Askov American., 1940-05-02
Thousands Hear
Secretary Wallace
CONTINUED from Page ~

"The revaluations and reappraisals
made in 1888 and 1884 helped put
farm credit on a sounder basis. But,
experience has demonstrated, that
these revaluations and reappraisals
were not realistic enough. There were
soft reappraisals. In thousands upon
thousands of instances, high valua-
tions bailed out the creditors but left
the farmers with debts they can
never pay. To use banking term,
this sort of thing might have made
the position of banks and insurance
companies more liquid, but it failed
to help the farmers and the credit
structure of agriculture.
Cites Figures on Debt Situation.
"Some of the figures on the farm
debt situation are more revealing than
loose statements about private enter
prise and soft credit:
(1) The land banks and land bank
commissioner have foreclosed over
1000 loans since 1888, including vol
untary deeds to avoid deficiency
judgments; last year more farmers
were foreclosed by the land banks
than by any other class of creditors
holding farm mortgages.
(2) More than 250,0OO loans, or
approximately 25 per cent of the
total are now delinquent; the delin-
quency increased steadily in 1887,
1888 and 1899.
60 The stock in 60 per cent of the
3,700 National Farm Loan Associa-
tions has been wiped out or so badly
impaired that loans no longer can be
made through the Associations.
'It should be emphasized that these
losses of capital investment are not
the fault of the officers or directors
of the National Farm Loan Associa-
tions. Nor is it the fault of the asso-
Citations that they have been unable
to perform the services for which
they were originally intended. The
lending policies of the farm credit
system have not been realistically
related to the national and interna-
tional situations which have affected
farm income, but, as stated, this
was not the fault of the local associa-
tions. Governor Black of the Farm
Credit Administration already has
taken steps to meet-as well as he
can with existing authority-the sit
uation shown by the figures I have
quoted and by other pertinent facts
$4,000 Loans Re-Amortized.
"Wherever possible he has reor-
ganized to keep loans on a sounder
basis; and this has relieved some of
the heaviest debt pressure. About
$4,000 loans, most of which were un-
wisely written for relatively short
term repayment, have been re-amor-
tized. New repayment programs have
been worked out for several thousand
of the most heavily indebted farmers.
Some of these borrowers will make
payments according to their income or
crop yield. The Farm Security Ad-
miniStration is being asked to help
those who are in very bad financial
condition but who still have chance
to pay out
But these measures cannot solve
the underlying problem. In the light
of experience there are at least three
basic needs. The first of these is
revision of interest rates. They
should and can be lowered from orig
inal contract rates ranging between
four and six percent. Instead of
weakening, this action will strengthen
the land banks since debtors will be
better able to pay.
Second, the responsibility for
losses on loans should be placed where
it belongs-on the Federal land banks
which make the loans and not on the
national farm loan associations, most
of which have become insolvent. AS
l have stated, most of the losses to
the associations were incurred not
because of poor management or the
attitude of its directors or officers,
but because of factors largely beyond
their control.
Eliminate Borrowers Stock.
"a third need is the elimination
of the requirement that the borrower
acquire stock amounting to five per-
cent of his loan. In practice, this
requirement has added per cent to
the amount borrowed and has injured
the debtor. A farmer needing 81 900,
for example, had to borrow $1050.
Because of this situation the farm
debt of the country is Sill 100000
higher than it otherwise would have
been. This 100000 of added
debt has not protected the associa-
tions. The quicker we get rid of this
pseudo-cooperative feature of the
present system, the better off we
will be-
81 feel sure that when farmers
understand what is going on they
and the organizations which rep
resent them will support moves for
sound credit and away from soft
credit. When land bank interest
rates are high other creditors are in
a position to charge farmers rates
that are too high-regardless of how
many farms are foreclosed as a result
The reasons for much of the opposi-
ton to low interest rates to farmer.
| cbo,,ld bo cloorlu understood bu forr,