaged in the
business 11 of making loans within the meaning of section 3(a).
the
loarl~'
If
are merely sporadic, isolated transactions, the agont
would not be so engaged and the Regulation would not bo applicable.
Very truly yours,
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L. P. Bethea,
Assistant Secretar.t.
'fO THE PRESIDFJJTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
t79
OF THE
FEDERAL RESERVE SYSTEM
S-599
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
December l/4-, 191..:2,
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Dear Sir:
There is attached a memorandum from the War Department, dated December 7, 1942, setting forth the procedure to be followed in the future in making amendments to
executed guarantee agreements.
We have been advised that the procedure outlined
in the War Department memorandum win be satisfactory to
the Navy Department and to the Maritime Cowmission.
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The Federal Heserve Bank of New York hii.s furnished
us with a. copy of a form i t proposes to use .in effecting
changes, other thrm changes in the amount of the loan, in
guare.nte8 a.greements. This form, a copy of which will be
sent to you under separate cover, h;~.s been reviewed by rcpresentat:l ves of the W<.r Department, Na.v:'Y' Dep.:trtment, and
Maritime Commission, and thE:-y are all in ag;reement that
this constitutes r~ V<)ry satisfn.ctory form of supnlemontal
agreement for use in the class of cases referred to in para.gr~·:.phs 5 E>.nd 6 of the enclosed Wv.r Dep.artment memorandum.
Vel( truly.--.
:JY~~~uu_::rs,
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1. P. Bethea,
Assistant Secretary.
Enclosure
TO THE PRESIDENTS OF ALL FlWERAL lillSERVE BANKS
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:180
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WAR DEPARTl:'ENT
HEADQtTARTBRS, SERVICES OF SUI'PLY
VTASHIN GTON , D. C •
Decamber 7th, 1942
SPBFJ-
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~EKO RAl! DUlv::
From' the V'lb.1' DfJpo.rtroont to the Board of Governors
of the Federal Roserve System
SUBJECT:
Amendments of Executed Guc.ra.ntee Agre:Jlnents
1, In a considerable numb0r of cases, the ~~r Department has
authorized amendments of executed guarante~• agreements, and in some
cases such amendments have been made by the Federal Reserve Banks
under their delegated authority "in loans of $100,000 or less. There
appears to be some confusion as to the nanner in vmich such amendments
are to be effected and also as to the correct numbering of the amended
agreements. It is recognized that the War Department's instructions in
this respect have not al'YJays been consistent and".in many cases have not
been as complete as they might have been, It is hoped that the following
instructions will establish for the future a simple procedure for the
amendment of e~isting guarantee agreements.
2, Extensions of the maturity of the loan, and consents to the
release, salo, transfer, fur thor ple dg.e, subordination, or substitution
of any of the collateral, do not need to be t.reated as amendments of
the guarantee ar;ree:r.t<mt, and are not included in the followint; instructions.
3. It is requested tha.t hereafter all a.nBnd.ments of execub:Jd
guarantee agreements, whether authorized by this office or approved
by the Federal Reserve Banks under th:dr delegated a.uthori ty in loans
of $100,000 and less, be effected in the r.~nner o~tlined below, so
that this office will be able to fi1rnish to the General Accounting
Off~cc a. complete set of all guarantee agreements with nll amendments.
4, .!£.~amendment chane;es ~amount o£_ ~ ~~ it is
suggested that the Federal Reserve Banks treat th~· amendment in the
same way as a new loan, vmich is to be used in part to repay the outstt\nding loan under the original guara.ntoe agreement. There should
therefore be a new ~uarantec agre~ment, currently dated, bearing a new
current nUl'!lber, and sho"Vring the new amount of the loc.n, as changed.
The old guarnntee agreement should be cancelled, in the munner specified
in the War Departm.::lnt' s memorandum of September 10, 1942, and the ir.-
1_81
-2debtednoss under the old cuarantee agreement should be reported to this
office as having bc<:m paid.
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5· If the amendment do·::JS not chanc·> the amount of tho loan, th:::
O.ITBndmont should be effected by executing s. supplem'Jntal ac;re<Jmont
in tho form of h letter agream,mt. Th·:) supplem:>ntal agre:JmEmt should be
de. ted currently and should carry the sa:r.K.J number us the original gus.rantee
agreem:;nt, modifi•;d so a.s to read "Suppbmont No.
to Contract W
11 •
F.C.
" or Contract W
F.C.
, "Supplement NO.
Th'J supplemental o.gro·.::mont shouldlY)" oxecuted in the s::::..me W'J.Y asa-guo.rantce
agreement, that is, there should be four executed copi·:~s sit;n;;d by the
Federal Reserve Bank and theJ fino.ncin[. institution, with tho seal of
the fino.ncint institution appear:i:nr; opposite its sicnatur3, and two
executed copies should bo sent to this office.
6. In those cases wh:r•; a loan o.cre"mont has boen referred to in
a. guarantee o.e:r·:::•Jmont, "-.nd it is proposed to amend the loe..n f'.(;re•.::m':'nt,
the general proceedure outlined in paracraph 7 will be appropriate.
The supplemflntc..l agreement will describo the am:::-r..dm:mts the.t have been
rw.de in the loan aGreement and wi 11 state the. t the guarantee agreement
is amended so as to cover the amended loan at;reement. It should be
noted that in cases of this kind~ the mere amendment of the loan a.g:.reement between the financing institt1tion and the borrower {to.vrhich the
War Department is not a. party) is not enoubh.
