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1 8 8 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE T O THE FEDERAL RESERVE BOARD X-7425 A p r i l 29, 1933. SUBJECT: Indebtedness of O f f i c e r s and Employees. Dear S i r ; Because of the s p e c i a l r e l a t i o n s h i p t h a t e x i s t s with member banks and the h i g h r e s p o n s i b i l i t y r e s t i n g upon t h e F e d e r a l r e s e r v e banks i n connection therewith, t h e Board f e e l s t h a t i t i s e s p e c i a l l y important t h a t the Federal Reserve Agents and t h e i r a s s i s t a n t s , i n c l u d i n g the members of t h e i r s t a f f s engaged i n a u d i t s and examinat i o n s , should r e f r a i n from i n c u r r i n g any indebtedness, d i r e c t l y or i n d i r e c t l y , t o member banks, t h e i r s u b s i d i a r i e s or a f f i l i a t e s , or otherwise p l a c i n g themselves i n any p o s i t i o n which may r e s u l t i n questions being r a i s e d as to the independence of t h e i r judgment or t h e i r d i s i n t e r e s t e d n e s s i n the discharge of t h e i r r e s p o n s i b i l i t i e s with r e s p e c t t o such banks under the Federal Reserve Act. Further- more, i n order t o avoid t h e p o s s i b i l i t y of embarrassment i n connection with the performance of t h e i r o f f i c i a l d u t i e s , i t i s t h e view of t h e Board t h a t they should r e f r a i n from i n c u r r i n g any indebtedness to o t h e r s except f o r l e g i t i m a t e and necessary purposes, and t h a t , whenever any indebtedness i s i n curred by them (excluding, of course, 1-7425 — 2 — c u r r e n t b i l l s f o r ordinary p e r s o n a l and. household expenses, "but not excluding indebtedness i n c u r r e d t o others to o b t a i n funds f o r payment of such b i l l s ) , t h e r e should be prompt d i s c l o s u r e of a l l t h e f a c t s to the F e d e r a l Reserve Board. The Board d e s i r e s t h a t each Federal Reserve Agent p r e p a r e and transmit to i t a s promptly as p o s s i b l e a f t e r J u l y 1, 1933, a r e p o r t showing a s of t h a t date any indebtedness of the agent and members of h i s s t a f f (excluding, of course, c u r r e n t b i l l s f o r ordinary personal and household expenses, but not excluding indebtedness i n c u r r e d t o o t h e r s t o o b t a i n funds f o r payment of such b i l l s ) . The r e p o r t should s e t f o r t h t h e name of the person, f i r m , c o r p o r a t i o n , or i n s t i t u t i o n t o which t h e indebtedness i s due, the d a t e on which i t was o r i g i n a l l y i n c u r r e d ( i n d i c a t i n g whether b e f o r e or a f t e r such o f f i c e r or employee entered the s e r v i c e ) , t h e maturity of the indebtedness, the unpaid b a l a n c e , a d e s c r i p t i o n of the s e c u r i t y t h e r e f o r , i f any, a b r i e f statement of the purpose f o r which the indebtedness was i n c u r r e d and t h e p r o g r e s s being made i n l i q u i d a t i n g i t , and any comment t h a t the Agent may wish to make i n connection t h e r e w i t h . In a d d i t i o n , t h e r e should be a prompt r e p o r t to t h e Federal Reserve Board of any i n d e b t edness of t h e kind r e f e r r e d to i n c u r r e d by the Agent or any member of h i s s t a f f a f t e r J u l y 1, 1933, and such r e p o r t should c o n t a i n informat i o n s i m i l a r to t h a t c a l l e d f o r above with r e s p e c t to indebtedness outstanding on t h a t d a t e . The Board b e l i e v e s t h a t the d i r e c t o r s of t h e Federal r e s e r v e banks w i l l f e e l t h a t the same g e n e r a l p r i n c i p l e s should be a p p l i e d t o the members of the s t a f f s of t h e Federal r e s e r v e banks, p a r t i c u l a r l y the o f f i c e r s , the heads of departments, and other employees occupying 190 •• 3 *• X-7425 r e s p o n s i b l e p o s i t i o n s , except t h a t the r e p o r t s mentioned would "be made t o the Boards of D i r e c t o r s i n s t e a d of to the Federal Reserve Board, I t r e q u e s t s , t h e r e f o r e , t h a t t h i s l e t t e r he "brought to the a t t e n t i o n of t h e Board of D i r e c t o r s of each hank, with the suggestion t h a t they consider t h e a d v i s a b i l i t y of adopting the se p r i n c i p l e s i f they have not a l r e a d y been e s t a b l i s h e d , of t a k i n g a p p r o p r i a t e s t e p s t o o b t a i n from such o f f i c e r s and employees information s i m i l a r to t h a t c a l l e d f o r with r e s p e c t t o t h e Federal Reserve Agents and the members of t h e i r s t a f f s , and of r e q u i r i n g a l l such o f f i c e r s and employees promptly to r e p o r t t o the Board of D i r e c t o r s any indebtedness of t h e kind r e f e r r e d t o t h a t nay t h e r e a f t e r be i n c u r r e d . In t h i s connection, the Board d e s i r e s to c a l l a t t e n t i o n t o i t s c i r c u l a r l e t t e r of May 7, 1924 (X-4048) which c o n t a i n s t h e following statement: tt * * * the Federal Reserve Board b e l i e v e s i t w i l l be a s obvious to t h e d i r e c t o r s of t h e Federal r e s e r v e banks as i t i s to i t s e l f t h a t the good conduct and r e p u t e of t h e Federal Reserve System r e q u i r e t h a t t h e o f f i c e r s of the r e s e r v e banks s h a l l give t h e i r e n t i r e t i n e and a t t e n t i o n to the a f f a i r s of t h e banks and not be i d e n t i f i e d with ary outside business i n t e r e s t s . 1 1 The Board f e e l s confident t h a t t h e d i r e c t o r s of t h e Federal r e s e r v e banks w i l l recognize the importance of s t r i c t conformity with the principles set f o r t h in that l e t t e r . While i t r e f e r s p a r t i c u l a r l y t o the o f f i c e r s of Federal r e s e r v e banks, i t i s equally a p p l i c a b l e t o heads of departments and employees occupying r e s p o n s i b l e p o s i t i o n s i n the banks, a s w e l l as to t h e Federal r e s e r v e a g e n t s and the members of their staffs. I f any of than has any connection with a b u s i n e s s con- cern of any k i n d , t h e Board r e q u e s t s t h a t i t be promptly advised with respect thereto. X-7425 - 4 - The Board w i l l be pleased to have an acknotrledgnent of the r e c e i p t of t h i s l e t t e r , t o g e t h e r i r i t h a statement of the a c t i o n t h a t has been or w i l l be taken i n regard to t h e s e m a t t e r s . Very t r u l y y o u r s , Chester M o r r i l l , Secretary. TO AGENTS OF ALL F . R. BAMS.
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