Letter to the Chairman of the Senate Committee on Expenditures in the Executive Departments About the Policies of the Federal Farm Loan Board.
[Released July 18, 1932. Dated July 15, 1932]
My dear Mr. Senator:
Last October, in a desire to have the Federal Land Banks function in a thoroughly humane and constructive fashion with relation to our farmers, I took up with the Farm Loan Board in Washington the whole question of the policies of the Board in respect to farmers who might be in difficulty.
Although I have no authority over the policies of the Board, I felt that, as I was about to recommend to the Congress the furnishing of $125,000,000 to the Farm Loan Banks for the purpose of enabling them to treat the farmers who were indebted to them with proper consideration in these times and to strengthen their situation both in loans and to their bondholders, I had a right to some understanding from them as to what policies they would pursue in case I made such a recommendation to the Congress.
The Farm Loan Board was most sympathetic in the entire matter and, as the result of our discussions, the enclosed letter was drafted by myself and the Chairman of the Board and sent to each of the banks. Responses were obtained that they would pursue these policies.
You will recognize that the banks must go through certain forms in cases of delinquencies to determine the cases honestly requiring relief but perhaps our farmers who are in difficulty do not realize the sympathetic view and the endeavor we are making in their interest in these times.
[Hon. Frederick Steiwer, United States Senate, Washington, D.C.]
Note: As printed below, Commissioner H. Paul Bestor's letter to the Federal land banks follows the text set forth in a contemporary news account.
As you know, the President recently announced:
"I shall recommend to Congress the subscription of further capital stock by the Government to the Federal land banks (as was done at their founding) to strengthen their resources so that on the one hand the farmer may be assured of such accommodation as he may require and on the other hand their credit may be of such high character that they may obtain their funds at low rates of interest."
The Farm Loan System is passing through a period of emergency due to the low price of commodities, as well as to drought in some sections. There are farmers who can not meet their mortgage payments. Anything in the nature of a general moratorium on farm mortgages would destroy one of the most valuable agencies ever created for American agriculture and would do infinite harm to the agricultural industry itself. This is indeed the recently expressed feeling of all the representative farm organizations.
On the other hand, the situation must be handled with intelligence and comprehension. I have told the President both before and since the above announcement that the banks are not pursuing a course of ruthless and drastic foreclosures. I have advised him that it is not the desire of the Federal land banks to acquire farms, and that in case of delinquencies it is the policy of all banks to consider each case on its individual merits and to institute foreclosure proceedings only when investigation discloses that a debtor is not a capable farmer, is not making a real effort to meet his obligation to the full extent of his capacity to pay and is not likely to succeed if given a reasonable opportunity, or when there are other factors making it necessary to take action in the vital interests of the bank.
I further informed the President that it is the desire of the banks to consider each individual case with sympathy and understanding and that they fully realize that when a capable man who will be able to work out his problem within a reasonable time wishes to make a fight to retain his farm it is not only humane but it is better for the country in this emergency and in the interests of the banks that he be given an opportunity rather than go through the expense of foreclosure and ultimate selection of another farmer to undertake the operation of the farm.
The Federal land banks constitute a permanent banking system and are of in. valuable service to agriculture as indicated by the President, and it is vitally important that they continue to function in the extension of credit to the farmer on a sound basis, and that the credit of the banks be of such high character that they may obtain funds at low rates of interest. In order that there be no misconception in the matter I should like to have from you, to be transmitted to the President, confirmation of my understanding as outlined above of your bank's policy in connection with the question of delinquencies.
Herbert Hoover, Letter to the Chairman of the Senate Committee on Expenditures in the Executive Departments About the Policies of the Federal Farm Loan Board. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/207222