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696 A meeting of the Board of Governors of the Federal Reserve ratetavias held in Washington on Saturday, April 11, 1942, at 11:00 a.sm. PRESENT: Mr. Mr. Mr. Mr. Ransom, Vice Chairman McKee Draper Evans Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters herein1111.,er referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Nieral Reserve System held on April 10, 1942, were approved unani- Telegram to Mr. Hays, Vice President of the Federal Reserve °I- Cleveland, stating that the Board of Governors approves for then, 'alreland Bank, effective April 11, 1942, the rate established by the tio d of directors of the Bank of 1 per cent on advances and re41 ' (itteo urIts to member banks under sections 13 and 13a of the Federal 11141e 1*/le Act and on advances to nonmember banks under the last paraPh or section 13, the deletion of the rate of 2-1/2 per cent on 4c111411ces to lenders other than banks under the last paragraph of see13 and the establishment without change of the other rates of -ac°1111t and purchase in the Bank's existing schedule. Approved unanimously. 697 4/4/42 -2Telegram to Mr. Caldwell, Chairman of the Federal Reserve of Kansas City, stating that the Board of Governors approves for the aneas City Bank, effective April 11, 1942, the rate established the board of directors of the Bank of 1 per cent on advances and re- -uus to member banks under sections 13 and 13a of the Federal Reserve A et) and the establishment without change of the other rates of 48count and purchase in the Bank's existing schedule. Approved unanimously. Letter to Mr. Meyer, Assistant Cashier of the Federal Reserve Bark Chicago, reading as follows: "The Board of Governors approves the changes in the m161 classification plan of the Federal Reserve Bank uhicago as requested in your letter of April 7, 1942." Per Approved unanimously. 4,11, Letter to Mr. Fletcher, Vice President of the Federal Reserve Of C leveland, reading as follows: of "Reference is made to that portion of your letter virlYarch 26 regarding the matter of waiving compliance 84? condition of membership numbered 6 by The Union ceh lge & Trust Co., Warren, Ohio, which bank was readmitted to membership. tl„, "Since it is understood that in the State of Ohio ' st funds deposited in the banking department of a baril_ liquidation of the bare preferred claims in event of ge,:anky you are authorized, in accordance with the to'ral authorization previously granted by the Board, berwaive compliance with condition of membership nununtil further notice. :From a check of the Board's files it appears that The 'tichland Trust Company, Mansfield, Ohio, which was 698 14a/42 —3- H., admitted to membership in December 1940, is another case in Ohio where compliance with the condition has not been Ilo'aivad, and, of course, you are also authorized to waive °I11Pliance with the condition by that bank until further notice.n Approved unanimously. Telegram to the Presidents of all Federal Reserve Banks, reada3 iollows: "Board has received from War Department authenticated of form of guarantee agreement for operations under eoutive Order 9112 together with a letter to the Federal Reserve Banks with respect thereto. This form of guarantee :greement has been prepared by the War Department in c0n111-14-tAtion with representatives of the Board of Governors e2,in the light of the suggestions received from the Fed' ' o0 4 Reserve Banks. Board has also received photostatic inPies of certain documents delegating authority for use Copies of thethis connection within the War Department. Board and by the authenticated guarantee agreement b2t°static copies of the other documents referred to will 107. sent to all Federal Reserve Banks today, by air mail Where ner,lessary. The text of the letter and form of '"arantee agreement are as follows: COPY 7 of "There has been delivered to the Board of Governors the form of 'Guarantee Agreemerit Federal Reserve System a with Financing Institution (Other Than Federal Re8,,, serve Bank)? identified by the date of April 10, 1942, duly authenticated by me on behalf of the War DepartThe bar Department hereby authorizes each Federal exnrve Bank to use this form of guarantee agreement in , 11 ing guarantees pursuant to the instructions issued : to' wa 4-1- Federal Reserve Banks by the Under Secretary of irlr under date of April 8, 1942. This form may be used pal,illaking such a guarantee in cases covered either by raph (e) or paragraph (f) of section 3 of such inIt is not to be used, however, in cases -81ng under paragraph (g) of said section 3. mos "It is contemplated that the form will be used in t cases in which guarantees are executed by Federal 699 4/4/42 -4"Reserve Banks on behalf of the 7tiar Department in accord,4'i tee with the instructions referred to. However, it is ! 