7. If the original guarantee a.creement was executed be fore the
distribution of thf.3 nandatory and optional standard conditions vvhich
were transmitted 1Ni th the ·war Department's memorandum of October 9,
191:2, these conditions do not need to be included in the amendment,
nor do they neod to. be included in any n0w guarantee acr8eracnt executed
in accordo.nce with pa.rabraph 4, above. But, as specified in the last
pa.ro.graph of the War D·Jpartment' s memorandum of October 9, 19L2, if any
of the new optior1al conditions aro used, all of thr;; rw.nda tory conditions
must be taken, too.
8. Kirdly tra.nsmi t tho forer;oing to all Federal Reserve Banks
and Liaison Officers.
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W~r
By:
Department of the United States
(SiGned)
Paul Cleveland
PAUL CLEV~;w~ D,
Lt, Colc:r:<;l, A. U, s.
Chief, Loar Soction,
Advance Payr;r:Jnt ~ Loan Branch
Fi s ce.l Di vi si on •
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s-6oo
182
BOARD OF GOVERNORS
OF" THE
.-
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 18, 1942•
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Dear Sir:
There are being forwarded to you tod~y under separate cover the indicated number of copies of the following
forms, a copy of each of which is attached he~eto, for the
use of State bank members in submitting reports of earnings
and dividends for the calendar year 1942:
Number of
copies
Form F.R. 107 (Revised November 1942), Report of
earnings and dividends-~~alendar year 1942.
Form F.R~ 107a (Revised December 1942), Instru~
tions for the preparation of reports of
earnings and dividends by State bank members
of the Federa.l Reserve System.
There are also enclosed three copies of a memorandum
(s-6ooa) which contains comments regarding the revised form
of earnings and dividends report that should be incorporated,
to the extent you think it desirable to do so, in your letter
transmitting the above forms to the State bank members; and
three copies of a memorandum (s-600b) which contains suggestions pertaining to the handling of the reports by the Federal Reserve Banks.
·
Very truly yours,
L. P. Bethea,
A$sistant Secretary~
•
Enclosures
.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
http://fraser.stlouisfed.org/
(Enclosures with addressed copies only.)
Federal Reserve Bank of St. Louis
s-6ooa
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SUGGESTED COMMENTS 'I'O BE INCLUDED IN FEDERAL }lli!SE~WZ :3AEt~' LB'l"l'EqS
SENDING EJI31HNGS AND DIVIDEHDS REPOR'r FORMS 1'0 S'rA'rE: BANK V..El.:BERS
IN DECI~!~iBER 1942
..
li The fonn of report has been revised and considerably simplified,
particularly in Sections 2 and 3. The revisions are the result of efforts
to brini;; about greater uniformity in forms of earnings and cti·.ddend.s reports,
t~ provide an inlproved form of' report, and to reduce the burden of bank
reporting.
2. The Board of Governors of the Federal Reserve System a.nd the
Federal Deposit Insurance Corporation have adopted substantially identical
forms of oa.rnings and dividends reports, and the Comptroller of the Currency
has adopted an identical itQmirs.tion of earnings, expenses, losses, rc•
coverius, and profits.
•·
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3. The National Association of· oup·arvisors of State Banks has recommended that State banking departments use. in so far as possible, a f'o:rm of
earnings and dividends report like tho.t adopted by the Federal Reserve System
and the Federal Deposit Insurance Corporation, and it is expected that most
of them will do so. ~~~est Sta.te b~:mks, thon•foN, will rondor the sama form
of r~port to both Fvdoral and State ·nanking authori tios.
4. D8tailfJd instructions ht:..ve boon providod for thu gutc.ancG of
Stc.t0 bank mombors in prvpuring their n::ports • Thuso instructions should be
ca.rofully raad boi'oro proparo.tion of th•) roport is br,;gun, and. they should be
prosorvod for futuru usc.
5 ~ In Section 1 tho principal r::Jvisions
n.rG
as follows f
Item l(c), ''Sorvico charges and oth:;r foes on bunk's
loans~, has boon o.ddGd.
If tho r0porting bank's rooords do not permit the detcrminCLtion of th0 actual
amount of such incom~.>, the amount roportod agair,_st
this i tum may bc.l ostimat0d (in so fur t<s the yoe. r
1942 is concerned).
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Normal or r0curring depreoiution on banking house,
furni tur·,;~ ond fixtures, h'~rutofor<') not sGgrE:g£\ted
from oxtre. ordinary lossus and depr~JCi~tion churges
on r:c:al estf;.to, is now to b,J shown sepctrut,,ly in
current operating oxpens.:,;s •
Taxes on net income:;, h·~rutof'or,_: included in current
oxponsos, u.re now to bo shov<'r~ s0para.tely ~~sa.:i.nst
it<;;m 7 o..s a d{lduction from "Profits b3foru income
•
taxus" •
s-6oOa 184
Di vidc;nds declared, fo:rm,:~rly shown in Section 2 n.s
a che..rgu a.so..inst undivided profits, aro now to b0
shown o.g~tinst i t0m 9 in Section 1 c.s c.. d:::Jduction
from not profits 1 r,.nd 11 Not p:rofi ts c.d't•.::r di vid"nds 11
&I'G thon to bu carriCdd for'We..rd to S•c;ctior: 2 1
''Chanr;os in Cc.pitr.. l Accounts".
