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rasoulallahbinbadisassalacerhso  wefaqdev iktab
الجمعة, 11 حزيران/يونيو 2021 08:29

The Farmer's Billion and a Half

كتبه  By John T. Flynn
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The Federal Farm Credit Administration, administered by a board headed by W. I. Myers as governor, controls, like a large holding company, a group of immense agencies-the Federal Land Banks, the Federal Farm Mortgage Corporation, the Production Loan Corporation, the Intermediate Credit Banks, the Emergency Crop and Seed Loan offices, the Regional Agricultural Credit Corporation, and the Agricultural Marketing Act. .

Here is a group of corporations in which the government has invested a billion and a half dollars in capital. And in addition they have borrowed three and a half billions on bonds and debentures. In addition there are the surpluses and various other kinds of borrowings so that the actual assets of these corporations are over five and a half billion dollars. Remember we tried to get some idea of what a billion dollars is. All this began a good while ago-back in 1917 when the Federal Land Banks were formed. Their business is to lend money to farmers to buy farms, to put in capital improvements.

These banks seek to operate on sound business principles. But in 1932, when things generally were going to pot, they were not doing much business. Nobody wanted to buy a farm. The farmers were more interested in buying ropes to hang money-lenders who were threatening to foreclose on their farms. In a few places they had even invested in a rope or two to hang judges who dared to sign foreclosure warrants. In at least one place they had the hemp around His Honor's neck. So in 1933 the Federal Farm Mortgage Corporation was formed. Forgive Us Our Debts / 29 It is an emergency agency. Its business is to help the distressed farmer who could not tak~ care of his mortgage and who faced foreclosure or was in default. Just a Twist of the Wrist In 1934 over three hundred thousand farmers got loans. At this moment the Farm Mortgage Corporation has outstanding $836,778,000 in mortgage loans, most of them second mortgages. About the same time the Land Banks found they could get no more money to do business with. They could not sell their bonds. No one wanted to buy bonds secured by mortgages on farms.

The Land Bank bonds are not guaranteed by the United States. But the Federal Farm Mortgage bonds are. So the Federal Farm Mortgage Corporation issued an additional batch of its own bonds-about seven hundred million-and swapped them with the Land Banks for their bonds. Then the Land Banks sold the Mortgage Corporation bonds and thus got money to go their way rejoicing. There are several points worth pausing on here. The first is that the Land Banks offer an object lesson of how the government gets drawn into holding the bag. The Land Banks were semi-private institutions at first. All the stock was owned by farm associations. Then the depression peeped around the corner. So the United States had to subscribe for 124 millions of stock in the Land Banks to supply money. Then it put in an additional 128 millions as a surplus. Then later it supplied 731 millions through this exchange of bonds with the Mortgage Corporation. These two banks between them-the Land Banks and the Federal Mortgage Corporation-hold mortgages on a million farms or more, valued at nearly three billion dollars. Where did these banks get all these three billion dollars to lend? Well, you recall our description at the beginning of this story of how money-bank money-is created by the simple process of making loans. The Land Banks and the Mortgage Corporation made loans. That is, the Land Banks borrowed from the Mortgage Corporation and the Mortgage Corporation borrowed from the banks-issued its bonds, which are just IOU's, and placed them with the banks. Some of it came from the Reconstruction Finance Corporation, which borrowed the money from the banks and loaned it to the Mortgage Corporation. There is a childlike notion among many honest souls that the government took all this money from the rich and gave it or loaned it to the poor-the poor farmer and the poor home owner. No, the government hasn't taken it from anyone yet-just borrowed it. It may get around to taking it from the rich and the poor a bit later. The net result of all this is that the farmer has kept his farm. Also he continues to owe the mortgage on his farm. The mortgage has not been wiped out. It has merely been shifted. The farmer owes the money to the government now instead of to the private money-lender. The matter is now one between Uncle Sam and the farmer. They'll have to work it out or fight it out between them. The money-lender is out of it. He has been paid off. But There's a Silver Lining On the other hand, much good has come of it.