4-80 contemplated that special conditions may be inserted the guarantee agreement in proper cases. In cases el.Tising under paragraph (e) of section 3 of the instruc:;.°ns referred to, each Federal Reserve Bank is hereby auy',Ilorized, without obtaining the prior consent of the War t u?Partment, to prescribe and agree to such special condiitc?s as, in its judgment, do not effect any basic change the provisions of the standard form of agreement referred to above. In all other cases any special condialc)ns should be agreed to only after obtaining the prior tPPr°val of the Advance Payment and Loan Section of the ar Department. "I am authorized, on behalf of the War Department, c! give the advice and authority above set forth. In r to expedite the transmission to the Federal Reserve of the authority contained in this letter, I am pe4lvering the letter to the Board of Governors of the ' wi eral Reserve System with the request that the Board 14e a copy thereof to each Federal Reserve Bank together to 1-18. copy of the form of guarantee agreement referred above and that the Board thereafter send to each such a bankf letter and a copy of the orm ofphotostatic copy of the authenticated by the g, vardot, guarantee agreement duly "GUARANTY AGREEMENT WITH FINANCING INSTITUTION (OTHER THAN FEDERAL RESERVE BANK) c1411, "The War Department of the United States (herein 'ed 'War Department'), acting through the Federal Reu ti11: : 17 Bank of as fiscal agent of united States, in accordance with the provisions of -A:ecutive Order No. 9112 of March 26, 1942, hereby agrees IvIth the (he • rein Called 'Financing Institution') as follows: lie„ "(1) Within ten (10) days after the receipt by the sti7rve Bank of written demand made by the Financing Inon War Department will purchase at face value for fr 1 cash per ce , OM the Financing Institution which loan a of amount of 46 the then unpaid principal 700 4/1142 —5— "the Financinc, Institution proposes to make to (herein called 'Borrower,), with appropriate adjustment for accrued interest, TAarantee fees, and other charges, if any, computed to the e of such purchase, subject to the terms and conditions herein stated, said loan being briefly described as follows: r description of the loan, which may be set forth here or, if necessary, in an attached exhibit, may in apere or, , ' td1:°Priate cases include a reference to the several obliga°118 evidencing the loan, the fact that only a part of ' . agreed amount of the loan is to be initially outstand4 2e ilg, and other relevant factors.) j 0, 1 -ar Department shall be obligated to make such purchase ;:1-3r if such written demand therefor by the Financing In.t ltution is made at any time hereafter and not later than r:e sixtieth day after the maturity of said loan or any sinewal or extension thereof made pursuant to the proviie°118 of paragraph (3) of this agreement, or, if the loan P le on demand, not later than the sixtieth day after demand for payment of such loan. pri "(2) Posselsion of Obligation_miSallattral. — in or to any purchase under this agreement, the Financ(,,g Institution shall hold the obligation or obligations '4?ferred to in this agreement as 'obligation') evidencing ' Ld loan, all the collateral therefor and all instrume annts delivered in connection therewith. In the event of eZ Purchase hereunder, the Financing Institution shall trrse to the Reserve Bank without recourse the obliga0151)1:1 evidencing the loan and shall thereafter hold said collateral and instruments in custody as ,1ati0n, 3 aze, tc1." - of and for the account of the War Department to elle extent of the War Department's interest therein. It zeall immediately notify the Reserve Bank of such endorse! t1 and shall recite in such notification that it holds heJr-u- obligation, collateral and instruments as provided se,!1-11- Upon the receipt of such notification, the ReBank shall deliver to the Financing Institution a t.1-ficate evidencing the interest, if any, of the FiIlj -e-Lng Institution in said loan. In any such case, 701 -6howeverupon five (5) days' written demand by the Re-. Serve Bank, the Financing Institution shall deliver posses• of said obligation to the Reserve Bank and shall as.1 n and deliver to the Reserve Bank said collateral and 'instruments, and thereupon the Reserve Bank shall issue iso the Financing Institution a receipt evidencing custody uY the Reserve Bank of said obligation, collateral and insjruments. The War Department shall at all times during the existence of this agreement have the right to examine mild inspect said obligation, collateral and all instru' Lents in connection therewith. nr Administration of_Loa. - The Holder (as devrillined under the provisions of paragraph (2) hereof) c:.said obligation, collateral, and instruments shall re() lire all payments on account of principal of or interest trol said loan and shall promptly remit to the other party of !this agreement such other party's pro rata share thereth Qetermined according to the respective interests of bee Parties in said loan. Except to such extent as may tl,,Permitted under this paragraph or paragraph (12) of 11;ts agreement, such Holder shall not, without the prior : l tten consent of the other party to this agreement, (a) mal ' of s or consent to any material alteration in the terms ci?aid obligation, collateral or instruments; (b) exer' ti e any option to accelerate the maturity of the obliga0; °n; or (c) make or consent to any release, sale, transfer substitution of any of said collateral or instruments. 