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30'1 ' A meeting of the Board of Governors of the Federal Reserve Systern held in Washington on 'Friday, October 23, 1942, at 11:00 a.m. PRESENT: Mr. Eccles, Chairman Mr. Draper Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairman s hereinThe action stated with respect to each of the matter referred to was taken by the BoLra: an of the -ar :daa;D':er Letter to Honorable Paul V. McNutt, Chair Cora mission, reading as follows: regarding the list "Your letter of October 16, 1942 with War Manpower ance accord of key positions submitted in t to the attenbrough been has Comnission Directive No. XI with your ance accord In tion of the Board of Governors. notified be sion Commis e Servic suggestion that the Civil of conpoint the be will who Of the official in our agency sion Commis the ent, deferm tact on problems of occupational on Divisi or, Direct d, Leonar has been advised that Mr. R. F. for ty capaci that in act Of Personnel Administration, will the Board of Governors of the Federal Reserve System. communicate with "As suggested in your letter, we will Occupational on tee Mr. Robert M. Barnett, Chairman, Commit Questions on sion, Deferment, of the Civil Service Commis War under ed requir Pertaining to positions on the lists Manpower Commission Directive No. XI." a Approved unanimously, together with e Servic Civil letter to the United States as Commission transmitting the information . stated in the above letter Counsel of the Federal Letter to Mr. Trimble, Assistant General -t'- ve Bank of Newyork, readinc, as follows: 2052 -2- 10/23/42 "This will acknowledge receipt of your letter of October 21, 1942, addressed to Mr. Vest, in which it is stated that the attorneys for General Motors Corporation and the attorneys for the banks wish to have a ruling from the Comptroller of the Currency as to the compliance Of the guarantee agreement used in connection with the General Motors loan with paragraph (10) of section 5200, Te are today addressing a letter to the Comptroller of the Currency presenting this matter to him. "It is understood that the form of guarantee ar4reetent in connection with the General Motors loan as agreed to by the War Department is Exhibit D of the pamphlet entitled 'Amended Application by Financing Institutions to Federal Reserve Bank of New York, Fiscal Agent of the United States, for guarantee of loan, pursuant to Executive Order No. 9112 dated March 26, 1942, relating to General Motors Corporation' and dated October 17, 1942, and we are so advising the Comptroller of the Currency." Approved unanimously, together with the following letter to Honorable Preston Delano, Comptroller of the Currency: "There is enclosed herewith a copy of a letter received from the Federal Reserve Bank of New York with reference to the question whether the agreement between the War Department and certain banks guaranteeing a loan made to General Motors Corporation pursuant to Executive Order 9112 complies with paragraph (10) of section 5200 U.S.R.S. The form of the guarantee agreement as agreed to by the War Department is Exhibit D of the enclosed Pamphlet entitled 'Amended Application by Financing Institutionsto Federal Reserve Bank of New York, Fiscal Agent of the United States, for guarantee of loan, pursUant to Executive Order No. 9112 dated March 26, 1942, relating to General Motors Corporation' and dated October 17, 1942. "There is also enclosed a copy of a letter and of Its enclosure addressed by the War Department to all Federal Reserve Banks under date of October 9, 1942, with reference to the inclusion of certain special conditions lettered (A) to (0), inclusive, in guarantee agreements under the Executive Order. A similar letter has been sent by the Navy Department to all Federal Reserve Banks. 2053 10/23/42 -3- "In order that we may advise the Federal Reserve Bank In this matter, it will be appreciated if you will advise whether in your opinion the guarantee agreement relating to the loan to General Motors Corporation complies with Paragraph (10) of section 5200, U.S.R.S., and if you will give similar advice regarding guarantee agreements in Which there have been incorporated special conditions (A) to (0), inclusive, in the form enclosed with the War DePartment's letter of October 9, 1942, but which are otherwise in the standard form of May 14, 1942, referred to in Your letter of Tune 18, 1942." Letter to Mr. Chalfont, Managing Director of the Detroit €111ch of the Federal Reserve Bank of Chicago, reading as follows: "This refers further to your letter of September 18, 1942, and our reply thereto dated October 1, 1942, regardine the meaninr, of the words 'original maturity' as used in the next to the last sentence of section 1 of the