Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, September 8, 1944, Volume 31, Part 3

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1344

A meeting of the Board of Governors of the Federal Reserve
SY8tenl

Ilas held in Washington on Friday, September 8, 1944, at 11:00

PRESENT:

Mr.
Mr.
Mr.
Mr.

Eccles, Chairman
Ransom, Vice Chairman
Draper
Evans

Mr. Bethea, Assistant Secretary
Mr. Carpenter, Assistant Secretary
Mr. Clayton, Assistant to the Chairman
The action stated with respect to each of the matters herein—
art,—

re
ferred to was taken by the Board:
The

minutes of the meeting of the Board of Governors of the

r-1
Reserve System held on September 7, 1944, were approved unani—

ot

Telegrams to Messrs. Treiber, McCreedy, and Clouse, Secretaries
the Federal Reserve Banks of New York, Philadelphia, and Cleveland,

N)ectively, Mr. Leach, President of the Federal Reserve Bank of
11.11141°11c11 Messrs.
Dillard and Stewart, Secretaries of the Federal Re—
4/*\re
Banks of
Chicago and St. Louis, respectively, Mr. Ziemer, Vice
l'Neiclent of
the Federal Reserve Bank of Minneapolis, Mr. Hall, Secretary
the
Federal Reserve Bank of Kansas City, Mr. Gilbert, President of
tile
Pederal
Reserve Bank of Dallas, and Mr. Earhart, Vice President of
the
Pederal Reserve
Bank of San Francisco, stating that the Board ap—
11'°\reci the
establishment without change by the Federal Reserve Banks
Louis and San Francisco on September 5, by the Federal Reserve




1345
94/44
—2—

sank of
Dallas on September 6, and by the Federal Reserve Banks of
New

y

(Irk, Philadelphia, Cleveland, Richmond, Chicago, Minneapolis,
ICknea
8 Cltr, and San Francisco on September 7, 1944, of the rates of

(11"°11/1t

and purchase in their existing schedules.
Approved unanimously.

Memorandum of this date from. Mr. Bethea recommending that Mrs.

Ire"rown be appointed as a charwoman in the Secretary's Office on a
te4114/7 basis for a period of not to exceed 60 days, with basic salary
attherate
of $1,200 per annum, effective September 8, 1944, with the
114clel‘8tarictitig that if anything derogatory develops in the investigation
°the"eferences her services may be terminated immediately.
Approved unanimously.
Ile morandum dated September 7, 1944, from. Mr. Leonard, Director
"the Di
ision of Personnel Administration, recommending, with the con—
ellrreric
e of the Secretary's Office, that Miss Evelyn Underwood, a file
elezit

A .

the latter Office, be transferred to the Division of Personnel
istrA4.
—lon as leave clerk, with no change in her present basic salary

the rate

of 81,560 per annum, effective September 16, 1944.
Approved unanimously.

Telegram to Mr. Evans, Vice President of the Federal Reserve Bank
reading as follows:




i34
9/8/44
-3"Pursuant to request your wire September 8, Board
c.pProves designation of James 0. Russell as special assletent examiner for the Federal Reserve Bank of Dallas."
Approved unanimously.
Letter to the board of directors of the "State Bank of Spring
Green"
'SPring Green, Wisconsin, stating that, subject to conditions of
41111".hip

numbered 1 to 3 contained in the Board's Regulation HI the

11°41'cl aPProves the bank's application for membership in the Federal Reerile 878telll and for the appropriate amount of stock in the Federal Reserve 8
of Chicago.
Approved unanimously, together with
a letter to Mr. Young, President of the
Federal Reserve Bank of Chicago, reading
as follows:
"The Board of Governors of the Federal Reserve Systern
0:
1 aPProves the application of the 'State Bank of Spring
pee
ciehl, Spring Green, Wisconsin, for membership in the
in !ral Reserve System, subject to the conditions prescribed
to 'he
enclosed letter which you are requested to forward
of he
e Board
of Directors of the institution. Two copies
ftleuch letter are also enclosed, one of which is for your
to es and the other of which you are requested to forward
00 ti.le
Chairman, Banking Commission for the State of Iiisnsln, for his information.
banvI nIt is assumed that you will follow the matter of the
la; 8 bringing into conformity with the provisions of
ap and the Board's regulations the requirements with reect to notice of withdrawals from savings accounts."
Telegram to the Presidents of all the Federal Reserve Banks readr°11ows:
"Last paragraph of Board's September 6, 1944, letter




