« PreviousContinue »
The policy of the Federal land banks with respect to loans is to grant all applications received which, in their judgment, meet the requirements of sound loans and which are eligible under the provisions of the Federal farm loan act, and the board is advised that the banks are encouraging applications of this character. In this connection, it may be desirable to review the loaning history of the banks to some extent in order that the decline in the volume of loans granted may be interpreted correctly. Except for the temporary recession during 1920-21, when the constitutionality of the law was being tested, the loaning operations of the Federal land banks expanded rapidly following their organization in 1917. By January 1, 1920, they had $294,000,000 of loans on their books, which constituted 3.7 per cent of the estimated total farm-mortgage debt in the United States. Five years later this volume had reached $988,000,000, or 9.9 per cent of the total debt, and by January 1, 1928, the latest date for which a Department of Agriculture estimate of the total debt is available, the volume of loans aggregated $1,156,000,000, or 12.2 per cent of the total debt. The largest amount loaned in any single year was in 1922 and since then, with the exception of 1926 and 1927, there has been a decline in the annual volume placed on the books.
As pointed out in the annual reports of the Farm Loan Board, the trend of new loans made by the Federal land banks has paralleled closely the trend in the volume of applications received. Statistical tables published in these reports show that approximately 66 per cent of the proceeds of all loans which have been submitted by the Federal land banks for approval as collateral for bonds was used to pay existing mortgages and about 11 per cent was used to pay other
. debts, thus making a total of approximately 77 per cent which was used for refunding purposes. Similar proportions of the loans made by joint-stock land banks were used for the purpose of refinancing existing indebtedness. Refunding operations in any substantial volume obviously could not be continued indefinitely, particularly in view of the fact that only a portion of the total farm mortgage indebtedness of the country is eligible to become loans of Federal land banks.
The farm loan act imposes definite limitations on loans which these banks may make. In the first place, they are limited to loans to borrowers who are at the time, or shortly to become, engaged in the cultivation of the farm to be mortgaged. According to the latest available estimates of the Department of Agriculture, approximately 41 per cent of the total mortgage debt of the country is secured by farms which are not owner-operated and which presumably therefore would be ineligible as the basis of loans by Federal land banks. A part of the mortgage debt also represents junior liens, while the loans of the Federal land banks are limited to first mortgages. The banks, moreover, are restricted to loans of $25,000 or less, and the law states that preference shall be given to loans of $10,000 and under. Further limitations apply to the purposes for which the proceeds of the loans may be used, the proportion of the appraised value of the land and improvements that may be loaned, and the basis of determining appraised value. In view of the fact, therefore, that the amount of loans eligible is thus definitely limited by the safeguards prescribed in the law, and in view of the fact that ordinarily most of the loans are made for refunding purposes, a decline from the volume of the first years of operations was inevitable. Furthermore, as no loans can be made in excess of 50 per cent of the appraised value of the land and 20 per cent of the appraised value of the permanent insured improvements at the time the loans are made, the dollar volume necessarily has been affected by the decline in farm-land values in recent years.
Data assembled by the Department of Agriculture show that the number of farms changing hands voluntarily has declined during the past five years, beginning with 29.6 per thousand in 1926 and decreasing thereafter to 23.5 per thousand in 1929 and 23.7 in 1930. In view of the relationship between real-estate transfers and the need for farm-mortgage financing, it is apparent that this reduction in real-estate sales activity has been a contributing factor in the decrease in applications received and loans closed. It may be pointed out also that many of the sales being made do not require special financing by an outside agency for the reason that involuntary holders, in disposing of the farms owned by them, frequently accept as a part of the consideration mortgages on the land sold.
