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1468 A meeting of the Executive Committee of the Federal Reserve Board qt11 1.0 "Presentatives of the Industrial Advisory ComnOttees of the Federal reEerve hanks was held in Washington on Tuesday, June 25, 1955, at 10:00 a. m. PRESENT: Mr. Szymczak, Presiding Mr. Miller Mr. James Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Governor Yr. Thurston, Special Assistant to the Governor Mr. Wyatt, General Counsel Mr. Smead, Chief, Division of Bank Operations Mr. Hammond, Division of Bank Operations Mr. H. F. Conniff, Deputy Governor of the Federal Reserve Bank of Atlanta Mr. S. F. Gilmore, Controller of the Federal Reserve Bank of St. Louis Mr. B. P. Adams ALSO PRESENT: Messrs. Albert M. Creighton, William H. Pouch, J. Ebert Butterworth, F. A. Smythe, William K. Norris, Sheldon V: Wood and Clarence Ousley, Chairmen of the Industrial Advisory Committees of the First, Second, Third, Fourth, Eighth, Ninth and Eleventh Federal Reserve Districts, respectively. Messrs. Wm. A. Parker, Will B. Marsh and Ralph Burnside, lembers of the Industrial Advisory Committees of the Sixth, Eleventh and Twelfth Federal Reserve Districts, respectively. Mr. A. L. Wilson, Secretary of the Industrial Advisory Committee of the Seventh Federal Reserve District. Mr. J. W. Barton, Manager, Industrial Loans Department, Federal Reserve Bank of Minneapolis. Mr. Cr eighton stated that at a supper meeting on the evening of 19351 the following matters were discussed in detail: The Kopplemann Bill Report of the Advisory Council of the Department of Commerce 1,:r. Creighton's report on his trip to Europe Publicity and public relations of the past and Present and plans for future 1469 8/25/3s -2Preparation of a statement for the press Other matters of importance to the Chairmen He called attention to the fact that the Industrial Advisory e°1.tees had been in existence approximately one year and referred brietlY to the industrial loan applicaticns approved and under considerst4417 the Committees. The minutes of the meeting of the Chairmen of the Industrial Advt . ' 411r Committees held in Washington on December 18, 1934, were read by "s Ebert Butterworth, Secretary of the meeting, and approved by the 111114." entatives of the Industrial Advisory Committees present. Mr- Butterworth stated that advice had been received that the 44118t Advisory Committees of the Fifth and Tenth Federal Reserve blau,& 8 would not be represented at this meeting and that Mr. A. L. wcluld represent the Industrial Advisory Committee for the Seventh Reserve District. Ur. Szymczak then addressed the meeting on the subject of Indus8 tt4e. an and a copy of his statement will be found in the Board's Mr. Pouch moved that a vote of thanks and appreciation be extended to Mr. Szymczak for his statement. Mr. Pouch's motion was approved unanimously by the representatives of the Industrial Advisory Committees present and it was understood that a copy of Mr. Szywczak's statement would be sent to the members of the Industrial Advisory Committees and the Federal reserve banks. th. 4 the conclusion of Mr. Szymczak's statement, Mr. Miller left -v1,0014. 6/2.5/35 _3_ Mr. James stated that he desired to express to the representatives °I the Industrial Revisory Cognittees his appreciation of their effic. it and faithful service in connection with the industrial loan ProEr,„ He said that he felt that the spirit of cooperation which they were . evidencing would be a contribution to the movement of recovery of the — '111ttry from the depression. Mr- Creighton read and elaborated briefly upon the report pre1 him following his return from a trip to Europe where he made ti .11Nre 8'4ga• tion of what some of the European countries have done through 1)411 10(i4. 4 ee. enannels to aid industry, particularly as regards the making of 4 eoPY of Mr. Creighton's report has been placed in the Board's IA'. Norris read the following resolution which was offered at PPer meeting of the Chairmen of the Industrial Advisory Committees eveninc): np . r' avinE received and discussed the report made by Chairman ighton dated June 4. 1935 entitled 'Industrial Loans pere and Abroad', the Committee desires to thank Chairman ; reighton for his personal study of European effort to ! 41 lieve industry in their respective countries and move :;.lat the report be apdroved and spread on the minutes of s meeting as a permanent record and for future refer, ncee That proper publication be given based upon this -ePort.0 Upon motion by Mr. Ousley, the resolution was unanimously adopted by the representatives of the Industrial Advisory Committees. 