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Ameeting of the Federal Reserve Board with representa tives (If the Industrial Advis ory Committees of the twelve Federal reserve cli4rtricts was held in Washington on Tuesday, December 18, 1934, at 10100 PRESEliT: Mr. Ix. Mr. Mr. Yr. Mr. Mr. Eccles, Governor Thomas, Vice Governor Hamlin Miller James Szymczak O'Connor Er. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Smead, Chief, Division of Bank Operations Yr. Wyatt, General Counsel Mr. Vest, Assistant Counsel ALSO PRESEUT: ot tt. Mr. McKay, Deputy Governor, Federal Reserve Bank of Chicago hr. Walden, Controller, Federal Reserve Bank of Richmond Mr. Gilmore, Controller, Federal Reserve Bank of St. Louis Mr. Hale, Cashier, Federal Reserve Bank of San Francisco Messrs. Albert M. Creighton, Wm. h. pouch , J. Ebert Butterworth, F. A. Smythe, John Sanford, Max Epstein, Wm. K. 1:orris, Sheldon V. Wood and Clarence Ousley, Chairmen of the Industrial Advisory Committees of the First, Second, Third, Fourth, Sixth, Seventh, Eighth, Ninth and Eleventh Federal Reserve Districts, respectively. Messrs. Walter J. Berkowitz and Ralph Burnside, members of the Industrial Advisory Committees of the Tenth and Twelfth Federal Reserve Districts, respectively. 4.. 6relght0n stated that a meeti ng of the representatives ''uluitrial Advisory Committees was held yesterday evening and 2/1B/34 -2- that the action taken at that time would be reported to the Board at tbds neeting. In response to his invitation to each of the individu41 nezlers of the Federal Reserve Board to address the meeting, Steteients were made by Governor Eccles, 1;12". O'Connor, Mr. Liner, 'afl 1.1r. James, Mr. Thomas and Mr. Szymczak. A summary state- " r of the Proceedings of this meeting which contains the substance the the statements made by the members of the Board will be found in Board's files. At the conclusion of their statements Governor Eccles and ttek. -.ra. uonnor, Miller, and Hamlin withdrew from the meeting. Dur- 14% Szyraczakt 5 statement Governor Martin of the Federal Reserve 13411ac of St. Louis and Mr. Golden:miser, Director of the Divizion of :11464roh and Statistics of the Federal Reserve Board, entered the toot' arid, Lir arnes loft the meeting. 14*. Creighton expressed the appreciation of the representaOf the Industrial Advisory Committees of the statements made 1lYth; Illernbers of the Federal Reserve Board. he then presented a 11.4tt nt of the actions taken by the Chairmen and representatives of the , dtIstrial Advisory Committees at the meeting yesterday evening. t(31 -en discussed at that meeting and the decisions reached are tIlr°1 ' th below. tiv Send bY Topics one and two wore presented and discussed I;or ris topics three and four by 1.1r. Pouch, topics six by 1:1r• Epstein, topics seven and eight by hr. Sanford, 4% tine and ten by 1,:r. Ousley, and topics eleven and twelve by -lattervorthi 12/18/34 -3QUESTIONS ANSWERS 1. 17 hat is feelinp: in regard to operation of Section 13b by the Federal reserve banks, (a) Among industrialists, (b) *whether potential borrowers or not? (a) Where they are acquainted, or have a knowledge of the law, they are favorable. Amonr, other business leaders? (b) Same answer as above. (e) Among financial institutions? (c) Financial institutions which are acquainted with the law are favorable; our great duty is to acquaint more with the real possibilities under the 2. l eed for working capital for Industry and commerce. (a) (b) aas experience indicated that there was a substantial need not being met through usual sources of credit? (a) Yes. Mile the need apparently is not as great as at first thought, there is need and this present law takes care of it, all of -which is supported by the number of loans that have been made in the short period we have been operating. T such need now exists ean it be adequately met 113ader the present Section 1:31? Z, ng that there will be a need for 13b ador commitments, (b) Yes. Vie feel that practically all worthy cases so far presented have been taken care of either directly or indirectly and existing needs can be taken care of in the future. 3924 12/18/34 -4- (a) Will applications for the most part take the form of: (b) (1) Applications for direct advances. (3a-1) At the present time most of the applications are for direct advances in most of the Federal Reserve Districts although the percentage varies considerably. (2) Applications involving, separate advances by the Federal reserve bank and by financing institution, or (3a-2) There is no general rule throughout the entire System. Applications direct to Federal reserve banks are decreasing and those to the local banks are increasing in the majority of tne districts. I:.ost members of the Committee feel that applicants should be encoura‹,ed to make applications through the local bans, which should be encouraged as it is most advantageous for the local banks. (3) Applications from financin institutions for commitments coverproposed advances. (3a-3) If financing institutions refers to Factor and Finance Companies, there have been very few cases of this kind. Should the rates charged by the Federal reserve banks be so fixed as to encourage aPPlications under 1, 2 or 3 above? (b) It seemed to be the consensus of opinion that the present rates were satisfactory and should be continued. Such rates should encourage the local banks to cooperate. Roe . p ee° t•C]rli Z 4 np• that subsection "a" of oTh 1°11 13b is designed to meet Et .e b lerleY situations, should it be z uanent provisi on of law, and if ° ' should it be amended as re!7,ards: 3925 12/18/34 -5- (a) Requirement that applicant be unable to obtain requisite assistance from usual sources. (b) (c) s, that loans be for working capital purposes Requirement that loans be made on a reasonable and sound basis. 4. The Committee feels that Section 13b should be continued in its present form as long as the emergency exists and that subdivisions a, b, c and d be continued. Two 1.:enbers believed that b night be broadened to include proprietary capital. (d) R equirement that loans be confined to established b usinesses. 4°uld subsection "b" of Section 14 be a permanent provision of law, and if so, should it be amended as regards: (a) A uthorization of advances through financing institutions other than member banks. ount of obligation as to loss sustained. 