Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-03-12

be calculated as made to the funds OF
national banks legally loanaple
ON real estate by provision OF seclloii
* of the new McFadden banking act.
Whatever further increase may De
made by the act in volume OF Iunos
released for loaning on real estate
security through the provisions OF sec.
ton 2(b). permitting the buying anu
selling Of marketable investment Sc
curities, Is as yet impossible to ap.
praise, according to the consensus OF
leading banking economists given IN
answer to an inquiry by the National
Association of Real Estate Boards.
Heads of Federal Reserve banks are
ma vet loath to predict the extent 10
which national banks will avail them
selves Of the new mortgage loan pro
vision, the associations inquiry lndi-
Gates.
currency. confirms the general inter
probation of the new act as AFFECTING
the powers of national banks not only
with reference to long-term nrst mort
gage city real estate loans but also
with reference to the purchase oi
bonds for investment. 1t VIII be the
province of the controller or the cur
rency, under the act, to denne what
investment securities may be conslu-
cred eligible for national bank pur'
chase and sale.
Banking Changes FOreseen.
While bankers and economists vary
widely in their views as TO the degree
10 which the effect of the new pro-
visions may come to be felt, those
replying are united in foreseelng
changes in banking practice, the to.ai
effect of which may be expected 10 De
...fl~v Iaxy a
which the individual real estate IN
yestment meets the loan appetite OF
the Individual banking institution
"As the provisions of the new bank
ing law are better understood, doubt
less a gradual increase in the amount
of mortgage loans in the portfoIlos
Of national banks will be noted" Il. X.
Fancher, governor of the Federai ne
serve Bank of Cleveland, predicts.
The effect of the new act is going
to be largely a matter OF the poncy
of each individual bank, Mr.. Fancher
points out, and 1t is as vet Impossible
to make any accurate evaluation OF
results.
"The McFadden bill viii increase the
power of national bank%to lend money
on real estate mortgages and VIII I'M
doubtedly result in considerable eX.
pansion Of such Investments, Charles
J. Bullock, director or the Harvard
economic service and chairman of the
committee on economic research OF
Harvard University, states.
Opinion on Time Deposits.
"r have an opinion from Federal
Reserve authorities that time deposits
can be invested in mortgages under
the conditions stated by the law, Dut
that q considerable proportion or the
so-called time deposits are not really
savings deposits and that well man
aged banks viii not treat them SO.
Moreover, Federal Reserve authorities
may discourage excessive investment
of time deposit money In real estate
mortgages.
member banks undoubtedly include
some money that can fairly be con-
sidered savings and can be invested In
real estate loans as safely by member
banks as the savings deposits OF ordi-
nary savings banks can be similarly
invested. Upon the other hand, con.
siderable and increasing proportion OF
the time deposit represents money
which formerly was carried as COM
merciai deposits and cannot safely De
treated as real savings deposits"
A computation of the volume of
funds in national banks released for
real estate loans as made in answer
to an inquiry from the National Asso-
citation OF Real Estate Boards by r.. G.
Rodkey Of the University Of Michigan
school of business administration is
as follows:
Section "a of the Federal Reserve
act provided that for national banks
not located in central reserve cities
loans on farm lands might be made
with maturities not exceeding Eve
wears and loans on improved urban
real estate with maturities not exceed
ing one year The total of all such
loans could not exceed rs per cent OF
the capital and surplus or one-third OF
the aggregate time deposits, Mr.. Rod.
ney points out.
section Is of the new act does not
exclude banks located in central re-
serve cities and increases the total
amount which can be loaned to 25
per cent OF capital and surplus or to
one-half the time deposits.
Estimate of Loanable Funds.
ION June 80, 1926. total time de-
posits of national banks amounted to
about $4,000, GOO, 900. Prior to the
passage OF this act one-third OF this,
or $1,000, 100000, could be loaned
legally on real estate. The new act
increases this to one.half, or $780,
900 600 This makes an increase of
approximately $1,050.000, 900. To this