sufficient to absorb all losses to date, to pay all of its operating expenses, and to provide a reserve of over $50,000,000 that is available for any future losses. Land Bank Commissioner loans have rendered during the past and are now rendering a helpful and worth-while service to American farmers; therefore, we recommend that the Land Bank Commissioner lending authority be extended to July 1, 1948. TABLE A.—Number of applications1 closed during the last half of 1945 compared with the estimated number that would have been closed and the estimated number that could not have been clased by the Federal land banks without Commissioner lending authority 2 Springfield. Louisville. New Orleans.. St. Paul.. Omaha. Wichita. Houston. Spokane... Total.... District 297 149. 342 494 416. 865. 786. 661 274. 677. 158. Number 508. 247. 200 First Mort- Number I 100 100 114 56 47 159 85 72 99 129 141 78 1, 180 Percent of all 31.0 35.2 33.6 75.8 45.0 77.8 79.7 Applications closed as loans Percent of all Joint 22.2 20.5 II. ESTIMATED NUMBER WHICH WOULD HAVE BEEN CLOSED 1,421. 526. 390. 245. 237 589 191 6, 168. 69.0 301 66.4 770. 24.2 466 55.0 338. 601 145 495 148 217 322 538 689 348 289 1 Includes commitments made prior to July 1, 1945, and loans based on prudent investment values. The data in columns II and III are based upon the assumption that the borrowers would have accepted 70 percent of normal agricultural value, or 5 percent less than the amount applied for, if there had not been legal authority to go up to 75 percent with a Lank Bank Commissioner loan. 4,572 Number Straight Federal land bank 269 132 304 451 Number 382 805 684 Total (5,193).. 1,328 482 342 222 208 5,609 III. ESTIMATED NUMBER WHICH COULD NOT HAVE BEEN Total 958 423 1, 109 652 924 1, 112 986 1,722 1, 119 1, 160 711 575 11, 361 82.5 47.0 33.6 34.5 41.2 54.3 Percent of all Percent of all 17.5 53,0 66.4 65.5 58.8 45.7 Straight FLB loans as a percent of all loans closed 28. 1 31.2 29.8 69.2 41.3 72.4 69.4 77.1 43. 1 29.5 31.2 36. 2 49.4 TABLE B.-Federal land banks and Land Bank Commissioner loan applications which were withdrawn after appraisals and loan commitments had been made, and which were subsequently financed by other lenders, by type of lender and farm credit districts, July 1, 1934, to Dec. 31, 1946 If we look a minute at table A, the first table, there is a break-down' by districts of the total of 11,361 loans, that is during the last half of 1945, compared with the estimated number of loans that would have been given, and it is estimated that could not have been closed by the Federal land bank without Commissioner lending authority. By districts, the first column is the first mortgage Commissioner and it shows 1,180 first mortgage Commissioner loans; the second column is joint loans; the third column is the Federal land bank, and the next column is the total loans made. Mr. JOHNSON. Is that Springfield, Mass.? Mr. DUGGAN. Yes. In other words in the Springfield district there were 589 joint loans made; straight land-bank loans, which were not to exceed 65 percent of normal agricultural value, totaled 269: making total loans of 958. Straight Federal land-bank loans closed, as the percentage of all loans closed amounted to 28.1 percent. Further on down you will notice in the Baltimore district that straight land-bank loans as a percentage of the total loans closed was 31.2 percent; Columbia 29.8; Louisville 69.2; St. Louis 72.4; St. Paul 69.4; Omaha 77.1; Wichita 44.1; Houston 29.5; Berkeley 31.2; and Spokane 36.2. Mr. FLANNAGAN. Now only about one-half of the loans on table 1 are straight land-bank loans? Mr. DUGGAN. 49.4 percent are, yes. Mr. FLANNAGAN. That is the over-all picture? Mr. DUGGAN. Yes. It is estimated that if there had been no second Commissioner loan and if all the land-bank loans did not exceed 65 percent of value, it would not have been possible for these farmer borrowers to take a 65-percent loan. In the next section of that table, it is estimated that, if there had been no second Commissioner loans, only 54 percent of the loans that were made could have been made. Mr. ABERNETHY. Is that all the loans? Mr. DUGGAN. Yes. Mr. PACE. That is a highly speculative figure. Mr. DUGGAN. It is the best judgment we could get, based upon the information we had; I will give you some additional information in just a minute. Let us look at table B for a minute. We will find out what is happening or what did happen on some of the loans. We would like this table to be kept confidential from the standpoint of not publishing the sources of the data; the sources of this data are confidential; we developed it for the use of the committee. Mr. ABERNETHY. I do not know whether this statement should go in. the record or not. Mr. DUGGAN. That is all right. Mr. ABERNETHY. That is public property. Mr. DUGGAN. Let us say not confidential except to put it in the record. This is land bank and land bank Commisisoner loans which were withdrawn after the appraisal and subsequently financed by the other lender. The type of lender and the Farm Credit districts, July 1 to December 1st, 1945, are given in the first column. There were 150 loans. which were withdrawn after appraisals and loan commitments had been made by the Federal land bank system. The land banks and land bank Commissioner had made commitments to loan 70 percent of the normal agricultural value. On these 150 farms the insurance companies actually made the loans at 82 percent of the normal agricultural