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FEDERAL RESERVE BANK
OF NEW YORK
Fiscal A g en t o f the U nited States

r Circular N o. 3 5 9 9 1
L
O ctober 9, 1950
J

REGULATION Y
LO AN GU A RA N TE E S FO R DEFENSE PR O D U C TIO N

To All Banks, Other Financing Institutions and
Others Concerned in the Second Federal Reserve District :

Enclosed is a copy of Regulation V , entitled “ Loan Guarantees fo r Defense
Production,” revised effective September 27, 1950.
In our Circular No. 3594, dated September 26, 1950, we quoted the text of a state­
ment issued by the Board of Governors o f the Federal Reserve System outlining the
purposes of the revised regulation and setting forth a schedule of the guarantee fees to
be paid by financing institutions to the Federal Reserve Banks, as fiscal agents o f the
United States on behalf of the guarantors, out of the interest received from the
borrowers with respect to the portions o f loans guaranteed under the regulation.
The maximum rate of interest which may be charged to any borrower with respect to
a guaranteed loan has been set at 5 per cent. W here the financing institution charges
a commitment fee to the borrower on the unused portion o f the loan, such fee cannot
exceed % o f 1 per cent, and the guarantor shares in the commitment fee on the same
basis as it shares in the interest on the guaranteed portion o f the loan.
W e are prepared to receive applications from all banks, both members and non­
members o f the Federal Reserve System, and from all other financing institutions,
in the Second Federal Reserve District. Your cooperation in this program is requested
in the interest of expediting defense production.
Additional copies of the revised Regulation V, together with copies o f the V-Loan
Guarantee Agreement and application form s, and o f this circular, will be furnished
upon request.




A

llan

S proul,

President.

BOARD OF GOVERNORS
of

th e

FEDERAL RESERVE SYSTEM

LOAN GUARANTEES FOR DEFENSE
PRODUCTION

REGULATION V
As Revised Effective September 27, 1950




INQUIRIES REGARDING THIS REGULATION
Any inquiry relating to this regulation should be addressed
to the Federal Reserve Bank o r Federal
Reserve branch bank o f the district
in which the inquiry arises.




REGULATION V
Revised Effective September 27, 1950

LOAN GUARANTEES FO R DEFENSE PRODUCTION
S E C T IO N

1. A U T H O R IT Y

This regulation is based upon and issued pursuant to the Defense
Production Act of 1950 (herein referred to as the “ A ct” ), and Execu­
tive Order No. 10161, dated September 9, 1950 (herein referred to
as the ‘‘Order” ), and after consultation with the heads o f the guaran­
teeing agencies designated in the A ct and the Order, namely, the
Department o f the Arm y, the Department o f the N avy, the D epart­
ment o f the Air Force, the Department o f Commerce, the D epart­
ment o f the Interior, the Department o f Agriculture, and the General
Services Administration. Pertinent portions o f the A ct and the Order
are set forth in the appendix to this regulation.
S E C T IO N 2 . O B J E C T IV E S OF FE D E RA L R E SE R V E S Y S T E M

In carrying out its functions under the A ct and the Order, it will be
the objective o f the Federal Reserve System to facilitate and expedite
to the greatest extent possible the financing o f contractors, subcon­
tractors, and other persons having contracts or engaged in operations
deemed by the guaranteeing agencies to be necessary to expedite pro­
duction and deliveries or services under Government .contracts for the
procurement o f materials or the performance o f services for the
national defense. The Board o f Governors o f the Federal Reserve
System (herein referred to as the ‘ B oard” ) and the Federal Reserve
Banks will cooperate fully with the guaranteeing agencies in order to
achieve this objective and will follow in general and to the extent
applicable procedures developed from experience obtained in the ad­
ministration of the V-loan and T-loan programs during W orld W ar II.
S E C T IO N 3 . PR O C ED U R E S

(a) Applications. Any private financing institution m ay submit
to the Federal Reserve Bank o f its district an application for a guar­
antee o f a loan to an eligible borrower. Such application shall be in
such form and contain such information as the Board may prescribe
after consultation with the guaranteeing agencies.
( b ) Eligibility o f B orrow er. N o loan shall be guaranteed unless
it shall first be determined that the contract or other operation o f the