1347

9/8/44
-4id2 states that Board contemplates releasing press
s atement
regarding T—loan program on September 11. Since
1
2rculars are to be mailed out by Reserve Banks on September
it is thought best to delay issuance of press state—
until that date. Press statement will contain state—
to effect that Reserve Banks are on that date dis—
ter•It
rb
t l uting forms and instructions relating to T—loan program
all banks in their districts. Copy of press statement
'all be wired
you later today."
Approved unanimously.
Telegram to the Presidents of all the Federal Reserve Banks read—
as

follows:

s "Referring Board's wire sent you earlier today there
t
to Voted below for your confidential information statement
given to press on September 11, 1944 for release in
"
- ang newspapers of Tuesday, September 12, 1944=
'The Board of Governors today announced in—
auguration of the program of guaranteed loans
and commitments authorized under the Contract
Settlement Act of 1944. Such termination loans,
e
4,°111monly called T loans, will be made by private
:inancing institutions, chiefly commercial banks,
'mar production contractors to liquefy or nun—
Ireeze" working capital tied up in terminated
contracts pending final settlement of claims
ta_rising therefrom. Guarantees will be executed
V the Federal Reserve Banks as fiscal agents
of the United States acting in behalf of the
War Department, the Navy Department, and the
nited States Maritime Commission. The Reserve
fanks are today distributing to pll banks in
'heir districts printed forms and detailed in—
formation.
'The T loan program is a logical extension
(
0)f the V and VT loan programs under Executive
,
:
1 der 9112, which provide war contractors with
'lnancing necessary for production. VT loans, in
1,”
_1
since September 1, 1943, provide both produc—
Q.on and termination financing, but have not




348
9/8/44
-5-"been available after cancellation has taken
Place. T loans, which are authorized under the
Contract Settlement Act, may be guaranteed after
the borrower's war production contracts have been
terminated. However, commitments for such loans
maY be guaranteed in advance of cancellation. Thus
the program affords war production contractors a
means of insurance against the freezing of their
working capital which might result from sudden
termination of their war contracts.
'New schedules of guarantee fees and commitment fees have been prescribed for T loans and will
also be made applicable to VT loans when executed
cn new forms which will be made effective in the
near future. The new schedule of guarantee fees
follows:
T LOANS
Per cent of
Guarantee Fee
loan guaranteed
(Per cent of interest
payable by borrower on
guaranteed portion of
loan)
80 or less
10

85

90

15

20
95
30
Over 95
50
'The maximum commitment fee that may be charged
the borrower by a financing institution will be 1/4
°f 1 per cent per annum, or in the alternative a
flat fee of not to exceed $50.00. Under the new
schedule, the fee is not shared by the guarantor.
'The
of interest on any T loan will
be 4-1/ maximum rate
2 per cent per annum, as compared with 5 per
cent heretofore. This maximum will likewise be made
aPPlicable to VT loans on the new forms.
'While the prospective need of war production
!?ntractors for T loans cannot be accurately esL'mated, the commercial banks should be prepared to
Take a large number of such loans within the first
tew weeks after the end of the European phase of
Wax. If applications for such loans were not
riled until after cancellations occur in large




