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Calendar No. 895
72D CONGRESS
1st Session
SENATE
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REPORT
No. 837
CREATION OF FEDERAL HOME-LOAN BANKS
JUNE 15 (calendar day, JUNE 16) , 1932.—Ordered to be printed
Mr. WATSON, from the Committee on Banking and Currency , submitted the following
REPORT
[To accompany S. 2959]
The Committee on Banking and Currency , to whom was referred
the bill (S. 2959) to create Federal home-loan banks, to provide for
the supervision thereof, and for other purposes , having considered
the same, report thereon with an amendment and recommend that the
bill as amended do pass .
The amendment proposed by the committee is the substitution
of the text of H. R. 12280 as reported to the House on May 25 , 1932 ,
with certain modifications.
The modifications proposed by the committee are as follows :
(1 ) To permit national banking associations to become members
of, or nonmember borrowers of, Federal home-loan banks .
(2) To provide that building and loan associations which would
be eligible to become members of Federal home-loan banks except
for the fact that they are not subject to inspection and regulation
under the banking laws or similar laws of the States in which such
associations are organized may be eligible for membership in the
Federal home-loan system upon subjecting themselves to such inspection and regulation as the Federal home loan bank board may
prescribe. This proposed modification conforms to the action of the
House on June 11 , 1932 , with respect to building and loan associations, in the consideration of H. R. 12280.
(3) To extend the provisions of the act to the Virgin Islands and
Puerto Rico .
The text of the majority report of the House Committee on Banking and Currency, submitted May 25, 1932, to accompany H. R.
12280, follows.
House Report No. 1418, Seventy-second Congress, first session
CREATION OF NOT LESS THAN 8 AND NOT MORE THAN
12 FEDERAL HOME LOAN BANKS
MAY 25, 1932. - Committed to the Committee of the Whole House on the state
of the Union and ordered to be printed
Mr. REILLY, from the Committee on Banking and Currency, submitted the following
REPORT
[To accompany H. R. 12280]
The Committee on Banking and Currency, to whom was referred
the bill (H. R. 12280) to create Federal home loan banks , having
considered the same, report favorably thereon with the recommendation that the bill do pass.
No attempt will be made in this committee report to go into the
details of the workings of this law, except to state in a general way
how the home loan banks are to be organized and how they are
expected to function .
EXTENDED HEARINGS
In order to carefully survey the need for this legislation and to
adequately analyze the proposed bill, two courses were followed by
the committee : (1 ) The extended record of hearings held by the
Senate was carefully examined , and (2 ) numerous witnesses appeared
before our subcommittee .
Eighty-three witnesses were examined by the two committees.
Sixty-one witnesses from 22 different States appeared in behalf of
the measure and 22 from 13 States opposed it .
Twenty-four representative building and loan officials from almost
as many different States appeared and 22 favored the measure and
2 were in opposition.
Bankers were evenly divided as to the desirability of the measure ,
six appearing for and six against .
Ten representatives of large eastern life insurance companies, including several of their mortgage lending agents from other parts of
the country, appeared in opposition to the measure.
Seventeen well-known figures from the general real-estate field
appeared, 13 in behalf of the measure and 4 in opposition.
Of 11 general or unclassified witnesses, 7 advocated the measure
and 4 opposed.
2
3
CREATION OF FEDERAL HOME LOAN BANKS
In addition to the above summarized witnesses , there appeared in
behalf of the bill and indorsing the principles of the legislation(1 ) The Secretary of Commerce , Mr. Robert P. Lamont.
(2) The president o the Reconstruction Finance Corporation,
Gen. Charles G. Dawes, and one of his division heads who supervises
loans to small-mortgage institutions , Mr. A. R. Gardner .
(3) The secretary of the recent President's Conference on Home
Building and Home Owning , Dr. John M. Gries.
(4) The active heads of the national organization of building and
loan associations , the United States Building and Loan League .
Numerous statements and messages appear in the record in approximately the proportions in which the witnesses appeared for and
against. Included in the statements filed in opposition is that of the
interim committee of the American Bankers Association .
NATIONAL SURVEY AS TO NEED FOR THIS LEGISLATION
Last January the Secretary of Commerce sent out questionnaires to
about 8,000 banking institutions and mortgage-loan companies of the
country to get their views on the legislation proposed in this bill . The
questionnaire contained the following four questions, which are
particularly significant :
1. Would the facilities provided by the proposed home loan discount banks for borrowing on your home mortgages add desirable
flexibility and security to the conduct of your institution?