1

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R E G U L A T IO N

V

S ec. 3

prospective borrower to be financed by such loan is one which is deemed
by the guaranteeing agency involved to be necessary to expedite pro­
duction and deliveries or services under a Government contract for
the procurement o f materials or the performance o f services for the
national defense. Such determination will be made in each case by
a duly authorized certifying officer o f the appropriate guaranteeing
agency or in such other manner as the guaranteeing agency m ay pre­
scribe. The determination will be made upon the basis o f information
contained in the application and accom panying papers filed by the
applicant financing institution, unless in the circumstances o f a par­
ticular case it appears that further information is necessary.
(c l A pproval o f Guarantees. Each application by a financing
institution for a loan guarantee will be subject to approval by the
appropriate guaranteeing agency in Washington or, to such extent as
the guaranteeing agency may prescribe, by the Federal Reserve Bank
to which the application is submitted. In any case in which an ap­
plication is required to be submitted to Washington for approval, the
Federal Reserve Bank will transmit the application, together with
all necessary supporting information and the recommendation o f the
Federal Reserve Bank, through the Board o f Governors to the guar­
anteeing agency involved. Subject to determination o f the borrower’s
eligibility, if the application is approved by a duly authorized con­
tracting officer o f the guaranteeing agency, such contracting officer
will authorize the Federal Reserve Bank to execute and deliver the
guarantee on behalf o f the guaranteeing agency. Such authorization
will be transmitted to the Federal Reserve Bank through the Board of
G overnors; and, thereupon, the Federal Reserve Bank, acting as fiscal
agent o f the United States, will execute and deliver the guarantee on
behalf o f the guaranteeing agency in accordance with the terms o f the
authorization. In any case in which the Federal Reserve Bank is
authorized by a guaranteeing agency to approve applications for guar­
antees, the Reserve Bank, if it approves the application and subject
to determination o f the borrower’s eligibility, will execute and deliver
the guarantee without submission o f the application for prior approval
by any officer o f the guaranteeing agency; but the Reserve Bank will
prom ptly notify the guaranteeing agency o f the execution o f such
guarantee.
(d) Other Form s and Procedures. The Board will prescribe
from time to time, after consultation with the guaranteeing agencies,
forms to be followed in the execution o f guarantees pursuant to this
regulation and such other forms as m ay be necessary. The Board will




R E G U L A T IO N

S ecs. 3, 4 ,5 .6

V

3

also prescribe, after consultation with the guaranteeing agencies,
procedures with respect to such matters as the purchase o f guaranteed
loans by the Federal Reserve Banks as fiscal agents, the handling
and disposition by the Federal Reserve Banks o f guarantee fees and
other fees collected, and such other procedures as may be found
necessary.
S E C T IO N

4 . R E S P O N S IB IL IT Y O F

FE D E RA L R E SE R V E B A N K S

A Federal Reserve Bank in arranging for or .making any guarantee
on behalf o f any guaranteeing agency will be expected to make reason­
able efforts to afford such guaranteeing agency the best available
protection against possible financial loss consistent with the obtaining
o f national defense production expeditiously. N o Federal Reserve
Bank, however, shall have any responsibility or accountability except
as agent in taking any action pursuant to or under authority o f the
Act, the Order, or this regulation. Each Federal Reserve Bank will
be reimbursed by each guaranteeing agency in the usual manner for
all expenses and losses incurred by the Reserve Bank in acting as
agent on behalf o f such guaranteeing agency, including among such
expenses, notwithstanding any other provision o f law, attorneys’ fees
and expenses o f litigation.
S E C T IO N 5. R A T E S A N D FE ES

Rates o f interest, guarantee fees, commitment fees, and other
charges which m ay be made with respect to guaranteed loans and
guarantees executed through the agency o f any Federal Reserve Bank
hereunder will from time to time be prescribed, either specifically or
by maximum limits or otherwise, by the Board o f Governors after
consultation with the guaranteeing agencies.
S E C T IO N 6 . REPO RTS

Each Federal Reserve Bank shall make such reports as the Board
of Governors shall require with respect to its operations pursuant to
the terms o f the A ct, the Order, and this regulation.