standard form of guarantee agreement. "The ouestions presented in your letter have since been considered by the Tar Department, and there is enclosed or Your information a copy of a letter which the Board is 6°day addressing to all Federal Reserve Banks setting forth the War Department's views with respect to these questions. "Your attention is called to the fact that the War DePartment has taken the position that, in the case of a rethe lcaving credit, the words 'original maturity' refer to . : than rather agreement "ate of final maturity of the credit to the maturity of a note representing a particular advance Under the revolving credit. We regret that the views exPressed in our letter of October 1, with respect to this question, which were based upon an informal discussion of this matter with one of the attorneys in the War Department, nre in conflict with the views which have now been formally expressed by the Tar Department." f Approved unanimously, together with the following letter to the Presidents of all the Federal Reserve Banks: "In connection with the execution of guarantee agreeTents pursuant to Executive Order No. 9112, certain quesqons have recently arisen as to the interpretation of the Words 'original maturity' appearing in section 1 of the Qtandard form of guarantee agreement. The Board has now 2054 10/23/42 -4- "received from the War Department a memorandum dated Oct?ber 5, 1942, setting forth the War Department's views With respect to these questions. "With respect to whether the words 'original maturity', aS here used, refer to an accelerated maturity, the War Department in this memorandum takes the view that these words were intended to refer to the expressed maturity of a loan and were not intended to refer to accelerated maturity whether automatic or optional.' ing "With respect to whether, in the case of a revolv ty maturi the to refer credit, the words 'original maturity' rethe under e advanc Of a note representing a particular the credit volving credit or to the date of final maturity of the folns contai ndum agreement, the War Department's memora lowing statement: d 'The guarantee agreement was originally drafte ing revolv a than with a term loan in mind rather ity in the credit. Consequently, there is some ambigu ay 60-d the r whethe case of revolving credit as to of ty maturi of date Period starts running from the e rather advanc ular the note representing a partic than from the date of final maturity of the revolv * * * ent. agreem loan ing credit as expressed in the 'Consequently, the War Department has always Navy Deheld the view, in which it is believed the maturity" nal "origi words partment concurs, that the applied as ent agreem in section 1 of the guarantee sed in the expres date to a revolving credit means the credit the of ation loan agreement for the termin issued rather than the date of any particular note ed that believ is It . In accordance with that credit the with tent consis this is the only interpretation agreetee guaran last sentence of section 1 of the ment which reads as follows: "Where the loan is payable in two or more amounts or instalments maturing at different times, the maturity of the loan shall be the maturity of the amount or instalment which is last due."' points out that "In this connection, the War Department referring to as ty' to interpret the words 'original maturi particular ada enting repres the date of maturity of a note case of a vance would mean that a financing institution in after the days 60 within Ilevolving credit would have to 'put' due became note ular partic exPiretion of the date at which a extend to ted obliga is even though the financing institution additional credit; and that this would increase the likeliment. hood of 'puts' and would seem undesirable to the War Depart 2055 10/23/42 _5_ "The War Department has given consideration to the inclusion in guarantee agreements of a special condition clarifying this question, but has concluded that such action is 1. 1nnecessary in view of the interpretation above expressed. ln this connection, the Tar Department's memorandum states: 'It was also felt that such an interpretative provision mic:ht throw some. doubt on existing guarantees of revolving credits and that it would be better simply to notify all Federal Reserve Banks of this interpretation with authority to give any financing institution having doubt as to the interpretation a letter expressing the views cf the guarantor." Letter to Mr. Frederick X. Wilson, Assistant Treasurer of the "Georges Ban'.! 