The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
392 BOARD O F G O V E R N O R S OF THE FEDERAL RESERVE SYSTEM WASHINGTON I A D D R E S S OFFICIAL C O R R E S P O N D E N C E TO THE BOARD March 21, 1939. Dear S i r : Attached i s a copy o f a l e t t e r d a t e d March 7 , 1 9 3 9 , from t h e A d m i n i s t r a t o r o f the United S t a t e s Housing A u t h o r i t y , r e q u e s t i n g a d v i c e a s t o whether i t would be p o s s i b l e f o r t h e F e d e r a l Reserve banks t o a c t a s a g e n t s of t h e United S t a t e s Housing A u t h o r i t y i n c o n n e c t i o n w i t h a proposed new p l a n f o r f u r n i s h i n g l o c a l h o u s i n g a g e n c i e s w i t h n e c e s s a r y funds f o r t h e c o n s t r u c t i o n of l o w - r e n t h o u s i n g p r o j e c t s . The plan c o n t e m p l a t e s t h e s a l e o f bonds by t h e l o c a l h o u s i n g a g e n c i e s , t h e p r o c e e d s of such bond o f f e r i n g s t o be d e p o s i t e d with t h e F e d e r a l Reserve banks and r e l e a s e d t o l o c a l d e p o s i t a r i e s of t h e l o c a l h o u s i n g a g e n c i e s on the s o l e order of the U n i t e d S t a t e s Housing A u t h o r i t y from time to time a s funds a r e needed f o r c o n s t r u c t i o n of t h e p r o j e c t s . The United S t a t e s Housing Act o f 1937 s p e c i f i c a l l y d i r e c t s the F e d e r a l Reserve banks t o a c t a s d e p o s i t a r i e s , c u s t o d i a n s , and f i s c a l a g e n t s f o r the United S t a t e s Housing A u t h o r i t y , and t h e Board s e e s no o b j e c t i o n t o t h e F e d e r a l Reserve banks a c t i n g i n the capacity requested in the attached l e t t e r . I t i s understood t h a t , i f i t appears t o be n e c e s s a r y or d e s i r a b l e , e x i s t i n g agreements between t h e r e s p e c t i v e banks and t h e A u t h o r i t y w i l l be m o d i f i e d t o such e x t e n t a s may be a p p r o p r i a t e or new agreements w i l l be e n t e r e d i n t o t o c o v e r the performance of t h e s e s e r v i c e s . Vezy t r u l y yoi L. P. Bethea, Assistant Secretaiy. Enclosure TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS S-151-a COPY DEPARTMENT OF THE INTERIOR UNITED STATES HOUSING AUTHORITY Washington March 7, 1959. Gentlemen: The plan of f i n a n c i n g contemplated by the U n i t e d S t a t e s Housing A u t h o r i t y p r i o r t o the p r e s e n t time a n t i c i p a t e d t h a t i t would be n e c e s s a r y f o r the United S t a t e s Housing A u t h o r i t y t o l e n d t o p u b l i c h o u s i n g a g e n c i e s 90% of the development c o s t o f l o w r e n t h o u s i n g p r o j e c t s . The remaining 10% was t o be r a i s e d from s o u r c e s o t h e r than the United S t a t e s Housing A u t h o r i t y . The e n t i r e 100% was t o be r e p r e s e n t e d by bonds of t h e h o u s i n g a g e n c i e s . Under such a p l a n , i t was p o s s i b l e f o r the U n i t e d S t a t e s Housing A u t h o r i t y , and i t has been our p r a c t i c e , t o advance funds from time t o time a s needed. P r o s p e c t i v e i n v e s t o r s had no o b j e c t i o n t o t h e d e p o s i t o f the proceeds of the bonds they were t o purchase ( r e p r e s e n t i n g o n l y 10% of the l o a n ) i n the l o c a l banks which a c t e d a s d e p o s i t a r i e s f o r t h e housing a g e n c i e s . At t h e p r e s e n t t i m e , we e x p e c t t h e h o u s i n g a g e n c i e s t o be a b l e to s e l l bonds r e p r e s e n t i n g a s much a s 95% o f the c o s t o f t h e p r o j e c t s t o p r i v a t e i n v e s t o r s , t h e bonds t o carry an i n t e r * e s t r a t e lower than the minimum r a t e a t which