1Zever/ unless otherwise provided in paragraph (12) of 011.1 agreement, such Holder may renew or extend any such tr'-gation, and may make or consent to any release, sale, crallsfer or substitution of collateral for the purpose Ithieffecting an orderly liquidation of the obligation, "Prior objection thereto shall have been made by thee rIew Other party; but appropriate notice of any such reor extension or action with respect to collateral thereafter promptly transmitted by such Holder tiec' -41e other party, except that no such notice shall be ordZearY with respect to the release of collateral in the course of business pursuant to the terms of the °n a greement between the Borrower and the Financing In• lLuticn. "(4) Faille to Sue 9r Co.nsent to Suit. - The FinancInstitution, if it be the Holder (as determined under 4 702 -7he provisions of paragraph (2) hereof) of said obligacollateral and instruments, shall not, without the Prior written consent of the War Department bring suit to nforce payment of said obligation or any installment t.hereon or foreclose on or otherwise enforce realization .said collateral. If at any time any portion of the zjr-Incipal or interest of said obligation is due and unPaid and (a) the War Department fails to give its consent, 30 days after receiving a written request from the j F nancing Institution to do so, to the bringing of a suit thei) enforce payment of said obligation or any installment reof or to the foreclosure on or enforcement of all or 1/ "ir of such collateral or (b) if the War Department be the er of the obligation and does not, within 60 days after t !iving a written request from the Financing Institution f- '° so, bring such a suit or institute proceedings to w!rsclose on or enforce all or any such collateral, the : t r Department shall thereupon in either event be obligated 4.oanPurcha8e the entire unpaid principal amount of said Aff n(5) - a of •1 a te t'., ' a st - If any contract made or order hecePted by the Borrower (such contract or order being tur t?in referred to as 'war production contract') constibe , .34 , 5 a prime contract with the War Department, Navy : c .7.1-timent or Maritime Commission, or constituting a 1,;11'.ract made or order placed to aid directly or indiofet4 in the performance of any prime contract with any ateeeld Government agencies shall be cancelled, terminmind or violated by reason of the cancellation or ter-of any such prime contract for the convenience the Government, then the percentage of the loan which gar " De artment is obligated to purchase under para,P hereof shall be increased as follows: The ratio bet., (1) pori:?en (a) the total amount in dollars of the unperformed , 1s of all uar production contracts of such Borrower rs 1?1 can: tce-L-Led, terminated or violated as aforesaid, and (b) Or- total amount in dollars of all unperformed portions ill 'war production contracts (including the amount in el: rat e (a)) of such Borrower shall be determined. Such loa ' . ° shall then be multiplied by the percentage of the krill,which the War Department is under no obligation to ki4:.1ase under paragraph (1) hereof. The product of such 1Plication shall constitute an additional percentage 703 4/11/42 -8oi the loan which shall be added, upon written request 1?5r the Financing Institution, to the percentage specified ln paragraph (1); and the Tar Department shall then be °1311gated to purchase such increased percentage of the 114Paid principal amount of the loan. Such written request be effective must be made promptly after the Financing l onstitution has knowledge of such termination, cancellation _r violation of such war production contract and in no eYent more than ninety (90) days after cancellation or termination of such prime contract. "(6) - If the aey Jar P jrcentage of the unpaid principal amount of the loan which ( , 11 ? *War Department is obligated to purchase under paragraph 1,1-) hereof is in excess of seventy-five (75) per cent, the Department at any time subsequent to ninety (90) days plitler the date of the original loan may purchase, and the theng Institution shall sell, such part or all of the wr unpaid amount of said loan as may be specified in a T,..1”en notice given by the War Department to the Financing -411statution at least ten (10) days prior to any such purchase. a "(7) eDorts as to Borrower's Condition. - The Fi, 11 ing Institution shall promptly notify the Reserve of any default on the part of the Borrower, and of unfavorable change in the financial condition or in the th business of the Borrower or in the collateral securing a,! 