Government Agencies of Credit

• Author: Shirley K. Hart
• Published date: 01 March 1938
• Date: 01 March 1938
• DOI: http://doi.org/10.1177/000271623819600124
• Subject Matter: Articles

162

Government

Agencies

of

Credit

By

SHIRLEY

K.

HART

T HERE

are

three

ways

in

which

,1 Government

agencies

of

credit

may

be

said

to

use

the

credit

of

the

United

States

Treasury

directly

or

in-

directly

in their

operations:

(1)

funds

for

loans

are

obtained

from

the

Treas-

ury

through

the

issuance

of

Govern-

ment

obligations;

(2)

funds

are

ob-

tained

from

the

public

sale of

the

agency’s

own

obligations,

which

are

fully

guaranteed

as

to

principal

and

interest

by

the

United

States

Treas-

ury ;

and

(3)

the

Government

guaran-

tees

the

payment

of

losses

sustained

by

private

institutions

advancing

credit

under

the

rules

and

regulations

of

the

agency,

in

which

case

the

lia-

bility

of

the

United

States

Treasury

is

contingent

only.

OUTSTANDING

EXAMPLES

Under

the

first

method,

the

lending

operations

of

the

agency

result

in

direct

additions

to

the

public

debt.

An

outstanding

example

of

this

type

of

agency

is

the

Reconstruction

Fi-

nance

Corporation,

which

obtains

its

funds

principally

through

the

sale

of

its

notes

to

the

Treasury.

As

of

Sep-

tember

30,

1937,

this

Corporation

had

loans

outstanding

and

preferred

stock

purchased

in

the

amount

of

$1,696,-

000,000.

Lesser

agencies

in

this

cate-

gory

with

loans

outstanding

as

of

September

30th

include

the

Commod-

ity

Credit

Corporation

($123,000,000),

and

the

Public

Works

Administration

($125,600,000)

.~

Federal

agencies

of

credit

whose

loan

funds

were

supplied

in

large

part

through

securities

issued

directly

by

the

agencies,

with

the

Government’s

guarantee

of

principal

and

interest,

in-

clude

the

Federal

Farm

Mortgage

Cor-

poration

and

the

Home

Owners’

Loan

Corporation.

As

of

September

30,

1937,

outstanding

farm

mortgage

loans

of

the

Federal

Farm

Mortgage

Cor-

poration

totaled

just

over

$823,000,-

000,

and

the

outstanding

home

mort-

gage

loans

of

the

Home

Owners’

Loan

Corporation

amounted

to

$2,472,000,-

000,

with

investments

of

the

Corpora-

tion

in

Building

and

Loan

Associations

amounting

to

$200,000,000.

The

agency

whose

operations

result

in

a

contingent

liability

to

the

Gov-

ernment

through

guarantee

of

pay-

ment

of

losses

of

private

institutions

making

loans

under

its

rules

and

regu-

lations

is

the

Federal

Housing

Ad-

ministration.

The

activities

of

this

agency,

in

so

far

as

they

touch

the

con-

sumer

credit

field,

are

discussed

in

de-

tail

later

herein.

In

the

confines

of this

article

it

is

impossible

to

discuss

the

operations

of

all

Government

agencies

of

credit.

For

a

concise

presentation

in

outline

form

of

the

authority,

organization,

funds,

and

functions

of

Government

lending

agencies,

reference

is

made

to

a

study

made

by

a

committee

of

the

American

Bankers

Association.2

PURPOSE

OF

LENDING

ACTIVITIES

Undoubtedly

the

primary

purpose

of

most

of

the

lending

activities

of

the

Government

credit

agencies

was

to

make

funds

available

to

corporations

or

to

individuals

who

were

unable

for

1

Daily

Statement

of

United

Statea

Treasury,

September

30,

1037.

2

Government

Lending

Agencies.

New

York

City:

Committee

on

Banking

Studies,

American

Bankers

Association

(May,

1937).

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