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FEDERAL RESERVE BOARD WASHINGTON address official correspondence t o t h e federal reserve board X-9052 December 20, 1934# Dear S i r : The B o a r d ' s l e t t e r of A p r i l 29, 1933, X-7425, on t h e subj e c t of i n d e b t e d n e s s of o f f i c e r s and employees, s t a t e d t h a t t h e r e should be a prompt r e p o r t t o t h e Board of any i n d e b t e d n e s s of t h e kind r e f e r r e d t o i n t h e l e t t e r i n c u r r e d by t h e F e d e r a l r e s e r v e 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 i n f o r m a t i o n s i m i l a r t o t h a t c a l l e d f o r i n t h e Board 1 s l e t t e r w i t h r e s p e c t t o i n d e b t e d n e s s o u t s t a n d i n g on t h a t d a t e . I t was s u g g e s t e d by t h e Board i n correspondence w i t h some of t h e F e d e r a l r e s e r v e agents during the p a s t year t h a t t h e y r e p o r t t o t h e Board, as i n c u r r e d , i n d e b t e d n e s s c r e a t e d by members of t h e s t a f f of t h e a g e n t ' s department and t h a t a r e p o r t be s u b m i t t e d as of J a n u a r y 1 and J u l y 1 of each year with r e g a r d t o t h e p r o g r e s s b e ing made i n t h e l i q u i d a t i o n of t h e i n d e b t e d n e s s p r e v i o u s l y r e p o r t e d . F u r t h e r c o n s i d e r a t i o n has been given t o t h i s m a t t e r , and i t w i l l be s u f f i c i e n t f o r t h e Board's purposes i f i n t h e f u t u r e a r e p o r t i s r e c e i v e d f r o m you as of January 1 and J u l y 1 of each year g i v i n g t h e i n f o r m a t i o n r e q u e s t e d i n t h e second p a r a g r a p h of t h e Board's l e t t e r of A p r i l 29, 1933, r e g a r d i n g t h e i n d e b t e d n e s s 408 X-9052 -2 i n c u r r e d by t h e F e d e r a l r e s e r v e agent and t h e members of h i s s t a f f during t h e p r e c e d i n g s i x months ( e x c l u d i n g c u r r e n t b i l l s f o r ordinaryp e r s o n a l or household expenses b u t i n c l u d i n g o t h e r i n d e b t e d n e s s i n c u r r e d d u r i n g t h e s i x months' p e r i o d ) , and c o n t a i n i n g a s t a t e m e n t , i n c o n n e c t i o n w i t h t h e e x i s t i n g i n d e b t e d n e s s of each i n d i v i d u a l , of t h e program f o r the l i q u i d a t i o n of such i n d e b t e d n e s s . I t w i l l be a p p r e - c i a t e d i f you w i l l a r r a n g e t o submit r e p o r t s as of J a n u a r y 1 and J u l y 1 of each year t o t h e Board i n accordance w i t h t h i s p r o c e d u r e . A copy of t h e Board's l a t t e r of A p r i l 29, 1933, i s a t t a c h e d . Very t r u l y - y o u r s , Chester M o r r i l l , Secretary* Inclosure TO ALL FEDERAL RESERVE AGE1ITS FEDERAL RESERVE BOARD WASHINGTON address official correspondence t o the federal reserve board X-7425 April 29, 1933. SUBJECT: Indebtedness of Officers and Employees. Dear Sir: Because of the special relationship that e x i s t s with member banks and the high r e s p o n s i b i l i t y r e s t i n g upon the Federal reserve banks i n connection therewith, the Board f e e l s that i t i s e s p e c i a l l y important that the Federal Reserve Agents and their a s s i s t a n t s , including the members of their s t a f f s engaged in audits and examinat i o n s , should r e f r a i n from incurring any indebtedness, d i r e c t l y or i n d i r e c t l y , to member banks, their subsidiaries or a f f i l i a t e s , or otherwise placing themselves i n any p o s i t i o n which may result i n questions being raised as to the independence of t h e i r judgment or their disinterestedness i n the discharge of their r e s p o n s i b i l i t i e s with respect to such banks under the Federal Reserve Act. Further- more, i n order to avoid the p o s s i b i l i t y of embarrassment i n connection with the performance of their o f f i c i a l duties, i t i s the view of the Board that they should r e f r a i n fro® incurring any indebtedness to others except for legitimate and necessary purposes, and t h a t , whenever any indebtedness i s incurred by them (excluding, of course, X-742S — 2 — current b i l l s f o r ordinary personal and household expenses, "but not excluding indebtedness incurred to others to obtain funds for payment of such b i l l s ) , there should be prompt disclosure of a l l the f a c t s to the Federal Reserve Board. The Board desires that each Federal Reserve Agent prepare and transmit to i t as promptly as p o s s i b l e a f t e r July 1, 1933, a report showing as of that date any indebtedness of the agent and members of h i s s t a f f (excluding, of course, current b i l l s for ordinary personal and household expenses, but not excluding indebtedness incurred to others to obtain funds for payment of such b i l l s ) . The report should set f o r t h the name of the person, firm, corporation, or i n s t i t u t i o n to which the indebtedness i s due, the date on which i t was o r i g i n a l l y incurred ( i n d i c a t i n g whether before 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 ) , the maturity of the indebtedness, the unpaid balance, a description of the security therefor, i f any, a b r i e f statement of the purpose for which the indebtedness was incurred and the progress being made i n liquidating i t , and any comment that the Agent may wish to make i n connection therewith. In addition, there should be a prompt report to the Federal Reserve Board of any indebtedness of the kind referred to incurred by the Agent or any member of his s t a f f a f t e r July 1, 1933, and such report should contain informat i o n similar to that called for above with respect to indebtedness outstanding on that date. The Board b e l i e v e s that the directors of the Federal reserve banks w i l l f e e l that the same general principles should be applied t o the members of the s t a f f s of the Federal reserve 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 X-7425 411. - 3 responsible p o s i t i o n s , except that the reports mentioned would he made to the Boards of Directors instead of to the Federal Reserve Board. It requests, therefore, that t h i s l e t t e r be brought to the a t t e n t i o n of the Board of Directors of each bank, with the suggestion that they consider the a d v i s a b i l i t y of adopting these p r i n c i p l e s i f they have not already been established, of taking appropriate steps to obtain from such o f f i c e r s and employees information similar to that c a l l e d for with respect to the Federal Reserve Agents and the members of their s t a f f s , and of requiring a l l such o f f i c e r s and employees promptly to report to the Board of Directors any indebtedness of the kind referred to that may thereafter be incurred. In t h i s connection, the Board desires to c a l l a t t e n t i o n to i t s circular l e t t e r of May 7, 1924 (X-4048) which contains the following statement; n * * * the Federal Reserve Board b e l i e v e s i t w i l l be as obvious to the directors of the Federal reserve banks as i t i s to i t s e l f that the good conduct and repute of the Federal Reserve System require that the o f f i c e r s of the reserve banks s h a l l give their entire t i n e and a t t e n t i o n to the a f f a i r s of the 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 , " The Board f e e l s confident that the directors of the Federal reserve banks w i l l recognize the importance of s t r i c t conformity with the p r i n c i p l e s set f o r t h i n 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 to the o f f i c e r s of Federal reserve banks, i t i s equally applicable to heads of departments and employees occupying responsible p o s i t i o n s i n the banks, as well as to the Federal reserve agents and the members of their s t a f f s . If any of then has any connection with a business con- cern of any kind, tho Board requests that i t be promptly advised with respect thereto. 1-7425 e — — The Board w i l l "be p l e a s e d to have an acknowledgment 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 r i t h a statement of t h e a c t i o n t h a t has "been or Trill be taken i n r e g a r d t o 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 AGEHTS OF ALL F . R. BANKS. 413
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