Evening star., 1934-01-10
Special Message Cites Moral
Obligation on Principal
of Securities.
SAME ACTION IS STUDIED
FOR HOME LOAN ISSUES
Tentative Drafts Of Proposed Bill
Are Already in Hands of
Congress Leaders.
BY G. GOULD LINCOLN.

President Roosevelt today proposed
to Congress that the Government
should guarantee the principal of the
$4,000, 100000 bonds already authorized
for the refnancing of farm mortgages.
The interest of these bonds is already
guaranteed by the Government.
In a special message to Congress,
his first since he delivered his address
at the opening session last week, the
President declared a "mc-al obliga-
tion" on the part of the Government
to guarantee these bonds.
The action contemplated would put
the bonds. on par with the issues
of securities by the Treasury Depart
ment. The purpose of the proposed
move is to make the agricultural credits,
authorized under the farm relief act
of the last session, work"
The Government under the original
$4,000, 100000 bonds for refinancing
farm mortgages, guaranteed the inter-
est on the bonds-but failed to guar
antee the principal.
Also Considers Home Bonds.
The Presidents message was exceed
tngly brief and dealt with the subject
OF the tarm mortgage bonds alone. He
is expected to send to the Senate later
today or tomorrow message urging
speedy ratification OF the st. Lawrence
waterway treaty with Canada
In line with the Presidents recon-
mendation that the Government now
guarantee fully the farm mortgage
bonds, it is understood he is consider
ing the recommendation that the Gov
ernment also guarantee the principal
of the $4,000, 100000 home mortgage
bonds of which Congress authorized the
issue to refinance home mortgages. The
Government guarantees the interest on
these home loan bonds now.
In his message today. the President,
commenting upon the responsibilities
which the Government would assume
in guaranteeing the principal of the
farm mortgage bonds. said
1T Is true that technically the re-
sponsibilities of the Government will be
increased by the amount of S2,0O0,-
100000, but it seems in every way right
that we thus publicly acknowledge what
amounts already to moral obligation.
In any event the securities to be of
fered are backed not only by the credit
Of the Government, but also by physical
property of very definite value"
Opposition Possible.
Tentative drafts of the proposed farm
mortgage bill, under which the Govern
rcent would guarantee the principal as
well as the interest on the farm mort
gage bonds, were sent several days ago
to the Capitol. Whether the measure
will be introduced in the Senate and
House by the Democratic leaders, Sena-
tor Robinson of Arkansas and Repre-
sentative Byrns of Tennessee, or by
the chairmen of the Banking and Cur
rency Committees will be determined
later.
While administration leaders pre-
dicted the bill would go through as
the President requested, it was admit
ted in some quarters that there might
be serious opposition to having the
Government assume this added re-
sponsibility. The legislation put through
at the last Congress for the ref1nancing
of farm mortgages had omitted this
guarantee of the principal in the hope
and expectation that such guarantee
would not be necessary.
The very fact, however, that this
added guarantee may be essential to
bring about a successful operation of
the refinancing of farm mortgages to
aid the many distressed farmers in the
country, is believed to be strong
argument in favor of prompt and ia
vorable action on the Presidents rec
ommendation.
Originated in Senate.
Under the operation of the measure
proposed by the administration a cor
poration would be set up with $780,
coo, 900 capital to administer the farm
credit bonds. The corporations board
of directors would be headed by Gov.
William l. Myers of the Farm Credit
Administration.
The original authority for the issu-
ance of farm mortgage bonds, was car
ried in the agricultural adjustment act,
passed at the special session Of Con-
gress last Spring. 1t was placed in the
bill by the Senate as an amendment to
the measure, and was handled in the
Upper House by the Banking and Cur
rency Committee. On the House side
this farm relief legislation has been
handled in the past by the Committee
on Agriculture.
The President has agreed that the
home mortgage bonds should be treated
on all fours in the matter of Govern
ment guarantee with the farm mortgage
bonds. In a conference with Chair
man Fahey of the Home Loan Board,
the President is understood to have
made such declaration. The Presl-
dent Is reported now to be considering
a recommendation with regard to the