I. A. A. RECORD— October, 1933 



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A Call For Action 



By Henry Morgenthau, Jr., 



Governor, Farm Credit Administration :5;>-:VM' 



I AM addressing here publicly every 

 officer and employee of the Farm 

 Credit Administration and every 

 individual in any way concerned with 

 the work of putting into effect the 

 Emergency Farm Mortgage Act of 

 ;. 1933. I include not only every officer 

 of every land bank, from the presi- 

 dent and the board of directors down 

 ■■■'-. to the newest clerk or stenographer, 

 but every officer and every member 

 of a farm loan association. I wish 

 ■■•': especially that what I have to say be 

 r\ read and understood by land ap- 

 ; praisers and loan committees. 



.In passing the Emergency Mortgage 

 Act, Congress expressed its confidence 

 in the land bank system and reposed 

 faith in that system as an agency 

 proper and fit to carry out the task 

 [ of bringing speedy relief to debt- 

 burdened American farmers. The 

 President in his consultations with 

 members of Congress before the pas- 

 sage of the act and in signing it gave 

 expression to the same faith and con- 

 fidence. 



Do Everything You Can 



~~' You officers and appraisers of the 

 Land Bank Division, you directors, of- 

 ficers and employees of land banks 

 and you officers and members of 

 ;; National farm loan associations have 

 r^ each and all been charged with a great 

 duty and responsibility by the Gov- 

 " ernment of the United States. That 

 duty and responsibility are to do 

 everything that you can to extend the 

 benefits of the Emergency Mortgage 

 Act as speedily as possible to all to 

 whom it- can be of service. 



I realize as well as you do that the 

 job is a huge one and the responsibil- 

 ity is great. The land banks never 

 before have been called on to do a job 

 even comparable to this. Applications 

 for loans received since the Emer- 

 gency Farm Mortgage Act was passed 

 last May amount to about three- 

 fourths of all the outstanding loans of 

 the land bank system, which has been 

 doing business since 1917. 



We can take some credit for the 

 speed with which we have built up 

 our organization to deal with this sit- 

 uation, but we can't take time out to 

 pat each other on the back. With a 

 back log of some 185,000 applications 

 for loans hanging over us and new 

 ones coming in at the rate of 17,000 

 ': or more a week we are a long way 

 ' from having the job licked yet. 



Farmer Wants Action 



The fact that we have increased the 

 number of appraisers at work from 

 210 when the law was passed to near- 

 ly ten times that number at present 

 means little to the farmer who has 

 been waiting sixty or ninety days to 

 learn whether he can get a loan. He 

 knows there has been delay; he doesn't 

 know why and it wouldn't help him to 

 pay his debts if he did. He wants ac- 

 tion; and so do I. So, I believe, do you. 



This is an emergency. We have been 

 busy, but we've got to get busier. 

 Every man and woman must get re- 

 sults or give way to somebody who 

 will. I mean that. It's too serious a 

 job for me to mince words. I intend 

 that every employee and every agent 

 shall have fair and considerate treat- 

 ment, but we've got to get results. 



We have been hiring appraisers and 

 other help as fast as we thought the 

 system could absorb them, but it 

 hasn't absorbed them fast enough. 

 We've got to take on men at an in- 

 creased rate and train them efficient- 

 ly. Every appraiser, every chief ap- 

 praiser, every reviewing appraiser 

 must seek and find ways to increase 

 the output of appraisals — but it must 

 be done without slighting the job of 

 making an accurate and fair appraisal. 



The Word "Normal" 



What is a fair appraisal ? Our an- 

 swer to that question will determine 

 how far we can go to help those whom 

 we want to help. Congress has given 

 us one word as a guide, leaving the 

 rest to our experience and judgment. 

 The word is "normal." Appraised 

 value is to be "normal" value. In de- 

 fining this word we have said that dis- 

 tress sales in these recent bad years do 

 not fix normal value and that neither 

 do high sale prices of boom years. Nor- 

 mal value is somewhere between. The 

 Agricultural Adjustment Act, passed 

 by Congress as a part of the same bill 

 that included the Farm Mortgage Act, 

 indicates that the years 1909 to 1914 

 inclusive were years of normal price 

 relations as between farm crops and 

 consumers' goods. So we have been 

 using farm commodity prices of 

 1909-14 as a principal guide in deter- 

 mining normal value of farms. 



There have been complaints that 

 this principle was not being faithfully 

 applied — complaints that many ap- 

 praisals since the act was passed have 



17 



been too low. We have had special 

 examinations made of many of these 

 complaints. We have had investiga- 

 tions by soil experts who have no 

 connections with the land bank sys- 

 tem, which are continuing. 

 "v The reports I have already received 

 convince me that some of these com- 

 plaints — perhaps many of them — are 

 well founded. I have not sufficient 

 information to say that appraisals are 

 generally too conservative; some may 

 even be too high. But I am convinced 

 that some appraisers have not under- 

 stood properly the rule of value that 

 we have instructed them to apply. 



A land bank loan has a maximum 

 limit of 50 per cent of the appraised 

 normal value of the land for agricul- 

 tural purposes, plus 20 per cent of the 

 value of permanent, insured improve- 

 ments. The purpose of that 50 per 

 cent margin is to give protection 

 against declines in value and these 

 may be due either to special causes 

 which affect the particular property 

 or they may be due to price declines 

 and bad business conditions that af- 

 fect all farm property. In the midst of 

 such a depression period it is illogical 

 to impose the same strict rules as to 

 farm earnings as a determinant of 

 value that we would impose in a pros- 

 perous period. That would mean ex- 

 acting a double margin of safety 

 which would block us from lending 

 to many able farmers who deserve 

 credit. That was the reason for the 

 phrase "normal value" in the act. It 

 is the basis for the explanations we 

 have given with respect to appraisals. 



Must Make Sound Loans 



Both the land banks and the Na- , 

 tional farm loan associations are re- 

 quired to make sound loans, but they 

 need not exact excessive security. 

 Members of associations as well as 

 land bank officials know that the 

 character and ability of the farmer 

 who gets the loan has much to do with 

 its soundness. The Emergency Mort- 

 gage Act does not instruct you to 

 make loans to open up new areas tu 

 the plow or to establish more people 

 on farms. It was drafted to take some 

 of the burden of debt from the backs 

 of experienced, capable farmers, es- 

 tablished on the land, and to release 

 funds to rural communities by re- 

 financing farm mortgages and other 

 debts on terms which the farmers 

 might reasonably be expected ,to pay 

 over a period of years out of the prod- 

 ucts of the soil. 



A loan to such an experienced, 

 capable farmer, to permit him to re- 

 tain the homestead he has farmed 

 successfully, may be made more safe- 

 ly than to a newcomer, inexperienced 

 (Continued on page 18) 



