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OFFICE OF ECONOMIC STABILIZATION
WASHINGTON. D. C.
DIRECTOR
May U , 1945
Hon. Marriner S. Eccles
Chairman, Federal Reserve Board
Washington 25, D. C.
Dear Mr. Eccles:
Enclosed herewith is a copy of a proposed draft
of an Executive Order dealing with Regulation of Real
Estate Credit.
I would like to discuss this Order at
the meeting of the Economic Stabilization Board on
Thursday.
Sincerely yours,
William K. Davis
Director
Encl. 1
0OK9M
5/12/1*5
of ^eftl Estate Oredifc
trie prices of urban and rural real estate have been rising
under the iafiuenee of elramst&ncea resulting from the war, thereby
speculative activity and unsound valuations and threatening the)
national program for econooic stabilisation authorised and directed by the
Congress in the m% of October 2, lyk% ($6 Stafe. ?6>}f &» aiaended,
th« voltMe of erndit extended on the wmmwibv of aad to
finance purchases of urban and rural real estate and t l ^ conditions under
*htsh such oredit i s available have an important inllikenee on the iaeitivt for
real estate ami on the getteral level of real estate prises;
HH&.cb/tJ the extension t l such e m i i t «t^&ents or ma/ itu^ent the
total volttne of fluids available to the public for the i^rehase of goods tuad
aerviaoa in general, of which supplies are limited in con»equ«oca of the war,
and thereby contributes or may contribute to inflationary pressures upon the
pri.ee level for goods and aervi£«s in ^eaeral ami to a rising cost of livingj
iM£iiS4i> the publicfcMetgVOkrequires, as part of the iHLtion&l prograa
for thm maintenance of stable GCOQORIC conditions, that the use of or«dit for
financing and reflnwieing the purchase or carrjin- of urban ans rural real
estate be regulated in order to assis-t (a) in curbing an unwarranted and
specttlativs iucrease in the ipneral level of real estate prices, (b) in
preventing evasion or avoidanc* of the existing gcrrerzaaental controls over
rents, (c) in restraining general inflationary tendencies, oy supplesenting
- 2and supporting other governeeiitai ateasurea designed to restrain susft tendencies,
(d) in protecting and promoting the sound and cons true tire interests of agriculture, howe owners, mturning ret#rans and the public generally, and (e) in
restraining the deTelofno&t of a m l estate debt structure that m&y hamper
in the post-war period} and
t©
mn
to
of
It is appropriate that such control should be exercised, subject
the gssaral policy directives QI* the Economic Stabilisation Linwtor, lhromg
existing -oirerrdsental agency which has pria&ry r«sp«m»ibilities «ith respect
the vUtteraincUion «ad supervision of sconoede stabilisation and
national cr©dit
by virtue or tne authority Tested in mm by Urn Jonatithe ataWteo eX the* I'oit^d ^tawe^, ami particularly by section
of the net of October 6, 1917* *& aewwJed from tlse tofei®«iiioludijjg the
irirst M v ?swers ^ t f 1^1*
• order, Attrfbng the
of the m r a»a thereafter tedag the period &f the aatioaml ^aergeiiey declared
by the i-'jreaiUeat on May 2?, 1>U., t^ pnx»»te the e l e c t i v e coaiuet «f Uie
war &^ to prsteot the si&ti^mi aeonsinj, i t i s hereby ordered &e ioll^rst
E M or BO&^ oi oatinnii
\-i)Sktft"t M M
sisfin
i(a) lo carry out the purposes of this order, the Board of
of the Federal 2*©89rve fyvtwi (hereinafter ealled the Bo&rd) is
hereby deeigimted an the agency through which there «h&li be iavestigat^i,
refulated, or prohibited transfers of creait or payaents batween, by, through,
or to &«y baaking institution, which constitute or arise directly or inoireotly
out of any extension or use of oreait £or or incidentalfee)suyin^* acqulrla^
Ha intere&t ia or aontrol of, carrying, holding, or trading in real estate,
whether urban or rural, or eviae&ses ©i" ownership thereof or interests therein.
In) Xr* eXXectuatin^ the purposes and %m provisions of this order, the.
Board shall have ths powers set forth in paragraph 1 of subdivision (»J oX
section J of the said act of Oetober 6, 1>17, a* amen£e4, and say also
utilise all otaer powers veated in it. .&ot&lag herein shall oe construed to
amend, supersede, or repeal any powers hciretoi'ora ajsal|p»d to the *wwird or to
any other agency under the aforesaid paragraph 1 of section Ji(b) of said act
-3of October 6, 191?» aaeaded, except that to the extent of &ny inconsistency
between this orct«r and any power heretofore assigned to &ay other agency
the previsions of ibis order shall govern*
(e) In exercising the powers conferred by this order the tfoard
shall be governed by the general policy directives of the Economic Stabilisation
2(A>.
