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F E D E R AL R E SE R V E B AN K O F N E W YO R K Fiscal Agent o f the United States f I Circular No. 3 7 1 2 1 May 29. 1951 J REGULATION V LOAN GUARANTEES FOR DEFENSE PRODUCTION To A ll Banks, O ther Financing In stitution s, and Others Concerned, in the Second Federal R eserve D istrict: V-loan financing for increased production of machine tools The General Services A dm inistration has entered into agreements, generally referred to as “ machine tool pool orders,” with a number o f manufacturers o f machine tools. U nder these contracts, the General Services Adm inistration places orders with each manufacturer fo r specific numbers o f certain tools at fixed prices. The m anufacturer undertakes to dispose o f the tools to defense contractors, p rior to com pletion if possible, and the Government agrees to take and p ay fo r any tools not so disposed o f at a price equivalent to the m anufacturer’s sales price, less 1 7 per cent, representing estimated profit and selling expense. The General Services Adm inistration is prepared to guarantee, under Regulation V , loans fo r working capital required to finance these contracts, and requests that prom pt assistance be given to manufacturers requiring V-loan financing fo r the perform ance o f the contracts. The loans will follow the general pattern o f V-loans made to subcontractors under defense orders and applications should be made b y the financing institutions on form Cr. 184, copies o f which will be furnished upon request to this Bank or its Buffalo Branch. Amendment to Assignment of Claims Act of 1940 On M ay 15, 1951, the President approved an A ct “ T o facilitate the financing o f defense contracts b y banks and other financing institutions, to amend the Assignment o f Claims A ct o f 1940, and fo r other purposes.” H eretofore, because o f certain rulings o f the Com ptroller General o f the United States, financing institutions have been reluctant to make loans secured b y assignments o f Government contracts either with or without guarantees o f such loans under the current V -loan program ; consequently, many contractors have been unable to obtain the necessary financing fo r the perform ance o f their defense contracts. This legislation clarifies the rights o f financing institutions taking assignments o f Government contracts as security fo r loans to defense contractors. The text o f the amendment is printed on the back o f this circular. The principal changes in existing law made by this amendment are the follow in g : 1. It removes the requirement that copies o f assignments be filed with the General A ccou ntin g Office. 2. It relieves assignee financing institutions o f any liability to repay amounts received by them after J u ly 1, 1950 under any assignment. 3. A u th ority fo r inclusion o f the “ no set-off” clause is extended to the Department o f Defense, the General Services Adm inistration, A tom ic E n ergy Commission, and such other departments or agencies as the President may designate. 4. W here the no set-off clause is included in a contract, the assignee financing institu tion is protected, not on ly against set-off on account o f claims arising “ independently o f the con tract,” but also against set-off o f any claims o f the Government against the assignor on account o f renegotiation, fines, penalties, or taxes or Social Security contributions, whether or not such claims arise from or independently o f the assigned contract. A dditional copies o f this circular will be furnished upon request. A llan Sproul, President. (o ver ) P ublic Law 30 — 82d Congress Chapter 75 — 1st Session S. 998 AN ACT T o facilita te the financing o f the defense contracts b y banks and other financing institutions, to amend the Assignm ent o f Claims A c t o f 1940, and f o r other purposes. B e it enacted ~by the Senate and H ouse o f R epresentatives o f the United States o f A m erica in Congress assembled, That section 1 o f the Assignment o f Claims A ct o f 1940, approved October 9, 1940 (54 Stat. 1029), is amended by striking out all after clause 3 o f the proviso and inserting in lieu thereof the follow in g : “ 4. That in the event o f any such assignment, the assignee thereof shall file written notice o f the assignment together with a true cop y o f the instrument o f assignment with (a ) the contracting officer or the head o f his departm ent or a gen cy; (b ) the surety or sureties upon the bond or bonds, i f any, in connection with such con tract; and (c ) the disbursing officer, i f any, designated in such contract to make payment. “ Notwithstanding any law to the contrary governing the validity o f assignments, any assignment pursuant to the Assignment o f Claims A ct o f 1940, as amended, shall constitute a valid assignment fo r all purposes. “ In any case in which moneys due or to become due under any contract are or have been assigned pursuant to this section, no liability o f any nature o f the assignor to the United States or any departm ent or agency thereof, whether arising from or independently o f such contract, shall create or impose any liability on the part o f the assignee to make restitution, refund, or repayment to the United States o f any amount heretofore since J u ly 1, 1950, or hereafter received under the assignment. “ A n y contract o f the Department o f Defense, the General Services Adm inistration, the A tom ic E n ergy Commission, or any other department or agency o f the United States designated b y the President, except any such contract under which fu ll paym ent has been made, may, in time o f war or national em ergency proclaim ed by the President (including the national em ergency proclaim ed December 16, 1950) or b y A ct or join t resolution o f the Congress and until such war or national em ergency has been terminated in such manner, provide or be amended without consideration to provide that payments to be made to the assignee o f any moneys due or to become due under such contract shall not be subject to reduction or set-off, and i f such provision or one to the same general effect has been at any time heretofore or is hereafter included or inserted in any such contract, payments to be made thereafter to an assignee o f any moneys due or to become due under such contract, whether during or after such war or emergency, shall not be subject to reduction or set-off fo r any liability o f any nature o f the assignor to the United States or any department or agency thereof which arises independently o f such contract, or hereafter fo r any liability o f the assignor on account o f ( 1 ) renegotiation under any renegotiation statute or under any statutory renegotiation article in the contract, (2 ) fines, (3 ) penalties (w hich term does not include amounts which may be collected or withheld from the assignor in accordance with or fo r failure to com ply with the terms o f the con tract), or (4 ) taxes, social security con tributions, or the withholding or nonwithholding o f taxes or social security contributions, whether arising from or independently o f such contract. “ E xcept as herein otherwise provided, nothing in this A ct, as amended, shall be deemed to affect or im pair rights or obligations heretofore accrued.” Approved May 15, 1951.