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fellHARY OF THE FEOENsL1 BM*K Of CLEVELWP TraNSRER federal of reserve St . L bank o u is M arch 15, 1938. To A ll Banks in the Eighth Federal R eserve D istrict: On June 19, 1934, Section 13b of the Federal Reserve Act, as amended, became effective. The intent of Congress in passing this Act was to make w orking capital available to industrial and commercial concerns which were not able to obtain requisite financial assistance on a reasonable basis Trom the usual sources. T he Section provides that financial assistance may be extended, either in the form of loans direct to industry and commerce, or in the form of com mitments by Federal reserve banks to com mercial banks, agreeing to take up from them, during the life of the commitments, loans made to industry and commerce, to provide w'orking capital. U nder the term s of the com mitments, the Reserve banks and commercial banks each assume an agreed proportion of any loss th at m ight be incurred in the final liquidation of the loans; the proportion of loss assumed by each differs in the light of varying conditions and circum stances. In no event shall the percent age assumed by commercial banks be less than 20%. Since Section 13b became effective June 19, 1934, this bank has endeavored to supply, reasonable basis, working capital to established industrial and commercial concerns which obtain such w orking capital from the usual sources. Several letters have been sent to you Reserve Bank of St. Louis, giving general inform ation in connection w ith the m aking of attention is especially directed to our letter dated M arch 4, 1935. on a sound and were unable to by the Federal 13b loans. Your From the date Section 13b became effective to and including F ebruary 16, 1938, w e have considered applications as follows: Approved 159 advances and commitments, aggregating in am ount $9,967,678. T he 159 advances and com mitments w ere approved to 47 different types of industry, and 47.9% were in am ounts rang ing from .$300. to $25,000. Of the number approved, 22 were w ithdraw n by applicants, said w ithdraw als aggregating $1,611,500. In a number of cases the applications were w ithdraw n because the applicants were able to obtain their financial requirem ents from the usual sources. Actual advances and commitments in the num ber of 137 were made, totaling $7,950,990. Of the advances and com m itm ents made, there were 36 advances aggregating $740,510, and 101 com m itm ents totaling $7,210,480. Of thi$ total, 89% has been repaid. T he balance of advances and com m itm ents now outstanding is $687,567. The employees of concerns accommodated under Section 13b according to the applications aggre gated in number 9,939. From the beginning, the Federal Reserve Bank of St. Louis encouraged banks to participate in the ad vances, and to carry the entire loan w ith a com m itm ent from the Reserve bank to take the loan up at any time during the life of the com mitment. T his enabled the commercial bank to get all of the interest (less the com m itm ent fee) on a liquid asset. W e feel th at this is the basis on which the 13b loans should properly be made, as we do not desire to even seem to be in com petition w ith commercial banks. Should it come to your attention that there are any established industrial or commercial concerns in the Eighth Federal Reserve D istrict which are unable to obtain working capital from the usual sources, but which could, in your opinion, furnish a sound and reasonable basis on which they might be supplied w ork ing capital, we shall appreciate it if you will bring the m atter to our attention. W e shall be glad to discuss it with you, or with the prospective applicant. V ery tru ly yours, W IL L IA M McC. M A R T IN , P resident.