4 Mr. 0 ozymczak stated that the Federal Reserve Board and the Federal SYstem appreciated very much the fact that Mr. Creighton at his - 13erise had made the trip to Europe and had studied the industrial 14,71 6/25/35 -4414 situation in European countries. Mr. Creighton stated that at the supper meeting of the representatiVe8 the Industrial Advisory Committees yesterday evening a detailed 4SCI1Z ion was had of the so-called Kopplemann Bill (H.R. 5918), and that a committee consisting of Messrs. Smythe, Burnside and Parker was 4PPqrited to draft a resolution which would express the attitude of the 4etitig toward the bill. 14r- Smythe read the following resolution which had been offered s eclamittee at the supper meeting yesterday evening: The so-called Kopplemann Bill providing for the creation of an i'0mediate Industrial Credit Corporation undertakes to furnish it industry and commerce financial credit practically identical 10 character to that now made available by Federal Reserve Bank t1,4 to industry and commerce and that which is available rrugh the Reconstruction Finance Corporation. It therefore erPl'esents very largely, if not altogether, a duplication of undeclit service which in our opinion is not necessary nor demanded er existing conditions. It is our firm belief that every ication to Federal Reserve Banks has received the considerathQn which it has merited and that loans have been approved by 4e Federal Reserve Ranks wherever such loans could be deemed orlTd and reasonable. It is believed that a material proportion halr''lle requirements for credit assistance that are justifiable age !been cared for by the combined action of the two existing ' ope cies and that the organizations already set up and in forl'.,tion for the investigation and consideration of applications die " - ).ans are efficient, economical and entirely without prejuthee ' The funds available are apparently sufficient to complete age task which has been undertaken. The creation of another 110Y at this time would seem uncalled for." vth e also made a statement outlining the considerations upon which tt;Pl ' 10n set forth in the resolution was based. Mr • ozymczak inquired whether the representatives of the Indusdvl, LelsY Committees have observed any indication as to whether 1472 6/4/66 -54414cants have any preference for the Federal reserve banks or the liecotBtruction Finance Corporation in filing their applications. Mr. Smythe expressed the opinion that the applicants prefer to "Yat the Federal reserve banks because of the possibility of obtaining gllieker action on their applications, but that, inasmuch as the Fed erea reserve banks are authorized to make loans only for working Qpit1 the Federal reserve banks were without authority to consider 4P1 ie'ati0n5 for certain loans which could be made by the Reconstruction Pt rice Corporation. This matter was discussed briefly and it was in- S the consensus of the repres3ntatives of the Industrial AdCo:amittees prselit nat there is not a clear distinction in the 1111(1 between the Federal reserve banks and the ReconstructiDn ?1441e Cor poration, ana that applications are most apt to be filed Illtlithe agency first coming to the attention of the applicant. Smythe moved adoption of the resolution read by him with regard to the Koppleinann Bill. nr. Smythe's motion was unanimously approved by the representatives of the Industrial Advisory Committees. 't4t hill. 'Burnside called attention to the reference in Lir. Szymczak's 11.t tO the desirability of having the industrial loan activities 'ederal reserve banks take the form of commitments to financing t t -'4tiolis wherever possible rather than the form of direct loans to and he related an incident in his district where a bank which 11\p "43ed to participate in industrial loans had, for the first time, the industrial loan program in connection with an applica- 1473 6/25/35 -6tiOti or a loan from one of its directors, and had reached the con clusi °11 that the industrial loan program offered it an opportunity to benf --assistance to its customers. He said that he felt there were ° ‘b 4-.Le which would find in the industrial loan program a means -" they would be able to come to the aid of their customers. Mr. Szymczak stated that an industrial loan by a financing 4-011 with a commitment from a Federal reserve bank was desirable bektte„, protected the bank and permitted it to make a profit on the 444, a. d/ what was more important, established or preserved a relation- betWeen the bank and the customer, the natural result of which °e, when more nearly normal conditions were attained, for the b44 t ° make loans to the customer without going to the Federal reserve bkra. a commitment. bet Following an inquiry by Mr. Norris with regard to cooperation 'she Federal reserve banks and the agencies of the Reconstruction N410 co e aorporation, the representatives of the Industrial Advisory : tte" indicated that there is close cooperation between the banks the 4gencie3 in all districts. Mr. Norris pointed out that the %lettliction Finance Corporation is authorized by law to make certain 444atrifIl loans which the Federal reserve banks cannot make and stated 44'4444 been the practice in his district when an application for 44°441°4n was received by the committee to refer the applicant to thq, ' teech t514 --ttruction Finance Corporation. He also stated that it had come Ektterition that certain applicants were aware that industrial loans 1474 v2sAs -7- be made both by the Federal reserve banks and the Reconstruction "ee Corporation and were filing applications in both places, and that hero, 44, close cooperation should be maintained between the banks and the Ile e°118trueti0n Finance Corporation agencies to prevent any possibility at ittlie eessary duplication of effort in the investigation of applications. le Mr. Szymczak inquired as to