1°any of which the Financing Institution has knowledge iTI‘4 which in its opinion is material. Upon request of toe,Reserve Bank the Financing Institution shall furnish to Reserve Bank any information that it has relating he financial condition of the Borrower and the progress °r the loan ) Expenses. - In the event of any purchase as in this agreement, all out-of-pocket expenses there incurred by the Tar Department, Reserve Bank, lnancing Institution in the collection of the obliga: tin noi- or preservation of the collateral therefor which are b, recovered from the Borrower, shall be shared ratably ecethe War Department and the Financing Institution in °/'dance with their respective interests in said loan. 19) Losses. - In the event of any purchase as proIrld ri' by -- all this agreement, all losses shall be shared ratably amthe War Department and the Financing Institution in c °Mance with their respective interests in said loan. L a 704 -9, "(10) Fees by War Department. - The Financing Insti' ttt:hVil pay to the Reserve Bank an amount computed at per centum per annum on the average dailY amounts of unpaid principal of said loan which the r Department may be obligated to purchase under this 4greement, provided such requirement shall terminate im: ediately upon the purchase by the War Department of its greed portion of said loan. of :(11) GengraJ,. - The provisions of paragraph (1) Is agreement relating to written demand by the Fi4-"elng Institution and the percentage of loan specified fl such paragraph shall not be applicable to purchases itcre under paragraphs (4), (5) or (6) hereof. In all thller respects purchases made under any paragraph of ls agreement shall be subject to all the terms and nditions of the agreement. Wherever the words 'Reserve F'nk' are used in this agreement, they shall mean the „ecielml Reserve Bank of acting :J.rrl.behalf of the War Department as fiscal agent of the ?clted States in accordance with the provisions of Exe utive Order No. 9112 of March 26, 1942. "(12) Special Conditions. ij "IN WITNESS WHEREOF, the parties have caused this a 4Zzent to b executed on their behalf by their duly au19 lzed agents this day of THE WAR DEPARTMENT OF THE UNITED STATES By Federal Reserve Bank of As Fiscal Agent of the United States (SEAL) By (Title) o'rEsir: (Financing Institution) (Title)" 705 4/4/42 -10In accordance with the above telegram, the following letter to the Presidents of all of the Federal Reserve Banks was approved unanimously, the letters to Minneapolis, Kansas City, Dallas, and San Francisco to be sent by air mail: "Referring to the Board's telegram of this date with :'.gard to operations under Executive Order No. 9112, we wlelose herewith the following documents: 1. A photostat of a memorandum to the Board of Governors, dated April 10, 1942, from Mr. Albert J. Browning, Chief of Purchase Branch, Procurement and Distribution Division, Special Representative of the Under Secretary of War. 2. A photostat of a letter to all Federal Reserve Banks, dated April 10, 1942, also from Mr. Browning. 3. A copy of the form of Guarantee Agreement with an attached certificate stating that such Agreement is in the form as enclosed with the letter from Mr. Browning referred to above. 4. A photostat of a memorandum from the Under Secretary of War for Lieutenant General Somervell, dated April 8, 1942, delegating authority under Executive Order No. 9112. 5. A photostat of a memorandum from Brigadier General W. D. Styer for the Director, Budget and Financial Administration Division, dated April 6, 1942. 6, A photostat of a designation of certain financial contracting officers by Brigadier General Styer, dated April 6, 1942, and approved by the Under Secretary of War. 7. A photostat of a memorandum from the Under Secretary of War for Lieutenant General Somervell, dated April 8, 1942, with regard to a transfer of the Advance Payment Section of the War Department." Ilteerire Tel -egram to Mr. Olson, Assistant Vice President of the Federal tank of Chicago, reading as follows: 4/11 —11— "Re your April 10 wire regarding guarantee charges, lieTerred to in Board's April 9 wire, such charges may be Pald.at such time or times as are justified by terms and e ondltions of loan agreement. Such charges should be on arinUal basis and any unearned fees should be rebated." Approved unanimously. Thereupon the meeting adjourned.
@FedFRASER