Aside from the funds available from capital stock subscriptions, amortization, and other payments, the loaning operations of the Federal land banks are financed by the sale of bonds to the public. These bonds are exempt from Federal, State, local, and municipal taxation, but the Government has assumed no liability for the payment of either principal or interest. Each bank is primarily liable for its own bonds and, in addition, is jointly liable with the other Federal land banks, under the conditions stated in the law, for the principal of and interest on bonds issued by any of the other Federal land banks. The income of the banks is derived mainly from the difference between the rate of interest charged on loans and the rate of interest paid on the bonds, and, in accordance with the law, the current rate on new loans of each bank is limited to 1 per cent above the rate of interest borne by the last issue of its bonds.
The national farm loan associations are the principal stockholders of the Federal land banks, and on December 31, 1930, they owned 98.3 per cent of the capital stock of the banks, which on that date aggregated more than $66,000,000. Individual borrowers through the Porto Rico branch of the Federal Land Bank of Baltimore owned 1.1 per cent, individual borrowers through agents, 0.2 per cent, and the Treasury of the United States 0.4 per cent. In accordance with the provisions of the law, the original stock subscribed by the Treasury has been retired gradually from the proceeds of subscriptions for stock by national farm loan associations, with the result that the Government now owns no stock in 10 of the banks and owns only small amounts in the Federal land banks of Springfield and Berkeley,
The national farm loan associations, in turn, are owned and controlled entirely by farmers who have obtained loans from Federal land banks and who have subscribed for stock of their associations, as required by law, in amounts equal to 5 per cent of their loans. Each association must indorse and become liable for the loans made to its members, and each borrower's stock is held by the association to protect it on its indorsement of the borrower's note. In addition, this stock carries the double-liability feature. In the circumstances, it is readily apparent that losses resulting from unsound loans ultimately must fall upon the stockholder-borrowers and that it is very definitely to their interest that not only their local association but the entire Federal land bank system follow sound loaning policies.
The associations, it may be added, are more and more realizing their responsibility, that the Federal land-bank system was designed by the Congress to be a permanent agency to function in good times and bad, and that, if it is to continue to serve in the manner intended, each unit must be maintained in a strong financial condition. Both the banks and the associations have observed in recent years the effects of loaning policies which resulted in difficulties and losses, and naturally in the conduct of their operations they are endeavoring to avoid the mistakes of the past.
It is interesting to note in this connection the statistics showing the amount of farm mortgages held by 52 life-insurance companies holding 91.8 per cent of the admitted assets of all legal reserve companies, which were published in the Proceedings of the Twenty-fourth Annual Convention of the Association of Life Insurance Presidents (December 11 and 12,1930). These statistics indicate that the farmmortgage loans of these companies declined from $1,982,548,000 on December 31, 1927, to $1,886,000,000 on December 31, 1930, or a decline of almost 5 per cent. On December 31, 1930, the outstanding loans of Federal land banks were approximately $32,500,000, or 2.8 per cent greater than on December 31, 1927.
With respect to the volume of applications received and loans closed, it appears that in more than half of the districts there was a reversal in the trend during the last part of 1930. The total amount of applications received during the last three months of 1930, for example, was 37 per cent greater than the amount received in the corresponding period of 1929. This trend has been reflected also in the volume of loans closed. During the last three months of 1930, 3,230 loans were closed in an aggregate amount of $12,741,700 which compares with 2,966 loans in an amount of $10,420,700 closed during the last three months of 1929. The loans closed in December, 1930, were 46 per cent greater in total amount than those closed in December, 1929.
It can not be stated at this time, of course, whether this is a temporary development or whether the upward trend in applications will be continued for some time. In any event the banks report that they have ample funds to take care of adequately secured loans which meet the requirements of the law.
(5) A statement classifying the assets and liabilities of each Federal land bank separating real estate from personal property
Exhibit A, attached, consisting of a pamphlet published quarterly by the Federal Farm Loan Board, includes on pages 5 to 8, inclusive, statements classifying the assets and liabilities of each Federal land bank, as of December 31, 1930. The consolidated statement of the 12 banks appears on page 4. It will be noted that in the assets, real estate owned is segregated from other assets and that, in addition, there appears in many statements the item, “Sheriffs' ctfs., judgments, etc. (subj. to redemp.).” In many States title may not be acquired following foreclosure until the borrower has had a stated period in which to pay the amounts in default and redeem his property. All lands held subject to redemption are indicated accordingly on the statements of condition attached.
