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U N I O N TRUST C O M P A N Y O F M A R Y L A N D
M E M B E R

F E D E R A L

R E S E R V E

S Y S T E M

BALTIMORE 3
T H O M A S B, M c A D A M S
CHAIRMAN OF THE BOARD




Honorable Marriner S. Eccles, Chairman,
Board of Governors,
Federal Reserve System,
Washington, D.C.
Dear Marriner:
I am very much afraid that the proposal to delay
any reduction i n the F . D. I . C* assessment may tempt banks to take
unnecessary risks to provide f o r increasing operating costs and
lower deposits.
In returning the investment of the Treasury, why
would i t not be desirable to defer similar action, f o r the time being,
i n regard to the Federal Reserve holdings or else insure the maintenance
of capital reserves of at least a B i l l i o n Dollars by s e l l i n g the
Federal Reserved interest to member banks on some suitable basis ?
This action would be of great help to a l l banks which, with lower
deposits and but l i t t l e increase i n income, f i n d expenses growing
day by day. This would also correspondingly reduce the risk element
f o r which the F . D. I . C. i s responsible.
With kindest regards,
Sincerely yours,

Chairman.

TBMcA.5.
P.S. I have been giving this matter a great deal of consideration i n
the l a s t several months and would be delighted to talk i t over with
you some time when you are not too busy and, at the same time, would
l i k e to get your advice as to another question i n connection with our
own company.

June 13, 1947.

Mr. Thomas B. McAdams, Chairman, .
Union Trust Company of Maryland,
Baltimore 3> Maryland.
Dear Tom:
In reply to your letter with regard to the FDIC, let me
say that in recent testimony I expressed my opinion that the assessment should be reduced now. Generally speaking, the banks have
never been in a stronger position.
The idea of keeping a reserve of at least a billion dollars
i s , of course, entirely arbitrary and not a requirement of the law.
Any economic collapse sufficient to wipe out such 4 reserve is hardly
conceivable under the 1938 agreement covering Federal as well as State
bank examination policy and in view of the liberalized discount provisions of the Banking Act of 1935* I f there were any such catastrophe i t is highly unlikely that a billion dollars would be anywhere
near sufficient. Moreover, the FDICfs financial strength is far
greater than was expected before war financing resulted in the enormous
increase in lank deposits.
It vvould not be possible to follow your suggestion of' deferring the return to the Reserve System of the 139 million dollars
which Congress required us to subscribe to FDIC stock. The die is
already cast. The Board has recommended and the President in his
Budget Message has proposed that Congress authorize the repayment of
this money so that i t may be turned into the Treasury. The FDIC stock
by law pays no interest to us so that the member banks would have no
interest in it* In any case, 139 million dollars would hardly make
much difference i f we had such an economic debacle as to drain off the
remaining FDIC reserves. I can see no such prospect for the next few
years certainly and during this time the fund w i l l be building up again
from the assessments as well as the investment of the reserves already
accumulated.
I would, of course, be glad to talk with you about the other
question to which you refer i f you happen to be in town and we can find
a mutually convenient moment.
fcdth best regards,
Sincerely yours,

M.

ETsb



Eccles,
Chairman.