Evening star., 1933-10-17
j. s. CONSERVAT0RS
FORBIDDEN TO BUY
HOME LOAN BONDS
Uncertainty on Order Re-
qarding Exchange of Mort
cages Cleared Up.
RECEIVERS MAY ACT
IN INTEREST OF TRUSTS
Announcement of General Policy
Issued by Controller of Cur
rency September %.

Treasury-appointed conservators of
mite instructions from the Treasury
Department not to acquire bonds Of the
Home Owners Loan Corporation, it
was admitted at the department today.
Although instructions to this effect
in the cases of receivers of closed
banks, issued September 6, subsequently
we're rescinded, the order continues TO
apply to conservators, j. E. Fouts, su-
pervising receiver and conservator in
the division of insolvent banks, de-
clared.
Oficials of the Home Owners Loan
Corporation had been under the i'm
preston conservators had been given
volving exchange of mortgages for the
per cent Government bonds on their
respective merits.
Zepp Held Within Rights.
A spokesman in the Office of the con-
troller of the currency said Wilbur II.
Zepp. conservator for the United States
Savings Bank here, was within his
rights when he declined to negotiate
with the Washington office of the Home
Owners Loan Corporation in cases in
GlldU UdllA 44SAo 41Aoo 2tASA soNoSS
on which home owners had asked FED
eral aid.
Upder date Of September 6, all ma
tcflal bank receivers and conservators
IWere notified that "the conclusion has
been reached that due to the functions
and obligations imposed by law in con-
nection with the liquidation Of insolvent
national banks, it would not be appro-
pirate at the present time for such
bonds to be acquired by receivers. AS
the acquisition of the bonds by con-
servators of closed national banks rep
resents substantially the same problems,
from the standpoint of liquidation. as
in the case of receiverships, the same
decision has been reached with refer
ence thereto. Receivers and conserva-
tors will therefore please be guided
accordingly"
The letter was signed by Mr.. Fouts.
Subsequently, on September %, the
controller of the currency, j. F. q.
O'Connor, notified Chairman William F.
Stevenson of the Federal Home Loan
Bank Board. Of the adoption OF gen.
eral policy permitting receivers to ex-
change their mortgages for bonds where
under the circumstances Of the particu-
lar case such course seems to be to the
advantage of the trust.
Overhead Expense Mounts.
Since the original order, O'Connor
said, 1--WE have been getting rather
positive reaction from receivers in varl-
Gus sections of the country. indicating
that In their opinion it would be Tor
the best interests of their trusts in many
instances to exchange their mortgage
assets for the Home Owners Loan Cor
poration bonds. They have pointed out
that due to present economic conditions,
an abnormally large number OF mort
cages have accumulated and that the
overhead expense involved in servicing
these mortgages, taking care OF interest
and taxes, and attending to other de-
tails in connection Herewith, is tend
ing to mount up into substantial pro-
portions and that in view of this situa-
ton and Of the further fact that a
market Is being established for the
bonds and that the market for the
mortgages of the mortgaged properties
is abnormally slow it would
be advisable to adopt at this time
general policy of permitting receivers
to exchange their mortgages for bonds
where under the circumstances of the
particular case such course seems to
be to the advantage of the trust"
The communication made no men
ton whatever of conservators.
The Treasury Department has issued
q circular saying the bonds will be ac-
cepted at par as collateral security
against deposits and the Reconstruction
Finance Corporation has agreed to ac-
cept them as collateral security on loans
at 80 per cent of their par value.