6. Section 2 has b~~n compl~toly revised. Hurotoforu this soction cQllod for th·~ gross nmounts of' all transfe;rs to D.nd from surplus 1
reserves for conting..::ncivs, rosurves f'or dividc:nd~> 1 e;tc., in Ci.ddi tion to
the.; •unow1ts of assossmnnts 1 rodu.ction of co.pi tr..l not r..::paid to she,roholdcrs 1
dividends p~id, utc. In r0visod ~action 2f all dobits Qnd cr0dits r~pr~
scmting r.1or'Jly trr,nsf(.;rs from onu ce..pi tc. l c.ccount to c,noth0r hr..v;_; b;;on
:::limint..tod, th.JNby groo.tly simplifying this soctiou of th8 r::;pcrt. All
thr~t is !lOW required is th<) ruporting of trD.nsc.ctions thc.t rosul t ei th-:.:r
in o.n increase;, or 1:~ avcrl)r.~su in th8 ~ of all capi tc.l c..ccounts,
7. SectJon 3 likewise has been radically changed~ Heretofore,
banks were required to show in this section the total profits, assessments,
contribution:;, etc,, since the organization of the bank, together with
the a.istribution thereof. 1'his inform&:cion has been coupletely eliminated.
All that is now required is that the banks show, as of' the beginning and
end of the report p~1riod, the balance in each capital account. '£his in ...
formation ma;y be readily taken from the bank's books •
•
8, Only calendar-year totals are to be reported in the current
report• An inttJrim semi-annual report, perhaps i::-:. condensed form, nay be
required a.t tho end of June •
•
s..ooob
185
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BUGGES'.i:'IOllS IN CONNECTI<,.;·N WITH HANDLING AND BXAMINi:..TION OF
S'l'ATE B.<..lm 1vL~WJt~H Ei..EWINGS i~ND DIVIDENDS RSPORTS BY
FEDERAL RESERVE BANKS
..
December
1942
i~ copy of the Federal Reserve Bank's lett0r to State bank r:tembors trE:.nsmi tting tha blcmk forms should bd furnishr;;d to the Board of
Govornol~s as soon as practicable, and a copy of the' lottur and aecompany•
ing forms should be sen-e -co tho banking dr~partmont or uach Stat:::: which
lies in tho Federal ResarvG district,
Whun r'.Jports on lt'orm F.H. 107 hav0 b0<m filed wii:.h the F0deral
Rusurvc Banks thoy should be carefully checked and any necessary corrections obtained t if practicablf;J, boforo th6y an forwardo<i to th~· Board
of Governors. Corr;.:ctions should be clearly shown on the copir s forwarded
to th:, Board, with an indication o1' th.::; u.uthority for tho correction, including thu iui tia.ls of cho pc.;rson a.t th,.., Fod'"'ral R.:~sorvc Bunk who mb.kes
thum. Whon necossary to clarify thu oorructions • a copy of 'the pertinent
correa}Jondenco should b,; fll.rnishDd th<:: Board"f If th0 obtainint: of corrections is lik..:1ly to dulay the ·transmi tta.l of' sny reports to th<1 Board
bGyond throe wo~ks from th..; olos:J o£' th; roport p<-,riod, such ruports, together with pertinont oorrespondonco or notes of outstnndin~ correspondence,
shoulu bo forvmrd,;;d to th~ :bo~rd, to be followed later by appropriato
a.dvic'~ of corroctions,
Tho roports should bo examined to sec
that~
among othDr things--
'£h-.; h-.:Jading of tho roport und r.:Jquircd sigrw. ture o.rccompl;;to;
All footings o.ro correct;
Amounts r.;;portod against c;o.ch i t<Jm in Section 1 do
not appoti.r to be obviously inconsishmt vii th th0
amounts shovm on pr(~codinE rCJport ( s) for compr.l.ro..blu
p~1riods;
"Othor curr~mt opcn,ting o&rnings", "Other curront
operating cxpons0s 11 , "R;covuriGs c..nd p:rofi ts- ..All
othor", c. nd "Losses o.nd chf.,rg0..-offs- .. .;.ll othsr 11 &.to
prop;:rly it•..'nlizcd;
Tho munb.)r of' off'icor3 u.ncl <:Jmploy.::;.;,s o.s shown against
itoms 2(a) and 2(b) appe~rs to be subst~ntially con~
po.ro.bl8 with prior r~ports;
.
s-6oob
.. 2..
The net chungo in total dupi tal o.ccounts shown o.g~·,inst
i turn 14, Section 2, agroos with thd dii'.f'cronco bGtwOclr. .
th0 ·totals sho·wn in th.:; first and second columns of
Soction 3;
Increas1;7s and decr<.:>ases in oapital in Sootion 3 ar.:.·
in corresponding entri..;s in Section 2;
reflvct~d
•
All items in the first column of Section 3 agree
with corresponding items of the report of earnings
and dividends for the same date;
The amoWlts shown in both columns of Section 3
agree .-d th corresp,mding i terns (or combinations of
items) in condition reports, F'orm F.R. 105, if such
reports are ren<iered as of the same dc.tes.
~·
It is desirable that, in so fa:r as practicable, examination of
and corrGsponderrce with the State bank membE;Jrs pertaininb to capital
accounts, as shown in earnings e.nd di1/idends reports and condition re•
ports , be conducted at the sar~~e time •
•
•
•
186
18?
"
BOARD OF GOVERNORS
Of" THE
...
FEDERAL RESERVE SYSTEM
S-601
WASHINI3TON
ACCREBB CF"F"ICIAL CCRREBPDNCENCE
TO THE BDARC
....
December
23, 1942
•
...
Dear Sir:
TherE; is enclosed for your information and gulclr.:.nce copy of
a memorandum dat.ed Dec~ber 10, 1942, signed by Col. John C. Mechem,
Signal Corps, U.~).A,, scttlng forth the procedure to be followed with
respect to the purchase by the V~a.r l.iepartment o.f the guaranteed portion of guaranteed loans. Vie are advised by Mr. William A. Coolidge,
Acting Chief, Finance Section, Navy JJepa.rtment, <md by Mr. B. B.
Griffith, Assistant to Director of Finance of the Ma.rit.ilile Corrmuss:ion,
that the procedure out,lineci in the har Department memor:mdurn of December 10 is satisfactory to the Navy Department and the Maritime Commission.
