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LIMITATION OK SIZE OF OUARAHTSES UHDEH S. 1916 The proposed amendment to S. 1918 whioh is attached prorides in e f f e o t that the aggregate amount of guarantees and oonsaitments n*de by Federal Reserve Banks and outstanding at any time may not exceed four times the amount of the fund provided for under the b i l l for meeting losses on suoh guarantees; in other words, the amount of guarantees and commitments may not exceed four times the fund of #139,299,557 as inoreased by inoome or deoreased by losses« In addition, however, the proposed amendment provides that the aggregate of the guarantees and commitments whioh are Individually in excess of #100,000 and are outstanding at one time may not exceed 50 per oent of the maximum permissible amount of suoh guarantees and oosnitiasnts. In other words, the aggregate of guarantees whioh are in excess of #100,000 may not sxoeed twice the amount of the fund pro* vided to meet losses. It is to be noted that this is not a limitation on the amount of guarantees of #100,000 and l e s s , but is a limitation on the aggregate amount of guarantees whioh individually are in excess of that amount« There would always be reserved for the making of small guarantees, i « e « , guarantees of #100,000 or less, at least one-half of the total volume of guarantees permissible* Moreover, i f the aggregate amount of larger guarantees had not reached the limit, the amount used for suoh small guarantees could go above 50 per cent and might become a much higher percentage of the t o t a l . I t is noteworthy in this connection that during the f i r s t three and one-half years of experience with the existing provisions of section 13b of the Federal Reserve Act, the aggregate amount of loans of #100,000 and under was 36.5 of the total amount of suoh loans. Loans of #100,000 and wader authorised by the Smaller *ar Plants Corporation constitute about 33 per cent of the total o f the Corporation's loans« Loans of #100,000 and under guaranteed under the Regulation Y program pursuant to Executive Order 9112 were a very much smaller percentage of the total amount of V-loans« It i s evident, therefore, that a 50 per oent limitation on the aggregate amount of guarantees in excess of #100,000, as would be provided in the attached amendm « i t to S. 1918, would be a very real restriction and one whioh would limit the amount of larger guarantees by the Federal Reserve Banks to a much smaller portion of the t o t a l , and would reserve for the making of small guarantees a much larger portion of the t o t a l , than has been the experienoe under section 13b heretofore, under the Smaller War Plants Corporation program, or under the V-loan program« In addition to the restraint upon the guaranteeing of larger loans imposed by the amendment i t s e l f , the Board of Governors would have authority to issue "regulations, limitations, and conditions" governing the operations of the Federal Reserve Banks in this connection. It would be the policy of the Board to see to i t that the guarantees and oossaitmente by the Federal Reserve Banks are spread as far as practicable among m a i l e r borrowers. 8/29/44 POSSIBLE AMENDMENT TO S. 1918 — OVERALL LIMITATION AND LIMITATION ON SIZE OF GUARANTEES Insert the following new subsection (d) just before the present subsection (d) end ohsnge the lettering of subsequent sub« sections accordingly* (d) No Federal Reserve Bank shell make any guarentee or commitment under this seotion i f the aggregate amount of guarantees end commitments made by a l l Federal Reeerve 3auks under this seotion end then outstanding equala or exceeds four times the then existing amount of the fund provided for in eubeection (b) hereof as suoh fund may have been inoreased or decreased in aooordanoe with the provisions of suoh subsection. The aggre- gate amount of suoh guarantees and commitments which individually are in excess of $100,000 and whioh are outetanding at any one time shell not exceed 50 per cent of the aggregate amount of guarantees and commitments which may be made under this seotion as speoified in the preoeding sentence. 8/29/44
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