2. Would operation of the discount banks increase the amount of
credit now available for legitimate use in your community?
3. Is there a demonstrable need for actual home construction , either
new houses or remodeling work, that could be undertaken in your
community if credit facilities were widened at the present time?
If so , could you estimate the probable extent of such contemplated
construction?
4. Would the facilities afforded by the proposed discount banks
help to relieve the dangers of foreclosures on urban homes and farms?
The following tables give the answers to these four questions as made
by the institutions to whom questionnaires were sent :
Question 1
Total...
National banks.
Building and loan associationsMutual savings banks..
Stock savings banks.
State banks.
Loan and trust companies..
Mortgage bankers..
Question 2
Question 3
Question 4
Yes
No
Yes
No
Yes
No
Yes
No
5,898
1, 415
1, 415
110
79
2, 633
217
29
1,796
506
267
76
35
764
51
97
6,525
1,772
1, 452
110
84
2,822
231
51
1,974
607
223
79
38
901
57
69
4, 264
1,033
1,040
30
53
1,965
126
17
4,479
1, 291
691
181
74
1,962
172
108
5, 935
1,635
1, 146
71
85
2,759
208
31
2,217
613
423
106
44
876
66
89
51. 22
55.55
39.91
85.78
58.26
49.96
57.71
86.40
72.81
72.74
73.05
40. 11
65.90
75.91
75.92
25.84
27. 19
27.26
26.95
59.89
34. 10
24.09
24.08
74.16
SUMMARY OF REPLIES (PER CENT)
Total.
National banks .
Building and loan associations .
Mutual savings banks...
Stock savings banks.
State banks..
Loan and trust companies .
Mortgage bankers..
76.66
73.66
84. 13
59. 14
69.29
77.51
80.98
23.02
23.34
26.34
15.87
40.86
30.71
22.49
19.02
76.98
76.78
74.49
86.69
58. 21
68.86
75.80
80. 21
43.91
23. 22
25.51
13.31
41.79
31. 14
24. 20
19.79
56.09
48.78
44.45
60.09
14.22
41.74
50.04
42.29
13.60
4
CREATION OF FEDERAL HOME LOAN BANKS
It will be noted that, with the exception of the answers to question
3, which deals with new construction , the answers are about 75 per cent
in the affirmative . The survey was tabulated by States in the Senate
hearings of March 9 and every State in the Union showed a substantial majority of home-financing institutions in favor of the proposed
legislation . The total assets of the institutions answering the questionnaire was $ 17,338,000,000.
A statement containing the essentials of the home-loan bank plan
accompanied the questionnaire and favorable responses indicated
approval of the principles and purposes of the legislation before you.
All the way through, approximately three-quarters of the institutions favored this bill.
HOME FINANCE CREDIT
The supply of capital for financing home owning and home building has never been sufficiently adequate to result in low costs of funds
or in sufficiently liberal loans to eliminate the costly second mortgage,
land contract, and other junior financing. It has been plentiful in
some portions of the country, but scarce and costly in others , particularly in the South, Middle West, and West.
The building and loan associations, cooperative banks, homestead
associations , 11,747 in number, together with savings banks , trust
companies, and other banks and some insurance companies, have
engaged in the home-financing field . These institutions have never
had a place to go for emergency accommodations or for long-time
funds. It is the purpose of this home-loan bank bill, with its system
of not less than 8 nor more than 12 banks, located in different parts
of the country, to function as a reserve system supplying short-time
and long-time funds to these institutions .
PROPOSED LEGISLATION NOT NEW
Legislation of this character has long been considered . During
President Wilson's second administration, under the sponsorship of
his Secretray of Labor, Wilson, the first home-loan bank measure
was proposed and the Banking and Currency Committees of both
Houses considered it at that time. There has been a continued
interest in and need for an agency to serve the small home owner
and home buyer in the cities and small towns, much after the fashion
that the Federal reserve system serves the commercial interests of the
country and the Federal farm loan system serves, or supplies credit
to, the farmer. The need for the home mortgage discount banks
has been much accentuated by the present economic conditions .
