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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.
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Very truly
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Enclosure 3
TO 'I' HE; PRESIDENTS OF' ALL F'.EDEltAL RESERVE BANKS
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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
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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,
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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.
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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
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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:;:;.
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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
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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
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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·•
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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
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: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.
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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
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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
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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
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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
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@FedFRASER