Evening star., 1939-05-06
enhancing
Units Held Ready
To Meet Crisis
Chairman of +. H.L B. B.
Traces Growth of
Credit System

After nearly seven years OF steady
growth and development, the Ma
tion's credit reserve structure for
thrift and home-finarcing insti-
tutions may be relied upon to meet
any possible financial crisis such as
that of 1888
This was the import of a state
nent made today by Chairman John
H. Fahey of the Federal Home Loan
Bank Board, which traced the
growth of the system established
by Congress in 1882.
"A strong home credit reserve
system is the only guarantee we can
have that a new Home Owners Loan
Corp, making direct loans to citi-
zens practically overnight, will never
need to be established" he said.
The H. o. L. c. to which Mr.. Fahey
referred was authorized by Congress
in 1888 at time when hundreds of
homes were being foreclosed upon
daily and when many of the coun-
try's home financing institutions
had become frozen and imperative
In all the H. o. L. c. advanced more
than $4,000 100000 to save million
American homes.
The establishment of the Federal
Home Loan Bank System, Mr.. Fahey
said, came too late to meet the
crisis of 1888 And, he pointed out,
H. o. L. c. overshadowed the less
spectacular organization. established
as a permanent institution to meet
future crises.
Unites 1881 Institutions.
Today, the chairman stated, the
bank system has grown to the point
where it unites 3,951 thrift and
home-flnancing institutions, with
assets of more than S4,400 900 900,
into the largest and most compre-
hensive mortgage reserve system in
the world"
Although in the first six years
Of the Federal Home Loan Bank
Systems existence it has entirely
new sources of home mortgage
credit" Mr.. Fahey said, stabilized
the home-financing structure of the
country and effected widespread i'm
provement in the standards of thrift
institutions. its potential power in
promoting safety for savers and eco
nomical home ownership has only
begun to assert itself"
The bank system, he explained,
was established to protect the saw
ings of the workers of the Nation
who are the principal investors in
vyiv sof
Following the pattern of the
Federal Reserve System, the Fed
eral Home Loan Bank System was
. permanent addition to the finan-
cial machinery of the United States,
intended to perform for the thrift
and home mortgage institutions the
same general reserve functions
which the Federal Reserve provides
for the commercial banks" Mr.
Fahey explained.
Just as the regional Federal Re-
serve Banks advance cash on sound
collateral to member banks, so the
II Federal Home Loan Banks fur
nish money to savings, building and
loan associations, cooperative
banks, mutual savings banks and in
surance companies against conser-
vative home mortgages.
Able to Transfer Funds.
Through it's inter bank opera
tions as need arises, the Federal
Reserve is able to transfer funds
from sections where there is a
surplus of idle money to areas where
It may be employed profitably to
the advantage of business and in
the public interest. The same valu-
able service is rendered in the home
mortgage field by the Federal Home
Loan Banks.
"Such credit operations are of the
greatest importance to the country.
The money thus made available on
reasonable terms makes possible the
employment of millions. Business
cannot go on without such serv-
ice and the welfare of all our peo-
pie Is affected by it."
Explaining the relationship of the
bank system to the national econ
omy. Mr.. Fahey said:
"The urban home mortgage debt
Of our country is the largest item
of private indebtedness in our ma
tional balance sheet, next only to
government, State and municipal
debt. Upon its careful protection
from wide fluctuations depend the
savings and confidence in home
ownership of millions
1T is also well to remember the