THE PRESENT SITUATION
There is some $20,000,000,000 in mortgages on small homes in the
country to-day. Nearly $ 8,000,000,000 of these are held by building
and loan associations. The balance are held by banks, insurance
companies, and private investors . Fundamentally, these securities are
as sound as we have in America to-day, but these worthy institutions
can not raise any funds on their mortgages at the present time. The
general unrest has resulted in substantial withdrawals from these
institutions and this has been augmented by the withdrawal of sav-
CREATION OF FEDERAL HOME LOAN BANKS
5
ings by those in need , due to unemployment and other conditions
growing out of our present distressing business situation .
The home loan bank system would provide a reserve agency ,
whereby these institutions can raise funds upon their seasoned home
mortgage loans. These funds will be used for several purposes :
(1 ) To refinance existing mortgages so as to permit smaller payments, and to accommodate the needs of withdrawing members and
depositors .
(2) To give the institutions funds permitting them to tide over, or
carry along, worthy borrowers who are having difficulty meeting
interest or installment payments.
(3 ) To assist borrowers in paying taxes and insurance costs , which
must be maintained regardless of conditions .
(4) To provide funds for modernization , repairs, and maintenance
of existing homes, thus increasing employment.
(5) To provide a source of funds to refinance the thousands of
short-term mortgages, which have been called for payment due to
bank failures and due to like financial institutions converting their
resources into liquid funds . Thousands of home owners are in
distress for mortgage money to-day.
(6) For such building of small homes as may be desired and needed
in many localities , thus giving employment to those engaged in the
building trades .
In connection with this last point, a misrepresentation has been
circulated concerning this bill . It has been alleged that the design
of the measure was to facilitate the construction of 3,000,000 homes .
Neither the testimony given before the committee, nor a study of
the provisions of the measure, give any credence to such generalization . True , there may be occasion for some construction , but that
will be only incidental and can not come in substantial amount until
after the emergency situation is passed.
It is particularly important that the people who have put their
savings in the home financing institutions of the country be afforded
relief through this measure and that the dispossession and foreclosure
sales on small homes, due to the drying up of mortgage money, be
stopped immediately.
This bill has been designed both to take care of this emergency
situation and to function as a permanent institution , thus eliminating ,
to a large extent, the probability of a recurrence of the present distressing conditions in the small mortgage field .
THE HOME LOAN BANK SYSTEM
The home loan bank system created by this bill will consist of
from 8 to 12 Federal home loan banks in districts to be determined
by a Federal home loan board , consisting of five members appointed
by the President.
Building and loan associations, cooperative banks, homestead
associations , savings banks, trust companies, and other banks with
time deposits (except national banks) and insurance companies , if
subject to inspection and regulation under the banking laws or under
similar laws of the State or the United States, are eligible for membership . The members will supply the permanent capital and upon
joining a bank will be required to subscribe for stock amounting to
6
CREATION OF FEDERAL HOME LOAN BANKS
1 per cent of the home mortgages held by each such member, with a
minimum amount of $ 1,500 .
Eligible institutions in States whose present laws do not permit
stock purchase are admitted to borrowing privileges by deposit with
the bank of cash or Federal Government securities , equal to the
amount of the required stock subscription . This will be permissive
pending the enactment of State legislation authorizing full compliance by subscribing institutions with the provisions of the act.
The board will determine the minimum capital of each of the Federal home loan banks, which will not be less than $ 5,000,000 . As
soon as practicable thereafter, the board will open books in each district for subscriptions to the capital stock of each district bank, to be
paid for in cash or by certified check. Subscriptions can be paid on a
quarterly basis. The amount of the minimum capital not subscribed
for by members within 30 days after the books have been opened for
stock subscriptions is required to be subscribed by the Secretary
of the Treasury on behalf of the United States. It is provided in the
bill that the funds for this purpose are to be furnished by the Reconstruction Finance Corporation, in a sum not to exceed $ 125,000,000 ,
upon which the Government receives 2 per cent interest. Provision
is made whereby, after the amount of capital of a Federal home loan
bank paid in by the members equals the amount paid in by the
Secretary of the Treasury , the bank is required to apply annually
to the payment and retirement of the capital stock held by the
United States 50 per cent of all sums thereafter paid in as capital,
until all the stock held by the United States is retired at par. The
Federal board has full power to retire Government capital earlier, if
conditions warrant .
Each of the banks is to have 11 directors, 2 appointed by the
Federal board, 3 elected by the small-sized members , 3 by the mediumsized members, and 3 by the large-sized members . All directors are
appointive until the members' investment is substantial. These 11
directors have the usual and full powers with regard to the conduct of
each of the 12 institutions .