•
,.
The Navy Department has also advised us that the written de-mand for purchase of principal c:illd interest subr:d.tted by a financing
institution must contain sufficient information to identify the loan,
end state (a) the unpaid principal amount of the loan on the date of
the demand for purchase, (b) the a.'Uount of interest dtw and unpaid on
the date of the dem«nd for purchuse, (c) the percentag~:J of trH:i: loan to
be purchased, und (d) that the statoments contained in the written demand are correct cmd just. It is as.:.:umed that in rnost cases nt lec.st
a financing institut.ion vrill be in touch with you prior to the submission of a formhl demand for purchr~se und that it will be a simple matter for you to tell it to .include the above data :iii. itu written demand .
If the written demand as submitted doeB not contain all :3uch ini'orme.tion, t,he fi:<:.i.VY Department rcl_ucsts tb<:..t you follow the procedure specified in the enclosure herewith and in addition proceed im;nediately to
obtain ~-. str:.temant from the fin:Jncing institution which vdll contain
the above information. Three copio~> of the revi&ecl stat.E;ment from the
fin~.ncing institution cont;::tining the information ~ipe·~i.fied J.bove should
be forwarded to Wa.shington by [;.j_r mn:il as soon as received, ~:nd wire
advice of its mailing should be protiptJ.y tranr.mittud to the Board.
Statements in the .fol"!il outlined above in the co::we of the Navy
Department will be sntisf:j_ctory to both the Whr Department and the
tc!roRY
•
188
,.,
-~<--
.•.
...
Maritime Comrn.ission, but we have been advi0ed 1nform&lly by representatives of the h'ar Department and Mari.t1rne Commission that <1 demand for
purchases received frora & financing institution which is in such form
as, in the oplnion of your co1.ms<:~l, conditute~; <m effective demc:;nd
under the t ermn of the guarantee c;grcement wLU be sufficient .
•
L. ? . Bet bee:,·'
As:.d.::;b.1.nt Secretary.
•·
..
,:-6Ul
}~nclo.:::cu·c
•·
•
..
•
•·
..
•
•
:189
S•6Cla
c 0 p y
WAR DEFART:tviENT
HEADQUARTERS, SERVICES OF SUFFLY
WASHUGTON, D.C.
SPBFJ-
December 10, 19L12
J!'El:ORANDU1.':
From the War Department to the Board of Governors of
the Federal Reserve System •
•
Procedure ·with respect to Furcha se of Guaranteed Forti on
of Guaranteed Loans.
1. It is requested that the Board of Governors notify all
Federal Reserve Banks of the procedure set forth in the following
paragraphs v."i th respect to the purchase by the War Department of the
guaranteed portion of guaranteed loans.
.., .
2. Upon receipt of written' dem:md by a financing insti tution that the 1J'lar Department purchase the guaranteed portion of a
guaranteed loan, pursuant to section 1 and any other applicable
sections of the cuara.:otee ar,reement, it is requested that the Federal
Reserve Bank prepare a statement setting forth the followinE:
..
(a.)
Name and address of borrowsr •
(b)
Number of gua ran te ::':l a. gre>Jment.
(c)
~aximum amount of loan specified in
guarantee arre0ment.
•
•
(d)
P0rcent guaranteed •
(e)
l'a turi ty.
(f)
Interest rate.
(g)
Guarantee fee.
(h)
That v.Titten dem:tnd· for rurch:tse was
rec"li ved from ( ins''rt nam,:; and address
of financing institution) on (insert
dQ to).
( i)
Amount of loH.n outstandir;c on date of
receipt of demand for p1;rcha so •
190
,
lv:einorandum to Board of Governors
(j)
s-6ola
December 10, 19h2
Computation of amount to be paid to financing
institution:
(1)
Guaranteed portion of outstandint loan
(2)
Accrued interest to (tenth
day follo-,.-.rin!; receipt of
written demand, except if
tenth day is not a business day, then to the
next suocecdirc business
day)
$_ _ _ __
Total ( rr::pr~'sonts funds to
bo mado available to
Federal Reserve Bank)
$_ _ _ _ __
( 3)
.
(k)
Pae_:e
2
(h)
Accrued guaru.ntoe fee to
(same dat~~ as (2) above:
to be deposited by Federal Reserv0 Bank vdth
Treasurer of thB United
St.~ tos in \lSual ms.nr1~r)
( ?)
Amount to b.; paid to
financing institution
-------
$
Wh.eth<~r or not to the b·')st of its knowledge
and belief there has be·:m any violation of the
guarantee agreement or bad faith on tho part of
the financing institution.
••
(1)
...
(m) A request
..
\"t'heth·~r
or not to tho b•Jst of its knowledt;'J and
bo;.;li.:;f thHr3. has be::n o.ny default by tho borrower
in complying with thfl t:;n~s of th~; loan.
tN~t funds in th~ amount shown under (3)
of subpc.ragraph (j) above be plu.ced c.t its dispose.l not lab r than oro day prior to the dz:.~ t3 to
which accrued int~·:r')st tmd accrued guarantee fee
hav<'l h3-:-m computed und';r such subparu.graph.
