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FEDERAL RESERVE BOARD 760 WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-4193 November 24, 1924. SUBJECT: Loans on Real Estate and Farm Lands by National Banks having no Time Deposits. Dear S i r : Inquiry has t e e n made of the Federal Reserve Board as to whether a national bank which has no deposits t h a t are classed as time deposits may make loans On improved and unencumbered farm lands and r e a l e s t a t e under the provisions of Section 24 of the Federal Reserve Act. The Board has considered t h i s question and i s of the opinion that the right Of n a t i o n a l banks to make loans on farm land and r e a l estate should not be r e s t r i c t e d to banks having deposits which are classed as time deposits. Section 24 provides in p a r t that "Any national banking association not s i t u a t e d in a central reserve c i t y may make loans secured by improved and "unencumbered farm land ***** and may also make loans secured by improved and unencumbered r e a l estate *****"„ From t h i s i t seems apparent t h a t the only r e s t r i c t i o n intended to be placed upon the r i g h t of n a t i o n a l banks to make r e a l e s t a t e loans i s that they shall not be situated in a central reserve c i t y , provided, of course, t h a t the loans comply in other respects with the provisions of Section 24 of the Federal Reserve Act. The provision of t h i s section with regard to the aggregate sum which a n a t i o n a l bank may loan upon r e a l e s t a t e , t h a t i s , up to 25$ of i t s c a p i t a l and surplus or to 1/3 of i t s time deposits, whichever may be the greater, i s merely a l i m i t a t i o n on the amount of such loans which a national bank, otherwise q u a l i f i e d , may make and was not intended to r e s t r i c t the r i g h t to make such loans only to those banks having time deposits. Very t r u l y yours, 50 GOVERNORS OF ALL F. R. BANKS Walter L. Eddy, Secretary.
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