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X-6835 : FEDERAL R | S £ R V E 842 BOARD STATEMENT FOR THE PRESS For immediate r e l e a s e . March 7, 1931. The Federal Reserve Board has amended i t s Regulation G governing the rediscount Toy Federal reserve banks of notes secured "by adjusted service c e r t i f i c a t e s so as to conform to the Act of February 27, 1931, amending Section 502 of the World War Adjusted Condensation Act; and copies of the amended regulation with the new portions indicated by capital l e t t e r s are released herewith. The amendments contained i n the Act of February 27, 1931, apply to loans by banks as well as to loans by thp Veterans 1 Bureau. The principal changes e f f e c t e d by the amendments are, (1) to increase the loan value of each adjusted service c e r t i f i c a t e immediately to 50 per cent of the face value of such c e r t i f i c a t e , and (2) to provide that the rate of interest on any such loan shall i n no event exceed per cent per annum, compounded annually. The original provision of Section 502 of the World War Adjusted Compensation Act to the e f f e c t that the rate of i n t e r e s t charged by banks on loans to veterans secured by their adjusted service c e r t i f i c a t e s s h a l l i n no event exceed by more than 2 per cent per annum the rate charged at the date of the loan f o r the rediscount of 90 day commercial paper by the Federal reserve bank of the Federal reserve d i s t r i c t i n which the lending bank i s located, remains i n e f f e c t . Therefore, as to a l l loans made on and a f t e r February 27, 1931, the rate of interest must not exceed, (a) simple i n t e r e s t at a rate not exceeding by more than 2 per cent per annum the rate charged at the date of the loan f o r the rediscount of 90 day commercial paper by the Federal reserve bank of the d i s t r i c t in which the lending bank i s located, or (b) 4jg per cent per annum compounded annually, whichever i s the lower. Subsection (e) of Section III of the Board's Regulation G contains a provision to the e f f e c t that, when a note given by a veteran for a loan on his adjusted service c e r t i f i c a t e contains, i n the form approved by the Director of the Veterans' Bureau, a provision for the extension of the maturity thereof from year to year, at the option of the holder e v i denced by h i s endorsement thereon, the maturity of said note ( a f t e r the f i r s t maturity stated thereon) s h a l l , f o r the purpose of determining i t s e l i g i b i l i t y , be deemed to be that stated i n the l a t e s t extension endorsed thereon by the holder. Notes i n this form need be used only .where the lending bank desires to retain the e l i g i b i l i t y of such notes for rediscount at Federal reserve banks subsequent to the f i r s t maturity. Banks not desiring to preserve such e l i g i b i l i t y a f t e r the f i r s t maturity may continue to use U.S. Veterans' Bureau Form No. 6615, which has been used heretofore.
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