(n) A certificat0 f1.S follows, "I certify that to tho
best of. the knowledce :md belief of tho Federal
Res~rvo Bank of
the above bill
is correct and just o.n-.d~th:-:-t..-·t~......p_,ti_y_m_e_n~t thor,:Jfor has
not bean recoived. 0
Page
Memorandum to Board of Governors
•
•
3
~'cembor 10, 1942
As soon as the above data ha.s be'm pr:parrJd by the F'oderal Roservo
Bank it should be tru.m;mitted by v.i.rf3 to tho We.r D·.;pcrtm,mt through
the B_oe.rd of Governors. At tho same timo three copies of th:J above
ste.bment executed by a.n authorized officer of the Federal Reserve
Bank and three copies of tho written d<Jrnand received from thG financing institution bearing; the following, "I hereby certify thc..t the
for:;going is a true and correct copy of a letter received by th8
FodorG.l R"serv•a BG.nk of
, on (insert date)''
and signed by an authorized officer of said Bank, should be forwarded
by m':.lil to the V\Ta.r Departm·ont through tho Bourd of Governors.
3. Funds will b8 r.nde available to the Federal Res~rve Bank
throut.h 8. wire from the Tre!lSurer of the United States authorizing the
Brmk to charge the Treasur')l"' 1 s account for th·3 spocifiod amount, In
order to identify tho payment the wire will sta. t8 the narrD of the f'inr;.ncing institution, guu.rantee agreemont numbr)r £md date of the Federal
Reserve Bank's statement.
4. A copy of th·'l voucher (Form No, l03t) relating to each
purch!lse "~Nill b:'· forwarded to tho Federal Rcsorvo Bank by the Finance
Officet United States Army, Washington, D. C, Ea.ch voucher will be
sta.rped a.s paid a.nd will show the Disbursinr Office Voucher Humber.
5· In ea.ch case a. t the tir:e of r;;a.kinc payment the Federal
Reserve Ba.nk should r•otify the financing insti tutior. in writing tha. t
such payment does not constitute a. waiver of the rir;hts of the War
Depa.rtmer.t under section 12 of the cuara.ntee agreement. One copy of
the noti fica. tion should be forwarded to the War Depa.rbnent.
6. 'I'he Federal Reserve Bank' should notif'y the War Depa.rtmmt
throut,:h the Board of Governors when pa.ymen t has been r.a de to the
firancing; institution. Such notificatior: should set forth the name of
the borrower, number of guarantee agreement, a.Ptount paid, da.te of payment, and name of financinr; institution.
7. Pursuant to sectior 2 of the c,ua.ra.ntee agreement t;he
financing institution will ::ndors0 the oblie:;-a.tion and assign the
colla.t~:ral to th~: Federal Res•.>rve Bank a.nd cive the notification
required by such section. The Federal Reserve Bank will deliver a.
certificate to tho financir.g insti tuti or evidencing its interest, if
a.ny, ire the loan, A standard form of certificate to b:J used by 8.11
Federal Reserve Banks is attached herewith. Except in special cases,
where the War Department will advise the Federal Reserve Bank, it is
coritempla ted that the financing in[;ti tution will continue to hold the
obligation and collateral as a.t;ent of and for the account of the War
Department to the extent of its interest.
8 • Repayments on account of principal ( includinc accrued
interest purchased) of' lQanl!l of which the r::;ua.ranteed portion has been
purcha. sed by the 1/1hr Department should be deposited by the Federal
192
s-6ola
Page
Memorandum to Board of Governors
•
..
•
•
..
•
4
'December 10, 19L2
Reserve Bank to the credit of the Treasurer of' the United States.
Advice with respect to such credits should be made on Form 6599. One
copy should be for~~rded to Lt. Colonel Carl Witcher, Disbursing Officer,
Firance Office, United States Army, 801 Channing :nace, N.E., Washington,
D. C., and ~o copies to the War Department (Advance Payment and Loan
Branch, Fiscal Division, SArvices of Supply) throui_:;h the Board of
Governors. Th9 advice should be noted on the reverse side that the
deposit represents a rApayment of funds advanced for the purchase of the
g\1aranteed portion of a guaranteed loan and set forth the name of the
borrower, date of purchase and Disbursing Office Vouch·;r Number,
9, Interest accrued subsequettt to the date of purchase and
paid to Federal ResGrve Banks should be handled in th8 sare manner as
guarant':)O fE~es. Advice with respect to such procedure is contained in
a letter dated lvay 8, 19'-·2 from tho Diroctor of the Fiscal Division to
the Board of Govornors.
10. The administration of loans subsequent to purchase of tho
guarantet'd portion will be hundbd by tho financin[ insti tutior ovming
tho tmgue.ra.nte-')d portion, subject to th: sup·'Orvi sian of the Federal
Reserve Bank as agent of the War Department. At tho time of makinr: paymont to th,-, financinr institution or within a r:Jasonable r.eriod thoro•
aft2r, it is requested that tho Federal R~;s~Jrve Bank nuke O.VLi.ilabla to
the V'·far Departm€)nt a surnrtn ry of all rccert information within its
knowledge r"la ting to thn fir..ancial condition of' the: borrowr;r e.nd the
progr'.'SS of the loan, which it has rec"'ived fron, the financing, insti tution in accorde"r..ce with the provisions of S•3Ctiorl 8 of the~ [;Uara.ntec
az.ror,lne'l"'t or othorv;iso. In tho casE; of loans in dofaul t or loans on
which default is threatonod, thf) War Dopartmc::nt should also bo inform.;d
as to thn steps proposnd to be tak.':'n in connection with the liquidation
of the lo&n 3.!1.d the subsequ'mt progrE>SS of such steps, Special instructions nay b" issued by the War D(;partmor:t iF certain casos, including
lOO'fo gun.rc..nte·'1d loans purchas0d and lO'ctnS pt1rcha.sed pursuant to section
7 of th8 ruar:;;.nt:le agreement •
War Dopt:•rtm.?.nt of the United
St~~ tes
...
John C. Mechem
ColonGl, Sigr:r;:..l Cor:rs
Chi•;f, AdvancG f'r.;.rmer:t :...r:.d Loan
Branch
Fi seal Division
•
•
•
:t93
s-6olb
PARTICIPATICl~
..
