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C H A R L E S H . T E N N E V
S P R I N G F I E L D ,

M A S S .

June 17, 1938•

Federal Reserve Board,
Washington, D. C.
Dear Sir:
I noticed in today's paper a dispatch which quotes you as
saying, "The reason why bank credit is not flowing adequately
into productive business channels is because the banks are
under too severe restrictions in their loaning and investment operations": also, "the comptroller's regulation in
effect confines permissible bank investments to registered
securities that are given approved ratings by recognized
rating films and that have a wide and active market."
1 have in mind just such a case, it seems to me. The Third
National Bank and Trust company of Springfield, Mass., of
which I am a director* with thirty-five years* continuous
service, has as collateral on a loan, 300 shares of Hampstead
Trust and 300 shares of Kadnor Trust*
I enclose copy of
letter 1 wrote to the Vice-President of thettiirdNational
Bank and Trust Company under date of April 14* The reason
for this letter was the fact that the bank examiner would
give no credit on the loan where this stock is held as collateral, although it is the only collateral which is bringing
in any income.
I might say that this is a Massachusetts real estate trust.
Something like fifteen years ago the bank had a loan with
the builder who operated in Massachusetts and he built these
two apartment houses on Memorial Drive, Cambridge. When he
failed, the bank was requested to take it out of its mortgages
and five of the directors, one of whom was myself, purchased
the equity and the bank wrote off probably $150,000. There
were five of us and l think we paid about §50,000 apiece.
There were 1500 shares of each Trust and each fifth purchaser
received 300 shares of each Trust. We had to spend a good
deal of money on the property, so we paid no dividends until
about five years ago and then we paid very handsome dividends.
Since that time .we have only paid about one-quarter of our
net earnings, using the rest of the money to pay down on the
mortgages held by the boston jrive Cents Savings Bank, and to
make improvements. The property is in first class condition,

M.S. J i c e


June 17/38•

is in a most desirable location and is today fully rented. The
payments on the mortgage have been cut in two by the bank and the
rate of interest reduced to
so that the mortgages are now
$258,750 on property values of $730,000*
The quick assets are
$25,000 and the quick liabilities - almost all accrued interest
and taxes - $7,000. The net income for five months, over and
above all charges, is about $9,000. I might say that my son is
manager of the properties and gets $1,000 a year and is one of
the owners.
These net earnings are just about double what they were last year,
not due entirely to increasing rents or occupancy, but due to
less repairs, the property having been brought up to first class
It seems strange that because there is no quoted market, that this
collateral is considered of no value, although I made an offer for
it sometime ago of $30,000®


June 27, 1938.

Mr. Charles H. Tenney,
Springfield, Massachusetts.
Dear Mr, Tenney:
This is to acknowledge receipt of your letter
of June 17th with reference to my recent letter to Senator
Wandenberg, in which I mentioned the unduly severe restrictions that were interfering with the adequate flow of bank
credit into productive business channels*'
The instance which you cite is very much in point.
I have had a considerable volume of mail from business men
and bankers in all parts of the country reflecting similar
conditions and strongly objecting totbem. It has been very
reassuring to know that those who have had practical contact
have felt very much as I do about the necessity for doing
away with these unduly severe restrictions, I feel that the
agreement just announced represents an important constructive
change in policies and procedures to be followed by the bank
examining and supervisory authorities, and that it is a recognition of intrinsic rather than fluctuating market or
liquidating values.
I wanted you to know that I very much appreciated
your letter and your courtesy in writing.

Sincerely yours,

M. S. Eccles,