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FEDERAL RESERVE BOARD
WASHINGTON
•.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
January 4, 1936.
Dear Sir:
In the last few weeks the amount of industrial loan applications received by the Federal Reserve banks, and particularly
the amount of such applications approved, has increased relatively
little.
Recent studies which have been made, particularly one by
the Committee on Direct Loans of the Associated Business Papers,
indicate the existence of some feeling that the Federal Reserve
System would have many more applications if a more intensive effort were made to acquaint prospective borrowers with the facilities open to them and to bring to the attention of member banks the
desirablity of making industrial loans under cover of Federal Reserve bank commitments.
As you know, the Board feels that it is important that
each Federal Reserve bank have some qualified person available at
all times to explain to prospective applicants for industrial advances what the Federal Reserve bank is prepared to do and how they
should proceed in order to obtain an advance.
It is, of course, ap-
preciated that the person having this responsibility should be fully
familiar with the Federal Reserve bank's policies and able to appraise
··A\
fairly accurately the financial problems of prospective applicants.
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He should also be able tc. convince applicants of the Reserve ba11k 1 s
desire to do whatever it can, consistently with the terms of section
13b, to make credit available to them.
In view of the expressed feeling that the System has not
{
done all that it should to implement the provisions of Section lob,
)
it will be appreciated if you will address a letter to each bank in
your district, requesting its assistance in furthering the industrial
loan program.
A draft of a letter which it is suggested you use in
this connection is attached.
Very truly yours,
Chester Morrill,
Secretaz•y.
Attachment.
TO ALL GOVEHNORS.
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DRAFT UF LETTEh Tv ~AEri1BLh iu\W !~0NMEIABEh. EANKS
Information 'il'hich has recently come to the attention of the Board of
Governors of the Federal Heserve System indicates the existence of some feeling that the Federal Reserve System has not done all that it could to make a
success of the industrial loan program authorized by Section 15b of the Federal
Reser~e
Act.
This section was adopted June 19, 1934, and as you recall,
authorizes the Federal Reserve banks to make credit available to established
industrial and commercial enterprises for the purpose of replenishing working capital, for periods not exceeding five years.
It has been the aim of the Board, the Federal lteserve banks, and the Industrial Advisory Co1nmittees to make such credit available to all borrowers
who are in need of working capital and to whom advances could be made on a
reasonable and sound basis.
To that end special efforts have been made to
bring the provisions of the sectiun to the attention of memtor and nonmember
banks and industry in general, and applications for such credit have
proved whenever possible.
b~en
ap-
It may: be th;;,.t there are now no enterprises in your
community which are unable to obtain needed v10ridng capitcl from the usual
sources and to Hhich loans for this purpose could be made en
sound basis.
ti.
reasonable and
This bank desires particularly, however, to cio what it can for
industry in its district, and if you knov: of t.cny instances, or hear of any
instances] ahere worthy
enterprises in need of 11orking capital have been un-
able to obtain it, we shall appreciate your bringing them to our attention.
Under the provisions of the Act the Federal Reserve Banks are authorized
·to make these loans either direct to borrowers or in participation with financing institutions.
If you are interested in participating in any loans, the
...
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liquidl ty .:.·f which may be guaranteed by the Federal heserve ba:1k and your loss
limited to a maximum of 20 percent) this bank will be glad to CCloperate with
you in any way it cu.n vii thin the law.
Very truly yours,
@FedFRASER