we a r e a u t h o r i z e d t o l e n d f u n d s . One o b s t a c l e t o such a plan i s the r e f u s a l o f p r o s p e c t i v e i n v e s t o r s t o permit the immediate d e p o s i t of t h e e n t i r e proceeds o f t h e s a l e of such bonds i n t h e l o c a l d e p o s i t a r i e s . Bond i s s u e s o f l o c a l a u t h o r i t i e s w i l l amount to s e v e r a l m i l l i o n s of d o l l a r s i n many c a s e s , and t h e p r o s p e c t i v e p u r c h a s e r s a r e unw i l l i n g to have t h e e n t i r e amount d e p o s i t e d i n l o c a l banks during t h e e n t i r e c o n s t r u c t i o n p e r i o d . In a d d i t i o n , i t i s contemplated t h a t the bond o f f e r i n g s of t h e l o c a l a u t h o r i t i e s w i l l be c o o r d i nated so t h a t the t o t a l o f f e r i n g s a t one t i m e may be a s much a s $ 2 0 0 , 0 0 0 , 0 0 0 . The p r o s p e c t i v e i n v e s t o r s have s u g g e s t e d t h a t t h i s money c o u l d be d e p o s i t e d i n s e v e r a l New York banks, but we a r e u n w i l l i n g to have such an amount r e p r e s e n t i n g a l a r g e p a r t of our p r e s e n t program on d e p o s i t i n one or s e v e r a l banks a t any one t i m e . For t h e s e r e a s o n s , we f i n d i t n e c e s s a r y t o ask y o u r a d v i c e as t o whether i t w i l l be p o s s i b l e f o r t h e F e d e r a l Reserve Banks to a c t a s our a g e n t s i n c a r r y i n g o u t t h e f o l l o w i n g p l a n . The p u b l i c housing a g e n c i e s (which a r e p u b l i c b o d i e s o f the s e v e r a l s t a t e s , c r e a t e d under s t a t e e n a b l i n g a c t s ) w i l l a u t h o r i z e t h e i r bonds and a d v e r t i s e them f o r s a l e . A f t e r b i d s have 394 —2— S—151—a been r e c e i v e d and the bonds awarded, we w i l l make arrangements w i t h t h e F e d e r a l Reserve Bank f o r t h e F e d e r a l Reserve D i s t r i c t i n which the l o c a l h o u s i n g agency i s s i t u a t e d to a c c e p t t h e d e p o s i t o f t h e p r o c e e d s o f the s a l e of such bonds o f t h e l o c a l h o u s i n g agency. These p r o c e e d s w i l l be h e l d by the p a r t i c u l a r F e d e r a l Reserve Bank f o r r e l e a s e , on the s o l e o r d e r of the U n i t e d S t a t e s Housing A u t h o r i t y , from time t o time a s funds a r e needed f o r cons t r u c t i o n of the p r o j e c t s . As funds a r e r e l e a s e d on t h e order of t h e United S t a t e s Housing A u t h o r i t y , t h e y w i l l be d e p o s i t e d i n t h e l o c a l d e p o s i t a r i e s of the housing a g e n c i e s . Such r e l e a s e s w i l l be i n s i z a b l e amounts e s t i m a t e d a t # 1 0 0 , 0 0 0 or more f o r a v e r age p r o j e c t s , and w i l l be supplemented from time t o time w i t h funds r e p r e s e n t i n g a d d i t i o n a l bond pur c ha s e s t y the U n i t e d S t a t e s Housing A u t h o r i t y i n t h e manner provided by our p r e s e n t a r r a n g e ments w i t h the Federal Reserve Banks. Under t h e proposed p l a n , the same amount of money w i l l be d e p o s i t e d i n and d i s b u r s e d from l o c a l banks a s would have been d e p o s i t e d i n and d i s b u r s e d from l o c a l banks under our p r e s e n t p l a n . Upon r e c e i p t of a d v i c e t h a t the procedure proposed above i s a g r e e a b l e t o y o u , we w i l l communicate w i t h t h e s e v e r a l F e d e r a l Reserve Banks and arrange the n e c e s s a r y d e t a i l s . F a i t h f u l l y yours, (Signed) Nathan S t r a u s NATHAN STRAUS, Administrator. Board of Governors of t h e F e d e r a l Reserve System, F e d e r a l Reserve B u i l d i n g Washington, D. C.
@FedFRASER