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FEDERAL RESERVE BOARD WASHINGTON OFFICE O F VICE GOVERNOR July 2, 1934. Enclosed I am handing you correspondence discussed at the recent conferonco of Governors and Chairman, to w i t : l e t t e r from Honorable Joseo Jonos, of tho Reconstruction Financo Corporation, to me under date of Juno 22, 1934, and my reply under date of Juno 36, 1934. You w i l l note that I mado my reply a s much along the s p i r i t of the discussion had i n tho confer onco a s I could. I understood tho expressions of tho conference to moan that tho Roscrvo Banks should not have j o i n t action with the Reconstruction Finance Corporation i n tho making of t h e s e loans hut that f u l l cooperation between the two agencies i n the i n t e r e s t of making the loons could woll bo had. I b e l i e v e that t h i s cooperation i n each bank w i l l prevent harmful competition between the Reconstruction Finance Corporation and your bonk, tho appearance of an applicant before tho Reconstruction Finance Corporation who had boon declined by your bank, and tho p o s s i b i l i t y of a c r i t i c a l review of any a c t i o n of your bank by the Reconstruction Finance Corporation. I am expressing myself f r e e l y on t h i s subject f e e l i n g that you are primarily i n t e r e s t e d i n your bank doing a f i n e job i n the i n t e r e s t I f the small i n d u s t r i a l i s t s of your d i s t r i c t , and that you w i l l work out tho d e t a i l s of cooperat i o n to a f f i r m a t i v e l y accomplish tho desired ends. m t h ny regards, I am Sincerely yours, Governor. Enclosures TO GOVERNORS A£D CHAIRMEN OF ALL F . R. BASKS. X-7948-a COPY RECONSTRUCTION FINANCE CORPORATION Washington June 22, 1934. Dear Governor Black: I t e g to enclose herewith copy of our regulations for i n d u s t r i a l loans. These can he a l t e r e d i f and as required. I t seems to me that as far as i s p r a c t i c a l under the law, the HFC and Federal Reserve Banks should consider these loans j o i n t l y , i . e . , Fedoral Reserve Industrial representatives and RFC Loan Committeemen s i t t i n g as a j o i n t Loan Committee i n considering industrial loans, i n v i t i n g the cooperation of "banks, and e s p e c i a l l y the "bank having the account of the applicant. In t h i s way, greater speed w i l l he accomplished, with each agency taking such p a r t i c i p a t i o n i n the loan as may he agreed upon at the time of making the loan. By t h i s procedure a greater spread i n the credit r i s k would a l s o ho obtained. Inasmuch as our o f f i c e s , with few exceptions, are i n Federal Reserve Bank buildings, i n d u s t r i a l loan applicants could he directed to a common o f f i c e for "Industrial Loans"; the Advisory Loan Committee, composed of representatives of the RFC and the Federal Reserve Bank, determining whether the loan would he recommended, and i f s o , what agency would make i t , or how i t would he participated i n ; Federal Reserve Bank management, as w e l l as the RFC Board, n e c e s s a r i l y reserving the r i g h t to adopt, a l t e r , change, modify, or r e j e c t recommendations of the Loan Committee. There w i l l undoubtedly he loans which Federal Reserve Bank management w i l l he w i l l i n g to make, i n cooperation with hanks, and i n which the RFC w i l l have no p a r t . On the other hand, there w i l l probably bo loans i n which the Federal Reserve and the RFC w i l l p a r t i c i p a t e i n connection with banks. I f somo such procedure as t h i s i s not agreeable to the Federal Reserve Board and the several Federal Reserve Banks, the RFC w i l l , at a l l events, cooperate w i t h Federal Reserve and other banks and lending agencies, with a view to f a c i l i t a t i n g such loans. Sincerely yours, Honorable Eugene R. Black Governor, Federal Reserve Board Washington, D. C. (signed) J e s s e H. Jones Chairman OPT X-7948-13 FEDERAL BESEBVB BOARD Washington June 26, 1934. Honorable J e s s e Jones, Chairman, Reconstruction Finance Corporation, Washington, D. C. Dear Mr. Jones: Your l e t t e r of the 22nd r e l a t i v e to cooperation i n the matter of making loans to industry was today considered at our conference. The conference f e l t that the law covering loans t o industry "by the Reserve Banks s p e c i f i c a l l y defines the funct i o n s and duties of the Reserve Banks i n the matter of making such loans. This law also provides f o r a Statutory Advisory Committee composed of i n d u s t r i a l i s t s and defines i t s duties and powers. The conference was of opinion that the Federal Reserve Banks cannot waive the duties or obligations imposed by law by any form of c o l l a t e r a l agreement. I t b e l i e v e s , however, that the Federal Reserve Banks w i l l f i n d many ways i n which they and the Reconstruction Finance Corporation agencies can be of mutual help by cooperation i n exchanging information and expeditiously handling the applications that w i l l come under the new l e g i s l a t i o n . To a considerable extent cooperation a l ready e x i s t s i n f a c t , and i t i s the f e e l i n g of the conference that such further working arrangements as may be necessary or desirable w i l l be developed most speedily and s a t i s f a c t o r i l y as the work progresses i n each bank. In the end wo are a l l s t r i v i n g to aid industry and to that end we w i l l cordially cooperate. In t h i s way wo w i l l help to a i d recovery. With my regards, I am Sincerely yours, (Signed) E. R. Blade Governor.
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