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December 20, 19U6. Mr. J. Weldon Jones, Assistant Director in Charge of Fiscal Division, Bureau of the Budget, Washington 25, D. C. Dear Mr. Jones j In accordance with your conversations with Chairman Eocles, he has had the enclosed paragraphs prepared and Mr. Sutead, Director of our Division of Bank Operations, has cleared the wording with Mr. Bartelt of the Treasury* The question of policy is, of course, another oatter, but as the Chairman remarked to you, if the President puts this up to the Congress and they for any reason whittle it down, the burden will be on them to find equivalent dollars somewhere else* It would seem offhand to ae that under this proposal you do not have to labor the question of Government ownership of enough stock to Insure control. If there is anything further we can do, please do not hesitate to let us know. Sincerely yours, Elliott Thurston, Assistant to the Chairman. Enclosure ET:b With the approval of the Federal Deposit Insurance Corporation, a b i l l was introduced in the previous session of Congress which contemplated a program of redemption of the capital furnished to the Corporation by the Treasury and by the Federal Reserve System. exceptionally strong position. She insured banks of the country are in an The present and prospective resources of the Corporation make possible and desirable an acceleration of the program of capit a l redemption so that i t may be reflected in the budget for the f i s c a l year I9J48. To this end, I recommend that the Congress authorize the Federal Deposit Insurance Corporation to repay for use during the f i s c a l year 191*8, #100,000,000 of the #150,000,000 of capital furnished by the Treasury and a l l of the sum of approximately #139*000,000 furnished by the Federal Reserve System. The Board of Governors of the Federal Reserve System has proposed that Congress at the sane time authorize the payment of the $139,000,000 to the Treasury. The Board of Governors has made a further reoommendatian, in which I also concur, that Congress repeal the existing authority of the Federal Reserve Banks to make d i rect loans to industry and authorise them to u t i l i s e their own funds, i f need should a r i s e , and without resort to Government funds or guarantees, to insure in part loans made by banking i n s t i t u t i o n s . Under this proposal, an additional sum of #139*000,000 would be released to the Treasury. Congress appropriated t h i s amount from the gold increment to finance industrial loan operations of Federal Reserve Banks, and #27,500,000 has been advanced for t h i s purpose. This advance would be returned to the Treasury as miscellaneous receipts and the Treasury would be released from the obligation to make further payments to the Reserve Banks. These proposals would make available for governmental purposes a total of approximately #378,000,000. Of t h i s , #266,000,000 would be in cash receipts and #111,800,000 would result from the release of the obligation on the part of the Treasury to make further payments to the Reserve Banks for industrial loan purposes.
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