5. It was the consensus of opinion that subsection "b" of Section 13b should be retained and a, b and c be not changed in the Authorization of separate loans by Federal reserve banks and by a financing Institution on which rePayments are made pro rata. 6, 11 r°121d the makinp: of loans for Iltc)rkirl, capital purposes pre, 18 /nablY have been conducted -vl'e ef fectively if Intermedi4e Credit Banks affiliated 7 1 1t11. the )0". been Federal reserve banks set up for this Pur? 48 provided in the first Proposed by the Federal °erve Board? If so. why? a G. The Committee felt that the answer to this question is NO; the Chicago Chairman dissenting. 3926 12/18/34 -67. Ilhat has been experience as regards applications? (a) EXtent to which fear of rejection and of possible adverse effect upon applicant's credit standing has discouraged submission of applications. (b) Extent of and reasons for withdrawal of applications. (a) It is not felt that fear of rejection and adverse effect upon an applicant's credit has discouraged applications in more than a few instances. (b) Negligible, and usually for the reason that applicant has found that funds would not be needed, or has obtained funds from usual banking sources. (e) I$ character of applica- Character of applications is improving and varying. The proportion of applications for direct advances is continuin- in varying proportions. tions improving? Is the proportion of applications for direct advances declining? (d) (e) lias there been any substantial number of complaints Of a lack of court esy on the part of the Committee or of offic ials or employees of Federal reserve banks? 18 there any evidence that Federal reserve banks are requiring an excessive amount of collateral to secure loans? (r) Is there evidence of any Other ground for criti cism Of either the comit tees or the banks? (d) Ye are not aware of any complaint of lack of courtesy on the part of the Committee or officials or employees of the Federal reserve banks. (e) There is no evidence that Federal reserve banks are requiring an excessive amount of collateral to secure loans. Cm the other hand, every effort is being made to make loans Then the security may be regarded as reasonable. (f) There is no evidence of any other ground for criticism of either the Committees or the Federal reserve banks. 3927 12/18/34 B. Assuming that more participations by and commitments to financial institutions are desirable, what is ycur recommendation as to how to best Obtain the cooperation of financial institutions to this end? _78. It is the consensus of opinion that more participations by and commitments to financial institutions are desirable, and this can be best dbtainod by direct contact with the applicants and the banks. Further that the present publicity be continued within each district and that this be supplemented by publicity of a national character and that the aid of the Federal Reserve Board be solicited in this connection. 9. It is the opinion that the Reserve banks have made diligent efforts to acquaint all financing institutions, particularly member banks, with the advantages to them of actively seeking out commercial and industrial enterprises in their territory in need of additional working capital and furnishing such capital by commitment from the Federal reserve banks. At the same time we submit that such efforts night well be intensified and we especially recommend to the several Reserve banks the action of the New York Reserve Bank in engaging the services of a practical and well known banker for a period of several months (the banker to be well known in the district) to visit banks and personally discuss with them and with borrowers in arrears or in temporary embarrassment the wisdom of negotiating loans under the terms of Section 13b. 9. lias the Federal reserve bank taken adequate measures to bring to the attention of fi118zIcial institutions, and Particularly of member baL.ks, the advantages to them of actively seeking cut commercial arid industria l enterprises in their territory in need of a4ditional working capital furnishin7 such capital Uncier the protection of a "Thraitment from the Federal reserve bank? 3928 12/18/34 10. MO 1411Lt, in your experience, Has been the most important service rendered industry and ecrnmerce under Section 13b? MI. 10. In our opinion the most important services rendered to industry and commerce under Section 13b are (a) Accommodation to industrial and commercial enterprises that could not be obtained otherwise. (b) the stimulation of credit confidence and accommodation to industrial and commercial enterprises by other banks, many of which have changed their credit policies since the administration of Section 13b ber-an, and (c) the enlightenment of many applicants concerning their on affairs and possibilities afforded by the expert analysis and advice of the Ldvisory Committees and Federal reserve officers. 11. The favorable recommendation of loans by the several Federal reserve banks has influenced many local banks to take over loans, extending credit there they would not have done so otherwise. 11. 12. 40 the administration of Sec' c1011 13b to date had any effect Ilet shown in rermlar reports °I,Poderal reserve banks on the ezl°11sion of crodit throu7h ef:;111ar and usual channels to , 11411Astry and commerce by private flnancinc; institutiofls? leecrn mendations, not covered 12. elsewhere, on the subject of the administrLktion of Section 13b. It is felt wise to continue this act as en emergency measure. It will not bring back prosperity, but it will be a material help to many who cannot secure necessary capital for two to five years. This will brid-e the cap where the capital market should function. During the discussion of the topics /dr. John N. Peyton, 3929 12/18/34 MIN Chairranc-11 and i:ederal ,:cserve Agent at the Federal aescrve '..6ank of clicl ir. Dai .cr of the lloard's staff, joined the neetinp:. At the conclusion of the discussion the meetino7 adjourned 171-th the uncierstandinc: that the representatives of the Industrial °rY tees would meet a7,ain in separate session this after- no on, 1)Prold,.ed Governor.
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