All members may borrow from a Federal home loan bank by placing
mortgages with the bank to secure loans . More money is advanced
on amortized installment mortgages of a term of eight years or more
than is advanced on straight mortgages or mortgages of shorter
duration. In no case can the amount advanced by a bank exceed 40
per cent of the value of the real estate . No mortgage on a home of a
value greater than $ 20,000 is accepted . The banks can not advance to
any member an amount in excess of twelve times the amount of the
capital subscribed by the member. The bonds issued by each bank
are secured by seasoned real estate home mortgages, with not less
than 190 per cent of unpaid mortgage principal behind each dollar of
bond issued. Some short-time loans out of capital subscribed by
members are permitted without mortgages being placed as collateral,
but funds realized from bond issues can not be so loaned .
The board prescribes all the necessary rules and regulations with
regard to the bond issue and the conduct of the banks. The board
approves or determines the rates of interest to be paid by the banks
upon their bonds or borrowings and a maximum rate of 5½ per cent is
established for the first seven years, after which it is to be 5 per cent.
The banks are jointly and severally liable on the bonds and in order
CREATION OF FEDERAL HOME LOAN BANKS
7
to keep the banks in proper condition to serve their membership , they
are required to have an amount equal to the capital subscriptions of
their members invested in ( 1 ) United States Government securities ,
(2 ) deposits in banks or trust companies , and (3) short- term loans to
members .
The principal funds of the banks come from ( 1 ) capital subscriptions
of their members ; (2 ) the issue of long-term bonds , which have limited
tax preferences ; (3 ) the initial Government advance, which is to be
retired as members come in, and (4 ) through such deposits as are made
in the banks by members only, upon which no more than 2 per cent
interest can be paid. These deposits will be entirely of surplus funds
of members . The banks are specifically restrained from doing any
general banking or commercial banking business . Their functions
are confined solely to serving member institutions .
The act requires the banks to accumulate reserves at higher rates
than are required in the Federal reserve system. The banks are
exempt from taxation and are designated as a depository of public
moneys and their bonds are made legal investments for fiduciary,
trust, and public funds .
Broad powers are given to the Federal home loan bank board in
regulating the activities of the banks and in providing for the orderly
conduct of home-financing activities throughout the country . The
board has broad powers in selecting officers , employees, attorneys, and
agents , although no compensation is permitted in excess of the salary
paid board members. The board has powers of examination and can
require periodical statements as well as examinations of Federal home
loan banks and their members . Necessary penalty clauses , etc. , are
provided.
EUROPEAN MORTGAGE BANKING SYSTEMS
Most European countries, including France, Germany, and Sweden,
have a central mortgage banking system. In general, they contain
practically all of the principles that are embodied in the Federal
home loan bank system . Their initial capital has usually been provided by the Government and in several cases the Government
directly guarantees their obligations . Principal funds come from the
issue of long-term bonds. These bonds enjoy a particularly popular
market and sell upon approximately the same basis and interest cost
as direct Government obligations. The bonds are backed by the
obligation of the issuing mortgage banking system and mortgages
used as collateral . Usually the mortgages used as collateral do not
exceed 50 per cent of the value of the property and the amount of
bonds that can be issued by each system is regulated . Additional
funds come from deposits.
There is vigorous Government supervision and governmental
agencies are practically in charge of most of the mortgage banking
systems. A surprisingly low cost of operation is universal, the entire
costs of the long-established systems being paid out of the spread of
one-half of 1 per cent to 1 per cent between cost of money on bonds
and lending to member institutions .
To a large extent , the institutions serve cooperative banks or credit
societies , some of them being similar to our building and loan associations. In several of the systems, the service of the mortgage banking
system is decentralized through branches or banks established in
different localities, but functioning under the central authority.
8
CREATION OF FEDERAL HOME LOAN BANKS
The systems make loans of varied duration, although preference,
or the larger advances , are made upon amortized or installment loans
of long duration rather than upon straight loans . Most of the banks
do such general banking business as is closely connected with mortgage
banking .
As a result of these mortgage banking systems in Europe , there has
been a more even supply of credit for European real estate and practically without exception the purchasers and owners of real property
in Europe obtain their mortgage funds at rates from 1 to 2 per cent
lower than those which prevail in this country.
