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OH April 29, 1935. Honorable Thomas Jefferion Coolidg e , Under Secretary of the Treasury, Vfashington, D. C. Dear &*r, am inolosin£ for your information a oopy of a letter whioh T hare written to Honorable James A, Moffett, / Administrator of the Federal Housing Administration, in response to a letter whioh he addressed to me under date of April 23, 1935, suggesting that section 5202 of the Rerised Statutes be amended so as to exflmot from the limitations thereof loans obtained by national banks on real estate mortgages from Federal Home Loan banks under the prorisions of seotion 10(b) of H,R« 6021, -which I understand has passed both houses of Congress and is now in conference. I understand that fr* Moffett has written a similar letter to the Seoretary of the Treasury and f sincerely hope that the Seoretary will concur in the position whioh I have taken on this subject. Very truly y^urs, / Inolosure /x/ (Signed) I.iarriner S. Eccles Marriner S. Socles, Goyernor, f o 4/ April 29, 1935. Honorable James A, fcol'fett. Federal Housing Administration, ashington, L, C. dear r. .loffotti I have received your letter of frj, fr$tlg3l/invi.tia^ attontion to the provisions oi section lo(o> 01 K« R« 6O£l4 «hl«h would authorize Federal Home Loan banks to make advances to approved IHHnsfiabf .crt-agees ^hich are subject to inspection and supervision oi same io\< tal ap-eney and whose principal activity in the mortgage field wubt consist of lending their own funds. You state that under this amendment national banks will be eligible to borrow from the federal iioroe Loan banks on the security of insured mortf.ar;e8# but they are substantially restricted in the exercise of this privilege by the limitations oi section 5202 oi the Revised Statutes? and you suggest that there be added to the ranking 'ct of 1955 an amendment exempting such borrowings from the limitations of section 5202. I do not favor such an amendment; because section 206 oi the Banking Act of 1955 would amend the I ederal Keserve Act so as to enable I ederal reserve banks to make advances to member banks on any of their sound assets# including real estate mortgages, and I feel that national banks should look to the i ederal reserve banks, rather than the Federal Loo« Loan banks or any other agenoy, for any financial assistance which "HP 1 hon, James A. Moffett, Administrator I A? members tf th© I ©deral ACnerve oysteii, the national banks are stockholders cf the ecleml reserve oanks, maintain their reoerves on deposit rith them, have constant daily contacts and relations with them, ftn<i have c. right tc look * o t^em for reasonable credit accommodations in times of reed* Ifrtieoftl bank! have no such relations with the Fed- eral boice Loan banks* - of the principal objectives of tre fsslMn -ct 01 1955 is to wake the rederal reserve banks more serviceable to their member teaks and to maVe it unnecessary for aeraber banks to go elsewhere lor their necessary credit accommodations. ent with this oljectlvw. The arendrent which you suggest is inconsist- It would imply that Congress expects national banks to borrow from the >choral l:ome loan banks on real eetate irortgages and laolrs faith in th© reatnires contained in the Banking ct of 193C to enable the rederel reserve tanks to furnish all the credit accommodations needed by their number banks* Moreover, I believe that the amendment whioh you suggest would raise false liopesi because national banks do not need to borrow now and would not need to borrow against real ©state mortgages except during periods of deflation or depression* DvrtBg such periodsf it would be difficult for the federal Hone Loan backs to sell their obligations to the investing public and thus tc obtain th« funds wfcth which to loans to the national banks* ' j j V J' Bon. James A, Moffett, Administrator — 5 If the iederal reserve banks should purchase the obligations of the federal Home Loan banks in order to meet such a situation, they would nerely be doing indirectly what the Banking 'ct of 1S36 seeks to enable them to do directly. If the Government should purchase the ob- ligations of the federal Hose Loan banks in order to enable them to make loans to national banks, the uovernment would have to raise the money by issuing its own bonds, aaany oi which would have to be purchased by the federal reserve banks. This would do even more indirectly that which the banking ct of 1955 seeks to accomplish directly. On the whole, I think it would be much simp! much more logical, and much more practical for the national banks to look only to the Federal reserve banks for financial assistance in times of need and for the Federal reserve banks to grant such assistance directly, a.8 the tanking Act of 1955 would enable them to do* Very truly yours. (Signed) Marriner S. Eccles JOJ tlarrinar s* Governor•
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