Evening star., 1936-06-02

The release of these frozen assets IN
payment of creditors claims bene-
flied business in general, helping the
city dweller and the farmer, too.
Foreclosure Rate Dropping.
In farm communities where lack Of
confidence had increased foreclosure
sales to the highest rates on record
nearly 40 foreclosures per 1000 farms
in the year ending March, 1888
the new financing and the payment
of credit claims began to show It's
effect. After three years the farm
foreclosure rate had almost been cut
in half. and that rate continues to
go down.
In three years, the Farm Credit
Administration has directly reduced
the interest rates of l in every 3
mortgaged farmer; and out Of every
SO the average farmer paid on in
terest before refinancing, he now pays
cnly So and the other 81 stays
in his own pants pocket. The total
saving as a result of refnacing and
temporary interest reduction pro-
vided BY Congress amounts to more
than $68OO0,0OO this year. Other
farmers with mortgage debts have been
indirectly benefited by the competitive
effort of refinancing at lower rates.
That part of the national farm in
come required to pay mortgage in
terest has been cut in half since
1898, and a smaller part of the farm
er's income now goes to pay mortgage
interest than at any time since 1929.
Short Terms Decline.
The work of the Federal land
banks in making loag-term mort
gage loans has set an example for
other creditors, and the short-term
farm mortgage as national insti-
tuition is on its way to join the dodo
bird.
No one ever expected the average
farmer to pay for his place with one
or two crops. Yet before the depres-
sion the vast majority of farm mort
cages were made for short periods of
or 3 years. years at the most
with renewals costly and uncertain.
We have known for long time that
it takes at least to 10 years for
farmers gross income to equal his
capital investment Consequently. the
farm mortgage should be made for
at least that term or longer If it is to
be repaid out of net income. Under
the Farm Credit Administration over
half million farmers have con-
verted their short-term obligations
INTO loans running from l3 to 30-odd
years. These loans are amortized with
annual or semi-annual payments, but
may be repaid faster at the option Of
the borrower.
Not only is agriculture in very
much improved position from the
standpoint of what it receives for its
products, but the total farm on the
mortgage debt is actually smaller.
From all the ref1nancing activities of
the Farm Credit Administration, con-
cerning which the public has heard so
much during the last three years, 1t
would be very easy to get the impress
sion farmers were increasing their in
debtedness materially and shouldering
a burden of debt from which they
would not be able to work out. How
ever, these facts are not the facts.
Back in 1928 the farm mortgage debt
was around nine and half billion
dollars. Now it is about seven and a
half billion dollars.
Turnover Each Generation.
When we speak of the farm mort
gage debt Of the United States we
must remember that there is turn
over in the ownership of farms
every generation. An increase in farm
mortgage debt does not necessarily
mean that the same farmers are going
deeper into debt but that the next
generation is taking over. AS every
one knows. the days of free land
and homesteading have long since
been passed. The mere sale OF q
property nowadays frequently creates
a debt against it to be carried by the
new owner, or when a young man in
herits a farm he may have to pay OF
the other heirs, and to do so, goes
into debt. When farmers graduate
from the tenant class into the owner
class they usually have only money
enough to make down payment and
therefore assume Indebtedness against
the property. At present, about two
thirds of the farms are free of debt.
Now let me tell you something about
the formation of the production credit
system of the Farm Credit Admin
istration and how it has operated over
the two-and -one-haif years since we
first started to set it up. A good many
dubious persons said, in the begin
ming. this was an experiment and in
ferred that the experiment would turn
out badly. I can tell you quite hon
estly it has worked out to the fullest
measure of our most optimistic hopes.
Background Of Step.
First. I invite you to 60 over with
me little background. Following the
few boom years Of the great war and
down to the depression, there were not
sufficient reservoirs of production
credit to serve the business needs OF
all farmers. In many regions credit
needs exceeded local savings. I may
sum up the situation by saying that
throughout the United States, in all
regions occasionally and in some
regions habitually, the legitimate
credit needs of agriculture were not
fully met by private agencies.
1t was not without reason, then,
that the Congress which enacted the
farm credit act incorporated therein
credit system designed to be perma-
nent, to embrace farmer-borrowers as
cooperative members and geared to
meet every short-term credit require
ment Of agriculture everywhere that
could be handled on business basis,
in sparsely settled territory as well