Borah on Debts

Borah on Debts

Nearly one-half of all U. S. farms are mortgaged. This indebtedness approximates nine billion dollars, of which two-thirds is concentrated in a dozen Midwest States. Insurance companies hold about 20% of all farm mortgages, government-supervised land banks about 12%. Most of these mortgages were negotiated when farm produce brought prices almost double today's. Compelled to pay interest and principal on old debts out of reduced earnings, many a farmer is close to revolt against foreclosure. Joint-Stock Land Banks are taking $50 per acre for foreclosed farms which the owner mortgaged for $125 per acre. Even at $50 per acre the banks are able to retire their own bonds which have likewise depreciated about two-thirds in value. This process proves profitable for the land banks; Chicago's in 1931 made over $600,000. Irate farmers fail to see how Republican relief has yet reached them from Washington.

Last week the New York World-Telegram's energetic Ray Tucker sought out Idaho's Senator Borah at Boise, asked him his solution of this enormous problem. The Borah remedy: Let insurance companies and other large holders of the land banks' mortgage bonds voluntarily scale down farm indebtedness to a point where it can be paid. Said Senator Borah:

"Most of this debt rests upon private contract. The Government cannot reach the problem by legislation. The initiative must come from the great insurance and mortgage companies. It may not seem ideal but such things are done with corporate indebtedness. This situation is so serious and the future of the country so involved that it should and can be accomplished. ... I assert . . . that these debts cannot be paid as they stand."

Impressed, the World-Telegram produced figures to show the following: U. S. life insurance companies take in about four billion dollars annually, disburse about three billion; they have $1,700,000,000 of their $16,000,000,000 in resources invested in farm mortgages; if they applied their surplus income for one year to farm mortgages, they could scale them down about two-thirds; such a move would cut their gross income less than 2%.

Heads of the great insurance companies ignored the Borah proposals, muttered they were not in business for philanthropy. But the problem will emerge for discussion Oct.11 when the Mortgage Bankers Association meets at Niagara Falls and Deane W. Trick of Bankers Life Co. of Des Moines speaks on "The Unwilling Farmer."

Last week Secretary of Agriculture Hyde put the nation on notice that all purchasers of produce on which farmers have borrowed from the Government are individually liable for payment of the debt. Buyers must pay the loan direct to Secretary Hyde before the farmer gets a cent for his crop. The Government's first lien means that the producer who has borrowed will get at present price levels, little or no cash on his sale.

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