Evening star., 1933-11-12
MADISON PRAISES
LAND BANKS WORK
IN 17-YEAR PERIOD
Former Virginia Banker Sees
Orderly Liquidation and De-
pIoreS Criticisms.

j. B. Madison, former member of the
F, Federal Farm Loan Board and former
| president. of the Virginia Joint Stock
Land Bank, believes that the closing
chapter in the work of the Joint Stock
Federal Land Banks is now being writ
ten. In comprehensive analysis of the
present status of these banks. he dis
cusses the orderly liquidation of the
system, which was prescribed by Con-
gress in the emergency farm mortgage
act of 1888, and at the same time de-
plores many of the misconceptions re-
garding the workings of this rural credit
organization.
Mr.. Madison, who now heads an in
restment firm of his own, declares that
the methods OF ths Joint Stock Land
Banks have been little understood and
that many unjust attacks have been
the result They have been described
as financial vultures" anxious to prey
on helpless borrowers, he asserts. fore
ing foreclosures OF loans so that pos
session of mortgaged farms might make
later sales bring higher prices to the
stockholders, the proceeds to be used
In purchasing their ow nbonds at dis
count
Little has been told of the good work
of these banks, he says. They were
organized only after long study had
convinced Congress that there was a
definite need for them. The farm loan
act of July Z, 1916, made these banks
, possible. They were at first bitterly
opposed by other mortgage companies
and in their early years were forced TO
spend a great deal of money In defend
ing that part of the act which made
their bonds exempt from taxation
Majority Chartered in 1922.
Most of the land banks were char
| tered in 1922 and began to operate at
| a time when farm values were at their
| peak, Mr.. Madison continues. Loans
were based on earning power and the
| sale value of farm values at time
| when there was a great deal of the
speculative element.
| with the great decline that has since
come about in the prices for both farm
products and lands" Mr. Madison says
''and the further fact that those Things
which the farmer must buy have not
correspondingly receded in price, plus
| the eve~- ~-burdensome taxes assessed,
| there have been thousands upon thou
! sands of farm failures, bankruptcy ano
1 wholesale abandonment with the result
| that Joint Stock Land Banks like others
similarly engaged have been compelled
to take over a great volume OF real
| estate which they must operate, NAM
! tain or dispose of in market that spells
sacrifice
Furthermore, the banks have been
and are compelled to carry a tremen-
dous number of delinquent loans. 1t Is
! believed that a conservative estimate
| would be that more than go per cent
| of all loans held by Joint Stock Land
Banks today are in default as to the
payment of matured amortization in
| stallments of principal and interest, and
| that due and unpaid taxes upon such
| mortgaged lands will equal in amount
a liberal percentage of the unpaid prin-
| cipal of said mortgages. These taxes
| constitute lien prior to the Joint Stock
Land Bank mortgages"
Two Ways to Obtain Funds.
Mr.. Madison announces that the in
! dividual banks of the Joint Stock Land
Bank system now can obtain only funds
necessary to make up the difference be-
tween the receipts from mortgage loans
! not delinquent and the amount needed
| to meet interest to the bondholders from
I one of two sources. They can borrow
from local banks or from the Recon
struction Finance Cooperation. undei
collateral requirements, or sell assets
at sacrifice prices.
In addition the emergency act pro-
vides for refinancing of Joint Stock
Land Bank loans by and through the
Federal Land Banks, so that in repay
ment the former banks would receive
either cash or per cent consolidated
bonds of the Federal Land Banks. This
avenue in the opinion Of Mr.. Madison
is the most practical way out. although
it presupposes that the Joint Stock
Land Banks will discount their mort
cages when new loan appraisals are
made on the basis OF normal lanc
| values.
TT was the policy of the Federal
Farm Loan Board and is the policy
it is believed, of its successor, the Farm
Credit Administration, to co-operatf
with and aid Joint Stock Land Banks
in every way possible in the solution
of their ever-growing problems" Mr.
Madison says.
During the II years in which joint
Stock Land Banks have operated they
have loaned over $9o0,0o0,000 to some
10000 borrowers"