APPENDIX
D E F E N S E P R O D U C T IO N A C T OF 1950
(Pub. N o . 774— 81st Cong.. Approved September 8. 1950)
•

•

•

•

•

T IT L E III— E X P A N S IO N O F P R O D U C T IV E C A P A C IT Y
A N D SUPPLY

S e c . 301. (a) In order to expedite production and deliveries or
services under Government contracts* the President m ay authorize,
subject to such regulations as he m ay prescribe, the Department of
the A rm y, the Department of the N avy, the Department o f the Air
Force, the Department o f Commerce, and such other agencies o f the
United States engaged in procurement for the national defense as he
m ay designate (hereinafter referred to as “ guaranteeing agencies” ),
without regard to provisions o f law relating to the making, perform ­
ance, amendment, or modification o f contracts, to guarantee in whole or
in part any public or private financing institution (including any
Federal Reserve bank), by commitment to purchase, agreement to share
losses, or otherwise, against loss o f principal or interest on any loan,
discount, or advance, or on any commitment in connection therewith,
which may be made by such financing institution for the purpose of
financing any contractor, subcontractor, or other person in connection
with the performance, or in connection with or in contemplation o f
the termination, o f any contract or other operation deemed by the
guaranteeing agency to be necessary to expedite production and de­
liveries or services under Government contracts for the procurement
o f materials or the performance o f services for the national defense.
(b l A ny Federal agency or any Federal Reserve bank, when desig­
nated by the President, is hereby authorized to act, on behalf o f any
guaranteeing agency, as fiscal agent o f the United States in the making
o f such contracts o f guarantee and in otherwise carrying out the pur­
poses o f this section. All such funds as may be necessary to enable
any such fiscal agent to carry out any guarantee made by it on behalf
o f any guaranteeing agency shall be supplied and disbursed by or
under authority from such guaranteeing agency. N o such fiscal agent
shall have any responsibility or accountability except as agent in
taking any action pursuant to or under authority o f the provisions
o f this section. Each such fiscal agent shall be reimbursed by each
guaranteeing agency for all expenses and losses incurred by such fiscal
agent in acting as agent on behalf o f such guaranteeing agency, includ­
ing among such expenses, notwithstanding any other provision o f law,
attorneys’ fees and expenses o f litigation.
(c)
All actions and operations o f such fiscal agents under authority
o f or pursuant to this section shall be subject to the supervision o f the
President, and to such regulations as he m ay prescribe; and the
President is authorized to prescribe, either specifically or by maximum




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R E G U L A T IO N

V

5

limits or otherwise, rates o f interest, guarantee and commitment fees,
and other charges which m ay be made in connection with loans, dis­
counts, advances, or commitments guaranteed by the guaranteeing
agencies through such fiscal agents, and to prescribe regulations gov­
erning the forms and procedures (which shall be uniform to the extent
practicable) to be utilized in connection with such guarantees.
(d) Each guaranteeing agency is hereby authorized to use for the
purposes o f this section any funds which have heretofore been appro­
priated or allocated or which hereafter may be appropriated or allo­
cated to it, or which are or may become available to it, for such pur­
poses or for the purpose o f meeting the necessities o f the national
defense.
*

*

*

*

*

T I T L E V I I — G E N E R A L P R O V IS IO N S
•

*

*

*

*

702. As used in this A ct—
(a ) The word “ person” includes an individual, corj>oration, part­
nership, association, or any other organized group o f persons, or legal
successor or representative o f the foregoing, and includes the United
States or any agency thereof, or any other government, or any o f its
political subdivisions, or any agency o f any o f the foregoing: Provided,
That no punishment provided by this A ct shall apply to the United
States, or to any such government, political subdivision, or government
agency.
(b ) The word “ materials” shall include raw materials, articles,
commodities, products, supplies, components, technical information,
and processes.
(c ) The word “ facilities” shall not include farms, churches or other
places o f worship, or private dwelling houses.
(d) The term “ national defense” means the operations and activi­
ties o f the armed forces, the Atom ic Energy Commission, or any other
Government department or agency directly or indirectly and sub­
stantially concerned with the national defense, or operations or activi­
ties in connection with the Mutual Defense Assistance A ct o f 1949,
as amended.
Sec.

*

*

*

*

*

S e c . 703. (a) Except as otherwise specifically provided, th<* Presi­
dent may delegate any power or authority conferred upon him by this
A ct to any officer or agency o f the Government, including any new
agency or agencies (and the President is hereby authorized to create
such new agencies, other than corporate agencies, as he deems neces­
sary), and he m ay authorize such redelegations by that officer or
agency as the President may deem appropriate. * * *
*

*

*

*

*

S e c . 704. The President m ay make such rules, regulations, and
orders as he deems necessary or appropriate to carry out the provisions




