New Britain herald., 1921-02-28
FARM loan ACT
IS CONSTITUTIONAL
Supreme Court Decides Long
Anticipated Question
FIFTY MILLIONS HELD UP
G.. z. Smith Instituted Suit to Test
Validity Of Act to Loan Government
Tax Exempt.

/ Money to Agriculturists-Secur
Tax Exempt.
| Washington, Feb. 2s.-The federal
| farm loan act, was held constitution
al today by the supreme court. This
| is the act under which land banks
were established to extend loans to
! farmers.
The act was attacked on the ground
that congress was without conStitu-
tional authority to establish farm
| loan banks and to exempt their bonds
from taxation. Justice Day who rem
dered the opinion for the court said
the power of congress to establish
banks had in a broad sense been up
held by the supreme court in the
days of Chief Justice Marshall.
The court in sustaining federal
! court DEGREES dismissing Injunction
proceedings brought by Mr.. Smith, al
so held that congress had the author
ity to exempt the bonds of the bank
from taxation.
Farm loans aggregating more than
$5O,000,000 have been held up since
May 1920 as a result of the suit in
Stituted by Charles E. Smith, a stock
holder in the Kansas City Title and
Trust company, to test the validity
of the Federal Farm Loan Act. APP
plications to this amount We're pend
ing when Commissioner Lobdell an
nounced at a conference of farm loan
officials here that officials approval
would be withheld pending a deci-
sion of the court
Officials placed the total amount
of loans of farmers held in allegiance
by the suit at many times $50,000,-
600, however, the receipt of aplica-
tions having stopped with Commits
sioner LobdelFs announcement. On
March 1, 1920 the Farm Loan Board
reported, that $1S2,S97. 900 had been
advanced to 1884 farmers and that
applications from 17S,734 persons
then pending totalled $471,O0O. 600.
The suit in the Supreme Court was
in the form of an appeal from lower
court decisions refusing to issue an
injunction to restrain the Kansas
City Title and Trust Company from
investing it's funds in bonds issued
by the Farm Loan Banks, The
Government, the Federal Land Bank
OF Wichita Kansas. and the First
Joint Stock Land Bank of Chicago,
on their application were made dc
PENDANTS in order that the entire
question might be settled finally in
one suit.
Counsel for Mr.. Smith asserted in
subs ance that the Farm Loan Act
was an exercise of power which con-
gress did not possess under the Con-
stitution. Further ground for attack
was found in the exemption OF the
farm loan securities from taxation,
as "instrumentalities of the govern
ment"
William G. McAdoo, former secre-
tary OF the Treasury, submitted the
government brief as special assistant
to the attorney general. in the argu-
ment of the case. He asserted that the
banks were created as fiscal agents"
of the government and that congress
had the clear right to set up such
institutions. Since assistance of agri-
culture pertains to the general well
fare it was argued. congress could
have made direct appropriations for
the purpose in view, but chose to
create these special agencies to pro-
vide the necessary fund.
With regard to the tax xemption
feature, Mr.. McAdoo contended that
il was simply a question for congress
to determine when the usefulness of
its agencies would be enhanced by
exemption"
Refuses Injunction.
The supreme court refused today
to issue an injunction restraining the
alien property custodian from selling
$4,000 shares of stock of the Botany
Worsted Mills, of Passiac, N. J..
which had been seized under the trad
ing with the enemy act.
The decision had the effect of sus-
tanning the government in it's claim
to authority under the act to seize
property of enemy subjects which had
been transferred to naturalized Amer
leans as trustees for the enemy own
ers.
Constitutionality "as applicable to
this case" of the trading with the
enemy act was upheld by the court.
nnrYEn nHu ENKrIY