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formNo. 131 f\ f f f^ 1 Ottiee Correspondence From FEDERAL FEDERAL RESERVE RESERVE B0ARD n»t« Jme 27, 1955 Governor Eoelea Subject: Application of real estate loan J« M» PaigW 717 regulations to State number banks In the work that Mr* Chase and I have been doing on a tentative draft of regulations governing real estate loans, I an strongly impressed by the fact that the Federal Reserve Board sight be greatly hampered if the regulations are not to be applicable to State member banks* I know that you have this natter in mind and that the exemption afforded to the State member banks by the bill as passed by the House does not meet with your approval. I am bringing the matter to your attention again in order to emphasise the practical importance of having the Senate bill make the State member banks subject to the same regulations as the national banks will be subject to. The existence of a large surplus of funds available for real estate loans will mean, of course, an increasingly competitive situation as the easing now evident in the mortgage market becomes more general. Thus the regulations that the Federal Reserve Board might well prescribe in the interest of soundness, without in any way being improperly restrictive, would nevertheless tend to pot the national banks at a disadvantage. The natural result of this would be to make the regulations of the Board appear unduly restrictive, even thoiagh they were soundly conceived* The national banks might therefore be critical of the regulations from the outset} the Board in this case would then be under constant pressure to modify19the regulations} and the old question of •competition in laxity would be injected into the situation All this would of course be quite contrary to the effect t}iat you desire the regulations to have, but I think it might be inevitable if your plan to have real estate loans subject to regulation by the Board is made applicable only to national banks.
@FedFRASER