PRINCIPAL OBJECTIONS TO THIS PROPOSED LEGISLATION
(1) It further intrudes the Government into private business.
This argument is no more available against the present bill than
against the Reconstruction Finance Corporation legislation recently
passed by Congress . The same argument was made against the
Federal reserve system, the Federal land bank system, and the
intermediate credit bank system .
This is emergency legislation demanded by the financial and economic conditions existing to -day in our country.
The bill provides for the gradual withdrawal of Government funds
from these banks and when this emergency is passed, the members
of the bank are undoubtedly going to furnish all the capital required
to operate the same.
(2) There is no lack of funds at the present time for the use of
home mortgage institutions and therefore no necessity for this
legislation.
The voluminous testimony taken before the Senate committee and
the House committee having consideration of this bill conclusively
demonstrates that there is a great demand at the present time for
more funds for the use of the home-mortgage institutions of the
country. Many of these institutions in the past have depended
upon loans from their local banks .
The banks for some time have been refusing to loan money to these
institutions, and not only that but in many cases have called loans
formerly made. The fact of the matter is that many of the homemortgage institutions are greatly in need of funds. They have
plenty of good securities, but because of the depression , they lack
liquid funds and this bill provides a method by which they may
secure such funds .
(3 ) If there is any demand for funds to aid in the functioning of
Lome mortgage institutions, the Reconstruction Finance Corporation
can take care of all such demands .
General Dawes , president of the Reconstruction Finance Corporation, appeared before the subcommittee of the House Banking and
Currency Committee and testified in part as follows :
Mr. CAMPBELL. You would recommend the enactment of this Federal home
loan bank bill?
General DAWES. I would, absolutely; yes.
Mr. CAMPBELL. You give it your unqualified indorsement?
General DAWES. My unqualified indorsement ; yes.
The testimony of General Dawes would seem to be a complete
answer to this objection to the bill.
CREATION OF FEDERAL HOME LOAN BANKS
9
The Reconstruction Finance Corporation has to date advanced
several millions to building and loan associations and has requests.
for many millions more on file. However, the short-term loan requirements of the Reconstruction Finance Corporation are not
adaptable to the needs and demands of the home-mortgage institutions.
Judging by the statements of the leaders of the home building industries of this country made before the committee of the House and
the Senate, the funds that will be required by these institutions are
way beyond any sum that could be furnished by the Reconstruction
Finance Corporation . It was estimated by competent witnesses
that at least $ 1,000,000,000 would be required to relieve the homeloan institutions of this country so as to put these institutions in a
position so that they could meet the demands for legitimate withdrawals, for refinancing mortgages, for repairs and remodeling of
buildings, and for new construction wherever deemed necessary.
(4) That the bill will encourage unhealthy home building.
This statement is wholly unwarranted . There is nothing in the
hearings of this bill to substantiate any such a claim. Sound, conservative home financing institutions are not going to finance a homebuilding boom to the detriment of investments already made and
which they hold.
The funds secured by these home mortgage institutions from the
banks set up by this bill will be used largely for the six specific
purposes set forth in the early part of this report.
(5) That the bonds of these banks can not be sold.
If the bonds issued by these Federal home loan banks can not be
sold, no bonds can be sold . These securities will represent prime
securities. The borrowing banks can not secure advances in excess
of 40 per cent of the appraised value of their real estate covered by
their mortgages . This means the value at the time the advances are
made to the members and not at the time the mortgages were made ;
and behind every dollar of bonds issued will be 190 per cent of unpaid
mortgages . It is submitted that these bonds will represent the best
possible securities .
REASONS FOR A HOME-LOAN BANK SYSTEM
(1) Figures show that home ownership in the United States is
declining and that we are drifting into a nation of tenants . The
principal reason is an insufficient amount of low-cost, long- term,
installment mortgage money . The home loan bank bill is designed
to place long- term funds in the hands of local institutions . Thus a
debt-free home ownership can be created as borrowers reduce their
debt from month to month. Our national credit structure needs , in
addition to the Federal reserve system and the Federal farm loan
system, these home loan banking units to serve the small saver and
the home buyer in the cities and small towns.
(2) Thousands of people who have borrowed money on their homes
are having difficulty meeting their contracted payments . With the
investors in the lending institutions withdrawing money, pressure is
created which prevents the lending institution from carrying the
borrower without payments until conditions improve or from reducing
his monthly payments. If the home-financing institutions had a
place to raise money on their mortgages, they could greatly assist
10
CREATION OF FEDERAL HOME LOAN BANKS
borrowers not only by showing greater leniency as regards their
mortgage payments , but also in paying taxes, insurance, and repairs
for them.
