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..... FEDERAL RESERVE BOARD WASHINGTON X-4772 ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD January 14, 1927. SUBJECT: Correspondence with Director of Veterans' Bureau. Dear Sir: There is attached :i1ercto, for your information, co:?Y of a letter which tho Board addressed recently to the Director of the United States Veterans Bureau, together with a.copy of his reply, both of which are self explanatory. Very truly yours,. J. C. Uoell, _ Assistant Secretary. To Go-vernors of all F, R. Banks . Enclosures: • • ( c0 p y) L:''HTED STATES VFTFRANS 1 IHJRE.AU 1 ~'.ASHHrGTON X-4772-a Jo!l.unry 11, 1927. D. :a. Crissinger, Governor, Federal Reserve Board, Washington, D. C. ~onorable My dear Governor Crissinger: I wish to acknowledge your le~er of January 10, 1927, propounding certain questions in respect to loans on Adjusted Service Certificates. The use of the term 11 bank11 in Regulation No. 163 was deemed to include the Federal Reserve Banks where applicable and this Bureau will honor loans presented by such ban~s in tho same manner as loans received from other banks will be redeemed; For this Bureau to assume a position that Federal Reserve Banks were not intended to be allowed to rede~m notes when such notes are made eligible for discounting wi tli the Federal Reserve Banks would, in my mind, have the effect of nullifying the intent of the Statutes. In regard to the matter of honoring loans made to a person not authorized to receive such loan1- I do not believe that the Bureau would be empowered to rAa~e payment thereon as the effect of redeeming these loans would be the same as paying on a forged instrument, which, of course, is directly contrary to all accepted :9rocedure. With kindest personal regards. very truly yours, Frank T. Hines, Director. " .. ( OJPY ) FEDERAL RFSYEVE 'BO.ARL X-4772-b January lO, 1927. Honorable Fr<mlc T. Hines, Director, United States Veterans! Bureau, Washington, D. C. My dear General Hines: The question has been raised as to what your policy will be with res9ect to paying to Federal reserve banks the amounts of notes re:presentir:.g loans made to veterans on the security of adj,~sted service certificates, which notes have been rediscom1ted with Federal reserve banks and left on their hands unpaid at maturity. The Board is familiar, of course, with the statement of policy contained in ~ubdivision (b) of Section 8 of your Regulation No. 163; but subdivision (a) of that paragraph states that if the veteran does not pay the loan at its maturity 11 the bank ho-lding the note and certificate11 may present the note to you for payment, and no specific mention is made of Federal reserve banks. It would seem that the word 11 bank'1 as l1ere used would clearly include Federal reserve banks; but, in view of the fact th::1.t some question has been raised about the matter, I believe it would be desirable for you to give the Board a specific statement as to wha.t ;:;our policy will be when such notes are presented to you for payr~:ent by Federal resel~ve banks. T:he question ·has also been ra.ised as to whether there would be any likelihood of your declining to pay a note presented by a Federal reserve bank when such note is accompanied by an affidavit of the lending bank stat1ng that the }Jerson who obtained the loan evidenced by such note iJ known to be the veteran named in the adjusted service certificate securing such note, but the Veterans 1 Bureau discovers that the loe:.n was not actually obtained by the veteran na.med in the certificate. In oth•3l' words, the question has been raised whether under such circumstances there would be ~1y likelihood of the Federal reserve b:mk suffering a."'ly loss in the event of the insolvency of the bank which rediscounted such note with the Federal reserve bank. A definite statement from you on this point will aid materially in clarifying the situation. An early re;?ly from you will be greatly apprecicLtod and the substance thereof will be corn.'Inmicated :promptly to all Federal reserve banks. Very truly yours. D. ~. Crissinger Gover:1or.
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