(6) The total amount of delinquent installments in connection with outstanding loans of Federal land banks and the percentage of the total assets of the banks represented by such installments
The statements of condition in Exhibit A likewise segregate the amount of delinquent installments in connection with outstanding loans of Federal land banks on December 31, 1930. As will be observed from the consolidated statement on page 4, the total amount of such installments on December 31, 1930, was $8,199,658.62, against which there were partial payments and reserves of $4,171,068.01, leaving a balance of $4,028,590.61 included in assets, which represented three-tenths of 1 per cent of the total assets reflected in the statements of the banks.
(7) The total carrying value of real estate acquired outright and subject to redemption, by foreclosure and otherwise, on hand December 31, 1929, and December 31, 1930—
This information is included in the following table:
December 31, 1929 and 1930
(8) Total number and amount of sales of acquired real estate made by Federal land banks during the calendar years 1929 and 1930
This information is included in the following table:
$8,007, 485. 82 8,308, 103. 58
(9) The number of joint-stock land banks and their status, how many have been liquidated or discontinued, how many are in process of liquidation, and how many in operation; a statement classifying the assets and liabilities of the banks still in existence in a manner similar to that for Federal land banks
The information requested is included in Exhibit A, attached. As will be noted at the bottom of page 10 of this exhibit, a total of 83 joint-stock land banks has been chartered under the Federal farm loan act. Of this number 48 are still in operation, 1 is in voluntary liquidation, and 3 are in receivership. Statements classifying the assets and liabilities of the banks still in existence, in a manner siinilar to that for Federal land banks, appear in this exhibit on pages 12 to 36, inclusive. Respectfully,
A. W. MELLON,
Secretary of the Treasury, Chairman Federal Farm Loan Board.
PROPOSED MERGER OF ROOSEVELT STEAMSHIP CO.
AND INTERNATIONAL MERCANTILE MARINE CO.
LETTER FROM THE VICE CHAIRMAN OF THE UNITED STATES SHIPPING BOARD TRANSMITTING IN RESPONSE TO SENATE RESOLUTION NO. 431, INFORMATION RELATIVE TO THE MERGER OF THE ROOSEVELT STEAMSHIP CO. AND THE INTERNATIONAL MARINE CO.
FEBRUARY 17 (calendar day, FEBRUARY 27), 1931.-Ordered to lie on the table
and be printed
UNITED STATES SHIPPING BOARD,
Washington, February 27, 1931. Hon. EDWIN P. THAYER,
Secretary of the Senate, Washington, D. C. Sir: In the matter of information requested of the Shipping Board by Senate Resolution 431, introduced by Mr. Fletcher, I have the honor to advise as follows:
(1) What information the board has with respect to the merger of the Roosevelt Steamship Co. and the International Mercantile Marine Co.
It has been stated to the board indirectly that representatives of the Roosevelt Steamship Co. and associates have purchased a working control of the stock of the International Mercantile Marine Co.
(2) If the board has been consulted concerning this merger and what action or attitude the board took with respect thereto.
The matter has never been formally presented to the board although there was some informal discussion of the subject with representatives of the corporation in July, 1930.
(3) If the board permits any of its managing agents directly or indirectly to operate foreign flag lines or vessels in competition with lines established and operated or sold by the board.
It is the recorded and established policy of the board to prevent such competition.
(4) What action the board contemplates taking as a result of this merger.
The investigations being made by the board have not developed to the point where that question can be definitely answered at this time.
(5) Whether any loan has been made by the Shipping Board for the construction of any ship now operated by any foreign company, or whether any ship for the construction of which loans have been made has been sold to and is now operated by any foreign company. No. Very truly yours,
E. C. PLUMMER, Vice Chairman.