1349
9/8/44
-6"'volume, it might be physically impossible to
process them promptly. Therefore, the program
urn emphasize the desirability of contractors
and their banks, in advance of cancellation, ne—
gotiating commitments to make such loans. These
commitments will be guaranteed by the Federal
Reserve Bank, acting as fiscal agent of the United
States, so that upon termination, borrowers can
Promptly obtain such loans and the banks will al—
ready have the protection of the guarantee.
'In comparison with the V and VT loan pro-garils, the T loan program is simplified and
liberalized in recognition of the obligation of
the Government, as expressed in the Contract
Settlement Act, to provide prompt and adequate
Interim financing to contractors pending final
settlement of their claims.'
Approved unanimously, together with
letters to Honorable Robert H. Hinckley,
Director of Contract Settlement, Colonel
John C. Mechem of the War Department,
Lieutenant Commander Donald P. Welles of
the Navy Department, and Mr. R. E. Anderson
of the Maritime Commission transmitting
copies of the above press release for
their confidential advance information.

trig

Letter to the Presidents of all the Federal Reserve Banks read—
f 1
°4-1-Ows:

the "In connection with the execution of T—loan guarantees,
toj
e is enclosed a copy of a memorandum received by the
ei I'd from the War Department, dated September 5, 1944,
bI Colonel Paul Cleveland, Chief, Advance Payment
..:,"n Branch, enclosing a proposed form of Statement
or ;
b,sr i7;-Lgibility of Borrower for Proposed T Loan to be used
Den;"aison Officers pursuant to instructions from the War
1.9rI4traent, to R11 Federal Reserve Banks dated September 4,

417d




1350
9/8/44
-7-'Kline Colonel Cleveland's memorandum refers to a
,.Proposed, form of Statement of Eligibility of Borrower
r.Proposed T Loan, we have been advised by him that it
4.8
Intended that this form shall be used by Liaison OfUnless and until changes are made therein."
Approved unanimously.

itle

Letter to the Presidents of all the Federal Reserve Banks readA

j
.

s48 10110WS:

, "For your information, there is enclosed a copy of
letter dated September 5, 1944, received by the Board
jom the Comptroller of the Currency, in which the opinf°11i8 expressed that guarantees executed on the standard
of T-Loan Guarantee Agreement, identified by the
1,k)rds f(Draft
of August 7, 1944)', which was approved
Director of Contract Settlement in his General RegNo. 1, dated August 18, 1944, would come within
the
84,Purview of Exception 10 to section 5200 of the United
6es Revised Statutes and of the definition of the term
0,7Lco
nditional' as used therein which was issued by the
uniPtroller of the Currency on June 18, 1942.
id
The standard form of T-Loan Guarantee Agreement,
a e
ntitled by the words '(Draft of August 7, 1944)f, as
PProved by
the Director of Contract Settlement and as
to
in
the Comptroller's letter, is identical with
the
b; standard form of T-Loan Guarantee Agreement, identified
th words
'Form of September 1, 1944', which has been
tir'"orized
a
by the War and Navy Departments and the Mariof ;_Commission for use in connection with the execution
the 1°a.4 guarantees, a copy of which was enclosed with
Bardis letter of September 6,
1944(S-782)."

;

Approved unanimously.
Letter to Mr. Day, Chairman of the Presidents' Conference at
c/el
'
ea Reserve Bank of San Francisco, reading as follows:
are r"14e understand that some of the Federal Reserve Banks
aced with problems in connection with the payment




1351

9/8/44
—8—
ret
roactively of overtime under the standards established
y the Fair Labor Standards Act of 1938 and that specifically
lls problems arise in connection with adjustments under the
0
11°Iving circumstances:
1. Where payment for overtime has been
computed on basic salary only, exclusive of
supplemental compensation.
2. Where certain employees or classes of
employees formerly considered by the bank as
exempt under the standards established by the
Act are subsequently determined to be nonexempt.
,
"It would seem that the situation, which is already
b'._nlatter of concern to some Federal Reserve Banks and may
,5 concern to others, involves questions of System
'
t]l,tleY and practice. Accordingly, it is suggested that
ta7 Tatter be brought up for consideration at the coming
etlng of the Presidents' Conference."

'i

4




Approved unanimously.
Thereupon the meeting adjourned.

Assistant Secretary.

Chairman.