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F

e d e r a l

r e s e r v e

B

a n k

OF DALLAS

Dallas, Texas, October 4, 1950

DEFENSE PRODUCTION LOANS

To All Banking Institutions and Others Concerned
in the Eleventh Federal Reserve District:

There is enclosed a copy o f Regulation V of the Board of Governors of the Federal Reserve
system, which outlines the functions of the Federal Reserve banks in carrying out the provisions
of Executive Order No. 10161, relating to the guaranteeing of defense production loans.
In connection with this program, the Board of Governors of the Federal Reserve System has
issued the following statement:
“ In order to facilitate the defense effort, a program of guaranteed loans patterned
after the so-called V-Loan Program of World War II has been inaugurated under authority
o f the Defense Production Act of 1950 and the President’s Executive Order No. 10161
o f September 9, 1950.
“ The guaranteeing agencies o f the Government named in the Executive Order are
the Department o f the Army, the Department of the Navy, the Department of the Air
Force, the Department of Commerce, the Department of the Interior, the Department of
Agriculture, and the General Services Administration. The program, adopted after consul­
tations among the various guaranteeing agencies and the Board o f Governors of the
Federal Reserve System, will again be administered through the agency of the Federal
Reserve banks.
“ Under the Defense Production Act, each of the guaranteeing agencies is authorized
to guarantee loans made by banks and other lending institutions to individuals and private
corporations for the purpose of financing contracts and other operations which the guaran­
teeing agency considers necessary for the procurement of materials and the performance
o f services for the national defense. In the administration o f this program, special atten­
tion will be given to the financing requirements of small business enterprises engaged in
operations relating to the defense effort.
“ The twelve Federal Reserve banks are designated in the Executive Order as fiscal
agents o f the United States to act on behalf of the guaranteeing agencies in the making of
guarantees; and the Executive Order authorizes the Board of Governors, after consultation
with the guaranteeing agencies, to prescribe regulations governing the operations o f the
Federal Reserve banks as such agents, rates and fees to be charged with respect to guar­
anteed loans, and the forms and procedures to be utilized in connection with the making
o f such guarantees. ^
“ In connection with the establishment of the new program, the Board of Governors, after
consulting the guaranteeing agencies, has revised its Regulation V, effective September 27,
1950, to govern the general operation of the program. A standard form of guarantee agree­
ment has been prescribed. Except for a few minor changes, it is identical with the form of
the 1944 V-Loan guarantee agreement which was in use at the close of World War II.
Likewise, the procedures for the handling of guarantees will follow generally and to the
extent applicable those which were in effect when the wartime V-Loan Program termi­
nated in 1945.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

“ The following schedule of guarantee fees has been established:

P er Cent o f
L oan G uaranteed

G uarantee F e e (P e r Cent
o f In te re st P ayable by
B orrow er on G uaranteed
P ortion o f L oan )

10
15
20
25
30
35
40-50

70 or less
75
80
85
90
95
Over 95

“ The maximum rate of interest which may be charged with respect to a guaranteed
loan has been set at 5 per cent.
“ These actions make it possible for the several guaranteeing agencies immediately to
provide such guarantees as may be necessary to facilitate the financing of defense con­
tracts. The form o f guarantee agreement, the schedule of rates and fees, and the various
procedures are subject to change from time to time as experience under the renewed pro­
gram may make desirable.
“ In the formulation o f policies and procedures there will be frequent consultations
between the guaranteeing agencies and the Board of Governors for the purpose of achiev­
ing uniformity and coordination to the greatest extent practicable. The program for
assisting in the financing of defense contractors— especially the smaller manufacturers
and business concerns— is expected to play an important part in carrying out the purposes
of the Defense Production Act of 1950.
“ In any case in which there is need for a guaranteed loan to finance a contractor or
subcontractor engaged in o p e r a tio n s r e la t in g to defense production, the contractor
should contact his local bank or other financing institution. If the financing institution is
in agreement, it should in turn contact the Federal Reserve bank or branch o f its district
and file with the Reserve bank or branch an application for a guarantee o f the loan by the
appropriate guaranteeing agency.”
This bank will cooperate and assist in every way possible in carrying out the provisions of
the Executive Order in accordance with the regulations of the Board of Governors o f the Federal
Reserve System, and financing institutions should direct all inquiries with respect to the program
to this bank or one of its branches at El Paso, Houston, and San Antonio, where they will be given
prompt and careful attention.
Member banks of the Federal Reserve System are requested to insert this regulation in their
ring binders.
Yours very truly,
R. R. GILBERT
President

