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FEDERAL RESERVE BANK O F NEW YORK Fiscal A g e n t of the United States r Circular No. 2 9 9 3 1 L August 23, 1945 J INFORMATION REGARDING THE VICTORY LOAN To all Banking Institutions, and Others Concerned, in the Second Federal Reserve District: For your information we quote below the text of an announcement by the Treasury Department released for publication on August 23, 1945, regarding the Victory Loan Drive. Secretary V i n s o n announced today that the V i c t o r y Loan Drive will begin October 29, 1945 and that the goal is $11,000,000,000. T h e Secretary said: " T h e present Treasury balance is large but enormous obligations incurred in the achievement of victory, including those for material and munitions already delivered and used, will drain this balance quickly and additional funds will be needed early in December. Government expenditures are being drastically reduced and this will continue vigorously. T h e aftermath of war, however, carries grave responsibilities that must be met. A substantial army and navy must be maintained until order is restored throughout the world. T h e cost of contract settlements, bringing our forces h o m e , their mustering-out pay, hospitalization, care, and rehabilitation will be great and will require large sums for which w e must plan n o w . " T h e Secretary said that the m a j o r emphasis in the V i c t o r y L o a n D r i v e will again be on sales to individuals. H e took occasion to stress the importance of saving on the part of individuals and the wise investment of savings, and stated that although this is the last great public drive systematic saving through payroll deduction plans for the purchase of Series E bonds will be continued. It is essential to the orderly continuance of the program that industrial plants, business establishments, and Federal, State, and local g o v e r n m e n t s with payroll deduction plans continue to service those plans, Mr. V i n s o n said, and it is highly important that all authorized issuing agents continue their bond issuing activities. T h e termination of the w a r should make no change in these respects. T h e g o a l and securities to be offered w e r e determined b y the T r e a s u r y after discussion with various g r o u p s , including Chairmen of the State W a r Finance Committees, officials of the Federal Reserve System, members of the American Bankers Association, representatives of insurance c o m panies, and other investment authorities. Detailed information c o n c e r n i n g the drive f o l l o w s : Of the $11,000,000,000 goal, $4,000,000,000 is to come f r o m sales to individuals and $7,000,000,000 f r o m other non-bank investors. Of the individual quota, $2,000,000,000 is to c o m e f r o m the sale of Series E bonds. T h e securities which will be sold under the direction of the State W a r Finance Committees are as f o l l o w s : Series E, F and G Savings B o n d s Series C Savings N o t e s 2^2% T r e a s u r y B o n d s of 1967-72, maturing D e c e m b e r 15, 1972 2 % % T r e a s u r y B o n d s of 1959-62, maturing D e c e m b e r 15, 1962 ]/%% Certificates of Indebtedness maturing D e c e m b e r 1, 1946 T h e D r i v e for individuals will extend f r o m O c t o b e r 29 through D e c e m b e r 8. During the period f r o m D e c e m b e r 3 through D e c e m b e r 8, subscriptions will be received f r o m all other non-bank investors for the marketable securities. The and 21/2c/o b o n d s will be dated N o v e m b e r 15 and the certificates of indebtedness will be dated D e c e m b e r 3, 1945, and will be sold at par and accrued interest f r o m those dates. A l l Series E, F and G Savings B o n d s and Series C Savings N o t e s processed through the Federal Reserve Banks between O c t o b e r 29 and D e c e m b e r 31 will be credited to the Drive. T h e Treasury will request that there be no trading in the marketable securities and no purchases of such securities other than o n direct subscription until after D e c e m b e r 8. (OVER) T o avoid unnecessary transfers of funds f r o m one locality to another, the T r e a s u r y again urges that all subscriptions b y c o r p o r a t i o n s and firms be entered and paid f o r t h r o u g h the b a n k i n g institutions w h e r e funds are located. T h i s request is made t o prevent disturbance t o the m o n e y market and the b a n k i n g situation. T h e T r e a s u r y will undertake, as in the Seventh W a r L o a n D r i v e , t o see that statistical credit is g i v e n t o any locality f o r such subscriptions as the purchaser m a y request, e x c e p t that subscriptions f r o m insurance c o m p a n i e s will be credited to the State of the h o m e office as in the past. T h e T r e a s u r y