the reaction of applicants when they "hat their applications are considered first by the Industrial 150t7 Conmdttees, and the representatives of the Industrial Advisory Coetti4..L uGef38 present expressed the opinion that the reaction is a favorable vecause of the fact that the committees are composed of active inchlatr ialists. Mr. Szymczak stated that he had attended a meeting of the board lirectors of a Federal reserve bank and had inquired of one of the C/488 A directors whether hi bank would be willing to make industrial 14418 lind that the banker had raised the question whether, in the event tkie FAIllt should make such a loan with a commitment from the Federal refib's and should find it necessary to rediscount the loan, such 4404 Would be a reflection on the member bank. Mr. Szymczak stated that it should be made clear to all financing institutions that the recilee° • 141tIng of industrial loans with the Federal reserve banks would not ed in any sense as a reflection upon the institution. Mr. Creighton read comparative figures of loans made by the Fedael've Bank of Boston and the Reconstruction Finance Corporation Federal Reserve District and stated that he felt there was 1475 6/25/35 -8- 411e. criticism of the Reconstruction Finance Corporation because of delay 1114441ing applications. In this connection, Mr. Norris expressed the °'Arlic3/1 that if something could be done to expedite consideration of 415Plica'ti°ne by the Reconstruction Finance Corporation which is authorized 441er the law to make capital loans to industry, all of the objectives IV' the K000lemann Bill could be achieved under existing legislation. Mr. Pouch made the suggestion that very desirable results would be "Qbtai, -Lied if officers of local banks were invited to attend meetings of the '44tEt1 1E11 Advisory Committees at which industrial loan applications Were e°11sidered. He stated that in his district the committee had in- o fficers of banks to meet with the members of the Industrial AdC°1113littee at luncheon and attend the meetings of the committee in 7 d"lat they may observe at first hand how thc committee functions, qot 'ilf°riaration regarding applications is obtained, and the extent to whil the committee investigates loans, and that the results obtained 4'11"hts approach hod been very satisfactory. 1V:r. Wood inquired whether it is the practice of some Federal banks to make commitments for the entire life of the loan and Pointed out that a majority of commitments are for periods of torth s to a year. Mr. Wood stated that there is considerable differe betw o.e 14411 eon the amount of commitments made by the Federal Reserve Bank w41.41 elli)(31is and other Federal reserve banks and that he was wondering th. 18 difference was due in part to the fact that some of the 11,4. b J:eder al reserve banks might be making commitments for the entire 1476 6/4/35 -9-Ofthe loan. He also raised the question as to the desirability bar '44g all commitments run for the entire term. This matter was Q401. -"ed briefly but no conclusions were reached. Of Mr. Creighton stated that Mr. Pouch, Chairman of the Committee "Iblic Relations, would lead a discussion on the subject of publicity, kite re lations and plans for the future. Mr. Pouch said that Mr. B. P. Ad% has been making a study of publicity for the industrial loan proand that he would make a statement to the meeting. lir. Adams expressed the opinion that there was a demand on the Of the public for more information on the industrial loan program 4ithat, in addition, steps must be taken to correct any misinformation to the public with regard to industrial loans. He outlined in °484161‘a.ble detail the steps which he was taking to make available to thtde to 4, 14tPers and magazines and other periodicals information with regard Kte iVn.3 —4411strial loan program and for the publication in such periodicals or 4rtieles relating to industrial loans. He also outlined his ideas 1144 l'egard to the use of radio addresses and stated that, on the basis tile inquiries 8 1140 ilelre received following Er. Szymczakis address before the Bankers Association, he felt there is a large number of people not been reached the industrial loan publicity and that un- eetort was made to reach each group of business men and industrialt th. h, IN ritttaa stem could not be certain that the publicity activities with to i 651 ndustrial loans had effectively been completed. He also the desirability of making it known that the Federal reserve 1177 8/25h5 -1013auk$ are wIaling to discuss the financial problems of applicants even though no loans are made. He concluded with the statement that he 48ired to get all the suggestions and help he could from the members °fthe Industridl'Advisory Committees with regard to the problem of Plib'jetty. Mr. Smythe inquired whether the Industrial Advisory Committees )10111,1 be zialez advised of the appearance of articles in trade and other maga- alld suggested that such advice would be helpful as it would enable the c.