BOARD OF GOVERNORS
of the
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 or Federal
Reserve branch hank of the district
in which the inquiry arises.

REGULATION V
Revised Effective September 27, 1950
LOAN GUARANTEES FOR DEFENSE PRODUCTION
SECTION

1. AUTHORITY

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 of the guaran­
teeing agencies designated in the Act and the Order, namely, the
Department of the Army, the Department of the Navy, the Depart­
ment of the Air Force, the Department of Commerce, the Depart­
ment of the Interior, the Department of Agriculture, and the General
Services Administration. Pertinent portions of the Act and the Order
are set forth in the appendix to this regulation.
SECTION 2. OBJECTIVES OF FEDERAL RESERVE SYSTEM

In carrying out its functions under the Act and the Order, it will be
the objective of the Federal Reserve System to facilitate and expedite
to the greatest extent possible the financing of 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 of materials or the performance of services for the
national defense. The Board of Governors of the Federal Reserve
System (herein referred to as the “ Board” ) 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 World War II.
SECTION 3. PROCEDURES

(а) Applications. Any private financing institution may submit
to the Federal Reserve Bank of its district an application for a guar­
antee of 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.
(б) Eligibility of Borrower. No loan shall be guaranteed unless
it shall first be determined that the contract or other operation of the

1

2

REGULATION 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 of materials or the performance of services for the
national defense. Such determination will be made in each case by
a duly authorized certifying officer of the appropriate guaranteeing
agency or in such other manner as the guaranteeing agency may pre­
scribe. The determination will be made upon the basis of information
contained in the application and accompanying papers filed by the
applicant financing institution, unless in the circumstances of a par­
ticular case it appears that further information is necessary.
(c) Approval of 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 of the
Federal Reserve Bank, through the Board of Governors to the guar­
anteeing agency involved. Subject to determination of the borrower’s
eligibility, if the application is approved by a duly authorized con­
tracting officer of the guaranteeing agency, such contracting officer
will authorize the Federal Reserve Bank to execute and deliver the
guarantee on behalf of the guaranteeing agency. Such authorization
will be transmitted to the Federal Reserve Bank through the Board of
Governors; and, thereupon, the Federal Reserve Bank, acting as fiscal
agent of the United States, will execute and deliver the guarantee on
behalf of the guaranteeing agency in accordance with the terms of 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 of the borrower’s eligibility, will execute and deliver
the guarantee without submission of the application for prior approval
by any officer of the guaranteeing agency; but the Reserve Bank will
promptly notify the guaranteeing agency of the execution of such
guarantee.
(d ) Other Forms and Procedures. The Board will prescribe
from time to time, after consultation with the guaranteeing agencies,
forms to be followed in the execution of guarantees pursuant to this
regulation and such other forms as may be necessary. The Board will

S ecs . 3, 4, 5 .6

REGULATION V

3

also prescribe, after consultation with the guaranteeing agencies,
procedures with respect to such matters as the purchase of guaranteed
loans by the Federal Reserve Banks as fiscal agents, the handling
and disposition by the Federal Reserve Banks of guarantee fees and
other fees collected, and such other procedures as may be found
necessary.
SECTION 4 . RESPONSIBILITY OF FEDERAL RESERVE BANKS

