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ality there would be an immense profit earned that should be paid into the sinking fund every year for the purpose of paying the debt which the Federal home loan bank owes the Treasury. The parent bank should receive its pro rata share of all dividends.

There should be no tax assessed against the credit of the Federal home loan bank. A tax upon money or money credits would increase the rate of interest in many States, as in Michigan there is no tax assessed against mortgage credits, but there is a recording fee of one-half of 1 per cent charged at the time of recording the mortgage on land contracts. Such fee is paid once and once only during the life of the mortgage or contract.

The futility of taxing mortgages credits is recognized by most of the States. It should be clear to any well-informed man that money invested in mortgages has its earning circumscribed within the narrow limits of the legal rate of interest obtaining in each State while the earning power of money invested in other property is unlimited. Any tax on mortgage credits would be shifted to the shoulders of the borrowers, which can least bear the extra burden.

The insurance companies allow local agents one-half of 1 per cent for negotiating loans. It would not cost the Federal banks as much as it does the local member because three-fourths of the cost of preparing for the loan is done by the local bank. So it is reasonable to suppose that a profit of onehalf per cent would cover the operating expenses of the parent bank.

Financial concerns have a billion dollars in mortgages earning 6 per cent interest and to expect them to lose one-sixth of their earnings would cause severe and certain disappointment. If these severe and unwarranted restrictions are retained in the bill the much needed supply of money for workingmen's houses will be shut off.

I should respectfully recommend that the unwarranted restrictions now in the bill should be stricken out, that a plain statement be made to the effect that a member bank could have the mortgages received by the parent bank on the basis of 50 per cent of the appraised value of the real estate.

Senator WATSON. The committee will rise until 10 o'clock to-morrow morning.

(Whereupon, at 5 o'clock p. m., the committee adjourned until the following day, Wednesday, February 17, 1932, at 10 o'clock a. m.)

THE LIBRARY OF THE

APR 11 1932
UNIVERSITY OF ILLINOIS.

Х

Creation of a System of Federal Home

Loan Banks

HEARINGS

BEFORE A

SUBCOMMITTEE OF THE COMMITTEE ON BANKING AND CURRENCY

UNITED STATES SENATE

SEVENTY-SECOND CONGRESS

FIRST SESSION

ON

S. 2959

A BILL TO CREATE FEDERAL HOME LOAN BANKS
TO PROVIDE FOR THE SUPERVISION THEREOF

AND FOR OTHER PURPOSES

PART 3

FEBRUARY 17, 18, AND 23, 1932

APPENDIX

Printed for the use of the Committee on Banking and Currency

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COMMITTEE ON BANKING AND CURRENCY

PETER NORBECK, South Dakota, Chairman SMITH W. BROOKHART, Iowa.

DUNCAN ('. FLETCHER, Florida. PHILLIPS LEE GOLDSBOROUGH, Maryland. CARTER GLASS, Virginia. JOHN G. TOWNSEND, JR., Delaware. ROBERT F. WAGNER, New York, FREDERIC C. WALCOTT, Connecticut. ALBEN W. BARKLEY, Kentucky. JOHN J. BLAINE, Wisconsin.

ROBERT J. BULKLEY, Ohio. ROBERT D. CAREY, Wyoming.

CAMERON MORRISON, North Carolina. JAMES E, WATSON, Indiana.

THOMAS P. GORE, Oklahoma. JAMES COUZENS, Michigan.

EDWARD P. COSTIGAN, Colorado. FREDERICK STEIWER, Oregon.

CORDELL HULL, Tennessee.
JULIAN W. BLOUNT, Clerk
GIBBS W. SHERRILL, A88istant Clerk

SUBCOMMITTEE ON SENATE BILL 2959

JAMES E. WATSON, Indiana, Chairman JOHN G. TOWNSEND, JR., Delaware.

ROBERT J. BULKLEY, Ohio. JAMES COUZENS, Michigan.

CAMERON MORRISON, North Carolina.

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