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Circular f No. 3
Series o 1926

Dallas, Texas, June 21, 1926
To the Member Bank Addressed:
In our Circular No. 2, Series of 1924, we advised our member banks that we would re­
quire financial statements in connection with all unsecured notes of $1,000 or over. Our board
of directors has now decided also to require statements in connection with notes based on live
stock in the amount of $2,500 and over, even though secured. In addition to this requirement,
we reserve the right to require that a member bank furnish us in connection w
rith live stock
paper the following:
First — A report of inspection of the live stock securing the indebtedness, such
report having been made not more than thirty days previous to the date
of the loan.
Second— Clerk’s certificate from county or counties in which the mortgages are
filed, showing all liens appearing of record against the live stock which
secures the note offered.
Third — Copies of leases and date of entrance of the live stock on the property
(if the borrower operates on leased property), together with a state­
ment of landlord’s or range owner’s liens.
Fourth— A Tax Collector’s or other acceptable statement of taxes and/or forest
permit fees paid or due and payable on such live stock.
Our experience has shown us the value of inspection reports and we feel that it would
be to the advantage of our member banks to have such reports covering their live stock loans.
For this reason we offer for consideration the following suggestions as to what a reliable
inspection report should cover and what we should expect it to cover in any case where we re­
quire it: (a) the name and address of the mortgagor, (b) the location of the live stock, (c)
the number of live stock (classified in detail) covered by the mortgage offered which have
been actually counted, and also the number which have not been counted but which have been
estimated, (d) marks and brands, and in whose name registered, (e) information concerning
the condition of the range and its carrying ability, and (f) information as to whether the
live stock is located above or below quarantine lines.
The inspection of the live stock should be made and the report rendered by a reputable,
practical live stock inspector, preferably an inspector employed or accredited by some respon­
sible association, such as a Federal Intermediate Credit Bank or ether responsible corpora­
tion making similar loans, which has no connection with the maker of the paper. In cases
where we require the inspection reports we will, however, give consideration to reports of in­
spection made by the offering bank or the owners of the live stock, provided the reports are
supported in each case by an affidavit of the owner and by a signed statement of two disinter­
ested persons of good standing certifying to the essential correctness of the information con­
tained in the report.
The co-operation of member banks along the lines indicated will enable this bank to more
intelligently and fairly pass upon the credit acceptability of live stock paper offered to it for
rediscount. It is also believed that the adoption of the suggestions offered will tend to im­
prove credit practices and that, by definitely establishing the values supporting live stock
loans, the hazards in connection therewith will be greatly reduced.
While this circular refers only to what may be termed strictly live stock loans and can
have no bearing on the transactions of many of our member banks, it is, nevertheless, being
sent to all of them as a matter of information.
Yours very truly,


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