J. P. Dreibelbis, assistant general counsel, Federal Reserve System___ Ralph W. S. Hill, assistant to the legal adviser, Department of State-- Ronald Ransom, Vice Chairman of the Board of Governors, Federal III FOREIGN ACCOUNTS IN FEDERAL RESERVE BANKS FRIDAY, JUNE 21, 1940 UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met at 3 p. m., pursuant to call, in the Capitol Building, Senator Robert F. Wagner, chairman of the committee, presiding. Present: Senators Wagner (chairman), Bankhead, Adams, Radcliffe, Brown, Hughes, Herring, Miller, Clark of Idaho, Downey, Townsend, Danaher, and Taft. Present also: Marriner S. Eccles, Chairman of the Board of Governors, Federal Reserve System; Ronald Ransom, vice chairman of the Board of Governors, Federal Reserve System; John K. McKee, member, Board of Governors, Federal Reserve System; J. P. Dreibelbis, assistant general counsel, Federal Reserve System; Ralph W. S. Hill, assistant to the legal adviser, Department of State. The CHAIRMAN. The committee will come to order. We have been called together because of a situation regarded by the Federal Reserve Board as a serious emergency. I received the bill too late yesterday afternoon to introduce it in the Senate, but the House having been in session until a later hour, Mr. Steagall was able to introduce the bill in the House and have it printed. You have before you a printed copy of the bill as it was introduced by Mr. Steagall. That is how this happens to be a House bill, and that is why the Senate has not had it yet. I thought it would be more advantageous if we had a printed bill instead of a typewritten bill. A copy of the House bill will be inserted in the record at this point. [H. R. 10127, 76th Cong., 3d sess.] A BILL To amend the Federal Reserve Act, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (e) of section 14 of the Federal Reserve Act is amended by striking out at the end of the first sentence thereof the words "for such foreign correspondents or agencies”, and inserting in lieu thereof the words "for foreign banks and bankers, and for foreign states and governments, agencies, and instrumentalities thereof". SEC. 2. Section 25 (b) of the Federal Reserve Act is amended by adding at the end thereof a new paragraph reading as follows: "Whenever any Federal Reserve bank has received from a foreign state recognized by the Government of the United States or from a central bank of any such state, or holds or controls any property in which such a foreign state or a central bank thereof has, or may have, any interest and a state of war or insurrection exists in such foreign state or the laws, orders, or regulations of the United States impose controls or restrictions by licensing arrangement or otherwise on the export of, or dealing in, property in the United States belong 1 ing to such foreign state or central bank, payment, transfer, delivery, or other disposal of such property to or upon the order of the person who the representative of such foreign state duly accredited to the Government of the United States shall certify to the Secretary of State has authority to receive, control, dispose of, or otherwise exercise dominion over such property, provided and so long as the Secretary of State recognizes and accepts the authority so certified to him, shall be conclusively presumed to be lawful and shall constitute a complete discharge and release of any liability for or with respect to such property. The Federal Reserve bank shall not be subject to any claim or liability in any court by way of suit, counterclaim, set-off, recoupment, or other affirmative action or defense in its own name or in the name of any of its officers, agents, or employees, as a consequence of any action which it takes in accordance with this paragraph. No court shall, at the instigation of any third party, by attachment, injunction, or other similar proceeding, in any way, directly or indirectly, restrain or prevent a Federal Reserve bank from making any payment, transfer, delivery, or other disposal of property herein referred to. For the purposes of this paragraph, the term 'property' shall include, without limitation, gold, silver, currency, credits, deposits, securities, choses in action, and any other form of property, the proceeds thereof, and any right, title, or interest therein; the term 'foreign state' shall include, without limitation, any foreign government or any department, district, province, county, possession, or other similar governmental organization or subdivision of a foreign government, and any agency or