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, and that is the reason I am asking you for uctive help-What is there about this system gainst the condition that exists to-day with land bank system, which you and Mr. Luce tially fashioned after?

the first place, the system is partially fash1 land bank, and also principally fashioned ve bank system.

he Federal land bank system, as you recall, is nly of borrowing associations created for the noney. There is no operating institution with th the Federal land bank system there are only d there and borrowers, that is, individuals put out an additional 95 per cent in place of it as his is different because it is patterned after the We are operating in this institution upon a loan associations which intend to use this e credit institution, for both long and short g our money there on deposit when we have ng operations.

I ask a question right at that point?

́es.

o this present crisis, due to restrictions in bankneration in values and as a result of one cause ever been a time up to this day, this hour, and loan association could not secure from its Is that it needed at reasonable rates of interest? Yes; I imagine those conditions have existed when they could not do it, depending entirely nditions. However, building and loan associasons ought not to have to depend solely upon t into which there sometimes creeps the danger and we do not feel that the home owner should haracter of feeling.

me ask you in that connection if that is not system with reference to the farmer? With reference to what?

ing subjected to a competitive system, about g into various competition in the country, getwith the local banks and local loan agencies? Yes; but they have to depend more or less upon many respects. The question asked me was building and loan associations could not get all of the money they need.

our answer is that the building and loan assobe dependent upon them?

Yes, sir. The home owner is dependent there d loan association.

hat is not exactly the same situation as the

I can not see where the farmer gets tied in with

Mr. WILLIAMS. I will tell you where he gets tied in with it, from the fact that the local banks carry 88 per cent of the farm loans of the country. That is where he gets tied in with the banks.

Mr. FRIEDLANDER. Then the Federal land bank has not put the banks out of competition.

Mr. WILLIAMS. And the fact is it has not relieved the situation at all, materially, has it?

Mr. FRIEDLANDER. I would say that it has. I am not a critic of the farm land banks.

Mr. WILLIAMS. Are you willing to place the reputation of this institution upon the record, or are you willing to place it upon the record made by the farm land banks and the Federal joint-stock land banks?

Mr. FRIEDLANDER. You have gone a little beyond it when you talk about the joint-stock land banks. The joint-stock banks were associations made up of private capital at the time of the passage of the farm land bank, and I would not at all want to place it upon the record of the joint-stock land bank. As far as the Federal land bank is concerned, I am quite an admirer of it. Of course, we know agriculture has gone through a grievous session in the Federal land bank case. The Federal land bank is not responsible for that. I call your attention, also, to the fact that Congress has set up a system of intermediate credit banks to relieve the farmer of the necessity of depending upon the local banks. That does not come in in connection with our situation.

Mr. WILLIAMS. I want to ask you about the intermediate credit system, are you familiar with that?

Mr. FRIEDLANDER. Somewhat.

Mr. WILLIAMS. What happened to them after that, that is, to the farmer now?

Mr. FRIEDLANDER. Of course, I am not an expert on farm relief. Mr. WILLIAMS. You referred to that as one of the agencies of the Government for relief of the farmers of the country.

Mr. FRIEDLANDER. I am talking purely about legislative relief. I want to say that I think the security of the home owner in a city or town is probably superior to the type of security which is behind your Federal land bank bonds. I also want to make this point that in this act you have got behind the bonds that will be issued not only the morgage security, which is all you have got behind your farin loan bonds, and the capital of the bank itself, but you have in addition the obligation of the borrowing institution which makes a great big difference.

M. WILLIAMS, Getting back to the credit agency, do you know at present that the intermediate credit banks are not able to furnish farmers of this country loans on an interest rate below 9 per cent!

Mr. FLED ANDER. I knew they were limited under the law.

Mr. WILLIAMS. They are in some States, and they can't furnish it, for the reason that they can't furnish it except by violating the usdary laws.

Mr. HANCOCK. Do you know that the farm land banks charge 8 per cent on extensions upon loans to all their borrowers now!

Mr. FRIEDLANDER. I do not know about that, but I venture to say the farmers would be worse off but for its establishment.

ou think that system has encouraged him to an he would have borrowed otherwise? may have in cases. I think that is the vice of

reason I propounded my question is not to at I am unfriendly to the idea incorporated I like to have you distinguish, if you can, and etween the operation of this proposed system bank system and the joint-stock land bank humble opinion, if you have any hope in the f this bill you had better divorce it from those as possible. Reference to them would not be aith in the value and need of the home-loan in this bill.

