Evening star., 1939-10-07
Fahey Would Limit
Home Loan Interest
Rates 10 s. Pct.
Declares Reductions
Go Long Way Toward
Restoring Confidence

Interest rates of per cent to 5a
per cent should represent the maxi
mum home seekers are asked to pay
for money with which to build, John
H. Fahey, chairman OF the Federal
Home Loan Bank Board, declared
today.
Moderate interest rates and liberal
long-term, amortized loans have
gone a long way toward restoring
public confidence in home owner
ship, he said, and it is up to lending
institutions to increase that con-
f1dence by exerting every effort to
meet the needs of people of modest
means" and to educate the public
to the value Of simple loan con-
tracts and what they mean in actual
economies to the home owner" in
contrast to contracts which contain
hidden commissions, fees and other
charges.
The stiffening of interest rates
and the changes in mortgage prac-
tice which developed during the
World War should not and are not
likely to follow the same pattern
at this time, Mr.. Fahey warned. AS
compared to "the muddled business
thinking" Of 1914, a clear-cut reali-
zation of the Nations problems is
apparent today, he said, with condi-
tions radically different from those
We confronted when the World War
broke and those which developed
later"
Strongest Financial Mechanism.
THE Federal Reserve System had
then been in existence but a COM
paratively short time" said Mr..
Fahey, land neither our banks nor
our business institutions were or
ganized to deal promptly with
strange conditions. Today the Fed
eral Reserve System is the strongest
piece of financial mechanism man
has yet devised, now so implemented
SO far as its discount powers are
concerned that it is almost impos-
sible to conceive of a national need
1t could not meet. Our commercial
banks have reserves never dreamt
OF and more money available for
use than any one ever thought of
only six years ago. The Reconstruc-
tion Finance Corp. has at its COM
mand great unused sums of money
which may be loaned to meet any
reasonable need which cannot be
satisfied through the banks.
In 1914 the stock exchange panic
aggravated our troubles. No real
danger threatens in that direction
today. The exchange itself has
made effective many policies which
insure greater stability, while a
vigilant Securities and Exchange
Commission and a better informed
public opinion provide further safe
guards against excesses. The Fed
eral Deposit Insurance Corp. and
the Federal Savings e. Loan Insur-
ance Corp. have given to depositors
in banks and to the savers who en-
trust their money to thrift institu-
tions such confidence that there is
little likelihood of the appearance of
a fear complex. The farm mortgage
situation has so improved since 1888
and the resources of the Farm
Credit Administration are such that
there is no occasion for concern
about meeting the mortgage lean
needs of our farmers.
Last but by no means least, the
growth and strength of the Federal
Home Loan Bank System are ap-
parent to all who examine the
home-flnancing structure critically.
The system has plenty of cash to
meet any needs of its member in
stitutions for a long period and
the members generally continue to
receive savings in increased volume.
The savings of our people which
seek employment in the home mort
gage field are greater by billions
than at any time in our history.
Price Adjustments Seen.
What does this mean so far as
home mortgage interests rates and
loan terms are concerned? 1t is
indeed probable that price levels
IN this country will move upward in
some directions: Some prices have
been too low and adjustments have
already been made. Others will
doubtless follow but it is doubtful
If prices will be allowed to get out
of hand as they did during the last
war. If that tendency develops the
public will unquestionably demand
restraints. Business itself should
see to it that the occasion for leg
1slative action does not arise. AS
for the price of money, there is at
present no prospect of a significant
rise in view of the abundant supply
available for all purposes. The
chairman of the Federal Reserve
Board has already made it clear
that the country is assured of a
supply of funds more than ade-
quate to meet every credit demand
that may be expected to arise as
a result of the war. The same con-
dition applies so far as savings and
home mortgage money are con-
cerned.
"The reduction of interest rates
on home mortgages which has taken
place in the United States in the last
five years is one of the most out
standing incidents in mortgage lend
ing history. 1t represents today an
annual saving to home owners of
at least $5O0,000,0O0. It is clear
that the leadership of the Federal
Government made this possible but
enterprising, foresighted lending in
stitutions, as well as very active COM
petition. contributed in a large way
and none more than savings and
loan associations. 1t is a record of
service Of which the associations
have right to be proud
IF today and for an indefinite
future mortgage lenders receive S
per cent to 51a per cent on home
loans, the prospect is that such
rates, generally speaking, will rep
resent about the maximum the pub
lie expects to pay. In my opinion,
institutions which adjust their
policies accordingly will be pursuing
q Uise co,1rce