A Federal Reserve Bank in arranging for or .making any guarantee
on behalf of 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
of national defense production expeditiously. No Federal Reserve
Bank, however, shall have any responsibility or accountability except
as agent in taking any action pursuant to or under authority of 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 of such guaranteeing agency, including among such
expenses, notwithstanding any other provision of law, attorneys’ fees
and expenses of litigation.
SECTION 5. RATES AND FEES

Rates of interest, guarantee fees, commitment fees, and other
charges which may be made with respect to guaranteed loans and
guarantees executed through the agency of any Federal Reserve Bank
hereunder will from time to time be prescribed, either specifically or
by maximum limits or otherwise, by the Board of Governors after
consultation with the guaranteeing agencies.
SECTION 6. REPORTS

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

APPENDIX
DEFENSE PRODUCTION A CT OF 1950
(Pub. N o . 774— 81st Cong., Approved September 8, 1950)
*

*

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*

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

Sec . 301. (a) In order to expedite production and deliveries or
services under Government contracts, the President may authorize,
subject to such regulations as he may prescribe, the Department of
the Army, the Department of the Navy, the Department of the Air
Force, the Department of Commerce, and such other agencies of the
United States engaged in procurement for the national defense as he
may designate (hereinafter referred to as “ guaranteeing agencies” ) ,
without regard to provisions of law relating to the making, perform­
ance, amendment, or modification of 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 of 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 of
the termination, of 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
of materials or the performance of services for the national defense.
(b) Any Federal agency or any Federal Reserve bank, when desig­
nated by the President, is hereby authorized to act, on behalf of any
guaranteeing agency, as fiscal agent of the United States in the making
of such contracts of guarantee and in otherwise carrying out the pur­
poses of 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
of any guaranteeing agency shall be supplied and disbursed by or
under authority from such guaranteeing agency. No such fiscal agent
shall have any responsibility or accountability except as agent in
taking any action pursuant to or under authority of the provisions
of 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 of such guaranteeing agency, includ­
ing among such expenses, notwithstanding any other provision of law,
attorneys’ fees and expenses of litigation.
(c) All actions and operations of such fiscal agents under authority
of or pursuant to this section shall be subject to the supervision of the
President, and to such regulations as he may prescribe; and the
President is authorized to prescribe, either specifically or by maximum

4

REGULATION V

5

limits or otherwise, rates of interest, guarantee and commitment fees,
and other charges which may 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 of 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 of meeting the necessities of 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
*

*

*

a

Sec . 702. As used in this Act—

(a) The word “ person” includes an individual, corporation, part­
nership, association, or any other organized group of persons, or legal
successor or representative of the foregoing, and includes the United
States or any agency thereof, or any other government, or any of its
political subdivisions, or any agency of any of the foregoing: Provided,
That no punishment provided by this Act 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 of worship, or private dwelling houses.
(d) The term “ national defense” means the operations and activi­
ties of the armed forces, the Atomic 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 Act of 1949,
as amended.

tt t
t

*

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«

Sec . 703. (a) Except as otherwise specifically provided, th£ Presi­
dent may delegate any power or authority conferred upon him by this
Act to any officer or agency of 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 may authorize such redelegations by that officer or
agency as the President may deem appropriate. * * *
*

*

•

»

»

*

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

6

REGULATION V

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

* t «
t

«

S ec . 709. The functions exercised under this Act shall be excluded
from the operation of the Administrative Procedure Act (60 Stat.
237) except as to the requirements of section 3 thereof. Any rule,
regulation, or order, or amendment thereto, issued under authority
of this Act 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 of the national defense, but no such rule, regulation, or order
shall be invalid by reason of any subsequent finding by judicial or other
authority that such a statement is inaccurate.

#

*

Sec . 711. There are hereby authorized to he appropriated such
sums as may be necessary and appropriate for the carrying out of
the provisions and purposes of this Act by the President and such
agencies as he may designate or create. Funds made available for the
purposes of this Act may be allocated or transferred for any of the
purposes of this Act, with the approval of the Bureau of the Budget,
to any agency designated to assist in carrying out this Act. Funds
so allocated or transferred shall remain available for such period
as may be specified in the Acts making such funds available.