6

R E G U L A T IO N

V

o f this A ct. A ny regulation or order under this A ct m ay be estab­
lished in such form and manner, may contain such classifications and
differentiations, and m ay provide for such adjustments and reasonable
exceptions as in the judgment o f the President are necessary or proper
to effectuate the purposes o f this A ct, or to prevent circumvention or
evasion, or to facilitate enforcement o f this A ct, or any rule, regula­
tion, or order issued under this Act.
*

*

*

*

*

Sec . 709. The functions exercised under this A ct shall be excluded
from the operation o f the Adm inistrative Procedure A ct (60 Stat.
237) except as to the requirements of section 3 thereof. Any rule,
regulation, or order, or amendment thereto, issued under authority
o f this A ct shall be accompanied by a statement that in the formula­
tion thereof there has been consultation with industry representatives,
including trade association representatives, and that consideration
has been given to their recommendations, or that special circumstances
have rendered such consultation impracticable or contrary to the
interest o f the national defense, but no such rule, regulation, or order
shall be invalid by reason o f any subsequent finding b y judicial or other
authority that such a statement is inaccurate.
*

*

*

*

*

S e c . 7 1 1 . There are hereby authorized to be appropriated such
sums as may be necessary and appropriate for the carrying out of
the provisions and purposes of this A ct by the President and such
agencies as he may designate or create. Funds made available for the
purposes of this A ct may be allocated or transferred for any of the
purposes o f this A ct, with the approval of the Bureau o f the Budget,
to any agency designated to assist in carrying out this A ct. Funds
so allocated or transferred shall remain available for such period
as may be specified in the Acts making such funds available.
*

9

*

it

*

S ec. 716. (a) Titles I, II, III , and V II of this A ct and all authority
conferred thereunder shall terminate at the close of June 30, 1952, but
such titles shall be effective after June 30, 1951 only to the extent
necessary to aid in carrying out contracts relating to the national
defense entered into by the Government prior to July 1, 1951.
(b ) Titles IV , V , and V I of this A ct and all authority conferred
thereunder shall terminate at the close of June 30, 1951.
(c) Notwithstanding the foregoing—
(1) The Congress by concurrent resolution or the President by
proclamation m ay terminate this A ct prior to the termination
otherwise provided therefor.
(2) The Congress may also provide by concurrent resolution




R E G U L A T IO N

V

7

that any section o f this A ct and all authority conferred there­
under shall terminate prior to the termination otherwise provided
therefor.
(3)
Any agency created under this A ct may be continued in
existence for purposes o f liquidation for not to exceed six months
after the termination o f the provision authorizing the creation of
such agency.
(d )
The termination of any section of this A ct, or o f any agency or
corporation utilized under this A ct, shall not affect the disbursement
o f funds under, or the carrying out of, any contract, guarantee, com ­
mitment or other obligation entered into pursuant to this A ct prior to
the date of such termination, or the taking of any action necessary to
preserve or protect the interests o f the United States in any amounts
advanced or paid out in carrying on operations under this Act.
E X E C U T IV E O R D E R NO. 10161
Approved September 9, 1950
D E L E G A T IN G C E R T A IN F U N C T IO N S OF T H E P R E S ID E N T
U N D E R T H E D E F E N S E P R O D U C T IO N A C T OF 1950
B y virtue o f the authority vested in me by the Constitution and
statutes, including the Defense Production A ct o f 1950, and as President
of the United States and Commander in Chief o f the armed forces,
it is hereby ordered as follows:
»
P A R T III.

«

*

«

»

E X P A N S IO N O F P R O D U C T IV E C A P A C IT Y
A N D SUPPLY

S e c . 301. The Department of the Arm y, the Department of the
N avy, the Department of the Air Force, the Department of C om ­
merce, the Department o f the Interior, the Department of Agriculture,
and the General Services Administration, in this Part referred to as
guaranteeing agencies, and each delegate under section 101 of this
Executive order shall develop and promote measures for the expansion
o f productive capacity and of production and supply of materials and
facilities necessary for the national defense.
S e c . 302. (a) Each guaranteeing agency is hereby authorized, in
accordance with section 301 of the Defense Production A ct o f 1950,
subject to the provisions of this section, in order to expedite production
and deliveries or services under Government contracts, and without
regard to provisions of law relating to the making, performance,
amendment, or modification of contracts, to guarantee in whole or in
part any public or private financing institution (including any Federal
Reserve B an k ), by commitment to purchase, agreement to share losses,
or otherwise, against loss of principal or interest on any loan, discount,
or advance, or on any commitment in connection therewith, which
m ay be made by such financing institution for the purpose o f financ­