instrumentality of any such foreign government or of any such organization or subdivision; the term 'central bank' shall include any foreign bank or banker which performs any one or more of the functions of a central bank; and the term 'person' shall include, without limitation, any corporation, partnership, association, or other similar organization." Who will present the matter in behalf of the Federal Reserve Board? Mr. ECCLES. Mr. Dreibelbis will Mr. Chairman. The Board has been working on this matter with the attorneys of the State Department and of the Treasury. I think that Mr. Dreibelbis would be better able to answer at least any legal questions that may be raised; I suggest, therefore, that Mr. Dreibelbis present the matter. The CHAIRMAN. Mr. Dreibilbis, will you proceed with your statement, please? STATEMENT OF J. P. DREIBELBIS, ASSISTANT GENERAL COUNSEL, FEDERAL RESERVE SYSTEM Mr. DREIBELBIS. Mr. Chairman and gentlemen, I have here a letter from the Federal Reserve Board and also letters from the Department of State, the Secretary of the Treasury, and the Bureau of the Budget, all letters approving this legislation. These letters are as follows: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Hon. ROBERT F. WAGNER, June 20, 1940. United States Senate, Washington, D. C. DEAR SENATOR WAGNER: There is enclosed herewith a draft of a bill the prompt enactment of which the Board wishes to urge because of certain problems which recent events have created for the Federal Reserve System. Chairman Eccles or Vice Chairman Ransom, who will hand you this letter, is prepared to explain the effect which the bill would have and to discuss the situations which have created the urgent necessity for its enactment. I am authorized to say that the State and Treasury Departments, to whom the bill has been submitted, approve of its enactment and the members of the Board, if you desire, will be glad to answer any question which you or the members of your committee may have. Yours very truly, (Signed) CHESTER MORRILL, Secretary. The Honorable MARRINER S. ECCLES, DEPARTMENT OF STATE, Washington, June 20, 1940. Chairman, Board of Governors, Federal Reserve System. MY DEAR MR. ECCLES: I have examined with care the enclosed copy of a draft bill entitled "A bill to amend the Federal Reserve Act, and for other purposes,' proposing to amend subsection (e) of section 14 and section 25 (b) of the Federal Reserve Act, which has been drafted by your Board in consultation with officers of the Treasury and State Departments. I am in entire concurrence with the scope and purposes of this bill and feel that its prompt enactment at this time is desirable. Sincerely yours, ADOLF A. BERLE, Jr., Assistant Secretary, (For the Secretary of State). Hon. RONALD RANSOM, THE SECRETARY OF THE TREASURY, Board of Governors of the Federal Reserve System, Washington, D. C. DEAR GOVERNOR RANSOM: The Treasury Department has carefully examined the bill to amend certain provisions of the Federal Reserve Act which the Federal Reserve Board has drafted after discussion with the State and Treasury Departments. The Treasury is familiar with the problems sought to be dealt with by the bill and the desirability of prompt enactment thereof. The Treasury accordingly recommends the enactment of the bill. Chairman, Board of Governors of the Federal Reserve System, Washington, D. C. MY DEAR MR. ECCLES: Reference is made to the draft of bill "To amend the Federal Reserve Act, and for other purposes," to which the State and Treasury Departments and the Board of Governors of the Federal Reserve System unanimously agree is needed in the present emergency to protect the foreign relations of the United States and to enable the Federal Reserve banks to cooperate with Government policies without possibly becoming involved in litigation in the process of doing so. You are advised that there would be no objection to the submission of such proposal to the Congress for its consideration. Very truly yours, JOHN B. BLANDFORD, The CHAIRMAN. Now, Mr. Dreibelbis, would you mind telling us what it is you want us to do and why? Mr. DREIBELBIS. The State and Treasury Departments and the Board of Governors of the Federal Reserve System unanimously agree that the enactment of H. R. 10127 is needed in the present emergency to protect the foreign relations of the United States and to enable the Federal Reserve banks to cooperate with Government policies without possibly becoming involved in litigation in the process of doing so. Prompt consideration of this legislation is earnestly requested. |