The Board shall prescribe such r«gulatioa» «a It
<ft+t»g B8c«»aai*y or Appropriat« goveraia^ transliors and payssd&ts (as h«r#lnafter defii»4) which constitute, or arise dir«etly ©r indirectly out of any
extenaion or as« of c.r«tilt for or incidental to b^yiagj acqulriug an
la or sontrol of, carrying, halitin^. or tracUUsg ia r«&l eet&t#, either urtean
or rural or bath as the .3oard may da>t*ralae» or evidences of omn&rehip
tm^mi
or iat«r«at« thsrein* Sweh r»gul,-Atioas «)iaXl r^^adii in affect 4mring
such periods as tha Board shall de««ft to ba in accordaoc© «lth the purposes oof
this order.
(b) tiueh re^LlatioiiJi ma/ froc tine to tlste^ orljiimlly or by amendment,
regulate or prohibit smh IMM001 and paya^ata« or ajjspt thast fro» regula*
tlon or prohibition, anci %ay classify ttH« aecoroin^ to the nature of the
ti-aaaactiors or r@al eatate or persons involved or upon such other basis as
may reasonably cU..fferentiate such transfers am paynenta for th@ ptirposea of
regulations ujadar this order, and may be aade applicable to one or sore of
th© classes so eatabliahe^; and, without limiting the generality of the foregoing, such regulations may r^uire triknsactions eV persons or classes thereof
to be registered or licenaesj aay prescribe appropriate liaita^ions, texms,
and conditioma for staeh registrations or licenses; say prorlde for sue
of any mmh registration or license for violation of any provision thereof
or of any rei|ulati«m» rule, iaatru6tlvmf or om*r prescribed
*ey prescribe appropriate requirements aa to the tCMidLn/r of records &sd &a
to th« fora, eont«ita, ©r subet&ntlfie 8ff*flftlNi af eastrmctn, liens, or
any relevant dac\msntsj say prohibit s o l i d tabioas by bwuein^ institutions
vhlgh would ©3accmrag« aTiision or atol^ao« of tha r#c|«ir«iii«fita ®f nt^r r#gak^«f or r«gi»trat»ioa uaa«r this ©niarf «id aay froc tls# to
aate© appropriate provlaioiMi -with r«»p«et t<» —
{1} The amosat of credit which «ay b« axtesdad on or i s ooawith piucti«aing« aeqairiag an inWroat 1A or control of,
, holding or trading i s &r&&& or rural real estate, or
evidences of oasgr&litp tb«r«of ©r lntareata tharaiA)
(2) the maturity and r-ate of liquidation which may fe*
stipulated in eoonsetlon with aaj mmh extension of cr«K2it$
(3) Thm methods for d«t«SBtafeBS 3Mtiirltlea» eoMputlag the
aoounte of ext«palo»a of credit, a«d deteivlaing tha prie«a «ad
Tallies upon which aueh eoKpuWtlons can lie maAm} me&
(k)
Special or {tlflai-ent t«r&s, conditions, or exea|itions
with mspset to temporary ejradlta which are aaraly inoid«ital to
cash puixhases, pagpaents or d«posi^s usable to liquidate eredit,
and other adjustaajits or speelal altuatlona*
(c)
<^i and after the efxeotive date of any regulations prescribed
fey **• §<mrd mtdur this order, aai notwitbatandia^ the prori«ioB« of any
other proelasation, order, regulation, or llee&ae under the aforesaid Act
of (^tober 6, 191?, &a aa^nded, no bajikln.^ institution, except as permit ted
by the regulation, snail sake, receive, or participate in any transfer or
which arises, directly or ijsdlr#ctly, o«it of an ext«msion of credit
— 5 •
suoject to s\*ch regulation; &od no person Making euch an extension of eredit
©r holding gyeh an ^x%mtmion of credit which i s subject to such re^yl&tion,
and no p&ram to whm much an extension, of credit i s nada, shall, AS a MwSW
of accomplishing the transaction, wake* receive, or cans® to be itads or
received, any transfer of credit or pays«&i b/, through, or to any banking
iastitutioti except as percdtted by th« regulation.
(d) ift@r ths ©rfeQti1?^ dat# of M)T such reftilatloa VPHy ccmt2»a«t
«xt«ading credit whitm i s s u b l e t thereto «sd which violates, or tfci perfonianee of whieh «oiild violate, any provision of euch regul&tion, and orerjr
li«m, pledge, or >ther property interest, securing such contract or created
in MHMw%tel therewith, shall b@ tiaenforeetbie bjr the person who ext«i^
credit or by any person who acquires aa^ right of sach person i s siaoh ccmtr&sts
Provl^d, that such disability shall not apply to violations of aay
provisions of such regulation d e s i s t e d therein by the Bo&jrd as being for
purpose*} or t© aungr person who extends sash credit, or acquires
such right for vslue, ia good faith and without knowing or having reasontotoaowthe fi^ts by reason of which the making or performance ©f sweh
contract nas er vrould be such a violation.