°111inittees to call such articles to the attention of interested kties in the various Federal reserve districts. t4t -1'angement5 Mr. Szymczak said would be made to advise the Industrial Advisory Com- 111, (1 the Federal reserve banks of the appearance of important 41icies. Mr. Creighton advised that the Committee on Public Relations " Ile a statement to the press along the lines outlined at the 411PAr aleeting yesterday evening. Mr. Szymczak stated that the publicity program outlined by Mr. / 1 4412 414 1748 not conceived with the idea of soliciting anyone to borrow the industrial loan program but to make certain that effective Itit°4111.at' 1On with regard to industrial loans is made available to everyWho tot io:ght be interested in order that they may make applications .3 should they desire to do so. Nived Mr. Szymczak then read a letter by the Federal Reserve Bank of New York from counsel for an at),4a ' ' 4 1 borro7;er expressing appreciation of the treatment accorded 1478 8/25As -11- the 13(3rrower by the Federal reserve bank. Mr. Szymczak stated that the l'eciellia reserve banks have received a number of such letters which indi44that the purposes of section 13b of the Federal Reserve Act are -46 attained at least in part. Mr. Creighton requested Mr. Szymczak to discuss the report made 0 the S ecretary of Commerce by the Business Advisory Council for the Dep, mrt teat of Commerce on the subject of credit and capital requirements Ot 8144 Nify„. industry and to what extent the rediscounting authority of the reserve banks would be enlarged by the passage of the proposed Act of 1935. Mr. Szymczak stated that the Board was familiar with 4ocir of the report of the Business Advisory Council before it was but was surprised by the last paragraph of the summary of the re'-ch recommends an immediate study by the Reconstruction Finance e°115°1at' 34n, the Federal Reserve Board, and the Securities and Exchange-Comsal cooperation with the investment bankers of the country, to a 0 4d that racilities be offered sound, small industries for the ac6410% th of needed capital. He said that the recommendation had been -4,110148_ tile 4400 eg with representatives of the Council and that it appeared that : 4411 ell had no specific data on which to base its recommendation or tA421. ktt suggestions as to the nature of the study which should be under- litte Szymczak also stated that the Banking Act of 1935 would per414Z PeA Ilt01 N'eral reserve bank, subject to such regulations as to maturities matters as the Federal Reserve Board may prescribe, to rediscount 1479 6/25/35 -12t(11'NEmber banks any commercial, agricultural or industrial paper and e advances to any member bank on its promissory notes secured by 1413'8011nd assets of such member bank. Mr. Creighton stated that at the supper meeting yesterday eventh e representatives of the Industrial Advisory Committees had conBidere d informally a resolution prepared by a committee consisting of kessra °0d, Norris and Ousley with regard to the report of the Business kviao 17 Council and that Mr. Wood would make a statement regarding the tktters Mr. Wood said that the discussion of the report had led to the tokiide taticn of the difference between working capital and investment 04141,41 and that the question had been raised as to whether there was 4ny, "leibility of doing something under new legislation which the Federal eserve banks and the Reconstruction Finance Corporation are not authorized to " Ildar present law. 1 t4 84Mr. Szymczak stated that he did not see what could be accomplished ' 114 recommended in the report of the Business Advisory Council 44 that if the representatives of the Industrial Advisory Committees '4'''thirie to 'Reetio4. suggest as to what could be accomplished, he felt their Should be specific in character. ot the Ousley called attention to the paragraph in the slimmnry 4Pcrt of the Business Advisory Council reading as follows: "As : pre etrY 10n Deen a matter of fact, long-term financing for small has always been difficult. It is not simply a deproblem. Through private investment bankers, it available only to concerns of sufficient size and 1480 6/25/35 -13standing to warrant the investment bankers in bringing out an le!tle as small as, for instance, ';10000,000. So it may be Bald that this facility has been practically denied to smaller concerns. Such enterprises have been obliged to develop their TIPital structures gradually out of undistributed earnings or attract the participation of individual capitalists. They oave not received the benefits of recourse to the capital nlarkets for their long-term requirements." Re ref exTed to the difficulty experienced by small concerns in obtaining eltPitaa 48 a pre-depression problem, and suggested that the report conider 0 the Reconstruction Finance Corporation as a temporary emergency 4tellev " and that the recommendation of the Council was made with the idea ot sl°PiAg some permanent means by which the capital needs of small 1144141.4 , es may be met. Norris suggested that the Council may have had in mind that the s eelkrities Exchange Act of 1934 acts as a deterrent to the acquisition usce. 13417 capital funds by small industries and that it might be of 148110,_ "414°e to work out a solution to that problem. ot 1.440134 nuring the discussion of the matter Mr. Wood read the following tion offered by his committee at the supper meeting yesterday Nqt€: ?Ile_ wiz, recommend that the Federal Reserve Board in cooperation eel!' such other