The border vidette., 1931-11-14
THE FEDERAL LAND BANK OF
BERKELEY

moratorium on FeQofal Lana
Bank farm mortgage loan inter
est is resulting only in harm,"
declared Willard D. Ellis, presi
dent of the Federal Land Bank
of Berkeley, here today at a
meeting of the officials of that
CO. cooperative farm mortgage bank
with the representatives Of the
sixteen National Farm Loan AS
sociations making first farm
mortgage loans in this state
Congress has no authority to
declare such q holiday for the
4OO. 600 borrowers from the Fed
eral Land Banks without declar
ing q general moratorium which
would effect all mortgage indebt
edness amounting to more than
nine billions of dollars through
out the United States, and it has
no intention of destroying the
credit system of the country, for
that is what such a proposal in
wolves. Many people. including
some borrowers, are still labor
ing under the illusion that the
Federal Land Banks are govern
ment institutions and secure their
loans flon the United States
treasury. whereas the treasury
own only one-half of one percent
of the capital stock of these
banks and the farmer borrow
ers, though the National Farm
Loan Associations, own about
$50, 900, 900 worth of stock. The
banks obtain funds to loan thru
the sale of their bonds, and not
from the federal government.
To pick out the borrowers from
the cooperative system, as 81
gantic as the system is, would be
to give preference to only about
II percent of the farmers who
have mortgages on their farms,
ia terms of the volume of farm
mortgage debts outstanding.
Such a move would greatly up
set. if not destroy cooperative
farm credit which the govern
ment itself has fostered by en-
atling the banks to start opera
tions on government. interest
free money. issue tax-exempt
bonds and by affording supervi.
sion of the system.
THE twelve Federal Land
Banks with more than q billion
dollars in long term, first farm
mortgages outstanding has to
collect from borrowers more than
$50, 900, 900 interest each year
and use it to pay the interest on
the more than q billion dollars
worth of Federal Land Bank
bonds outstanding in the hands
of hundreds of thousands of in
vestors. including estates. insti
tutions and individuals. The
proposals to daclare q morator
ium on the payment of the inter
est on the banks loans strikes at
the very foundation of co-opera
tive banking, for it encouraged
uniformed farmers to withhold
their installmenr payments when
due. Farmers who are able to
pay their installments, including
interest, withhold payment to
the detriment Of their own CO
operative system.
THE policy of the banks is to
extend credit to borrowers in so
far as it is possible to do 80. but
there are very definite limits,
circumscribed by the capital and
surplus of these institutions.
Where narrower has q consist
ant record for the prompt pay
ment of the instailments on his
loan when due, be is much more
likely to be accommodated with
an extension than is q chronic
delinquent who is a perpetual
drag to cooperative institution
which must pay the interest
promptly on its outstanding
bonds.
The plan advanced by Presi
dent Hoover a few weeks ago,
and which be intends to present
to Congress when it convenes. is
a much more business-like me
thod of taking care of the situa
ton which has arisen primarily
because of the low price of azri
cultural commodities. His pro
posal for the government to add
to the capital stock of the Fed
eral Land Banks would. increas
ing the ratio of stock and re-
serves to the bonds in the
hands of investors. not only give
the banks more earning power
but should greatly improve the
market for their bonds, thus
eventually resulting in a more