Evening star., 1933-01-28
LEADER DEFENDS
HOME LOAN BANKS
Associations Admitted to Sys'
tenn Sound, Declares
League President.

Each building and loan association
admitted to membership in the Federal
Home Loan Bank System is financially
strong institution, Ward B. Whitlock,
Springfield, ILL.,, president of the
United States Building and Loan
League, declared today.
The statement was issued to correct
q mistaken conception in some quar-.
ters, he said, that the system is sort
of benefit society" to bolster up finan-
cial institutions, an idea that de-
veloped because the law was passed by
Congress as a part Of its program Of
relief legislation.
"Only the sound institutions are par
ticipating in the Home Loan Bank
System today and thousands equally
sound are waiting to use the facilities
of the regional banks when their ap-
phcations are approved and the tenn
porary barrier raised by State laws has
been eliminated" said Mr.. Whitlock.
There is no place at all in the sys-
tenn for membership of any institution
which may have gotten itself into
trouble with unSound credit practices
and now as last resort tries to save
the day by borrowing money.
Safeguards Are Taken.
'The practical home f1nanciers gov
erning this system and its units have
acted on the theory that q weak in
Stitution which tries to solve its prob
lens by going deeper into debt eventu-
ally becomes a distinct liability on the
financial community. By its policies
Of strict examination for participating
associations, the system is retailing
its funds through those which have
been tried and proved sound, and is
thus seeing to it that the home financ-
ing done in 1888 and the years to
come will be by sound institutions.
In addition to its fundamental pur-
pose of expanding home-owner credit,
the new system Is designed to en-
courage the loaning activities Of the
sound institutions. Therefore, it is un-
thinkable that credit institution with
the permanent responsibility Of the
Home Loan Bank System should try to
perpetuate any of the weak units in
the financial structure by giving them
a temporary blanket for the mistakes
which may now be resulting from past
unsound practices.
Idea Called Wrong.
1.-THE idea that there is some weak
ness about an institution which uses
credit is entirely erroneous and out Of
line with our present credit economy.
Quite the contrary, any association
which belongs to the system has DEM
cpstrated its strength. As matter of
fact, the building and loan associa-
tions, rather than getting dole, are
putting a substantial amount OF their
own money into the Home Loan Banks
when they become members, by buying
capital stock equal to one per cent of
their assets.
Their participation in the credit IA
cilities Of the system in this instance
is a major effort to be of greater
service to the community, to have
funds for making loans, which have
been lacking in the past two years be-
cause savers did not have much money
to invest, and because those who had
saved in many instances were forced
to fall back upon their 'rainy,day'
funds. Inability Of these associations
to make new loans in the depression
their financial soundnesS, as the in
vestigations of the Federal Home Loan
Bank System have shown.
Private capital will be required to
keep the Home Loan Banks function
ing as the chief reservoir of credit
for the local home financing institu-
tions. The banks will issue bonds to
obtain these funds for their opera
tions. Since the strong institutions
are the ones participating in the Home
Loan Banks, there is every reason to
believe that the bonds will find a ready
market. It is important that the pub
lie get clear once and for all that no
home financing institution seeking a
dole Is being allowed to participate in
the Home Loan Bank System"