------__,.-
CERTIFICATE HJRSUAl'iT .TO GUARANTBE AGREEl'ENT
Pursuant to section
No.
--------------,
dated
---
oft\ cert!l.in cue.rent::;o o.gre•Jmcnt
-----------------
191-1_, between
-----(Name and aadress of Financinc Insti tutior0.:..·--(horeinafb,r C!:tllod "Financirr, Institution'') and the W£tr Dq:artment
of the United Sta. t1.1s (hort:lir>a rt~:r culled the "Guarantor"), tho FodGral
•
·----(hereir.a ft:Jr
called "Rasorvo
Be.r.lr 11 ) , as fiseal ar;er.t of the United States, has been notified ~y
the Financinc Institution that it has endorsed to the Reserve Bank
the followinc described oblige. tion or
obli~;a tions
of
---
(Name and address of Dor.rower)
that it has assicned the collateral therefor to the Reserve Bank, and
•
that it holds said obligation or oblirations and collateral therefor,
in ac,_ordance 1Nith said sectior
Principal Amount
OriGin~l
UnFaid
Date
--- of said cuarantee agreement:
Interest Rate
lf.a. turi ty
..
Pursuant to said section
of said guarantee agreement
and subject to the t'7rms and conditions of such acreement, the undersi~ned
thereby certifies tha. t the Financint; Insti tntior is the m•.'!1er
of an u n d i v i d e d - - - - - - - - - per cent ( _ __.%) interest ir_ the
above described obligation or obligations •
•
•
•
194
s-&n b
-2-.
..
Nothin[ hereir contained shall constitute a
r~pr3senta-
tion or warranty on tho part of the Guara.ntor or th3 Res(:lrve Bank
as to the genuineness or validity of the above
describc~d
obli(.&tion
or oblir,e.tions or as to the amount of rrincipal or the an1our..t of
accrU•:ld. interest outstanding 1:1nd unpaid at ar..y time th'3 reon.
Thr:J rights
•
repr.~s~ntod
by thir. certificate an non-
trar.sferable, except by operation of law or with tho prior written
consent of thf; Guarantor.
In th·:J evor.t of any such transfer, this
"
C•'3rtificat·'>. shall be surrendered to the Reserve Bank for cancolla•
tion, ar!d a new certificate vd th
approprin.t'~
be issued by the Res.,rve Bank to such
chang:)s th•Jrein shall
transfer~e.
Vnless and until
this certificat•; has been cancelled and superseded by st:ch n;;w cor-
•
tificat'.'.l, the Guarantor and the Reserve Bank may treat th<.J :Financing
Institution as above na.mE;d for all purposes as
th~)
sole own:;r of tho
IN 1JUTNESS WHSREOF, the Guarantor has ct:..used this certificate
..
to be
si~;nod
by its duly nuthorized agent this
---------·
--- day
of
19!~_.
THE WAR DEFARTL'Bl': T OF TEE U:NI '!'ED STATES
•
By
Federal Rosorve Bank of
-~,__~,.-.,----
As Fiscu.l Ag·;r,t of the United Stat~~s
•
By
•
------------~~~--------------( Titlo)
BOARD OF GOVERNORS
uF' THE
195
FEDERAL RESERVE SYSTEM·
S-602
WASHINGTON
ADDRESS OF"F"ICIAL CORRESPONDENCE
TO THE BOARD
Deeernbe:c 23, 1942.
Dear Sir:
Reference is made to the Board's letter of
January 17, 1927 (.St. 5236), concerning reporL1 from
Federal Reserve Banks on arranr;ementt> with loc:al cl.ear·ing homJe associations and arrangement::> for group clear-·
ing o'f cheeks out~>ide of Fedc1ral Her3erve I-3ank and bra.ncn
cities.
It Lithe Board'::. intention in the future to
request these reports about eve::·y J;-.hree yea.rs. Accord--ingly, no report need be submitted as of' ,; anu<:n'Y 1,
19~.3, and subsequently until called for.
Very truly yours,
~~---·
r--;
~-t ..tf..__.e_.~.
L. P. Bethea,
Assistant Secretary.
TO THE PRESIDF.u'JTS OF ALL FEDERAL HESERVE BAIJKS.
~--·
196
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
S-603
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 26, 1942.
Dear Sir:
H.eferring to our letter of Decemry=.:r 22, 1942,
with reference to the proposed revision of the :.otandard
fo!'m of guarantee agreement, this is to advise you that
any suggestions may ·oe submitted so e.s to reach the Board
not later than January 12, 1943.
L. P. Bethea,
AE;dstant Secretary.
TO Tl-!:C PH.ESID1:1'TTS DF ALL F'EDEll.AL f{E.3J'.'HVJ: BANXS
197
BOARD OF GOVERNORS
OF' THE
S-604
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS DF'F'ICIAL CDRREBPDNDENCE
TD THE BDARD
December 28, 1942.
Dear Sir:
In order to reduce the amount of work on the part of the
Reserve Banks in prepartng the annual reports to the Board on salary
data, the swmnary on Foi~ 9?46-c has been simplified and is to be prepared on the basis of basic salaries, exclusive of any supplemental
compensation.
It has been suggested that the usual list of employees as of
the first of the year be eliminated on the ground that, in the course
of an examination, the Board's examiners check salaries paid against
the maximum salaries in the personnel classification plan. Other uses,
however, are made of the lists submitted to the Board. Furthermore, it
is anticipated th.st, in connection with questions which may arise with
respect to adjustments of salaries and wages under the regulations of
the Econond.c .Stabilization Director, it will be helpful to have such infonnation readily available. Accordingly, it is requested that the list
be submitted in the usual form.
