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1337 A meeting of the Board of Governors of the Federal Reserve 6̀Ystem waS held in Washington on Saturday, August 18, 1945, at 10:30 PRESENT: Mr. Ransom, Vice Chairman Mr. Szymczak Mr. Draper Mr. Carpenter, Secretary Mr. Connell, General Assistant, Office of the Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman The action stated with respect to each of the matters hereinOtte , referred to was taken by the Board: reatiin Telegram to the Presidents of all the Federal Reserve Banks g as follows: cei,: Following memorandum dated August 17, 1945, re' e from Navy Department signed by Comdr. Donald P. tolles, Chief of Finance Division, on procedure to be ter ?wed in connection with guaranteed loan program afGe1.4ugust 14, 1945. Similar memorandum, signed by Maj. ?tarter, received from War Department. pl1A 9RANDUM TO THE BOARD OF GOVERNORS OF THE FEDRESERVE SYSTEM .ubject: Guaranteed Loan Program after August -1-4, 1945 1. The announcement of the Japanese agreement ' to surrender makes it appropriate for the `a7r1,1ces to modify the guaranteed loan program, 4na accordingly the following instructions are '8811 "by the War Department, the Navy Department a nd the i Maritime Commission in connection with pll,t?ure administration of guaranteed loans by the e'eral Reserve Banks. 'V AND VT LOANS '2. Outstanding V and VT Loans. The rights : 4c1 obligations of the guarantor (including the FedZ, 1 Reserve Bank as its agent), the financing inand the borrower under existing loans and guarantees as defined in the documents relating 1338 8/18/45 -2- "thereto, will not be affected by the surrender of Japan. In cases where outstanding loans require the consent of the Reserve Bank or the guarantor for the financing of production under additional war contracts, such consent should not be given Without submission of the matter to Washington. '3. Outstanding Authorizations. V-loan a uthorizations which were outstanding on August 14) 1945 may be executed in accordance with their terms, but the authority previously given to the Reserve Banks to extend such outstanding authorizations for a period of thirty days is hereby revoked. Requests for the extension of such authorizations should be referred to the guarantor, and its decision will be made in the light of the circumstances involved in each case. Pending Applications. Applications for -loans which have been filed with the Reserve Banks and which were pending with the Reserve Banks or the Services on August 14, 1945 will, 1,1nless withdrawn by the financing institution, °e processed in the usual my. In such cases, ' lphe guarantee will be confined to a loan with a actTcia:lrily formula limited to items under termincontracts, and borrowings under unterminated contracts will be permitted only if the circumstances stipulated in paragraph (7) below eXist. /34mi, '5. Extensions of Maturity. The Reserve are authorized to consent to requests for 'he extension of maturity of any V or VT loans under the 1942 or 1943 form of guarantee agreement maturing hereafter (whether it be an origial maturity or a maturity resulting from an ex4!nsion hitherto granted) when in the opinion of .Te Reserve Bank (concurred in by the Liaison Ofleer in the case of War Department guarantees) tlIch extension is necessary for orderly liquidaof the loan, subject to the following condi01 (3n8: (a) no such extension may exceed sixty (b) the borrower shall relinquish its rights 'uder Section 6, except as to contracts terminated ror to the beginning of the period of the exinstitution shall rni°n; and (c) the financing in --4-inquish its rights under Section 5, except as Z I 8/18/45 -3"to contracts terminated prior to the beginning of the period of the extension. Pursuant to such relinquishment, contracts terminated during any such period of extension should be excluded from (a) or (x), as the case may be, and included in (b) or (y), as the case may be. Loans under the 1944 V-loan guarantee agreement may be extended by the financing institution under the terms of section 7 thereof. Additional extensions or an extension exceeding sixty days may be given only with the consent of the guarantor after submission t° Washington. Previous instructions which are i nconsistent with the instructions set forth in tills paragraph are hereby revoked. '6. Authority_ for new V-loans. The surrender of Japan has not resulted in termination of the war within the meaning of the First War Powers Act, 1941, under which Executive Order 9112 was issued. Accordingly, the War and Navy Departments and the Maritime Commission are still empowered to enter into contracts with financing institutions Fuaranteeing them against loss of principal or interest on loans, discounts or advances, or on camTitments in connection therewith, which may be made lor the Purpose of financing any contractor, subcontractor or others engaged in any business or ?Peration which is deemed by the War Department, the Navy Department or the Maritime Commission to e necessary, appropriate or convenient for the Prosecution of the war. „ '7. Policy as to new V-Loans. However, it wi-LI be the policy of the Services to enter into :uarantees or new V loans (as distinguished from inendin g guarantees of outstanding loans or issulrlig guarantees of refinancing arrangements made „ Order to bring about orderly liquidation of outStanding guaranteed loans) only in exceptional cases *c"nd where there is a clear necessity for the promurement of supplies or services by the War DepartNavy Department or Maritime Commission from trt, he particular borrower, and where no other means adequate financing is available to that borrower. 