(3) Many homes are being lost through the calling or refusal to
renew straight mortgages. Owners who have never failed to pay
interest charges are denied renewals and threatened with foreclosures
as banks, trust companies, bank receivers , and insurance companies
demand their funds . The operations of the home loan bank system
will remedy this situation and place at the disposal of the home owner
loans that he can pay out of his income without costly renewal commissions and the fear of foreclosure.
(4) Home ownership has been commended and urged by our men
in public life and leaders in all phases of American life . Millions of
our thriftiest and most patriotic citizens have purchased their homes
and now own them free from debt, or with only small remaining mortgage balances . Recent statistics show that in the last hundred
years over 8,000,000 homes have been purchased through the building and loan plan alone. To -day these people from the common
walks of life can not borrow on these homes to tide them through the
vicissitudes of unemployment, reduced income, sickness and the like.
These difficulties arise because mortgage credit has dried up, a situation which a home loan bank system for discounting home mortgages
would prevent.
(5) The investment in the homes of the country is a significant
and imposing portion of our national wealth . Much of the decline
in the values of residential real estate has been due to the lack of
credit during the last two years . Foreclosures and inability to
borrow on homes create distress conditions and low prices in homes,
which are supposed to be the most stable of property and investments.
Home owners must have funds before business can recover . The
existence of a home loan bank system will in the future prevent the
recurrence of present conditions . If deflation in the value of homes
continues through lack of credit, the life savings of millions of ordinary people who have bought homes will be lost.
(6 ) Hundreds of small banks which have closed could have carried
on if they had had a way of raising money on their good mortgages.
Building and loan associations have disappointed thousands of their
investors in that they have been unable to return their savings within
reasonable notice. The home loan bank system will develop funds
which would reach the small investors in these thrift and home
financing institutions . It will be needed to counteract any drift of
money away from the home financing activities that specialists in
this field believe may come as the result of the depression.
(7) With funds available for needed repairs , additions and modernization of homes already erected , thousands of men now unemployed
can be put to work. There are also many who have saved for years
with the intention of building when conditions were " right, " who
would build now, when labor and materials are the cheapest they
have been in years, if they could secure assistance in mortgage money
without bonuses and without incurring the dangers of short-term
financing. It is against public policy to completely end home construction if the purpose is to maintain or increase values in obsolete
insanitary, slum homes, which should no longer be occupied .
CREATION OF FEDERAL HOME LOAN BANKS
11
(8) Funds for home owners should be available at low cost and in
liberal amounts at all times . The home owner should not be subject
to the vicissitudes of the general money market . The smaller communities, as a rule, are without sufficient mortgage funds for homefinancing demands at all times. In the years when there has been
ample money in some parts of the country, there have been high rates
and scarcity in others . The home loan bank system will stabilize
the home-financing activities of the country and provide a device
through which mortgage funds will flow into the areas of need , with
resulting benefit to home ownership in the form of lower costs and
more liberal loans . The present local institutions will be the units
in the system, rather than experimenting with any untried proposals.
(9) The establishment of this system will enable thousands of
deserving citizens who have been induced to undertake home ownership in the wrong way, namely, by a short-term mortgage which is
now coming due, to save their equities by finding credit upon a proper
basis through amortized long- term loans.
(10) Home ownership, as a national objective , will be permanently
injured by the thousands of foreclosures that are now being made on
homes, unless through the establishment of a credit system designed
to prevent the recurrence, the public may know that such conditions
can not again prevail . The millions of people who have placed their
all in the purchase of a home must once again feel secure in their
investment and have the courage to continue toward the full accomplishment of home ownership.
(11 ) The home loan bank system will eliminate the costly and burdensome second mortgage by enabling local lending institutions to
make advances up to 70 and 80 per cent of sound value to reliable
purchasers of homes.
(12 ) Unless there be a restoration of confidence in realty values,
hundreds of towns and cities having heavy bonded indebtedness and
depending upon the collection of ad valorem taxes upon real estate,
principally homes , for the repayment of their debts and interest,
Property owners are
will have their credit permanently destroyed .
failing and refusing to pay taxes under the present demoralized
conditions of realty values and the home-financing institutions are
unable to advance the money for them because they do not have the
surplus funds with which to make any loans , however necessitous
they may be.
