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F E D E R AL R E SE R V E BANK
O F N E W YORK
Fiscal Agent of the United States
r Circular N o. 3 7 6 1 1
U September 25, 1951 J

V -LO A N FINANCING FOR INCREASED PRODUCTION O F MACHINE TO O LS
T o all Banks, and Others Concerned,
in the Second Federal R eserve D istrict:

In our Circular No. 3712, dated May 29, 1951, we advised you of the machine tool pro­
gram undertaken by the General Services Administration and o f its request that assistance
be given to machine tool manufacturers in the form of V-loan financing. The Administrator
o f the General Services Administration has recently written a letter to the Board of Governors
o f the Federal Reserve System, explaining that the need fo r machine tools has become even
more urgent. T o meet that need, substantially all machine tool manufacturers will soon be
producing fo r essential purposes, and the General Services Administration is now prepared
to expand its program o f financing these manufacturers through guaranteed V loans. W e
quote below from the text o f the letter.

M y l t e of May 1 1951 advised you of the Machine Tool Program undertaken by t i Agency
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upon direction of the Defense Production Administration and emphasized the importance of a s s ­
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ance t machine t o manufacturers in the form of Y-loan guarantees.
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Subsequently, as a part of the program for the increase of production of metalworking t o s the
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Director of Defense Mobilization directed that advance payments be made in appropriate c s s Accord­
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i g y the contract provisions were modified t permit an advance of funds up t thirty per cent of the
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amount in the event private financing was not available on reasonable terms. However, the advance
payment i not appropriate in many cases and the necessary increase of production cannot be financed
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s l l by such means.
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In view of the urgency for increased machine t o production, t i Administration i prepared t
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lend e s n i l machine t o manufacturers, their subcontractors and supp ie s a l po sible assistance
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in financing production through Y-loan borrowings.
Those manufacturers whose production i determined by the National Production Authority to be
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e s n i l and substantially earmarked, either directly or in i e t y for the national defense, wi be con­
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sidered e i i l for Y loans to finance t e r current production. As substantially a l machine t o pro­
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duction i now or shortly w l be earmarked for defense contractors, defense supporting in u t i s or
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dsre,
foreign governments under mutual a
ssistance programs, we w l not require a borrowing formula which
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l mi s borrowings on the b
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asis of a segregation of defense production contracts from ‘ c v l a orders.’
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Even in those instances where the manufacturer does not presently hold a machine t o pool con­
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t a t t i Administration i prepared, in e s n i l and exceptional cases as determined by the National
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Production Authority, to authorize Y l a s
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I i recognized that the re
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quisite production of machine t o s cannot be obtained without f c l t e
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expansion. In those cases where the National Production Authority determines such expansion w ll aid
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the national defense, t i Administration w l , t the extent necessary, guarantee Y loans t finance the
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construction or acquisition of new f c l t e . In addition we w l a s s by i s a l n the necessary equip­
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i l sit
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ment and f c l t e in such plants under the provisions of Section 303(d) of the Defense Production Act
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of 1950, as amended.
Additional copies o f this circular will be furnished upon request.




A llan S proul,

President.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102