I. A. A. RECORD— July, 1933 



17 



fol- 



fctter 



the 



and 



one- 



What Of The New 

 Credit Legislation 



The Intent and Purpose of the Act is to Bring Relief to 



Worthy Debtors in Need 



Bu- 





FROM letters reaching headquar- 

 ters of the Illinois Agricultural 

 Association it is evident that 

 some local farm loan associations are 

 still operating under rules and regula- 

 tions developed by the federal land 

 banks over a long period of years. 



Complaints from members indicate 

 that the intent and purpose of the 

 Emergency Farm Mortgage Act, 

 namely to bring relief to farm debtors, 

 is being disregarded in some counties 

 . . . that the practices of some county 

 farm loan association officials com- 

 pare with those of hard boiled bankers 

 and loan agents. 



For example, a member in a western 

 Illinois county applied for a $5,000 

 first mortgage loan on a 78 acre farm 

 which cost 112,000 unimproved back 

 in 1920. Since then the land has been 

 improved, the owner advises, the mort- 

 gage on the land has been whittled 

 down to $7,000 and the holders of the 

 mortgage are willing to take $5,000, 

 throw off $1,000 and take a second 

 or third mortgage for the other 

 $1,000. 



In addition to the income from the 

 farm, the family has an outside in- 

 come of $800 per year. 



Turned Down 



We are informed that the local loan 

 association secretary came and looked 

 over the farm, made his report to the 

 board, and the board turned down the 

 loan with the advice that no loans 

 were being made on rolling land. 



While we have no first hand knowl- 

 edge of the merits of this case, we do 

 know that there is nothing in the 

 Emergency Farm Mortgage Act which 

 forbids making loans on rolling land. 

 Nor is there anything in the act 

 authorizing similar regulations which 

 are reported to have become a part of 

 the system. 



Going back to the case mentioned 

 above, our member writes that the 

 representative of the farm loan as- 

 sociation who called to inspect the 

 farm remarked that the Emergency 

 Credit act "was just so much bally- 

 hoo." Yet, we are informed, this same 

 association made a loan to the owner 

 of a choice 160 acre farm free of all 



indebtedness who took over a farm to 

 help out a bank. "Now it is up to me 

 to go to the mortgage holders and 

 admit that farm relief is all political 

 propaganda and will give no assist- 

 ance where actually needed," writes 

 this indignant member. "I am writing 

 this hoping that this policy will be 

 given an airing and that someone be- 

 sides the owners of 160 acre farms 

 clear of debt will sometime be given 

 assistance." 



This case reveals that it's one thing 

 to have a law, and another thing to 

 get proper and sympathetic adminis- 

 tration in carrying out the purpose of 

 the law. 



Judging from reported statements 

 of the new governor of the Farm 

 Credit Administration, Henry Mor- 

 genthau, Jr., he proposes to make the 

 new emergency credit act really bring 

 relief to needy farmers. Numerous 

 statements coming from his office 

 cite cases showing how mortgage 

 debts are being scaled down and re- 

 financed through loans made by farm 

 loan commissioners and land banks. 



The fact that the new credit ad- 

 ministration hardly has had an op- 

 portunity to work out its policies in 

 administering the new act should be 

 taken into consideration. Supplemen- 

 tary legislation necessary to make the 

 credit act a real relief measure was 

 passed only shortly before congress 

 adjourned. : ? '^ > "v-^':''-X'^ .:■.,';'". '^ 



■■'■■-• Must Be Patient 



Those in charge of administering 

 the federal credit legislation both at 

 Washington and in the Federal Land 

 Bank at St. Louis apparently are 

 sincere in wanting to bring the maxi- 

 mum relief to worthy farm debtors 

 within the limits of the authority 

 granted them. If certain subordinates 

 and local administrators make rules 

 of their own which are clearly not in 

 sympathy with the intent of congres3 

 and the administration, such a situa- 

 tion can and undoubtedly will be 

 handled. For the present, patience 

 must be shown both by creditors and 

 debtors. 



On the other hand, no reasonable 

 debtor should expect to secure a fed- 



eral land bank loan for more than 60 

 per cent of the normal value of the 

 land plus 20% of the improvements. 

 This is the law. If the land was 

 bought in the speculative era at a 

 long price, and the mortgagor is hope- 

 lessly in debt, it is too much to ex- 

 pect Uncle Sam to step in and take 

 over a mortgage which the owner 

 would have little chance of paying off 

 even in normal times. Bankruptcy and 

 a new start may be the preferable 

 course if creditors are unwilling to 

 co-operate in scaling down the debt to 

 allow for re-financing. 



Cases like the one mentioned here 

 should be brought before county con- 

 ciliation committees, or a conciliation 

 commissioner authorized under the 

 amendment to the federal bankruptcy 

 act passed in the regular session of 

 congress last winter. Bankruptcy 

 courts are authorized to appoint one 

 or more such commissioners on appeal 

 by 15 or more farmers who certify, 

 that they intend to appeal for an ex- 

 tension of their loans. 



Two Kinds of Loans 



Both in the May and June issues of 

 the RECORD, provisions in the new 

 emergency credit act for refinancing 

 farm mortgages were made clear. Gov- 

 ernment loans, it should be remem- 

 bered, are divided into two classes as ^ 

 follows: 



1. Federal land bank loans which 

 are limited to 50% of the NORMAL^ 

 value of the land plus 20% of the I 

 NORMAL value of improvements. 



2. So-called "farm loan commission- 

 er" loans limited to $5,000 which may 

 equal but not exceed 75% of the NOR- 

 MAL value of the land or other farm " 

 property offered as collateral. The 

 75% rule applies to the total of all 

 loans on the property offered. 



Federal land bank loans bear 4%% 

 interest and principal payments are 

 waived for a period of five years. 

 "Commissioner" loans bear 5% inter- 

 est and most of them are being made 

 for a period of 13 years with the 

 principal installments waived the first 

 three years. 



Governor Morgenthau of the Credit 

 Administration is giving close super- 

 vision to the "commissioner" loans 

 through his personal agents stationed 

 in the 12 federal land banks. Loans 

 requested during the three weeks fol- 

 lowing the passage of the act totalled 

 $9,000,000 and in the week ending 

 June 2 nearly 2,400 requests' came in 

 for over 6% million dollars. St. Louis 

 and St. Paul districts reported the 

 heaviest volume. 



Uncle Ab says he does not know 

 whether happy folks are lucky, or 

 lucky folks are happy; but that happi- 

 ness and luck go together. 



