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231 BOARD OF GOVERNORS OF" THE FEDERAL RESERVE SYSTEM • S-488 WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 25, 1942 • Dear Sir: .. • VVi th respect tu the standard form of guarantee agreement dated jJiay 14, 1942 approved by the l:l.gencies concernE:d for use in connection with operc.tions under Executive Order No. 9112, there is enclosed a copy of a memorandum dated May 21, 1942 which the Board has received f:com Leiutenant Colonel Paul Cleveland, Chief, Advance Payment and LoHn Sc:ction, iN:tr Department. It will be noted that in accordance nith this memorandum, a special condition should be inserted in section 13 of all guarantee ~,greements executed by the Federal Reserve Banks on behalf' of the 'Nar Department tmder the Executive Order above mentioned • Very truly yours, • Digitized • for FRASER L. P. Bethea, Assistant Secretary. Enclosure • 232 S-488-a WAR DEPARTMEl"IJT Headquarters, Services of Supply Washington, D. C. • May 21, 191..2. • M.Elvl.ORANDUM For the Board of Governors of the Federal Reserve System • Attention: Committee. SUBJECT: .. • • ' Assistant Administrator, War Loans Guarantee Agreement. l. The standard form o£' guanmtee agreement dated May 14, 1942, does not expressly prohibit the Financing Institution from obtaining any separate coU.ateral security for its sole benefit. The form of guarantee agrecmer.t also does not expressly require that separate payments ur security obtained by the Financing Insti tuGion after the vvar Department has become the holder of the obligation, must be applied for the benefit of both the War Department and the Financing Institution. In other vmrris, it might be that afte1" the ;dar Department has become the holder of the obligation, sE:parate payments or security could be obtained. arJri applied by the Financing Insti tution in liquidation of its partlcipation in the loan . 2. In order to eliminate thi::;: pos~>ibili ty, and pending explicit coverage of this point by revision of the standard form of guarantee agreen:)3nt for use on all loans guaranteed by the War Department, Nc-nr; Department or Maritime Commission, it is requested that all. the Feder:il Reserve Banlcs be instructed to insert the following speci3l condition in Section 13 of all guarantee agreements executed for the War Departl'l\ent: • .. "All clinounts at any time paid or credited upon the loan, however realized, must apply ratably for the benefit of the Financing Institution and the VJar Department, according to their respective interest in the loan." (Signed) Paul Cleveland Paul Cleveland, Lieut. Colonel, A. U. S. Chief, Advance Payment and Loan Section • •
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