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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)
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