To avoid the necessity for reference to various letters with
respect to annual reports on salary matters, the Board's letter of November 25, 1936 (X-9746) is canceled and it is requested that the following data be surnnitted:
1.
Su.'llillary report as to number and salaries of offieers and
employees as of December 31, 1942. (Form S-604-a)
These figures are for publication in the Board's annual
report for 1942 and it is requested that they be submitted
as promptly as practicable. The figures should not reflect any changes in ~ither the number or salaries of officers and employees that become effective January 1, 1943.
2.
Summar-.r of salaries of employees by salary groups.
S-604-b)
3,
List of employees as of January l, 1943.
(Form
(Form S-604-c)
198
S-604
-·2l~.
Brief statement a.s to supplemental compensation, if any,
paid ·during the year 191~2. (Form S--604-d)
5.
Brief statement a.s to the basis, extent, and practice with
respect to the payment of overtime and the granttng of compensator~ leave for overtime.
'l'he reports referred to above should cove:t• all employees of
the Reserve Bank, including those whose salaries aJ~e reimbursable, but
should not include employees of the Victory Fund Committee.
flo
Very trQly yours,
Enclosures
TO THE
4
PHESID~£NTS
OF ALL FEDEEAL RESE;HVE
F.JA~ES.
i99
S-604-a
NUMBER AND SALARIES OF Q]'J!'ICI{;RS AND EiVlPLOY~'.ES OF ~·HE
l'""EDE'RAL RESERVE BANK OF
(INCLUDING BHANCH.ES)
December 31, 1942
rrota1 officers
and employees
including those
whose salaries
are reimbursed
to the hank in
whole or in .eart
Annual salary of President
Officers and employees (included
in column 1) whose
salaries are :reimbursed to the bank
in whole or in
part( a)
$_ _ __
Other officers:
Number
Annual salaries (b)
-----
$_ _ __
..,------
$_ __
~;
Employees, both permanent and
temporary:
Number (c)
Annual Sal::J.ri.es ("b)
$
(a)
Should represent ageregate of fractional amounts in the case of employees
whoso salar;ies are only partly reimbursed to the bank. For exe. rnple, if
25 per cent of the salary of an employee recei ·.ring *1, 200 a year iH reimb,.lrsed to the bank, .25 should be included in the computation of the
"nu1·n.ber 11 of employees, an.cl the amount of salary reimbursed, $300, :;;houltl
be included in the computation of the annual salaries.
(b)
Including supplemental compensation, i1' any, adjusted to an annual basis,
paid ~s of December 31, 1942.
(c)
In tho case of part-time employees, i.e., employcef:; who £<re regularly engaged
for le~Js than a full day, the "uumber11 reported should reprostmt the portiqn
of the full day \\'Orked. For ,;xam.ple, i f nny employee is regularly engaged
for one--half' of the usual working day, • 50 should he includod in tho l~ompu
tation of the "number" of employees.
SUMMARY OF SALARIES OF
OF FEDERAL RESEE'T.S BANK OF
Salaries
u."1der
$1500
EMPLOYEES
S-604-b
(INCLUDING
BRANCHES)
.Salaries:
Salaries
Sctlaries
<!!2· ,,·
c:or·Vo• of $/+000: Totr.l
fr0m $1500: .Pro""' 'If'
and over:
to $2499
to $3999
-'-
.,
W
NQT.ber of employees:
On Jan. l, 1942
On j:m. 1, 1943
Salaries of employees:
Total on Jan. 1, 1942 (a)
Total on Jan. 1, 1943
Average on Jan. l, 191,2 (a)
Average on Jan. l, 1943
Separations
Nuntber
Number
Number
Number
Number
during the year 1942:
caused by death
who left on militarJ leave
caused by resignations
cnused by retirement
due to all other reasons
Totc:.l sep.rations
Employees on mili t<~r:r leave ond entitled to reemployment benefits under the urliforn;. plan:
Nmnber as of Jan. l, 1943.
TotA.l salaries as of dates of leaving
(a)
As submitted in report for la.st year.
1943 since srJlc>ry figures f0r
the figures for Janu,"lry 1,
NOTE:
~Tanu~u:7
The figures will not be strictly comp;:cable to those for
l, 1942 include supplementn.l compensc!tion, if <my, wherea.s
1943 do not.
Suir:.mc:Jry is for employees a:xclusive of officers. All figures are for b<1sic snl~ries exclusi.v'2 of
overtim(J :;nd Stlpplement"2l compcns~tion ,' if r~ny. Employees absent on pal~t sc:l.2 1'71 or ·vdthout pay
(except. on military leave) should be included j_n the statE:..rnent ::;t full amr:.J.P1 s~.lBries. Employ·ees,
if <J.ny, regu.l:: rly receiving nor:1inal s<:laries should be excluded .'md th~~i r nu.rr.ber ~md. ~:.ggr·2gTte
salaries as of Jtmlil=t!"'J l, 1942 ;md January 1, 1943, stated in r. footnote.
l\)
0
0
s-604-c
201
EMPLOYEES OF THE FEDERAL RESERVE Bl-INK OF_ _ _ _ ___.;AND ITS
BRANCHES (IF ANY) ON JANUARY 1, 1943
Name of Employee
Title of Job
Maximum
Salary
Salary on Jan. 1
1942*
1943
Summary is for employees, exclusive of officers. Figures are for salaries,
exclusive of overtime and supplemental compensation, if any.
Employees should be listed by functions or departments and the ~ositions
or jobn arranged in the same order as they appear in the personnel classification plan, For~ A, on file with the Board of Governors of the Federal Reserv~
System. Employees classified in general junior positions should be included in
the departments to which assigned, following the other employees in those departments.