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R E G U L A T IO N

V

ing any contractor, subcontractor, or other person in connection with
the performance, or in connection with or in contemplation o f the
termination, o f any contract or other operation deemed by the guaran­
teeing agency to be necessary to expedite production and deliveries
or services under Government contracts for the procurement of m a­
terials or the performance of services for the national defense.
(b ) Each Federal Reserve Bank is hereby designated and author­
ized to act, on behalf o f any guaranteeing agency, as fiscal agent of
the United States in the making of such contracts of guarantee and in
otherwise carrying out the purposes of the said section 301, in respect
o f private financing institutions.
(c) All actions and operations o f Federal Reserve Banks, under
authority o f or pursuant to the said section 301 of the Defense Pro­
duction A ct of 1950, shall be subject to the supervision of the Board
o f Governors o f the Federal Reserve System. Said Board is hereby
authorized, after consultation with the heads o f the guaranteeing
agencies, (1) to prescribe such regulations governing the actions and
operations of fiscal agents hereunder as it may deem necessary, (2)
to prescribe, either specifically or by maximum limits or otherwise,
rates of interest, guarantee and commitment fees, and other charges
which may be made in connection with loans, discounts, advances, or
commitments guaranteed by the guaranteeing agencies through such
fiscal agents, and (3) to prescribe regulations governing the forms
and procedures (which shall be uniform to the extent practicable) to
be utilized in connection with such guarantees.
*
PART IX .

*

*

*

*

G E N E R A L P R O V IS IO N S

S e c . 902. (a) Except as otherwise provided in section 9 0 2 (c) of
this Executive order, each officer or agency having functions under
the Defense Production A ct o f 1950 delegated or assigned thereto by
this Executive order may exercise and perform, with respect to such
functions, the functions vested in the President by Title V II of the
said Act.
(b )
The functions which may be exercised and performed pursuant
to the authority of section 902(a) o f this Executive order shall include,
but not by way o f limitation, (1) except as otherwise provided in
section 701 (c) of this Executive order, and except as otherwise required
by section 403 of the Defense Production A ct of 1950, the power to
redelegate functions, and to authorize the successive redelegation of
functions, to agencies, officers, and employees o f the Government, (2)
the power to create an agency or agencies, under the jurisdiction of
the officer concerned, to administer functions delegated by this Execu­
tive order, and (3) in respect o f Parts I, II, IV , and V o f this Execu­
tive order, the power o f subpoena: Provided, That the subpoena
power shall be utilized only after the scope and purpose o f the investi­
gation, inspection, or inquiry to which the subpoena relates have been
defined either by the appropriate officer referred to in section 902(a)




R E G U L A T IO N

V

9

of this Executive order or by such other person or persons as he shall
designate.
(c)
There are excluded from the functions delegated by section
902(a) o f this Executive order (1) the functions delegated by Part V II
o f this Executive order, (2) the. functions o f the President under sec­
tions 703(b) and 710 (a ) o f the Defense Production A ct o f 1950, (3)
the functions o f the President with respect to regulations under sections
7 1 0 (b ), 7 1 0 (c), and 710(d) o f the said A ct, and (4) the functions of
the President with respect to fixing compensation under section 703(a)
o f the said Act.
S e c . 903. All agencies o f the Government (including departments,
establishments, and corporations) shall furnish to each officer to whom
functions are delegated or assigned by this Executive order such infor­
mation relating to defense production or procurement, or otherwise
relating to the functions delegated or assigned to such officer by this
Executive order, as he may deem necessary.
S e c . 904. Each delegate referred to in section 101 o f this Executive
order shall, when and if he shall deem it necessary and appropriate,
appoint a committee composed o f representatives o f such agencies of
the Government as he may determine. Any committee so appointed
shall advise and consult with the delegate concerned, as he m ay request,
in connection with the carrying out o f the functions delegated to him
by sections 101, 201, and 302 o f this Executive order, and shall advise
the delegate concerned regarding requirements of materials and facili­
ties.
H a r r y S. T ru m a n
The W hite House,
September 9, 1950.




OA 3 X 9 7

F E D E R A L R E S E R V E BANK
O F N EW YORK

October 10, 1950.

T o all Banking Institutions in the
Second Federal R eserve D istrict:

W e are pleased to announce that Bank of Allwood, a newly
organized bank in Clifton, New Jersey, which formally opened for
business today, is a member o f the Federal Reserve System.




A

llan

S proul,

President.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102