The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
ebo?fr, ) 11 17'.1 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Wednesday, September 17, 1952. The Board met in the Board Room at 10:10 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Evans Vardaman Mills Robertson Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Mr. Vest, General Counsel Mr. Noyes, Director, Division of Selective Credit Regulation Mr. Boothe, Assistant Director, Division of Selective Credit Regulation Mr. Hackley, Assistant General Counsel Mr. Connell, Technical Assistant, Division of Selective Credit Regulation Before this meeting there had been sent to the members of the Board copies of a memorandum from Mr. Boothe, dated September 16, 1952, reporting developments in connection with a proposed loan of 476)750,000 to be made to Reynolds Reduction Company, of Richmond, Virry4 b'11J-e., a newly organized subsidiary of Reynolds Metals Company, by a group of banks and insurance companies and guaranteed by General Ser1,4 _ "'ees Administration. This matter had been discussed at meetings °f the Board on August 8, August 12, September 3, and September 11, 1952 and following the September 11 meeting, which was attended by *. Larson, General Services Administrator, and members of his staff, 9/17/52 -2- the Board authorized Mr. Boothe to suggest to General Services Ad ministration a basis for further negotiations with the lending institutions. Mr. Boothe's memorandum stated that he had been advised by 'Phelan, Mr Vice President of the Federal Reserve Bank of New York, that a conference was held at the Reserve Bank on September 16, with representatives of the lending institutions, the borroaer, and the guaranteeing agency, and that the following proposal to mr. Phelan for presentation to the Board: 1. The maximum premium payable upon voluntary prepayment in full of the bonds and notes representing the indebtedness would be 5 per cent, which premium would prevail through the year 1958, with reductions on January 1, 1959, and annually thereafter. 2. No premium would be payable if it became necessary for a refunding to take place in connection with additional facilities which would require the consolidation of this debt with a new one to be guaranteed by the United States Government. 3. The loan agreement and bond purchase agreement would prohibit any partial refunding of the bonds and notes. I. The commitment fee of 1.7 per cent paid by the borrower to the lending institutions since July 1, 1952, would continue as submitted 1635 9/17/52 -3to be paid until such time as the guarantee agreement became effective, when it would be reduced to one-half of one per cent, but the fee would be paid by Reynolds Metals . Company rather than Reynolds Reduction Company until the execution of the guarantee agreement. Chairman Members of the staff reviewed for the benefit of Martin developments in the matter which had occurred in his absence, and there ensued an extended discussion of the terms and conditions °f this particular transaction, the outstanding regulations of the board regarding commitment fees and termination fees and their aPPlicability to this financing, the responsibilities of the Board in respect program in to this specific loan and the guaranteed loan ge neral, and the action which should be taken concerning the proPosed loan to Reynolds Reduction Company. In the course of the discussion, it as agreed that inasmuch brought to as the terms and conditions of the proposed loan had been the attention of the Board, it would be incumbent upon the Board to ch as the Board take cognizance of them. It was also agreed that inasmu had d Administration and sugiscussed the matter with General Services gested a course of action to that agency and the proposed terms and eration, °°nditions had been resubmitted to the Board for its consid 1636 -4- 9/17/52 a meeting with representatives of all of the guaranteeing agencies snould now be arranged for the purpose of obtaining their views concerning the questions under discussion, after which further consideration would be given by the Board to possible changes in its Present regulations. The discussion then turned to a consideration of the views tO be expressed by Board representatives at the meeting with the guarazteeing agencies. With respect to commitment fees, it was the consensus that it should be stated the Board was inclined to adhere to its out tand- ing 1-11-1-e l which provided a maximum commitment fee of 1/2 of one per cent) and that the Board would not be inclined to favor the payment Of any fee prior to the date of execution of the loan documents in onnection with a guaranteed loan. With respect to the provision for a prepayment penalty, a premium, rliaj°ritY of the members of the Board expressed the view that a if Set at a reasonable figure, might be justified in the case of a 1°ng-term loan for facilities provided that no such premium should be Parable in the event of consolidation of the debt with any subecillent loan to be guaranteed by the Government or to be made by the Reeo nstruction Finance Corporation or any other agency of the Government. "t If) 9/17/52 -5- On this point, however, Governor Mills stated that he could see n° justification for a request by lending institutions for inclusion of a prepayment penalty in the case of a guaranteed loan, that he felt the Board had a responsibility in connection with the V-loan Program to protect the interests of the Government, and that provision for a prepayment premium might be contrary to the interests of the , the G°vernment in circumstances where, except for such a premium private barr°wer would be able to refinance the indebtedness through ellarinnls and the Government would be relieved of its contingent li ability. At the conclusion of the discussion, it was agreed unanimously that Governor Vardaman should arrange for a meeting with the guaranteeing agencies immediately for the purpose of obtaining the benefit of their views on the matters under discussion. Unanimous approval was given to the request contained in a memorandum from Mr. Young, Director, Division of Research and Statistics, dated September 16, 1952, that he be permitted to continue to serve as professorial lecturer at George Washington University during the coming school year. At this point all of the members of the staff except Messrs. Sherman and Kenyon withdrew and the following additional actions were taken by the Board: Ir 9/17/52 -6Minutes of actions taken by the Board of Governors of the Federal Reserve System on September 16, 1952, :fere approved Unanimously. Memorandum dated September 15, l9 2, from Lir. Leonard, Director, Division of Bank Operations, recommending that the resignation of Frances Louise Franklin, Statistical Cler in Lhat her reDivision, be accepted to be effective, in accordance with cillest, at the close of business September 15, 1952. Approved unanimously.
@FedFRASER