value. Now we think, Mr. Pace, if the land banks had been permitted to make only 65 percent of the normal agricultural value, there would be a still larger number of loans that would go to some other group. Mr. PACE. The record here shows that they are lending at a cheaper interest rate than you are. How can we object to it if they all will go there? Mr. DUGGAN. I do not think the Record shows it. Mr. PACE. The chart shows that your insurance companies are lending at a lower rate than you are. Mr. FLANNAGAN. Let us get through with this table. Mr. DUGGAN. There were 293 land bank and commissioner loans on which commitments had been made to lend up to 66 percent of the normal agricultural value; these loans were later made by commercial banks at 86 percent of the normal agricultural value. Mr. POAGE. That certainly does not show much of anything. That simply shows that the land banks and Commissioners would loan more than 1 percent than the Commissioners could loan but the insurance companies loaned 86 percent, which was right up to full value. Now surely you do not mean to say that because that 1 percent would have had any great effect there, the land banks could have loaned up to 65 percent without it and all you had was 66 percent loaned there? Mr. DUGGAN. It varies by districts. In the Houston district they would have loaned 72 percent of normal agricultural value, which was nearer to the 18 loans in that district. Then there were 298 loans on which the land banks and Commissioner had made commitments to lend up to 68 percent of normal agricultural value, and which individuals loaned 89 percent of the normal agricultural value. Mr. PACE. You mean you traced every one of those applications to see what became of them? Mr. DUGGAN. Yes. Under the heading "Others" there were 74 loans on which land banks and Commissioner had made commitments to lend up to 68 percent of normal agricultural value and which other lenders loaned 88 percent of the normal agriculture values; or, for all lenders, there were 818 loans on which land banks and Commissioner made loan commitments up to 68 percent and “All lenders" loaned 86 per cent. Mr. POAGE. Does that not look like these private lenders are getting away out on a limb and inflationary? Mr. DUGGAN. Some of the insurance companies, Mr. Poage, are rather selective in the area in which they lend. The Federal land banks are not set up to serve higher risk areas. I think that the many farmers are much more inflationary even in the land risks and land values than are some of the lending agencies. Mr. POAGE. Does not the fact that a lending agency is lending on the average here of up to 86 percent of the normal value, 86 percent land loaned, is that not getting in the inflationary class itself? We used to always think of 50 percent as a pretty good land loan. If we are getting up in that figure, is that not tending to bring about inflation when we are getting that kind of a loan? Mr. DUGGAN. There are other factors that are much stronger in influencing inflation right now, I think, than these. Yet these are having some influence in the increasing price of the land. Mr. POAGE. All right. Then if it is true that the higher loan value the private companies will set, the higher they go the greater the inflation. Is that not true, that the higher the Government lending agency goes the greater the inflationary trend? Mr. DUGGAN. I would say that we feel that the lending authority, keeping at the same rate that it has been in the past and giving the appraisals of normal agricultural value, have had a slowing down influence on inflation over what it would have otherwise been. Mr. POAGE. Over what it had been had you increased it to 100 percent? Mr. DUGGAN. Over what it would have been if we had had fewer loans and fewer land appraisals, that is the point. There are two fundamental things involved. One is, do you want to keep the land banks in the field as pace setters, as a yardstick? Do you want them self-supporting, that is, paying their way? Or do you want Congress to appropriate funds for their administration? At present the funds for the administration of the land-bank functions of central office, the district Federal land banks and the local National Farm Loan Association offices are paid by the Federal landbank system and not by congressional appropriations. Mr. FLANNAGAN. Now Governor, the House meets at 11 o'clock and I think we are going to have to adjourn. We have a hearing set for tomorrow. I understand Mr. Hope and Mr. Andresen will be away all of next week and I should like for both of them to be here when we get back on this. Would the week after next suit you to finish up? Mr. DUGGAN. Any time that suits the committee we can attend. Of course, the lending authority expires July 1. Mr. FLANNAGAN. Yes, we have to take immediate action one way or another. Mr. DUGGAN. I have a meeting of the land bank presidents in Kansas City next week but I can come back the following week, if it is the wish of the committee. Mr. FLANNAGAN. I think that would be the course to pursue because I would like to have the full committee here if possible when we pass on this, and I will adjourn this hearing until sometime the week after next and I will set the date sometime this evening or to morrow. Mr. DUGGAN. Thank you, Mr. Chairman, that will be fine. Mr. FLANNAGAN. Thank you very much for appearing, Mr. Duggan. (Whereupon at 10:45 a. m. the committee adjourned to meet at the call of the Chair.) |