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319 FEDERAL RESERVE BOARD WASHINGTON address official correspondence t o the federal reserve board X-9006 November 1, 1934. Dear Sir: Daring the meeting of Chairmen and other representatives of the Industrial Advisory Committees i n Washington on September 27, 1934, there was a discussion of the status of the committees and their r e l a t i o n s with the Federal reserve "banks under the i n d u s t r i a l credit a c t . A "brief digest of this discussion i s contained i n the summary statement which was sent to you with the Board's l e t t e r , X-8031, of October 2, 1934. As you know, Congress, i n establishing the Industrial Advisory Committees, provided that each member should "be a c t i v e l y engaged i n some i n d u s t r i a l pursuit within the Federal reserve d i s t r i c t i n which the committee i s established; that each application should "be submitted to such committee; and, a f t e r examination by i t of the business with respect to which the application i s made, that the a p p l i c a t i o n should be transmitted to the bank with the recommendation of the committee . As the enactment of t h i s new l e g i s l a t i o n was based upon the b e l i e f that there were many established business enterprises whose needs for working capital had not been met by banking i n s t i t u t i o n s , i t was X-9006 320 — 2 — evidently the expectation of the Congress that establishment in each d i s t r i c t of a body composed of carefully selected i n d u s t r i a l i s t s would bring to bear in the f i r s t instance upon the problem submitted i n each application the kind of independent judgment that would be most appropr i a t e for the determination of the question whether the loan desired could be made on a sound and reasonable basis notwithstanding the r i s k s and uncertainties that might have deterred banks from making such loans. It i s important, therefore, i n order to carry out the obvious intent of the Congress that the Industrial Advisory Committee s h a l l be f r e e to use such means and methods as they may deem necessary in order to enable them not only to make the examinations required by the law but to exercise their independent judgment i n making their recommendations to the Federal reserve banks. The question has arisen, however, whether the o f f i c e r s of the banks, i n a s p i r i t of cooperation and a desire quickly to reach harmonious conclusions, may have overlooked the purpose of Congress as to the precedent and independent p o s i t i o n of the committees and have attempted to i n fluence the members of the committees to adopt views which the o f f i c e r s , in the l i g h t of their own banking experience, f e l t should apply to the f i n a l d i s p o s i t i o n of the applications. However sound such views might be and however commendable the desire to a s s i s t , the Board f e e l s that i t should point out the a d v i s a b i l i t y on the part of the o f f i c e r s of the banks of refraining from any form of action with respect to the proceedings of the committees which might seem to j u s t i f y c r i t i c i s m s in the X-9D06 - 3 future that the recommendations of the Industrial Advisory Committees v/ere reached otherwise than through the e x e r c i s e of t h e i r independent judgment. This expression of the Board's f e e l i n g i n t h i s matter of course should not be interpreted as r e s t r i c t i n g i n any degree the freedom of the committee to c a l l for any a s s i s t a n c e that i t may need and i t i s expected that the i n v e s t i g a t o r s who prepare data f o r submission to the committees w i l l include i n t h e i r reports a l l pertinent data that they have been a b l e to gather regarding the condition, management, e t c . , of the a p p l i c a n t , both of a favorable and unfavorable nature, i n order that the committees may be i n p o s s e s s i o n of a l l the f a c t s which the i n v e s t i g a t o r s have been able to a s c e r t a i n . Very truly yours, Chester M o r r i l l , Secretary. TO GOVERNORS AND AGENTS OF ALL F. R. BANKS.
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