Evening star., 1933-01-28
Special Dispatch to The Star.

NEW YORK, January pa novel
plan for combating imitation and at
the same time relieving the present
embarrassment of debtors has been for
mulated by DR.. Rufus S. Tucker. dis
tinguished American economist. 1t has
the support Of other members Of his
profession who have studied it. The
main features Of it are herewith pre-
sented.
DR.. fuckers thesis is that imitation
now would be ruinous and that some
practical plan is necessary for meeting
conditions which the inflationists en-
phasize.
If imitation were carried on vigor-
ously enough to affect the price level
and benefit debtors" he says. lit would
almost certainly cause the failure of
most Of our banks. by reducing the
value of their bond holdings and caus-
ing runs by depositors wishing either
to hoard their money or to speculate
with it. It would still further un-
balance the Government budgets, both
national and local. It would make all
business mad speculation. leading in
some cases to excessive paper profits,
but in most cases to bankruptcy"
R.F. C. Co operation Needed.
His plan is to permit every owner of
first mortgage on farm or residential
property to sell his mortgage to the
Reconstruction Finance Corporation in
exchange for l5-year 2 per cent taxable
Government bonds. The principal
amount of these bonds is not to be in
excess of the principal amount OF the
mortgage. nor over so per cent of the
fair value of the pledged property in
1929. after deducting unpaid taxes, nor
more than 80 per cent of the present
fair value of this property
The mortgages transferred to the
Government would, under the Tucker
plan. continue in force but subject to
certain notifications There would be
a sliding scale. for instance. in interest
rates ranging from 3 per cent the first
two years, per cent the next three
years. and 5 per cent for the remain
ing 10 years. All payments on ac-
count Of principal, unless voluntarily
made, would be deferred for five years.
The unpaid principal would be Hqui-
dated in 10 equal annual installments,
beginning in the sixth year. and be
wholly repaid at the end of the fif-
teenth year. when the 2 per cent Gov
ernment bonds mature
The purpose Of the reduction in in
terest and the postponement of pay
ments on principal is to enable debtors
TO weather the depression and to re-
adjust themselves to new conditions. It
is accepted that marginal farmers and
the owners of badly Located or ill
planned urban real estate will not be
saved by this plan" 1t Is recognized,
too. that while creditors take a paper
loss they gain in security and liouidity
and their purchasing power would be
much stimulated. The plan also helps
local taxing bodies, as it releases funds
that may be available for payment of
delinquent taxes.
Estimate Of Mortgages.
DR.. Tucker estimates that the total
OF rural mortgages Is approximately
$40, ,000, 100000, and those on urban
residences about $l5.000, ,000. 900. Under
these circumstances it Is estimated that
10000 900, 900 of per cent bonds
might, be necessary to carry the plan
to a successful conclusion. It Is pointed
out that as these bonds are given in
exchange for mortgages they do not
constitute an increase in the outstand-
ing Government debt. They represent
genuine self -hduidating enterprise
and are covered by tangible assets.
They do not compete in the market
with existing Government bonds, as
they are not tax exempt and carry no
circulation privilege. It Is argued that
the financial institutions receiving these
2 per cent bonds in exchange for their
mortgages would have strong motives
for holding them until their market
value approaches par in order to avoid
taking an actual loss on the books.
The machinery for working out this
plan would be under the direction of
the Reconstruction Finance Corpora.
tion, with the stats of the Farm Loan
Bank and the Home Loan Bank as
sisting in making appraisals. It is
pointed out that it would not be neces-
sary or desirable for these lending or
gan1Zations to refund all Of their exist.
ing loans, . considerable portion of
which are identified with either farm
or residential mortgages.
While the Tucker proposal Is con.
cerned mainly with real estate mort
cages, it might be applied to the rail-
roads which are now being relieved
by loans from the Reconstruction FL
nance Corporation, such loans adding
to permanent debt and thereby effect
ing no improvement In the credit struc-
ture. This would involve the same sort
Of exchange of existing railroad bonds
for per cent Government bonds and
provide the carriers with . period Of
respite during which they could adjust