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F o r m N o . 131

Office Correspondence
To

Governor Eccles

FromJN

_J._M._

FEDERAL RESERVE

Date April 25, 1955

Subject:

Mortgage, Discotnat Bank_

As a result of my politely discouraging attitude in the
conversations with Schmidt, Nelson, and MacDougall, of the National
Association of Real Estate Boards, that organization has turned
away from its plan to establish a mortgage-discount bank within the
Federal Reserve System.
This does not mean, however, that there will not be another
effort to establish some kind of mortgage-discount bank other than the
national mortgage associations. A revised bill is being prepared, or
has already been completed, to establish a mortgage-discount bank
under what Schmidt referred to, in his last conversation with me, as
"private auspices." I have no doubt, though, that it will look to a
governmental guaranty of debentures, or else to capital subscription
by the Government in the first instance*
The National Association of Real Estate Boards has been
officially urging the establishment of a mortgage-discount bank for
the past four or five years — I think from the outset of the Federal
Home Loan Bank legislation during the Hoover Administration. What
they are after is, in practical effect, a GMAG for all classes of
real estate mortgages.
The real author and chief sponsor of the plan is Schmidt.
He is persistent, uncompromising, and quite incapable of thinking of
mortgage financing outside the framework he has himself designed*
Since he is now president of the National Association of Real Estate
Boards, he is in a position to pueji his discount bank harder than
ever.
I have been making various inquiries about the extent of
the support for his forthcoming bill, and I am told, in substance,
that if Schmidt died tomorrow the plan would be forgotten as far as
the bulk of the Association membership is concerned.