Many thousands of deserving farmers have been saved from foreclosure and complete loss. In the shift from the private to the government lender, about a hundred million, perhaps~muchmore, has been shaved away from the farm indebtedness. The farmer's interest rate was reduced to his great advantage. And a plan has been installed to enable him to payoff his principal over the years. Incidentally, others were helped. The farmers owed their mortgage notes to various institutions. Hence assumption of the mortgages by the government enabled these lenders to get their money back. About 12 percent of the money went to life-insurance companies and about 10 percent to commercial banks. The largest part, apparently, went to private lenders. It was this which led some critics of the plan to suggest that it was inspired by a movement to bail out the noteholders.

The next great agency for lending money on behalf of the government is the Home Owners Loan Corporation, better known as the HOLC. This is a subsidiary of the Home Loan Banks. It did in the town what the Farm Mortgage Corporation did in the country. It took over the mortgages of a million home owners who couldn't keep up their payments. In April of this year the HOLC held mortgage notes valued at $2,621,000,000. In addition it had brought a hundred millions in stock of a government savings insurance corporation and nearly two hundred millions of various savings and loan associations. The corporation got its billions just as the Farm Mortgage Corporation got its billions-by selling its bonds to the banks. The HOLe was born in the travail of 1933.

It appeared at a time when millions of Americans who had answered the siren call of the land developer to "buy a home" were afraid to open the door for fear the sheriff would come in with his trained wolves. Forgive Us Our Debts / 31 There was a good deal of genuine headache under the rooftree those days. But there was also a good deal of highly flavored hogwash dished up by congressional orators and professional saviors about the wicked money-lender driving the distracted father and his wife and children from the old homestead. The fact is that a lot of these houses which were holding up the mortgages were not old homesteads. A lot of the "home owners," hadn't been in their "little homes" for more than a year or two. They were good people who had bought little "first- and second-mortgage manors" from speculative real estate developers, many at highly inflated prices-for something or other down and something else a month. The mortgages on many of these houses were a good deal more than the houses were worth then or are worth now. It really wasn't a terrible favor to the "wretched victim" to save him and keep him tied for a life-time to a mortgage that is, to say the least, a little heavy.

There were a lot of insurance companies and mortgage companies and banks and plain private mortgage money-lenders who were stuck with great bales of mortgage paper on these new homes. And I recall well the spring of 1933 when a gentleman representing large financial interests in New York's suburbs took me to lunch and tried to induce me to shed some propagandist tears in an attempt to get the government to buy up these mortgages. All this must be borne in mind in order to keep the picture properly compounded of the good and bad elements. One result of it, of course, is that the government today holds twice as many home mortgages as all the commercial banks in the country put together, more than all the life-insurance companies or more than all the savings banks and more, even, than the 8,000 building and loan associations combined. When the HOLC was organized in certain counties the home owners literally swarmed into its offices. In Cook County, Illinois, the government holds a mortgage on 13 percent of all the homes in the county. In DeKalb, Georgia, the government holds the paper on 20 percent of the home owners. In Detroit, or rather Wayne County, the government holds 25 percent-one fourth-of all the owned homes in the county. In Tulsa County, Oklahoma, it's 30 percent. In Finney County, Kansas, it's 32 percent. The palm, I think, must go to Bennett, South Dakota, a small settlement with 42 houses. Thirty-seven of the owners rushed to the HOLC. Fourteen were taken on. That, however, is 33.3 percent. You find the percentage of loans highest in places like the Detroit suburbs, Cleveland, Queens county and Brooklyn in New York, where the "developer" and speculative builder were busiest 32 / John T. Flynn before the depression. In New York City as a whole the government has taken over mortgages on 11 percent of the homes.

Link : https://mises.org/library/forgotten-lessons-selected-essays-john-t-flynn

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