(13 ) The years 1920-21 and 1929-1932 demonstrated a permanent
need for a reserve system for the home-financing institutions, just as
commerce and industry has the Federal reserve system and agriculture
has the Federal farm loan system . It will stabilize these thrift and
home-financing institutions ; will improve and standardize mortgage
practices ; will decrease costs of mortgage money, and will regulate
the supply of mortgage credit in a way that will disccurage building
booms and support normal construction year in and year out.
(14 ) This measure is an important and integral part of the comprehensive program for economic recovery undertaken by Congress.
The railroads, the banks, and almost every type of business and
financial activity have been steadied by the Federal Government.
Charity and public service have made commendable progress in caring
for the unemployed and others in want. However, no consideration
has been given to the home owner who, after all, is the backbone of
12
CREATION OF FEDERAL HOME LOAN BANKS
our Nation . Mortgages have been foreclosed ; families have lost
their homes and the savings they have had in them , and many wage
earners who own property are in want . A great injustice results if
those who own their homes are not given relief in the present emergency and provision made to prevent a recurrence of the present
distress . The home loan bank system will serve the wage earner
and people in the humbler walks of life , through serving those institutions which are devoted to helping them accumulate their
savings for the " rainy day " and also helping them to own their
homes.
In conformity with section 2a of rule 13 of the House rules there is
hereby printed the various sections of the laws of the United States
Code as are applicable under this act by section 28 and there is also
printed section 2 of the Reconstruction Finance Corporation_act,
approved January 22, 1932 , to which a new paragraph is added .
The following sections of the laws as set forth in the United States
Code are made applicable under this act by section 20 (a) :
Member of Congress taking consideration for procuring contract : Whoever,
being elected or appointed a Member of or Delegate to Congress, or a Resident
Commissioner, shall, after his election or appointment and either before or after
he has qualified, and during his continuance in office, or being an officer or agent
of the United States, shall directly or indirectly take, receive, or agree to receive,
from any person any money, property, or other valuable consideration whatever,
for procuring, or aiding to procure, any contract, appointive office, or place, from
the United States or from any officer or department thereof, for any person whatever, or for giving any such contract, appointive office, or place to any person
whomsoever; or whoever, directly or indirectly, shall offer, or agree to give, or
shall give, or bestow, any money, property, or other valuable consideration
whatever, for the procuring, or aiding to procure, any such contract, appointive
office, or place, shall be fined not more than $ 10,000 and imprisoned not more
than two years; and shall, moreover, be disqualified from holding any office of
honor, profit, or trust under the Government of the United States. Any such
contract or agreement may, at the option of the President, be declared void.
(Criminal Code, sec. 112 ; Ü. S. C. , title 18 , sec. 202.)
Receiving pay by Member of Congress in matters affecting United States :
Whoever, being elected or appointed a Senator, Member of or Delegate to
Congress, or a Resident Commissioner, shall, after his election or appointment
and either before or after he has qualified, and during his continuance in office,
or being the head of a department, or other officer or clerk in the employ of the
United States, shall, directly or indirectly, receive, or agree to receive, any compensation whatever for any services rendered or to be rendered to any person,
either by himself or another, in relation to any proceeding, contract, claim, controversy, charge, accusation, arrest, or other matter or thing in which the United
States is a party or directly or indirectly interested, before any department,
court-martial, bureau, officer, or any civil, military, or naval commission whatever, shall be fined not more than $ 10,000 and imprisoned not more than two
years ; and shall moreover, thereafter be incapable of holding any office of honor,
trust, or profit under the Government of the United States. (Criminal Code, sec.
113; U. S. C., title 18, sec. 203.)
Member of Congress interested in public contracts; contracts void : Whoever,
being elected or appointed a Member of or Delegate to Congress, or a Resident
Commissioner, shall, after his election or appointment and either before or after he
has qualified, and during his continuance in office, directly or indirectly , himself ,
or by any other person in trust for him, or for his use or benefit, or on his account,
undertake, execute, hold, or enjoy , in whole or in part, any contract or agreement, made or entered into in behalf of the United States by any officer or person
authorized to make contracts on its behalf, shall be fined not more than $3,000.