*
Sec . 716. (a) Titles I, II, III, and V II of this Act 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 VI of this Act 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 may terminate this Act prior to the termination
otherwise provided therefor.
(2) The Congress may also provide by concurrent resolution

REGULATION V

7

that any section of this Act and all authority conferred there­
under shall terminate prior to the termination otherwise provided
therefor.
(3)
Any agency created under this Act may be continued in
existence for purposes of liquidation for not to exceed six months
after the termination of the provision authorizing the creation of
such agency.
(d)
The termination of any section of this Act, or of any agency or
corporation utilized under this Act, shall not affect the disbursement
of funds under, or the carrying out of, any contract, guarantee, com­
mitment or other obligation entered into pursuant to this Act prior to
the date of such termination, or the taking of any action necessary to
preserve or protect the interests of the United States in any amounts
advanced or paid out in carrying on operations under this Act.
EXECUTIVE ORD ER NO. 10161
Approved September 9, 1950
DELEG ATIN G CERTAIN FUNCTIONS OF THE PRESIDENT
UNDER TH E DEFENSE PRODUCTION ACT OF 1950
By virtue of the authority vested in me by the Constitution and
statutes, including the Defense Production Act of 1950, and as President
of the United States and Commander in Chief of the armed forces,
it is hereby ordered as follows:
*
P A R T III .

*

*

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E X P A N S I O N OF P R O D U C T I V E C A P A C I T Y
A N D SUPPLY

Sec . 301. The Department of the Army, the Department of the
Navy, the Department of the Air Force, the Department of Com­
merce, the Department of 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
of productive capacity and of production and supply of materials and
facilities necessary for the national defense.
S ec . 302. (a) Each guaranteeing agency is hereby authorized, in
accordance with section 301 of the Defense Production Act of 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, perfonnance,
amendment, or modification of 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 of 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 financ­

8

REGULATION V

ing any contractor, subcontractor, or other person in connection with
the performance, or in connection with or in contemplation of the
termination, of 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 ma­
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 of 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
of private financing institutions.
(c) All actions and operations of Federal Reserve Banks, under
authority of or pursuant to the said section 301 of the Defense Pro­
duction Act of 1950, shall be subject to the supervision of the Board
of Governors of the Federal Reserve System. Said Board is hereby
authorized, after consultation with the heads of 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 .

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

Sec . 902. (a) Except as otherwise provided in section 902(c) of
this Executive order, each officer or agency having functions under
the Defense Production Act of 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) of this Executive order shall include,
but not by way of 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 Act of 1950, the power to
redelegate functions, and to authorize the successive redelegation of
functions, to agencies, officers, and employees of 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 of Parts I, II, IV, and V of this Execu­
tive order, the power of subpoena: Provided, That the subpoena
power shall be utilized only after the scope and purpose of 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)

REGULATION 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) of this Executive order (1) the functions delegated by Part VII
of this Executive order, (2) the functions of the President under sec­
tions 703(b) and 710 (a) of the Defense Production Act of 1950, (3)
the functions of the President with respect to regulations under sections
710(b), 710(c), and 710(d) of the said Act, and (4) the functions of
the President with respect to fixing compensation under section 703(a)
of the said Act.
* * * * *
Sec . 903. All agencies of 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.
Sec . 904. Each delegate referred to in section 101 of this Executive
order shall, when and if he shall deem it necessary and appropriate,
appoint a committee composed of representatives of such agencies of
the Government as he may determine. Any committee so appointed
shall advise and consult with the delegate concerned, as he may request,
in connection with the carrying out of the functions delegated to him
by sections 101, 201, and 302 of this Executive order, and shall advise
the delegate concerned regarding requirements of materials and facili­
ties.
H arry S. T ruman
The White House,
September 9, 1950.

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