9: Trust Company, Hyattsville, Maryland, reading Plain s follows: "This is with reference to your letter of October 16, 1942 asking about the effect of Regulation W on certain nodernization loans. "According to our understanding, the exemption for defense housingt credits, es designated by the Administrator of the National Housing Administration under Order No. 8, is not available where the occupants of the properties would not be required to move if the repairs contemplated "re not made, even thour:h such repairs are considered to be necessary to reserve the property or conserve fuel. "Amendment No. 6 which has to do with fuel conservat. copy of which is enclosed, provides an exception : . 1°11) 0 RegulationW which is entirely separate from the 'defense hoUsingt provision. Exterior asbestos siding does not quelLithifY under this amendment inasmuch as it is not applied la existing structures. "The administration of Regulation W has been decentralized and we should appreciate it if you would address any written inquiries you might have in the future to the Bsltimore Branch of the Federal Reserve Bank of Richmond which has responsibility for the district in which Ilyattsvale is located." Approved unanimously. 2056 10/23/42 . lemorndum dated October ! -68, 1942, from Mr. Smeed, Chicf of the Division of Bank Operations, recommending (1) tht the Board give its tentative ar,proval to a reviz:ed report forn, a copy of which was att;th.ed • to the memorandum, of earnings, expenses, and dividends of State Trierrib or (Jenks, and (2) that he be authorized to send the follong let- tort0 the Presidents of all the Federal Reserve Banks and to discuss the . 'uoJect informally with representative bankers and representLtives r bankers asseciaticns. The memorandum also stated that a copy of t110 tentative form ii.ould be seri, to the Deputy Comptroller of the Currency for his information. proposed revised "There are enclosed three copies of a member banks State of report form of earnings and dividends the proapproved not has (form F.R. 107). While the Board furnish to us authorized posed changes in the form it has diecopies of the form to the Federal Reserve Banks and to CUss it with representative bankers. informally that "The Comptroller's office has advised us time in this change at It does not contemplate making any banks, national of the form of earnings and dividends report earnof itemization It will be observed, however, that the the of face the on expenses, profits, and recoveries earncombine to able Proposed form is such that we will be bRrics with corings and expense statistics of State member banks in national responding statistics as now reported by The banks. member order to obtain comparable totals for all presthe and form proposed Principal differences between the sections ent notional and State member bark forms are in to pertain which forms, 2 Lad 3 on the reverse side of the distribution the to and inter-capital account transactions understood that Of total profits since organization. It is revise the Federal Deposit Insurance Corporation expects to its that hoped its earnings and diviC ends form, end it is substanrevised form and the Board's revised form will be tially identical. the proposed "It will be appreciated if you will have practicable revised form reviewec and let us have as soon as to make. Such comments and suggestions as your Bank may wish 2057 10/23/42 —7— "Instructions governing the preparation of the proposed revised form of report are now being drafted and copies of the draft will be sent to you as early as practicable. "The auestion whether semi-annual reports should be required covering the first half of each year will be considered at a later date." The above letter was approved unanimously. Memorandum dated October 19, 1942, from Mr. Nelson, Assistant 4cretarY, submitting for the consideration of the Board the renewal of the fire and supplemental contract insurance on the Board's buildinv and its contents and the purchase of insurance from the War Damage Corporation as a protection against loss from enemy attack, and recommending (1) that the fire and supplemental contract insurance of $1,000,000 on the 180arri -i s building, and $100,000 on its contents, be renewed with the Stock Colt, art Association for a period of five years from November 24, 1942, °tithe same basis as the insurance now in force, and (2) that no war cialllage insurance be purchased at this time. Approved unanimously. Memorandum dated October 22, 1942, from Mr. Bethea, submitting the travel expense voucher of Governor Szymczak covering the period Octo- ber 16-20, 1942, and recommending that, because no other accommodations Procurable at the time between Washington and Chicago, the payment Of &tl. additional expenditure of $13.95 by Mr. Szymczak covering the dif- tere nee in the price of a compartment and a drawing room be approved. Approved unanimously. Thereupon the meetin adjourned. Secrets y. 413Proved:---' Chairman.
@FedFRASER