Evening star., 1920-01-17

Three distinct plans for the total
or partial removal of real estate finance
from the losing struggle against tax
eXemp securities are now before Con-
gress. First, u chain of federal home
loan banks to rediscount the mortgages
funds to be provided by an issue of tax
exempt federal 'nstrumentaliteS' ::
second, specific exemption of interest
on mortgages amounting to $4,000 ::
third, a federal urban mortgage bank
to rediscount the mortgages of mem
ber corporations by issues Of tax eX-
empt bonds.
Referring to these various schemes.
the Savings Bank section of the Amer
ican Bankers Association says:
"The proposed federal home loan
banks are provided for in the Calder
building and loan association officials
acting through the Department of La
Dor. 1t now seems possible that the
majority of those most interested in
the future growth of such associations
see the evil results of a. plan which was
proposed with much enthusiasm.
The second resulted from methods
of real estate finance which are peculiar
to New York city. and no very pro-
nounced support is evident elsewhere.
While there would be an -undoubted ad-
vantage to those offering mortgage Sc
curitles in competition with government
! bonds and instrumentalities. the princi-
pal arguments as set forth by the Mer-
chants Association of New York are
that the housing shortage is nation
wide, seriously threatens the industrial
| efficiency, peace and prosperity of this
| country and the health and contentment
| OF its people: that Congress has already
! established the principle of assisting in
the financing of urgently needed pro-
1ects by the elimination of income tax
from securities as in the case of the
| government loans. the federal farm loan
banks, War Finance Corporation and
| municipalities, and that the present
housing situation is due in large degree
| to curtailment of construction by the
government during the war.
Urban Mortgage Bank Plan FauItv.
! An urban mortgage bank is the
most recent proposal Although i,
has received no extensive discussion
1t is well to note that it proposes tc
form comparatively owned but
politically managed corporation oi
| sl,o00.ooo or more capital under fed
erai auspices. 1t would use federal
credit to rediscount at not over
! per cent the real estate mortgages
! for terms of from ten to fifty wears
held by banks or by trust, title, mort
gage and insurance companies. which
would invest per cent of their re-
That stock would be entitled to a Z
per cent cumulative dividend as
earned.
Like the proposed home loan bank
1t would obtain instrumentality' ex-
emptions by the mere grant of author
lty to deal in federal securities and
to accept government deposits-if, as
and when SO designated by the Sec
retary of the Treasury-but provided
that no such government funds can be
used in its regular mortgage buying
business.
I'm the last analysis the same end
would be accomplished by authoriZ
ing the purchase by the United States
Treasury of real estate mortgages
which would qualify with the arbi-
trary specifications and unusually
long terms named in the bill 1t is
mortgages shall be amortized. al
though it is specified that higher
rate of amortization than per cent
a year shall render the mortgage in
eligible for such discount
In replying to a request from the
introducer for comment on this bill
the secretary of the savings bank
section of the American Bankers AS
sociation noted that in his opinion the
bill could serve no other purpose than
to:
tening the day when the entire tax
burden of the country will rest upon
real property and service incomes
"2. Establish certain requirements as
to the cost of obtaining and perfect
| ing mortgage loans, which may be
fair in the mind of the one who draft
ed this bill, but which may be entirely
inadequate at other times and in other
places.
"3. Establish a system of red tape
and new positions. whereas the entire
function could be performed by an
officer of the Treasury Department.
~. While the bill extends the ad-
vantages first conferred by the fed
eral farm loan act, it still fails to ex-
tend the benefits Of tax exemption to
all real estate loans. but creates a
new and further discrim nation which
at some time must be removed Fur
ther the subsidy sought to be con-
ferred by this bill must sooner or
ha n