he Federal land bank system, as stated a few ot get under way until Congress had passed, time, a bill which provided for the incorporaloan associations. National farm loan associahe world but a group of farmers who want to g together and agreeing to put in a nominal gagreed to put in a nominal sum of money, the amount they expect to borrow, and if they it in $100. That is all the stock they take, and tional collateral that is behind those bonds, is le to your Federal land bank and borrow the these bankers around here will tell you that ry high amount to make safe a loan, and they to borrow just as much as they can get, but to this he does not go to the home loan bank with the operations of that bank. He comes to n association, he goes to the country bank or npany, and he borrows $2,000. This law here h that except the effect that it might have upon son of competition. That man has to make a an institutions, just as though this home loan xisted, and it only produces reserve credit by 1 may borrow 50 per cent or 60 per cent of the iding the amount is not in excess of 40 per cent curity.

he system as proposed here intended primarily g and loan associations and kindred organiza

We think it is.

ir argument may be applicable to the joint-stock se to Mr. Williams's question, but what about the anks; there is something more behind that? In the intermediate credit banks they have

rdon me, but do I understand you to say that ank loans have not anything but 5 per cent of m?

Plus the mortgage security.

ndoubtedly; and the Government inspects that

Mr. FRIEDLANDER. Yes; the Government has a right to inspect the security. The point I am making is that in addition to the security which the Government has in the land bank it has also all of the assets of the borrowing association back of its obligation to repay this loan. That is the point I make.

Mr. WILLIAMS. That ought to make it all the stronger.

Mr. FRIEDLANDER. That is it.

Mr. WILLIAMS. It ought to make the loan all the better.

Mr. FRIEDLANDER. Yes; that is the point I make.

Mr. WILLIAMS. Can you account for the fact that those bonds are selling for 75 cents on the dollar?

Mr. FRIEDLANDER. The Federal land bank has not

Mr. WILLIAMS (interposing). Has not what back of it?

Mr. FRIEDLANDER. Has not anything back of it except the intrinsic security itself and the small amount of stock of the local association. Mr. WILLIAMS. It has the mortgages and the stock of the associa tion back of it.

Mr. FRIEDLANDER. Yes. Now, then, here is the difference. Take a merchant who goes to, let us say, the First National Bank of this city and borrows $100,000, and the First National Bank takes a note of that merchant and of the Federal reserve bank borrows the money upon which that note of $100,000 is paid. The First National Bank has got to take up that obligation and pay the Federal reserve bank. There is the main difference between this system which is set up upon that basis and the Federal land bank system. There is no intermediary force in between there that will safeguard that collateral.

Mr. REILLY (presiding). Mr. Friedlander, as far as I understand the law, under this bill the bank only loans 40 per cent on the mortgages.

Mr. FRIEDLANDER. Yes.

Mr. REILLY (presiding). And the securities!

Mr. FRIEDLANDER. Yes.

Mr. REILLY (presiding). So, it ought to be 40 per cent better off than the farm land banks.

Mr. FRIEDLANDER. Yes.

Mr. REILLY (presiding). I do not think there is any question at all but what securities issued by this bank will be better than in the farm land bank, as far as that is concerned.

Mr. FRIEDLANDER. I want to state this about the matter of the de crease in the bond market. Let us not charge that up to the Federal land bank system. It has probably enough faults of its own to take care of. Even direct Government obligations have gone down to $85. Let us not say it is because the Federal land bank has been a success or has not been a success. Certainly it is not any argument because Liberty bonds have gone down to $85 that the United States Government should adopt some other way of financing itself.

Mr. WILLIAMS. It is some indication of the price that these bonds may bring if put on the market, isn't it?

Mr. FRIEDLANDER. Yes; if they were floated right at this time, it might be, although I think they would command the highest price be ause they have security back of them.

Mr. WILLIAMS. What do you think they would bring on the market now?

hat would be purely a guess.

lerstand that; that is the reason I am asking

S.

have to raise the funds that way. I am asking at you must raise the funds in that manner.

es.

must loan those same funds back to the home

es, sir.

at do you figure as the spread between the debentures and the loans made to the home

hese banks should operate on a basis of one-half half to 1 per cent?

es.

n't you know that none of these other banks w a margin?

They have a different type of bank.

, sir.

You will find the testimony before the Senate small cost of operation in the Land Bank of k. I think it runs $22,000 per year.

lo not understand what you mean by the land

The Land Bank of the State of New York is a or building and loan associations in that State. and has operated there for 13 or 14 years. rely a private institution?

No; a public institution. It has a special State its securities are accorded preferred tax status

I understand the State of New York has put peration of that bank?

I do not think the State of New York has ney in there, although, I understand the State bably the largest purchaser of the bonds of that

ids.

hat is not in the sense in which I mean a public the standpoint of the government of the State, nds into it for the purpose of operating it? I ion whether it is or not.

No; I do not think it is endowed or subsidized

Tot subsidized?

. No.

t is simply an institution authorized under the f New York.

. To do certain things. It is subject to examinaby the State Banking Department and in that ic institution.

Jndoubtedly, as is every other bank in the State. ¿. Yes.

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