credit and investment agencies as they may wozZt make an early study of the problem of furnishing to theZ3r and needed industries such permanent capital as may in illdgment be required." I °I. ** Clayton stated that it would appear that the resolution as d --,Ties the implication that the existing agencies can supply e4114-413 "'LI. requirements of industry without additional legislation and 11114teated that if the resolution were adopted by the representatives 1481 64'36 Qfthe I ndustrial Advisory Committees it might be well to incorporate a alltion that the study recommended include a suggestion that the need Edditional legislation should be studied. Mr. Wood stated that it was not the intention of the committee the..t 4 4e resolution should carry the implication referred to by Mr. Clayton. Mr. James suggested that the need of the small industry is pri'the creation of some authority which would pass upon the financial 41t114 8 of the small industrial enterprise and place a value thereon which Wegad be made available to investors, )111eth„ or not they desired to invest th '8 o pinion an arrangement of this he °I.thY small industries to obtain who would then be able to determine in the enterprise. He stated that character would do much to enable additional capital when needed. At the conclusion of the discussion, la% Wood submitted the following resolution for consideration of the representatives of the Industrial Advisory Committees: "We recommend that the Federal Reserve Board make an early 8tudY of the problem of furnishing to worthy industries such Permanent capital as may in their judgment be required." Mt. Norris moved that the resolution be amended to read as follows: "Recognizing that there is nothing in the present act ' s verning the industrial loans of the Federal reserve Which would permit us to take care of capital loans, ": recommend that the Federal Reserve Board make an early 0 8:',11dY of the problem of furnishing to worthy industries 'eh permanent capital as may in their judgment be re- t Mr. Norris' motion was approved and the resolution in its amended form was adopted unanimously by the representatives of the Industrial Advisory Committees present. 1482 t 6445 —15— At this point Governor Eccles joined the meeting and stated that he re_ gretted that, because of other engagements, he had been unable to 1140VIA „ wie meeting. He expressed appreciation of the efficient and effective manner in which the Industrial Advisory Committees were assist— Ina ill laking the industrial loan program successful. He said that, while there were some who questioned the advisability of the Federal reserve 14411t8 "-J-ng direct loans to industry, the Federal Reserve Board and the Feder al reserve banks had taken the position that as Congress had passed 'glslation authorizing the banks to make such loans it was the duty Of eve 4144 rYons concerned to do everything possible to carry out the provi- °f the law, and that the Board felt that through the cooperation Qt the T 411dustrial Advisory Committees a record has been made which was 4 Justification of the activities of the Federal Reserve System. he Ye nor then referred briefly to the status of the proposed Banking t141 to Qt 1935 and expressed the opinion that if passed it will contribute Iltrd the expansion of private credit with a corresponding contraction et love rnment lending. Mr. Szymczak suggested that the Governor express his opinion as Wheth er the enlarged authority of the Federal reserve banks to redis— N t ttlrEt4415 ,4_1) "for their member banks would aid in making working capital to ble 4 Of funds at the present time and there is no occasion for them tol L, to industry. Governor Eccles said that the banks have an — /1447 prom the Federal reserve banks, but that he felt that the en— `9teci edi3counting powers which would be given to the Federal reserve 1483 6/25/35 -.16— by the Banking Bill of 1955 would assist in the removal of the dit complex" of bankers and focus their attention upon the funda44141 soundness of assets rather than primarily on maturities, because t es Of depression the only assets, whether in the nature of loans or atraents, that are really liquid are assets which can be rediscounted ttths central bank. He also stated that in his opinion it is desirable the•t. the law e b changed as contemplated by the Banking Bill of 1935 to krilit banks to invest time and savings funds in long term amortized estate mortgages, and he outlined briefly his views as to the effect or th Passage of the Banking Bill of 1935 on short and long term money 1 tea. Mr. Ousley moved adoption of the following resolution: "We record our appreciation of the courtesies, facilities 414 services afforded us by Governor Eccles, the members and employees of the Federal Reserve Board for our accommodation and comfort." The resolution was approved by all of the representatives of the Industrial Advisory Committees present. Ot D*Ing the meeting there were distributed copies of a statement iletrial advances and commitments under Section 13b of the Federal t*N3 Act made by Federal reserve banks to June 19, 1955. Thereupon the meeting adjourned. 4) - L, V1/101.4 . Secretary. k)1.4oved mmittee.
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