Section 3* Th« Board my require any p#raesn to keep n fall record of,
and %Q furnish undex* oath, in the foi^ of reports or othend.se, cospl^te
information illative to any acts or transactions ?&?&?rm& to in this order
either before, daring, or after the completion yh®r®&t9 or as si&y be othervls.e necessary to adssiniatar or enforce the provisions of this orderj and
in any c&se in which a report can be required the Board may, when necessary
for the effective actatisadLstratiea of this order, r&quir# the proctaetion of,
§M «ay inspect my books of account, records, contracts, letters, Bsnoranda,
or other p&p®r&$ in %b@ custixiy or cot^rol QI sueh person.
- 6 -
maammaam
A c t i o n !*(»)•
Xa ada&aiateriag this order, the Board ©ay
the Inio Marion ami services of the Federal
eposit Insurance Corporation,
the Cofflpiroller of the CxktntQoft &^« national bousing Ageasy, the Fara
Atairtis&failoiiy and any other &g«aeian* Fodoral or State* which
and appropriate,
the Board maj r«qo»at any 8i»ch ag^ncj to
i s t s r or participate in th« &«a6inlstrsti«»i of aay of thft B€ard f s orders or
smiftQ hereiUKler^ ai^ «ay £ ed«ral agaac/ shall b« *ov«m*d by
dlr«atlT« which the iaonwie 3t«MU&atlon
to sueh as«ney v 8 partielpst*i<m thsrein»
the f a c i l i t i e s *asi »endes« of
UM»
ir«ct©r wxy immm with
Th« Bo»ri aay ai«o employ
Federal ?i«8«rve
B^ESICS
In atfeinist^rijag
tblfl or«l«ar.
(b)
So acwion oX the tfoard, IJS carryiae w& the ^roviuioR* of this
oro«r, shall apply to credit outsvanuin;{ on the eiTectlve date of tills
order, except t c the extent that thi Board say deem i t necessary in e f f e e tuatiag the jmrpoBes of the
Section 5*
Awr tbe purposes of i h i s order, uulea* x^he ©ootext oiber*
e l s e mq^lresy the following terswt shell here the follendag
Fxwriuedy that the &oar£ ma/ i s i t s re^olstlaos give sueh terms
restricted
trust or corpoi'«t>ionf or any feueraly state or other
(b)
'•traasfers and pa^peats1* means transfers ot credit or
byp whroufh, or to any aaaJdn,- iftstit.ution or i n s t i t u t i o n s .
(c)
"Basking institution" means any person* as above defined, who or
whioh i s ejag*iged» diree&ly or indirectly, either primarily or incidentally,
as principal, agent, broker or otherwise in the business of transferring
credits or in receiving deposits or in aaking, receiving, holding, arranging
or clearing extensions of credit or payBeais which constitute or arise oat
of extensions of credit.
a
&xt®ri3i0n of credit11 S*ABS any loan, ad-ranee, or ctiacount; the
ftf an/ mortgage, d«ed of trust or similar insimseat ©r obligatiotii
eonditdoitoU sale contract $ any sal# or contract of sale, either f&r
present or future delivery t uader whish part or a l l ©X th® price i s pa/able
mi^aequent to the »akiag of swch aale or eontraet; any rest&l-pyrehaae ee»tract, or any co»tr«^t for th« leasiatc of property xanAmr which th« lesse® either
has tl» option ©f becosln^ DM o*n«r thereof ©r obli^tes hiaaelf to |»ijr *•
a sum substantially equal to or in excels of the value thereof;
optical, deA&ady lien, pledge or siisilar clals a,.ja.iBStf ©r for the
delivery of, propiurty m moaeyj any fwrefease, <ii»eoiiat^ or oth#r ec<juisitioa
of, or asy extansi^i of credit apoa the security of, any obligation or elaia
arising out of aitj of %fo% fora ;oin j and *ny transaction or series of transactions having a similar purpose or effeot*
the doard i s authorised to preserll»€ defialtions, aot itteonslsvCMJt
with this ©rder, of any terms, othsr than those above listed 9 which i t nay
nBB ia i t s directives> orders or regalatlons issued pursuant to this ord^r.
nwarm
&Mtioci 6.
Whoever willfully violates or Jmowtr^ly participates i s
the violation of this order ©r of a ^ regulfttlna preseribfsd herennder,
shall hm subject to the penalties applicable with respect to violations of
.
if
•eetion 5(>>* of the said &et of -Jctob«r 6,
* Stefcioa 5(^) P»*ds in imrt as follows* *Whoev»r willfully violates
*ny of th& jK-oTisioiui of tills au&iivision or of aoy
order» rul© or regttliition Issued thereunder* slmli f
o^KVictloftf b^ fii^^ iKJt ^)re Iheji tlOjCWf or, i f «. tmturai
person, s&y be iapi iooned for net sore than ten years, or
both; and any officer, director * or 4^ant oit ar*y corporation
who imowingly j>artlcii>ates in sueh violation
is*y be punished
11
by & like fliw> i£prisc»»bent9 or both.
@FedFRASER