•
The total number of employees including employees ·whose salaries are reimbursed to the bank in whole or in part and the total salaries paid should b•3
sho~~ for each function or department.
Extra help or temporary employees should
be listed with the re~1lar employees of the bank and designated by the letter
"T" after the classification symboL In case of employees on a per diem or
hourly basis, the estimated total annual compensation should also be shown.
*If hired during 1942, please show the initial salary •
•
202
s-604-d
SUPPLEMEN'fAL. COMPENSATION PAID DURING
'='er-t
.•!.. od
....
~
1942~
Times of 1
Payment .!?I
sY
'l'otal supplemental compensation paid during 1942 ......•.... $._____ _
Please state briefly practice with respect to payment of supplE"..mental
compensation to employees who leave between dates of' regular payments
of supplemental compensation.
----------
§) Show as a period the time during 1.'/hich supplemtmtal compensation
was paid at the same rate on the same basic amount and at the same
intervals.
· .£/
Please relate times of payment to period covered; e.g., end of' each
month, quarterly (indicating when quarter ends and the payment is
made), etc.
203
BOARD OF GOVERNORS
Of" THE
FEDERAL RESERVE SYSTEM
S-605
WASHINGTON
ADDRESS OF'F'ICIAL CORRESPONDENCE
TO THE BOARD
December 31, 1942.
Dear Sir:
Informal discussions have been had with representatives of the War Department, Navy' Department, and Maritime
Commission with respect to an apparent lack of uniformity in
the vouchers submitted by the Federal Reserve Banks requesting
reimbursement for expem;es incllrted pursuant to F..x.e~utive Order
No. 9112. As an outgrovrth of the::H~ discussions, the following
suggestions have been m:.;.de with respect to the prevJ.ration of
the vouchers which apply uniformly to the three Services, the
only variation being in the number of' carbon copies det>ircd of
Form 1034:
Form 1034
l.
That the month or other period covered be shown
in the second column, "Date of Delivery or Service".
2.
That a uniform legend be shown in the third
column, "Articles or Services", reading as follows: 11 l'.Jcpenses incurred, as fiseal agent of
the United Stut.en, for the ~:---~~~-~----'
pursuant to Executive Order No. 9112 11 •
3.
Thc.~.t
4.
The Navy Department and the ;'A.aritime Commission
each desire one copy of Form 1034 (white) and
five copies o.f Form 1034a. (y€;llow); the War Department de::;ires one white copy and two yellow
copies.
the total arnount only of the voucher be
shown in the 11 Amount 11 column. (When the expenses of both the head offl.ce and branches are
included in the same voucher, it is· not dcsirfd
that separate totals be shown for each office.)
204
S-605
-2Documents supporting Form 1034
l.
One copy only of each supporting document is desired.
(This refers both to rcr.:eipted bills furnished by
outside firms and to certif.i.ed statements prepared
in typewritten form by the Hsserve Ba.nk.)
2.
V~hcn
3.
It is requested that 3 r::opies of a summary statement
of expenses included in each vouc~her be submitted in
accordance with the c'.ttached i\_.rm, a supply o.f which
is being forwarded to your Bank under separate cover.
When the expenses cf the head ofEce and branches are
included in the same vuuchr:lr, the "combined" figures
only are desired on the sununary statement.
4.
All supporting documents, including copies of telegrams, should be stapled together securely in the
upper left corner (with the staples op~ning ;:Jn top),
and any folded papers should be: arro.nged in. such a
manner as to permit ready inspection without unfastening.
the expenses of the head cffice and branches are
included in the same voucher, the supporting documents
should be arranged, for IJ.l.L offices combined, by
object of expenditur{~ ("Salaries"; "Retirement system
contributions", etc.). It is not desired that the
document:> b0 arranged separately for tht: head office
and each branch, and separate total:; for each class
of expenditure need not be shown for the head office
and each branch.
The riavy Department and Maritime CoClffiission prefer that
expenses incurred at the br~::nchos ·bo includ8d in the head office
vouchers with.')ut segregat:Lcn, and the War Department prefers this
arr:1ngernent except ir; c.?..ses where liaison officers are stationed
at the branches. The War Dep:.rtment requests that separi'.tG vouchers
be submitted fe-r br?..nches hu.ving liaison officers. None of the
agencies will object, however, to the ~ubmissJon of separo.te vouchers
fur the branches, if it is f;und more CC•flVE;n:i.ent to have the
branehes follow this procedure.
Very truly yours,
----~
(
~
~=-:...--···~
.-·
;/~J'/~
/. ~
ti<" L-·Pl.,(.~--
1. P. Bethea,
Assist<1.nt SecretDry.
Enclosure.
TO THE PRESIDENTS OF ALL FEDEHAL RESERVE BANKS.
...
,,
s-605 ...a
Su.'Il!Il.ary of expenses incurred, as fiscal agents of the United States,
for t h e - - - - - - - - - ' pursuant to Executive Order No. 9112.
205
Amount
Salaries, including supplemental eo:npensation
Officers
gmployees
Retirement system contributions
Workmen's compensation insurance
Overtlme
Supper money
Telephone
Tolls
All other
Telegraph
Leased wire
Commercial wires
Printing, duplicating (including photostat work, etc.),
stationery, and supplies
Postage and expressage
Commercial agency credit reports and services
(Total charges, in;;luding charges, if any, for
telephone, telegraph, etc.)
Traveling expenses
Local transportation
Legal fees paid to outside counsel
Rental of furniture and equipment
Space maintenance
.\1edical fees and expenses
Other expensel:3 (specify)
Total (should agree with total on accompar.ying
Form 1034)
@FedFRASER