Evening star., 1932-02-20
HOME LOAN BANK
PLANS ANALYZED
Measure Before Senate Com
mittee Studied by Building
League President.

While decision by the Senate sub
committee headed by Senator Watson
OF Indiana on the proposal to establish
a system Of Federal home loan banks
is being awaited by interested national
groups, an analytical summary Of pro-
visions Of the measure has been sent
to the As State organizations of the
United States Building and Loan
League by its president, William E..
Best, Pittsburgh.
Extensive arguments were made by
beth friends and foes of the measure
this week when hearings were resumed
before a subcommittee OF the Senate
Banking and Currency Committee
This brought out a restatement of the
many points made in earlier hearings.
1t is anticipated the hearings will
be concluded after one more session. to
be held at the call Of Senator Watson
probably early next week.
High Lights Emphasized.
The summary of the measure as pre-
pared by the head of the Building and
Loan League. lists the following points:
Il. The bill will create system Of
II Federal home loan banks in dis
trictS determined by the Federal Home
Loan Board
%. Building and loan associations,
cooperative banks, homestead associ-
ations, savings banks, trust companies,
banks with time deposits and insur
ance companies. if subject to inspec-
ton and regulation, are eligible for
membership. The members supply the
permanent capital and upon becoming
members subscribe $2,500, plus l per
cent OF the mortgages eligible for COL
lateral or discount. This subscription
can be paid on a quarterly basis. and
immediately upon payment of the first
quarter, a member Is eligible to borrow
II times its subscription.
Eligible institutions in States whose
laws do not permit stock purchase are
admitted through the waving of these
requirements under procedure prescribed
in the bill. All member institutions are
subject to examination, although State
examinations are accepted, If adequate
Members may withdraw under provi-
sions similar to those in the Federal
Reserve act.
Minimum Capital S5,000,O00
"3 Each of the II banks will start
with a minimum capital of at least
S5,000,000. Subscriptions are to be
opened and at the end of 80 days the
subscriptions are to be totaled and the
Government subscriptions to stock bring
the total initial capital for all II banks
to S150,O00,000. The Government sub
scription Is merely an advance and is to
be repaid as additional institutions Join
the system. An early retirement of the
Government capital Is anticipated by
the provisions Of the bill
-. This board is to consist Of five
members appointed by the President,
with six-year terms; one member of the
board to be designated as chairman
This board exercises supervisory control
over the general activities including the
issuing of bonds. the capital of the in
dividual banks. the membership qualifi-
cations. the rates of interest on notes.
debentures and bonds. the conditions for
the borrowing of money, etc.
IS. Each Federal Home Loan Bank
has a board Of II directors, nine Of
whom are elected by the members and
two appointed by the Federal board.
The nine members represent three sizes
or classes Of participants, so that small,
medium sized and large members are
all represented on the board of each
bank. Each director serves for three
wears. Directors are appointed by the
Federal board. should individual mem
bers Of the bank hold capital amounting
to less than 100000.
Directors Compensation.
THE directors compensation is deter
mined entirely by the banks themselves
and only persons connected with the
home financing business are eligible to
be one of the nine directors elected by
the members. The board of directors
must administer the affairs of the sew
eral banks fairly and impartially and
extend to members such advances as
may be safely and reasonably made with
due regard to the maintenance of ade-
quate credit standing of the Federal
Home Loan Bank and its obligations.
"6 The bill assumes, as does the
Federal Reserve act, that 1t can best
serve the small savers and the home
owners by serving the home financing
institutions In all the small towns and
cities in the United States. These home
financing institutions are primarily
building and loan associations. and the
small or country banks.
THE mortgages, which the members
may place as collateral. are divided
into two classes: 1 Amortized. or
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