Evening star., 1931-11-14
Presidents Home Loan Plan
Congress VIII Be asked to Establish System OF
-. Discount Banks to Ad Institutions
and Speed Building.

termined by the Federal Board upon
the basis OF the aggregate Of such
mortgage loans and probable needs of
the particular district.
"(c) The proposed discount banks
20 make no initial or direct mortgages
but to loan only upon the obligations
of the loaning institutions secured by
the mortgage loans as collateral so az
to assure and expand the functioning
of such institutions.
Limited to Farm and Urban Property.
"(d) Building and loan associations.
savings banks, deposit banks. farm loan
banks, etc, may become members OF
the system after they have satisfied the
conditions of qualifications and eligibil-
ity that may be fixed by the Fedora
Be rd.
"te) The mortgage loans eligible fol-
collateral shall not exceed $4,000 each
and shall be limited to urban and farm
property used for home purposes.
20 The maximum amount to be
advanced against the mortgage col
lateral not to exceed more than so pei
cent of the unpaid balance on un-
amortiZed or short term mortgage loans
and not more than so per cent Of the
unpaid balance Of amortized long term
mortgages, and no advance to be made
are to be made on the basis
that there are sound appraisals of
the property upon which such mort
cages have been made. In other
words, given sound appraisals there
will be advanced in the case Of
short term or unamortized loans 25 pei
cent of the appraisal and in case OF
amortized long term loans, 80 per CEN
of the appraised value OF the property
"(g) The discount banks as their
needs require from time to time to
vestorS to an amount not to exceed in
the aggregate IL times the capital OF
the issuing bank. The bonds of these
discount banks would be thus secured
by the obligations of the borrowing in
stitutionS, the mortgages deposited as
collateral against such obligations and
the capital of the discount banks
These bonds to be acceptable for Sc
curity for government and postal de-
posits. The result would be bond OF
high grade as to quality and security.
"th) If the aggregate initial capita,
of the discount banks should in the
beginning be fixed at $l50,000,000 1,
would be possible for the IL banks tc
finance approximately something ovel
81 800, ,000,0 900 of advance to the bor-
rowing institutions, which could be
further expanded by increase in their
capital.
Subject TO Congress Action.
"d) It Is proposed to find the initial
capital stock for the discount banks In
much the same way, in so far as Is
applicable, as the capital was found for
the Federal Reserve Banks-that Is,
that an organization committee In each
district should first offer the capital te
the institutions which would par
ticipate in the service of the bank. And
as was provided in respect to the Fed
eral Reserve Banks, II the initial cap
ital is not wholly thus provided, Il
should be subscribed by the Federal
Government; and further somewhat as
was provided in the case Of the Fedora
Land Banks, other institutions using
the facilities Of the discount bank
should be required to purchase from
time to time from the Government some
proportionate amount of its holdinyi
of stock II there be any. In this man
ner any Government capital will grad
ually pass over to provide ownership, as
was the case in the Federal Land
Banks.
"The above details of the propose
are put forward as suggestions in
order. to give clarity to the centfa,
idea rather than as infiexible conclu-
sions. The whole plan would neces-
sarily be subject to the action Of Con-
gress and many parts Of 1t will no
doubt need development
There is no element of imitation in
the plan but simply better organiza-
ton of credit for these purposes
This proposed institution does no
In any way displace the National Credit
Association, which occupies an entirely
different field of action"