All contracts or agreements made in violation of this section shall be void ; and
whenever any sum of money is advanced by the United States, in consideration
of any such contract or agreement, it shall forthwith be repaid ; and in case of
failure or refusal to repay the same when demanded by the proper officer of the
department under whose authority such contract or agreement shall have been
CREATION OF FEDERAL HOME LOAN BANKS
13
made or entered into, suit shall at once be brought against the persons so failing
or refusing and his sureties, for the recovery of the money so advanced. (Criminal Code, sec. 114 ; U. S. C. , title 18 , sec. 204.)
Making official contract with Member of Congress : Whoever, being an officer
of the United States, shall on behalf of the United States, directly or indirectly,
make or enter into any contract, bargain, or agreement, in writing or otherwise,
with any Member of or Delagate to Congress, or any Resident Commissioner,
after his election or appointment as such Member, Delegate, or Resident Commissioner, and either before or after he has qualified , and during his continuance
in office, shall be fined not more than $3,000 . * (Criminal Code, sec. 115 ; U. S. C.,
title 18, sec . 205.)
Contracts not affected : Nothing contained in sections 204 and 205 of this
title shall extend, or be construed to extend, to any contract or agreement made
or entered into, or accepted, by any incorporated company, where such contract
or agreement is made for the general benefit of such incorporation or company;
nor to the purchase or sale of bills of exchange or other property by any Member
of or Delegate to Congress, or Resident Commissioner, where the same are
ready for delivery, and payment therefor is made, at the time of making or entering
into the contract or agreement. (Criminal Code, sec. 116 ; U. S. C. , title 18.
sec. 206.)
Official accepting bribe : Whoever, being an officer of the United States, or a
person acting for or on behalf of the United States, in any official capacity, under
or by virtue of the authority of any department or office of the Government thereof; or whoever, being an officer or person acting for or on behalf of either House
of Congress, or of any committee of either House, or of both Houses thereof,
shall ask, accept, or receive any money, or any contract, promise, undertaking,
obligation, gratuity, or security for the payment of money, or for the delivery or
conveyance of anything of value, with intent to have his decision or action on
any question, matter, cause, or proceeding which may at any time be pending,
or which may by law be brought before him in his official capacity, or in his place
of trust or profit, influenced thereby, shall be fined not more than three times the
amount of money or value of the thing so asked, accepted, or received, and
imprisoned not more than three years ; and shall, moreover, forfeit his office or
place and thereafter be forever disqualified from holding any office of honor,
trust, or profit under the Government of the United States. (Criminal Code,
sec. 117 ; U. S. C. , title 18 , sec. 207. )
RECONSTRUCTION FINANCE CORPORATION ACT APPROVED JANUARY 22, 1932
SEC. 2. The corporation shall have capital stock of $500,000,000, subscribed
by the United States of America, payment for which shall be subject to call in
whole or in part by the board of directors of the corporation.
There is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $500,000,000, for the purpose of making payments upon such subscription when called : Provided, That $ 50,000,000 of
the amount so subscribed , and the expansion of same through the notes , debentures, bonds, or other obligations as set out in section 9 shall be allocated and made
available to the Secretary of Agriculture, which sum, or so much thereof as may
be necessary, shall be expended by the Secretary of Agriculture for the purpose of
making loans or advances to farmers in the several States of the United States in
cases where he finds that an emergency exists as a result of which farmers are
unable to obtain loans for crop production during the year 1932 : Provided further,
That the Secretary of Agriculture shall give preference in making such loans or
advances to farmers who suffered from crop failures in 1931. Such advances or
loans shall be made upon such terms and conditions and subject to such regulations as the Secretary of Agriculture shall prescribe. A first lien on all crops growing, or to be planted and grown, shall , in the discretion of the Secretary of Agriculture, be deemed sufficient security for such loan or advance. All such loans
or advances shall be made through such agencies as the Secretary of Agriculture
may designate, and in such amounts as such agencies , with the approval of the
Secretary of Agriculture, may determine. Any person who shall knowingly make
any material false representation for the purpose of obtaining an advance or loan
or in assisting in obtaining such advance or loan under this section shall, upon
conviction thereof, be punished by a fine of not exceeding $1,000 or by imprisonment not exceeding six months, or both.
Receipts for payments by the United States of America for or on account of such
stock shall be issued by the corporation to the Secretary of the Treasury and shall
be evidence of the stock ownership of the United States of America.
SR- 72-1- VOL 2-
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@FedFRASER