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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 etr , hs upon direction of the Defense Production Administration and emphasized the importance of a s s sit ance t machine t o manufacturers in the form of Y-loan guarantees. o ol Subsequently, as a part of the program for the increase of production of metalworking t o s the ol, Director of Defense Mobilization directed that advance payments be made in appropriate c s s Accord ae. i g y the contract provisions were modified t permit an advance of funds up t thirty per cent of the nl, o o 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 s s l l by such means. oey In view of the urgency for increased machine t o production, t i Administration i prepared t ol hs s o lend e s n i l machine t o manufacturers, their subcontractors and supp ie s a l po sible assistance seta ol l r, l s in financing production through Y-loan borrowings. Those manufacturers whose production i determined by the National Production Authority to be s e s n i l and substantially earmarked, either directly or in i e t y for the national defense, wi be con seta drcl, ll sidered e i i l for Y loans to finance t e r current production. As substantially a l machine t o pro lgbe hi l ol duction i now or shortly w l be earmarked for defense contractors, defense supporting in u t i s or s il dsre, foreign governments under mutual a ssistance programs, we w l not require a borrowing formula which il l mi s borrowings on the b i t asis of a segregation of defense production contracts from ‘ c v l a orders.’ ‘iiin ’ Even in those instances where the manufacturer does not presently hold a machine t o pool con ol t a t t i Administration i prepared, in e s n i l and exceptional cases as determined by the National rc, hs s seta Production Authority, to authorize Y l a s on. I i recognized that the re t s quisite production of machine t o s cannot be obtained without f c l t e ol aiiis expansion. In those cases where the National Production Authority determines such expansion w ll aid i the national defense, t i Administration w l , t the extent necessary, guarantee Y loans t finance the hs il o o 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 aiiis i l sit ntlig ment and f c l t e in such plants under the provisions of Section 303(d) of the Defense Production Act aiiis of 1950, as amended. Additional copies o f this circular will be furnished upon request. A llan S proul, President.