4 such cases the financing institution will be e:)cPeoted to take an exposure clearly commensurate i 1340 8/18/45 -4-"'With the risk involved, and the maturity will be limited strictly in accordance with the requirements of the particular contracts to be financed. Appropriate provision for borrowing against terminated contracts may be included in such loans. 'T-LOANS '8. There will be no present change in the Operation of the T-loan program. However, the special provision with respect to receivables on unterminated subcontracts under terminated prime contracts, which was authorized by the Navy Department memorandum of April 24, 1945 attached to Board letdated April 27, 1945 to be inserted in zxhibit D of the termination loan agreement, may not be inserted in T-loan agreements executed hereafter, unless the prospective borrower still holds 1:;rar contracts which have not been fully terminated. lf any- case arises where the omission of this spe2ial provision will, in the opinion of the Reserve J?azik, work an undue hardship upon the borrower, it 13 requested that such case be referred to the guarantor for its consideration. '9. I am authorized to state that the War Department and the Maritime Commission concur in the above. '10. It is requested that copies of the above instructions be transmitted to all Federal Reserve Banks and to Army Liaison Officers." Approved unanimously. Telegram to the Presidents of all the Federal Reserve Banks fig as follows: "Neither military nor civilian jeeps a;TT, classified automobiles for purposes of Regulation Vv. Approved unanimously. Letter to Mr. Day, President of the Federal Reserve Bank of ancisco, reading as follows: copy "There is enclosed herewith for your information a ' u a letter addressed to Chairman Eccles by Charles " /45 —5— it 13 . a. Henderson, Chairman of the Board, Reconstruction Finance Corporation. The letter is self-explanatory." Approved unanimously. The letter referred to above read as follows: "With the thought that this may be a matter of con2e to the Board of Governors of the Federal Reserve stem, we are advising you that recently this Corpora2.0n cancelled its Blanket Participation Agreements with the First Richmond, Richmond, California, and with National Bank in the Escalon State Bank, Escalon, California, 11.id Agreements being dated April 24, 1945 and June 7, t'945, respectively. This Corporation also denied liabilUnder said Agreements with respect to the loans made ' 17 said banks to Renco, Ltd. the same reason, we are also calling to your 't,tention the following facts: "According to our information, Renco, Ltd. is the 'estamed business name of Mrs. Jeannette R. Partridge, a certificate to that effect having been filed in Martinez k,ontra Costa County, California, approximately three ths ago. Her husband owns the controlling interest !!ree banks: the First National Bank in Richmond, ce ndy California, the Escalon State Bank, Escalon, He V-°rnia, and the Bank of Hughson, Hughson, California. moll s also president of the First National Bank of Richarid director of the Escalon State Bank. The loan .a.de V the Escalon Bank to Renco is secured by 1191 Shares ; /11 of the stock of the First National Bank of Richcotlu (the Richmond Bank has outstanding 3000 shares of m4mon and 1000 shares of preferred stock) and the loan to Renco by the Richmond Bank is secured by 151 shares 1/11 of stock of the Bank of Hughson, California (the Bank has outstanding 3000 shares of common stock). arid ,'In connection with the criss-crossing of the banks tent collateral securing the loans to Renco, Ltd., at1°11 is 8 ,ection 3, particularly invited to 12 U.S.C. 83 and to 44 of Act 652 (the Bank Act), Deering's California kxe nsral Laws (Vol. 1, page 241 )." Tel -egram reading as follows to Mr. Leedy, President of the Peder.Reserve Bank of Kansas City, in reply to his telegram of Autklet 17 '1945, outlining the procedure which the Federal Reserve Bank j Tr 1342 8/18/45 —6— "ansas City proposed to follow in the handling of checks drawn 04 Nebraska banks, a few of which have notified the Reserve Bank that th e'Y did not intend to comply with the recent State law which requires the Par clearance of checks: „ "Re your wire August 17, we have considered language advices respect to which you propose to give your endorsers with the return of checks not paid at par and also reti°n taken with respect to bank which made deduction in onl-tting for items forwarded to it. Procedure which you " -Line seems satisfactory and we have no suggestions to °ffer.0 Approved unanimously Thereupon the meeting adjourned. Vice Chairman.
@FedFRASER