appreciates the substantial c o o p e r a t i o n it has received in this respect. I n order to help in a c h i e v i n g its o b j e c t i v e of selling as m a n y securities as possible outside of the b a n k i n g s y s t e m , the T r e a s u r y urges the c o o p e r a t i o n of all banking institutions in declining t o make speculative loans f o r the purchase of G o v e r n m e n t securities, and in declining t o accept subscriptions f r o m c u s t o m e r s w h i c h appear to b e entered f o r speculative purposes. T h e acquisition of o u t standing securities b y banks on the understanding that a substantially like a m o u n t of the n e w securities will be subscribed for t h r o u g h such banks, thus enabling them to expand their w a r loan d e p o s i t balances, is regarded as an i m p r o p e r practice b y the T r e a s u r y . T h e Secretary will request b a n k i n g institutions not to make such purchases. T h e T r e a s u r y is in f a v o r of the banks m a k i n g loans to facilitate permanent investment in G o v e r n m e n t securities p r o v i d e d such loans are made in a c c o r d with the joint statement issued b y the National and State Bank S u p e r v i s o r y Authorities on N o v e m b e r 23, 1942.* T h e T r e a s u r y requests that all n o n - b a n k investors refrain f r o m selling securities heretofore acquired to obtain funds to subscribe f o r the securities offered in the V i c t o r y L o a n Drive. T h i s request is not intended to preclude normal p o r t f o l i o adjustments. H o w e v e r , subscriptions b y insurance c o m p a n i e s and savings institutions will b e s u b j e c t t o limitations to b e announced later. L i f e insurance c o m p a n i e s , s a v i n g s institutions, and States, municipalities, political subdivisions and similar p u b l i c corporations, and agencies thereof, will be permitted to m a k e deferred p a y m e n t , at par and accrued interest, f o r the 2 * 4 % and 2 y 2 % marketable b o n d s allotted t o them, up t o F e b r u a r y 28, 1946. D u r i n g the period f r o m D e c e m b e r 3 t h r o u g h D e c e m b e r 8 f o r this p u r p o s e as banks a c c e p t i n g demand deposits, will be portion of their time deposits in Series F and Series G Savings b o n d s , and the % % certificates o f f e r e d in the D r i v e , under Securities s o acquired b y the banks will not be included in t o w a r d any quota. c o m m e r c i a l banks, w h i c h are defined a f f o r d e d an o p p o r t u n i t y to invest a B o n d s , the and 2 1 / 2 % T r e a s u r y limitations to b e a n n o u n c e d later. the D r i v e n o r will they be counted C o m m e r c i a l banks will n o t b e permitted to o w n the 2 y 2 % o r the 2 % % marketable b o n d s o f f e r e d in the D r i v e until within ten years of their respective maturity dates, e x c e p t as p r o v i d e d above. T h e special b o n d in m e m o r y of the late President Franklin D e l a n o R o o s e v e l t will first be available at the start of the V i c t o r y L o a n D r i v e , w h e n it will be on sale at all a g e n c i e s authorized to issue U n i t e d States S a v i n g s B o n d s of Series E . T h i s b o n d , in the d e n o m i n a t i o n of $200, t o be issued at $150, will constitute an additional d e n o m i n a t i o n of Series E b o n d s , and will have the same terms and attributes as the other denominations. Your attention announcement. is called particularly to the last eight paragraphs ALLAN of the above SPROUL, President. * The joint statement referred to reads as follows: T h e Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Executive Committee of the National Association of Supervisors of State Banks made the following statement of their examination and supervisory policy with special reference to investments in and loans upon Government securities. 1. There will be no deterrents in examination or supervisory policy to investments by banks in Government securities of all types, except those securities made specifically ineligible for bank investment by the terms of their issue. 2. In connection with Government financing, individual subscribers relying upon anticipated income may wish to augment their subscriptions by temporary borrowings from banks. Such loans will not be subject to criticism but should be on a short term or amortization basis fully repayable within periods not exceeding six months. 3. Banks will not be criticized for utilizing their idle funds as far as possible in making such investments and loans and availing themselves of the privilege of temporarily borrowing from or selling Treasury bills to the Federal Reserve Banks when necessary to restore their required reserve positions.
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