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FEDERAL RESERVE BOARD

WASHINGTON

O F

VICE GOVERNOR

July

2, 1934.

Enclosed

I am

handing

y o u

correspondence discussed

a t t h e

recent conferonco

of

Governors

and

Chairman,

t o w i t :

letter from Honorable Joseo Jonos,

of tho

Reconstruction

Financo Corporation,

to me

under date

o f

Juno

22, 193 4, and

my reply under date of Juno 36 , 1934 .

You wi ll note that I mado my reply a s much along

t h e spir i t o f t h e discussion had in tho confer onco a s I could.

I

understood

th o

expressions

of tho

conference

t o

moan that

th o

Roscrvo Banks should

n o t

have joint action with

the

Reconstruction Finance Corporation

i n t h o

making

o f

these

loans

hu t

th at f u l l cooperation between

the two

agencies

i n

t h e

interest

o f

making

t h e

loons could woll

bo had.

I

believe that this cooperation

i n

each bank will

prevent harmful competition between

t h e

Reconstruction Finance

Corporation

and

your bonk,

t h o

appearance

of an

applicant

before

th o

Reconstruction Finance Corporation

who had

boon

declined by your bank, and tho p o s s i b i l i t y o f a cr i t i ca l

review of any act ion of your bank b y t h e Reconstruction

Finance Corporation.

I am

expressing myself freely

on

thi s subject f e el -

i n g

that

y o u a r e

primarily interested

i n

your bank doing

a

f i n e

j o b i n t h e

interes t

I f t h e

small industrial ists

of

your

d i s t r i c t ,

and

that

yo u

will work

out tho

d e t a i l s

o f

coopera-

t i o n

to

affirmatively accomplish

th o

desired ends.

m t h n y

regards,

I am

Sincerely yours,

Governor.

Enclosures

TO

GOVERNORS

A£D

CHAIRMEN

OF ALL F . R.

BASKS.

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X-7948-a

C O P Y

RECONSTRUCTION FINANCE CORPORATION

Washington

June

22

1934.

Dear Governor Black:

I t eg to enclose herewith copy of our regulations f o r industrial

loans. These can he altered i f and as required.

I t seems to me that a s fa r a s i s practical under the law, the HFC

and Federal Reserve Banks should consider these loans jointly, i . e . , F ed -

oral Reserve Industrial representatives and RFC Loan Committeemen s i t t i n g

a s a joint Loan Committee i n considering indust rial loans, in vi ti ng the

cooperation o f banks, and especially th e bank having t h e account of the

applicant. I n this way, greater speed w i l l he accomplished, with each

agency taking such participation

i n t h e

loan

as may he

agreed upon

at th e

time o f making t h e loan. By this procedure a greater spread i n t h e credit

risk would also h o obtained.

Inasmuch

a s our

off i ce s , w i th

few

exceptions,

a r e i n

Federal Reserve

Bank bui ldi ngs , i nd us tr ia l loan appl ican ts could h e directed t o a common

o f f i c e f o r Ind ust ria l Loans ; th e Advisory Loan Committee, composed of

representatives of th e RFC and th e Federal Reserve Bank, determining

whether th e loan would he recommended, and i f so , what agency would make

i t , o r how i t would h e participated i n ; Federal Reserve Bank management,

a s wel l as the RFC Board, n eces sar ily reser ving t h e right t o adopt, alter,

change, modify,

or

reject recommendations

o f the

Loan Committee.

There will undoubtedly he loans which Federal Reserve Bank manage-

ment will h e w i l l i n g t o make, i n cooperation with hanks, and in which the

RFC w i l l have no part . On th e other hand, there w i l l probably bo loans

i n which t h e Federal Reserve and the RFC wil l part ic ipate i n connection

with banks.

I f somo such procedure a s t h i s i s n o t agreeable to the Federal Reserve

Board and the several Federal Reserve Banks, the RFC w i l l , a t a l l events,

cooperate with Federal Reserve and other banks an d lending agencies, with a

view

t o

faci l i tat ing such loans .

Sincerely yours,

(signed) Jesse H. Jones

Chairman

Honorable Eugene R. Black

Governor, Federal Reserve Board

Washington, D. C.

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P T

X 7948 13

FEDERAL BESEBVB BOARD

Washington

June 26 , 193 4.

Honorable Jesse Jones, Chairman,

Reconstruction Finance Corporation,

Washington,

D. C.

Dear Mr. Jones:

Your letter of t h e 22nd relative t o cooperation i n

th e matter of making loans to industry w as today considered a t

our conference.

The conference f e l t that the law covering loans t o

industry by th e Reserve Banks specifically defines t h e func-

t ions and duties of t h e Reserve Banks i n t h e matter of making

such loans . This la w also provides f o r a Statutory Advisory

Committee composed of industr ia l i s t s an d defines i t s duties

and powers.

The conference was of opinion that t h e Federal R e-

serve Banks cannot waive t h e duties or obligations imposed b y

law by any form o f collateral agreement. I t believes, however,

that t h e Federal Reserve Banks w i l l f ind many ways i n which

they

and the

Reconstruction Finance Corporation agencies

can

be of mutual help by cooperation i n exchanging information and

expeditiously handling th e appl icat ions that w i l l come under

the new l e g i s l a t i o n . To a considerable extent cooperation a l -

ready exists i n f a c t , an d i t i s t h e f e e l i n g of t h e conference

that such further working arrangements

as may be

necessary

or

desirable wil l b e developed most speedily an d s a t i s f a c t o r i l y

as t h e work progresses i n each bank.

In t he end wo ar e a l l str iv ing t o a i d industry and

t o that end we w i l l co rdia lly cooperate. I n th i s way wo wil l

help t o a i d recovery.

With my regards, I am

Sincerely yours,

(Signed) E. R. Blade

Governor.

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